Richard Burt Professional Law Corporation
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Assignee of Suspended Corporation Cannot Sue on Assigned Claim
In Cal-Western Business Services, Inc. v. Corning Capital Group, Inc. (2013) 221 Cal. App. 4th 304, a judgment creditor assigned to Pacific West One Corp. the judgment creditor’s interest in a judgment against Corning Capital. Then, at a time when Pacific West One’s corporate powers were suspended for the failure to pay taxes, Pacific West One assigned its interest in the judgment to Cal-Western. Cal- Western filed an action to enforce the judgment against Corning Capital.
Under Revenue and Taxation Code § 23301, except for filing an application for tax-exempt status or amending the articles of incorporation to establish a new corporate name, “a suspended corporation is disqualified from exercising any right, power or privilege.”
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.
Because a defense based on lack of capacity to sue existed at the time of notice of the assignment and could have been asserted against Pacific West One had it brought the action itself, Cal-Western was subject to the same defense in suing to enforce the judgment as Pacific West One’s assignee.
The court held that Cal-Western lacked the capacity to sue to enforce the judgment as the assignee of a suspended corporation, and its complaint was properly dismissed.
If your corporation is suspended, contact Richard G. Burt for answers to your legal questions.