AMERICAN RETAIL MANAGEMENT, INC., Plaintiff and Respondent, v. BAKERSFIELD FOOD CITY, INC., et al., Defendants and Appellants.
Plaintiff American Retail Management, Inc., brought an action against Bakersfield Food City, Inc., William Young, and Jack Young's Supermarkets, Inc., for damages for breach of a contract between plaintiff and the named defendants. Those defendants raised as an affirmative defense that plaintiff, a Washington corporation, had not qualified to do business in California as required by Corporations Code section 2105,1 and thus was prohibited by section 2203, subdivision (c), from maintaining its lawsuit. Plaintiff contended it was not subject to this prohibition since it did not transact intrastate business. All the issues, including whether plaintiff was required to qualify to do business in California, were tried in a single trial to the court below. Following trial, the court ruled (1) that plaintiff was entitled to recover from Bakersfield Food City, Inc., and Jack Young's Supermarkets, Inc. (defendants) the sum of $31,208.63; (2) that plaintiff transacted a substantial amount of business within California at a time when it was not qualified to do business here; and (3) that the action be abated until such time as plaintiff qualified to do business in California. After the trial court denied defendants' posttrial motions, including a motion to amend their answer to plead the statute of limitations, it entered judgment in accordance with its memorandum of decision, and defendants appealed.
The principal issue presented on appeal is whether the applicable statute of limitations was tolled by the filing of plaintiff's complaint in 1983 even though plaintiff did not qualify to do business here until 1986. We hold that it was so tolled; we also resolve the other issues in favor of plaintiff and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In 1982, plaintiff was engaged in the business of making detailed analyses of supermarket operations so plaintiff could recommend to store management actions the supermarkets should take to increase the efficiency and profitability of their businesses. As a means of expanding its own business, plaintiff either conducted or participated in various seminars and workshops in California to explain its system for improving grocery operations to various grocers' groups, including one in Fresno. Such participation led to contracts with grocers in Hanford and in Redding, in addition to a contract with defendants, entered into February 1, 1982.
The contract with defendants required plaintiff to install its system in defendants' stores for a fee of $35,000, payable $5,000 upon execution of the contract and the balance in six monthly payments of $5,000 each. In addition, defendants were to pay a weekly charge of $65 per store for followup services and to reimburse travel expenses. Defendants were given the right to cancel at any time they were dissatisfied with plaintiff's services.
Plaintiff visited defendants' various stores, assisted in the training of their personnel, made recommendations and installed plaintiff's computerized program as agreed. Defendants made only one payment—the downpayment of $5,000. They terminated the contract on February 26, 1982.
Defendants' termination and failure to make the agreed payments led to this proceeding in which the trial court found defendants liable for travel expenses of $1,208.63 incurred prior to the termination, plus the $30,000 of unpaid installments due under the contract. Following issuance of the memorandum of decision and the trial court's abatement of the action in all respects as already described, plaintiff acted to qualify to do business in California. On appeal, as in the trial court, defendants have challenged the sufficiency of that action. They also assert that the trial court abused its discretion in denying their posttrial motion to amend their answer to plead the statute of limitations, thus presenting the above-stated principal issue on appeal.
I. Has plaintiff complied with section 2203, subdivision (c), a necessary prerequisite to maintenance of its lawsuit?
Defendants first argue that despite the trial court's finding that plaintiff had conducted intrastate business in California and was therefore required to qualify to do business by section 2105, plaintiff did not, and has not to this date, complied with the corollary provisions of section 2203, subdivision (c). Section 2105 is set forth below at footnote 2.2 That section outlines the steps a foreign, i.e., non-California, corporation must take to obtain a certificate of qualification from the Secretary of State enabling it to conduct intrastate business. (See also 1A Ballantine & Sterling, Cal. Corporation Laws (4th Ed.1962) Foreign Corporations, § 391, pp. 18–22—18–34.)
