Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. SC090942, Lisa Hart Cole, Judge.
O’Neil & Matusek and Henry John Matusek II for Plaintiff and Appellant.
Maranga Morgenstern, Robert A. Morgenstern, Ninos Saroukhanioff, and Dennis S. Newitt for Defendants and Respondents.
ASHMANN-GERST, J.
Plaintiff and appellant Michael Hauser (Hauser), as assignee for American Re-Fill-It Corporation doing business as American Supply Distribution & Information Network (American Re-Fill-It) objects to a trial court order dismissing his action against defendants and respondents United Parcel Service, Inc. (UPS) and Adrian Vasquez (Vasquez). Among other things, he contends that the trial court erred in finding that (1) American Re-Fill-It’s status as a suspended corporation applied to him as an individual assignee; and (2) respondents were relieved from their waiver of this plea in abatement by asserting it just before trial.
We find no error and, accordingly, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Hauser is the owner and sole shareholder of American Re-Fill-It. Beginning in September 2004, American Re-Fill-It’s corporate status was suspended for failure to pay its franchise taxes.
On August 31, 2005, Vasquez, a UPS employee, entered American Re-Fill-It’s place of business on his daily pick-up and delivery route. On his way out of the premises, Vasquez allegedly pushed the power button on a computer server several times, resulting in the destruction of the server’s hard drive and loss of business data.
One year later, on August 31, 2006, Hauser, as assignee of American Re-Fill-It, filed suit against UPS and Vasquez for negligence and related causes of action. Following two demurrers, Hauser, still as assignee of American Re-Fill-It, filed the second amended complaint on February 13, 2007. Respondents filed their answer on March 6, 2007, asserting the statute of limitations as an affirmative defense.
Although the complaint, first amended complaint, and second amended complaint admit that American Re-Fill-It is a suspended corporation, respondents did not raise the issue of its lack of capacity to sue in any of its demurrers or motions to strike, and did not raise this issue as an affirmative defense.
The case was then set for trial.
On January 11, 2008, one month before the continued trial date of February 13, 2008, respondents filed a motion to dismiss the action for lack of capacity, arguing that (1) Hauser, as American Re-Fill-It’s assignee, only enjoyed the same rights as his assignor; (2) at no time during the pendency of the action did American Re-Fill-It, a suspended corporation, enjoy the capacity to sue; (3) thus, Hauser could not maintain the instant action against respondents.
Hauser filed an opposition to respondents’ motion, claiming, inter alia, that a motion to dismiss for incapacity is a plea in abatement that respondents waived by failing to assert it earlier. He also advised the trial court that American Re-Fill-It was applying for reviver. American Re-Fill-It was in fact revived on January 25, 2008.
Supplemental briefs were filed by the parties, and respondents’ motion was heard on February 8, 2008. The trial court granted respondents’ motion. It found that American Re-Fill-It was a suspended corporation, and thus lacked the capacity to sue. As an assignee, Hauser took only the rights and privileges enjoyed by his assignor, American Re-Fill-It. Because American Re-Fill-It lacked the capacity to sue, so too did Hauser.
That being said, the trial court noted that this challenge was a plea in abatement that should have been raised at the earliest opportunity. Although respondents were aware at the time the action was filed on August 31, 2006, that American Re-Fill-It was a suspended corporation, it waited until January 2008 to raise this issue. Thus, respondents had waived this defense, unless they could be relieved from that waiver. Given that “the suspended corporation did not intend to pay its delinquent taxes by assigning the corporate claims to its sole individual shareholder” and “did not intend to seek revival, but rather sought to continue doing business under the corporate name without assuming any of the corporate obligations,” respondents were relieved from their waiver and were permitted to assert American Re-Fill-It’s lack of capacity to sue at that late stage of the proceedings.
Then the trial court addressed whether Hauser’s claims were barred by the applicable statutes of limitation. It concluded that American Re-Fill-It’s revivor was not retroactive; thus, Hauser’s action was time-barred. Accordingly, the trial court dismissed the action.
