Filed 7/23/26
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
8451 MELROSE PROPERTY, LLC B340673
et al.,
(Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. BC414854)
v.
YOUSEF AKHTARZAD et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Daniel M. Crowley, Judge. Affirmed.
King & Spalding, Paul J. Watford; Wilson Sonsini Goodrich
& Rosati, Julia Hu; Nemecek & Cole, Marshall R. Cole and
Vikram Sohal for Defendants and Appellants.
Liner Freedman Taitelman and Cooley, Michael A.
Taitelman, Steven E. Formaker; Greines, Martin, Stein &
Richland, Robin Meadow and John J. Metzidis for Plaintiffs and
Respondents.
_________________________
A commercial lease soured. The landlord won, and we
affirmed, a significant money judgment against the tenant named
in the lease. This appeal concerns the landlord’s postjudgment
efforts to add several individuals and a corporation as judgment
debtors through the summary process that has emerged under
Code of Civil Procedure section 187. (Subsequent references to
section 187 are to this provision.) The individuals are assertedly
the named tenant’s silent partners in a belatedly discovered “one-
for-all” family partnership. The corporation is assertedly the
partnership’s vehicle for real estate leasing ventures. The trial
court, citing equitable concerns favoring the landlord, amended
the judgment to add the individual partners and the corporation.
These newly added judgment debtors appeal. We affirm.
BACKGROUND
A. Sina’s Liability for Breach of Contract
8451 Melrose Property, LLC (Melrose) owns a commercial
building on Melrose Avenue in West Hollywood, California. In
2008, Melrose, through its manager Jack Simantob, leased the
building to Sina Akhtarzad. They agreed to an 11-year term with
rent initially fixed at $55,000 per month.
After struggling to make productive use of the building,
Sina, in January 2009, stopped paying rent. (We refer to Sina
and his various family members by their first names for clarity.)
Sina told Simantob he would pay $25,000, but nothing further.
He warned Simantob against filing a lawsuit, threatening his
attorneys would “crush” Simantob in court. Simantob, regaining
possession of the building, saw it had been gutted. Stairs,
drywall, electrical wiring and sockets, railings, ductwork, and
bathroom fixtures had been removed. (8451 Melrose Prop., LLC
2
v. Akhtarzad (May 28, 2020, B288963) [nonpub. opn.] (Melrose
II).)
In June 2009, Melrose sued Sina for breach of contract and
declaratory relief. Melrose prevailed at a bench trial in 2011,
winning an $8,549,307.33 judgment, but Sina obtained reversal
on appeal due to a change in the law of parol evidence that
occurred while the appeal was pending. (8451 Melrose Prop.,
LLC v. Akhtarzad (July 30, 2013, B237052) [nonpub. opn.]
(Melrose I).)
“On remand, the parties stipulated to a second trial in front
of a referee,” who conducted a 10-day trial. (Melrose II, supra,
B288963 [nonpub. opn.].) After that trial, the referee issued a
139-page statement of decision in Melrose’s favor. “The referee
concluded Melrose’s total damages were $10,555,837, consisting
of $9,887,337 in unpaid rent and $668,500 to restore the
[b]uilding. The referee also found Melrose made reasonable
efforts to mitigate these damages. He awarded Melrose and
Simantob attorney fees and costs. [¶] The trial court adopted the
referee’s statement of decision and entered judgment in favor of
Melrose and Simantob” in 2018. (Ibid.) We affirmed. (Ibid.)
B. Bankruptcy Revelations and the Motion to Amend
Following the earlier, bench-trial judgment and another
significant litigation loss in an unrelated commercial property
dispute, Sina and his wife, Ramesh, filed for bankruptcy. (In re
Akhtarzad (Bankr. C.D.Cal. 2011) No. 2:11-BK-61640.) The
bankruptcy matter has its own lengthy history. In it, Melrose
filed an adversary proceeding. Melrose argued Sina’s debt should
survive bankruptcy because Sina fraudulently induced the
building lease by representing he had the means to perform it
personally when he did not.
3
While conducting discovery for the adversary proceeding in
2023 — which had returned to life after the second judgment
against Sina became final — Melrose and Simantob unearthed
information about the business dealings of Sina and Ramesh, and
of Sina’s brothers and their wives (Kourosh and Shirin
Akhtarzad, and Yousef and Shahpar Akhtarzad). Although
Melrose and Simantob had known of Sina’s relatives and various
family-controlled business entities, they claim the 2023 discovery
disclosures, discussed in depth below, newly showed that Sina
and his brothers and their wives were acting as partners in a
“one-for-all” partnership and that this partnership, not Sina, had
secretly been the real tenant in the disputed lease. Melrose and
Simantob, then, believed Sina had sought personal bankruptcy
on a partnership debt as a ruse to divert attention from the
partnership and to shield it from liability.
In December 2023, Melrose and Simantob sought
amendment of the second judgment to add Sina’s partners —
Kourosh, Shirin, Yousef, and Shahpar — as well as the
partnership’s vehicle for property leasing, Amey Enterprise Inc.
(Amey). Melrose and Simantob argued that “each partner in a
general partnership is jointly and severally liable for partnership
obligations” and asserted “Yousef Akhtarzad, Kourosh
Akhtarzad, Shirin Akhtarzad and Shahpar Akhtarzad are proper
debtors on a judgment based on a Partnership obligation.”
Though “the individual partners were not separately represented
at trial,” each was part of a single enterprise — the partnership
— and all were thus “virtually represented.”
4
C. Evidence on the Motion to Amend
We review the evidence before the trial court on the motion
to amend judgment regarding who was involved with this ill-
fated lease and when that information surfaced.
1. The Lease
Simantob, who signed the lease for Melrose, submitted a
declaration in support of the motion. He had negotiated the lease
solely with Sina. At the time of contracting, Sina did not disclose
he was entering the lease on behalf of any family business and
Simantob was unaware of Sina’s family business or a
partnership. Sina, who submitted a declaration in opposition to
the motion, disagreed, averring he proposed contracting through
one of the family partnership entities, which would have been
Sina’s standard business practice, but Simantob wished to
contract with Sina personally.
The lease required a $330,000 initial payment, including
four months’ rent at $55,000 a month and a $110,000 security
deposit. A check from a “Shirin Yousefzadeh Akhtarzad (SRS)”
account covered this amount. The lease also required payment of
property taxes and insurance premiums. A check for
approximately $26,000 from an “Amey Enterprises DBA Olympic
Collection” account covered those. At Sina’s request, Simantob
coordinated with a management company, using the name Nasa
Group, to facilitate payment. Before breach of the lease, Amey,
not Sina, sublet a portion of the Melrose building to Vera Wang
Bridal House, LLC.
2. Earlier Bankruptcy Revelations
Early in the bankruptcy proceeding, in 2012, Sina and
Ramesh filed documents illuminating their financial situation.
5
First, a schedule of personal property called for disclosure
of the debtors’ “interests in incorporated and unincorporated
businesses” and “partnerships.” The schedule lists 30 companies,
including Amey, and denotes Ramesh, but not Sina, as having a
minority interest in them. The list does not mention a
partnership with the debtors’ family members.
Second, a statement of financial affairs called for disclosure
of “businesses in which the debtor was an officer, director,
partner, or managing executive of a corporation, partner in a
partnership, sole proprietor, or was self-employed.” Though the
debtors listed many of the companies listed in the previous
document, Amey is not listed and neither is a partnership with
the debtors’ family members.
Third, the statement of financial affairs also called for
disclosure of payments to insider creditors. In response, the
debtors stated revenues from the listed real estate companies
“are paid into a general account to pay mortgages, taxes, and
other expenses of the [companies] every month” and noted
Ramesh “is one of three named account holders on the account.”
