Cld Const., Inc. v. City of San Ramon

• Decision Date: 23 July 2004
• Docket Number: No. A102742.,A102742.
• Citation: 16 Cal.Rptr.3d 555,120 Cal.App.4th 1141
• Court: California Court of Appeals Court of Appeals
• Parties: CLD CONSTRUCTION, INC., Plaintiff and Appellant, v. CITY OF SAN RAMON, Defendant and Respondent.

16 Cal.Rptr.3d 555

120 Cal.App.4th 1141

CLD CONSTRUCTION, INC., Plaintiff and Appellant, v. CITY OF SAN RAMON, Defendant and Respondent.

No. A102742.

Court of Appeal, First District, Division 5.

July 23, 2004.

Terence O. Mayo, San Francisco, Mayo & Rogers, Counsel for plaintiff and appellant.

Byron D. Athan, City Attorney, Counsel for defendant and respondent.

JONES, P.J.

Relying on long-standing authority holding that a complaint filed by a corporate party in propria persona is void, or a nullity, the trial court granted a motion to strike the complaint of CLD Construction, Inc. (CLD) against the City of San Ramon (City) for breach of contract without leave to amend. We conclude respondent City's objection to the complaint filed by the self-represented corporation raises a curable defect, and dismissal without leave to amend is not mandated. Accordingly, we reverse the judgment of dismissal.

BACKGROUND

CLD and the City entered into a written contract whereby CLD agreed to construct a public skateboard facility for $227,700. CLD, represented by an attorney, made a claim against the City for breach of the contract. On April 12, 2002, CLD was notified that its claim was rejected. The rejection was sent to CLD's attorney and warned that CLD had only six months from that date to file a complaint against the City. The rejection also informed CLD that it could seek an attorney's advice in the matter, and should do so immediately if it wanted such advice.

On October 15, 2002, the last day for doing so, CLD filed its complaint, appearing "pro per." It alleged the City breached the skateboard contract by presenting architectural plans with numerous design errors, by instituting change orders, and by failing to compensate CLD for the delays caused by the change orders. It sought damages of $159,877.02 which, it alleged, were caused by the delays required to correct the deficiencies in the City's architect's plans. The unverified complaint was signed "by: Ali Neesaneh" whose name was typed as: "Ali Neesaneh, CLD Construction, Inc." The complaint did not identify Neesaneh's relationship to CLD, but the skateboard facility agreement, which was attached to the complaint, identified him as "owner" of CLD.

On December 6, 2002, CLD, "In Pro Per," filed a substitution of attorneys, substituting Terence Mayo and the law firm Mayo & Rogers as its attorney of record. Neesaneh, as president, executed the substitution for CLD.

On January 15, 2003, the City, pursuant to Code of Civil Procedure¹ section 435, moved to strike CLD's complaint in its entirety on the grounds a corporation cannot file a pleading in propria persona. Alternatively, it demurred on the grounds the court lacked subject matter jurisdiction because a complaint filed in propria persona on behalf of a corporation is void, and no valid complaint was filed within the requisite six months from April 12, 2002, the date the City rejected the claim.

The trial court granted the motion to strike without leave to amend because CLD's complaint was filed by a corporation without legal representation. Such a filing, the trial court held, was a "nullity." Given this conclusion, it deemed the demurrer moot. The trial court reasoned that because the substitution of attorney Mayo occurred after the statute of limitations for filing the complaint had run, the court lacked "original jurisdiction." It then dismissed the action with prejudice, and entered judgment and awarded costs to the City.

DISCUSSION

Standard of Review

Section 436 gives the trial court discretion to strike out all or any part of a pleading not filed in conformity with the laws of this state. An order striking a pleading (§ 435) is reviewed for abuse of discretion. (Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 612, 107 Cal.Rptr.2d 489.)

Corporate Representation by Attorney

A corporation has the capacity to bring a lawsuit because it has all the powers of a natural person in carrying out its business. (§ 17; Corp.Code, §§ 105, 207.) However, under a long-standing common law rule of procedure, a corporation, unlike a natural person, cannot represent itself before courts of record in propria persona, nor can it represent itself through a corporate officer, director or other employee who is not an attorney. It must be represented by licensed counsel in proceedings before courts of record. (Caressa Camille, Inc. v. Alcoholic Beverage Control Appeals Bd. (2002) 99 Cal.App.4th 1094, 1101-1103, 121 Cal.Rptr.2d 758 & citations therein.) The same venerable common law rule obtains in federal courts, notwithstanding the comparable federal statute that permits "parties" to plead and conduct their own cases personally. (28 U.S.C. § 1654; Rowland v. California Men's Colony, Unit II Men's Advisory Council (1993) 506 U.S. 194, 201-202, 113 S.Ct. 716, 121 L.Ed.2d 656.) The rule exists in most sister states as well, often by statute. (Annot., Propriety and Effect of Corporations Appearance Pro Se Through Agent Who is Not Attorney (1992) 8 A.L.R.5th §§ 2, 3, pp. 672, 675.)

