Judge Randolph M. Hammock, Case Number: 24STCV06890, Date: 2025-01-24 Tentative Ruling

Plaintiff Haagen Redondo, LLC, is the owner of a commercial building at 407 Pacific Coast Highway, Redondo Beach, CA, and brings this action against its former tenant, Defendant Alex K. Roth, Inc., for breach of a lease agreement.

The matter initially came for hearing on December 23, 2024. The matter was then continued to January 24, 2024, and supplemental briefing was allowed. This court has read and considered Plaintiff’s 01/06/2025 Supplemental Reply and Declaration, and Weightman’s 01/20/2025 Supplemental Opposition and Declaration, and now rules as follows.

As alleged in the Complaint, Plaintiff is the owner of a commercial shopping center at 407 N. Pacific Coast Highway, Redondo Beach, CA. (Compl. ¶ 2.) In 2013, Plaintiff entered into a 10-year lease with Defendant Alex K. Roth, Inc. (“AKR”), whereby Plaintiff would occupy a unit at the shopping center. (Id. ¶ 17.) Alex Kevin Roth (“A. Roth”), Cynthia Marie Roth (“C. Roth”) and Steven Randall Weightman (“Weightman”) were and are principals of AKR. (Id. 18.) At the same time, Roth, C. Roth and Weightman each entered into a written Guaranty of Lease (“Guaranty”) guaranteeing the obligations of AKR.” (Id. ¶ 19.)

In 2020, AKR changed its name to Defendant SC Barbecue, Inc. (“SCB”). (Id. ¶ 5.) Plaintiff alleges AKR and SCB “are de facto the same corporation with the same principles, shareholders, principal place of business and same scope of business and are largely identical apart from the name.” (Id. ¶ 6.) Plaintiff alleges “AKR changed its name in 2020 to escape the multiplicity of lawsuits that were being initiated that year, due to its unscrupulous business practices.” (Id. ¶ 7.)

In January 2022, AKR assigned the lease to Defendant Rishab Sarup Oberoi to operate a restaurant at the property. (Id. ¶¶ 3, 28.) Around the same time, “the Guarantors were expressly released from the Guaranty, with the express permission of the Plaintiff. The assignor tenant AKR was not released by the Guaranty.” (Id. ¶ 20.) Under the Assignment, “all liabilities that existed prior to the Assignment, inclusive of payment of rent, were still the liabilities of AKR.” (Id. ¶ 30.) After various alleged breaches of the lease by the tenant, including the failure to pay rent, Plaintiff brought this action against AKR, SC Barbecue, Inc., and Oberoi. (Id. ¶¶ 51-64.)

A court may amend a judgment to add additional judgment debtors. (CCP § 187; Wolf Metals Inc. v. Rand Pacific Sales, Inc. (2016) 4 Cal. App. 5th 698, 702.) This includes the authority to impose liability upon an alter ego. (Highland Springs Conference & Training Center v. City of Banning (2016) 244 Cal. App. 4th 267, 280.) “It 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. [Citation]. The decision to grant an amendment lies in the sound discretion of the trial court. [Citation]. Great liberality is allowed in granting such amendments.” (Relentless Air Racing, LLC v. Airborne Turbine Ltd. P'ship (2013) 222 Cal. App. 4th 811, 815.)

In order to prevail in a motion to add judgment debtors, a creditor must show 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, supra, 222 Cal. App. 4th at 815-816.)

Plaintiff contends Weightman is the alter ego of Judgment Debtors Alex K. Roth, Inc., and SC Barbecue, Inc. In opposition, Weightman argues he did not control the litigation. He contends there was “no proper jurisdiction over” SC Barbecue and takes issue with the manner of service and resulting default. Additionally, because a judgment was entered by default, he contends that he did not have the opportunity to litigate at all, much less control the litigation.

In Motores De Mexicali, S. A. v. Superior Ct. (1958) 51 Cal. 2d 172, 173, Motores de Mexicali, S.A. sued Bi Rite Auto Sales, to recover a debt. The trial court entered default judgment against the defendant after it failed to answer. After failing to recover the amount of the default judgment directly from the defendant, Motores de Mexicali moved to amend the default judgment to add three individuals as judgment debtors, alleging that the defendant was the alter ego of the three individuals. (Id. at 173–174.)

On petition to the Supreme Court for writ of mandate, the Supreme Court concluded that amending the default judgment to add additional judgment debtors on an alter ego theory would unconstitutionally deprive those individuals of due process. (Id. at 175–176.) The Court reasoned that the Fourteenth Amendment guarantees a defendant in a judicial proceeding “the opportunity to be heard and to present ... defenses.” (Id. at 176.) “Summarily add[ing]” the individual defendants to the default judgment “without allowing them to litigate any questions beyond their relation to the allegedly alter ego corporation would patently violate this constitutional safeguard.” (Id.) The Court distinguished previous Court of Appeal decisions that had added parent corporations to judgments against their subsidiaries where the parent corporations had actually litigated the cases, because in Motores the judgment was entered against the corporation “strictly by default.” (Id.) Despite its age, Motores appears to remain good law. (See Lopez v. Escamilla (2022) 79 Cal. App. 5th 646, 652 [discussing but distinguishing Motores].)