Also in 2012, a meeting of creditors occurred at which
lawyers for Melrose, Simantob, and another creditor asked
questions of Sina and Ramesh, and also of Kourosh, one of Sina’s
brothers. They discussed the multitude of family-related
business entities. In discussing one of them, AhMen, Inc.,
Kourosh volunteered to provide answers as he was “familiar with
the books and records of Ramesh and Sina.” When asked if he
was an accountant, Kourosh replied “No, just — my wife, she
really is the partner.” The examiner then proceeded to remind
Kourosh of his interest in AhMen, Inc. and asked questions about
the entity. Kourosh, addressing that entity’s founding date,
6
stated it was “formed in 1962; in 2006 Ramesh and other
partners . . . bought the shares in the corporation.” Ramesh’s
shares in AhMen, Inc. were pledged to Amey. This was done so
Amey would pay for Sina’s litigation expenses. For Amey, Sina
would do “repairs” and “maintenance.” Later in the hearing, Sina
fielded questions about his financial relationship with his
brothers. He replied, “[n]o” it was not “true that whenever you or
your family, your brothers, your sister-in-laws, need money you
basically take whatever money is available for your purposes.”
And “[n]o,” he did not “share [his] money with [his] brothers at all
times.”
At another hearing around this time, which Melrose and
Simantob briefly excerpted in a 2013 bankruptcy court filing,
Sina addressed who determined who received what distributions
from the family business entities. He was asked if he “ever
make[s] that determination for any of these corporations,
partnerships, or LLCs?” Sina responded “I’m not the only
partner, but my wife is not the only partner. So the answer to
your question is no.” Later, Sina was again asked about
distributions from the entities and stated his “partners” were
involved. When asked who those were, Sina responded “[m]y
brothers?”
These disclosures enabled Melrose and Simantob, also in
2013 and before the second trial in this matter, to request
consolidation in the bankruptcy proceeding of the debtors’ estate
with the family business entities. Melrose and Simantob urged
the existence of a “family business which consists of owning
various limited liability companies and corporations.” Melrose
and Simantob contended members or shareholders of the entities
treated them as “one unified mega-empire, within which they can
7
shift funds around in a strategic attempt to avoid the creditors of
any given entity or individual.” And Melrose and Simantob noted
the “SRS account was an account into which the income
distributions from the [entities] of which Shirin, Ramesh and
Shahpar are members were ‘pooled’ ”and “funds from this account
were then used to pay the personal expenses of the [d]ebtors.”
These disclosures also prompted Melrose, in pursuing its
breach-of-lease case in 2014 after reversal of the first judgment,
to file a motion to amend its complaint to add new fraud causes of
action that included Amey, AhMen, Inc., and Ramesh as
defendants. The theory was that Sina fraudulently entered the
lease with no intention of performing it, and that his wife and
both entities, which she partially owned, conspired in and abetted
the fraud. The trial court denied the motion to add these new
fraud-based causes of action.
3. Later Bankruptcy Revelations
Reversal of the first judgment against Sina paused the
adversary proceeding in bankruptcy against Sina, but that
proceeding resumed after the second judgment. In response to
interrogatories in the resumed proceeding, Sina, in early 2023,
stated that while Simantob expected him to perform the lease
personally, Sina’s “belief and expectation was that the [l]ease
would be administered through Amey.” Sina, moreover, stated he
had “access to funds (including income and financing proceeds of
the partnerships)” as described in an attached declaration of
William Mahanian, his accountant. Sina stated payments made
on the lease “belonged equitably to [him] through his wife
Ramesh” and through his “interests in family entities such as
Amey and the SRS (Shirin Akhtarzad, Ramesh Akhtarzad,
Shahpar Akhtarzad) bank account.”
8
Mahanian, a CPA, had “been the accountant for Sina and
Ramesh Akhtarzad, and all their business[] entities since 1988.”
In his declaration, he explained that, since 1988, Sina and
Ramesh have “conduct[ed] all their business activities, mostly in
real estate, in partnerships with their other two brothers and
their spouses.” Sina “is the only partner that is in charge of
leasing, purchasing and sale of real estate. On [a] few occasions,
if he purchased real estate in his personal name, he would
subsequently transfer that real estate in a new LLC with him
and his brothers and their spouse as the partners.” Sina and
Ramesh rarely, if ever, “had any financial transactions that were
outside of family members partnership, here called partners. All
partners share all investments, income and expenses together.
Each member had their own share and accounting based off their
percentages of ownership.” Sina and Ramesh “always had access
to all cash flows and funds from all entities at any time.” At the
end of 2008, around when the lease was signed, the estimated
fair market value of the partnership’s investments was over $400
million. Mahanian was able to meticulously calculate the share
of partnership income due to Sina and Ramesh.
Depositions of Mahanian and Sina followed.
Mahanian stated Sina was part of a “one-for-all” family
partnership that had existed for decades. To illustrate the
partners’ intertwining, Mahanian explained, “it has happened
that if one of these partners refinances their personal residence
or sells something that is personal, the money would come back
to the business to acquire more real estate.”
Sina answered questions about his relationship to the
Melrose lease and his understanding of the partnership and
Amey. Sina confirmed a partnership amongst him, his two
9
brothers, and each of their wives had existed since 1979. When
asked if he was personally Melrose’s tenant, he responded he
was, “[a]ccording to Jack [Simantob]” and “according to the
lease.” But Sina stated the lease was “part of a partnership
business” and money needed to cover lease-related expenses
would come from the partnership, not from him personally. And
Sina did not personally pay to defend Melrose’s lawsuit; the funds
came from one of the family’s business entities. Records from
Amey show it paid numerous defense costs. From the beginning,
“[t]he intention was this [lease] would be part of a family
business.” Further, Sina’s intent when signing the lease was for
Amey to act as the tenant and administer the lease, even though,
again, Sina had signed the lease personally at Simantob’s
request. Internally, the family partnership referred to the lease
as an Amey lease. Amey’s tax filings show the lease under its
auspices. Sina was Amey’s manager, oversaw its leasing, and
had check signing authority throughout 2008 and 2009.
In keeping with the family partnership’s practices, the SRS
account paid lease expenses. The SRS account was a “mother
account” or “handling account” that facilitated partnership
investments and distributions to partners and paid partnership
expenses, including for Amey. The SRS account ledger showed
payments to and from Amey. Secretary of State documents
showed Amey’s officers and directors consisted of the namesakes
of the SRS account: Shirin, Ramesh, and Shahpar.
4. Akhtarzad Declarations About the Partnership
Sina and his family, responding directly to the motion to
amend judgment, reaffirmed the partnership. Sina’s declaration
in opposition to the motion states: “We are all partners in what
we commonly refer to as a Family Partnership. . . . The partners
10
share the investments, income and expenses of the Family
Partnership, and each of the partners has his or her own share of
the Family Partnership. Ramesh and I hold, on average, at least
33% of the Family Partnership, ranging between 20% and 50% of
any single asset. This is because there are multiple entities
within the Family Partnership, and the family members (the
partners) have different interests in the various entities as new
assets are acquired.” When the partnership enters leases, it is
Sina’s “common business practice to enter into such commercial
lease agreements through Amey,” which “is part of the Family
Partnership.” Sina averred, however, “neither my brothers nor
their wives played any substantive role in [the] litigation” with
Melrose.
Sina’s brothers and in-laws — Kourosh, Shirin, Yousef, and
Shahpar — all submitted declarations agreeing a family
partnership existed separate and apart from the various
companies that conduct “[m]ost” of the partnership’s business.
They each declared “[t]he partners share the investments, income
and expenses of the Family Partnership, and each of the partners
has his or her own share of the Family Partnership.” They each
also acknowledged the judgment creditors’ contention that “ ‘all
family member partners had access to all funds in all entities for
any reason without having any negative effect on the operations
of any of the entities’ ” and stated in response that “each of the
‘inter-entity’ loans and advances were properly documented and
accounted for in the books and records for the LLCs comprising
the Family Partnership.” Each partner was aware of the lease
litigation, but none materially participated in it, or in the lease’s
negotiation. None selected the attorneys who represented Sina
11
and none made, or was asked to make, material decisions
regarding the lawsuit.
