Noble Security v. Wells Fargo Bank CA1/3 ( 2014 )

Filed 3/28/14 Noble Security v. Wells Fargo Bank CA1/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
NOBLE SECURITY, INC. et al.,
Plaintiffs and Appellants,
v. A134142
WELLS FARGO BANK, N.A. et al.,
(Marin County
Defendants and Respondents. Super. Ct. No. CV082499)
This is an appeal from final judgment after the trial court granted the summary
judgment motion of defendants Wells Fargo Bank, N.A., Wells Fargo & Company and
two individual employees, Ghada Yasin and Helen Owyang (collectively, Wells Fargo).
Plaintiffs Noble Security, Inc. (Noble Security), Noble Locks Enterprises, Inc. (Noble
Locks) and Office Security Systems, Inc. (OSSI) challenge this judgment, arguing,
among other things, that a triable issue of fact exists and that summary adjudication, not
summary judgment, should have been ordered. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs are affiliated corporations owned or controlled by Meir Avganim and
engaged in manufacturing and selling mechanical locking systems for laptop computers.
Noble Security is a California corporation with a Wells Fargo checking account opened
in February 2003 and closed in January 2007; Noble Locks is a Nevada corporation that
qualified to do business in California with a Wells Fargo checking account opened in
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February 2004 and closed in June 2007; and OSSI is a Texas corporation with no Wells
Fargo checking account.
Beginning in 2005, some plaintiffs and Avganim became involved in various
lawsuits against, among others, their sales representative, Jane Ratto, and accountant,
Penelope Kane. Briefly stated, these lawsuits involved Ratto’s and Kane’s alleged
misappropriation of Avganim’s and plaintiffs’ corporate funds, including funds held in
plaintiffs’ Wells Fargo bank accounts. Relevant here, in August 2003, Kane opened a
Wells Fargo checking account in the name of “Noble Enterprises,” which was
subsequently closed in October 2007. In May 2005, Ratto and her husband opened a
Wells Fargo checking account in the name of “JR Marketing LLC dba Noble Locks
Enterprises,” which was subsequently closed in October 2006. Eventually, after the
dispute between plaintiffs, the Rattos and Kane erupted, Wells Fargo filed an interpleader
action to determine the proper owner of the funds held in the Noble Locks and Noble
Security checking accounts. During discovery in these lawsuits, Wells Fargo produced to
the plaintiffs records regarding, among other things, checks deposited in the accounts
opened by Noble Security and Noble Locks, as well as in the JR Marketing accounts
opened by Ratto, her husband or Kane. Ultimately, judgment was entered against Ratto
and Kane awarding Avganim and the plaintiffs the corporate funds held in the Wells
Fargo accounts, but denying them any damages based on the alleged wrongdoing.
On April 1, 2008, the California Franchise Tax Board forfeited the corporate
powers of Noble Locks due to the corporation’s failure to file tax returns or pay franchise
taxes. This forfeiture of corporate powers lasted at least through January 2011. The
corporate status of Noble Locks was subsequently reinstated and its corporate powers
revived on February 14, 2011. Similarly, OSSI forfeited its corporate powers under
Texas law as of January 2011 (after becoming inactive in 2005), and was then revived as
a corporation in June 2011.
Meanwhile, on May 21, 2008, plaintiffs filed the operative complaint in this action
asserting the following causes of action against Wells Fargo: conversion, breach of
fiduciary duty, fraud/concealment, interference with economic advantage, negligence,
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breach of contract and conspiracy. These causes of action were based on two primary
theories. First, plaintiffs alleged that Wells Fargo allowed unauthorized persons to act as
signatories on their accounts. Second, they alleged Wells Fargo deposited checks paid by
third parties to one or more plaintiffs into accounts owned by other persons, including the
Rattos. Wells Fargo answered the complaint, raising affirmative defenses based on,
among other things, lack of capacity to sue and statutes of limitations.
