Judge Ralph C. Hofer, Case Number: 24NNCV03144, Date: 2024-10-18 Tentative Ruling

DUE TO THE COURT’S SCHEDULING ISSUES, THE CALENDAR WILL START AT 8:30 A.M. AND WILL RECESS AT 9:30 A.M. WHATEVER MATTERS HAVE NOT BEEN CALLED WILL TRAIL TO THE 1:30 P.M.

Plaintiff Avalon Promenade Inc. alleges that it is the owner of premises in Burbank, and that in September of 2019, defendants David Heislop and Renee Heislop agreed to rent the premises pursuant to a written agreement with plaintiff agreeing to pay rent of $3,760 payable monthly on the first of the month.

The complaint alleges that defendants were served with a 3-day notice to pay rent or quit on July 17, 2024, and failed to comply with the requirements of the notice. Plaintiff requests past due rent of $36,931.89, reasonable attorney fees, forfeiture of the agreement, and damages at the rate of $125.33 per day from August 1, 2024.

Defendants David Heislop and Renne Heislop demur to the complaint on the ground plaintiff is a corporation which has been declared in forfeiture by the Franchise Tax Board for failure to pay California state taxes, so lacks the capacity to sue.

CCP § 430.10 provides that a party against whom a complaint has been filed may object by demurrer on the ground "(b) The person who filed the pleading does not have the legal capacity to sue."

Under CCP § 430.30(a), an objection to a pleading may be taken by a demurrer "[w]hen any ground for objection to a complaint...appears on the face thereof, or from any matter of which the court is required to or may take judicial notice…"

Defendants rely on Color-Vue, Inc. v. Abrams (1996) 44 Cal.App. 4th 1599, 1603-1604, in which the Second District noted that “[s]uspension of corporate powers results in a lack of capacity to sue….”

Defendants have filed a Request for Judicial Notice attaching a Statement of Information from the California Secretary of State indicating that on April 2, 2024, the status of plaintiff was changed from “Active” to “Forfeited—FTB.” [RFJN, Ex. 1]. Under Revenue and Taxation Code section 23302(c), where a taxpayer is suspended by the Franchise Tax Board, the Board is required to transmit the name to the Secretary of State, at which point the suspension becomes effective. The statute expressly provides, “The certificate of the Secretary of State shall be prima facie evidence of the suspension or forfeiture.”

Plaintiff does not dispute this suspended status, but argues that plaintiff will seek revivor, so that the proper remedy for such a problem is to continue the matter to permit plaintiff a reasonable time to do so.

“‘The suspension of the corporate powers, rights, and privileges means a suspended corporation cannot sue or defend a lawsuit while its taxes remain unpaid. [Citation.] Once a suspended corporation pays its taxes and obtains a certificate of revivor, however, the corporation may be allowed to carry on the litigation.””

Travelers Property Casualty Co. of America v. Engel Insulation, Inc. (2018) 29 Cal.App.5th 830, 834, quoting Kaufman & Broad Communities, Inc. v. Performing Plastering, Inc. (2006) 136 Cal.App.4th 212, 217-218.

In Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361, the Second District reversed a trial court’s order denying a motion to vacate a renewal of a judgment by a suspended corporation. The Second District noted in that case, if a corporation’s suspended status only comes to light during litigation, “the normal practice is for the trial court to permit a short continuance to enable the suspended corporation to effect reinstatement….” Timberline, at 1366. The Second District emphasized that the purpose of the then applicable Revenue and Tax Code suspension provision was to put pressure on corporations to pay taxes, and that this purpose is satisfied where tax delinquencies, once corrected, are treated as irregularities, with no further penalties. Timberline, at 1366; see also, Schwartz v. Magyar House, Inc. (1959, 2nd Dist.) 168 Cal.App.2d 182, 190.

Here, plaintiff indicates that plaintiff discovered the alleged forfeiture status during this litigation, and requests an opportunity to reinstate its corporate status. Since plaintiff appears prepared to promptly seek revivor, the normal practice recognized will be applied and a short continuance permitted to enable plaintiff to effect reinstatement.

Defendants David and Renee Heislop’s Demurrer to Complaint for Unlawful Detainer is CONTINUED TO _December 20, 2024_____ to permit defendant a reasonable time to effect reinstatement.

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