Tabarrejo v. Super. Court
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After Tabarrejo left his employment as a PRH caregiver, he filed a claim with the Labor Commissioner for unpaid wages. He was awarded $131,096.77. PRH appealed to the superior court and posted the undertaking required by Labor Code 98.2.1. The trial court granted Tabarrejo’s motion to dismiss on the ground that PRH was a suspended corporation that lacked capacity to sue. PRH failed to pay within 10 days, so Tabarrejo asked the court to release the undertaking to him. PRH disputed Tabarrejo’s entitlement, primarily arguing that since PRH’s corporate powers were suspended, the court lacked jurisdiction over the matter ab initio and should never have accepted the undertaking. The court concluded that PRH did not have standing to appeal and ordered the release of the undertaking to PRH’s owner. The court of appeal reversed, holding that the issue was one of legal capacity, not standing. Although the appeal was invalid when filed because PRH lacked capacity to sue, PRH could have retroactively validated the appeal by reviving its corporate powers. That PRH elected not to do so did not retroactively deprive the court of jurisdiction. The trial court was directed to enter an order releasing the undertaking to Tabarrejo.
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Filed 11/24/14; pub order 12/18/14 (see end of opn.) IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT MANUEL TABARREJO, Petitioner, H040377 (Santa Clara County Super. Ct. No. 1-12-CV-237107) v. THE SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent. PRINCESS RETIREMENT HOMES, INC., Real Party in Interest. Petitioner Manuel Tabarrejo was employed as a caregiver by real party in interest Princess Retirement Homes, Inc. (PRH). After Tabarrejo left his employment, he filed a claim with the Labor Commissioner for unpaid wages and other wage-related claims. The Labor Commissioner awarded Tabarrejo $131,096.77. PRH appealed the Labor Commissioner’s order to the superior court and posted the undertaking required by Labor Code section 98.2.1 Tabarrejo moved to dismiss the appeal on the ground that PRH was a suspended corporation that lacked the capacity to sue. The trial court granted Tabarrejo’s motion to dismiss. PRH then failed to pay the 1 All further statutory references are to the Labor Code, unless otherwise stated. amount due under the Labor Commissioner’s order within 10 days, so Tabarrejo asked the court to release the undertaking to him. But PRH disputed Tabarrejo’s entitlement to the undertaking on a number of grounds, primarily arguing that since PRH’s corporate powers were suspended, the court lacked jurisdiction over the matter ab initio and should never have accepted the undertaking. The trial court concluded that PRH did not have standing to file the appeal and ordered the release of the undertaking to PRH’s owners, James and Judith Morales. We hold that the trial court erred as a matter of law when it released the undertaking to the Moraleses based on its conclusion that PRH did not have standing to file the appeal. The question presented is one of legal capacity, not standing. Although the appeal was invalid when filed because PRH lacked the capacity to sue since its corporate powers had been suspended, PRH could have retroactively validated the appeal by reviving its corporate powers. That PRH elected not to revive its corporate powers did not retroactively deprive the court of jurisdiction to accept the appeal and the undertaking for filing or to dismiss the appeal based on PRH’s incapacity to sue. We shall therefore grant Tabarrejo’s request for writ relief and direct the trial court to vacate its order releasing the undertaking to the Moraleses and to enter a new order releasing the undertaking to Tabarrejo. FACTS PRH, an assisted living facility, employed Manuel Tabarrejo as a caregiver from June 3, 2009, through September 30, 2011. Pursuant to an oral agreement, PRH initially paid Tabarrejo $8 per hour. On April 1, 2010, PRH raised Tabarrejo’s rate of pay to $8.25 per hour. Tabarrejo lived at the assisted living facility during his employment with PRH. He worked an average of 15 hours per day, performing caretaking duties for facility “patients.” Tabarrejo quit his job on September 30, 2011. 2 California Secretary of State records reveal that PRH: (1) incorporated in 1996; (2) was suspended by the Secretary of State in April 1999 for failing to file a statement of information; and (3) was suspended by the Franchise Tax Board in March 2000 for failing “to meet franchise tax requirements (e.g. failure to file a return, pay taxes, etc.).” As of November 2013, PRH’s powers, rights, and privileges remained suspended. The same records list James Morales as the CEO of PRH and Judith Morales as its agent for service of process. James and Judith Morales are the “owners” and “shareholders” of PRH; they did not work at the facility. PROCEDURAL HISTORY Tabarrejo’s Complaint Before the Labor Commissioner On November 29, 2011, Tabarrejo filed a complaint with the Labor Commissioner seeking compensation for unpaid regular, overtime, and minimum wages and for failure to provide meal and rest periods; waiting time penalties (§ 203); and interest. Tabarrejo named PRH and James and Judith Morales as defendants, asserting they were joint employers. Proceedings Before the Labor Commissioner On November 5, 2012, the Labor Commissioner conducted a hearing. Tabarrejo appeared and was represented by counsel. James and Judith Morales appeared in their individual capacity and on behalf of PRH. All defendants were represented by the same attorney. Florence Deloso (a caregiver), Mary Matias (the business manager), and the Moraleses testified on behalf of PRH. At the beginning of the hearing, the hearing officer asked when PRH was incorporated. Defense counsel responded, “It’s not current.” Defense counsel then asked Judith Morales whether PRH had paid its “dues” and “registration fee,” to which she 3 responded, “Yes” under oath. After the hearing officer stated that the Secretary of State records showed a Franchise Tax Board suspension in 2000, defense counsel stated, “Right. And after that, they’ve paid their registration, but they indicate it’s still not listed as current.” The hearing officer stated: “Suspended or not, a corporation is still subject to the Reynolds [v. Bement (2005) 36 Cal.4th 1075] decision[,] which requires that the common law elements of alter ego liability be shown for the individuals,” and “[i]f the plaintiff cannot show the common law elements of alter ego liability, I’m just going to . . . dismiss the individuals.” The hearing officer concluded that PRH’s status as a suspended corporation did not “eliminate[] the corporate entity for the purpose of being the employer,” and dismissed the individual defendants. Tabarrejo testified that from July 2009 through September 2011, he worked 205 days at a base rate of $8 an hour and 389 days at a base rate of $8.25 an hour. During that time, he worked 988 overtime hours and 820 double time hours at a base rate of $8 per hour, and 1,716 overtime hours and 1,556 double time hours at a base rate of $8.25 per hour. Tabarrejo claimed he was not relieved of all duties for at least half an hour on any of those days, did not receive rest breaks, and would watch patients while he ate. PRH did not have time records and did not offer any evidence to contradict Tabarrejo’s testimony. According to the hearing officer, PRH “offered schedules and testimony” about what “might” have happened or what “could” have happened, but “did not offer evidence about what actually did happen to [Tabarrejo], in terms of hours worked, on any particular day.” “One of [PRH’s] witnesses testified that she was told to take a meal period each day and could get coverage so she did not have to watch a patient while she ate.” “However, that same witness also acknowledged that sometimes she would have to watch a patient while she ate.” There was evidence that Tabarrejo “would leave the facility on personal errands and that there was coverage if a staff member had to leave or take a break.” 4 Nine days after the hearing, the Labor Commissioner issued an Order, Decision, or Award (Order) in favor of Tabarrejo, awarding him $131,096.77. The award included unpaid wages ($74,741.33), liquidated damages under section 1194.2 ($38,638.00), accrued interest ($12,766.84), and waiting time penalties under section 203 ($4,950.60). The hearing officer dismissed James and Judith Morales as defendants pursuant to Reynolds v. Bement, supra, 36 Cal.4th 1075, because Tabarrejo had not established the common law elements of alter ego liability against them. Thus, PRH became the sole defendant subject to the Labor Commissioner’s Order. Proceedings in the Trial Court PRH filed an appeal of the Order in the superior court on December 4, 2012;2 the Moraleses did not appeal the Order. As required by section 98.2, subdivision (b), that same day, the Moraleses deposited an undertaking of $131,096.77 with the court on behalf of PRH3 so it could appeal the Order. The Moraleses claim they posted the undertaking because PRH had no assets. Since the Moraleses (who had been dismissed as individual defendants) did not appeal the Order, it is final as to them. In April 2013, Tabarrejo filed a motion to dismiss the appeal on the ground that PRH was a suspended corporation and lacked the capacity to sue. In his motion, 2 Although the copy of the notice of appeal in the record is dated November 28, 2012, the notice was not filed that day. On our own motion, we have taken judicial notice of the docket entries for this case in the trial court’s public website, which indicate that the appeal and the undertaking were filed on December 4, 2012. (<http://www.sccaseinfo.org/> [as of Nov. 24, 2014].) 3 The record suggests that Judith Morales obtained a cashier’s check to pay for the undertaking. The only document in the record is a copy of a withdrawal slip dated December 4, 2012, which indicates that Judith Morales withdrew funds to pay for the undertaking. The withdrawal slip does not identify the owner of the account from which the money was withdrawn (i.e., whether it belonged to the Moraleses or PRH or some other entity). PRH contends the undertaking was deposited by both Judith and James Morales on behalf of PRH. We adopt that description for this opinion. 5 Tabarrejo requested that the undertaking be forfeited to him. He also requested attorney fees. PRH did not file an opposition to the motion. On May 8, 2013, the court granted the motion to dismiss, ordered entry of judgment for Tabarrejo, and ordered that the undertaking be forfeited to Tabarrejo if the judgment was not paid within 10 days (§ 98.2, subd. (b)). On May 16, 2013, PRH filed an ex parte application to set aside the judgment of dismissal on the ground that it had never received a copy of the motion to dismiss. The court denied PRH’s ex parte application without prejudice to seek the same relief in a noticed motion. PRH then filed a noticed motion to set aside the dismissal. Tabarrejo did not file an opposition to the motion or appear at the hearing. The court granted the motion on June 11, 2013. After Tabarrejo asserted that he had not been served with the noticed motion to set aside the dismissal, the court set the matter for rehearing on September 19, 2013. In August 2013, PRH obtained new counsel. In its reply papers in support of the motion to set aside the dismissal, PRH argued that the appeal “should not be dismissed because of a procedural irregularity before the Labor Commissioner that was known and accepted by both parties” and that dismissal under the circumstances of this case would “defeat the letter and the spirit of Labor Code § 98” and “work an extreme injustice.” PRH advised the court that it was seeking administrative relief from the Labor Commissioner (discussed below), asked the court to consider the arguments it made to the Labor Commissioner, and urged the court not to dismiss the appeal before the Labor Commissioner ruled on its requests. Post-Hearing Application for Administrative Relief From the Labor Commissioner PRH and the Moraleses filed a posthearing application for administrative relief with the Labor Commissioner, which asked that the Order be amended to (1) delete the order dismissing the Moraleses as defendants; and (2) substitute the Moraleses as the 6 employer in place of PRH. The application asserted that the Moraleses had been dismissed by the Labor Commissioner due to the “mistake and inadvertence” of their former counsel. The Moraleses agreed, if the Order was amended, to “waive the protection under Reynolds v. Bement” and to stipulate, for the purposes of the application, “to liability as an alter ego” of PRH. They said all they wanted was “to have their day in court.” According to the application, the Moraleses posted the undertaking because PRH “has no assets.” They argued that their former counsel had “erroneously filed” the notice of appeal from the Labor Commissioner’s decision and facilitated the posting of the undertaking. They asserted that defense counsel’s mistakes “should be rectified through [their] administrative application before the damage to the