Judge: Teresa A. Beaudet, Case: 23STCV02602, Date: 2025-02-07 Tentative Ruling

Case Number: 23STCV02602    Hearing Date: February 7, 2025    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiffs Central Metal, Inc. (“CMI”) and Jong Uk Byun (“Byun”) (jointly, “Plaintiffs”) filed this action on February 6, 2023 against Defendants Hope YS Kim, Jason Kim, Young M. Kim, J&I Consulting, Inc. (“J&I Consulting”), and SA Recycling LLC. The Complaint alleges causes of action for (1) breach of fiduciary duty, (2) fraud, (3) constructive fraud,

(4) professional negligence, (5) violation of Business and Professions Code section 17200,

(6) financial elder abuse, (7) civil conspiracy, (8) conversion, (9) violation of Penal Code section 496, and (10) aiding and abetting.

            On December 11, 2023, Hope YS Kim, Jason Kim aka Young M. Kim, and J&I Consulting filed an Answer to the Complaint.

On April 10, 2023, J&I Consulting filed a Cross-Complaint against CMI and Byun. On November 27, 2023, J&I Consulting filed the operative Second Amended Cross-Complaint, alleging causes of action for (1) breach of contract, and (2) fraud – promise with no intent to perform. On April 3, 2024, the Court entered a Judgment in this action providing, inter alia, that

“on March 13, 2024…the Court ordered that the tentative ruling on the Demurrer to the Second Amended Cross-Complaint by Cross-Defendant Central Metal, Ind. [sic] (‘CMI’) be sustained in

its entirety without leave to amend; IT IS HEREBY ORDERED, ADJUDGED, AND DECREED in accordance with Code of Civil Procedure section 581(f)(1) that Judgment of Dismissal with prejudice shall be entered for CMI and against Cross-Complainant J & I Consulting, Inc. (‘Cross-Complainant’), on the Second Amended Cross-Complaint, that the Second Amended Cross-Complaint be dismissed with prejudice in its entirety as to CMI[,] that Cross-Complainant take nothing as against CMI, and that CMI [sic] the prevailing party.”

            Plaintiffs now move for an order striking J&I Consulting’s Answer to the Complaint and entering default against J&I Consulting in this action. The motion is unopposed.

Request for Judicial Notice

The Court grants Plaintiffs’ request for judicial notice.

Discussion

A court may strike any “¿irrelevant, false, or improper matter¿inserted in any pleading¿” or any part of a pleading “¿not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.¿” (¿¿Code Civ. Proc., § 436¿¿.) “¿The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.¿” (¿Code Civ. Proc., § 437¿.)

Plaintiffs assert that here, J&I Consulting “has been a suspended corporation…since April 2, 2024.” (Mot. at p. 4:11-12.) Plaintiffs assert that accordingly, J&I Consulting “lacks [the] capacity to defend itself in this action and its Answer should be stricken.” (Mot. at p. 5:4.)

Plaintiffs cite to Grell v. Laci Le Beau Corp. (1999) 73 Cal.App.4th 1300, 1305-1306, where the Court of Appeal noted that “Revenue and Taxation Code section 23301 states: ‘Except for the purposes of filing an application for exempt status or amending the articles of incorporation as necessary either to perfect that application or to set forth a new name, the corporate powers, rights and privileges of a domestic taxpayer may be suspended . . .’ if the corporation fails to pay its taxes or any penalty and interest which may be owing. Thus, except for filing an application for tax-exempt status or amending the articles of incorporation to perfect that application or establish a new corporate name, a suspended corporation is ‘disqualified’ from exercising any right, power or privilege.” The Grell Court noted that “[d]uring the period that a corporation is suspended for failure to pay taxes, it may not prosecute or defend an action, appeal from an adverse judgment, seek a writ of mandate, or renew a judgment obtained prior to suspension. The purpose of Revenue and Taxation Code section 23301 is to prohibit the delinquent corporation from enjoying the ordinary privileges of a going concern, and to pressure it to pay its taxes.” (Id. at p. 1306 [internal quotations and citations omitted].)

In her supporting declaration, Plaintiffs’ counsel states that “[e]ffective April 2, 2024, [J&I Consulting] is a suspended corporation as confirmed by California Secretary of State records identifying [J&I Consulting] as ‘Suspended – FTB.’ A true and correct copy of Secretary of State records which I obtained by navigating to the Secretary of State’s Bizfile Online portal at https://bizfileonline.sos.ca.gov/search/business and conducting a search by name inquiry for ‘J & I Consulting, Inc.’ is attached to the RJN at Exhibit 4.” (Ponce-Gomez Decl., ¶ 6.)

Exhibit 4 to Plaintiffs’ RJN includes a California Secretary of State “Business Search” pertaining to J&I Consulting. (Plaintiffs’ RJN, Ex. 4.) The “Business Search” “lists “Suspended-FTB” next to “Status,” and “04/02/2024” after “Inactive Date.” (Plaintiffs’ RJN, Ex. 4.) In addition, Exhibit 5 to Plaintiffs’ RJN is an “Entity Status Letter” from the State of California Franchise Tax Board dated November 26, 2024, which provides that J&I Consulting “is not in good standing with the Franchise Tax Board.” (Plaintiffs’ RJN, Ex. 5.)

J&I Consulting does not oppose the instant motion, and thus does not dispute that it is a suspended corporation. As set forth above, “[d]uring the period that a corporation is suspended for failure to pay taxes, it may not prosecute or defend an action.” (Grell v. Laci Le Beau Corp., supra, 73 Cal.App.4th at p. 1306.) Accordingly, the Court grants Plaintiffs’ motion to strike J&I Consulting’s answer to the Complaint.

Plaintiffs also assert that the Court should enter J&I Consulting’s default. Plaintiffs assert that “California Code of Civil Procedure § 585 authorizes a court to enter default against a defendant that does not answer a complaint.” (Mot. at p. 5:8-9.) But Code of Civil Procedure section 585, subdivision (b) provides that “if the defendant has been served, other than by publication, and no answer, demurrer, notice of motion to strike of the character specified in subdivision (f), notice of motion to transfer pursuant to Section 396b, notice of motion to dismiss pursuant to Article 2 (commencing with Section 583.210) of Chapter 1.5 of Title 8, notice of motion to quash service of summons or to stay or dismiss the action pursuant to Section 418.10 or notice of the filing of a petition for writ of mandate as provided in Section 418.10 has been filed with the clerk of the court within the time specified in the summons, or within further time as may be allowed, the clerk, upon written application of the plaintiff, shall enter the default of the defendant. The plaintiff thereafter may apply to the court for the relief demanded in the complaint.” (Emphasis added.) Plaintiffs do not appear to cite to legal authority demonstrating that the Court may enter J&I Consulting’s default, as opposed to entering default judgment. Accordingly, the Court denies Plaintiffs’ request that the Court enter J&I Consulting’s default in this action.

Conclusion

Based on the foregoing, Plaintiffs’ motion is granted in part. The Court grants Plaintiffs’ motion to strike J&I Consulting’s Answer to the Complaint. The Court strikes the Answer filed on December 11, 2023 as to J&I Consulting only. The Court denies Plaintiffs’ request that the Court enter default against J&I Consulting.

Plaintiffs are ordered to provide notice of this Order. 

DATED:  February 7, 2025                      ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court