D. Superior Court Grants Amendment
Following briefing, written evidentiary submissions, and
oral arguments, the superior court amended the judgment in
favor of Melrose and Simantob to name, jointly and severally,
Kourosh, Shirin, Yousef, Shahpar, and Amey as debtors.
In a written order, the court found the Akhtarzads had
indeed formed a “one-for-all” partnership. The partners “acted in
concert to acquire and manage real property,” and they intended
the lease with Melrose to “be part of that enterprise.” Though
“Sina was the nominal tenant” on the lease, he shared his
partners’ intentions and acted “as an agent of the [p]artnership”
as he typically does in real estate matters. Amey, of which Sina
was the sole manager, was a “[p]artnership entity” meant to
perform the lease, as it had paid “[p]artnership expenses,” such
as taxes and insurance, and had sublet a portion of the premises.
Sina oversaw the litigation for the partnership and the
partnership paid for the litigation. “While the individual
partners were not separately represented at trial, the
Partnership itself was virtually represented through Sina, one of
its members. Each of the partners was part of a single
enterprise: the ‘one-for-all’ Partnership.” Sina litigated
“vigorous[ly], contesting liability on the merits of the case
through two trials and two appeals,” and his interests were “the
same as the interests of the Partnership and Amey.” He thus
“virtually represented” the partnership, “and by extension, its
individual members,” as well as Amey.
After making these findings, the superior court rejected the
would-be debtors’ assertion of laches. They had “not shown an
12
unreasonable delay in bringing the motion to amend the
judgment,” as Melrose and Simantob acted “within a few months”
of discovering the “ ‘one-for-all’ Family Partnership.” Nor had the
would-be debtors shown prejudice from their delayed addition to
the judgment.
The newly added judgment debtors appealed. Amidst
briefing, they moved for judicial notice of documents not before
the trial court. We previously deferred that motion and now deny
it. (In re Marriage of Brewster & Clevenger (2020) 45 Cal.App.5th
481, 498 [“The appellate court does not take judicial notice of
matters not considered by the trial court, absent exceptional
circumstances”].)
DISCUSSION
I. Section 187
The newly added judgment debtors challenge their addition
to the judgment, which the trial court ordered pursuant to Code
of Civil Procedure section 187.
Section 187 grants courts “all the means necessary to”
effect their jurisdiction. (§ 187.) California courts agree this
grant of authority permits a court to “ ‘ “amend its judgment at
any time so that the judgment will properly designate the real
defendants.” ’ ” (Greenspan v. LADT LLC (2010) 191 Cal.App.4th
486, 508 (Greenspan); see Motores de Mexicali, S. A. v. Superior
Court of Los Angeles County (1958) 51 Cal.2d 172, 175 (Motores)
[noting use of section 187 to add judgment debtors].) “The
addition of a new party as judgment debtor stems from the
concept of the alter ego doctrine, which is that an identity exists
between the new party and the original party, whose
participation in the trial leading to the judgment represented the
newly added party.” (Misik v. D’Arco (2011) 197 Cal.App.4th
13
1065, 1072.) A court, then, “ ‘ “ ‘is not amending the judgment to
add a new defendant but is merely inserting the correct name of
the real defendant.’ ” ’ ” (Greenspan, at p. 508.)
“[E]ven if all the formal elements necessary to establish
alter ego liability are not present, an unnamed party may be
included as a judgment debtor if ‘the equities overwhelmingly
favor’ the amendment and it is necessary to prevent an injustice.”
(Carolina Casualty Ins. Co. v. L.M. Ross Law Group, LLP (2012)
212 Cal.App.4th 1181, 1188–1189 (Carolina Casualty), quoting
Carr v. Barnabey’s Hotel Corp. (1994) 23 Cal.App.4th 14, 20–23
(Carr).) Although authority from the same year as Carr states an
alter ego relationship must be shown (Triplett v. Farmers Ins.
Exchange (1994) 24 Cal.App.4th 1415, 1420, section 187’s broad
grant of authority contemplates no such limitation. No court,
meanwhile, in the three decades since Carr has advanced
Triplett’s more constrained approach to deny section 187 relief
when it would otherwise be appropriate. (See In re Levander (9th
Cir. 1999) 180 F.3d 1114, 1122, fn. 11; cf. Mesler v. Bragg
Management Co. (1985) 39 Cal.3d 290, 301 [“The essence of the
alter ego doctrine is that justice be done”].)
Whether the relationship inviting section 187’s application
is alter ego or an equitable analog, courts have allowed
amendment if a plaintiff meets its burden to show: (1) the party
to be added as a judgment debtor had control of the underlying
litigation and was virtually represented in that proceeding; (2)
there is such a unity of interest and ownership that the separate
personalities of the party already on the judgment and the party
to be added do not in reality exist; and (3) an inequitable result
would follow if the acts of the party already on the judgment were
treated as its acts alone. (Highland Springs Conference &
14
Training Center v. City of Banning (2016) 244 Cal.App.4th 267,
280 (Highland Springs); Relentless Air Racing, LLC v. Airborne
Turbine Ltd. Partnership (2013) 222 Cal.App.4th 811, 815–816
(Relentless); Carolina Casualty, supra, 212 Cal.App.4th at
p. 1194; Greenspan, supra, 191 Cal.App.4th at pp. 508, 509, 511;
Carr, supra, 23 Cal.App.4th at p. 21.)
The first requirement, “that the proposed judgment debtors
have had control of the underlying litigation and have been
virtually represented,” assures that section 187 places liability
only at the feet of those who sufficiently had their day in court.
(Greenspan, supra, 191 Cal.App.4th at p. 509; id. at p. 517 [“We
must also keep in mind that section 187 applies only if the
parties to be added as judgment debtors had control of the
underlying litigation and were virtually represented”].) The
remaining requirements mirror those that establish alter ego,
and so assure that section 187 does not reach beyond the “real”
defendants. (Id. at pp. 508–509.) If a judgment creditor does not
invoke alter ego to impose section 187 liability, we look for its
equitable “equivalent.” (Cam-Carson, LLC v. Carson Reclamation
Authority (2022) 82 Cal.App.5th 535, 550 (Cam-Carson).) In sum,
section 187 liability follows from a nonparty’s sufficient litigation
control and sufficient relationship to a judgment debtor. (Cf.
Misik v. D’Arco, supra, 197 Cal.App.4th 1065, 1072 [section 187
applies to “an alter ego who had control of the litigation”].) When
section 187’s requirements are met, “[n]o statute of limitations
applies” so equity can be done. (Highland Springs, supra,
244 Cal.App.4th at p. 287.)
While caution is often urged before disregarding corporate
forms, the “greatest liberality” is often encouraged in allowing
amendments under section 187, meaning courts exercise their
15
discretion “under section 187 with a particular eye towards
promoting justice.” (JPV I L.P. v. Koetting (2023) 88 Cal.App.5th
172, 190; see also Misik v. D’Arco, supra, 197 Cal.App.4th at
p. 1073.) We review a trial court’s decision to add a judgment
debtor for an abuse of discretion. (Carolina Casualty, supra,
212 Cal.App.4th at p. 1189.) We review the court’s fact findings
for substantial evidence (ibid.), but we review independently
questions of law regarding section 187’s scope (see Phillips,
Spallas & Angstadt, LLP v. Fotouhi (2011) 197 Cal.App.4th 1132,
1142).
We next address relevant background principles of
partnership, then turn to whether the trial court could add Amey
to the judgment, and finally address the individual partners.
II. Partnership Principles
A. Partnership and Partner Liability
The original and new individual judgment debtors, Sina
and his relatives, are partners in a partnership. Amey is alleged
to be an adjunct of the partnership. Principles of partnerships,
then, are relevant.
Generally, “the association of two or more persons to carry
on as coowners a business for profit forms a partnership.” (Corp.