Several rationales lie behind the rule. First, a corporation, as an artificial entity created by law, can only act in its affairs through its natural person agents and representatives. If the corporate agent who would likely appear on behalf of the corporation in court proceedings, e.g., an officer or director, is not an attorney, that person would be engaged in the unlicensed practice of law. (Merco Constr. Engineers, Inc. v. Municipal Court (1978) 21 Cal.3d 724, 730, 147 Cal.Rptr. 631, 581 P.2d 636 (Merco).)

Second, the rule furthers the efficient administration of justice by assuring that qualified professionals, who, as officers of the court are subject to its control and to professional rules of conduct, present the corporation's case and aid the court in resolution of the issues. (Merco, supra, 21 Cal.3d at p. 732, 147 Cal.Rptr. 631, 581 P.2d 636; In re Victor Publishers, Inc. (1st Cir.1976) 545 F.2d 285, 286.) Third, the rule helps maintain the distinction between the corporation and its shareholders, directors, and officers. (8 A.L.R.5th, supra, at p. 672.)

A motion to strike under section 435 et seq. is traditionally used to reach pleading defects that are not subject to demurrer. (5 Witkin, Cal. Proc., 4th ed., Pleading, § 960, p. 420.) Every pleading must be subscribed, i.e., signed, by the party or his or her attorney. (§ 446, subd. (a).) CLD's complaint was not subscribed by an attorney, nor did it otherwise indicate that CLD was represented by counsel. Therefore, if CLD's complaint was, as respondent asserts, incurably defective insofar as it was subscribed only by its president, the court could strike it.

Effect of Nonattorney Representation

The dispositive issue in this appeal is the consequence of the defect in CLD's complaint. Section 452 mandates that a pleading is to be liberally construed for purposes of determining its effect, "with a view to substantial justice between the parties." Where the defect raised by a motion to strike or by demurrer is reasonably capable of cure, "leave to amend is routinely and liberally granted to give the plaintiff a chance to cure the defect in question." (Price v. Dames & Moore (2001) 92 Cal.App.4th 355, 360, 112 Cal.Rptr.2d 65; Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 168, 203 Cal.Rptr. 556.) A pleading may be stricken only upon terms the court deems proper (§ 436, subd. (b)), that is, terms that are just. (§ 472a, subd. (c); Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768, 73 Cal.Rptr.2d 829.) It is generally an abuse of discretion to deny leave to amend, because the drastic step of denial of the opportunity to correct the curable defect effectively terminates the pleader's action. (Vaccaro v. Kaiman, supra, at p. 768, 73 Cal.Rptr.2d 829.)

Relying on Paradise v. Nowlin (1948) 86 Cal.App.2d 897, 195 P.2d 867 (Paradise), the City argues that CLD's defective complaint could not be cured because it was "void," insofar as CLD could not represent itself. Therefore, the City urges, the court was mandated to dismiss the action because no valid complaint was filed within the statute of limitations.

In Paradise, the respondent moved to dismiss an appeal because the appellant, a corporation, failed to pay the filing fee within the requisite time. (Paradise, supra, 86 Cal.App.2d at p. 898, 195 P.2d 867.) The appellate court agreed that dismissal was warranted on that ground, but on its own motion dismissed the appeal for "another and more important reason ... that the defendant corporation filed [its] notice of appeal ... and its opposition to the dismissal ... in propria persona. Such notice and opposition are void by reason of the corporation's lack of power to represent itself in an action in court." (Ibid.) Paradise supported its conclusion by citing numerous federal and sister state cases expressing the rule that a corporation can only be represented by an attorney. (Ibid.)

We question the present day validity of Paradise's summary conclusion that a notice of appeal (or, impliedly, another document) filed on behalf of a corporation by a nonattorney is automatically void, that is, of no legal effect whatever, an absolute nullity. (Black's Law Dict. (7th ed.1999), p. 1568, col. 1.) We further question whether Paradise supports the proposition that the admitted defect in CLD's complaint is incurable.

The first cited authority in Paradise is Bennie v. Triangle Ranch Co. (1923) 73 Colo. 586, 216 P. 718, in which the Colorado court held that a judgment resulting from proceedings instituted and prosecuted by a nonattorney for a corporation was void because it was contrary to Colorado law permitting only licensed attorneys to practice law. Other out-of-state cases in Paradise's string of citations also followed Bennie. However, at least two of the out-of-state cases cited by Paradise are distinguishable: the trial courts, although striking the...