The Liu Bunch v. Song CA2/3 ( 2023 )

Filed 12/6/23 The Liu Bunch v. Song CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on
opinions not certified for publication or ordered published, except as specified by rule
8.1115(b). This opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
THE LIU BUNCH, LLC, B321457
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC453717)
v.
KI JONG SONG et al.,
Defendants and Respondents.
APPEAL from an order of the Superior Court of
Los Angeles County, Kenneth R. Freeman, Judge. Reversed and
remanded with directions.
Zee Law Group, Tappan Zee and Kimberly Barrientos for
Plaintiff and Appellant.
Lagasse Branch Bell + Kinkead, Christopher C. Cianci for
Defendants and Respondents.
‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗
The Liu Bunch, LLC appeals from an order vacating a 2011
default judgment entered in its favor against Ki Jong Song and
Mi Sook Song. The trial court found The Liu Bunch, a foreign
limited liability company, did not have a certificate of registration
to transact business in California when the judgment was
entered, and therefore lacked legal capacity to maintain the
lawsuit. The court accepted the Songs’ argument that the
judgment was void on its face. We conclude this was error and
reverse.
FACTUAL AND PROCEDURAL BACKGROUND
In 2006, the Songs received a loan of $1.09 million from
nonparty Union Bank N.A. (Union Bank) secured by a deed of
trust to real property located in Nevada. Union Bank assigned
the loan to The Liu Bunch in 2010. By October 2010, the Songs
owed more than $50,000 in outstanding payments on the loan.
The Liu Bunch filed a complaint against the Songs in January
2011 asserting claims for breach of contract, money due on an
open book account, and money due on an account stated. The
Songs did not respond to the complaint. The court entered a
default judgment in favor of The Liu Bunch in August 2011. The
court granted The Liu Bunch’s application to renew the judgment
in June 2021.
In November 2021, the Songs filed a motion to set aside the
judgment. The Songs argued The Liu Bunch was not properly
registered with the California Secretary of State as a foreign
Limited Liability Company (LLC). The Songs contended The Liu
Bunch was therefore “not qualified” to maintain the lawsuit
based on Corporations Code section 17708.07, subdivision (a).
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The Songs asked the court to set aside the judgment as void
under Code of Civil Procedure section 473, subdivision (d).1 They
also filed a request for judicial notice of a printout from the
Secretary of State website showing no results for a search for an
LLC with the name “liu bunch.”
The Liu Bunch opposed the Songs’ motion in March 2022.
The opposition argued that any challenge to The Liu Bunch’s
registration status should have been raised by demurrer; the trial
court should stay the case pending its registration rather than
invalidate the judgment; a judgment is void when the trial court
lacks subject matter or personal jurisdiction, and here the
complaint was properly served; and any invalidity must appear
on the face of the judgment and may not be established solely
through extrinsic evidence. The opposition attached a copy of
The Liu Bunch’s application to register with the Secretary of
State of California as a foreign LLC dated March 8, 2022.
The trial court found The Liu Bunch did not have a
certificate of registration when it obtained the default judgment,
thus it lacked legal capacity to maintain the lawsuit. The court
concluded the judgment was therefore void on its face, granted
the Songs’ motion, and set aside the default judgment and the
entry of default. The Liu Bunch timely appealed.
DISCUSSION
The fundamental legal question in this appeal is whether a
plaintiff’s corporate incapacity at the time of judgment renders
the judgment void. In its appellate briefing, The Liu Bunch
contends a judgment is void if the court lacked subject matter or
personal jurisdiction, and asserts there was no such lack of
1 All further undesignated statutory references are to the
Code of Civil Procedure.
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jurisdiction in this case. The Liu Bunch did not expressly discuss
whether a lack of capacity is a jurisdictional deficiency. On the
other hand, the Songs argue the trial court correctly found The
Liu Bunch lacked capacity, but they do not provide any legal
authority or reasoning in support of their contention that this
incapacity rendered the judgment void. We invited the parties to
submit supplemental briefing on the issue of whether, assuming
The Liu Bunch lacked capacity at the time it obtained the default
judgment because it had not registered as a foreign LLC, any
lack of capacity rendered the judgment void. Having considered
the parties’ briefing in its entirety, we conclude the trial court
erred in finding The Liu Bunch’s asserted lack of capacity
rendered the judgment void.2
2 The Liu Bunch also argues it was not required to register
as a foreign LLC because the underlying contract was not an
intrastate transaction, and contends the motion to set aside the
judgment was untimely. These arguments were not raised before
the trial court and we decline to reach them for the first time on
appeal, particularly given the fact-intensive nature of the former
argument. (In re Marriage of Brewster & Clevenger (2020) 45
Cal.App.5th 481, 509–510 [declining to consider for first time on
appeal allegations that raise new “issues of fact that could be
altered by the presentation of additional evidence”]; see
Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 767
[even if new theory raised on appeal is pure question of law court
has discretion not to consider it].)
The Liu Bunch further contends the trial court erred in
considering extrinsic evidence because, for purposes of
section 473, subdivision (d), a judgment must be invalid on its
face to be set aside. Because we conclude the judgment was not
void, we need not address this argument.