Code, § 16202, subd. (a).) A partnership can arise from a written
agreement or be implied from the partners’ acts. (Eng v. Brown
(2018) 21 Cal.App.5th 675, 694.) “A partnership is an entity
distinct from its partners.” (Corp. Code, § 16201.) “Each partner
is an agent of the partnership for the purpose of its business. An
act of a partner, including the execution of an instrument in the
partnership name, for apparently carrying on in the ordinary
course the partnership business or business of the kind carried on
by the partnership binds the partnership, unless the partner had
16
no authority to act for the partnership in the particular matter
and the person with whom the partner was dealing knew or had
received a notification that the partner lacked authority.” (Id.,
§ 16301, subd. (1).)
“A partnership or other unincorporated association,
whether organized for profit or not, may sue and be sued in the
name it has assumed or by which it is known.” (Code Civ. Proc.,
§ 369.5, subd. (a); accord, Corp. Code, § 16307, subd. (a).) “A
partnership is liable for loss or injury caused to a person, or for a
penalty incurred, as a result of a wrongful act or omission, or
other actionable conduct, of a partner acting in the ordinary
course of business of the partnership or with authority of the
partnership.” (Corp. Code, § 16305, subd. (a).) Generally, “all
partners are liable jointly and severally for all obligations of the
partnership.” (Id., § 16306, subd. (a).) Commentators view this
last provision, with roots in the Revised Uniform Partnership
Act, as reflecting an “aggregate theory” of partnership, even as
other portions of the revised act, and of California partnership
law, adopt the “entity theory” of partnership. (Haberbush, Note
and Comment: Be Careful What You Wish For: The Unforeseen
Repercussions of the IRS’ Desired Outcome in United States v.
Galletti on the IRS’ Ability to Collect Partnership Taxes Against
General Partners (2011) 32 Whittier L.Rev. 533, 564.)
Several provisions address the practicalities of obtaining
relief from a specific partner. Section 369.5, subdivision (b), of
the Code of Civil Procedure states “[a] member of [a] partnership
or other unincorporated association may be joined as a party in
an action against the unincorporated association. If service of
process is made on the member as an individual, whether or not
the member is also served as a person upon whom service is
17
made on behalf of the unincorporated association, a judgment
against the member based on the member’s personal liability
may be obtained in the action, whether the liability is joint, joint
and several, or several.” (Code Civ. Proc., § 369.5, subd. (b).)
Personal liability under this provision depends on being joined in
the suit and served. (Fazzi v. Peters (1968) 68 Cal.2d 590, 596
(Fazzi) [discussing section 388, the predecessor to section 369.5].)
Additionally, the Corporations Code instructs that “[a]
judgment against a partnership is not by itself a judgment
against a partner” and “[a] judgment against a partnership may
not be satisfied from a partner’s assets unless there is also a
judgment against the partner.” (Corp. Code, § 16307, subd. (c);
see Rappaport v. Gelfand (2011) 197 Cal.App.4th 1213, 1231,
fn. 14.) Moreover, “[a] judgment creditor of a partner may not
levy execution against the assets of the partner to satisfy a
judgment based on a claim against the partnership unless” one of
five conditions applies. (Corp. Code, § 16307, subd. (d).) Those
conditions are: “(1) A judgment based on the same claim has
been obtained against the partnership and a writ of execution on
the judgment has been returned unsatisfied in whole or in part.
[¶] (2) The partnership is a debtor in bankruptcy. [¶] (3) The
partner has agreed that the creditor need not exhaust
partnership assets. [¶] (4) A court grants permission to the
judgment creditor to levy execution against the assets of a
partner based on a finding that partnership assets subject to
execution are clearly insufficient to satisfy the judgment, that
exhaustion of partnership assets is excessively burdensome, or
that the grant of permission is an appropriate exercise of the
court’s equitable powers. [¶] (5) Liability is imposed on the
18
partner by law or contract independent of the existence of the
partnership.” (Ibid.)
Partners, in sum, are liable for partnership debts, but
partners and their partnership are distinct in that a judgment
against one partner or the partnership does not necessarily turn
other partners into judgment debtors and expose them to
individual liability.
B. Partnership, Preclusion, and Due Process
Features of partnership liability are revealed by our state’s
law of preclusion — that is, the law that tells us whether claims
or issues arising in one action can be relitigated in another. “In
accordance with due process,” preclusion “can be asserted only
against a party to the first lawsuit, or one in privity with a
party.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813,
824 (DKN Holdings); see JPV I L.P. v. Koetting, supra,
88 Cal.App.5th at p. 193.) And the requirement of due process
that limits preclusion’s reach also restrains a court’s power when
amending judgments under section 187. (Mac v. Minassian
(2022) 76 Cal.App.5th 510, 520 [the requirement for section 187
amendment “ ‘that the new party had controlled the litigation’ ”
exists “ ‘to satisfy due process concerns’ ”].)
As one instance in which partnership law, privity, and due
process intersect, take Dillard v. McKnight (1949) 34 Cal.2d 209
(Dillard). There, our Supreme Court rejected the notion “that a
judgment against one partner in an action brought against him
personally on a tort arising out of the partnership business is res
judicata when the same issues are raised in subsequent litigation
against another partner.” (Id. at p. 214; see DKN Holdings,
supra, 61 Cal.4th at p. 825 [approving of Dillard as holding that
“business partners are not in privity for purposes of preclusion”];
19
accord, Patel v. Crown Diamonds, Inc. (2016) 247 Cal.App.4th 29,
39.)
In Dillard, the plaintiffs sued McKnight, the driver of a car
that fatally struck their son, and Wilcox, the driver’s employer.
(Dillard, supra, 34 Cal.2d at p. 212.) After a first trial, the
plaintiffs secured a judgment against both defendants, premised
in part on a finding that McKnight had acted within the scope of
his employment with Wilcox. (Ibid.) “As the result of certain
evidence adduced upon the [first] trial, plaintiffs claim[ed] to
have learned for the first time the identity of” two partners of
Wilcox: Bower and Thorley. (Ibid.) The plaintiffs served process
on the new partners and substituted them for “Doe” defendants
in an amended complaint. (Ibid.) In a second trial, the court
found McKnight caused the collision but was not acting for his
employer and entered judgment for the added partners. (Ibid.)
The plaintiffs appealed, contending the employment finding
underlying the first judgment should have applied, under
preclusion principles, against the added partners. (Dillard,
supra, 34 Cal.2d at p. 212.) If the added partners were not
parties to the first trial, argued the plaintiffs, they were Wilcox’s
privies. (Id. at p. 213.) In rejecting this argument, the Supreme
Court reaffirmed the general rule “that partners are not in such
privity with one another that a judgment against one partner in
an action brought against him personally on a tort arising out of
the partnership business is res judicata when the same issues are
raised in subsequent litigation against another partner.” (Id. at
p. 214.) The Court reiterated “ ‘that in no case will a judgment
entered after service on less than all the partners be given the
effect of a personal judgment against partners not actually
served.’ ” (Ibid.) “If the rule were otherwise a partner would be
20
required to discover at his peril any action against his copartner
that might conceivably relate to the partnership business and
seek to intervene therein. On the second trial the only issue that
would be open would be the nature of his relationship to the
party sustaining the adverse judgment. Such procedure would
deprive him of valuable rights contrary to ‘the mandate of due
process of law’ — that no person can be affected by a hearing or
adjudication of a court of justice without his voluntary
appearance or affording to him by means of the service of process
an opportunity to appear and contest the claim that may be made
against him.” (Ibid.) The “assertion that ‘service upon one
partner, is service upon all . . . is not the rule in this State;’ ”
rather, “ ‘[t]o sustain a judgment against a defendant, he must be
served with process, or brought into Court through some of the
forms of law.’ ” (Id. at pp. 214–215.) Dillard reached these
conclusions despite acknowledging the rule, now set forth in
Corporations Code section 16306, subdivision (a), that partners
bear “joint and several liability on a partnership matter.” (Id. at
p. 217; see DKN Holdings, supra, 61 Cal.4th at p. 826 [“[J]oint
and several obligors are not considered to be in privity for
purposes of issue or claim preclusion”].)