On January 25, 2011, Wells Fargo moved for judgment on the pleadings based on
its discovery during the course of litigation that Noble Locks had forfeited its corporate
powers in California, during which forfeiture the statutes of limitations had run. Two
months later, on March 11, 2011, Wells Fargo moved for summary judgment or,
alternatively, summary adjudication on statute-of-limitations grounds and, as to OSSI, on
the ground that it had forfeited its corporate powers under Texas Law and thus lacked the
capacity to sue.1
Following a hearing on these motions, the trial court granted Wells Fargo’s motion
for summary judgment against Noble Locks, Noble Security and OSSI on statute-of-
limitations grounds, and then denied as moot its motion for judgment on the pleadings
against Noble Locks. Judgment was then entered in favor of Wells Fargo on October 25,
2011, prompting this timely appeal.2
DISCUSSION
Plaintiffs raise the following issues on appeal. First, plaintiffs contend the statutes
relied upon to find that Noble Locks forfeited its right to bring suit in California when it
forfeited its corporate powers in California are needlessly “draconian” and should be
relaxed in their case. (See Rev. & Tax Code, §§ 23301, 23301.5.) Second, plaintiffs
repeat this essentially equitable argument with respect to the trial court’s finding that
1
Wells Fargo also moved for summary judgment against plaintiff OSI, a Texas
corporation. The court denied its motion as to OSI, a ruling not challenged on appeal.
2
Before entering judgment, the trial court granted Wells Fargo’s application to
correct a clerical error in its summary judgment order misidentifying Noble Security
(instead of Noble Locks) as the corporate entity that forfeited its corporate status in 2008.
The court thus filed an amended order on October 4, 2011.
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OSSI, a Texas corporation, had also forfeited its corporate powers, including its right to
bring suit. Third, plaintiffs contend summary judgment should not have been granted
because a disputed issue of fact exists regarding whether Noble Locks actually forfeited
its corporate powers in California. And, lastly, plaintiffs contend summary adjudication,
not summary judgment, should have been granted because some claims are subject to
longer statutes of limitations that did not expire. We address each issue below in logical
order.
The relevant standard of review is not in dispute. Summary judgment may be
granted “if it is contended that the action has no merit . . . .” (Code Civ. Proc., § 437c,
subd. (a).) A defendant moving for summary judgment has met the burden of showing
that a cause of action has no merit if that party “has shown that one or more elements of
the cause of action, even if not separately pleaded, cannot be established, or that there is a
complete defense to that cause of action. Once the defendant . . . has met that burden, the
burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts
exists as to that cause of action or a defense thereto. The plaintiff . . . may not rely upon
the mere allegations or denials of its pleadings to show that a triable issue of material fact
exists but, instead, shall set forth the specific facts showing that a triable issue of material
fact exists as to that cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd.
(p)(2). See also Teselle v. McLoughlin (2009) 173 Cal. App. 4th 156, 168-169.)
“We review an order granting or denying a motion for summary judgment de
novo, examining the evidence before the trial court. We independently determine the
effects of that evidence as a matter of law. (Sangster v. Paetkau (1998) 68 Cal. App. 4th
151, 161, 163 [80 Cal. Rptr. 2d 66].) ‘In undertaking our independent review of the
evidence submitted, we apply “ ‘ “the same three-step process required of the trial court:
First, we identify the issues raised by the pleadings, since it is these allegations to which
the motion must respond; secondly, we determine whether the moving party’s showing
has established facts which negate the opponent’s claims and justify a judgment in
movant’s favor; when a summary judgment motion prima facie justifies a judgment, the
third and final step is to determine whether the opposition demonstrates the existence of a
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triable, material factual issue. [Citations.]” ’ ” ’ (Dawson v. Toledano (2003) 109
Cal. App. 4th 387, 392 [134 Cal. Rptr. 2d 689].)” (Jenkins v. County of Riverside (2006)
138 Cal. App. 4th 593, 601-602.)
I. Summary Judgment Against Noble Locks.
In granting summary judgment in favor of Wells Fargo, the trial court reasoned
with respect to Noble Locks that it had forfeited its corporate status in California by
failing to file tax returns or pay overdue taxes in California, which in turn precluded the
corporation from bringing litigation in California during the forfeiture period. Further,
during Noble Locks’ forfeiture period, the relevant limitations periods – to wit, one year
for claims based on payment of checks by unauthorized signatories and three years for
claims based on depositing of checks intended for Noble Locks into the Rattos’ JR
Marketing account – had run. As such, the trial court concluded, all of Noble Locks’
claims against Wells Fargo were now time-barred. We agree.
