CREDITORS ADJUSTMENT BUREAU, INC. VS SUN & STARS LIGHTING IN

Tentative Rulings

Case Number: EC065714    Hearing Date: December 04, 2020    Dept: D

TENTATIVE RULING

Calendar: 4

Date: 12/4/2020

Case No: EC 065714 Trial Date: None Set

Case Name: Creditors Adjustment Bureau, Inc. v. Sun & Star Lighting, Inc.

MOTION TO BE RELIEVED AS COUNSEL

MOTION TO STRIKE ANSWER

Moving Party: Lexint Law Group, APLC (Relieved)

Plaintiff Creditors Adjustment Bureau, Inc. (Strike)

Responding Party: Defendant Sun & Stars Lighting, Inc. (No Opposition)

RELIEF REQUESTED:

Order relieving counsel as counsel of record

Strike answer of defendant

SUMMARY OF FACTS:

Plaintiff Creditor’s Adjustment Bureau, Inc. alleges that defendant Sun & Stars Lighting, Inc. became indebted to plaintiff’s assignor, Jiangsu Evertie Lighting Co. Ltd., in the amount of $2,660,020.74, due on February 25, 2016, which defendant has failed to repay. The complaint alleges causes of action for open book account, account stated, and reasonable value.

On October 26, 2016, defendant filed its answer to plaintiff’s unverified complaint.

On September 1, 2017, defendant filed a Notice of Stay of Proceedings, based on an automatic stay caused by the filing of defendant’s bankruptcy case.

The matter had been stayed. Moving party had submitted a docket showing that the subject bankruptcy case was closed on October 25, 2019. [Freed Decl. ¶ 2, Ex. 1].

This motion to strike was originally heard on March 13, 2020. The court published its tentative ruling on the evening of Thursday, March 12, 2020, which was to continue the matter 60 days to permit the parties to meet and confer concerning the motion and to permit defendant a reasonable time to effect reinstatement.

The minute order states:

“If no reinstatement is achieved, or initiated by that date, the answer of suspended corporation Sun & Stars Lighting, Inc., will be stricken automatically pursuant to this order.

Motion is continued to 5/15/2020 to see if corporation is revived. In the event the corporation is not revived by 5/15/2020, the Court’s Tentative Ruling to become the order of the Court.”

The motion was then continued to October 23, 2020. No further papers had been filed and the court published its tentative ruling on the evening of Thursday, October 22, 2020, which became the order of the court. The court ruled:

“UNOPPOSED Motion to Strike Answer of Suspended Corporation Sun & Stars Lighting, Inc. was continued to this date to permit defendant Sun & Stars Lighting, Inc., a suspended corporation, time to effect a reinstatement. Defendant Sun & Stars Lighting, Inc. has failed to submit any further papers to the Court, so has evidently failed to effect reinstatement, and has failed to update the Court to assure the Court reinstatement is being pursued in good faith or to request a further continuance. The Court’s previous Tentative Ruling will now become the order of the Court, and the answer of suspended corporation Sun & Stars Lighting, Inc. is ordered stricken pursuant to the Court’s March 13, 2020 order.”

The minute order shows the motion to strike was then scheduled for this date, which appears to be an error.

ANALYSIS:

Motion to Be Relieved as Counsel

Correct address in proof of service? (CCP §§1013, 1013a)

Client: ok

Other parties: ok

GROUNDS FOR MOTION:

Client has severed all communications with the attorney, attorney is no longer able to effectively represent client

DECLARATION BY MOVING ATTORNEY [CRC 3.1362 (c),(d)]:

Reasons why motion is necessary: ok

Address recently confirmed (within last 30 days)

Last known address. Counsel has been unable to confirm address is current by calling last known telephone number or numbers

PROPOSED ORDER (CRC 3.1362 (e)):

Address and phone number of client set forth: Last known

Proper warning: Ok

Future dates filled in: Not current

Procedural

It does not appear that proper service of this motion has been made on the client.

Under CCP § 284:

“The attorney in an action or special proceeding may be changed at any time before or after judgment or final determination, as follows:

1. Upon the consent of both client and attorney, filed with the clerk, or entered upon the minutes;

2.  