Morales[es] becomes permanent and legally unfixable.” The Moraleses asked the Labor Commissioner to stay execution of the judgment in the superior court and to file an amended order so they could file a new notice of appeal in the superior court. The Labor Commissioner denied PRH’s and the Moraleses’ requests in a letter dated September 24, 2013. The Labor Commissioner explained that the Moraleses were not entitled to relief under section 98, subdivision (f) because such relief is only available when a defendant fails to attend a hearing, and the Moraleses attended the hearing—both in their individual capacity and on behalf of PRH—and were represented by counsel. The Labor Commissioner also denied the Moraleses’ request to amend the Order to modify the legal name of the business (§ 98, subd. (h)(2)) since the hearing officer had found that PRH was the correct defendant and had dismissed the Moraleses because “alter ego liability was unfounded.” Finally, he Labor Commissioner refused to set aside the Order or grant another hearing. Further Proceedings in the Trial Court On September 19, 2013, while the application for administrative relief was pending, the trial court conducted a hearing on PRH’s request to set aside the dismissal. 7 The court denied the motion to set aside the dismissal and ordered counsel to appear on October 24, 2013, to be heard regarding forfeiture of the undertaking. The court also found that the time for PRH to appeal the Order had expired and that judgment may be entered in favor of Tabarrejo for $131,096.77. PRH did not seek appellate review of the order denying its motion to set aside the dismissal. On October 7, 2013, PRH’s counsel sent a letter to the trial court recounting PRH’s failed application for relief from the Labor Commissioner and arguing that the proper action to restore the parties to the status quo ante was to return the undertaking to the Moraleses. This time, PRH argued that the “owners of the cash deposit, Judith and James Morales, are not the employer” and that they were not parties to the appeal. PRH argued that the court “never had jurisdiction . . . and should not have accepted the cash deposit ab initio” and that the undertaking should therefore be returned to the Moraleses. Tabarrejo filed an opposition to PRH’s request to return the undertaking to the Moraleses. Tabarrejo argued, among other things, that under section 98.2, subdivision (b), forfeiture of the undertaking to Tabarrejo was mandatory since the case had been dismissed and PRH had failed to pay the award within 10 days of the dismissal. Tabarrejo also told the court that PRH had not paid the $8,610 in attorney fees the court had previously ordered, and he requested $15,985 in additional attorney fees under section 98.2, subdivision (c) and section 1194. In reply, PRH argued that “if the Court is not disposed to provide [PRH] with a de novo hearing and a trial on the merits, then it would be fundamentally unfair and a violation of due process to retain their [sic] cash deposit for an appeal that was disallowed in the first place, and then disburse that money to [Tabarrejo] without a trial on the merits . . . .” PRH also objected to the amount Tabarrejo requested in attorneys fees, calling it excessive for a “run of the mill wage claim.” On November 4, 2013, the court ruled in favor of PRH on the forfeiture issue and ordered the clerk to release the undertaking to the Moraleses. The court found that “PRH 8 was a suspended corporation with no standing to file the appeal, that the appeal was void from the outset, and that an order releasing the bond to [Tabarrejo] would be inconsistent with that finding. Further, it would be an inequitable result for the person who posted the bond if the money was released to the [employee].” The court nonetheless granted Tabarrejo’s request for attorney fees and awarded the full amount claimed ($15,985). Tabarrejo filed this petition for writ of mandate, prohibition, or other relief on November 19, 2013, asking this court to direct the trial court to vacate its order. DISCUSSION Tabarrejo argues that the trial court abused its discretion, acted in excess of its jurisdiction, and erred as a matter of law when it released the undertaking to the Moraleses. He contends the trial court should have disbursed the undertaking to him under section 98.2, subdivision (b) because PRH’s appeal was dismissed in September 2013 and PRH has failed to pay the amount awarded by the Labor Commissioner. He argues that the trial court had jurisdiction to accept PRH’s appeal and the undertaking, and that PRH’s incapacity to sue or to defend itself based on its status as a suspended corporation was not a jurisdictional defect. He also requests costs and attorney fees for litigating PRH’s appeal. PRH responds that its appeal was “effectively void and/or moot on the day it was filed,” and that the trial court should not have accepted the undertaking and was not authorized to release it to Tabarrejo. PRH argues that since the trial court had no jurisdiction from the start, the undertaking must be returned to the Moraleses. PRH also argues that if it “was not entitled to file an appeal and have a new trial, then it stands to reason that the [trial court] cannot in fairness retain and then disburse what would be [the] appellant’s money. To do so would be an unconstitutional taking . . . and a violation of due process.” PRH argues, alternatively, that if the court had jurisdiction, then it had the inherent power to permit the Moraleses to prosecute the appeal. Finally, 9 PRH argues that it would be unfair to award Tabarrejo attorney fees because Tabarrejo’s counsel contributed to the “procedural disaster” in this case. Before addressing the parties’ contentions, we examine the Moraleses’ role in these writ proceedings. The Moraleses are not parties to these writ proceedings The captions on the preliminary opposition and the return filed with this court state that they were filed by “Princess Retirement Homes, Inc., et al., Real Parties in Interest.” The plural references “et al.” and “Parties” suggest that there is more than one real party in interest. In addition, the preliminary opposition asserts that the Moraleses are “the true real parties in interest” and the return alleges they “are also Real Parties In Interest.” But, as we shall explain, the Moraleses are not parties to the writ proceedings in this court. Only PRH appealed the Labor Commissioner’s Order to the superior court. If they had wanted to, the Moraleses could have appealed the Labor Commissioner’s finding that they were not employers, but they elected not to appeal that