Hauser’s timely appeal ensued.
DISCUSSION
It is well-established that a suspended corporation lacks the capacity to sue, and it cannot evade that rule by assignment. (Cleveland v. Gore Bros., Inc. (1936) 14 Cal.App.2d 681, 682 (Cleveland).) Because American Re-Fill-It was a suspended corporation from September 2004 through January 25, 2008, it lacked the capacity to initiate or maintain a lawsuit against any defendant, including respondents, during that time. It could not circumvent that result by assigning away its claims.
At oral argument, Hauser’s counsel attempted to differentiate Cleveland by arguing that because the statutes have changed, Cleveland is no longer viable. We disagree. While the tax laws have changed, the intent of the statutory scheme remains constant—a corporation must pay its taxes to enjoy the right to maintain a lawsuit. (See Rev. & Tax. Code, § 23301; Community Elec. Service v. National Elec. Contr. (9th Cir. 1989) 869 F.2d 1235, 1239.) Nothing in Myrick v. O’Neill (1939) 33 Cal.App.2d 644, 647–648 [addressing whether a contract with a suspended corporation is void or voidable] compels a different conclusion.
Thus, the next question is whether respondents timely raised this issue. We agree with Hauser and the trial court that they did not. “[A] defense based upon such a suspension of corporate powers is a species of plea in abatement” (Gar-Lo, Inc. v. Prudential Sav. & Loan Assn. (1974) 41 Cal.App.3d 242, 244) that must be raised “‘at the earliest opportunity’” or be waived (Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1604). Here, as the trial court found, respondents were on notice from the filing of the original complaint, on August 31, 2006, that Hauser was pursuing the instant action as the assignee of a suspended corporation. Yet, they did nothing to verify the status of American Re-Fill-It, and delayed in filing their motion to dismiss for nearly a year and a half; not until January 2008, one month before trial, did they seek to dismiss the action for lack of capacity to sue. “Their unnecessary delay waived the plea.” (Color-Vue, Inc. v. Abrams, supra, at p. 1605.)
“Once a plea in abatement is waived ‘“the court will be rarely justified in permitting the defense to be made later.”’ [Citation.] In the unusual circumstance where a corporation announces that it does not intend to pay its delinquent taxes, the trial court may properly relieve a defendant from his waiver and permit him to assert the corporation’s lack of capacity to sue.” (Color-Vue, Inc. v. Abrams, supra, 44 Cal.App.4th at p. 1605, citing Gar-Lo, Inc. v. Prudential Sav. & Loan Assn., supra, 41 Cal.App.3d at p. 244.)
Here, substantial evidence supports the trial court’s conclusion that American Re-Fill-It did not intend to seek revival by paying its delinquent taxes. Rather, by making the assignment of the claim to Hauser, American Re-Fill-It evinced its intent to continue operating under its corporate name without assuming any of its corporate obligations. In other words, using the vehicle of assignment, it sought to carry on litigation while not paying its taxes, in defiance of Revenue and Taxation Code section 23301. (Gar-Lo, Inc. v. Prudential Sav. & Loan Assn., supra, 41 Cal.App.3d at p. 244.) It cannot do so. (Cleveland, supra, 14 Cal.App.2d at pp. 681–682.) Accordingly, the trial court properly relieved respondents of their waiver of the lack of capacity defense.
Finally, we must consider whether American Re-Fill-It’s belated revival (on Jan. 25, 2008) is retroactive, because the revivor issued after the statute of limitations on Hauser’s claims expired. “Every California court facing this question has held that corporate reinstatement will not validate retroactively the earlier filing. These decisions conclude that the expiration of a statute of limitation qualifies as a ‘defense’ that ‘has accrued.’” (Community Elec. Service v. National Elec. Contr., supra, 869 F.2d at p. 1240.) American Re-Fill-It’s revival, which issued after the expiration of the applicable statutes of limitation, does not save Hauser’s action from dismissal.
DISPOSITION
The order is affirmed. Respondents are entitled to costs on appeal.
We concur: BOREN P. J., DOI TODD J.