Court Opinion

ID: 9738244
Source: CourtListenerOpinion
Date Created: 2023-08-26 19:46:37.501682+00
Date Added: 2024-06-11T07:24:04.396610
License: Public Domain

CONLEY, P. J., Concurring and Dissenting
I agree with the end result reached by the main opinion, namely, that the judgment in favor of the plaintiffs should be reversed. However, while the opinions arrive at the same destination, the two paths taken are so divergent that I feel impelled to express a dissent.from the reasons given by the majority for the reversal. It seems to me that in recognizing and giving full weight to the evidence received on behalf of defendant corporation during the time that it was unquestionably suspended, the majority opinion is flying in the face of the law as set up by the Legislature; it usurps the prerogative' given to that, body to repeal or modify the applicable statute.
*495Briefly, this is a contest concerning the legal right to a mining claim; for a period of approximately two years before the trial, the defendant corporation had failed to pay its franchise tax and was, consequently, suspended; counsel for the respondents objected in. open court to the trial of the case by the defendant, made proof that it had failed to pay its franchise tax and observed that, under the specific law (Rev. & Tax. Code, §23301), “the corporate powers, rights and privileges of [the defendant had been] suspended. . . .” Instead of ruling on the matter forthwith, or granting defendant a continuance as in Schwartz v. Magyar House, Inc.,. 168 Cal.App.2d 182 [335 P.2d 487], the trial judge said he would take the motion under advisement and continued to receive evidence from each side to the conclusion of the hearing. The defendant had no right to have the ease tried in the circumstances. The judge presiding was incorrect in not immediately recognizing the lack of right on the part of the defendant to proceed as if it had not been suspended. Later, the court apparently became aware of its error and gave judgment to the plaintiffs on the sole ground that the suspended defendant had no right, when it did, to contest the case.
It has been held repeatedly that a corporation which has been suspended for failure to pay franchise taxes may not, during such suspension, prosecute or defend an action (Reed v. Norman, 48 Cal.2d 338, 343 [309 P.2d 809] ; Schwartz v. Magyar House, Inc., supra, 168 Cal.App.2d 182,188), or make a motion for a new trial (Ransome-Crummey Co. v. Superior Court, 188 Cal. 393 [205 P. 446]), or take an appeal (Boyle v. Lakeview Creamery Co., 9 Cal.2d 16 [68 P.2d 968]), or file mandamus proceedings in the appellate court (Brown v. Superior Court, 242 Cal.App.2d 519 [51 Cal.Rptr. 633]). In short, it may exercise only such power as is reserved to it by the statute.
Ransome-Crummey Co. v. Superior Court, supra, 188 Cal. 393, 398, holds: “. . . we are of' the opinion that the subsequent revival of the corporate rights, powers, and privileges did not have the effect of validating the acts attempted during the period of suspension. The revival is not made retroactive by the statute. The suspension of the rights, powers, and privileges is a disability imposed on a corporation as a penalty, and it would tend to deprive the statute of its force and encourage a corporation in default to postpone payment of its taxes indefinitely if it were held that by subsequent payment of the delinquent taxes all the benefits of the *496attempted acts denied to the corporation could be secured.”
The reinstatement of á franchise-tax defaulting corporation through the issuance of a certificate of revivor does not validate acts of the corporation during the period of suspension. (Smith v. Lewis, 211 Cal. 294, 300 [295 P. 37]; Cleveland v. Gore Bros., Inc., 14 Cal.App.2d 681, 682-683 [58 P.2d 931].)
In this case, the record shows that prior to the entry of judgment, the defendant corporation paid its delinquent franchise tax and the court became acquainted with that fact. It would seem that the court should have granted the defendant’s motion for leave to file an amended answer and the certificate of revivor, and then should have ordered that the respective parties adduce evidence of their respective basic rights. Section 23305a of the Revenue and Taxation Code specifically provides that upon issuance of a certificate of revivor “the taxpayer therein named shall become reinstated but such reinstatement shall be without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture. ’ ’
The evidence received during the suspension of defendant was a nullity, and, this being so, the judge was correct in ordering judgment for the plaintiffs. However, the court later should have granted the motion to set aside the judgment, which was timely (Rules of Court, rules 2 and 3(b); Code Civ. Proc., §§ 12, 12a, 12b, 473; Troxell v. Troxell, 237 Cal.App.2d 147, 151 [46 Cal.Rptr. 723]; Garcia v. San Francisco, 250 Cal.App.2d 767 [58 Cal.Rptr. 760]), because the court had been made aware that the defendant corporation was rehabilitated, and it was then wrong to continue the status which resulted from the previous judgment. It became the duty of the court, with a revived corporation as defendant, to set aside the earlier judgment so that the pleadings could then be amended and the rights of the parties ascertained in accordance with their basic factual relationship. It is for that reason I believe that the judgment in favor of the plaintiffs should be set aside and the respective rights of the parties reconsidered by the trial court.
A petition for a rehearing was denied June 23, 1969.