Legal Question in Business Law in California

Hello,

Does anyone know if a closely held Suspended California Corporation can do a Corporate transfer of a Recorded Deed of Trust, to its principle (or another party for that matter)?

The corporation has a note and Deed of Trust against a piece of raw land, that is unpaid and long overdue, and needs to be put into foreclosure.

This would Not be a legal action due to the non-judicial aspect of Foreclosure, correct?

I put this under business law as I am aware of most of the Legalities of Real Estate as it is. I need to know if such a transfer would hold up.

My understanding of Corporate Law, is that a suspended corporation persists to exist, and in many cases may continue to run, except when initiating or defending legal actions.

If I understand it correctly, it can enter into contracts, however they would be unenforceable by the corp. although enforceable by the other party to the contract. Thus, if held to a contract (and therefore compelled to perform/act in the course its routine business), the state seemingly could not deny the corp its right to certain rights to operate and perform as it would under "active" status, such as a transfer of assets or non-judicial collection of a note?

Any input would be appreciated!

Thank you.


Asked on 8/22/09, 11:38 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

The transfer of the note and deed of trust from the corporation to its 100% owner is unlikly to be attacked through a suit for rescission, since no one but the owner would have standing to attack the transaction on the round that the corporation lacked the power to transfer the assets.

However, the transaction could be attacked on grounds other than the suspension.

For example, if there are minority shareholders, this would be an illegal distribution, unless the shareholders all consented (or got equivalent value).

More significantly, the corporation has an obligation to take care of its creditors before making liquidating distributions to insiders like officers, directors and shareholders. Sounds as though the FTB might be a creditor.

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Answered on 8/23/09, 6:33 pm


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