Judge Thomas D. Long, Case Number: 22STCV21658, Date: 2023-09-19 Tentative Ruling

On June 15, 2023, IPL filed a demurrer. IPL argued that this action is barred by res judicata and the parties’ settlement agreement.

On September 19, 2023, the Court overruled the demurrer and ordered IPL to file an answer within 10 days.

On October 23, 2023, plaintiff CWS filed the instant motion to strike IPL NA’s answer.

CWS has complied with the meet and confer requirement. (Pakradouni Decl. ¶¶ 2-4.) “Before filing a motion to strike pursuant to this chapter, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion to strike for the purpose of determining whether an agreement can be reached that resolves the objections to be raised in the motion to strike.” (Code Civ. Proc. § 435.5, subd. (a).)¿

CWS seeks judicial notice of (1) the Statement and Designation by Foreign Corporation for IPL Inc. filed with the California Secretary of State on February 2, 2011; (2) history report for IPL; (3) certificate of status for IPL, Inc., dated September 6, 2023; and (4) Statement and Designation by Foreign Corporation for IPL North America, Inc. filed with the California Secretary of State on December 1, 2020. The Court GRANTS CWS’s requests pursuant to Evidence Code sections 452(c) and (h).

IPL NA seeks judicial notice of (1) Certificate and Articles of Amalgamation of IPL Plastics, Inc. dated October 1, 2020; (2) Asset Transfer Agreement dated October 1, 2020; (3) Certificate of Amendment dated October 1, 2020, changing the name of IPL St-Damien Inc. to IPL Canada Inc.; and (4) Certificate of Amendment dated October 23, 2020, changing the name of IPL Canada Inc. to IPL North America Inc. The Court GRANTS CWS’s requests pursuant to Evidence Code sections 452(h).

CWS brings this motion under Code of Civil Procedure sections 435 and 436. California law authorizes a party’s motion to strike matter from an opposing party’s pleading if it is irrelevant, false, or improper. (Code Civ. Proc. §§ 435; 436, subd. (a).) Motions may also target pleadings or parts of pleadings that are not filed or drawn in conformity with applicable laws, rules, or orders. (Code Civ. Proc. § 436, subd. (b).) Alternatively, CWS requests that the Court strike the answer under the Court’s inherent power to regulate its docket under Code of Civil Procedure section 128.

CWS moves to strike IPL NA’s answer on the grounds that it has no ability or right to defend itself in California court because IPL, a Canadian company, forfeited its right to do business in California. IPL NA does not dispute the law on this matter, but rather requests that the Court substitute IPL NA as a party to this action under its inherent power. IPL NA states that it is the appropriate party for this action based on the following merger transactions: (1) in October 2020, IPL merged into IPL Plastics, Inc.; (2) IPL Plastics Inc. assigned all of its liability and obligations with respect to IPL’s North American operations to IPL St-Damien, Inc; (3) IPL St. Damien Inc. changed its name to IPL Canada Inc.; and (4) IPL Canada Inc. changed its name to IPL NA. (Darling Decl. ¶¶ 3-6.) Thus, IPL NA states that as a result of these transactions, it is the assignee and successor in interest to CWS’s claims against IPL. (Id. ¶ 7.) In reply, CWS asserts that IPL’s inability to defend itself likewise prohibits IPL NA from defending itself on a claim that arose from the original, forfeited entity. CWS relies on a subrogation case where the court found that an insurer could not defend a case brought against its insured which was a suspended corporation as well as other cases that prohibited an assignee of a suspended corporation from prosecuting an action. (See Truck Insurance Exchange v. Superior Court (1997) 60 Cal. App. 4th 342, Cal-Western Business Services, Inc. v. Corning Capital Group (2013) 221 Cal. App. 4th 304, Thorner v. Selective Cam Transmission Co. (1960) 180 Cal. App.2d 89.)

The Court finds that IPL NA, as the assignee, steps into the shoes of IPL, thus it may be substituted into this case. However, the Court finds CWS’s case law to be persuasive in determining that as the assignee, IPL NA also inherits the disqualification from participating in litigation activities. “Code of Civil Procedure section 368, [] provides, in pertinent part, that ‘[i]n the case of an assignment of a thing in action, the action by the assignee is without prejudice to any set-off, or other defense existing at the time of, or before, notice of the assignment.’ In cases where the assignor of a chose in action is a suspended corporation, California courts generally have recognized that the assignee is subject to the same defenses that could have been asserted against the assignor.” (See Cal-Western Business Services Inc., supra 221 Cal. App. 4th at 310.) Under the Revenue and Taxation Code, a suspended corporation may not bring or defend an action. (Id. [“…suspended corporation is ‘disabled from participating in any litigation activities’… The purpose of Revenue and Taxation Code section 23301 ‘is to “prohibit the delinquent corporation from enjoying the ordinary privileges of a going concern” [citation], and to pressure it to pay its taxes [citation].’”].) Further in Truck Ins. Exchange, the court denied an application to intervene for an insurer who “stood in the shoes” of the insurer, but allowed intervention for another insurer which had independent standing. The court stated: “This right is not the equivalent of ‘standing in the shoes’ of the insured. Consequently, Truck is not barred by RCS’s disability. Truck has independent standing to preserve its right to claim such contribution as may be available from Transco and Alpine.” (Truck Ins. Exchange, supra, 60 Cal.App.4th at 350.) This is not the case here as IPL NA does not establish that it has independent standing apart from being IPL’s assignee. Accordingly, IPL NA lacks capacity to defend.

However, the Court finds that an order striking the answer may not be necessary at this time so long as IPL corrects its deficient suspended/forfeited status. “[I]f the corporation’s 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 (by paying back taxes, interest and penalties) to defend itself in court.” (Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361, 1366.)

Accordingly, the motion to strike is CONTINUED to allow IPL to reinstate its corporation status.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court