Judge Upinder S. Kalra, Case Number: 23STCP00079, Date: 2024-03-20 Tentative Ruling

Judge: Upinder S. Kalra, Case: 23STCP00079, Date: 2024-03-20 Tentative Ruling

Case Number: 23STCP00079 Hearing Date: March 20, 2024 Dept: 51

Tentative Ruling

Judge Upinder S. Kalra, Department 51

HEARING DATE: March 20, 2024

CASE NAME: Pearl Beta Funding, LLC v. Lonewolf Insurance Services, et al.

CASE NO.: 23STCP00079

MOTION TO AMEND JUDGMENT

MOVING PARTY: Plaintiff Pearl Beta Funding, LLC

RESPONDING PARTY(S): None as of March 18, 2024

REQUESTED RELIEF:

1. An Order amending the Judgment against Judgment Debtor, Stefan Joseph Leer and KTL Holdings, Inc. to include Three Zero Four Zero Two Holding, LLC and Tatanisha Leer aka Tanisha as judgment debtors.

TENTATIVE RULING:

1. Motion for Leave to Amend is GRANTED in part and DENIED in part:

a. Granted as to Three Zero Four Zero Two Holding, LLC;

b. Denied as to Tatanisha Leer aka Tanisha.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On January 4, 2023, Plaintiff Pearl Beta Funding, LLC (Judgment Creditor) filed an Application for Entry of Judgment on Sister-State Judgment naming Judgment Debtors Lonewolf Insurance Services, Inc., El Dorado Hills Insurance Solutions Inc., Golden Foothill Insurance Services LLC, The Genesis LS Fund LLC, Life Shares LLC, KTL Holdings Inc., and Stefan Joseph Leer (Judgment Debtors).

On January 12, 2023, Judgment on Sister-State Judgment was entered by the clerk.

On July 14, 2023, Judgment Creditor filed an Application for Issuance of Writ of Execution, Possession or Sale for property located at 30402 Marbella Vista, San Juan Capistrano, CA 92675 owned by Judgment Debtor Stefan Joseph Leer.

On July 14, 2023, Judgment Creditor obtained a Writ of Execution (Money Judgment) against all Judgment Debtors and filed a Memorandum of Costs after Judgment.

On September 26, 2023, Judgment Creditor filed an Application and Order for Appearance and Examination of Judgment Debtor Stefan Joseph Leer.

On September 27, 2023, Judgment Creditor filed an Application and Order for Appearance and Examination of Third Person Tatanish L. Leer which was granted.

On January 17, 2024, Judgment Creditor filed a Return to Court Writ of Execution.

On February 13, 2024, Judgment Creditor filed the instant Motion to Amend Judgment pursuant to CCP § 187. As of March 18, 2024, there are no oppositions filed with the court.

LEGAL STANDARD:

Motion to Amend Judgment

Under Code of Civil Procedure, section 187

When jurisdiction is, by the Constitution or this Code, or by any other statute, conferred on a Court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this Code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this Code.

(Code Civ. Proc., § 187.) This section empowers the Court to “use all the means necessary” to carry its jurisdiction into effect. The Court therefore has authority in certain circumstances to amend a judgment against a corporation (or other entity) to add as a judgment debtor the entity's nonparty “alter ego” who controlled the underlying litigation. In effect, “amending a judgment to add an alter ego does not add a new defendant but instead inserts the correct name of the real defendant.” (Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1072-1073 [complaint only named LLC, which was totally controlled by individual].) It is not necessary that alter ego doctrine be alleged or proved in the underlying lawsuit. (Id. at 1074-1075; Danko v. O’Reilly (2014) 232 Cal.App.4th 732, 741.)

