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Like Elmer Gantry, Supreme Court Breathes New Life Into Revivals

The state, of course, likes to see corporations pay their taxes.  When a corporation fails to do so, "the corporate powers, rights and privileges of a domestic taxpayer may be suspended, and the exercise of the corporate powers, rights, and privileges of a foreign taxpayer in this state may be forfeited".  Cal. Rev. & Tax. Code, § 23301.  When a corporation is suspended, it generally may not "prosecute or defend an action, nor appeal from an adverse judgment in an action  . . . ." Reed v. Norman, 48 Cal.2d 338, 343 (1957).  Suspension, however, is not the final word because a corporation can pay its taxes and then apply with the Franchise Tax Board for reinstatement. Cal. Rev. & Tax Code § 23305.  Assuming the corporation meets the applicable statutory requirements, the Franchise Tax Board issues a "certificate of revivor."  Id.  "Upon the issuance of the certificate [of revivor] by the Franchise Tax Board the taxpayer therein named shall become reinstated but the reinstatement shall be without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture . . . ."  Cal. Rev. & Tax Code § 23305a.

So what happens when a suspended corporation files a notice of appeal and is thereafter revived, but the time for filing an appeal has lapsed?  Strangely, this is a jurisdictional issue because filing a timely notice of appeal is a jurisdictional requirement.

In Bourhis v. Lord, Cal. Supreme Ct. Case No. S199887 (March 4, 2013), the California Supreme Court held that revival validates the earlier notice of appeal.  Justice Ming W. Chin writing for the court relied on on two earlier cases, Rooney v. Vermont Investment Corp., 10 Cal.3d 351 (1973) and Peacock Hill Assn. v. Peacock Lagoon Constr. Co.,  8 Cal.3d 369 (1972).  Justice Joyce L. Kennard in a concurring and dissenting opinion argued that failure to file a timely appeal works a forfeiture than cannot be cured and she would have overruled the two earlier decisions of the court.  For reasons of fairness, however, she would have applied that result only prospectively.

It is interesting to note that Justices' use of age of the Rooney and Peacock Hill Assn. cases.  Justice Chin noted that 

The rule stated in those cases has existed for four decades.  It does not appear the rule has proven unworkable or has unduly hampered the state's ability to collect its taxes.

He also emphasized that the legislature could have changed the rule if it so desired.  Justice Kennard, on the other hand, took the view that longevity is not a corrective:

In support of its holding, the majority cites two 40-year-old decisions of this court, one of them with a vigorous dissent by Justice Stanley Mosk. In my view, those two decisions were wrong then, are wrong now, and should be overruled.



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