The following facts are relevant. Noble Locks’ causes of action against Wells
Fargo accrued no later than 2006, when Wells Fargo provided regular statements and
checks to plaintiffs regarding their accounts. At that time, the applicable statutes of
limitations began to run – to wit, one year, or until 2007, for the claims based on the
alleged payment of checks to unauthorized signatories (Code Civ. Proc., § 340, subd.
(c)), and three years, or until 2009, for the claims based on depositing checks intended by
third parties for plaintiffs into others’ accounts (Cal. U. Com. Code, § 3118, subd. (g)).
On April 1, 2008, Noble Locks’ corporate powers were suspended by the Franchise Tax
Board pursuant to Revenue and Taxation Code sections 23302 and 23301.5 based upon
its failure to, among other things, file tax returns and/or pay overdue taxes.3 On May 21,
2008, plaintiffs filed the operative complaint in this lawsuit. In February 2011, Noble
Locks was revived as a corporation in California upon the issuance of a certificate of
reviver.
3
Unless otherwise stated, statutory citations herein are to the Revenue & Taxation
Code.
5
That Noble Locks forfeited its right to sue when it forfeited its corporate powers is
a matter of statutory law. Under section 23301, “the corporate powers, rights and
privileges of a domestic taxpayer, may be suspended, and the exercise of the corporate
powers, rights and privileges of a foreign taxpayer in this state may be forfeited” if,
among other things, the corporation fails to pay any tax or penalty “on the last day of the
12th month after the close of the taxable year,” or fails to pay any tax or penalty “due and
payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this
part, upon notice and demand from the Franchise Tax Board . . . on or before 6 p.m. on
the last day of the 11th month following the due date of the tax.” (§ 23301, subds. (a),
(b).) Similarly, section 23301.5 provides “the corporate powers, rights and privileges of a
domestic taxpayer may be suspended, and the exercise of the corporate powers, rights
and privileges of a foreign taxpayer in this state may be forfeited if a taxpayer fails to file
a tax return.” (§ 23301.5.)
Further, as our appellate colleagues in the Second Appellate District have
explained: “A corporation which has its powers suspended pursuant to these sections
lacks the legal capacity to prosecute or defend a civil action during its suspension.
[Citations.] Accordingly, when a suspended corporation commences an action during its
suspension, the statute of limitations continues to run. [Citations.] [¶] A suspended
corporation may revive its corporate powers by complying with the requirements set forth
in section 23305 which provides: ‘Any taxpayer which has suffered the suspension or
forfeiture provided for in Section 23301 or Section 23301.5 may be relieved therefrom
upon making application therefor in writing to the Franchise Tax Board and upon
payment of the tax and the interest and penalties for nonpayment of which the suspension
or forfeiture occurred, together with all other taxes, deficiencies, interest and penalties
due under this part, and upon the issuance by the Franchise Tax Board of a certificate of
revivor. . . .’ [¶] If the statute of limitations runs out prior to revival of a corporation’s
powers, the corporation’s action will be time barred even if the complaint would
otherwise have been timely. [Citations.] A corporation is so barred because, under
section 23305a, the issuance of a certificate of revivor is ‘without prejudice to any action,
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defense or right which has accrued by reason of the original suspension or forfeiture.’
[Citations.]” (Sade Shoe Co., Inc. v. Oschin & Snyder (1990) 217 Cal. App. 3d 1509,
1512-1513 [italics added].)
Thus, applying this law to the undisputed facts of our case, the trial court correctly
found Noble Locks’ claims time-barred, given that its corporate powers were suspended
in April 2008, a month before plaintiffs filed their complaint against Wells Fargo, with
the result that the complaint’s filing did not trigger commencement of this action or toll
the applicable statutes of limitations. Further, the statutes of limitations continued to run
until expiring, in 2007, for payment-to-unauthorized-signatories claims and, in 2009, for
depositing-checks-in-other-accounts claims. (Code Civ. Proc., § 340, subd. (c); Cal. U.