Dillard, furthermore, rejected the plaintiffs’ argument that
the absent partners’ asserted exercise of control in the first trial
should alter the outcome. (Dillard, supra, 34 Cal.2d at p. 217.)
The plaintiffs contended “from the record it may be inferred that
defendants Bower and Thorley, through their correspondence
with defendant Wilcox’ counsel at the time of the first trial, knew
of plaintiffs’ cause of action as involving the responsibility of the
partnership and so were in an equal position of authority to
exercise control over the conduct of such proceedings” but “chose
21
to stay ‘in the background’ and let defendant Wilcox, as agent of
the partnership (Civ. Code, § 2403) ‘bear the brunt of the
defense,’ so that ‘they are now estopped to deny the force and
effect of the [first] judgment.’ ” (Dillard, supra, 34 Cal.2d at
pp. 216–217.) The plaintiffs claimed “the situation is analogous
to that of an ‘undisclosed principal,’ who is bound by a judgment
in a prior action rendered against his agent on the identical issue
when raised in subsequent litigation.” (Id. at p. 217.)
Responding to this argument, the Supreme Court
recognized that nonparties who control litigation could be bound
by it. (Dillard, supra, 34 Cal.2d at p. 216; see Krofcheck v.
Ensign Co. (1980) 112 Cal.App.3d 558, 568 (Krofcheck); JPV I
L.P. v. Koetting, supra, 88 Cal.App.5th at pp. 178, 193–194
[finding privity between LLCs and their managing members
when those members controlled litigation]; Valley Nat’l Bank v.
A.E. Rouse & Co. (9th Cir. 1997) 121 F.3d 1332, 1337 [preclusion
could apply to “an unnamed, unserved partner who participates
in a defense of the partnership”]; see also Code Civ. Proc., § 1908,
subd. (b) [“A person who is not a party but who controls an action,
individually or in cooperation with others, is bound by the
adjudications of litigated matters as if he were a party if he has a
proprietary or financial interest in the judgment or in the
determination of a question of fact or of a question of law with
reference to the same subject matter or transaction”].) But the
court, first, faulted the plaintiffs for not raising the issue of
control in the trial court, thereby denying the defendants the
opportunity to contest their control. (Dillard, at p. 217.) The
defendants “might have been able to prove that they did not
participate in the conduct of the prior defense or agree to have
their copartner . . . conduct it for them.” (Ibid.) The court also
22
rejected preclusion arising from the “mere knowledge of one
partner that his copartner is being sued on an alleged
partnership transaction.” (Ibid.) Partnership liability and
agency principles, standing alone, could not surmount the court’s
due process concerns. (Dillard, at pp. 217–218.)
Courts are similarly hesitant to give preclusive effect to
judgments against partnerships in subsequent efforts to secure
relief against partners. In Krofcheck, the creditor on a Utah
judgment against a partnership sought to enforce that sister-
state judgment in California against a general partner assumed
to have controlled the Utah litigation. (Krofcheck, supra,
112 Cal.App.3d at pp. 560, 567.) The Court of Appeal rebuffed
these efforts. (Id. at pp. 563–564.) Whether under Utah or
California law, a judgment against a partnership was not against
an unnamed, unserved partner. (Id. at pp. 564–566, citing Fazzi,
supra, 68 Cal.2d 590, 592–598, and Dillard, supra, 34 Cal.2d at
p. 214). Fazzi had reiterated the “elementary common law
principle . . . that a judgment may not be entered either for or
against one not a party to an action or proceeding,” and held an
individual judgment against a partner could not be rendered
against a partner not joined in a suit against a partnership.
(Fazzi, at pp. 592, 594, 597.) The court in Krofcheck, recognizing
that a partner who controlled the underlying litigation against a
partnership might be in privity with the partnership for purposes
of issue preclusion, concluded the proceeding to enforce the Utah
judgment instead sought to invoke claim preclusion. The court
concluded this aspect of res judicata was unavailable in the
pending sister-state enforcement proceeding. (Krofcheck, at
pp. 566–568.)
23
It has been said, drawing on the Restatement Second of
Judgments (1982) (Restatement), that the relationships between
“partners and their partnerships” are amongst those traditional
legal relationships that give rise to privity and preclusion.
(Headwaters Inc. v. United States Forest Serv. (9th Cir. 2005)
399 F.3d 1047, 1052–1053, citing Rest.2d Judgments, §§ 43–61.)
But the Restatement’s discussion of partners and partnerships
underscores California’s non-automatic approach.
According to the Restatement, “[a] judgment in an action by
an injured person against a partner upon an obligation or
liability incurred in the course of partnership business [¶] . . . [¶]
renders the property of the partnership subject to execution to
satisfy the judgment but is not otherwise binding on a partner
who was not a party to the action unless he controlled or
participated in controlling the defense of the action, or was given
notice of an opportunity to defend the action.” (Rest.2d
Judgments, § 60(1)(b)(ii), p. 106; cf. id. § 59(3)–(5), pp. 94–95
[describing a litigation control requirement for binding
individuals associated with a corporation].) “[A] partner who has
been served with process can defend the action [on] behalf of the
partnership . . . . A judgment for the plaintiff is binding upon
unserved partners to the extent of the partnership property,
which thereupon is subject to execution to collect the judgment.
To this extent, the partnership is in effect treated as an entity
when one of its members is made a defendant.” (Rest.2d
Judgments, § 60, com. a, p. 109.)
Thus, “[a]lthough all general partners are substantively
liable for obligations incurred by other partners in the course of
the business, this does not signify that a judgment establishing
such an obligation is binding upon a partner who was not
24
individually a party to the adjudication. A partner who has been
made a party defendant represents himself and other partners to
the extent of their interest in partnership property; he does not
represent unjoined partners for the purpose of establishing their
liability beyond their investment as embodied in partnership
property.” (Rest.2d Judgments, § 60, reporter’s notes, p. 113.) In
some jurisdictions, a judgment against a partnership “may have
evidentiary value in a subsequent action to establish the personal
liability of unjoined partners. In these jurisdictions, an unjoined
partner may be summoned after judgment to show cause why he
should not be made liable under the judgment. The burden of
proof on the question of liability is then shifted from plaintiff to
the newly joined partner. Aside from this possibility, however, a
partner who has not been served as a defendant is not bound
beyond his interest in the partnership property.” (Rest.2d
Judgments, § 60, com. a, p. 109; cf. 14th RMA Partners, L.P. v.
Reale (2d Cir. 1996) 100 F.3d 278, 280–281 [“a subsequent
suit . . . is only for the purpose of affording the partner the
opportunity to contest” the partner’s status with respect to the
partnership]; Dayco Corp. v. Fred T. Roberts & Co. (1984)
192 Conn. 497, 505 [a partner who controlled arbitration and a
partner without involvement were both bound individually in a
second suit on the underlying partnership liability].)
California does not offer this more direct route. The
limitations on individual partner liability, according to the
Restatement’s reporter’s notes, are viewed by California and
some like-minded states as “required by due process. Thus, it has
been said that it would be a denial of due process if a judgment
based on service of process on a partner were to result in
conclusive determination of the personal liability of a partner
25
who was not personally served.” (Rest.2d Judgments, § 60,
reporter’s notes, pp. 114–115, citing Dillard, supra, 34 Cal.2d
209; accord, Nisenzon v. Sadowski (R.I. 1997) 689 A.2d 1037,
1050.) Though the Restatement observes the contrary view is
possible — that is, a partner could be viewed as the agent of all
his partners in all aspects of litigation — it concludes this is not
generally so “as a matter of modern common law.” (Rest.2d
Judgments, § 60, reporter’s notes, p. 115.)