ruling. Moreover, the 10-day jurisdictional time limit for the Moraleses to request a trial de novo of the Order expired long ago. (§ 98.2; Pressler v. Donald L. Bren Co. (1982) 32 Cal.3d 831, 837 (Pressler) [the “time for filing a notice of appeal from a decision of the Labor Commissioner is mandatory and jurisdictional”].) In writ proceedings, “ ‘ “real party in interest” has been generally defined as “any person or entity whose interest will be directly affected by the proceedings . . . .” [Citation.] While the real party in interest is “usually the other party to the lawsuit or proceeding being challenged” [citation], it may be . . . “anyone having a direct interest in the result” [citation], or “the real adverse party . . . in whose favor the act complained has been done.” ’ ” (Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1178 (Connerly).) Although the Moraleses may have a direct interest in the result of these writ 10 proceedings because they allegedly provided the funds for the undertaking, as we shall explain, they are not real parties in interest because they were not designated as parties in Tabarrejo’s writ petition. Since a writ proceeding in the Court of Appeal is an original proceeding, and not an appeal, the petition “serves as the complaint,” and “must name all of the parties.” (Tracy Press, Inc. v. Superior Court (2008) 164 Cal.App.4th 1290, 12961297, citing Cal. Rules of Court, rule 8.490(b)(2).) Tabarrejo’s writ petition names PRH as the real party in interest, but does not name the Moraleses. Since the petition does not allege that the Moraleses are real parties in interest, they are not parties to these proceedings. (Id. at pp. 1296-1297.) Overview of Berman Hearing Process The Supreme Court has reviewed the statutory scheme that governs employee wage claims on several occasions, most recently in Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1127-1129 (Sonic). The Sonic court explained that “ ‘ “If an employer fails to pay wages in the amount, time or manner required by contract or by statute, the employee has two principal options. The employee may seek judicial relief by filing an ordinary civil action against the employer for breach of contract and/or for the wages prescribed by statute. (§§ 218, 1194.) Or the employee may seek administrative relief by filing a wage claim with the [Labor Commissioner] pursuant to a special statutory scheme codified in sections 98 to 98.8. The latter option was added by legislation enacted in 1976 . . . and is commonly known as the ‘Berman’ hearing procedure after the name of its sponsor.” ’ ” (Sonic, at pp. 1127-1128; italics added.) After an employee files a complaint with the Labor Commissioner for nonpayment of wages, section 98, subdivision (a) provides for three alternatives. The Labor Commissioner may: (1) accept the matter and conduct an administrative hearing; (2) prosecute a civil action for the collection of wages and other money payable to employees; or (3) take no further action on the complaint. (Sonic, supra, 57 Cal.4th at 11 p. 1128, citing Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1115 (Murphy).) “ ‘The Berman hearing procedure is designed to provide a speedy, informal, and affordable method of resolving wage claims. . . . “[T]he purpose of the Berman hearing procedure is to avoid recourse to costly and time-consuming judicial proceedings in all but the most complex of wage claims.” ’ ” (Murphy, at p. 1115.) The procedural rules for a Berman hearing underscore its purpose. If the Labor Commissioner conducts a hearing, he or she must do so within 90 days. (Sonic, supra, 57 Cal.4th at p. 1128.) “ ‘ “[T]he pleadings are limited to a complaint and an answer; the answer may set forth the evidence that the defendant intends to rely on . . . ; if the defendant fails to appear or answer no default is taken and the commissioner proceeds to decide the claim, but may grant a new hearing on request. (§ 98.) The commissioner must decide the claim within 15 days after the hearing. (§ 98.1.)” ’ ” (Sonic, at p. 1128.) “ ‘Within 10 days after notice of the decision any party may appeal to the appropriate court, where the claim will be heard de novo; if no appeal is taken, the commissioner’s decision will be deemed a judgment, final immediately, and enforceable as a judgment in a civil action. (§ 98.2.) If an employer appeals the Labor Commissioner’s award, “[a]s a condition to filing an appeal pursuant to this section, an employer shall first post an undertaking with the reviewing court in the amount of the order, decision, or award. The undertaking shall consist of an appeal bond issued by a licensed surety or a cash deposit with the court in the amount of the order, decision, or award” (§ 98.2, subd. (b).)’ ” (Sonic, supra, 57 Cal.4th at p. 1129.) PRH asserts that the “stated purpose of the undertaking is to secure an appellant’s right to a trial de novo.” (Underscoring original.) Contrary to PRH’s assertion, the purpose of the undertaking “ ‘is to discourage employers from filing frivolous appeals and from hiding assets in order to avoid enforcement of the judgment.’ ” (Sonic, supra, 57 Cal.4th at p. 1129; see also Palagin v. Paniagua Construction, Inc. (2013) 222 Cal.App.4th 124, 138 (Palagin) [the “primary process for deciding wage claims is 12 not the trial de novo reflected in section 98.2, but the administrative procedure reflected in section 98”].) Consistent with this purpose, the undertaking requirement only applies to employers; an employee need not file an undertaking to appeal. (§ 98.2, subd. (b).) “ ‘The timely filing of a notice of appeal forestalls the commissioner’s decision, terminates his or her jurisdiction, and vests jurisdiction to conduct a hearing de novo in the appropriate court.’ [Citations.]” (Murphy, supra, 40 Cal.4th at p. 1116.) “The trial court ‘hears the matter, not as an appellate court, but as a court of original jurisdiction, with full power to hear and determine it as if it had never been before the labor commissioner.’ ” (Id. at pp. 1116-1117.) “ ‘The decision of the trial court, after de novo hearing, is subject to a conventional appeal to an appropriate appellate court.’ ” (Id. at p. 1116.) The Sonic court summarized relevant aspects of the Berman statutes as follows: “In sum, the Berman statutes provide important benefits to employees by reducing the costs and risks of pursuing a wage claim in several ways. First, the Berman hearing itself provides an accessible, informal, and affordable mechanism for laypersons to seek resolution of such claims. [Citation.] Second, section 98.2, subdivision (c) discourages unmeritorious appeals of Berman hearing awards by providing that a party who unsuccessfully appeals an award must pay the other party’s costs and attorney fees. [Citation.] . . . Fifth, the Berman statutes ensure that an employee will actually collect a judgment or award by mandating that the Labor Commissioner use her [or his] best efforts to collect a Berman hearing award and by requiring the employer to post an undertaking for the amount of the award if it takes an appeal. [Citation.]” (Sonic, supra, 57 Cal.4th at pp. 1129-1130; italics added.) With this statutory framework in mind, we turn to the principles governing corporate capacity to sue or defend an action. 13 Corporate Capacity to Sue or Defend Under California law, a corporation ordinarily has the capacity to sue. (See Corp. Code, § 207 [corporation generally has “all of the powers of a natural person in carrying out its business activities”]; Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1603-1605 (Color-Vue).) But a corporation that has had its powers suspended “lacks legal capacity to prosecute or defend a civil action during its suspension.” (Sade Shoe Co. v. Oschin & Snyder (1990) 217 Cal.App.3d 1509, 1512 (Sade).) On the other hand, a suspended corporation may be sued and a default judgment may be entered upon its failure to respond. (Grell v. Laci Le Beau Corp. (1999) 73 Cal.App.4th 1300, 1306.) “The ‘corporate powers, rights and privileges’ of any domestic corporate taxpayer may be suspended for failure to pay certain taxes and penalties. (Rev. & Tax. Code, § 23301.) This means the suspended corporation cannot sell, transfer or exchange real property in California, and contracts entered into during the time of suspension are voidable . . . through legal action. [Citation.] . . . Nor, during the period of suspension, may the corporation prosecute or defend an action, seek a writ of mandate, appeal from an adverse judgment, or renew a judgment obtained before suspension. [Citation.]” (Center for Self-Improvement & Community Development v. Lennar Corporation (2009) 173 Cal.App.4th 1543, 1552 (Center).) “The purpose of Revenue and Taxation Code section 23301 is to ‘ “prohibit the delinquent corporation from enjoying the ordinary privileges of a going concern,” ’ in order to pressure it into paying its taxes. (Peacock Hill Assn. v. Peacock Lagoon Constr. Co. (1972) 8 Cal.3d 369, 371 . . . .[(Peacock Hill)]) That purpose, in turn, ‘is satisfied by a rule which views a corporation’s tax delinquencies, after correction, as mere irregularities.’ ” (Center, at p. 1552.) In cases of Franchise Tax Board suspensions, such as PRH’s suspension in 2000, a “suspended corporation can regain its corporate powers by filing all required tax returns, paying the necessary taxes, penalties or fees due, and applying to the Franchise Tax Board for a certificate of revivor. (Rev. & Tax. Code, § 23305.) This reinstatement or 14 revivor generally is ‘without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture . . . .’ (Id., § 23305a.)” (Center, supra, 173 Cal.App.4th at p. 1553.) Thus, the revival of corporate powers retroactively validates any procedural steps taken on behalf of the corporation in the prosecution or defense of a lawsuit while the corporation was under suspension. (Benton v. County of Napa (1991) 226 Cal.App.3d 1485, 1490 (Benton).) “Most litigation activity has been characterized as procedural for purposes of corporate revival. For example, a judgment obtained during suspension is validated by subsequent revivor. [Citations.] A motion to dismiss an appeal because of a party’s suspension may be denied if the party obtains a certificate of revivor. [Citations.] . . . The corporate defense of an action undertaken during suspension may be validated by later revival of corporate powers. [Citations.].” (Benton, supra, 226 Cal.App.3d at pp. 1490-1491, citing Traub Co. v. Coffee Break Service, Inc. (1967) 66 Cal.2d 368, 371 (Traub) and other cases.) “In sum, the revival of corporate powers enables the previously suspended party to proceed with the prosecution or defense of the action and validates a judgment obtained during suspension. [Citations.]” (Center, supra, 173 Cal.App.4th at p. 1553.) A corporation’s powers, rights, and privileges may also be suspended if a corporation fails to file annual statements of information pursuant to Corporations Code section 1502, as PRH failed to do. (See Corp. Code, § 2205.) “[A] corporation suspended under the Corporations Code, like a corporation suspended under the Revenue and Taxation Code, is also disabled from participating in litigation activities.” (Palm Valley Homeowners Assn., Inc. v. Design MTC (2000) 85 Cal.App.4th 553, 556, 560.) The corporation may revive its powers by complying with the requirements of Corporations Code section 2205, subdivision (d). (Id. at pp. 561-562.) 15 The trial court had jurisdiction to accept PRH’s appeal PRH’s corporate incapacity to sue and to defend itself did not deprive the trial court of jurisdiction to accept the appeal. “Corporate incapacity is nothing more than a legal disability, depriving the party of the right to come into court and represent its own interests. As such, lack of capacity is not a jurisdictional defect and is waived if not properly raised. [Citation.] . . . Thus, the suspended status of corporate powers at the time of filing suit does not impede the trial court’s jurisdiction to proceed, nor does a suspension after suit commences but before rendition of judgment deprive the court of jurisdiction or render the judgment void.” (Center, supra, 173 Cal.App.4th at pp. 15521553, citing Traub, supra, 66 Cal.2d at p. 371.) Courts have distinguished “between procedural steps taken on behalf of the suspended corporation while under suspension, which can be resuscitated by revival, and substantive defenses that accrue during the time of suspension, which cannot.” (Center, supra, 173 Cal.App.4th at p. 1554, citing Benton, supra, 226 Cal.App.3d at pp. 14901491.) The statute of limitations is regarded as a substantive defense. If an action is commenced while the corporation is suspended, the corporation’s subsequent revival does not prevent the running of the statute of limitations; if the statute runs prior to revival, the corporation’s action will be time-barred, even if the complaint would otherwise have been timely. (Center, at p. 1554; Sade, supra, 217 Cal.App.3d at p. 1513.) It appears the trial court relied on this rule, in part, when it ruled on PRH’s motion to set aside the dismissal and the parties’ competing claims to the undertaking. In its October 4, 2013 order on the motion to set aside the dismissal, the