Com. Code, § 3118, subd. (g).) Noble Locks was then not revived until 2011, when a
certificate of revivor issued, a date beyond the limitations period. (§ 23305.)
In challenging the trial court’s reasoning, plaintiffs insist there is a triable issue of
fact as to whether Noble Locks actually forfeited its corporate powers in California. We,
however, disagree. The trial court, on Wells Fargo’s motion, took judicial notice of a
Secretary of State certificate dated January 6, 2011, stating as follows: “The records of
this office indicate the California Franchise Tax Board forfeited [Noble Locks’] powers,
rights and privileges on April 01, 2008, pursuant to the provisions of the California
Revenue and Taxation Code, and the entity’s powers, rights and privileges remain
forfeited.” Under California statutory law, no other proof was required. (§ 23302, subd.
(c) [“The Franchise Tax Board shall transmit the names of taxpayers to the Secretary of
State as to which the suspension or forfeiture provisions of Section 23301, 23301.5, or
23775 are or become applicable, and the suspension or forfeiture therein provided for
shall thereupon become effective. The certificate of the Secretary of State shall be prima
facie evidence of the suspension or forfeiture”] [italics added].)
Plaintiffs do not challenge the trial court’s taking of judicial notice of the
Secretary of State certificate. Plaintiffs insist, however, that they rebutted the
certificate’s “prima facie evidence” by offering the declarations of three corporate
officers, including Avganim, in which they denied receiving notice of Noble Locks’
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forfeiture of corporate powers.4 As plaintiffs note, a corporation’s powers cannot be
forfeited pursuant to sections 23301 or 23301.5 until the Franchise Tax Board has mailed
to the corporation “a notice preliminary to suspension which indicates that the taxpayer
will be suspended by a date certain,” and that “date certain” has passed without the
corporation coming into compliance. (§ 21020, § 23302, subds. (a)-(c).) However, as
Wells Fargo points out, nothing in plaintiffs’ proffered evidence actually contradicts the
certificate’s statement that Noble Locks’ corporate powers were forfeited on April 1,
2008. Simply put, even assuming the veracity of the declarants’ denials of receiving the
requisite notice, such facts would not prove the corporation failed to receive notice.
Generally speaking, a corporation is deemed to have received notice when such notice is
mailed to the corporation at its ordinary place of business. It need not be mailed to any
specific corporate officer or employee. (Pacific Gas & Elec. Co. v. State Board of
Equalization (1955) 134 Cal. App. 2d 149, 153-154 [“When the notice is mailed correctly
directed to the corporation as such at its own address, the service is completed and
whether it reaches the specific agent or division which must act on it is the risk of the
addressee corporation and depends on its care”].) Accordingly, we conclude plaintiffs
have failed on this record to rebut the presumption that the Franchise Tax Board’s official
duty to mail to Noble Locks notice preliminary to suspension pursuant to section 21020
“has been regularly performed.” (Evid. Code, § 664; § 23302; § 21020.) While plaintiffs
may have produced evidence three Noble Locks representatives received no notice of
forfeiture, they produced no evidence the corporation did not receive notice, much less
that the requisite notice was never mailed. Such evidence does not, as the trial court
found, create a disputed issue of material fact capable of defeating summary judgment.
Accordingly, the trial court had a proper basis for finding its claims time-barred. (Sade
Shoe Co., Inc. v. Oschin & Snyder, supra, 217 Cal.App.3d at p. 1513 [a corporation’s
revival is without prejudice to the limitations defense accruing during the forfeiture
4
According to these declarations, Avganim was Noble Locks’ “World Wide Group
Director;” Shimon Yair was one of its “principal[s], with signing authority; and Rodney
Lewin was its designated agent for service of process.
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period]; § 23305a [“Upon the issuance of the certificate by the Franchise Tax Board the
taxpayer therein named shall become reinstated but the reinstatement shall be without
prejudice to any action, defense or right which has accrued by reason of the original
suspension or forfeiture”].)
