Judge Kerry Bensinger, Case Number: BC426714, Date: 2024-08-01 Tentative Ruling

Plaintiff Efrain Arenas was a restaurant worker at Albae’s Restaurant. The restaurant was owned by Hee J. Lee and Yeun Dan Lee. In 2008, Yeun Dan Lee created a limited liability corporation which she named “Christable Corporation,” and named her daughter, Christable Lee, as its president. At the time, Christable Lee (hereafter, “Ms. Lee”) was a college student.

In November 2009, Plaintiff filed this action against Defendant Christable Corporation dba Albae’s Restaurant (“Christable Corp.”) for various Labor Code violations arising from his employment at Albae’s.[1] Defendant, appearing through counsel, answered the complaint. Defense counsel later withdrew. When Christable Corp. did not obtain new counsel, the court struck its answer and entered default against Christable Corp. On September 16, 2011, Plaintiff obtained a default judgment against Christable Corp. in the sum of $53,833.33.

Plaintiff encountered difficulties in enforcing the judgment. To that end, in October 2015, Plaintiff served Christa. le Corp c/o Christable Lee with an Application and Order for Appearance and Examination. Ms. Lee was served with the Application and Order at 222 Valencia St., #3, San Francisco, CA 94103.

In August 2017, Plaintiff moved to amend the judgment to add Ms. Lee and Yeun Dan Lee as additional judgment debtors. Plaintiff served Ms. Lee with the moving papers at 1850 McAllister St, San Francisco, CA 94115. Ms. Lee was, and continues to be, an attorney in the State of California. Plaintiff obtained the McAllister address from the California State Bar website. The court granted the unopposed motion on September 15, 2017. Notice of the amended judgment was sent to Ms. Lee at the McAllister address on September 20, 2017. During this period, Plaintiff resided in Oakland, CA.

On November 17, 2023, Ms. Lee and Yeun Dan Lee were served with a Writ of Execution and other documents at 330 S. Westmoreland Ave., Los Angeles, CA 90020. Yeun Dan Lee resides at the Westmoreland address with her son, Ms. Lee’s brother. At this time and up to the present, Ms. Lee resided at 2501 47th Ave, San Francisco, CA 94116.

In December 2023, Ms. Lee’s brother notified Ms. Lee of the levying documents mailed to the Westmoreland address. After directing her attorney to review the court docket, Ms. Lee learned for the first time that Plaintiff had joined her as a judgment debtor in August 2017.

Ms. Lee seeks an order vacating the amended judgment based on the equitable grounds of extrinsic mistake.[2] The court finds Ms. Lee is entitled to the requested relief.

A party seeking relief from the entry of judgment must do so “within a reasonable time, in no case exceeding six months, after the judgment … was taken.”¿ (Code Civ. Proc., § 473, subd. (b).) However, after six months from entry of judgment, a trial court may still vacate a judgment on equitable grounds even if statutory relief is unavailable.¿ (Olivera v. Grace (1942) 19 Cal.2d 570, 575-76.) “One ground for equitable relief is extrinsic mistake—a term broadly applied when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits.” (Rappleyea, supra, 8 Cal.4th at p. 981.) “ ‘Extrinsic mistake involves the excusable neglect of a party. [Citation.] When this neglect results in an unjust judgment, without a fair adversary hearing, and the basis for equitable relief is present, this is extrinsic mistake. [Citation.]’ ” (Heyman v. Franchise Mortgage Acceptance Corp. (2003) 107 Cal.App.4th 921, 926.)

“To set aside a judgment based upon extrinsic mistake one must satisfy three elements. First, the defaulted party must demonstrate that it has a meritorious case. Second, the party seeking to set aside the default must articulate a satisfactory excuse for not presenting a defense to the original action. Last, the moving party must demonstrate diligence in seeking to set aside the default once ... discovered.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 982.)

Plaintiff moved to add Ms. Lee as a judgment debtor on the grounds that Ms. Lee was an alter ego of Albae’s. “Under the alter ego doctrine, then, when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) Hence, the plaintiff must show “some conduct amounting to bad faith that makes it inequitable for Cooper [the individual] to hide behind the corporate form.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 418.) Amending a judgment to add a party as an alter ego “requires both (1) that the new party be the alter ego of the old party and (2) that the new party … controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns. The due process considerations are in addition to, not in lieu of, the threshold alter ego issues.” (Wolf Metals Inc. v. Rand Pacific Sales Inc. (2016) 4 Cal.App.5th 698, 703.)

In support of his motion to amend the judgment, Plaintiff offered the following evidence: (1) Statements of Information filed with the California Secretary of State which named Christable Lee as the Chief Executive Officer (CEO) and Chief Financial Officer (CFO); (2) an online business search on the California Secretary of State website listing Christable Corp. as suspended by the Franchise Tax Board as of July 31, 2017, and (3) Christable Corp.’s Answer to the Complaint and written discovery propounded on Plaintiff by Christable Corp.’s then attorney. (Motion to Amend Judgment, Santos Decl., Exs. 2-8, 14.)

