Case Name:   Steven Hartmeier v. Producepoint.com, Inc., et al.

Case No.:       1-13-CV-239638

After full consideration of the arguments, authorities, and papers submitted by each party, the court makes the following rulings:

This action arises out of an alleged breach of contract.  Plaintiff and cross-defendant Steven Hartmeier (“Mr. Hartmeier”) entered into negotiations with defendant and cross-complainant Rock Clapper (“Mr. Clapper”) regarding employment with defendant Producepoint.com, Inc. dba NGB Markets (“NGB”).  Mr. Hartmeier alleges that Mr. Clapper fraudulently represented that NGB was licensed, in good standing with the State of California, financially viable, and was capable of paying the salary and benefits offered to him.  (Second Amended Complaint (“SAC”), ¶ 23.)  On or about February 7, 2011, Mr. Hartmeier entered into a written employment agreement (the “Employment Agreement”) with NGB and Mr. Clapper (collectively “Defendants”), in which Mr. Hartmeier became the chief executive officer of NGB.  (SAC, ¶ 6.)  The Employment Agreement called for Mr. Hartmeier to be paid a base salary of $275,000 per year, plus bonuses and vacation time.  (SAC, ¶¶ 11, 13-16.)  On June 16, 2011, Mr. Clapper verbally promised and confirmed via email that Mr. Hartmeier was entitled to a bonus in the amount of $50,000.  (SAC, ¶¶ 9, 26.)  Mr. Hartmeier resigned from his position on August 31, 2011.  (SAC, ¶ 7.)  Mr. Hartmeier alleges that Defendants breached the Employment Agreement by failing to pay him the salary, bonuses, and vacation time that he accrued.  (SAC, ¶ 17.)

On April 30, 2014, Mr. Hartmeier filed the operative second amended complaint (“SAC”), alleging causes of action for: (1) breach of contract; (2) fraud; (3) fraud in the inducement; (4) quantum meruit; and (5) restitution.

On June 4, 2014, Defendants filed an answer to the SAC. On the same date, NGB filed a cross-complaint against Mr. Hartmeier, alleging causes of action for conversion and breach of fiduciary duty.  In its cross-complaint, NGB alleges that, during the course of his employment, Mr. Hartmeier transferred over $40,000 from a bank account maintained by NGB to himself without authorization.  (Cross-Complaint, ¶ 11.)

Mr. Hartmeier demurs to the cross-complaint of NGB under Code of Civil Procedure section 430.10, subdivision (b) on the grounds that NGB lacks the legal capacity to sue.  (See Notice of Motion, p. 2:9-12.)  In addition, Mr. Hartmeier moves to strike the answer of NGB pursuant to Code of Civil Procedure sections 435, 436, and 437 on the ground that NGB lacks the legal capacity to defend itself in this action.  (See Notice of Motion, p. 2:4-7.)

Mr. Hartmeier’s request for judicial notice of the certificate of status from the California Secretary of State dated June 24, 2014, indicating that NGB is a suspended corporation, is GRANTED.  (See Gigax v. Ralston Purina Co. (1982) 136 Cal.App.3d 591, 602, fn. 6 [“[a] court may take judicial notice of the acts and records of the Secretary of State”]; see also Gamet v. Blanchard (2001) 91 Cal.App.4th 1276, 1286-1287; see also People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [only relevant matters subject to judicial notice]); see also Evid. Code § 452, subd. (h) [a court may take judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy”].)

The judicially noticeable facts indicate that NGB is a suspended corporation and, therefore, lacks the legal capacity to sue or defend itself in this action.  (See Grell v. Laci Le Beau Corp. (1999) 73 Cal.App.4th 1300, 1306 [during the period that a corporation is suspended for failure to pay taxes, it may not prosecute or defend an action, appeal from an adverse judgment, or seek a writ of mandate]; see also Reed v. Norman (1957) 48 Cal. 2d 338, 343; see also Boyle v. Lakeview Creamery Co. (1937) 9 Cal. 2d 16, 20-21.)   However, NGB indicates that is in the process of obtaining a certificate of revivor from the California Secretary of State and the applicable case law establishes that it is appropriate to permit NGB a short period of time to obtain a revivor.[1]  (See Cadle Co. v. World Wide Hospitality Furniture, Inc. (2006) 144 Cal. App. 4th 504, 512-513; see also Schwartz v. Magyar House, Inc. (1959) 168 Cal. App. 2d 182, 188-189; see also Timberline, Inc. v. Jaisinghani (1997) 54 Cal. App. 4th 1361, 1366.)

Accordingly, Mr. Hartmeier’s demurrer to the cross-complaint of NGB is SUSTAINED, with 60 days leave to amend—a reasonable amount of time for NGB to pay its back taxes and obtain a certificate of revivor.  Additionally, Mr. Hartmeier’s motion to strike the answer of NGB on the ground that NGB lacks the legal capacity to defend itself in this action is GRANTED, with 60 days leave to amend.  However, if NGB obtains a certificate of revivor in less than 60 days, NGB is ordered to file its amended pleadings as soon as practicable.

The court will prepare the order.