Key Decisions

January 2013 – Corporate Suspension Defense Must Be Pled

(filed under: Key Decisions | January 16, 2013)

Corporate Suspension Defense Must Be Pled

V & P Trading Co., Inc. v. United Charter, LLC
(Cal. Ct. of App., 3d Dist.), filed December 19, 2012

KEY FACTS

V & P Trading sued United Charter for damage to property that was being stored in United Charter’s premises. United Charter answered the complaint and, as an affirmative defense, asserted that the statute of limitations had run. It did not, however, assert that V & P’s corporate status had been suspended for failure to pay taxes.

V & P moved to compel answers to discovery. United Charter opposed it based on the fact that, at the time, V & P’s corporate status – and right to sue – had been suspended. The trial court denied the motion and sanctioned V & P for having made it.

United Charter moved for summary judgment based on the statute of limitations, which had run after V & P had filed suit, but while its status had been suspended. V & P opposed this based on the fact that United Charter had not pled that its status had been suspended. The trial court granted the motion.

HOLDING & REASONING

The Court of Appeal affirmed the motion for summary judgment, but reversed the sanction award.

A plea in abatement, such as suspension of corporate status, must be pled or it is waived. United Charter could not rely on the fact V & P’s corporate status had been suspended. The trial court erred in denying V & P’s motion to compel and in sanctioning it.

As to summary judgment, United Charter had pled the statute of limitations as a defense. Although it was dependent on V & P’s inability to sue, that was not waived for statute of limitations purposes.

ANALYSIS

This case demonstrates the importance of paying one’s taxes in a timely manner. It also demonstrates the importance of properly pleading affirmative defenses.