Section 2203 specifies penalties to be imposed upon a foreign corporation which transacts or conducts intrastate business without first having obtained the necessary certificate of qualification. In addition to a statutory penalty of $20 per day that may be imposed under subdivision (a) of that section for each day intrastate business is conducted by a foreign corporation not qualified to do so, subdivision (c) precludes a foreign corporation from maintaining any action or proceeding upon such intrastate business until the corporation (1) has qualified to do business, (2) has paid the Secretary of State a penalty of $250 in addition to the normal filing fees and filed a receipt therefor with the clerk of the court where the action is pending, and (3) has filed receipts showing payment of “all franchise taxes and any other taxes on business or property in this state that should have been paid for the period during which it transacted intrastate business.” Defendants argue that plaintiff cannot maintain even the instant appeal because it has failed to satisfy section 2203, subdivision (c).
Defendants concede that plaintiff has satisfied the first two requirements of the statute in that it has, in fact, qualified to do business in California, provided the trial court with evidence of this fact, and has paid the statutorily mandated $250 penalty, evidenced by a receipt furnished to the trial court. But they vigorously assert that plaintiff has never complied with the third statutory prerequisite to maintenance of a lawsuit based on intrastate business. Specifically, they urge that plaintiff failed to furnish the trial court any “receipt” for the payment of franchise taxes due in 1982, the year it conducted intrastate business in California. We deem this a challenge to the sufficiency of the evidence presented to the trial court to establish that plaintiff paid its franchise taxes.
Until after trial on plaintiff's breach of contract claim against defendants, in which evidence was introduced and arguments were heard on whether plaintiff had conducted intrastate business in California, it had not been established that plaintiff was required to comply with the provisions of section 2203, subdivision (c). Thus, plaintiff's alleged noncompliance was first presented to the trial court by defendants' posttrial motion to dismiss plaintiff's complaint, or, alternatively, for leave to amend their answer to plead the statute of limitations. No transcript of the hearing on defendants' motion is before us, but the minute order for the hearing and the formal order denying defendants' motion indicate counsel for both parties appeared and the court was “satisfied that plaintiff has now qualified to do business in this state and is entitled to a judgment.” The trial court denied defendants' motions “[o]n proof made to the satisfaction of the Court. ” (Emphasis added.) To satisfy the statutory requirement that plaintiff file receipts for payment of franchise taxes for the year in which it qualified to do business, plaintiff furnished the trial court a photocopy of its California corporation franchise or income tax return for 1982 partially obscured by a photocopy of a check payable to the State of California for $200. The form indicates it was prepared on June 9, 1986, the check is dated June 10, 1986, and a stamp at the top of the form indicates “REMIT JUN 17 1986 FRE.”
Defendants have two objections to this proof. First, defendants contend the photocopies provided by plaintiff are not a “receipt.” To refute plaintiff's claim that the Franchise Tax Board does not issue receipts, defendants attached to their reply brief a photocopy of a receipt form for taxes paid issued by the Franchise Tax Board. Secondly, defendants assert that payment of $200, the minimum annual corporate income tax due the state of California, is insufficient. Such payment, they argue, does not reflect payment of interest accrued between 1982, the year in which plaintiff conducted instrastate business, and 1986, the year in which the franchise tax was paid. As an appendix to defendants' opening brief, they attached a form prepared by the Franchise Tax Board showing the method to be used to calculate interest and penalties, and based upon this form, defendants estimate plaintiff should have paid an additional $70 in interest.
Although defendants advanced these same theories to the trial court, nothing in the record suggests that any “proof” was presented there. Defendants seem to have overlooked their burden of proving plaintiff is barred from maintaining its action by failure to comply with section 2203, subdivision (c). As the court pointed out in Thorner v. Selective Cam Transmission Co. (1960) 180 Cal.App.2d 89, 90, 4 Cal.Rptr. 409 “ ‘The burden of proving that section 6801 [predecessor of section 2203] precludes maintenance of an action is upon the party pleading the bar of the statute.’ [Citation.]”
