Can You Amend a UD Complaint in California to Correct a Name of a Legal Entity?
In the recent appellate decision in 1215 Fell SF Owner LLC v. Fell St. Automotive Clinic, the three consolidated appeals arose from two related unlawful detainer proceedings filed by Fell Holdings LLC (Fell Holdings) and Stanyan Holdings LLC (Stanyan Holdings), and appellants Fell Street Automotive Clinic (Fell Street Clinic), Stanyan Street Automotive Clinic (Stanyan Street Clinic), and Laurence Nasey (Nasey) sought review of certain postjudgment orders.
Fell Holdings and Stanyan Holdings misdescribed themselves as California limited liability companies rather than Delaware limited liability companies in their unlawful detainer complaints.
Arguing that this pleading defect deprived the trial court of fundamental jurisdiction because a legally nonexistent entity has no capacity to sue, appellants argued that all judicial action taken in the cases was void ab initio.
The appellate court rejected appellants’ argument.
Even if it accepted the premise of appellants’ claim—that the pleading discrepancy at issue, minor or not, has jurisdictional implications—the issue is whether the discrepancy is curable by amendment, not whether all judicial action in the cases should be treated automatically as a nullity.
The appellate court reversed and remanded so that respondents could pursue curative amendments under Code of Civil Procedure section 473, subdivision (a)(1).
All three appeals turned on a single issue arising out of the same set of background facts. In brief, those facts are as follows. For many years, Nasey owned two separate properties in San Francisco (the Properties), one on Fell Street, and one on Stanyan Street. At these locations Nasey operated a sole proprietorship under the dba’s, “Ted & Al’s Towing” and “Ted & Al’s Service.”
He lost ownership of the Properties in a nonjudicial foreclosure during the pandemic, but managed to remain in business by agreeing to a leaseback arrangement with the new owners, Fell Holdings and Stanyan Holdings respectively.
This leaseback arrangement was memorialized in a September 2020 settlement agreement (the Settlement Agreement).
Under the Settlement Agreement, Fell Street Clinic and Stanyan Street Clinic became tenants of Fell Holdings and Stanyan Holdings for a period of months, and during that time Nasey was given the opportunity to repurchase the Properties.
For each of the Properties, the parties stipulated to entry of judgment against appellants if Nasey failed to close escrow on the contemplated repurchase (the Stipulations for Entry of Judgment).
Shortly after entering the Settlement Agreement, Fell Holdings and Stanyan Holdings filed but did not serve two unlawful detainer proceedings, one naming Stanyan Street Clinic as the tenant defendant (the Stanyan Street case), and the other naming Fell Street Clinic as the tenant defendant (the Fell Street case).
Pursuant to the Stipulations for Entry of Judgment, on February 19, 2021, the trial court filed identical judgments in the Stanyan Street case and in the Fell Street case (the Eviction Judgments).
The Eviction Judgments were initially filed under seal and provided for a forbearance period during which appellants were obligated to pay certain rental arrearages and current monthly rent on a monthly schedule.
In late 2022, however, after the deadline for Nasey’s repurchase of the Properties passed, respondents brought motions to unseal and to enforce the Eviction Judgments.
On December 21, 2022, the court issued identical orders unsealing and granting enforcement of the Eviction Judgments (collectively the Enforcement Orders).
In April 2023, appellants moved to vacate the Eviction Judgments and the Enforcement Orders, for the first time arguing a lack of fundamental jurisdiction on the ground that Fell Holdings and Stanyan Holdings are not California limited liability companies; that those alleged entities have no legal existence; and that, as a result, all judicial action in both cases, from the date they were filed, was null and void.
The court rejected this argument, and on August 4, 2023 issued substantively identical orders denying the vacatur motions (the Denial of Vacatur Orders).
At the heart of all three appeals is a single question arising from what respondents argue is, at worst, a minor pleading error in each of the unlawful detainer complaints.
That question is: Because the respondents misdescribed themselves as California limited liability companies rather than Delaware limited liability companies, does the naming discrepancy require us to conclude that the Eviction Judgments are void in both cases, entitling appellants to restoration of possession of the Properties and return of the earnest money deposit?
Reprising the argument they made in the trial court, appellants urged that the answer is yes.
Appellants argued that the named unlawful detainer plaintiffs, Fell Holdings and Stanyan Holdings, are not real entities and have no capacity to sue or enter into contracts.
This is so, appellants contended, based on allegations Fell Holdings and Stanyan Holdings make in describing themselves.