Ms. Lee challenges the sufficiency of the foregoing evidence. She contends that not one of those documents demonstrates that she controlled the litigation. The court agrees in considerable part. Plaintiff’s evidence highlights only Ms. Lee’s absence from any role in the litigation. Further, Ms. Lee points out that the Statements of Information were signed by her mother, Yeun Dan Lee. And, as Ms. Lee explains in her declaration, Yeun Dan Lee, an immigrant from South Korean who speaks little English created Christable Corp. in 2008 based upon the advice of Yeun’s certified public accountant. Yeun Dan Lee named Ms. Lee as Christable Corp.’s CEO and CFO without notifying Ms. Lee or obtaining her permission. Ms. Lee did not learn about the existence of Christable Corp. until after Plaintiff obtained the default judgment in this matter. At the time Christable Corp. was created, Ms. Lee was a college student. (See Lee Decl., ¶¶ 3-6.) Ms. Lee demonstrates she has a meritorious defense.

Ms. Lee states that she never received notice of Plaintiff’s motion to amend the judgment. Plaintiff served Ms. Lee with the motion at 1850 McAllister St., San Francisco, CA in August 2017. However, Ms. Lee had moved to Oakland by May 1, 2017. (See Lee Decl., ¶ 11.)

Plaintiff argues that Ms. Lee, as an attorney, was obligated to provide her current address to the California State Bar. That may be true, but the fact remains that Ms. Lee effectively demonstrates having never received notice of Plaintiff’s motion to amend the judgment. Ms. Lee furnishes a satisfactory excuse for not opposing the motion to amend the judgment.

Plaintiff obtained the amended judgment in September 2017. A writ of execution was served at Yeun Dan Lee’s residence in Los Angeles in November 2023. A month later, Ms. Lee brother notified Ms. Lee of the levying documents. Ms. Lee then instructed her attorney to review the court docket. Soon after, Ms. Lee learned for the first time that Plaintiff had amended the judgment naming her as a judgment debtor. (Lee Decl. ¶ 10.) This motion followed nearly five months later.

Plaintiff argues that Ms. Lee has not acted diligently. He points out that Ms. Lee was served with an application and order for appearance for a debtor’s examination in November 2015. Further, Plaintiff served many documents between 2015 and 2023 in an attempt to collect on the judgment. Yet, despite being aware of the lawsuit, Ms. Lee did not take any steps to vacate the judgment.

Ms. Lee does not dispute that she was served with the application and order for appearance for a debtor’s examination. She states that she did not respond to the application because the order “was not directed at [Ms. Lee] personally, and because the document did not identify [Ms. Lee] as a defendant in the action[.]” (Lee Decl., ¶ 9.) Rather, the order was for a debtor’s examination of Christable Corp. (Application and Order for Appearance and Examination.) In other words, Ms. Lee did not receive any notice that she was a party, or was being joined as a party, to this action.

The court agrees with Ms. Lee that there is no indication she was being joined as a party to this action until Plaintiff moved to amend the judgment. Ms. Lee establishes she never received notice of that motion. Ms. Lee had no occasion to seek relief from the amended judgment until she learned of its existence five months prior to the filing of this motion. As to the documents served between 2015 to 2023, the court likewise agrees with Ms. Lee’s observation that Plaintiff does not attach any of those documents or furnish any explanation to show how Ms. Lee would have known of their existence.

Based on the foregoing, the court finds Ms. Lee acted diligently in seeking to vacate the amended judgment.[3]

If the court is inclined to grant the requested relief, Plaintiff contends he is entitled to recover reasonable compensatory legal fees and costs pursuant to Code of Civil Procedure section 473.5(c). Plaintiff is mistaken. Civil Procedure section 473.5 has no application here. Section 473.5 applies “[w]hen service of a summons has not resulted in actual notice to a party in time to defend the action and a default or default judgment has been entered against him or her in the action.” Here, no summons was ever issued to, or served on, Ms. Lee. The statutory section does not apply.

Based on the foregoing, the Motion to Vacate Amended Judgment is Granted. The amended judgment entered on September 15, 2017 is Vacated as to Christable Lee.

[1] Plaintiff also named Hee J. Lee as a defendant and Yuen Dan Lee as Doe 1. Plaintiff dismissed these defendants on September 16, 2011.

[2] Ms. Lee also argues that the amended judgment should be vacated because she was never served with the summons and complaint. Therefore, the court lacks personal jurisdiction over Ms. Lee and renders the amended judgment void. The argument is unavailing. As Ms. Lee concedes, a trial court has authority to amend a judgment to add additional judgment debtors. (Hall, Goodhue, Haisley & Barker, Inc. v. Marconi Conf. Ctr. Bd. (1996) 41 Cal.App.4th 1551, 1554.) Further, “[j]udgments may be amended to add additional judgment debtors on the ground that a person or entity is the alter ego of the original judgment debtor.” (Id. at p. 1555.) A motion to amend a judgment is not a summons or complaint and is therefore subject to the same procedural requirements as any other motion. (See Reliant Life Shares, LLC v. Cooper (2023) 90 Cal.App.5th 14, 58 [“As Ms. Cainong necessarily concedes, the service at issue here is not the service of a summons and complaint, and she offers no authority for her contention that the motion to amend the judgment was “akin” to service of a summons and complaint. In the absence of any such authority, we see no reason to treat Cooper's motion to amend the judgment as subject to different procedural requirements than any other motion. Particularly is this so given the court's findings in phase one of the trial that the evidence established Michaels used the three trusts as extensions of himself.”].) However, the court vacates the amended judgment on the grounds stated herein.

[3] Plaintiff argues he will suffer prejudice from the delay in prosecution and has incurred considerable expenses in seeking default, entering judgment, and trying to collect on judgment. The court is sympathetic to Plaintiff’s position. However, holding Ms. Lee liable given her apparent lack of knowledge and lack of involvement in the creation of Christable Corp. and this litigation (until now) is not the appropriate remedy.