Defendants have offered no authority for their premise that the “receipt” referred to in section 2203, subdivision (c), can mean only a form receipt issued by the Franchise Tax Board and nothing else. The obvious purpose of requiring the filing of such a receipt, as well as a receipt showing payment of the $250 penalty to the Secretary of State, with the clerk of the court where the action is pending, is to ensure the trial court will have evidence before it from which to determine compliance with section 2203, subdivision (c). The form receipt to which defendants direct this court's attention in their reply brief was not, as far as the record reveals, presented to the trial court. Even had it been presented, it would not have prevented the trial court from accepting other competent evidence sufficient to satisfy it that the foreign corporation, i.e., plaintiff, had complied with the punitive provisions of section 2203, subdivision (c). This is precisely what happened here. The trial court made it perfectly clear in both the minute order and in the formal order that plaintiff's compliance with the statute had been proved to the court's satisfaction. The court accepted the photocopied corporate tax return and check. This evidence is sufficient, and not incompetent as a matter of law, to show compliance.
Similarly, again remembering that defendants bear the burden of proving plaintiff is barred from maintaining its action by its failure to comply with section 2203, subdivision (c), defendants should have proved, not merely hypothesized, that payment of $200 was insufficient since it could not encompass payment of interest on corporate tax for the tax year 1982. The trial court declined to accept defendants' speculation as satisfying their burden of proof; we do likewise. Thus the trial court's determination that plaintiff had complied with section 2203, subdivision (c), is supported by substantial evidence.
II. Was the applicable statute of limitations tolled by the filing of plaintiff's complaint in 1983 even though plaintiff did not qualify to do business until 1986?
Defendants next urge that the four-year statute of limitations on this written contract (Code Civ.Proc., § 337, subd. (1)) was not tolled by the filing of plaintiff's complaint on March 3, 1983, a time when plaintiff, a foreign corporation, was not qualified to do business in California.
Defendants sought dismissal, in part, upon this same contention. The minute order shows the trial court denied defendants' motion upon an erroneous conclusion that the statute of limitations would not have run against plaintiff's breach of contract claim until August 15, 1986, four years after, the date upon which the court determined the last of six $5,000 installments on the $35,000 contract price would have been due. Although the contract price of $35,000 was a single price for a single completed service, installation of an efficiency and productivity program, the contract here provided that payments were to be made on a monthly installment basis. The statute of limitations would begin to run on each installment as it became due. As the court pointed out in Conway v. Bughouse, Inc. (1980) 105 Cal.App.3d 194, 200, 164 Cal.Rptr. 585, “Even where a specific amount of money is due to be paid out over a period of time, ‘the statute of limitations begins to run against the cause of action for the recovery of an unpaid installment at the time it is payable. ’ [Citations.]” (See also Bank of America v. McLaughlin (1957) 152 Cal.App.2d Supp. 911, 915, 313 P.2d 220; 3 Witkin, Cal.Procedure (3d ed. 1985) Actions, § 375, pp. 402–404.)
Even though the trial court denied defendants' motion for dismissal and for leave to amend based on the wrong reason, we conclude that the result reached was correct. Because resolution of the question left unanswered by the trial court—whether the statute of limitations was tolled by the filing of plaintiff's complaint in March 1983—is a question of law, it is appropriate that this court resolve that issue. This precise issue presents a question of first impression in California and, indeed, has rarely been addressed in other jurisdictions.
