Judge Thomas Falls, Case 20PSCV00387 2023-03-01 Tentative Ruling

Judge: Thomas Falls, Case: 20PSCV00387, Date: 2023-03-01 Tentative Ruling

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Case Number: 20PSCV00387 Hearing Date: March 1, 2023 Dept: O

HEARING DATE: Wednesday, March 1, 2023

RE: FCC LOGISTICS, INC.A CALIFORNIA CORPORATION vs TEAM ALLIANCE LOGISTICS, A CORPORATION INC., et al. (20PSCV00387)

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Plaintiff’s APPLICATION FOR DEFAULT JUDGMENT

Tentative Ruling

Plaintiff’s Application for Default Judgment is DENIED without prejudice.

Background

Plaintiff FCC Logistics, Inc. (“Plaintiff”) alleges as follows: Chia Chun Jimmy Chi (“Chi”), Yu

Lung Kwei (“Kwei”) and Jacky Chen (“Chen”) (hereinafter collectively, “Trio”) were officers of

Wild West Investment Group, Inc. (“Wild West”). On or around July 15, 2018, the Trio

approached Plaintiff’s President, Tammy Chou, to request (1) a loan in the sum of $250,000.00 and (2) a lease of the industrial zoned property located at 400 E. Compton Blvd., unincorporated Los Angeles County, CA 90248 (“Industrial Site”) for the development and operation of Wild West. Plaintiff entered into the loan and lease with the Trio, with the Trio’s personal guaranty. The Trio concealed that the true reason for the loan and lease were for their own personal benefit and for the start-up capital of Team Alliance Logistics Inc. (“Team Alliance”), in order for Team Alliance to derive income from the Industrial Site. On or about August 6, 2019, Ally Wang (“Wang”) proceeded to incorporate Team Alliance and the Trio diverted the loan proceeds to themselves and to Team Alliance. The loan was not repaid and monthly lease payments were not made.

On June 15, 2020, Plaintiff filed a complaint, asserting causes of action against Team Alliance,

Chi, Kwei, Chen, Wang and Does 1-20 for:

1. Conspiracy

2. Fraud and Deceit

3. Common Count

4. Breach of Lease

5. Unjust Enrichment

On February 18, 2021, June 22, 2021, and August 17, 2021, and March 2, 2022, the court denied Plaintiff’s applications for default judgment.

On March 22, 2022, Plaintiff filed an amended complaint (“FAC”) against Defendants for:

1. Fraud and Deceit

2. Common Count and

3. Unjust Enrichment

On May 31, 2022, default was entered against Defendants Chi and Kwei but NOT entered as to Defendant Wild West because the name of the defendant did not match that on the FAC.

On July 13, 2022, Plaintiff filed an application for default judgment as to Defendants Chi and Kwei, which court denied.

On July 15, 2022, default was entered against Defendant Wild West. That same day, Plaintiff filed an application for default judgment as to Defendant Wild West, which the court denied.

On March 21, 2023, Plaintiff refiled its application for default judgment.

Discussion

The court previously noted the following defects:

First, Plaintiff attempts to hold the corporate entity and the two individual defendants each liable for $326,837, placing Plaintiff’s recovery at total recovery of $980,511. This far exceeds any allegations in the complaint.

Second, as the court noted in its March 2, 2022 tentative, “the Loan Agreement, moreover, appears to have been signed by Chi on behalf of Wild West. It is unclear to the court how the above constitutes a personal guaranty made by Chi.” This defect has not been cured.

Third, to the extent that Plaintiff filed and served a FAC making alter ego allegations, this is a default judgment wherein evidence of such allegations is required. No such evidence has been provided.

Fourth, to the extent that Plaintiff provides the declaration of Patty Wang, a certified public account, presumably to demonstrate that a $250,000 loan was made, Plaintiff has not provided a calculation of such payments.

(October 26, 2022 Tentative Ruling) (emphasis added).

Now, Plaintiff has still failed to cure the defect about (1) alter ego allegations and (2) evidence of the loan.

1. Alter Ego

Plaintiff cites to Carlsen v. Koivumaki (2014) 227 Cal. App. 4 879, 899-900 to support its proposition that “[t]he liability under alter ego is based on the facts alleged in the FAC, as they are admitted as true as to liability.” (Summary of Case p. 2.) However, as noted in Carlsen, such is permissible if there are “well-pleaded allegations.” (Id) (emphasis added). “The well-pleaded allegations of a complaint refer to all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . [that] set[s] forth the ultimate facts constituting the cause of action.” (Id.) Here, however, a review of the operative complaint provides merely conclusory alter-ego allegations. For example, that Defendants CHI and KWEI “inadequately capitalized WILD WEST” or that they “failed to hold shareholder meetings, maintain corporate minutes or comply with any of the formalities consistent with a legitimate corporate enterprise.”

To the extent that Plaintiff relies upon FCC’s president’s declaration (citing to ¶ 5), the court is uncertain how withdrawals for auto expenses, meals, promotions, office expenses, etc. constitute as evidence to show embezzlement of funds for personal use rather than business purposes.

Therefore, as the FAC does not provide well-pleaded allegations regarding alter ego nor is there evidence of such provided, the application is again denied for this reason.

2. Loan

Second, as to the Loan, Plaintiff explains that the evidence of the loan is attached as Exhibit C to Chou’s declaration.

Attached are three screenshots of checks made from a JP Morgan Chase. The checks are in the following amounts: $150,000 (07/20/2018), $100,000 (09/19/2018), and $100,000 (09/20/2018). However, these checks post two problems.

First, the FAC does not mention when the loans were made but only references that on July 15, 2018, the Defendants approached Plaintiff for the loan. Presumably, then, it would follow that the loan would be provided shortly after July 15, 2018, leaving it unclear as to the relevance of the September 19 and 20 checks.

Second, the FAC alleges that the loan was for $250,000, but the three checks would provide a total of $350,000. Thus, that discrepancy alone creates ambiguity as to the allegations in the FAC.

Therefore, as the evidence for the loan does not support the amount alleged in the FAC, this defect has again not been cured.

Conclusion

Based on the foregoing—notably that the evidence and explanations do not support the allegations in the FAC—the application is again denied without prejudice.