III. Amey
We turn to the addition of Amey, the partnership’s vehicle
for leasing, as a judgment debtor. We start with Amey’s
relationship to Sina. And we probe, in terms deriving from the
alter ego doctrine, whether the evidence permitted trial court
findings that there was a unity of interest and ownership such
that the separate personalities of Sina and Amey did not in
reality exist, and that an inequitable result would follow if Sina’s
acts were treated as his alone. (See Highland Springs, supra,
244 Cal.App.4th at p. 280.)
Although Melrose has not asserted a classic alter ego
relationship between Sina, the partnership, and Amey,
section 187, as noted, can reach the equitable equivalents of alter
ego (Cam-Carson, supra, 82 Cal.App.5th at p. 550) who should be
deemed the real defendants (Greenspan, supra, 191 Cal.App.4th
at p. 508). And alter ego, it turns out, is sometimes viewed as a
means to treat potential judgment debtors as if they were in
partnership. “Where the alter ego theory is proved, corporation
owners are ‘essentially partners operating through a corporate
form, and they are liable for its debts.’ (Hiehle v. Torrance
Millworks, Inc. (1954) 126 Cal.App.2d 624, 630.)” (Minn. Mining
& Mfg. Co. v. Superior Court (1988) 206 Cal.App.3d 1025, 1028
26
(Minn. Mining).) Partners, after all, are, by statute, agents of the
partnership, bind the partnership in partnership matters, and
are jointly and severally liable for partnership debts. (Corp.
Code, §§ 16301, subd. (1), 16306, subd. (a).) And a partnership is
liable for the acts of its partners. (Id., § 16305, subd. (a).) These
are statutory commands beyond the sometimes blurry realm of
equity. The Legislature has determined that a partnership has
the sort of unity of interest with its partners that can support
partnership liability. Thus, a single partner “may, by
appearance, bind the firm as well as himself, both as a copartner
and individually.” (Promotus Enterprises, Inc. v. Jiminez (1971)
21 Cal.App.3d 560, 565; cf. Poswa v. Jones (1913) 21 Cal.App.
664, 669 [“the judgment against the individual members of a firm
may be enforced against the partnership assets”].)
Here, the evidence supported the trial court treating the
partnership as the real defendant. Sina conceded the lease was
“part of a partnership business” and money needed to cover lease-
related expenses would come from the partnership, not from him
personally. When the partnership enters leases, it is Sina’s
“common business practice to enter into such commercial lease
agreements through Amey,” which is entirely owned by, and
“part of[,] the Family Partnership.” Internally, the partnership
referred to the lease as an Amey lease. Amey’s tax filings show
the lease under its auspices. Sina was Amey’s manager, oversaw
its leasing, and had check signing authority at the time of the
lease with Melrose. Amey, not Sina, sublet a portion of the
Melrose building to Vera Wang Bridal House, LLC, on behalf of
the partnership.
The evidence also supported the trial court’s finding that
the partnership controlled the litigation. (Highland Springs,
27
supra, 244 Cal.App.4th at p. 280; NEC Electronics Inc. v. Hurt
(1989) 208 Cal.App.3d 772, 778–780 (NEC).) The partnership
financed the litigation and paid the lawyers. The partnership
entrusted Sina, the partner who appeared in the litigation but
did not finance it, with managing the partnership lease being
litigated. More than that, Sina vigorously litigated the dispute
through two trials on the merits and two appeals. We discern no
way, and have been pointed to none, in which Sina’s litigation
efforts shorted the partnership. The partnership, via its agent
Sina, offered a potent, if unsuccessful defense. (NEC, at p. 781.)
The evidence, furthermore, permits viewing Amey as a
mere instrumentality and effective alter ego extension of the
partnership. (See Gordon v. Aztec Brewing Co. (1949) 33 Cal.2d
514, 520–523.) In Gordon, our Supreme Court approved “the
trial court’s determination that as a matter of law [a] corporate
defendant was the alter ego of [a] partnership” (id. at p. 523,
italics omitted) and the trial court’s jury instruction that “ ‘if one
is liable, both are liable’ ” (id. at p. 521). In that case, “[t]he
partners were the same persons as the stockholders in the
corporation.” (Ibid.; see also Ukegawa Bros. v. Agric. Labor
Relations Bd. (1989) 212 Cal.App.3d 1314, 1324 [“It is clear the
corporation is the alter ego of the partnership and was not denied
the opportunity to obtain review of the 1982 order”]; cf. In re
Levander, supra, 180 F.3d at p. 1123 [adding partnership to a
judgment against a corporation “raises no due process
concerns”].) “Alter ego liability ‘is not limited to the parent-
subsidiary corporate relationship; rather, “under the single-
enterprise rule, liability can [also] be found between sister [or
affiliated] companies.” ’ ” (Cam-Carson, supra, 82 Cal.App.5th at
p. 550, quoting Troyk v. Farmers Group, Inc. (2009)
28
171 Cal.App.4th 1305, 1341; see Greenspan, supra,
191 Cal.App.4th at p. 512.) Amey is a partnership vehicle owned
and controlled by members of the family partnership to conduct
partnership leasing. There are no outside shareholders. While
Amey argues it is not Sina’s alter ego, it does not contest its
relationship to the partnership or the trial court’s conclusion that
Amey was a “partnership entity.”
While, as Amey notes, some courts have raised concerns
about “outside reverse veil piercing” — in which an outsider to a
corporation seeks to hold a corporation liable for an individual
shareholder’s debts — those concerns are inapplicable to the
partnership scenario before us. (See Curci Investments, LLC v.
Baldwin (2017) 14 Cal.App.5th 214, 222, citing Postal Instant
Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510.)
“Outside reverse piercing can harm innocent shareholders and
corporate creditors, and allow judgment creditors to bypass
normal judgment collection procedures. Legal theories (such as
agency or respondeat superior) and legal remedies (such as
claims for conversion or fraudulent conveyance) adequately
protect judgment creditors without the need to distort theories of
corporate liability.” (Postal Instant Press, Inc., at p. 1513.) With
a general partnership debt, however, the innocent shareholder
concept is inapt and there is no need for veil piercing of the sort
applicable to corporations. (See Minn. Mining, supra,
206 Cal.App.3d at p. 1028 [discussing how alter ego allows
treating corporation owners as partners].) Instead, the general
rule is that a “partnership is liable for . . . a wrongful act . . . of a
partner” (Corp. Code, § 16305, subd. (a)) and “partners are liable
jointly and severally for all obligations of the partnership” (id.,
§ 16306, subd. (a)).
29
Despite Amey’s arguments to the contrary, the trial court’s
findings, in the exercise of its discretion under section 187, that
the equities favored amendment and that Melrose was
sufficiently diligent in seeking amendment were adequately
supported. (See Highland Springs, supra, 244 Cal.App.4th at
pp. 280, 282, 289 [a party opposing amendment may raise laches,
which requires the moving party’s unreasonable delay plus either
that party’s acquiescence or prejudice to the opposing party].)
The evidence permitted the trial court’s conclusions,
whether or not it compelled them, that Sina hid the partnership
and its involvement in the Melrose lease and contrivedly sought
personal bankruptcy relief for an obligation he and his partners
secretly viewed as arising out of partnership activities, thereby
shielding the partnership, and ultimately himself, from exposure.
The trial court could reject Sina’s claim of disclosure and credit
the evidence of secrecy. (G & W Warren’s, Inc. v. Dabney (2017)
11 Cal.App.5th 565, 581.) Though Melrose thought it had a lease
with Sina personally and thought Sina’s own wealth made him a
reliable lessee, Sina and the partnership knew otherwise. Sina
kept this to himself through the lease litigation and the early
stages of the lengthy bankruptcy that followed. Then years later,
when Sina believed it was in his interest to do so, he revealed the
lease was a partnership lease and revealed his apparent wealth
was partnership wealth then beyond the judgment creditors’
reach. Viewing the facts this way, the trial court, in its
discretion, could conclude it would be inequitable for the
partnership, through its leasing vehicle, Amey, to not face
liability for its previously undisclosed debt for reasons that
sufficiently parallel those supporting liability against the alter
ego of a corporation. (Cf. Carr, supra, 23 Cal.App.4th at pp. 22–
30
23 [allowing amendment when “the named defendants conducted
themselves as though they were the proper defendants” and
sought “to shield the entity which should have been named”];
Relentless, supra, 222 Cal.App.4th at p. 816 [finding inequity
when new judgment debtors and old judgment debtor entity were
“one and the same,” the new debtors paid personal debts with
entity funds, and it was “highly unlikely” the entity would have
assets to satisfy the judgment].)
