Judge: Latrice A. G. Byrdsong, Case: 21STLC08392, Date: 2023-10-31 Tentative Ruling

Case Number: 21STLC08392    Hearing Date: October 31, 2023    Dept: 25

Hearing Date:                         Tuesday, October 31, 2023

Case Name:                             COZI CAPITAL, LLC, a corporation v. HEADLIGHT FACTORY, LLC, a corporation; LAWRENCE KHACHATOURIAN, an individual; and DOES 1-20

Case No.:                                21STLC08392

Motion:                                   Motion for Order to Amend Judgment to Add Versani, Inc. as the Alter Ego of Headlight Factory, LLC, and an Order Enjoining the Judgment Debtors from Transferring Assets or Income to Other Entities

Moving Party:                         Plaintiff Cozi Capital, LLC

Responding Party:                   None

Notice:                                    OK

Tentative  Ruling:           Plaintiff Cozi Capital, LLC’s Motion for Order to Amend Judgment to Add Versani, Inc. is GRANTED.

                                                Plaintiff Cozi Capital, LLC’s Motion for Order Enjoining the Judgment Debtors from Transferring Assets or Income to Other Entities is GRANTED.

BACKGROUND

On November 23, 2021, Plaintiff Cozi Capital, LLC (“Plaintiff”) filed this action against Defendants Headlight Factory, LLC (“Headlight Factory”), Lawrence Khachatourian (“Khachatourian”) (collectively, “Defendants”) and Does 1 through 20, alleging the following causes of action: (1) breach of contract and (2) account stated. The complaint alleged that the parties entered into a written contract for a business loan on January 15, 2019, and Defendants breached the contract in February 2019 by failing to make the agreed-upon installment payment when it came due.

On January 13, 2023, defaults were entered against the Defendants.

On February 2, 2023, default judgment was entered against the Defendants.

On September 19, 2023, Plaintiff filed the instant motion to amend the judgment to add a judgment debtor and enjoin the judgment debtors from transferring assets or income to other entities.

MOVING PARTY POSITION

            Plaintiff asserts that the Court has the authority to modify the judgment in this case to add additional judgment debtor pursuant to Code of Civil Procedure § 187. Plaintiff argues that amending the judgment to add Versani, Inc. as a judgment debtor is appropriate because the company was incorporated by Khachatourian on June 2, 2022, and it uses the same address, phone number and CEO as Headlight Factory. Further, Versani Inc. is in the same business of wholesale auto parts as Headlight Factory. Plaintiff reasons that the incorporation of Versani, Inc. was merely an attempt to facilitate the fraudulent transfer of assets and operations from Headlight Factor to Versani, Inc. Furthermore, Plaintiff asserts that the judgment debtors should be enjoined from transferring any assets pursuant to Civil Code § 3439.07.

OPPOSITION

            None filed as of October 26, 2023.

REPLY

            None filed as of October 26, 2023

ANALYSIS

I.          Request for Judicial Notice

            Plaintiff requests the Court to take judicial notice of the following documents:

(1)   The State of Information for Headlight Factory, which was filed with the California Secretary of State on April 18, 2018;

(2)   The State of Information for Headlight Factory, which was filed with the California Secretary of State on August 28, 2018;

(3)   The Articles of Incorporation for Versani, Inc., which was filed with the California Secretary of State on June 2, 2022;

(4)   The State of Information for Versani, Inc., which was filed with the California Secretary of State on September 22, 2022;

(5)   The webpage for Versani, Inc.;

(6)   The judgement entered in this action on February 2, 2023;

(7)   The complaint filed in this action on November 23, 2021;

(8)   The writ return dated August 10, 2023 from the Los Angeles County Sheriff’s Department.

The Court grants the request in its entirety pursuant to Evidence Code § 452(c), (d), and (h).

II.        Motion to Amend Judgment

A.        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.  Further, “Section 187 contemplates amending a judgment by noticed motion.”   Highland Springs Conference & Training Center v. City of Banning (2016) 244 Cal.App.4th 267, 280.

B.        Merits

Plaintiff moves to amend the judgment to add Versani, Inc. as an additional judgment debtor on the basis that it is the alter ego and successor corporation of Headlight Factory.  See Notice of Motion at pg. 2.  Further, Plaintiff seeks to enjoin the Defendants and Versani Inc, and their agents and employees from transferring any assets or income to other entities.  Ibid

“Modification of a judgment may be proper when the newly-named defendant is an existing defendant’s alter ego. ‘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, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons ... actually controlling the corporation, in most instances the equitable owners. The alter ego doctrine prevents individuals ... from misusing the corporate laws by the device of a sham corporate entity formed for the purpose of committing fraud or other misdeeds.”  Wolf Metals Inc. v. Rand Pacific Sales, Inc. (2016) 4 Cal.App.5th 698, 703 (internal citations omitted).  

