Gar-Lo, Inc. v. Prudential Sav. & Loan Assn.

• Decision Date: 21 August 1974
• Docket Number: INC,GAR-L
• Citation: 41 Cal.App.3d 242,116 Cal.Rptr. 389
• Court: California Court of Appeals Court of Appeals
• Parties: , a California corporation, Plaintiff and Appellant, v. PRUDENTIAL SAVINGS AND LOAN ASSOCIATION, etc., et al., Defendant and Respondent. Civ. 44676.

Page 389

116 Cal.Rptr. 389

41 Cal.App.3d 242

GAR-LO, INC., a California corporation, Plaintiff and Appellant, v. PRUDENTIAL SAVINGS AND LOAN ASSOCIATION, etc., et al., Defendant and Respondent.

Civ. 44676.

Court of Appeal, Second District, Division 4, California.

Aug. 21, 1974.

Rehearing Denied Sept. 5, 1974.

Gelfand, Malamed, Susman & Benjamin, Beverly Hills, for plaintiff and appellant.

Meyers, Stevens & Walters, Los Angeles, for defendant and respondent.

FILES, Presiding Justice.

This is a motion to dismiss an appeal upon the ground that the appellant is a corporation whose powers were suspended on or before July 1, 1969, pursuant to Revenue and Taxation Code section 23301, by reason of its failure to pay franchise taxes. A certificate of the Secretary of State is attached to the notice of motion, constituting prima facie proof of the suspension. (Rev. & Tax.Code, § 23302.)

The action was filed by appellant in the superior court on September 3, 1970, and a summary judgment against appellant was entered May 13, 1974. The record on appeal has not yet been prepared.

In opposition to the motion, appellant argues that its lack of capacity to sue could only have been raised by plea in abatement, and that respondent waived that defense by failing to raise it in the trial court at the earliest opportunity. Appellant contends it should be allowed to maintain this appeal for the purpose of showing that the superior court erred in basing its judgment upon the suspension of corporate powers.

It is true that a defense based upon such a suspension of corporate powers is a species of plea in abatement (see Traub Co. v. Coffee Break Service, Inc. (1967) 66 Cal.2d 368, 370, 57 Cal.Rptr. 846, 425 P.2d 790) and that a suspended corporation which pays its taxes and obtains a certificate of revivor during the pendency of an action may be allowed to carry on the litigation, even to the extent of validating otherwise invalid prior proceedings. The purpose of the suspension is to induce the payment of taxes. 'There is little purpose in imposing additional penalties after the taxes have been paid.' (Peacock Hill Assn. v. Peacock Lagoon Constr. Co. (1972) 8 Cal.3d 369, 371, 105 Cal.Rptr. 29, 30, 503 P.2d 285, 286, Accord: Traub Co. v. Coffee Break Service, Inc., Supra.)

In Traub, the court said: 'Our holding with respect to the final judgment here attacked is to be distinguished from cases holding that a suspended corporation not shown to have been reinstated lacks the right or capacity to defend an action or to appeal from an adverse decision.' (66 Cal.2d at p. 371, 57 Cal.Rptr. at p. 848, 425 P.2d at p. 792.)

Here we have a corporation which indicates no intention to pay its delinquent franchise taxes. It claims, in effect, that it has acquired an irrevocable license to carry on litigation in this court in defiance of section 23301, by reason of respondent's failure to object in the trial court 'at the earliest opportunity presented.' Appellant's argument overlooks that the main purpose of the statutory suspension is to collect a tax, and that respondent is only an incidental...