La Casa de la Raza Inc vs Tomas Castelo
Case No: 16CV00266
Hearing Date: Wed Mar 20, 2019 9:30

Nature of Proceedings: Motion to Strike

Revised Tentative:

TENTATIVE RULING: The motion of defendants to strike the pleadings and documents filed by plaintiff’s attorney, Matthew Clarke, is denied.

BACKGROUND:

In this action, plaintiff La Casa de la Raza, Inc. has sued defendants MLG Leasing, Inc. and Tomas Castelo after defendants threatened to foreclose on plaintiff’s property located at 601 E. Montecito Street, Santa Barbara, California 93103. In 2015, defendants helped plaintiff avoid foreclosure on $440,000.00 loan from Fidelity Mortgage Corporation by purchasing the Fidelity note. Defendants purchased the note to allow plaintiff to remain in good financial standing while it secured more permanent financing elsewhere. Defendants allegedly promised not to foreclose on the property and to allow plaintiff to continue using its facility uninterrupted provided plaintiff made the monthly loan payment of $4,101.38. Plaintiff was never able to secure a long-term loan and in late 2015 it ceased making payments on the note.

In January 2016, defendants notified plaintiff that they intended to foreclose on the property. In an attempt to halt the foreclosure sale, plaintiff on February 23, 2016, filed a petition in bankruptcy, La Casa De La Raza, Inc. v. Tomas Castelo and MLG Leasing, Inc., United States Bankruptcy Court, Central District of California, Northern Division, Case No. 9:16-bk-10331-PC. At the same time, plaintiff filed the present complaint against defendants for (1) fraud, (2) intentional interference with prospective economic advantage, (3) breach of contract, (4) breach of the covenant of good faith and fair dealing, (5) promissory estoppel, and (6) unfair business practices. Defendants answered the complaint on February 26, 2016, with a general denial.

Defendants now move the court for an order striking the pleadings and documents filed by Kelley Clarke, PLLC, a Texas professional limited liability company, on the ground that the company is not authorized to conduct business in the state of California. There is no filed opposition to the motion.

ANALYSIS:

Plaintiff is represented in this matter by Matthew Clarke of the firm of Kelley Clarke, PLLC, 301 S. Coleman Street, Suite 20, Prosper, Texas 75078. When the action was first filed in January 2016, Mr. Clarke was with the firm of Christman, Kelley & Clarke, PC, 1334 Anacapa Street, Santa Barbara, California 93101. According to court records, Mr. Clarke relocated to Texas in or around March 2017. In or around May 2018, Mr. Clarke’s firm changed its name to Kelley Clarke, PLLC, and moved to its current location in Texas.

Defendants contend that Kelley Clarke, PLLC, a Texas professional limited liability company, is not authorized to conduct business in the state of California and now move to strike all documents and pleadings filed by the firm. Corporations Code Section 2105, subdivision (a), provides that “[a] foreign corporation shall not transact intrastate business without having first obtained from the Secretary of State a certificate of qualification.” In addition, Corporations Code Section 2203, subdivision (c), provides that a foreign corporation which does not hold a valid certificate from the Secretary of State “shall not maintain any action or proceeding . . . in any court of this state.” A search of the records of the California Secretary of State reveals that Kelley Clarke, PLLC, is not a registered foreign corporation in California. (Fischer Dec., ¶2.) Further, a search of the records of the Secretary of State of the state of Texas reveals that the business charter for Kelley Clarke, PLLC, was ordered forfeited on January 25, 2019. (Fischer Dec., ¶3, Ex. 1.)

Defendants’ motion to strike will be denied. Even assuming that what defendants allege is true, the information they have provided merely concerns Kelley Clarke, PLLC, as a business entity. It has no bearing on whether Mr. Clarke was, and is, licensed to practice law in California.

In their reply (response) papers, defendants assert for the first time that plaintiff’s status as a California non-profit corporation has been suspended by both the California Secretary of State and the Franchise Tax Board for non-payment of taxes and other reporting failures. (Fischer Dec., ¶2, Ex. 1.) Accordingly, defendants argue, plaintiff is not allowed to operate or participate in litigation. “We think it plain upon a reading of the statutory provisions that a corporation suspended for failure to file a required statement under Corporations Code section 1502 is, like a corporation suspended for failure to pay taxes under Revenue and Taxation Code section 23301, disabled from participating in any litigation activities.” Palm Valley Homeowners Association, Inc. v. Design MTC (2000) 85 Cal.App.4th 553, 560.

The court declines to consider this argument in ruling on defendants’ motion since plaintiff was not given proper notice that defendants would be moving to strike plaintiff’s pleadings and other documents on the basis that it is a suspended corporation. “[A]ll moving and supporting papers shall be served and filed at least 16 court days before the hearing.” Code Civ. Proc. §1005, subd. (b). That being said, however, the court will require plaintiff to submit proof at the trial call on March 20, 2019, that it is not a suspended corporation.