Request for Judicial Notice

The court grants Judgment Creditor’s request for judicial notice as to Exhibits 1 through 10. (Evid. Code § 452(c), (h); See Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23,37.) However, the court only takes judicial notice of the foregoing documents only as to “the existence, content and authenticity of public records and other specified documents”; it does not take judicial notice of the truth of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.)¿¿

ANALYSIS:

Judgment Creditor seeks to amend the judgment against Judgment Debtor Stefan Joseph Leer (Stefan) to include his spouse, Tatanisha Leer aka Tanisha (Tatanisha) with respect to community property assets due to fraudulent conveyance to a Wyoming LLC called Three Zero Four Zero Two Holding LLC (Wyoming LLC).

Alter Ego Liability

Judgment Creditor requests that the court disregard the corporate form for the Wyoming LLC.

Judgment Creditor must show: “(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 existed; and (3) an inequitable result will follow if the acts are treated as those of the entity alone.” (JPV I L.P. v. Koetting (2023) 88 Cal.App.5th 172, 194 (JPV); see also Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 511 (Greenspan) [identifying these requirements as two items rather than three items].) Whether the evidence has established that the corporate veil should be ignored is primarily a question of fact which should not be disturbed when supported by substantial evidence.” (Id. at 512; quoting Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1248.) While alter ego is an extreme remedy and sparingly used, courts are allowed “the greatest liberality” in amending judgments to add the “real defendant or alter ego of the original judgment debtor in order to see that justice is done.” (JPV, supra, at p. 189.)

There are various relevant factors in applying the alter ego doctrine including:

“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 . . . the use of the corporate entity to procure labor, services or merchandise for another person or entity” and “the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors.”

(Id. at p. 195. [citing Misik, supra, at p. 1073 and Greenspan, supra, at p. 513.]) Courts may also narrowly focus on “certain inequitable uses of the corporate form for specific purposes” where disregarding the corporate form is appropriate while leaving it intact for all other purposes. (Ibid. [citing Kohn v. Kohn (1950) 95 Cal.App.2d 708.])

Judgment Creditor also argues that the single enterprise rule applies. “Generally, alter ego liability is reserved for the parent-subsidiary relationship. However, under the single-enterprise rule, liability can be founded between sister companies. The theory has been described as follows: ‘“In effect what happens is that the court, for sufficient reason, has determined that though there are two or more personalities, there is but one enterprise; and that this enterprise has been so handled that it should respond, as a whole, for the debts of certain component elements of it. The court thus has constructed for purposes of imposing liability an entity unknown to any secretary of state comprising assets and liabilities of two or more legal personalities; endowed that entity with the assets of both, and charged it with the liabilities of one or both.”’ [Citation.]” (Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1249-1250.) “Factors for the trial court to consider include the commingling of funds and assets of the two entities, identical equitable ownership in the two entities, use of the same offices and employees, disregard of corporate formalities, identical directors and officers, and use of one as a mere shell or conduit for the affairs of the other. [Citation.] ‘No one characteristic governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied. [Citation.]’ [Citation.]” (Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1341-1342.)

It appears to the court that the factors weigh in favor of the single entity rule, if not for limited applicability alter ego liability. The two critical factors here are the same parties involved in the corporate forms at issue, use of mere shell or conduit for the affairs of the other, and the risk of inequitable result but for finding liability. The heaviest factor is the risk of inequitable result. First, Judgment was entered on September 13, 2021, in New York against Judgment Debtors, including Stefan Joseph Leer and KTL Holdings Inc. (Cohen Decl., Exhibit A.) Judgment Creditor and Judgment Debtors, executed by Judgment Debtor Stefan Joseph Leer on behalf of all named Defendants, on December 10, 2021. (Cohen Decl., Exhibit B.) This indicates that Judgment Debtor Stefan Joseph Leer knew there was a judgment against him. Judgment Creditor then filed this action due to Judgment Debtors’ default under the settlement agreement.[1] (Cohen Decl. ¶ 3.) There is then a series of entity amendments and property transfers identified by Judgment Creditor of an asset, the real property located in San Juan Capistrano, purportedly to keep it out of Judgment Creditor’s reach. (See RJN Exhibits 1 through 10.) The Wyoming LLC was created after this Judgment, and after this action commenced, in around April 2023. (RJN, Exhibit No. 6.) Tatanisha Leer was the Wyoming LLC’s member. (RJN, Exhibit 7.) In April 2023, another entity, DRVN Holdings, LLC (which Judgment Debtor Stefan Joseph Leer had previously been a member of), transferred the SJC Property to Tatanisha Leer as her sole and separate property. (RJN, Exhibits 8.) Tatanisha Leer executed this grant deed as a member of DRVN Holdings, LLC. (Ibid.) That same date, Judgment Debtor Stefan Joseph Leer executed a quitclaim deed of that property to Tatanisha Leer. (RJN, Exhibit 9.) One month later, in May 2023, Tatanisha Leer granted the property to the Wyoming LLC. (RJN, Exhibit 10.)