3. Upon the order of the court, upon application of either client or attorney, after notice from one to the other.”

(emphasis added).

Service on the client was made by mail at the client’s “last known address,” with counsel checking the box on the Declaration in support of the motion that counsel has been unable to confirm the address is current after calling the last known telephone number or numbers.

CRC Rule 3.1362(d) authorizes the service of a motion to withdraw on the client by mail where the motion is accompanied by a declaration stating facts showing the service address is either current or the last known address:

“If the notice is served by mail under Code of Civil Procedure section 1013, it must be accompanied by a declaration stating facts showing that either:

(1) The service address is the current residence or business address of the client; or

(2) The service address is the last known residence or business address of the client and the attorney has been unable to locate a more current address after making reasonable efforts to do so within 30 days prior to the filing of the motion to be relieved.”

CCP § 1011(b) sets forth requirements for personal service of a party at a residence and provides “(3) If the party’s residence is not known, any attempt of service pursuant to this subdivision may be made by delivering the notice or papers to the clerk of the court, for that party.”

The court will determine if counsel has complied with the requirement that “reasonable efforts” have been made to locate a more current address. The official form lists efforts such as mailing the motion return receipt requested, calling the last known telephone number, contacting persons familiar with the client, or conducting a search. The court will hear from counsel regarding what efforts have been made here, as a simple unsuccessful telephone call does not appear to constitute reasonable efforts. The court will discuss further reasonable efforts to be pursued, and will consider ordering counsel to serve the moving papers on the clerk of the court.

Substantive

If the procedural issue is corrected at the hearing, the paperwork is in order, except The future hearings include the October 23, 2020 hearing. If a further future hearing is scheduled at the hearing, counsel will be instructed to complete paragraph 7 of the order designating the next hearing in this matter.

Motion to Strike

As discussed above, the motion to strike answer was ruled upon and finally determined at the hearing on October 23, 2020. The hearing for this date was calendared in error. The court’s ruling of October 23, 2020 granting the motion and ordering the answer stricken remains the order of the court.

RULING:

[No Opposition].

Motion to be Relieved as Counsel is DENIED without prejudice. The Court is concerned that the “last known” address at which the client was served has not been confirmed as the current address, and will discuss the reasonable efforts made to confirm the address is current or locate a more current address, as required under CRC Rule 3.1362(d). If the client’s current address is not known, and reasonable efforts have been exhausted, the Court will consider whether service may be made by delivering notice and the papers to the clerk. CRC Rule 3.1362(d); CCP §1011.

Motion to Strike Answer of Suspended Corporation Sun & Stars Lighting, Inc. was calendared in error. The Court’s ruling of October 23, 2020 granting the motion and ordering the answer stricken remains the order of the Court.

GIVEN THE CORONAVIRUS CRISIS, AND TO PROMOTE APPROPRIATE SOCIAL DISTANCING, UNTIL FURTHER ORDERED, DEPARTMENT D IS ENCOURAGING AUDIO OR VIDEO APPEARANCES

Please make arrangements in advance if you wish to appear via LACourtConnect by visiting www.lacourt.org, and scheduling a remote appearance. Please note that LACourtConnect offers an audio-only appearance option at a current cost of $15.00 and a video appearance option at a cost of $23.00. Counsel and parties (including self-represented litigants) are encouraged not to personally appear, unless they have obtained advance permission of the Court. Anyone who appears in person for the hearing will be required to comply with strict social distancing measures, including, but not limited to, assigned seating, capacity limitations in the courtroom, designated waiting areas, and strictly enforced spacing in line to communicate with court staff. If no appearance is set up through LACourtConnect, or otherwise, then the Court will assume the parties are submitting on the tentative.

Case Number: EC065714    Hearing Date: October 23, 2020    Dept: NCD

TENTATIVE RULING

Calendar: 14

Date: 10/23/2020

Case No: EC 065714 Trial Date: None Set

Case Name: Creditors Adjustment Bureau, Inc. v. Sun & Star Lighting, Inc.

MOTION TO STRIKE ANSWER

Moving Party: Plaintiff Creditors Adjustment Bureau, Inc.

