Cal-Western Business Services, Inc. v. Corning Capital Group
163 Cal. Rptr. 3d 911
Cal. Ct. App.2013Background
- Judgment ($317,882) in Part Properties v. Corning Capital entered 1/31/1995; Part Properties assigned judgment to Pacific West One on 7/14/1995.
- Pacific West One’s corporate powers were suspended for nonpayment of taxes on 7/3/2000; suspension remained in effect when assignment occurred.
- Pacific West One assigned the judgment to Cal-Western on 8/25/2001 while still suspended.
- Cal-Western filed this action to enforce the judgment on 4/4/2005; Pacific West One remained suspended at filing.
- Trial court later concluded Cal-Western lacked capacity to sue as assignee of a suspended corporation and striking/dismissing the complaint was proper.
- Court affirmed dismissal, holding assignee lacked capacity to enforce the judgment while assignor remained suspended.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether assignee can sue to enforce a judgment when assignor was suspended | Cal-Western argues section 23301 limits to suspended corps, not assignee in good standing | Corning Capital contends assignee inherits defenses and cannot sue | Cal-Western lacked capacity to sue as assignee of a suspended corporation |
| Whether lack of capacity defense was waived or timely raised | Cal-Western asserts defense should be allowed despite late raising | Corning Capital failed to raise timely but relief is allowed in unusual circumstances | Court allowed defense to be raised/considered; not an abuse of discretion to strike |
| Whether assignment validity affects capacity defense | Assignment is valid; not voidable; public policy favors assignee’s rights | Assignment while assignor suspended subject to defenses | Validity of assignment not dispositive; capacity of assignee governs |
| Whether public policy supports allowing good-standing assignees to sue | Public policy favors assignees in good standing | Allowing could permit evading suspension/Tax Code aims | Policy does not override statutory scheme; assignee still subject to defenses |
| Whether trial court properly applied case law on lack of capacity to sue | Court should follow equitable/public policy | Court properly applied Timberline, Cleveland, etc. | Court did not abuse discretion; correct application of law |
Key Cases Cited
- Timberline, Inc. v. Jaisinghani, 54 Cal.App.4th 1361 (Cal.App. 1997) (suspended corporation cannot prosecute/defend litigation to pressure payment of taxes)
- Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc., 136 Cal.App.4th 212 (Cal.App. 2006) (recovery hinges on capacity to sue; public policy considerations for waivers)
- Grell v. Laci Le Beau Corp., 73 Cal.App.4th 1300 (Cal.App. 1999) (purpose of Tax Code section 23301 to incentivize payment of delinquent taxes)
- Palm Valley Homeowners Assn., Inc. v. Design MTC, 85 Cal.App.4th 553 (Cal.App. 2000) (suspended corporation barred from litigation activities)
- Cleveland v. Gore Bros., Inc., 14 Cal.App.2d 681 (Cal.App. 1936) (assignee subject to same incapacities as assignor during suspension)
- Thorner v. Selective Cam Transmission Co., 180 Cal.App.2d 89 (Cal.App. 1960) (assignee barred where assignor would be barred to sue in state)
- Color-Vue, Inc. v. Abrams, 44 Cal.App.4th 1599 (Cal.App. 1996) (waiver and public policy considerations in capacity arguments)
- Traub Co. v. Coffee Break Service, Inc., 66 Cal.2d 368 (Cal. 1967) (plea in abatement for lack of capacity must be timely raised)
- Essex Ins. Co. v. Five Star Dye House, Inc., 38 Cal.4th 1252 (Cal. 2006) (assignment of chose in action; defenses flow to assignee)
- Great Western Bank v. Kong, 90 Cal.App.4th 28 (Cal.App. 2000) (assignee takes rights subject to defenses)
- Johnson v. County of Fresno, 111 Cal.App.4th 1087 (Cal.App. 2003) (stands in the shoes doctrine for assignees)