Further, we decline plaintiffs’ request to excuse Noble Locks from compliance
with sections 23301 and 23301.5 based on purported wrongdoing by Wells Fargo.
Plaintiffs theorize that Noble Locks could not file mandatory tax returns or pay overdue
taxes because Wells Fargo mishandled its accounts or otherwise tied up their corporate
funds in the interpleader action. However, they present no actual evidence of
wrongdoing, much less legal authority for the proposition that wrongdoing may provide a
basis for excusing a corporation from otherwise mandatory tax laws. As such, they
provide no legal basis for reversal. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th
826, 853 [plaintiff may not rely on speculation to defeat summary judgment].) Moreover,
while plaintiffs urge this court to fashion an exception to the forfeiture rules similar to the
recognized exception for delinquent corporate taxpayers that substantially comply with
the State’s corporate revival statute, plaintiffs neither claim nor attempt to prove Noble
Locks substantially complied in this case. (See Sade Shoe Co., Inc. v. Oschin & Snyder,
supra, 217 Cal.App.3d at p. 1515 [“a corporation which has been suspended pursuant to
sections 23301 and/or 23301.5 may nonetheless prosecute or defend an action prior to its
official revivor provided there has been substantial compliance with the revival statute”].)
We thus decline their request for lack of legal and factual support.
II. Summary Judgment Against OSSI.
Plaintiffs then argue without offering additional legal support or analysis that
summary judgment against OSSI was error for all the same reasons summary judgment
against Noble Locks was error. Specifically, as with Noble Locks, the trial court found
OSSI’s claims were time-barred because the applicable one- and three-year statutes of
limitations had run while its corporate powers under Texas law had been forfeited. Even
assuming this argument was not waived based on plaintiffs’ failure to provide proper
legal authority or analysis in their briefs on appeal (Provost v. Regents of University of
9
California (2011) 201 Cal. App. 4th 1289, 1294), the undisputed law and facts nonetheless
support the trial court’s ruling.
Similar to California corporations, Texas corporations failing to pay taxes and file
tax returns forfeit corporate powers, including the power to sue. (Texas Tax Code Ann.,
§§ 171.251, 171.252.) Further, under California law, a foreign corporation lacking the
power to sue in its state of incorporation likewise lacks power to sue in California. (CM
Record Corp. v. MCA Records, Inc. (1985) 168 Cal. App. 3d 965, 969.) That is precisely
what occurred here, and thereby allowed the expiration of OSSI’s claims – to wit, OSSI’s
corporate powers were forfeited in October 2005 and were still forfeited as of January
2011, a date after the limitations periods had ended (in 2007, for payment-to-
unauthorized-signatories claims and, in 2009, for depositing-checks-in-other-accounts
claims). (Code Civ. Proc., § 340, subd. (c); Cal. U. Com. Code, § 3118, subd. (g).) Thus,
for all the reasons already explained, we conclude no basis exists for disturbing the trial
court’s grant of summary judgment against OSSI.
III. Summary Judgment Against Noble Security.
Finally, plaintiffs contend the trial court erred by granting summary judgment
rather than summary adjudication against Noble Security because certain of its claims
survived the statute of limitations. As plaintiffs note, Noble Security did not forfeit its
corporate powers like the other plaintiffs. As such, plaintiffs insist claims raised by
Noble Security that accrued no later than 2006 and that have a three-year limitations
period were not time-barred when the complaint became operative as to Noble Security
upon its filing in May 2008.5
Wells Fargo disputes this contention. It reasons that the operative complaint does
not include any claim by Noble Security subject to a three-year limitations period (i.e.,
those based on the bank’s alleged depositing of third-party checks intended for one or
more plaintiffs into the accounts of third parties). Rather, Wells Fargo continues, the
complaint only raises claims based on this theory on behalf of Noble Locks and “those
5
Plaintiffs implicitly concede claims governed by the one-year statutory limitations
period are time-barred.
10
Plaintiff corporations which did not have Wells Fargo accounts.” Undeniably, Noble
Security did have a Wells Fargo account during the relevant time period. Moreover,
Wells Fargo adds, the trial court expressly invited plaintiffs to address the issue of
whether Noble Security asserted other claims that would survive the statute of limitations
by “fil[ing] an appropriate motion,” but plaintiffs admittedly did not do so. We agree
with Wells Fargo that, on this record, the trial court’s ruling as to Noble Locks must
stand.