To be sure, the earlier bankruptcy proceedings revealed a
wide-ranging family business in which family members had
stakes in a multitude of entities. But the trial court could
conclude those proceedings did not reveal the true nature of
Sina’s lease nor the existence of the overarching partnership
holding that lease. It may have seemed to Melrose and
Simantob, in seeking consolidation earlier in the bankruptcy
proceeding, that the Akhtarzads had a “mega empire” of entities
and could conspire to move personal assets to dodge creditors and
accrue income during bankruptcy. But the trial court could have
concluded that moving personal assets through a series of
discrete entities to shield personal debts and debts of those
entities did not, in this case, necessarily portend the overarching
partnership and its control of the lease. Sina’s statement of
financial affairs in the bankruptcy listed entities, but no
partnership. It seems, also, the bankruptcy consolidation papers’
failure, on both sides, to mention the partnership is plausibly
evidence that such an arrangement was not then disclosed,
known, or suspected rather than evidence compelling a finding
that Melrose lacked diligence.
Melrose was aware of Amey’s existence as a sometime
source of funds for Sina. But, again, without knowing about the
31
overarching partnership and its interest in the lease with
Melrose, it was plausible for Melrose and Simantob to have
overlooked the significance of a single $26,000 check from Amey
for tax and insurance payments on the lease. And if Melrose and
Simantob later viewed Amey as a family business entity tied to
Sina’s wife, that did not command the conclusion that Amey was,
after all, effectively a party to the lease with Melrose on behalf of
a then-unknown partnership.
Ultimately, we conclude Amey’s addition as a judgment
debtor under section 187 was, given the evidence, within the
broad discretion we afford the trial court in these matters.
III. Individual Partners
If Amey, as the partnership’s stand in, is a proper
defendant, what of the individual partners?
As noted, a partner is jointly and severally liable for
partnership debts. (Corp. Code, § 16306, subd. (a).) The
individual partners, here, authorized Sina to conduct partnership
leasing business as their agent. (See id., § 16301, subd. (1).) Just
as Sina and the undisclosed partnership shared a unity of
interest akin to alter ego that permitted section 187 amendment
to add Amey, so did Sina, the undisclosed partnership, and the
undisclosed individual partners.
As noted earlier, the very goal of the alter ego doctrine is to
treat corporation owners as partners. (See Minn. Mining, supra,
206 Cal.App.3d at p. 1028.) “[I]t is settled that two or more
shareholders of a corporation may be liable as principals or
partners under the alter ego principle.” (Riddle v.
Leuschner (1959) 51 Cal.2d 574, 581, first italics added [two
family members who owned corporate shares treated as alter
egos]; see also Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1284
32
[under the alter ego principle, an “entity is considered an
association of individuals”].) Membership in a single business
enterprise has also been said to potentially subject a nonparty
member to a section 187 motion to amend. (Toho-Towa Co., Ltd.
v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096,
1107–1108.) Like alter ego, “ ‘[t]he “single-business-enterprise”
theory is an equitable doctrine applied to reflect partnership-type
liability principles.’ ” (Id., at p. 108, italics added; cf. Weiner v.
Fleischman (1991) 54 Cal.3d 476, 482 [a joint venture, which
shares features with a partnership, is “ ‘an undertaking by two or
more persons jointly to carry out a single business enterprise for
profit,’ ” italics added].) Indeed, a partner has the kind of
relationship with a partnership that potentially permits section
187 amendment. In Carolina Casualty, supra, 212 Cal.App.4th
at p. 1183, the court affirmed the amendment of a judgment to
add a dissolved law firm’s sole equity partner to a judgment
against the firm. And in Relentless, supra, 222 Cal.App.4th at
pp. 813, 815, the court reversed a trial court’s refusal to add a
limited partnership’s two individual members as judgment
debtors.
The equitable concerns that permitted Amey’s addition to
the judgment pertain to the individual partners as well. The
partners, like the partnership, reaped the benefit of letting Sina
treat the partnership debt as his own while sheltering in the
background. Meanwhile, the evidence permitted the conclusion
that in this decades-old “one-for-all” partnership, the partners
mingled seemingly personal and partnership transactions,
pooling their investments, income, and expenses. The partners
had access to partnership cash flows at all times. One partner’s
refinanced home would provide funds for further investments.
33
Returns from those investments, such as the Melrose lease,
would enable still others. (Cf. Triyar Hospitality Management,
LLC v. WSI (II)—HWP, LLC (2020) 57 Cal.App.5th 636, 642–643
[affirming a section 187 amendment adding two brothers as
judgment debtors when they “freely transfer[ed] funds among
their legal entities and commingle[d] their own funds with the
funds of their entities to accomplish whatever purpose they
wish[ed]” and rendered the original defendant entity judgment
proof].) Had the lease succeeded, the partnership and the
individual partners would have benefited. Had Melrose known it
had transacted with a partnership and had it known of the
individual partners, it could have sued and served those
individual partners, and, in that case, individual partner liability
for a partnership debt would have been statutorily authorized.
To be sure, and as explained (see infra, Discussion, part
II.B), imposition of joint and several liability on an individual
partner is not automatic. First, a judgment against a
partnership is not a judgment against a partner. (Corp. Code,
§ 16307, subd. (c).) Second, a partner litigating for a partnership
may bind the partnership and its assets, but does not
automatically bind other partners in their individual capacities.
(Dillard, supra, 34 Cal.2d at pp. 214–218; Promotus Enterprises,
Inc. v. Jiminez, supra, 21 Cal.App.3d at p. 565.) Third, a plaintiff
may obtain a judgment for joint and several liability against a
partner if a plaintiff serves that partner individually. (Code Civ.
Proc., § 369.5, subd. (b).) But none of these rules undercuts the
bedrock rule of partners’ joint and several liability. And none of
these rules precludes obtaining judgments against partners as
individuals through other proper methods.
34
Thus, if an absent partner sufficiently controls the
litigation, the litigation may bind that partner individually under
principles of preclusion. (Dillard, supra, 34 Cal.2d at p. 216
[preclusion doctrine could bind absent partners].) Whether the
overlap between control for purposes of preclusion and control for
purposes of section 187 is complete, cases addressing one doctrine
may inform cases addressing the other. (See Minton v. Cavaney
(1961) 56 Cal.2d 576, 581 (Minton) [evaluating litigation control
for preclusion and citing a section 187 decision, Motores, supra,
51 Cal.2d 172]; Gottlieb v. Kest (2006) 141 Cal.App.4th 110, 152
(Gottlieb) [evaluating litigation control for preclusion and citing
both preclusion and section 187 decisions].)
“ ‘Control of the litigation sufficient to overcome due
process objections may consist of a combination of factors, usually
including the financing of the litigation, the hiring of attorneys,
and control over the course of the litigation.’ ” (NEC, supra,
208 Cal.App.3d 772, 781.) No factor tends to be determinative
and “courts look to the totality of the circumstances in
determining the issue of control.” (Conte v. Justice (2d Cir. 1993)
996 F.2d 1398, 1402; accord, Gonzalez v. Banco Cent. Corp.
(1st Cir. 1994) 27 F.3d 751, 759 [“The critical judgment cannot be
based on isolated facts. Consequently, an inquiring court must
consider the totality of the circumstances to determine whether
they justify a reasonable inference of a nonparty’s potential or
actual involvement as a decisionmaker in the earlier litigation”];
see also Aronow v. LaCroix (1990) 219 Cal.App.3d 1039, 1048–
1050 [privity arising from control and adequate representation is
a highly fact-specific determination and control need not be
complete]; Ceresino v. Fire Ins. Exchange (1989) 215 Cal.App.3d
814, 821 [looking to “the practical situation” when evaluating
35
control].) Control helps to establish that the absent party
“ ‘ “should reasonably have expected to be bound by the prior
adjudication,” ’ ” which can arise “ ‘if the unsuccessful party in
the first action might fairly be treated as acting in a
representative capacity for the party to be estopped.’ ” (Gottlieb,
supra, 141 Cal.App.4th at p. 156.)
