Brandon v. Umpqua Lumber & Timber Co.

SLOSS, J. Motion to dismiss appeal. The action was brought in December, 1911, against the Umpqua Lumber and Timber Company, a corporation organized under the laws of this state, to quiet title to certain parcels of land in the county of Mendocino. The corporation answered, setting up a claim to an easement for a railroad right of way over the lands de *323 scribed in the complaint. Judgment in favor of the plaintiffs was entered on January 2, 1913. On January 11, 1913, the attorneys who had appeared for the corporation gave notice that it appealed from said judgment. The respondents, presenting a certificate of the secretary of state showing that on November 30, 1912, prior to the entry of judgment, the defendant corporation had forfeited its corporate charter for failure to pay its license-tax, moved to dismiss the appeal on the ground that the forfeiture took away the right of the corporation to give notice of, perfect, or prosecute an appeal. It is, no doubt, the rule that, unless the statute otherwise provides,_ “the effect of the dissolution of a corporation is to terminate its existence as a legal entity, and render it incapable of suing or being sued as a corporate body or in its corporate name.” (Crossman v. Vivienda Water Co., 150 Cal. 575, 580, [89 Pac. 335].) And this effect follows, whether the dissolution has been declared by judicial decree, as in the case of the Vivienda Water Company, or results from the statute declaring the forfeiture of the corporate franchise for nonpayment of license-tax. (Newhall v. Western Zinc M. Co., 164 Cal. 380. [128 Pac. 1040].) It may, too, be conceded that section 10a, added to the Corporation License Act in 1906 (Stats. Ex. Sess. 1906, p. 22) providing that the directors of a corporation forfeiting its charter are trustees of the corporation and its stockholders, with power to settle the affairs of the corporation, and to maintain or defend actions pending in favor of or against the corporation, did not, in its original form, give the trustees authority to maintain or defend actions in the corporate name. This provision is substantially similar to section 400 of the Civil Code, which was held, in Crossman v. Vivienda Water Co., 150 Cal. 575, [89 Pac. 335], to give no such authority. But section 10a was amended in 1907 (Stats. 1907, p. 745) by the addition of the following proviso: “Provided always that no action pending against any corporation shall abate thereby, but may be prosecuted to final judgment the same may be enforced by execution with the same force and effect and in like manner as though no forfeiture had occurred . . .” This enactment has been construed by us in the very recent case of Lowe v. Superior Court, 165 Cal. 708, [134 Pac. 190], where the court used this language: “We are of *324 the opinion that section 10a of the act, as amended by the addition of the proviso, should be construed as providing that any action included within the meaning of the proviso shall not abate by reason of the forfeiture, but may be continued and prosecuted in the corporate name to final judgment, the control and management of the action so far as the corporate interests are concerned being in the directors or managers in office at the time of the forfeiture, they being the trustees of the corporation and stockholders or members. While doubtless they may be properly substituted as parties defendant, such substitution is not essential to a continuance of the action, as we read the statute.” In the case just referred to this court had been asked to issue a writ of prohibition restraining the superior court from enforcing a judgment entered against a corporation after the forfeiture of its charter. The relief sought was denied. The views expressed in the foregoing quotation are decisive of the present motion, unless the respondents can successfully distinguish the Lowe case from the one before us. This they seek to do by pointing out that in the Lowe case the parties suing the corporation were seeking to continue the prosecution against it in its corporate name, while here the defendant corporation is seeking to exercise the right of appeal. But we think the proviso is not to be construed as conferring a right upon the adverse party alone. It declares that the action shall not abate, “but may be prosecuted to final judgment (and) . . . enforced . . . in like manner as though no forfeiture had occurred.” It is true that actions by the corporation are not saved. But in actions against the corporation, the intent seems to be to permit the litigation to go on to final judgment and execution as if there had been no forfeiture. If the plaintiff may prosecute his‘action regardless of the forfeiture, using the corporate name as that of the party to be served with notices of all kinds, and otherwise treating the corporation as the party defendant, there must be the correlative right of defending in the corporate name against such prosecution. The contrary view would lead to the anomalous result that those interested in resisting the action would be bound by proceedings taken against the corporation in its corporate name, while they could not defend in the only name and capacity by which it was sought to bind them. Our conclusion is that the pro *325 viso gives the right to continue the defense, as well as the prosecution, in the corporate name, notwithstanding a forfeiture of charter pending the action, and that the right of defense includes the right to prosecute an appeal in the name of the corporation. It becomes unnecessary to consider other points urged in opposition to the motion. The motion to dismiss the appeal is denied. Angellotti, J., Lorigan, J., Melvin, J., Shaw, J., and Henshaw, J., concurred.