court stated, “The time for [PRH] to appeal from the Labor Commissioner’s Order . . . has expired and therefore judgment may be entered in accordance with [section] 98.2(d) in favor of [Tabarrejo].” And in its November 4, 2013 order regarding release of the undertaking, the court found 16 “that the appeal was void from the outset.” As we shall explain, the trial court erred to the extent that its rulings were based on the conclusion that the appeal was not timely filed because of PRH’s incapacity to sue or to defend itself. We begin with the rule that timely filing of the notice of appeal and the undertaking is both mandatory and jurisdictional. (Pressler, supra, 32 Cal.3d 831, 837; Palagin, supra, 222 Cal.App.4th 124, 140.) If the appeal and the undertaking are not filed within the time set forth in section 98.2, the trial court is without jurisdiction to hear the case. (Pressler, at p. 837; Palagin, at p. 140.) But the appeal and the undertaking in this case were filed within the time set forth in the statute. Section 98.2, subdivision (a) provides that an appeal of a Labor Commissioner order must be filed “[w]ithin 10 days after service of notice” of the order and that “[f]or the purposes of computing the 10-day period after service, Section 1013 of the Code of Civil Procedure” applies. Since the Order was served by regular mail, under Code of Civil Procedure section 1013, PRH was entitled to five additional days, or a total of 15 days, to file its appeal. The Order was served on November 19, 2012, and PRH’s appeal and the undertaking were filed on December 4, 2012, 15 days later. PRH’s appeal was therefore timely. But the trial court concluded that the time to appeal had expired, presumably because PRH was suspended at the time the notice of appeal was filed. Although the trial court did not explain its reasoning behind its timeliness ruling, it appears the court treated the section 98.2 deadline for filing a notice of appeal as a statute of limitations and held that even though the appeal was timely under section 98.2, the action was barred because PRH was suspended when it filed its appeal. In Bourhis v. Lord (2013) 56 Cal.4th 320 (Bourhis), the California Supreme Court reviewed the question of a court’s jurisdiction when a notice of appeal is timely filed by a suspended corporation. A plaintiff corporation and others filed a civil action against multiple defendants. (Id. at p. 323.) Before trial, the defendants learned that the plaintiff corporation had been suspended and filed a motion to preclude it from offering any 17 evidence at trial. The trial court denied the motion, contingent on the corporation reviving its corporate powers. The defendants prevailed at trial and the plaintiffs, including the suspended corporation, filed timely notices of appeal of both the judgment and a postjudgment order awarding costs and attorney fees. (Ibid.) The defendants filed motions in the Court of Appeal to dismiss the corporation’s appeals on the ground that its corporate powers were still suspended. The corporation opposed the motions with evidence that its corporate powers had been revived seven days after the motions were filed. The Court of Appeal denied the motions and the Supreme Court granted review of the question whether the revival of the corporation’s powers validated its earlier notice of appeal. (Id. at pp. 323-324.) The Bourhis court stated: “If revival of corporate powers occurs while a valid appeal can still be taken, the question appears easy; the revival would validate a prior notice of appeal and permit the appeal to proceed. The appeal would be timely, and little purpose would be served by requiring the corporation to file another, essentially identical, notice of appeal. But appeals are subject to jurisdictional time limits. A notice of appeal must be filed within 60 days after service of the notice of entry of judgment. (Cal. Rules of Court, rule 8.104(a).) ‘The time to file notice of appeal, both in civil and criminal cases, has always been held jurisdictional in California.’ [Citation.] As to both appeals at issue here, this time had expired before [the plaintiff corporation’s] corporate powers were revived. Should the later revival validate the earlier invalid notice of appeal in this circumstance?” (Bourhis, supra, 56 Cal.4th at pp. 325-326.) The court held that it did. The Supreme Court reviewed two prior cases in which it had held that the revival of corporate powers after an appeal had been filed did not prevent the appellant from proceeding with the appeal, and it declined to overrule those cases. (Id. at pp. 325-328.) The Bourhis court observed that a number of Court of Appeal cases have held that the running of a statute of limitations is a substantive defense that may not be prejudiced by the corporation’s later revival of its corporate powers. (Bourhis, supra, 56 Cal.4th at 18 p. 328.) The Supreme Court acknowledged the tension between the rule articulated in the statute of limitations cases (no retroactive revival) and the rule for notices of appeal (retroactive revival), and concluded that “the two approaches can be reconciled.” (Id. at p. 329.) The court explained that Revenue and Taxation Code section 23305a provides that revival “ ‘shall be without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture,’ ” and that the statute of limitations cases “explain that those statutes provide a substantive defense that later revival of corporate powers cannot prejudice.” (Ibid.) The notice of appeal cases, on the other hand, “implicitly concluded that the expiration of the time to file a valid notice of appeal does not provide an ‘action, defense or right’ within the meaning of [Revenue and Taxation Code] section 23305a. . . . Similarly, being in a position to move to dismiss an untimely appeal is not a ‘right’ under that statute. Thus interpreted, the two rules—one concerning appeals, the other concerning statutes of limitations—can coexist.” (Ibid., citing Rooney v. Vermont Investment Corp. (1973) 10 Cal.3d 351 (Rooney), and Peacock Hill, supra, 8 Cal.3d 369.) The court stated that while “filing a timely notice of appeal is a jurisdictional requirement, . . . what is jurisdictionally required is that the notice of appeal be timely, not that it be filed by an active corporation.” (Bourhis, at p. 329.) Since the notices of appeal in Bourhis “were timely even if invalid when filed,” the “corporation’s later reinstatement made the earlier, invalid but timely, notices of appeal valid and still timely.” (Ibid., original italics.) Section 98.2, subdivision (a) provides: “Within 10 days after service of notice of an order, decision, or