Defendants contend that the filing of the complaint by a nonqualified foreign corporation does not toll the statute of limitations and that the statute continues to run until the corporation qualifies to do business in the State of California. To support their argument, defendants rely primarily upon Welco Construction, Inc. v. Modulux, Inc. (1975) 47 Cal.App.3d 69, 120 Cal.Rptr. 572 (Welco ). In Welco the court was concerned with an attempt to initiate an action by a corporation whose corporate powers had been suspended pursuant to Revenue and Taxation Code section 23301 for nonpayment of corporate franchise tax. With certain limited exceptions, failure to pay corporate franchise taxes when due will result in suspension of “the corporate powers, rights and privileges of a domestic taxpayer ․ and the exercise of the corporate powers, rights and privileges of a foreign taxpayer in this state may be forfeited․” (Rev. & Tax Code, § 23301; see also 2 Ballantine & Sterling, Cal.Corporation Laws, supra, Franchise & Income Taxes, § 474.03, p. 22–91.) The plaintiff in Welco had filed its action two months after its corporate powers had been suspended. When the case came on for trial two days short of the five-year limitation, the defendant challenged the plaintiff's standing to prosecute the action while its corporate powers were suspended. The challenge prompted the plaintiff to file a certificate of revivor pursuant to Revenue and Taxation Code section 23305a. That section permits the Franchise Tax Board under specified conditions to issue a certificate of revivor of the taxpayer's corporate powers.
Affording plaintiff the benefit of every doubt, the Welco court proceeded “on the assumption that, except for the issue of corporate suspension, the actions were otherwise timely filed.” (Id. at p. 71, 120 Cal.Rptr. 572.) Relying upon Cleveland v. Gore Bros., Inc. (1936) 14 Cal.App.2d 681, 58 P.2d 931, it concluded that the “revivor and restoration of the corporation's rights, privileges and powers did not have retroactive effect in respect of commencement of the prosecution of the action so as to toll the statute of limitations.” (Id. 47 Cal.App.3d at pp. 71–72, 120 Cal.Rptr. 572.) After distinguishing a number of more recent Supreme Court cases, the court concluded, “[i]t is clear from these holdings that procedural acts in the prosecution or defense of a lawsuit may be validated retroactively by the corporate revival. It is equally clear that the recent holdings do not apply to substantive defenses that have accrued during the corporate suspension. The statute of limitations is not a procedural right but is a substantive defense.” (Id. at p. 73, 120 Cal.Rptr. 572; ABA Recovery Services, Inc. v. Konold (1988) 198 Cal.App.3d 720, 724, 244 Cal.Rptr. 27; compare, e.g., Peacock Hill Assn. v. Peacock Lagoon Constr. Co. (1972) 8 Cal.3d 369, 105 Cal.Rptr. 29, 503 P.2d 285; Traub Company v. Coffee Break Service, Inc. (1967) 66 Cal.2d 368, 57 Cal.Rptr. 846, 425 P.2d 790.)
As plaintiff points out, no California case has applied the rule of Welco to the situation in which a foreign corporation, having filed an action within the statute of limitations, nevertheless fails to qualify to do business within the state until the statute has run. Plaintiff attempts to distinguish Welco on two bases. First, plaintiff points out that the defendant there asserted the statute of limitations before trial rather than after trial as in this case. While that is a distinction, standing alone it would not defeat the applicability of Welco. The posttrial amendment of defendants' answer to raise the bar of the statute of limitations was a matter within the discretion of the trial court. (Estate of Horman (1971) 5 Cal.3d 62, 72–73, 95 Cal.Rptr. 433, 485 P.2d 785.)
Of more import is plaintiff's second distinction based on differences in the language of the applicable statutes. Revenue and Taxation Code section 23305a expressly states that the revivor of corporate powers is “without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture.” This statutory language figured prominently in the decision of the court in Welco, as did the Welco court's recognition of the purpose underlying Revenue and Taxation Code section 23301, i.e., “to put pressure on the delinquent corporation to pay its taxes, [a purpose which] is satisfied by a rule which views a corporation's tax delinquencies, after correction, as mere irregularities.” (Welco Construction, Inc. v. Modulux, Inc., supra, 47 Cal.App.3d at p. 72, 120 Cal.Rptr. 572; see also Electronic Equipment Express, Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 846, 176 Cal.Rptr. 239.) Thus, the absence of an express disability similar to that found in Revenue and Taxation Code section 23301 from the provisions of the Corporations Code limiting the exercise of corporate powers prior to qualification is significant. However, the determinative concern is the difference in purpose underlying the two statutes and, most importantly, public policies furthering and encouraging interstate commerce that might be impeded by judicially imposed limitations such as that urged by defendants herein.