Appellants contended it has been settled for over 100 years that if a party does not exist, it cannot enter into legal agreements, be represented by counsel, or prosecute or defend any legal action.
Because no entity named Fell Holdings LLC, a California limited liability company or Stanyan Holdings LLC, a California limited liability company exists, appellants argued that the trial court lacked fundamental jurisdiction to enter judgment.
Indeed, they go even further. They contend that the jurisdictional defect at issue here, which is unwaivable and may be raised at any time, cannot be cured by amendment.
Respondents, for their part, do not contest the principle that a court lacks fundamental jurisdiction to proceed in an action initiated by a nonexistent party or that jurisdictional defects may be raised at any time, including after entry of judgment, but claim instead that the incorrect description of the corporate plaintiffs in this case does not involve a problem of “nonexistence.”
Rather, pointing to a cryptic passage in a century-old Court of Appeal opinion that has never been cited for the proposition respondents urge to be adopted, they say their misdescription of their own corporate identity should be ignored as a “trivial” scrivener’s error.
Neither appellants’ position nor respondents’ position is correct.
Putting to one side for a moment the legal consequence of the pleading discrepancy at issue here (i.e., whether it deprived the trial court of jurisdiction ab initio), there is a long line of cases, involving plaintiffs who mistakenly pleaded the identity of a business entity defendant by the wrong name and the error was discovered long after the filing of the complaint, often after a statute of limitations deadline ran against the correctly described defendant.
In this situation, curative amendments were allowed under section 473 if it could be said that the error was nothing more than a “misnomer” correctible by a change in the description of the defendant, but not if the correction required the addition of a party against whom, in substance, the original complaint stated no viable cause of action.
This analysis applies in “ ‘wrong defendant’ ” as well as “ ‘wrong plaintiff’ ” cases.
In both scenarios, the allowance of amendment and relation back to avoid the statute of limitations does not depend on whether the parties are technically or substantially changed; rather the inquiry is as to whether the nature of the action is substantially changed.
Appellants are mistaken in claiming the pleading discrepancy involved in this case is beyond repair.
The twist in this case is that the pleading discrepancy at issue in this case was brought to the attention of the trial court after entry of judgment.
The appellate court concluded that it makes no difference.
Appellants conceded that amendments after judgment are allowed on an application for relief after the judgment has been vacated or reversed, but contend that a motion for relief under section 473, subdivision (b) must be filed within six months after judgment and therefore would be untimely in this case.
Section 473, subdivision (b), which confers authority to grant parties or their legal representatives relief from any judgment, dismissal, order, or other proceeding taken against them based on mistake, inadvertence, surprise, or excusable neglect, is not the pertinent source of discretion.
The pertinent source of discretionary authority is section 473, subdivision (a)(1), which authorizes pleading amendments in furtherance of justice, and on any terms as may be proper, subject to no specified time limit.
Where a defendant raises an issue of fundamental jurisdiction by vacatur motion filed after entry of judgment on the ground that there is a previously undiscovered pleading defect in the plaintiff’s complaint—as appellants did here, when they pointed out the misdescription of respondents’ pleaded state of domicile for the first time more than two years after the Eviction Judgments were entered—the plaintiff is entitled to respond by seeking leave to cure the defect under section 473, subdivision (a)(1).
Accordingly, the appellate court reversed the Denial of Vacatur Orders in both underlying unlawful detainer cases and remand with directions that the trial court (1) vacate the Eviction Judgments and the Enforcement Orders without prejudice to their possible reinstatement if respondents are able to cure the potential jurisdictional defects appellants have identified; and (2) entertain and decide any motion from respondents under section 473, subdivision (a)(1) seeking to amend the complaints in these actions.
Only if the pleading defects appellants have identified are not correctible will there be any need to consider procedural consequences under the nullity doctrine.
LESSONS:
1. Carefully determine and plead the precise legal name of any parties in a complaint.
2, Curative amendments are allowed under section 473 if it could be said that the error was nothing more than a “misnomer” correctible by a change in the description of the defendant, but not if the correction required the addition of a party against whom, in substance, the original complaint stated no viable cause of action.
3. Section 473, subdivision (b), which confers authority to grant parties or their legal representatives relief from any judgment, dismissal, order, or other proceeding taken against them based on mistake, inadvertence, surprise, or excusable neglect, is not the pertinent source of discretion in all cases.
4. The pertinent source of discretionary authority may be section 473, subdivision (a)(1), which authorizes pleading amendments in furtherance of justice, and on any terms as may be proper, subject to no specified time limit.