Judge: Mark A. Young, Case: 21SMCV01761, Date: 2024-03-01 Tentative Ruling

Case Number: 21SMCV01761    Hearing Date: March 26, 2024    Dept: M

CASE NAME:           Calemzuk v. Corral 360, et al.

CASE NO.:                21SMCV01761

MOTION:                  Motion to Add Judgment Debtor

HEARING DATE:   3/26/2024

Legal Standard

            The Court may amend a judgment to add an alter ego of an original judgment debtor, and thereby make the additional judgment debtor liable on the judgment. (CCP § 187; Highland Springs Conference & Training Center v. City of Banning¿(2016) 244 Cal.App.4th 267, 280.) To prevail on the motion, the judgment creditor must show, by a preponderance of the evidence, 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 entity and the owners no longer exist; and (3) an inequitable result will follow if the acts are treated as those of the entity alone.” (Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership (2013) 222 Cal.App.4th 811, 815–816.) 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. (Wells Fargo Bank, N.A. v. Weinberg¿(2014) 227 Cal.App.4th 1, 9.)

Analysis

Plaintiff Emiliano Calemzuk moves to amend the judgment in this action to add Alejandro Corral as an additional Judgment Debtor under Code of Civil Procedure (CCP) section 187. Judgment was entered against the sole defendant, Defendant Corral 360 Inc., and in favor of Plaintiff, on January 28, 2022, for the principal amount of $58,540.00. Mr. Corral is allegedly the principal of Defendant. Plaintiff argues that Corral 360 is merely a shell corporation that has been suspended for years, intended to solely benefit its principal Alex Corral, and thus Mr. Corral should be liable for the judgment.

“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, 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, citations and alterations omitted.)

 “The first requirement for disregarding the corporate entity under the alter ego doctrine—whether there is sufficient unity of interest and ownership that the separate personalities of the individual and the corporation no longer exist—encompasses a series of factors. Among the many factors to be considered in applying the doctrine are one individual’s ownership of all stock in a corporation; use of the same office or business location; commingling of funds and other assets of the individual and the corporation; an individual holding out that he is personally liable for debts of the corporation; identical directors and officers; failure to maintain minutes or adequate corporate records; disregard of corporate formalities; absence of corporate assets and inadequate capitalization; and the use of a corporation as a mere shell, instrumentality or conduit for the business of an individual. This list of factors is not exhaustive, and these enumerated factors may be considered with others under the particular circumstances of each case. ‘No single factor is determinative, and instead a court must examine all the circumstances to determine whether to apply the doctrine.’” (Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1073, as modified (Aug. 9, 2011), citations omitted.)

 “The second requirement for application of the alter ego doctrine is a finding that the facts are such that adherence to the fiction of the separate existence of the corporation would sanction a fraud or promote injustice. The test for this requirement is that if the acts are treated as those of the corporation alone, it will produce an unjust or inequitable result.” (Misik, supra, 197 Cal.App.4th at 1073; NEC Elecs. Inc. v. Hurt (1989) 208 Cal. App. 3d 772, 777 [evidence discloses that Hurt depleted the assets of debtor-corporation by receiving approximately $2.8 million in “loans” and by using corporate moneys to pay for his personal expenses].)

Plaintiff presents evidence that Mr. Corral is the sole person Plaintiff interacted with in relation to the subject funds. (Calemzuk Decl., ¶¶ 3-10.) In the years leading to this litigation, Corral reassured Plaintiff multiple times that he would repay the money loaned to him, “personally guaranteeing” repayment. (Id., ¶ 4.) Even following judgment, Mr. Corral said that he would repay Plaintiff. (Id., ¶5.) Plaintiff also provides that Mr. Corral committed to paying $5,000.00 per month for 13 months to pay off the judgment, and that the only two payments came from Mr. Corral. (Id., ¶¶13-14.) Mr. Corral is listed as Defendant’s sole officer (Chief Executive Officer, Secretary, Chief Financial Officer), sole director, and also as the designated Agent for Service of Process by the Secretary of State. (Id., Ex. C.) Plaintiff also notes that the court found good cause to issue an order to appear for examination to Mr. Corral on behalf of Corral 360 Inc., and issued a bench warrant against Corral 360 for Mr. Corral’s failure to appear. Plaintiff notes that Corral 360 is suspended by the secretary of state, apparently for failure to pay taxes. (Id., Ex. D.) From this evidence, the Court concludes that Mr. Corral is the sole officer, director and agent of service of process for Corral, and that Mr. Corral guided Corral 360’s defense to this litigation. (See Id., ¶ 17.)

The Court also notes that Plaintiff has attempted to collect against Corral 360 via certain post-judgment collection methods and certain post-judgment discovery. No responsive documents, particularly corporate records such as minutes or financial records, were ever produced. (Supp. Masserat Decl., ¶ 4.) Mr. Corral has told counsel that no corporate records exist for production. (Id., ¶ 5, Ex. B.) Mr. Corral has also stated there are no corporate bank accounts or assets to disclose (or pursue). (Id., ¶ 6.) Mr. Corral also failed to appear at an ORAP on behalf of Corral 360.

The above evidence presents several factors that establish a unity of interest between Mr. Corral and Corral 350. Mr. Coral is the sole proprietor of Corral 360. Mr. Corral held himself out as personally liable for the debts of Corral 360 by his promises to pay the judgment and personally paying a portion of said judgment. Mr. Corral also controlled Corral 360’s defense of this litigation. Mr. Corral apparently did not respect corporate formalities, as no corporate records exist, such as minutes or for finances. Thus, Mr. Corral used Corral 360 as a shell for his personal business and did not adhere to corporate formalities. Further, the record shows that Corral 360 lacks sufficient capitalization. Plaintiff thus cannot recover directly from Corral 360. It would be inequitable to allow Mr. Corral to avoid liability through his use of a corporate shell, Corral 360.

Plaintiff therefore shows the necessary alter-ego factors. Accordingly, the motion is GRANTED.