Judge: Christian R. Gullon, Case: 24PSCV00070, Date: 2024-08-09 Tentative Ruling

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Case Number: 24PSCV00070    Hearing Date: August 9, 2024    Dept: O

Tentative Ruling

Plaintiffs’ Application for Entry of Default Judgment re: Joseph Acosta is DENIED because can’t hold individual officer/director liable for corporate acts. In the alternative, default judgment is CONTINUED because of bankruptcy proceedings.

Background

This case arises from a home renovation project. Plaintiffs ALEJANDRO SANCHEZ and KINDRA SANCHEZ[1] allege the following against Defendants EFREN LUNA (owner of Safari); JOSEPH ACOSTA (vice-president of Safari); and SAFARI LANDSCAPING & POOLS (“Safari”): In October 2022, Plaintiffs entered into a contract with Safari for installation of a pool and spa and remodel of their backyard. Though the parties agreed to a completion date of July 3, 2023 and though Plaintiffs have paid for 95% of the contract price in the amount of $231,395.00, the vast majority of the work has yet to be completed.

On January 9, 2024, Plaintiffs filed suit asserting the following causes of action (COAs):

On January 23, 2024, Luna filed his answer.

On May 22, 2024, default was entered against Joseph Acosta.

On May 29, 2024, Plaintiffs filed the instant application for entry of default judgment as to Joseph Acosta.

On June 17, 2024, Efren filed a Notice of Stay of Proceedings indicating that the case is stayed with regard to all parties.

Discussion

Plaintiffs seek entry of default judgment as to Acosta in the total amount of $133,829.00, which includes $132,764.00 in damages.

The application is denied for the following two reasons.

First, pursuant to Code of Civil Procedure section 585, a party seeking judgment on the default by the Court must file a dismissal of all parties against whom judgment is not sought or an application for separate judgment under CCP § 579, supported by a showing of grounds for each judgment. Here, however, Plaintiffs have not filed an application for separate judgment as to Acosta.

Second, Plaintiffs seek to hold Acosta (and Luna) individually liable. However, it is well-established that corporate officers and directors cannot ordinarily be held personally liable for the acts or obligations of their corporation. However, they may become liable if they directly authorize or actively participate in wrongful or tortious conduct. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 503-504; see also Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 858.) Here, the complaint is premised upon breach of contract. Therefore, as there are no allegations of wrongful act(s) performed in the name of the corporation, the individual defendants shielded from liability. To the extent that Plaintiffs may rely upon their 4^th and 5^th COAs for intentional misrepresentation and false promise, respectively, those are not well pled. Effectively, guided by the instructions set forth in Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, absent a properly pled complaint, default judgment is improper. Should Plaintiffs seek to amend their complaint, the application is denied with prejudice.

Bankruptcy

Notwithstanding, as soon as a bankruptcy case is filed, an automatic stay immediately goes into effect and generally prevents creditors (and other parties) from taking most actions against property of the bankruptcy estate, the debtor, and the debtor's property. Here, according to the CM-180 form filed by Luna on 6/17/24, a bankruptcy case has been filed (6:24-bk-11500-WJ) and the form mentions Safari. Therefore, until the bankruptcy court order lifts the stay has been entered or the stay has expired, taking any actions in this case is premature.

Conclusion

Based on the foregoing two defects, the application is denied (with or without prejudice TBD). Notwithstanding, the default judgment hearing will be continued pending the bankruptcy proceeding.