Judge Christian R. Gullon, Case Number: 21PSCV00620, Date: 2023-11-13 Tentative Ruling

Judge: Christian R. Gullon, Case: 21PSCV00620, Date: 2023-11-13 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, attorneys are advised to check this website to determine if any changes or updates have been made to the tentative ruling.

Counsel may submit on the tentative rulings by calling the clerk in Dept. O at 909-802-1126 before 8:30 the morning of the hearing. Submission on the tentative does not bind the court to adopt the tentative ruling at the hearing should the opposing party appear and convince the court of further modification during oral argument.

The Tentative Ruling is not an invitation, nor an opportunity, to file any further documents relative to the hearing in question. No such filing will be considered by the Court in the absence of permission first obtained following ex-parte application therefore.

MOTION TO AMEND JUDGMENT TO ADD ALTER EGO AS AN ADDITIONAL JUDGMENT DEBTOR is DENIED without prejudice.

On July 30, 2023, Plaintiff Lee and Lee, LLC filed suit against Defendant IFC Fulfillment Company, Inc. (“Defendant IFC”) for (1) Non-payment of rent and (2) Incurable Breach.

O August 17, 2021, HeavenStone Corporation (Defendant “Heavenstone”) filed a ‘Prejudgment Claim of Right of Possession.’

On April 18, 2022, the court conducted a non-jury trial. According to the minute order, “Court orders judgment entered for Plaintiff Lee & Lee, LLC, a California Limited Liability Company against Defendant IFC Fulfillment Company, Inc., a California Corporation and Defendant HeavenStone Corporation on the Complaint filed by Lee & Lee, LLC, a California Limited Liability Company on 07/30/2021 for past rent due in the amount of $164,627.40 and holdover damages $119,352.69 for a total of $283,980.09.”

On September 8, 2022, Defendant Heavenstone filed a motion to set aside void judgment.

On October 11, 2022, according to the minute order on the motion, “The Court verbally gives the party it's Tentative Ruling to deny the motion. The motion is heard and argued. Counsel for plaintiff submits on the Court's Tentative Ruling. The Court takes the Hearing on Motion to Set Aside/Vacate Judgment (CCP 473) under submission.”

On December 5, 2022, the court ruled on the motion to set aside judgment. The minute order provides the following: “The Motion to Set Aside/Vacate Judgment filed by HeavenStone Corporation on 09/08/2022 is Denied. The Court lifts the stay ordered on 10/20/2022. The Judgment entered on 4/18/2022 is to stand.”

On October 30, 2023, Defendant IFC filed a substitution of attorney. That same day, Defendants IFC and Heavenstone filed their opposition to the instant motion.

Plaintiff brings forth the motion pursuant to CCP section 187. (Motion p. 4.) Section 187 states: “When jurisdiction is, by the constitution or this code, or by any other statute, conferred on a court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this code.” Effectively, pursuant to section 187, “a trial court has jurisdiction to modify a judgment to add additional judgment debtors.” (Motion p. 4, citing McClellan v. Northridge Park Townhome Owners Ass’n, Inc. (2001) 89 Cal.App.4th 746, 752.)

“In order to prevail on a motion to add alter ego judgment debtors, [the judgment creditor] must show that (1) the parties to be added as judgment debtors had control of the underlying litigation and were virtually represented in that proceeding; (2) there is such a unity of interest and ownership that the separate personalities of the judgment debtor and those other parties no longer exist; and (3) an inequitable result will follow if the acts are treated as those of the entity alone.” (Motion p. 4, citing Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership (2013) 222 Cal. App. 4th 811, 815–816 (Relentless).)

Despite judgment in favor of Plaintiff and against HeavenStone, HeavenStone has made no attempt to pay any part of the Judgment. Effectively, Plaintiff moves to add the name of Heavenstone Ranch Corp. (Defendant “Heavenstone Ranch”) as an additional judgment debtor because Heavenstone Ranch “is, and at all times material to Plaintiff’s case was, the alter ego of Defendant Heavenstone.” (Motion p. 1:24-26.) In reaching its determination that Heavenstone Ranch is the alter ego of the judgment debtor Heavenstone, Plaintiff argues the following:

- Both were/are operated with integrated resources in pursuit of a single business purpose.

In opposition, Defendants take issue with the lack of evidence, specifically arguing that the evidence should be excluded based upon (1) Lack of Personal Knowledge; 2) Lack of Foundation; 3) Hearsay; 4) Argumentative; 5) Evidence Code 352 (in some instances).[2]

As a prefatory matter, Plaintiff interchanges between Heavenstone Ranch being the dba of Heavenstone Corporation and it being the alter ego. The court is uncertain as to the exact theory at issue. Moreover, alter egos are generally entities set up to provide a legal shield for the individual person controlling the operation. Proving that such a business entity is a mere cover or alter ego for the business owner (here, that being Jack Jie Qin), that would allow Plaintiff to pierce the veil of the corporation(s) to take away Jack Qin’s protection. Put plainly, it is unclear how alter ego is at issue when the argument is not to amend the judgment to name Jack Qin as a judgment debtor.

Issue of the theory aside, the court determines that Plaintiff has provided insufficient evidence of alter ego liability. While in Reply Plaintiff may argue that “The court is not required to hold an evidentiary hearing on a motion to amend a judgment but may rule on the motion based solely on declarations and other written evidence,” the very cases Plaintiff cites to, McCellan and Relentless, suggest that ample evidence is required before making any such determination. (See McClellan, supra, 89 Cal.App.4th at p. 755[“The record reflects abundant evidence to support the trial court's determination that successor liability should attach to Northridge Park as Peppertree's successor.”]; see Relentless, supra, 222 Cal.App.4th at p. 816 [“Those findings are supported by more than ample evidence and are not challenged here.”].)

Here, merely having the name “Heavenstone” in both entities’ names, having the same address, and creating the entities within one month of each other are insufficient to find alter ego. In fact, contrary to Plaintiff’s assertion that the two entities have the same employees, a copy of the Nevada Secretary of State Business Entity Detail for Heavenstone Corporation (Motion, Ex. B) and a copy of the California Secretary of State Business Entity Detail for Heavenstone Ranch Corp. (Motion, Ex. C) do not provide information about the employees (names, number, etc.) to draw such a conclusion. Moreover, while Heavenstone Ranch’s information only provides the name of Jack Jie Qin, Heavenstone’s business information provides the names of other individuals, including Visman Jie Chow (treasurer and director) and Erik Treutlein (labeled as “Individual with Authority to Act”).

All in all, whereas the trial court in McClellan cited to the “evidence of similarity of names, identity of directorate, purchase of assets and offer of stock to the old shareholders at a nominal value” (id. at p. 754) in holding that a successor corporation is a mere continuation and hence liable for the acts of its predecessor, here such specifics as to the assets and other features of the entities are not discussed.

Therefore, there is an insufficient showing of a unity of interest and ownership.

[1] Plaintiff’s motion indicates that is brought forth by Defendant Heavenstone. (Motion p. 1.) However, as noted in Reply, this was an inadvertent error since Heavenstone is the debtor to which Plaintiff seeks to add to the judgment.

[2] Defendants have not filed evidentiary objections.