Judge: Daniel S. Murphy, Case: BC239003, Date: 2024-03-01 Tentative Ruling

Case Number: BC239003    Hearing Date: March 1, 2024    Dept: 32

BACKGROUND

            Plaintiff initiated this action against Defendant Vincent J. Ferro in October 2000. On January 29, 2015, the Court entered judgment for Plaintiff in the amount of $14,381.65. To date, Defendant has only paid $2,000. With interest, the total remaining balance to date is $22,699.91.

            Defendant is the sole member and CEO of Strategic Merchant Partners LLC (Strategic). Plaintiff presently moves to add Strategic as a judgment debtor on the grounds that it is Defendant’s alter ego. Plaintiff argues that Defendant is using Strategic to hide assets from collection. There is no opposition to the motion.

LEGAL STANDARD

“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.” (Code Civ. Proc., § 187.)

“Pursuant to section 187, a trial court has jurisdiction to modify a judgment to add additional judgment debtors.” (McClellan v. Northridge Park Townhome Owners Ass'n (2001) 89 Cal.App.4th 746, 752.) “Judgments are often amended to add additional judgment debtors on the grounds that a person or entity is the alter ego of the original judgment debtor.” (NEC Electronics Inc. v. Hurt (1989) 208 Cal.App.3d 772, 778.) “This is an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant.” (Ibid.) “Such a procedure is an appropriate and complete method by which to bind new . . . defendants where it can be demonstrated that in their capacity as alter ego of the [judgment debtor] they in fact had control of the previous litigation, and thus were virtually represented in the lawsuit.” (Ibid.)

DISCUSSION

I. Proof of Service

            Initially, the Court notes that service of the motion is inadequate. The proof of service indicates service by mail directly to Defendant and Strategic. Given the age of the case and Strategic’s apparent suspended status, there is no indication that the listed address is the current address for either Defendant or Strategic. It does not appear that Defendant or Strategic received adequate notice of the motion.

II. Merits

“[C]ourts may ignore the corporate entity under the alter ego doctrine ‘when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose.’” (JPV I L.P. v. Koetting (2023) 88 Cal.App.5th 172, 199.) “Whether the theory relied on by the moving party and the trial court is alter ego, piercing the corporate veil, or some other challenge to the fiction of the corporate entity, the doctrine ‘limits the exercise of the corporate privilege to prevent its abuse.’” (McClellan, supra, 89 Cal.App.4th at p. 753.) The judgment creditor’s “inability to collect, when combined with the other factors indicating inequitable uses of the corporate form, may satisfy the unjust result element for alter ego liability.” (JPV, supra, 88 Cal.App.5th at p. 200.)

In Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214, 221, the court acknowledged that piercing the corporate veil could be used to “satisfy the debt of an individual through the assets of an entity of which the individual is an insider.” However, this requires a fact-driven analysis, and “the trial court should, at minimum, evaluate the same factors as are employed in a traditional veil piercing case, as well as whether [the creditor] has any plain, speedy, and adequate remedy at law.” (Id. at p. 224.)

Plaintiff argues that Defendant is the sole member and CEO of Strategic. (See Lubetzky Decl., Ex. A.) Plaintiff also argues that Defendant has used the LLC bank account to pay personal expenses and deposit personal funds. (Id., ¶ 4, Ex. B.) Plaintiff has attempted without success to collect from Defendant directly. (Id., ¶ 5.) Plaintiff’s counsel believes this is because Defendant has been secreting his assets through Strategic. (Ibid.) Therefore, Plaintiff argues that treating Strategic as a separate entity would work an injustice.  

However, Plaintiff has not established that she lacks an adequate remedy at law. (See Curci, supra, 14 Cal.App.5th at p. 224.) Additionally, Plaintiff has not presented sufficient evidence to show that Strategic had an opportunity to litigate the underlying action or controlled the defense of the action such that its interests were “virtually represented” in the underlying action. (See NEC, supra, 208 Cal.App.3d at p. 781.) Plaintiff’s evidence indicates that Strategic was formed in 2011, long after this action was initiated. (See Lubeztsky Decl., Ex. A.)

CONCLUSION

            Plaintiff’s motion to add judgment debtor is DENIED.