November 2017 Archives

A Shield, Not a Sword: Insurance Carriers' Rights When Intervening on Behalf of a Suspended Corporation

By: Paul T. McBride

On November 7, 2017, Judge David Brown of the Sacramento County Superior Court ruled that an intervenor insurance carrier may not file a cross-complaint in a construction defect lawsuit. While this ruling is not binding precedent, if upheld on appeal it will affect the rights of intervening insurance carriers, and so merits discussion.

Background- Effect of Corporate Suspension

California Revenue & Taxation Code §23301 provides for suspension of a California corporation's "rights, powers, and privileges" for nonpayment of taxes. Once it is suspended, a corporation is prohibited from taking any actions; it can neither prosecute nor defend lawsuits. Gar-Lo, Inc. v. Prudential Sav. & Loan Assn. (1974) 41 Cal.App.3d 242. Since it cannot defend a lawsuit, it is a comparatively simple matter to take a default judgment against a suspended corporation, provided it is properly served. Once a default judgment is entered against a suspended corporation, it may be enforced, i.e. collected, against its insurance carrier, pursuant to California Insurance Code §11580(b)(2), assuming the judgment creditor can prove the damages encompassed by the judgment are covered by the policy of insurance.

Don't Lose Your Lease! (How to Properly Exercise Your Option to Extend)

By: Kenneth W. Chung

If your lease contains an option to extend the lease term and you intend to extend your lease, then you must properly and timely send your written option exercise notice. If your notice is even one day late, then the landlord may reject your request to extend the lease term. In such event, the landlord has the right to evict you from the premises, increase your rent to an amount higher than fair market value, or require other payments or terms as a condition to extending your lease. In order to avoid such potential consequences, the option exercise notice must be properly and timely sent.

Unless you have a form lease, no two leases are identical. Therefore, you should review your lease and option provisions carefully so that you may understand and satisfy all requirements. However, please note that most leases require the option exercise notice to be sent within a certain time period before the lease expiration date. The following is a sample provision:

Tenant may exercise the Option by first giving to Landlord a minimum of 6 months written notice, but not more than 12 months written notice of Tenant's intent to exercise the Option.

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