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Dissolved Corporation Not Limited to Defending Action Against It, May Also Sue—Appeals Court
By a MetNews Staff Writer
The Court of Appeal for this district has ordered reinstatement of an action that was dismissed because the plaintiff corporation had been dissolved.
Los Angeles Superior Court Judge Rupert A. Byrdsong granted a motion by defendant Yuan Hao “Eric” Cheng to terminate the suit against him for alleged corporate looting on the ground that plaintiff E&E Optics, Inc. is no longer in existence.
Byrdsong reasoned that while an action against a defunct corporation may proceed, such an entity may not maintain litigation, saying that it would be “an “oxymoron for a company that no longer exists” to be “able to bring an action.”
He public policy allows suit to continue against a corporation that has wound up its affairs because otherwise, “the companies would just go buck wild, dissolve, and say, ‘Hey, we escaped liability’ ” but that there is no such justification for allowing suits by them.
Weingart’s Opinion
“This was error,” Justice Gregory Weingart of Div. One said in an unpublished opinion filed Monday. He explained:
“Under Corporations Code section 2010, E&E continued to exist for purposes of the litigation despite its dissolution. The statute and relevant case law affirm that a dissolved corporation may continue to participate in litigation either as a plaintiff or as a defendant. We therefore reverse the dismissal of E&E’s claims and affirm the remainder of the judgment.”
The judgment also included the dismissal of the action against an individual defendant and a default judgment against a business.
Statutory Language
Weingart said that limiting the ability of a dissolved corporation to defending itself “finds no support in the text of section 2010.” He pointed out that subd. (a), with italics added by him, “states that a dissolved corporation ‘continues to exist for the purpose of...prosecuting and defending actions by or against it,’ ” adding:
“Subdivision (b) of the same section further clarifies that ‘[n]o action or proceeding to which a corporation is a party abates by the dissolution of the corporation or by reason of proceedings for winding up and dissolution thereof.’…To bar E&E from continuing to prosecute its case against Eric would be contrary to the plain text of the statute, and we are aware of no case holding otherwise.”
The case is Wan v. Cheng, B335658.
Diamond Bar attorney Bin Li represented plaintiffs/appellants E&E Optics and its owner, Bonnie Kwok Ling Wan. Steven P. Chang, Gene H. Shioda and Heidi M. Cheng of the San Gabriel firm of Shioda Langley & Chang acted for Eric Cheng.
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