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Corporate Suspension No Bar To Creditor's Suit

Wanke Industrial, Commercial, Residential, Inc. v. AV Builder Corp.,  2020 Cal. App. LEXIS 134, involved a judgment creditor's attempt to enforce its judgment against its judgment debtor's debtor.  On appeal, the debtor's debtor argued that the plaintiff could not enforce its judgment because it stood in the shoes of its judgment debtor, which was a suspended corporation.  The Court of Appeal rejected this argument, reasoning:

"Tax code restrictions serve as a penalty on the suspended corporation to incentivize payment of delinquent taxes.  Foreclosing a creditor's suit against a third person based on unilateral action taken by a suspended judgment debtor would not further that goal."

The Court's holding leads to the anomalous result that an assignee of a suspended corporation can not enforce a suspended corporation's claim while a judgment creditor of a suspended corporation can.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume X, Number 51

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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