California Procedure,  Capacity to Sue,  Judgment

Judgment assignees better be careful

Last month’s decision in Cal-Western Business Services, Inc. v. Corning Capital Group, case no. B241714 (2d Dist., November 6, 2013) makes for some interesting reading and a cautionary tale for those who purchase assignments of judgments.

Corning Capital found itself on the losing end of a money judgment. The original judgment creditor assigned the judgment to Pacific West One Corp., who then assigned it to the unfortunate Cal-Western. Why unfortunate? Because Pacific West One’s corporate status was suspended at the time it gave the assignment and was never revived, and the trial court held that as a result, Cal-Western lacked capacity to enforce the judgment against Corning Capital. The Court of Appeal affirmed.

One could be forgiven for being confused by this statement of the court (my emphasis):

At the time Cal-Western filed the instant action on the Judgment four years later [after the assignment], Pacific West One’s corporate powers had not been revived and it remained a suspended corporation lacking capacity to file or maintain a suit. Therefore, because a defense based on lack of capacity to sue existed at the time of notice of the assignment and could have been asserted against Pacific West One had it brought the action itself, Cal-Western was subject to the same defense in suing to enforce the Judgment as Pacific West One’s assignee.

What is one to make of that? If the the notice of the assignment is the time when capacity is determined, then why mention that the assignor’s suspended corporate status had not been later revived? Later revival would be immaterial, unless the court is intimating that that the assignor’s revival prior to the notice of assignment would give the assignee standing that did not exist at the time of the actual assignment. Is the court doing so? That seems inconsistent with its citation to

the general rule that “`[t]he assignee “stands in the shoes” of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment.'” (Johnson v. County of Fresno (2003) 111 Cal.App.4th 1087, 1096; see also Bliss v. California Co-op. Producers (1947) 30 Cal.2d 240, 250 [“an assignee of a chose in action is subject to all equities and defenses existing at or before the notice of the assignment“][.])

What about other scenarios? For example, if if a corporate assignor is in good standing at the time of the assignment but is suspended by the time notice of the assignment is given, does the assignee have standing?

Maybe there are cases definitively answering these questions.  But caution should be the watchword for those purchasing assignments of judgments. Any assignee who purchases a judgment from a corporate assignor better be careful about confirming that the assignor is a corporation in good standing at the time of the assignment and then serve notice of the assignment immediately, before that status can change. Some warranties and guarantees in the assignment agreement wouldn’t hurt, either.

They're capacitors, get it? Capacity, capacitor . . aw, forget it. That's what you get when your humble law blogger also majored in electrical engineering.