In the context of assessing whether to bind absent
corporate alter egos, it has been said that “some active defense of
the underlying claim is contemplated.” (NEC, supra,
208 Cal.App.3d 772, 781, citing Minton, supra, 56 Cal.2d at
p. 581.) This can refer to the actual litigant defending a suit
actively on its merits rather than, for instance, acceding to a
default judgment. A default judgment might indicate a corporate
defendant’s preference for bankruptcy rather than a concession of
liability such that it could be unfair to bind absent parties even
closely related to the defendant. (NEC, at pp. 780–781 [when
there is a default, there is “no defense . . . to control”]; see
Motores, supra, 51 Cal.2d at pp. 175–176 [rejecting addition of
alleged alter egos of a corporation as judgment debtors following
a default judgment]; Gottlieb, supra, 141 Cal.App.4th at pp. 153–
154 [no control by alleged alter ego when corporation had no
assets to mount a defense and took a default].)
The concept of an active defense can also refer to an absent
party’s level of participation. (Minton, supra, 56 Cal.2d at
p. 581.) In Minton, our Supreme Court stated an absent party —
there, a corporate officer absent from a suit against the
corporation — must “ ‘participate in the control of the action and
if judgment is adverse, be able to determine whether or not an
appeal should be taken. It is not sufficient that he supplies the
funds for the prosecution or defense, that he appears as a witness
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or cooperates without having control.’ ” (Ibid; see NEC, supra,
208 Cal.App.3d at p. 781 [“it is not enough that Hurt was
‘aware’ ” as “[s]urely every chief executive officer of a corporation
is cognizant of claims asserted against the corporation”]; Gottlieb,
supra, 141 Cal.App.4th 110, 152.)
In the partnership context, Dillard establishes mere
awareness or knowledge of a pending suit is not control of it.
(Dillard, supra, 34 Cal.2d at p. 217.) Absent partners deserved
an opportunity “to prove that they did not participate in the
conduct of the prior defense or agree to have their copartner . . .
conduct it for them.” (Dillard, at p. 217.) While NEC and
Gottlieb, citing to Minton, called for a certain level of active
participation when a closely held corporation and its owners are
involved, Dillard, though it did not fully address the scope of
control, did not use that language. Also, when the Restatement
summarizes the participation required of absent owners of closely
held corporations and absent partners, it does not use identical
language. The Restatement concludes absent owners of a closely
held corporation, such as those in NEC and Gottlieb, are bound if
they “actively participated in the action on behalf of the
corporation.” (Rest.2d Judgments, § 59, subd. (3)(a), p. 94.) But
with absent partners, they are bound if they “controlled or
participated in controlling the defense of the action, or [were]
given notice of an opportunity to defend the action.” (Id., § 60,
subd. (1)(b)(ii), p. 106.)
Sawyer v. Sunset Mut. Life Ins. Co. (1937) 8 Cal.2d 492
(Sawyer) offers additional perspective. There, the question was
whether beneficiaries could bind a reinsurer, Sunset Mutual,
based on a judgment they obtained against an original insurer,
Roosevelt Mutual. (Id. at pp. 494–495, 500.) First, the court
37
determined that, given the reinsurance contract, the reinsurer,
Sunset Mutual, “was jointly liable with . . . Roosevelt Mutual . . .
on the policy.” (Id. at p. 497.) It then accepted a form of the
beneficiaries’ “contention that where one person is responsible
over to another to pay the latter’s obligation, either by law or
contract,” preclusion could apply. (Id. at p. 500.) The court saw
“no escape from [that] conclusion.” (Ibid.) “It is not necessary for
a reinsurer to actively participate in the defense of the action,
provided it is proved that the reinsurer has notice of the
pendency of the action and is afforded an opportunity to defend,
and the defense is carried on without fraud or collusion by the
original insurer.” (Id. at p. 501.) Given the original insurer,
Roosevelt Mutual, had defended the original action “to the best of
its ability” and the reinsurer, Sunset Mutual, had notice but
refused to participate, preclusion was appropriate. (Ibid.)
Sawyer addressed preclusion in a scenario where the
underpinnings of liability amongst parties were preordained.
Partnership is peculiarly such a scenario. Partnership law
exposes partners to automatic liability of the sort corporations
law strives to prevent. (Corp. Code, § 16306, subd. (a).) The
expectation of partners in partnership is liability. Partnership
law, moreover, makes partners agents of the partnership and
exposes partners to individual judgments on partnership debts,
even if those individual judgments do not arise and cannot be
collected upon automatically. (Id., §§ 16301, subd. (1), 16307,
subd. (c); Code Civ. Proc., § 369.5, subd. (b).) Some jurisdictions
view the partnership relationship as so special that it does
automatically expose individual partners to judgments in later
suits even absent control. (Rest.2d Judgments, § 60, com. a,
p. 109; id., reporter’s notes, p. 115; 14th RMA Partners, L.P. v.
38
Reale, supra, 100 F.3d at pp. 280–281; Dayco Corp. v. Fred T.
Roberts & Co., supra, 192 Conn. at p. 505.) Although the nature
of the partnership relationship does not yield this result in
California (cf. DKN Holdings, supra, 61 Cal.4th at p. 826
[preexisting joint and several liability is not itself enough for
privity and preclusion]), it nonetheless, in tandem with Sawyer
and Dillard, informs and offers context for how to assess when
individual partners have sufficient litigation control to render
themselves bound for purposes of a section 187 motion to amend.
In light of this, but without delineating further rules on the
topic, we conclude the evidence supports the trial court’s fact-
bound finding of the individual partners’ litigation control in this
case for purposes of section 187. As already noted, Sina was the
partnership’s designated agent for leasing, the lease was a
partnership lease on the partnership’s books, and the partnership
was the “real defendant” in the action. The partnership, not
Sina, paid for the lawyers and the litigation. Sina litigated
vigorously; the proceedings were the antithesis of a default.
Every partner to be added as a judgment debtor conceded
awareness of the litigation and its subject matter. They were on
notice. While none of the partners may have selected the
attorneys that represented Sina and while none may have been
asked to make, or made, material decisions regarding the
lawsuit, no evidence suggests the partners lacked an opportunity
to participate. To the contrary, they impliedly, over the course of
years, ratified Sina as their representative and ratified Sina’s
defense tactics, footing the litigation bill throughout. Even now,
there is no suggestion Sina could have better defended the suit or
that the partners could have contributed something different.
The partners’ incentives, once aware of the litigation, to monitor
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Sina and the litigation were significant. Even with the
partnership unnamed in the complaint, it can be inferred the
partners knew of the partnership’s secret involvement. Sina,
moreover, rarely, if ever, had any financial transactions outside
of the partnership. In fact, all the partners’ seemingly personal
transactions in their “one-for-all” partnership were sources of
income and liability for the partnership. The Melrose suit, then,
given the nature of the partnership’s treatment of personal assets
and the laws applicable to partnerships generally, presented
grave, foreseeable financial risks to the partners as individuals.
The individual partners sufficiently controlled the suit for
purposes of section 187 given the contours of their partnership
relationship with Sina, all while Sina may be fairly said to have
acted concertedly for the partnership and the partners. (See
Gottlieb, supra, 141 Cal.App.4th at p. 156.)
Assessing the individual partners’ relationship to Sina, the
partnership, and the litigation, the individual partners’ addition
as judgment debtors under section 187 was, as with Amey, within
the broad discretion we afford the trial court in these matters.
DISPOSITION
We affirm the judgment and award costs to respondents.
SCHERB, J.
We concur:
STRATTON, P. J. WILEY, J.
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