Accordingly, the court agrees with Judgment Creditor that there is substantial evidence that the Wyoming LLC was created to shield Judgment Debtors’ assets, namely the SJC Property, from Judgment Creditor.

Community Property

Judgment Creditor seeks to add Tatanisha Leer as a judgment debtor in order to pursue claims against community property with her spouse, current Judgment Debtor Stefan Joseph Leer.

CCP §695.010(a) provides: “Except as otherwise provided by law, all property of the judgment debtor is subject to enforcement of a money judgment.”

Here, it is unclear to the court what assets Judgment Creditor seeks by including Tatanisha Leer as a party. The authority cited by Judgment Creditor indicates the non-debtor spouse must be named if the creditor seeks their separate property, not the community property. The only asset identified in the motion is the SJC Property which, according to the records produced by Judgment Creditor, belongs to the Wyoming LLC – not to Tatanisha Leer as community or separate property. Judgment Creditor has not identified what property it seeks to reach belonging to Tatanisha Leer as her sole and separate property.

Accordingly, the court DENIES Judgment Creditor’s motion to amend the judgment to the extent it adds Tatanisha Leer as a Judgment Debtor.

Fraudulent Transfer – Uniform Voidable Transactions Act (UVTA)

Judgment Creditor contends that the court should amend the judgment to incluse Tatanisha Leer and the Wyoming LLC under the UVTA.

In California, a fraudulent conveyance under the Uniform Voidable Transactions Act (“UVTA”) involves “a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim.” (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 829.) A transfer under the UVTA is fraudulent as to a creditor if the debtor made the transfer with actual intent to hinder, delay, or defraud any creditor of the debtor. (See Civ. Code, § 3439.04(a); Filip, supra, 129 Cal.App.4th at 829.)¿

To find a transfer voidable as to a creditor, the transfer by the debtor must be made with actual intent to hinder, delay, or defraud the creditor or the debtor. (See Id., § 3439.04(a).) Some factors that may be considered in determining actual intent are: (1) whether the transfer or obligation was to an insider; (2) whether the debtor retained possession or control of the property transferred after the transfer; (3) whether the transfer or obligation was disclosed or concealed; (4) whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (5) whether the transfer was of substantially all the debtor’s assets; (6) whether the debtor absconded; (7) whether the debtor removed or concealed assets; (8) whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (9) whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (10) whether the transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) whether the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor. (Id., § 3439.04(b).)¿¿

Here, the same facts discussed under the alter ego liability analysis apply. There is a suspicious string of entity formation and property transfers after Judgment Creditor’s judgment and settlement agreement with Judgment Debtors.

Accordingly, the court GRANTS Judgment Creditor’s motion to amend as to the Wyoming LLC.

CONCLUSION:

For the foregoing reasons, the Court decides the pending motion as follows:

1.Motion for Leave to Amend is GRANTED in part and DENIED in part:

c. Granted as to Three Zero Four Zero Two Holding, LLC;

d. Denied as to Tatanisha Leer aka Tanisha.

Moving party is to give notice.

IT IS SO ORDERED.

Dated: March 20, 2024 __________________________________ Upinder S. Kalra

Judge of the Superior Court

[1] Judgment Debtors have never appeared in this action.