Case Number: BC534057 Hearing Date: June 03, 2014 Dept: 34

Moving Party: Defendant Capital Brands LLC (“defendant”)

Resp. Party: Plaintiff Kingstar Direct Inc. (“plaintiff”)

Defendant’s demurrer to the complaint is OVERRULED.

The Court takes judicial notice of defendant’s exhibit B. (See Evid. Code, § 452(c), (h).) The Court need not take judicial notice of plaintiff’s complaint because it is the operative pleading in this action.

PRELIMINARY COMMENTS:

The Court disregards the declaration of Edwin Crain filed with the opposition. A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (Code Civ. Proc. § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Crain’s declaration constitutes extrinsic evidence and is inappropriate for the instant demurrer.

BACKGROUND:

Plaintiff commenced this action on 1/23/14 against defendant for breach of written contract and accounting. Plaintiff alleges that on 10/17/11 it entered into a written contract with defendant. (Compl., ¶ 6.) Under the agreement, defendant was obligated to pay a royalty to plaintiff, to provide plaintiff with reports and information regarding product sales, and to accompany payments with an accounting setting forth certain information. (Id., ¶¶ 8-10.) Plaintiff alleges that defendant failed to perform these obligations. (Id., ¶ 12.)

ANALYSIS:

Defendant demurs to the entire complaint and the two causes of action contained therein on the ground that plaintiff lacks capacity to bring the complaint. (Code Civ. Proc., § 430.10(b).)

Corporations Code section 2105(a) provides: “A foreign corporation shall not transact intrastate business without having first obtained from the Secretary of State a certificate of qualification.” “A foreign corporation transacting intrastate business which has failed to qualify with the Secretary of State may … commence an action in state court. [Citation.] A foreign corporation transacting intrastate business which has failed to qualify may not, however, maintain an action commenced prior to qualification, except upon the satisfaction of certain conditions.” (United Medical Management Ltd. v. Gatto (1996) 49 Cal.App.4th 1732, 1739 [italics in original] [citing Corp. Code, § 2203].)

The failure of a foreign corporation to qualify to transact business prior to commencing an action is a matter of abatement of the action. [Citation.] Once a nonqualified foreign corporation commences an action regarding intrastate business, the defendant may assert by demurrer or as an affirmative defense in the answer the lack of capacity to maintain an action arising out of intrastate business. [Citation.] This abatement procedure enables the foreign corporation to obtain a judicial determination as to whether it is in fact transacting intrastate business. The defendant bears the burden of proving: (1) the action arises out of the transaction of intrastate business by a foreign corporation; and (2) the action was commenced by the foreign corporation prior to qualifying to transact intrastate business. [Citation.] If the defendant establishes the bar of the statute, then the foreign corporation plaintiff must comply with section 2203, subdivision (c). Ordinarily, the matter should be stayed to permit the foreign corporation to comply. If the foreign corporation plaintiff complies with section 2203, subdivision (c), by qualifying and paying fees, penalties and taxes, it may maintain the action. If the foreign corporation fails to comply, the matter should be dismissed without prejudice.

(Id. at p. 1740.)

For the purposes of section 2105(a), “transact intrastate business” is defined in Corporations Code section 191, as “entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.” (Corp. Code, § 191(a); Mediterranean Exports, Inc. v. Superior Court (1981) 119 Cal.App.3d 605, 616-617.)

There is no dispute that plaintiff is a foreign corporation that has not filed papers to qualify with the Secretary of State. (See Compl., ¶ 3; RJN Exh. B; Opp., p. 4:11-13.)

The facts alleged in the complaint do not establish that plaintiff conducts business within California or that the subject written agreement involved a transaction of intrastate business. The attached written agreement provides that the scope of the work is to write, create, produce, supervise, and edit two television commercials for a product. (See Compl., Exh. A, ¶ 1.) The agreement provides: “The principal photography will be performed in Los Angeles, California at a time to be agreed to by the parties. Editing will take place in Toronto, Canada.” (Ibid.) At most, this establishes that plaintiff entered into one agreement that contemplated that some of the work would be performed within California. This is not sufficient, by itself, to establish that plaintiff entered into “repeated and successive transactions of its business in this state.” (See Corp. Code, § 191(a).) Defendant provides no authority which holds that a single agreement contemplating partial performance in California is sufficient to establish that the action arises out of a transaction of intrastate business by the plaintiff.

Accordingly, defendant’s demurrer is OVERRULED.

Defendant to answer within 10 days.