Judge Theodore R. Howard, Case 17-931798 2022-09-22 Tentative Ruling

Judge: Theodore R. Howard, Case: 17-931798, Date: 2022-09-22 Tentative Ruling

The unopposed motion by plaintiff Floorit Financial Inc. (“plaintiff”) to amend the judgment against defendant and judgment debtor Maria Elena DiPaolo to add defendant DiPaolo Whetmore, LLC as judgment debtor is GRANTED.

Preliminary Matter - RJN

Plaintiff’s request for judicial notice of Exhibits A through L is GRANTED. The court takes judicial notice of the existence of the documents but not the truth of the matters therein. (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 482-483)

Merits

CCP §187 authorizes the court to amend a judgment to add judgment debtors. (Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1072). Generally, the court may amend the judgment at any time so that it will properly designate the real defendants. (Hall, Goodhue, Haisley & Barker, Inc. v. Marconi Conf. Center Bd. (1996) 41 Cal.App.4th 1551, 1555) Judgments may be amended to add additional judgment debtors on the ground that such judgment debtor is the alter ego of the original judgment debtor. (Ibid.)

The alter ego doctrine comes into play when a party claims that the opposing party is using the corporate form unjustly and in derogation of the plaintiff’s interests. (Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486510) There is no litmus test to determine when the corporate veil will be pierced but there are two general requirements: (1) that there is such unity of ownership and interest that the separate personalities of the corporation and individual no longer exist and (2) that if the acts are treated as those of the corporation, an inequitable result will follow. (Id. at p. 511).

The alter ego test includes a number of factors such as commingling of funds and other assets, failure to segregate funds, treatment by an individual of the assets of the corporation as his own, the failure to obtain authority to issue stock, the failure to maintain minutes or adequate corporate records, confusing the records of separate entities, identical equitable ownership in the two entities, the use of the corporation as a mere shell for a single venture or business of an individual, the disregard of legal formalities and the failure to maintain arm’s length relationships among related entities, the diversion of assets by a person to the entity to the detriment of the creditors, manipulation of assets and liabilities between entities to concentrate the assets in one and the liabilities in the other, among other factors. No single factor is determinative. The court looks to the circumstances to determine whether to apply the doctrine. (Id. at p. 513)

Unity of interest and ownership

Floorit has shown that there is sufficient unity of interest and ownership between Whetmore and DiPaolo because DiPaolo is the sole 100% member and sole manager of Whetmore. (Hamburg Decl., Ex. B 194:20-195:8). On 2/28/2018, DiPaolo transferred to Whetmore, for no consideration, the only asset which Whetmore holds, real property in which DiPaolo resides. DiPaolo pays no rent to Whetmore for use of the property. (Hamburg Decl. Ex. A, 169:11-19, 174:11-175:3; Ex. B, 197:1-8)

Whetmore is a shell holding company for the property. (Hamburg Decl. Ex. B 188:14-25, 194:20-195:20). It conducts no business and serves only to hold title to the property. (Hamburg Decl. Ex. B, 189:1-14; 196:2-5; 197:9-198:2)) There is no separate bank account for Whetmore. (Hamburg Decl. Ex. B, 188:8-10) It does not derive any revenue. (Hamburg Decl. Ex. B 188:1-7) It has no employees, and DiPaolo is the only person on the LLC. (Hamburg Decl. Ex. B, 188:18-22)

Injustice or inequitable result

Floorit has shown that treating the acts of controlling/ownership of the property as those of Whetmore alone will promote injustice or cause an inequitable result.

At the time of the transfer of the property, DiPaolo was aware that she was being sued by plaintiff. (Hamburg Decl., Ex. A, 175:13-16) DiPaolo has only partially satisfied the judgment against her by paying just over 11% of the judgment upon order of the court to do so. She has made no effort to satisfy the remainder of the $182,851.38 judgment against her. (Atilano Decl. ¶¶25-28; RJN, Ex. L) Floorit has shown that allowing DiPaolo to wall off that asset in a shell of a company which conducts no business and has no purpose other than to hold the one asset that could satisfy the judgment, will promote an injustice or cause an inequitable result.

Having satisfied both requirements for application of the alter ego doctrine, Floorit’s motion is GRANTED.

The judgement shall be amended to add DiPaolo Whetmore LLC as a judgment debtor.

Floorit to give Notice of Ruling.