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I. Standard of Review
The trial court “may, on motion of either party after notice
to the other party, set aside any void judgment or order.” (§ 473,
subd. (d).) “We review de novo a trial court’s determination that
a judgment is void.” (Cruz v. Fagor America, Inc. (2007) 146
Cal.App.4th 488, 496 (Cruz).)
II. The Trial Court Erred in Finding the Judgment Void
When a foreign LLC fails to comply with registration
requirements in the Corporations Code, it “lack[s] . . . capacity to
maintain an action arising out of intrastate business.” (United
Medical Management Ltd. v. Gatto (1996) 49 Cal.App.4th 1732,
1740 [addressing parallel requirements for foreign corporations];
Corp. Code § 17708.07, subd. (a) [foreign LLC “transacting
intrastate business in this state shall not maintain an action or
proceeding in this state unless it has a certificate of registration
to transact intrastate business in this state”].)
However, a challenge to the validity of an action based on a
corporate plaintiff’s lack of capacity “ ‘must be raised . . . at the
Finally, in response to our invitation to submit
supplemental briefing, the Songs primarily argued that
irrespective of whether the judgment was void, The Liu Bunch
could not renew the default judgment due to its lack of capacity.
This argument is not properly before us. The trial court found
the Songs’ motion to vacate the renewal of judgment was not
properly served and, after vacating the default judgment,
concluded the motion to vacate the renewal of judgment was
moot. Thus, the trial court never ruled on the later motion, and
we have no ruling to review on appeal. Moreover, the Songs did
not include any argument regarding the motion to vacate the
renewal of judgment in their opening or reply briefs, and they
were not invited to address that issue in our request for
supplemental briefing. We therefore disregard the argument.
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earliest opportunity or it is waived,’ ” and should be raised “ ‘in
the original answer or by demurrer at the time of the answer.’ ”
(Color-Vue, Inc. v. Abrams, 44 Cal.App.4th 1599, 1604.) Here,
the Songs did not file an answer or demur to the complaint. The
Songs therefore forfeited any argument based on The Liu Bunch’s
asserted lack of capacity. (Parish v. Peters (1991) 1 Cal.App.4th
202, 209, fn. 8 [default judgment “permanently precludes the
filing of an answer”].)
Moreover, a judgment is void “only if the court rendering it
lacked subject matter jurisdiction or jurisdiction over the
parties.” (Neumann v. Melgar (2004) 121 Cal.App.4th 152, 164.)
The Songs’ only basis for seeking to set aside the judgment was
that The Liu Bunch’s incapacity rendered the judgment void
under section 473, subdivision (d). Yet, “lack of capacity is not a
jurisdictional defect,” and an entity’s incapacity at the time of
judgment does not render the judgment void. (Tabarrejo v.
Superior Court (2014) 232 Cal.App.4th 849, 863.)
For example, in Traub Co. v. Coffee Break Service, Inc.
(1967) 66 Cal.2d 368 (Traub), the cross-complainant, which
lacked capacity due to the suspension of its corporate powers for
nonpayment of corporate taxes, obtained a judgment against the
cross-defendants. (Id. at pp. 369–370.) More than a year after
the judgment was entered, the cross-defendants filed a motion to
set it aside as void based on the cross-complainant’s incapacity.
(Ibid.) The trial court denied the motion. (Ibid.) Our Supreme
Court affirmed, expressly rejecting the argument that the
judgment was void as a result of the corporation’s incapacity.
(Ibid.) The court recognized that a judgment may be void for lack
of jurisdiction, but distinguished between jurisdictional
deficiencies and incapacity, reasoning that the cross-
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complainant’s lack of capacity at the time of judgment “[did] not
deprive the court of jurisdiction or render the judgment void and
subject to collateral attack after it ha[d] become final.” (Id. at
p. 371.)
Similarly, here, even if The Liu Bunch lacked capacity to
maintain the lawsuit when the judgment was entered, that
incapacity did not “deprive the court of jurisdiction or render the
judgment void.” (Traub, supra, 66 Cal.2d at p. 371.) Rather,
“lack of capacity . . . results in judicial action ‘in excess of
jurisdiction,’ ” and “judicial acts in excess of jurisdiction are
merely ‘voidable.’ ” (Jo Redland Tr., U.A.D. 4-6-05 v. CIT Bank,
N.A. (2023) 92 Cal.App.5th 142, 156.) “Only void judgments and
orders may be set aside under section 473, subdivision (d);
voidable judgments and orders may not.” (People v. The North
River Insurance Co. (2020) 48 Cal.App.5th 226, 234.) Because the
judgment was not void as a matter of law, the court had “no
statutory power under section 473, subdivision (d)” to set it aside.
(Cruz, supra, 146 Cal.App.4th at pp. 495–496.) The order must
be reversed.
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DISPOSITION
The trial court order setting aside the default and default
judgment is reversed, and the trial court is directed to enter an
order reinstating the default and default judgment. The matter
is remanded for further proceedings consistent with this opinion.
Appellant to recover its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS
ADAMS, J.
We concur:
EDMON, P. J.
LAVIN, J.
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