Responding Party: Defendant Sun & Stars Lighting, Inc. (No Opposition)

RELIEF REQUESTED:

Strike answer of defendant

SUMMARY OF FACTS:

Plaintiff Creditor’s Adjustment Bureau, Inc. alleges that defendant Sun & Stars Lighting, Inc. became indebted to plaintiff’s assignor, Jiangsu Evertie Lighting Co. Ltd., in the amount of $2,660,020.74, due on February 25, 2016, which defendant has failed to repay. The complaint alleges causes of action for open book account, account stated, and reasonable value.

On October 26, 2016, defendant filed its answer to plaintiff’s unverified complaint.

On September 1, 2017, defendant filed a Notice of Stay of Proceedings, based on an automatic stay caused by the filing of defendant’s bankruptcy case.

The matter had been stayed. Moving party had submitted a docket showing that the subject bankruptcy case was closed on October 25, 2019. [Freed Decl. ¶ 2, Ex. 1].

This motion to strike was originally heard on March 13, 2020. The court published its tentative ruling on the evening of Thursday, March 12, 2020, which was to continue the matter 60 days to permit the parties to meet and confer concerning the motion and to permit defendant a reasonable time to effect reinstatement.

The minute order states:

“If no reinstatement is achieved, or initiated by that date, the answer of suspended corporation Sun & Stars Lighting, Inc., will be stricken automatically pursuant to this order.

Motion is continued to 5/15/2020 to see if corporation is revived. In the event the corporation is not revived by 5/15/2020, the Court’s Tentative Ruling to become the order of the Court.”

The motion has since been continued to this date.

No further papers have been filed.

ANALYSIS:

It does not appear that Sun & Star Lighting, Inc. has taken any steps to address its status as a suspended corporation. The file shows that the only papers which have been filed in this matter since the previous hearing are papers in support of a motion to be relieved as counsel, filed by counsel for defendant Sun & Star Lighting.

The matter was previously continued pursuant to Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361, 1365-66 in which the Second District stated that 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 (by paying back taxes, interest and penalties) to defend itself in court.” Timberline, at 1366, citation omitted. The Second District emphasized that the purpose of the Revenue and Tax Code suspension provisions is 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.

Defendant has been permitted the opportunity to effect reinstatement, for what has now been a seven month period, but has evidently failed to do so and has failed to offer to pay the back taxes, update the court as to the status or request further time to pursue the matter. The court’s previous Tentative Ruling will now become the order of the court, and the answer of suspended corporation Sun & Stars Lighting, Inc. will be stricken automatically pursuant to the court’s March 13, 2020 order.

RULING:

[No Opposition].

UNOPPOSED Motion to Strike Answer of Suspended Corporation Sun & Stars Lighting, Inc. was continued to this date to permit defendant Sun & Stars Lighting, Inc., a suspended corporation, time to effect a reinstatement. Defendant Sun & Stars Lighting, Inc. has failed to submit any further papers to the Court, so has evidently failed to effect reinstatement, and has failed to update the Court to assure the Court reinstatement is being pursued in good faith or to request a further continuance. The Court’s previous Tentative Ruling will now become the order of the Court, and the answer of suspended corporation Sun & Stars Lighting, Inc. is ordered stricken pursuant to the Court’s March 13, 2020 order.

GIVEN THE CORONAVIRUS CRISIS, AND TO PROMOTE APPROPRIATE SOCIAL DISTANCING, UNTIL FURTHER ORDERED, DEPARTMENT D IS ENCOURAGING AUDIO OR VIDEO APPEARANCES

Please make arrangements in advance if you wish to appear via LACourtConnect by visiting www.lacourt.org, and scheduling a remote appearance. Please note that LACourtConnect offers an audio-only appearance option at a current cost of $15.00 and a video appearance option at a cost of $23.00. Counsel and parties (including self-represented litigants) are encouraged not to personally appear, unless they have obtained advance permission of the Court. Anyone who appears in person for the hearing will be required to comply with strict social distancing measures, including, but not limited to, assigned seating, capacity limitations in the courtroom, designated waiting areas, and strictly enforced spacing in line to communicate with court staff. If no appearance is set up through LACourtConnect, or otherwise, then the Court will assume the parties are submitting on the tentative.