award [of the Labor Commissioner] the parties may seek review by filing an appeal to the superior court, where the appeal shall be heard de novo.” (Italics added.) Based on its plain language, section 98.2, subdivision (a) sets forth the time for “filing an appeal.” It is not a statute of limitations. Therefore, the rule regarding appeals, not statutes of limitations, applies in this case. That the notice of appeal is filed in the superior court for de novo review does not alter our conclusion. (Pressler, supra, 19 32 Cal.3d at p. 836 [the rules governing conventional appeals apply to appeals in which a trial de novo is required].) Since PRH’s notice of appeal was “timely, even if invalid when filed,” the superior court had jurisdiction to accept the appeal and the undertaking, notwithstanding PRH’s lack of capacity as a suspended corporation. (Bourhis, supra, 56 Cal.4th at p. 329.) In Bourhis and the cases it relied on, the revival of corporate powers retroactively validated a previously invalid notice of appeal and the parties were allowed to proceed with their appeals. (Bourhis, supra, 56 Cal.4th at p. 323 [corporation that revived its powers seven days after motion to dismiss its appeal allowed to proceed with appeal]; Peacock Hill, supra, 8 Cal.3d at pp. 370-371 [the respondent moved to dismiss the appeal on the ground that the appellant was a suspended corporation; the appellant had just revived its powers and later filed a certificate of revivor; motion to dismiss properly denied]; Rooney, supra, 10 Cal.3d at pp. 356, 359 [ “The revival of corporate powers validated the procedural steps taken on behalf of the corporation while it was under suspension and permitted it to proceed with the appeal”].) Unlike the corporations in Bourhis, Peacock Hill, and Rooney, PRH has not taken any action to revive its corporate powers and its counsel’s statements at oral argument suggest PRH has no intention of reviving its powers. Does a different rule apply here, where the corporation has not made any attempt to revive its corporate powers? In our view, the answer is no. That the notice of appeal was invalid when filed and has never been validated by the revival of PRH’s corporate powers does not mean the trial court was without jurisdiction to accept the appeal and the undertaking for filing in December 2012. As plainly stated in Traub, “the suspended status of corporate powers at the time of filing the action by a corporation does not affect the jurisdiction of the court to proceed.” (Traub, supra, 66 Cal.2d at p. 371.) When PRH filed its appeal in the trial court, there was always a possibility that it would cure its incapacity by reviving its corporate powers. Like the corporations in 20 Bourhis and Peacock Hill, PRH could have revived its corporate powers while Tabarrejo’s motion to dismiss was pending. Indeed, it is an abuse of discretion to deny a corporation’s request for a continuance to pay its taxes and obtain a certificate of revivor. (Color-Vue, supra, 44 Cal.App.4th at p. 1606.) That PRH elected not to revive its powers and retroactively validate its prior litigation activity did not retroactively divest the court of jurisdiction to hear the appeal. The court had jurisdiction over the parties and the subject matter when the appeal and the undertaking were filed; it also had jurisdiction months later to dismiss the action based on PRH’s incapacity. PRH’s decision not to cure its incapacity affected PRH’s right to proceed with the litigation, but it did not divest the trial court of jurisdiction. To the extent the trial court’s order was based on the erroneous belief that it did not have jurisdiction to accept PRH’s notice of appeal and the undertaking, that was error. It was always within PRH’s powers to cure the “procedural quandary” it found itself in and obtain a trial de novo on the merits of Tabarrejo’s wage claims. All it had to do was revive its corporate powers by paying its taxes and filing a statement of information. PRH’s contentions that Tabarrejo and his counsel and the Labor Commissioner contributed to this alleged “procedural disaster” are without merit. The trial court erred when it held that PRH did not have standing to appeal The trial court ruled in favor of PRH on the forfeiture issue, “finding that [PRH] was a suspended corporation with no standing to file the appeal, that the appeal was void from the outset, and that an order releasing the bond to the plaintiff would be inconsistent with that finding.” The court also found that “it would be an inequitable result for the individual who posted the bond if the money was released to the plaintiff” and directed the clerk to release the undertaking to the Moraleses. But the “[s]uspension of corporate powers results in a lack of capacity to sue, not a lack of standing to sue.” (Color-Vue, 21 supra, 44 Cal.App.4th at pp. 1603-1604, fns. omitted, original italics, citing Traub, supra, 66 Cal.2d at p. 370.) “ ‘There is a difference between the capacity to sue, which is the right to come into court, and the standing to sue, which is the right to relief in court.’ [Citation.] ‘Incapacity is merely a legal disability, such as infancy or insanity, which deprives a party of the right to come into court. The right to relief, on the other hand, goes to the existence of a cause of action. It is not a plea in abatement, as is lack of capacity to sue. [Citation.]’ ” (Id. at p. 1604; original italics.) And as we have noted, a corporation’s lack of capacity to sue “at the time of filing the action . . . does not affect the jurisdiction of the court to proceed.” (Traub, supra, 66 Cal.2d at p. 371.) Since a suspended corporation (like PRH) lacks the capacity to sue and to defend itself, but does not lack standing, we conclude that the trial court erred when it ordered the undertaking released to the Moraleses to the extent it reasoned that PRH lacked standing to sue. Tabarrejo—not the Moraleses—was entitled to the undertaking Section 98.2, subdivision (b) provides, in relevant part: “The undertaking shall be on the condition that, if any judgment is entered in favor of the employee, the employer shall pay the amount owed pursuant to the judgment, and if the appeal is withdrawn or dismissed without entry of judgment, the employer shall pay the amount owed pursuant to the order, decision, or award of the Labor Commissioner unless the parties have executed a settlement agreement for payment of some other amount, in which case the employer shall pay the amount that the employer is obligated to pay under the terms of the settlement agreement. If the employer fails to pay the amount owed within 10 days of entry of the judgment, dismissal, or withdrawal of the appeal, or the execution of a settlement agreement, a portion of the undertaking equal to the amount owed, or the entire undertaking if the amount owed exceeds the undertaking, is forfeited to the employee.” (Italics added.) 