Case Number: BC496972 Hearing Date: April 09, 2014 Dept: 32

CASE NAME: Montebello, SRL v. Fox Fabrics, Inc., et al.
CASE NO.: BC496972
HEARING DATE: 04/09/14
DEPARTMENT: 32
SUBJECT: (1) Demurrer to Complaint
(2) Motion to Strike Portions of Complaint
MOVING PARTY: (1), (2) Defendants Fox Fabrics, Inc. and Phil Fox
RESP. PARTY: None

TENTATIVE RULING

Demurrer to Complaint

Demurrer to Abate Action as Plaintiff Lacks Capacity to Sue as Plaintiff is not Qualified to do Business Within California SUSTAINED WITH 20 DAYS LEAVE TO AMEND. The demurrer is MOOT in all other respects.

Motion to Strike MOOT based on the sustaining of the demurrer to abate action.

STATEMENT OF THE CASE

Plaintiff filed this complaint on December 13, 2012. Plaintiff alleges that on unspecified dates it entrusted Defendants with goods for which Defendants would receive payments from customers and then pay Plaintiff with the proceeds. Plaintiff alleges that Defendants have converted and/or fraudulently concealed payments made by customers for Plaintiff’s goods. Plaintiff also alleges that Defendants are indebted to Plaintiff on an open book account.
Defendants filed a demurrer and motion to strike set for hearing on March 12, 2014. Plaintiff filed no opposition to the motions, but on March 11, 2014, one day prior to the hearing on Defendants’ demurrer to the original complaint, Plaintiff filed a first amended complaint that did not materially alter the allegations of the complaint. At the March 12, 2014 hearing, Plaintiff withdrew its first amended complaint and the Court continued the hearing until April 9, 2014. The Court ordered that Plaintiff could file opposition to the motions based on the new hearing date. However, Plaintiff still has filed no opposition to the motions.
ANALYSIS

Demurrer

Plaintiff’s Qualification to do Business in California

In the demurrer, Defendants contend that the Court should issue an abeyance of the action because Plaintiff is not qualified to do business in California. A foreign corporation may commence an action in state court without qualifying to transact intrastate business in California. (United Medical Management Ltd. v. Gatto (1996) 49 Cal.App.4th 1732, 1739.) A defendant may then raise a defense that the nonqualified foreign corporation cannot “maintain” the action. To establish this defense, defendant must show that (1) the action arises out of the foreign corporation’s intrastate business; and (2) the foreign corporation brought the action before qualifying to transact business in the state. (United Systems of Arkansas, Inc. v. Stamison (1998) 63 Cal.App.4th 1001, 1007.) If this is shown, an action brought before qualification must be abated until the corporation qualifies. (United Medical, 49 Cal.App.4th at 1740.)

In the complaint, Plaintiff alleges that Plaintiff is “an Italian corporation with its principle places of business in Montebello Vicentino, Italy.” Plaintiff further alleges that “at the time the relevant transactions took place, Plaintiff Montebello also had a principle place of business for its US customers located at 13101 Washington Boulevard, Suite 457, Los Angeles CA 90066.” Plaintiff concedes that it is “in the process of and will imminently be, licensed to do business in the State of California with standing to bring this lawsuit.” (Compl. ¶ 1.)

Based on these allegations, it appears from the complaint that Plaintiff is not presently registered as a foreign corporation to transact business within California. The complaint apparently arises from Plaintiff’s intrastate business relationship with Defendants, who conduct business in California. (Compl. ¶¶ 2-3.) Accordingly, the action must be abated until Plaintiff shows that it is qualified to transact business in California. The demurrer to the entire complaint is SUSTAINED WITH 20 days LEAVE TO AMEND. Plaintiff filed this lawsuit 16 months ago alleging that it was imminently going to be qualified. If Plaintiff does not qualify to do business within the next 20 days and otherwise comply with its statutory obligations, the Court will dismiss the case without prejudice. See United Medical, supra, at 1740.

Motion to Strike

In the motion to strike, Defendants contend that Plaintiff’s request for attorney’s fees and punitive damages should be stricken. Based on the sustaining of the demurrer to abate the action, the motion to strike is MOOT.