Case Number: EC065714    Hearing Date: March 13, 2020    Dept: NCD

tentative ruling

Calendar: 12

Date: 3/13/20

Case No: EC 065714 Trial Date: None Set

Case Name: Creditors Adjustment Bureau, Inc. v. Sun & Star Lighting, Inc.

MOTION TO STRIKE ANSWER

Moving Party: Plaintiff Creditors Adjustment Bureau, Inc.

Responding Party: Defendant Sun & Stars Lighting, Inc. (No Opposition)

RELIEF REQUESTED:

Strike answer of defendant

SUMMARY OF FACTS:

Plaintiff Creditor’s Adjustment Bureau, Inc. alleges that defendant Sun & Stars Lighting, Inc. became indebted to plaintiff’s assignor, Jiangsu Evertie Lighting Co. Ltd., in the amount of $2,660,020.74, due on February 25, 2016, which defendant has failed to repay. The complaint alleges causes of action for open book account, account stated, and reasonable value.

On October 26, 2016, defendant filed its answer to plaintiff’s unverified complaint.

On September 1, 2017, defendant filed a Notice of Stay of Proceedings, based on an automatic stay caused by the filing of defendant’s bankruptcy case.

The matter has been stayed. The opposition submits a docket showing that the subject bankruptcy case was closed on October 25, 2019. [Freed Decl. ¶ 2, Ex. 1].

The court will accordingly consider the motion to strike.

ANALYSIS:

Under CCP§ 436:

“The court may, upon a motion made pursuant to CCP § 435, or at any time in its discretion, and upon terms it deems proper:….

(b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.”

The motion is apparently brought as an appeal to the court in its discretion to strike the subject pleading, as a motion to strike by the party would be untimely, as the answer here was filed on October 26, 2017.

The motion argues that Sun & Star Lighting, Inc. is a suspended corporation. The motion submits evidence from the Secretary of State Business Search Entity Detail showing that this entity as of January 10, 2020, had the status of “SOS SUSPENDED.” [Freed Decl. ¶ 3, Ex. 2].

““Corporations Code section 2205, subdivision (c) makes clear that, 'except for the purpose of amending the articles of incorporation to set forth a new name,' the suspended corporation may transact no business of any kind.” (Palm Valley Homeowners Assn., Inc. v. Design MTC, supra, 85 Cal.App.4th at p. 560.) Since “[c]onducting litigation is not 'amending the articles of incorporation to set forth a new name[,]' ” (ibid.) corporations that have been suspended for failing to file the requisite information statement are “disabled from participating in litigation activities.” (Id. at p. 556.)

Leasequip, Inc. v. Dapeer (2002, 2^nd Dist.) 103 Cal.App.4th 394, 402.

However, it is recognized that the proper remedy for such an irregularity is not to strike the pleading or sustain a demurrer, but to stay the matter pending revival of the corporation. In Color-Vue v. Abrams (1996) 44 Cal.App. 4^th 1599, 1605-1606, the Second District held that the trial court should have granted a continuance to permit the corporation to pay back taxes primarily because defendant had failed to raise the issue of the corporation’s suspension until trial, and so had waived the objection. The court held that this lack of capacity should have been raised at the earliest time, by, for example, demurrer. Color-Vue, at 1604.

The Second District in Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361, 1365-66 has stated that 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 (by paying back taxes, interest and penalties) to defend itself in court.” Timberline, at 1366, citation omitted. The Second District emphasized that the purpose of the Revenue and Tax Code suspension provisions is 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.

There is no opposition here, so no indication that defendant has any interest in pursuing reinstatement. Nevertheless, the court could either continue the hearing for a reasonable period to permit defendant the opportunity to effect reinstatement, or the Court could grant the motion with an extended period of leave to amend, to permit defendant that opportunity.

RULING:

[No Opposition].

UNOPPOSED Motion to Strike Answer of Suspended Corporation Sun & Stars Lighting, Inc. is CONTINUED 60 days to May 15, 2002 to permit the parties to meet and confer concerning the motion, and to permit defendant a reasonable time to effect reinstatement. If no reinstatement is achieved, or initiated by that date, the answer of suspended corporation Sun & Stars Lighting Inc., will be stricken automatically pursuant to this order.