The complaint, in paragraphs 7 through 10, makes several allegations relating to
Wells Fargo’s alleged permitting of unauthorized persons to act as signatories on
plaintiffs’ accounts, including by “delet[ing] the names of the Plaintiffs’ agents who were
proper signatories on the Plaintiffs’ accounts, and add[ing] the names of other
unauthorized persons to act as signatories on Plaintiffs’ accounts.” (Italics added.)
The complaint, in paragraphs 11 through 14, then makes several allegations with
respect to Wells Fargo’s alleged depositing of checks into accounts opened or owned by
third parties with no right to plaintiffs’ corporate funds. However, unlike the allegations
in paragraphs seven through ten, which refer to “plaintiffs” collectively, the allegations in
paragraphs 11 through 14 mention only specific plaintiffs, namely Noble Locks and those
plaintiffs without Wells Fargo accounts. Specifically, the complaint states:
“Wells Fargo, through the actions of certain of the Individual Defendants, opened an
account under the name of JR Marketing, LLC, dba Noble Locks Enterprises. When
Wells Fargo received checks for deposit which were written to the corporate Plaintiff,
Noble Locks Enterprises, Inc., instead of depositing these checks into the proper account
owned by the Plaintiff corporation, Wells Fargo deposited them into the JR Marketing
LLC account, thereby converting Noble Locks Enterprises, Inc.’s checks. (Italics added.)
“Wells Fargo and the Individual Defendants also received checks made payable to those
Plaintiff corporations which did not have Wells Fargo accounts. Defendants deposited
these checks into accounts owned by other persons or entities who had no right to receive
those funds, thereby converting Plaintiffs’ checks.” (Italics added.)
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Finally, in the later sections of the complaint in which specific causes of action are
raised (including conversion, interference with economic advantage and negligence), the
complaint generally states as to each cause that it “incorporate[s] each of the foregoing
paragraphs as if fully set forth herein.” The complaint does not, however, set forth any
additional facts or allegations purporting to add Noble Security as a party claiming to
have been injured by Wells Fargo’s alleged depositing of checks into accounts opened or
owned by third parties with no right to plaintiffs’ corporate funds.
Plaintiffs direct us specifically to paragraphs 36 and 37, which provide in relevant
part: “Defendants . . . failed to deposit checks payable to Plaintiffs into Plaintiffs’
accounts. In doing so, Defendants disrupted Plaintiffs’ economic relations with their
customers.” However, we decline to read this sentence in isolation from the rest of the
complaint, particularly from those paragraphs incorporated by reference that, as we just
explained (pp. 10-11, ante), limit claims arising from Wells Fargo’s alleged depositing of
checks in the wrong accounts to plaintiffs other than Noble Security. (Zhang v. Superior
Court (2013) 57 Cal. 4th 364, 370 [courts must give the complaint “a reasonable
interpretation, reading it as a whole and its parts in their context”].) As such, we agree
with Wells Fargo summary judgment, not summary adjudication, against Noble Security
was proper because the operative complaint failed to raise any claims against the bank
based on its depositing of checks into third parties’ accounts. (Turner v. State of
California (1991) 232 Cal. App. 3d 883, 891 [“The pleadings delimit the issues to be
considered on a motion for summary judgment”]; Government Employees Ins. Co. v.
Superior Court (2000) 79 Cal. App. 4th 95, 98-99, fn. 4 [“defendant moving for summary
judgment need address only the issues raised by the complaint; the plaintiff cannot bring
up new, unpleaded issues in his or her opposing papers”].)
Accordingly, we stand by our conclusion that plaintiffs have failed to prove error
in the trial court’s grant of summary judgment against each of the three plaintiffs – Noble
Locks, Noble Security and OSSI – based on the running of the statutes of limitations.
DISPOSITION
The judgment is affirmed.
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_________________________
Jenkins, J.
We concur:
_________________________
McGuiness, P. J.
_________________________
Pollak, J.
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