Judge: Mark H. Epstein, Case: SC127521, Date: 2023-11-17 Tentative Ruling

Case Number: SC127521    Hearing Date: November 17, 2023    Dept: I

This is a motion to amend the judgment to include Aghnami as Marmara’s alter ego.  The motion is GRANTED.

Preliminarily, the objections to the Saccuzzo declaration are OVERRULED.  The court will draw the inference that he has sufficient knowledge for the statements he makes due to his status as counsel for plaintiff.  Further, the court relies more on the underlying evidence than it does on this declaration.

The court will not go through the background of this case, which can be found in the court’s Statement of Decision.  Suffice it to say that the court found in favor of defendant Rock (owned by the Kayas) and against defendant Marmara.  Perhaps fearing that Marmara is not going to be able to stand the judgment, plaintiff seeks to add Marmara’s sole owner, Aghnami, as a judgment debtor on an alter ego theory.  Alter ego is one theory by which a judgment can be amended even after it is issued.  (Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214.)  The decision is within the court’s sound discretion.  (Carolina Casualty Ins. Co. v. L.M. Ross Law Group, LLP (2012) 212 Cal.App.4th 1181.)  Of course, the discretion is not unbounded.  To hold a person as a judgment debtor under an alter ego theory, the court must make the appropriate findings.

The theory behind the alter ego doctrine is that the “true” defendant is the person behind the entity such that allowing the corporate form to shield the real tortfeasor (or contract-breacher) would be inequitable and that the new judgment debtor had essential control over the prior litigation.  On the other hand, the corporate form is not improper.  Where the corporate form is used legitimately, it can, and often does, shield the entity’s owners from liability.  Indeed, that is one of its primary purposes.  The trick is knowing where the corporate form is being used legitimately and when it is being used simply to shield someone from justice improperly.  The doctrine is equitable in nature.  (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523.)

Plaintiff contends that Marmara was used by Aghnami to perpetrate the fraud here.  They claim that Aghnami told them that his Turkish partners, the Kayas, were part of Marmara and would make sure that plaintiff was paid.  In point of fact, though, Marmara (or at least the one formed in the United States) was owned solely by Aghnami.  And, of course, the Kayas never paid.  There was some evidence at trial that Aghnami told the Kayas that they would own Marmara, and apparently they did own a Marmara in Turkey.  But the entity that owned the real property in which the Kayas thought they were investing was the US Marmara, in which they had no ownership interest.  Eventually the Kayas sued and settled.  The upshot is that the Kayas wound up owning the property (and rejecting the debt to plaintiff), but Marmara had (and so far as the court knows, still has) an upside participation if the ultimate sale price of the property was high enough.

The test for alter ego is somewhat fluid.  The question is whether there is such a unity of interest between an entity and its owner and such an inequitable result would follow if the legal separation remained in place that one should be viewed as the alter ego of the other.  That has led to several tests over time.  For example, to find alter ego the owner must exercise dominance and control over the entity.  Generally, one looks to see if corporate formalities are followed.  One looks to see if the entity is adequately capitalized.  One looks to see if the entity has some separation from the owner as opposed to being used for whatever purpose the owner deems expedient.  (Sonora, supra, 83 Cal.App.4th at pp. 538-539.)  According to plaintiff, Marmara and Aghnami qualify as alter egos.  Plaintiff notes that Nikravesh, who was very close to Marmara and Aghnami, testified that Aghnami “was” Marmara.  The financial documents that are in the record for this motion suggest that Marmara did whatever Aghnami wanted it to do.  So far as the court can tell, Aghnami was Marmara’s sole owner.  It does appear that Aghnami used Marmara to lie to plaintiff (by claiming that the Kayas were part of the entity).  So far as the court can tell, there is no Operating Agreement, and no regular meetings or minutes or resolutions of Marmara.  While the court cannot say that the evidence is overwhelming, it is relatively strong.  The fact that Marmara had a bank account or issued apparently fraudulent K-1 forms will not defeat the motion.  The court has always been troubled by the multiple Marmara entities and the fact that there is some strong evidence that Aghnami used the two entities to defraud the Kayas.  Of course, the Kayas are not parties to this motion.  But the fact that the entity was used to perpetrate a fraud—even if against another—is some evidence favoring the alter ego finding.  The court is also more than a little troubled by the lack of an Operating Agreement.  While there is testimony that such an agreement exists, it has yet to be produced.  That is not the sort of document one simply misplaces.  The lack of any regular corporate records is also a problem.  And there is at least some evidence that funds were comingled.  Again, the court is not overwhelmed by the evidence plaintiff submits.  And the court can see that reasonable minds might differ on the point given the existing record.  However, the court believes that the evidence preponderates in plaintiff’s favor here.

Defendant claims that the real problem is that plaintiff should have filed a proper Mechanic’s Lien.  The court agrees that the failure to file the Lien is a problem.  In fact, that is what led to Rock’s success in the case.  But it is no defense to the motion at hand.

The bottom line is that the court believes that the evidence is sufficient to show that Marmara and Aghnami are in fact one and the same.  The motion is GRANTED.