NEC Elecs. Inc. v. Hurt (1989) 208 Cal. App. 3d 772, a case relied on by the non-party, is also particularly instructive. There, the Court declined to amend a judgment to add an alter ego creditor where the entity’s and individual’s interests in the litigation “were not the same.” (Id. at 780.) That was because the entity chose to “let the matter proceed uncontested because it planned to file a Chapter 11 bankruptcy petition.” (Id. at 780.) The Court noted that situation “contrast[ed] with the usual scenario where the interests of the corporate defendant and its alter ego are similar so that the trial strategy of the corporate defendant effectively represents the interests of the alter ego.” (Id.)

Here, Weightman is the sole director, chief executive officer, chief financial officer, and agent for service of process for AKR. (Ewart Decl., ¶ 7, Exhibits 2, 3 and 4). Additionally, at all relevant times, these entities were owned entirely by Weightman.

Plaintiff also presents evidence that Weightman engaged in corporate practices one might consider unscrupulous. He created multiple entities that served the identical business purpose of operating a restaurant at the premises. The entities’ filings with the Secretary of State contain inconsistencies regarding the number of outstanding shares. He then attempted to dissolve the entities altogether after the judgment was entered.

This matter initially came for hearing on December 23, 2024. There, the court and parties considered an informal resolution of the motion. At the conclusion of that hearing, the court continued the matter to January 24, 2024, to allow the parties to consider the proposal.

On January 6, 2025, Plaintiff filed a “Supplemental Reply (With New Information).” The reply indicated Plaintiff would not be accepting the proposal and indicated it was presenting “new evidence.” Given the new filing, this court permitted the opposing parties to file a supplemental opposition. (See 01/08/2025 Motion.) On January 20, 2024, Weightman served his Supplemental Opposition on Plaintiff and emailed a courtesy copy to this department.

In the supplemental reply, Plaintiff contends that “newly discovered evidence” mandates adding Weightman to the judgment. That is, Plaintiff’s counsel states that “[o]n, December 27, 2024, after searching for Defendant’s organization on the California Secretary of State (“SOS”), [she] saw that Steve Weightman caused a Certificate of Election to Wind Up and Dissolve SC Barbecue to be filed with the SOS on the same day this Court entered default judgment against SC Barbecue, September 18, 2024.” (01/06/2025 Ewart Decl. ¶ 2.) Plaintiff contends “[t]his dissolution was executed in bad faith, clearly aimed at evading enforcement of the judgment against SCB.” (Supp. Reply 2: 10-11.)

First, it should be noted that this evidence is hardly new. Plaintiff provided this exact evidence in its initial motion on October 16, 2024. (See 10/19/2024 Eward Decl. ¶ 8, Exh. 2.) This court also noted in its initial Tentative that Defendant attempted to dissolve the entities after the judgment was entered. Plaintiff’s attempt to present this evidence as a “new” development is somewhat puzzling.

Also in the supplemental reply, Plaintiff contends that the “evasive conduct of Weightman’s counsel, David Jimenez (“Jimenez”), has compounded” the fraud or injustice. In meet and confer efforts, Attorney Jimenez refused to directly answer whether he represented Defendant SC Barbecue. (See 01/06/2025 Ewart Decl. ¶ 3, Exh. 2.) While Jimenez’s representation of the entity is largely of no consequence in this action, the exchange does potentially evince some gamesmanship by Weightman and his counsel regarding the relationship between Weightman and the entities.

Here, under the totality of the circumstances, the evidence suggests that because the entity Defendants were insolvent, and because Weightman believed he was insulated from liability, Weightman made the calculated decision to ignore the lawsuit. Whether this belief is wise or not is irrelevant. What matters is that it demonstrates that the interests between the entities and their purported alter ego (Weightman) were perhaps not the same. (See NEC Elecs, Inc., supra, 208 Cal. App. 3d at 780.) Therefore, the critical issue of whether the non-party (Weightman) was or was not “virtually represented” in the action remains to be determined.

Plaintiff may have had valid reasons for not naming Weightman as a Defendant in the first place. But had it done so, there is no doubt Weightman’s decision to defend or not defend the action on behalf of himself or his entities would have taken on a different calculation. The court finds it unlikely Weightman would have permitted a default judgment to be entered against him had he been named. Thus, there exists due process concerns if he is added as a judgment debtor under these circumstances. In short, one can reasonably assert that “[t]o summarily add” Weightman to the judgment “without allowing [him] to litigate any questions beyond [his] relation to the allegedly alter ego corporation would patently violate” due process. (Motores De Mexicali, S. A., supra, 51 Cal. 2d at 176.)

It should be noted that the parties executed a “Lease Assignment and Assumption Agreement” effective January 1, 2022, which released Weightman as guarantor from “all future obligations under the Lease, provided that Guarantor shall remain liable for all liabilities under the Lease…” (Weightman Decl. ¶ 5, Exh. A.) This might explain Plaintiff’s failure to name Weightman as a Defendant in the first place, as well as Weightman’s belief that he was shielded from any liability.