22 Contrary to PRH’s assertions, section 98.2, subdivision (b) does not require or guarantee a new trial. The statute recognizes that appeals of Labor Commissioner decisions may be resolved in a variety of ways, including a trial de novo, withdrawal of the appeal, dismissal, or settlement. Section 98.2, subdivision (b) does not limit the grounds for dismissal of an appeal. Furthermore, when the appeal is dismissed without a settlement, and the employer fails to pay the amount awarded by the Labor Commissioner within 10 days of dismissal, section 98.2, subdivision (b) expressly provides for forfeiture of the undertaking to the employee; it does not provide for the release of funds to individuals who posted the undertaking on behalf of the employer. PRH’s appeal was dismissed without entry of judgment in May 2013; PRH’s motion to set aside the dismissal was denied in October 2013. There was no settlement and PRH did not pay the amount of the Labor Commissioner’s Order within 10 days of the order of dismissal. Under the plain language of section 98.2, subdivision (b), the entire undertaking, which equals the amount awarded by the Labor Commissioner, “is forfeited to the employee,” Tabarrejo. The trial court therefore erred when it ordered the undertaking released to the Moraleses. Costs and Attorney Fees Tabarrejo has requested (1) costs under California Rules of Court,4 rules 8.4858.493; and (2) costs and attorney fees under section 98.2, subdivision (c). Rules 8.485 through 8.493 apply to writ proceedings within the original jurisdiction of the Court of Appeal and the California Supreme Court, including this writ. (Rule 8.485(a).) Rule 8.493 provides that the prevailing party is entitled to costs if we resolve the writ proceeding by written opinion, but that this court has the discretion to award or deny costs in the interests of justice. Since Tabarrejo is the prevailing party and 4 All further rules citations are to the California Rules of Court. 23 we have resolved this writ proceeding by written opinion, we shall exercise our discretion to award him costs in this proceeding. Section 98.2, subdivision (c), provides: “If the party seeking review by filing an appeal to the superior court is unsuccessful in the appeal, the court shall determine the costs and reasonable attorney’s fees incurred by the other parties to the appeal, and assess that amount as a cost upon the party filing the appeal. An employee is successful if the court awards an amount greater than zero.” (Italics added.) Generally, the amount of statutory or contractual attorney fees to be awarded is a matter within the trial court’s discretion, which we review for an abuse of discretion. But the determination of the legal basis for an attorney fees award is a question of law, which we review de novo. (Connerly, supra, 37 Cal.4th at p. 1175.) Upon our de novo review, we conclude that Tabarrejo is entitled to an award of attorney fees and costs under section 98.2, subdivision (c). PRH appealed the Labor Commissioner’s Order to the trial court. PRH’s appeal was dismissed for lack of corporate capacity. Thus, PRH was unsuccessful in its appeal. Upon dismissal of the appeal, PRH became liable for the full amount awarded by the Labor Commissioner, which was $131,096.77 (§ 98.2, subd. (b)). Since PRH was unsuccessful in its appeal and Tabarrejo recovered more than zero, the court is required to “determine the costs and reasonable attorney’s fees incurred by the other parties to the appeal [(Tabarrejo)], and assess that amount as a cost upon the party filing the appeal [(PRH)].” (§ 98.2, subd. (c).) For these reasons, we conclude that Tabarrejo is entitled to costs and attorney fees under section 98.2, subdivision (c) for these writ proceedings. DISPOSITION Let a peremptory writ of mandate issue directing the trial court to: (1) vacate its November 4, 2013 order granting PRH’s request for return of cash deposit and releasing the undertaking to the Moraleses; and (2) enter a new order denying PRH’s request for 24 return of cash deposit, granting Tabarrejo’s request to disburse the undertaking to him, and directing the clerk of the court to release the undertaking to Manuel Tabarrejo. Tabarrejo is entitled to his costs for this writ proceeding, in an amount to be determined by the trial court, including any costs and attorney fees that may be assessed as costs pursuant to section 98.2, subdivision (c). 25 _______________________________ Márquez, J. WE CONCUR: _____________________________________________ Bamattre-Manoukian, Acting P.J. ______________________________ Grover, J. FILED 12/23/14 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT MANUEL TABARREJO, Petitioner, H040377 (Santa Clara County Super. Ct. No. 1-12-CV-237107) v. THE SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent. PRINCESS RETIREMENT HOMES, INC., Real Party in Interest. BY THE COURT: The requests for publication of the opinion in the above entitled action filed by (1) the Labor Commissioner of the State of California on behalf of appellant Manuel Tabarrejo on December 11, 2014—in which respondent Princess Retirement Homes, Inc. has joined; and (2) the Katharine and George Alexander Community Law Center on behalf of appellant Manuel Tabarrejo on December 15, 2014, are granted. The opinion which was filed on November 24, 2014, is certified for publication. (Grover, J. would deny the request for publication.) Date: _________________________ Márquez, J. _________________________________ Bamattre-Manoukian, Acting P.J. The written opinion which was filed on November 24, 2014, has now been certified for publication pursuant to rule 8.1105(b) of the California Rules of Court, and it is therefore ordered that the opinion be published in the official reports. Date: ___________________________________ Bamattre-Manoukian, Acting P.J. 2 Trial Court: Santa Clara County Superior Court Superior Court No. CV237107 Trial Judge: The Honorable Peter H. Kirwan Attorneys for Petitioner Manuel Tabarrejo: Jessica Fry State of California -Department of Industrial Relations Margaret Prado Alvarez Alexander Community Law Center Attorneys for Real Party in Interest Princess Retirement Homes, Inc.: Robert Peter Weiss Narvid Scott LLP Tabarrejo v. Superior Court (Princess Retirement Homes, et al.) H040377 3
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