Only a foreign corporation transacting intrastate, as opposed to interstate, business is required to qualify to do business with the Secretary of State pursuant to section 2105. Only a foreign corporation transacting intrastate business without having qualified pursuant to section 2105 is penalized by the provisions of section 2203, subdivision (c). It is a well-established principle flowing from the commerce clause of the federal Constitution (U.S. Const., art. I, § 8, cl. 3) that a state may not compel a purely interstate seller of goods to qualify to do business in the state. (Allenberg Cotton Co. v. Pittman (1974) 419 U.S. 20, 95 S.Ct. 260, 42 L.Ed.2d 195.)
As the court points out in Neogard Corp. v. Malott & Peterson–Grundy (1980) 106 Cal.App.3d 213, 222, 164 Cal.Rptr. 813, “[p]resumably so as not to conflict with Allenberg Cotton, in 1975 the Legislature provided that an out-of-state corporation would not be considered to be transacting intrastate business for purposes of section 2105 if the corporation's in-state activity” consists solely, although not exclusively, of carrying on one or more of specifically designated activities. These include maintaining or defending a lawsuit (§ 191, subd. (c)(1)), “[s]oliciting or procuring orders, whether by mail or through employees or agents or otherwise, where such orders require acceptance without this state before becoming binding contracts” (§ 191, subd. (c)(6)), and “[c]onducting an isolated transaction, completed within a period of 180 days and not in the course of a number of repeated transactions of like nature” (§ 191, subd. (c)(8)).
California case law makes it equally clear that a foreign corporation has the right to compel a judicial determination of whether it is, in fact, transacting intrastate business (as opposed to interstate business) so as to be subject to the provisions of sections 2105 and 2203, subdivision (c). In Neogard Corp. v. Malott & Peterson–Grundy, supra, 106 Cal.App.3d 213, 164 Cal.Rptr. 813 Neogard had brought suit in California, and the defendants asserted as an affirmative defense Neogard's lack of capacity to maintain an action based on intrastate business when Neogard had not qualified to conduct such business. At a separate trial on this special defense, the court determined Neogard had transacted intrastate business in California and, upon Neogard's concession that it had not qualified to do so, the trial court entered judgment for the defendants. In affirming the judgment, the court rejected both Neogard's argument that during the applicable period it had conducted only interstate, not intrastate, business in California as well as its argument that to prohibit it from proceeding with the lawsuit was repugnant to the commerce clause. Implicit in the court's determination that Neogard fell within the category of interstate actors who conducted sufficient intrastate business to warrant regulation of their activity pursuant to sections 2105 and 2203, subdivision (c), is the recognition that Neogard was entitled to challenge the applicability of those statutes and obtain a judicial determination of the need to qualify based upon facts proven to the trial court.
Similarly, in Mediterranean Exports, Inc. v. Superior Court (1981) 119 Cal.App.3d 605, 174 Cal.Rptr. 169, the plaintiff moved to strike Mediterranean's answer and cross-complaint based on sections 2105 and 2203, subdivision (c), as well as applicability of Revenue and Taxation Code section 23301. Mediterranean challenged the factual applicability of those statutes. In granting the plaintiff's motion, the trial court found that Mediterranean had been conducting intrastate business in California and had failed to pay corporate franchise taxes, a factor which the trial court apparently believed automatically suspended Mediterranean's corporate powers. The appellate court noted with respect to Revenue and Taxation Code section 23301 that while the statute was mandatory, it was not self-executing; suspension of corporate powers occurred only when the Franchise Tax Board advised the Secretary of State of a delinquent taxpayer, whether a domestic or foreign corporation. Evidence introduced at trial indicated the Franchise Tax Board had determined that the business Mediterranean had conducted in California did not constitute the transaction of intrastate business. While it appeared Mediterranean might owe some state corporate taxes, the corporate powers of a foreign corporation conducting only interstate business could not be suspended for such a delinquency. Moreover, the court reviewed the business activities conducted by Mediterranean and concluded there was a triable issue of fact as to whether those activities amounted to the transaction of intrastate business so as to compel Mediterranean to obtain a certificate of qualification. Again, while the court does not expressly so hold, a foreign corporation's right to a judicial determination of the necessity that it qualify to do business is a necessary predicate to the court's conclusion.