“Before the alter ego doctrine will be invoked in California, two conditions generally must be met. ‘First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.’ While courts have developed a list of factors that may be analyzed in making these determinations, ‘[t]here is no litmus test to determine when the corporate veil will be pierced; rather the result will depend on the circumstances of each particular case.’”  Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214, 220–221 (internal citations omitted) (alterations in original).   

“Modification of a judgment may also be proper under the ‘successor corporation’ theory. According to that theory, when a corporation sells or transfers all of its assets to another corporation constituting its ‘mere continuation,’ the latter is also liable for the former’s debts and liabilities. Generally, ‘California decisions holding that a corporation acquiring the assets of another corporation is the latter’s mere continuation and therefore liable for its debts have imposed such liability only upon a showing of one or both of the following factual elements: (1) no adequate consideration was given for the predecessor corporation’s assets and made available for meeting the claims of its unsecured creditors; (2) one or more persons were officers, directors, or stockholders of both corporations.”  Wolf Metals Inc., supra, 4 Cal.App.5th at 704-705 (internal citations omitted) (emphasis added); McCellan v. Northridge Park Townhome Owners Ass’n, Inc. (2001) 89 Cal.App.4th 746, 753 (“If a corporation organizes another corporation with practically the same shareholders and directors, transfers all the assets but does not pay all the first corporation's debts, and continues to carry on the same business, the separate entities may be disregarded and the new corporation held liable for the obligations of the old.”).

            Here, in support of its alter ego and successor corporation theories of liability, Plaintiff presents the following undisputed evidence to show that Versani, Inc. should be added as a judgment debtor. First, based on the filings with the California Secretary of State in 2018, it is shown that Headlight Factory engaged in the business of wholesale auto parts, was located at 11920 Sheldon Street, Unit A, Sun Valley, California 91352, and managed by Khachatourian, who was its sole member.  See RJN, Exhs. 1-2.  The address used here matches the one listed in the loan agreement between the parties.  See Goodman Decl. ¶ 2, Exh. 1.  Second, after the complaint was filed on November 23, 2021, Khachatourian later incorporated a separate business entity, Versani, Inc. on June 2, 2022.  See RJN, Exhs. 3-4, 7.  Versani, Inc. is also located at 11920 Sheldon Street, Unit A, Sun Valley, California 91352, entirely controlled by Khachatourian, and in the business of auto head lights.  Ibid.  Both business entities also maintain the same phone number.  See Goodman Decl. ¶¶ 2-3, Exhs. 1-2.  Third, even though Versani, Inc. was only recently incorporated, its website boasts that it has a ten-year history of providing auto parts to its customers.  See RJN, Exh. 5.   Fourth, the Los Angeles County Sheriff’s Department was unable levy the judgment against Headlight Factory because the business licensee at 11920 Sheldon St. Unit A did not match the writ.  See RJN, Exh. 8.

            Under the circumstances, the Court finds that Plaintiff has sufficiently shown that Versani, Inc. is the successor corporation to Headlight Factory. Because Versani, Inc. is operating the same business as Headlight Factory and the former entity has seemingly ceased its operations, it is clear that Versani, Inc. is a “mere continuation” of Headlight Factory. Additionally, it is undisputed that Khachatourian controls both entities. Thus, Versani, Inc. is liable for the debts of Headlight Factory. See Wolf Metals Inc., supra, 4 Cal.App.5th at 704-705. Furthermore, to prevent the judgment debtors from escaping their liability, they are enjoined pursuant to Civil Code § 3439.07(a)(3)(a) from further transferring their assets or income to any other entity.

            Accordingly, the motion is granted. In the interest of judicial economy, the Court declines to address the argument of whether Versani, Inc. is the alter ego of Headlight Factory.

III.       Conclusion

            Based on the foregoing, Plaintiff’s Motion for an Order to Amend the Judgment to Add Versani, Inc. is GRANTED. Additionally, Plaintiff’s request for order enjoining the judgment debtors from transferring assets or income to other entities pursuant to Civil Code § 3439.07 is GRANTED.

            Plaintiff is instructed to file a proposed amended judgment reflecting this order within 10-court days.

Counsel for the Moving party is ordered to give Notice.