Significantly, by its express terms, section 2203, subdivision (c), recognizes that a foreign corporation may commence a lawsuit prior to compliance with section 2105. Only if the basis for that lawsuit is intrastate business is the corporation precluded by the statute from maintaining the action until it has complied with section 2105 and has paid the fees, penalties and taxes required in section 2203, subdivision (c). This statutory language represents an important distinction between section 2203, subdivision (c) and Revenue and Taxation Code section 23301. Consistent with the statutory purpose underlying Revenue and Taxation Code section 23301, i.e., to compel the payment of delinquent corporate income taxes, a corporation whose corporate powers have been suspended for nonpayment cannot commence, maintain or defend a lawsuit until the delinquent taxes have been paid and a certificate of revivor secured. The purposes underlying sections 2105 and 2203, subdivision (c) are considerably broader than merely to compel the payment of corporate income tax. As the court points out in Neogard Corp. v. Malott & Peterson–Grundy, supra, 106 Cal.App.3d at page 223, 164 Cal.Rptr. 813, the “enforcement scheme is designed to protect against unscrupulous corporate practices [and] equalizes the position of in-state and out-of-state corporations”; it specifically provides a procedure by which service of process can be obtained on a foreign corporation. Section 2105 is not a punitive statute.
While section 2203, subdivision (c), like Revenue and Taxation Code section 23301, does penalize corporations for noncompliance with statutorily mandated responsibilities, the particularized purpose of the taxation statute, to compel the payment of delinquent corporate taxes, justifies barring a corporation, foreign or domestic, from any exercise of corporate power until the delinquency has been remedied. The more general purpose underlying the qualification provisions of the Corporations Code is served by the narrower disability imposed by section 2203, subdivision (c), i.e., barring a foreign corporation from maintaining a lawsuit based on intrastate commerce until the corporation has qualified to do business in California. This general purpose would not be furthered by judicial construction of section 2203, subdivision (c) to parallel Revenue and Taxation Code section 23301.
The specific language of section 2203, subdivision (c) also serves to distinguish this case from two extrajurisdictional cases that address this issue and conclude that the applicable statute of limitations continues to run, notwithstanding the filing of a lawsuit, until a foreign corporation conducting intrastate business has qualified to do so. In both such cases the governing statute precluded not only the maintenance of a lawsuit but the commencement of such suit, either by express statutory language (League to Save Lake Tahoe v. Tahoe Reg.Pl. (1977) 93 Nev. 270 [563 P.2d 582, 583–584] ) or by judicial interpretation, i.e., statutory language forbidding the prosecution of an action necessarily forbids the institution of such action (Western Electrical Co. v. Pickett (1911) 51 Colo. 415 [118 P. 988, 990]; see generally Annot. (1966) 6 A.L.R.3d 326, 343, § 12 and cases cited). Obviously, when a statute precludes commencement of a lawsuit by a nonqualified foreign corporation conducting intrastate business, such a corporation must necessarily determine whether its business is, in fact, intrastate, requiring it to qualify, prior to commencement of suit. This is true in California where the suit may be commenced but simply not maintained if in fact the suit is based on intrastate business and the corporation is required to qualify pursuant to section 2105.
Additionally, as we have discussed, California case law establishes the right of a foreign corporation to a judicial determination of whether or not its business activities are sufficient within the meaning of section 191 to require it to qualify in order to conduct intrastate business pursuant to section 2105 (hereafter need to qualify). That right would be meaningless in many cases unless the commencement of an action tolls the statute of limitations. For example, a foreign corporation which delays commencing a lawsuit in California until all other means of resolving its dispute have been exhausted may find that it has only a short time remaining before the applicable statute of limitations expires. Unless the statute is tolled by the filing of the lawsuit, the foreign corporation would be forced to forgo its right to a judicial determination of its need to qualify to do intrastate business or risk the absolute bar of the statute. Thus a foreign corporation, though reasonably believing it conducts nothing more than interstate commerce, would be compelled to submit to regulation in California when it could not constitutionally be compelled to do so, solely to avoid the imminent threat of having its cause of action barred by the applicable statute of limitations.
In the instant case, plaintiff filed its action three years before the period of limitations on a written contract would have expired. Although here this relatively lengthy period would have permitted plaintiff to seek a special trial on defendants' plea of abatement early in the proceedings, we decline to adopt a rule requiring such a special trial which could foreseeably preclude a nonqualified foreign corporation confronting a shorter period of limitations from obtaining a judicial determination of its need to qualify prior to expiration of the statute. We believe the right of a foreign corporation to seek such a judicial determination must be protected under all reasonably foreseeable circumstances.
While the statute of limitations is considered a meritorious defense, its underlying purpose is not furthered by cutting off an action filed within the statutory period by a foreign corporation later determined to have conducted intrastate business so as to need to qualify under section 2105. Such a case is not one in which a claim has been “ ‘allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.’ ” (3 Witkin, Cal. Procedure, supra, Actions, § 309, p. 338.) Nor is this a case where the adversary has not been put on notice of the claim within the applicable period of limitation and has gained the right to be free of stale claims. (Ibid.)
To some limited extent the policies that make assertion of the statute of limitations a meritorious or a favored defense are at odds with the public policies involved in regulation of interstate and intrastate commerce. But the bare fact the statute of limitations would have expired (if filing the lawsuit did not toll the statute even when its underlying purposes have all been satisfied) should not defeat an otherwise meritorious claim when the conflict would negatively affect the commerce clause of the United States Constitution. (See, e.g., Coons v. American Honda Motor Co. (1983) 94 N.J. 307 [463 A.2d 921, 927].)
As the California Supreme Court long ago pointed out in American etc. Wireless v. Superior Court (1908) 153 Cal. 533, 536, 96 P. 15:
“A statute of this state which purports to curtail the privilege of a foreign corporation to maintain or defend actions in this state, and to impose conditions upon compliance with which alone they may be permitted to do so, will not be construed to extend beyond the plain meaning of its terms considered in connection with its object and purposes.”
Since section 2203, subdivision (c), expressly authorizes the commencement of an action by a foreign corporation which has not qualified to do business in California, we hold, consistent with the principle announced in American etc. Wireless v. Superior Court, supra, and the cases discussed above, that the commencement of such an action tolls the statute of limitation.
We are not persuaded that the case cited by defendants after the parties' briefs on appeal were filed, i.e., White Dragon Productions, Inc. v. Performance Guarantees, Inc. (1987) 196 Cal.App.3d 163, 241 Cal.Rptr. 745, dictates a contrary conclusion on the tolling issue.
In White Dragon Productions, supra, the court concluded that summary judgment for Performance Guarantees was improper, due to triable issues of fact concerning the voidability of the contract underlying the action of interpleader. The court reached this conclusion notwithstanding the lack of any direct evidence that Performance Guarantees' corporate powers had ever been suspended by the California Secretary of State. That court determined that the provisions of Revenue and Taxation Code section 23305a were nevertheless applicable. Specifically, the court held that a nonqualified tax-delinquent corporation was subject to any “action, defense or right” which would have accrued under section 23305a by reason of that corporation's original forfeiture. The court explained its reasoning as follows:
“It is both fair and logical that the ‘action, defense or right’ which would accrue against a suspended tax-delinquent foreign corporation should also accrue against a nonqualified, and hence nonsuspended, tax-delinquent foreign corporation. By saying this, we do not suggest that suspension or forfeiture is automatic; what concerns us is that Franchise Tax Board can only submit names of tax-delinquent foreign corporations to the Secretary of State for suspension purposes (Rev. & Tax. Code, § 23302), if it is aware of their existence. When the state has no record of their existence, suspension or forfeiture is impossible. It would defy logic to immunize a nonqualified tax-delinquent corporation from the ‘action, defense or right’ which would have accrued against it had it followed this state's qualification procedures.” (Id. at p. 171, fn. omitted, 241 Cal.Rptr. 745.)
We think it is significant in this case that when the trial court determined that plaintiff had engaged in intrastate business in California, section 2203, subdivision (c) prevented it from maintaining its action until it qualified to do business in California. Plaintiff could do that only if it paid all the corporate franchise and other taxes due. Thus there is no basis in this case for the concern expressed by the court in White Dragon Productions “that Franchise Tax Board can only submit names of tax-delinquent foreign corporations to the Secretary of State for suspension purposes (Rev. & Tax. Code, § 23302), if it is aware of their existence.” (Ibid.) Plaintiff could not secure a judgment against defendants here without the Franchise Tax Board becoming aware of its existence. Because we are not confronted in this case with the voidability provision of Revenue and Taxation Code section 23304, we believe the forfeiture of rights and privileges prescribed by section 23301 of that code is not automatic. (See Mediterranean Exports, Inc. v. Superior Court, supra, 119 Cal.App.3d at p. 617, 174 Cal.Rptr. 169.)
In a case such as this when the principal issue is whether the statute of limitations is tolled even for a short period, it would be unfair for this court to make its own determination as to when plaintiff automatically became tax delinquent and subject to forfeiture of its rights and privileges.
The conclusion we have reached on the issue of the tolling of the statute of limitations dictates our answer to defendants' final argument that the trial court abused its discretion in denying their motion to amend their answer to assert a statute of limitations defense. There can be no abuse of discretion in denying defendants' motion to assert a defense that would have been unavailing.
The judgment is affirmed, and plaintiff is awarded its costs on appeal against defendants.
1. All further statutory references are to the Corporations Code unless otherwise indicated.
2. Section 2105 provides: “(a) A foreign corporation shall not transact intrastate business without having first obtained from the Secretary of State a certificate of qualification. To obtain that certificate it shall file, on a form prescribed by the Secretary of State, a statement and designation signed by a corporate officer stating: [¶ ] (1) Its name and the state or place of its incorporation or organization. [¶] (2) The address of its principal executive office. [¶ ] (3) The address of its principal office within this state, if any. [¶] (4) The name of an agent upon whom process directed to the corporation may be served within this state. Such designation shall comply with the provisions of subdivision (b) of Section 1502. [¶] (5) Its irrevocable consent to service of process directed to it upon the agent designated and to service of process on the Secretary of State if the agent so designated or the agent's successor is no longer authorized to act or cannot be found at the address given. [¶] (6) If it is a corporation which will be subject to the Insurance Code as an insurer, it shall so state that fact. [¶] (b) Annexed to that statement and designation shall be a certificate by an authorized public official of the state or place of incorporation of the corporation to the effect that such corporation is an existing corporation in good standing in that state or place or, in the case of an association, an officers' certificate stating that it is a validly organized and existing business association under the laws of a specified foreign jurisdiction. [¶ ] (c) Before it may be designated by any foreign corporation as its agent for service of process, any corporate agent must comply with Section 1505.”
HAMLIN, Associate Justice.
MARTIN, Acting P.J., and STONE (Wm. A.), J., concur.