AAA Blueprint v. Vasquez
Filed 4/2/13 AAA Blueprint v. Vasquez CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE
DISTRICT
DIVISION THREE
AAA BLUEPRINT & DIGITAL REPROGRAPHICS, INC.,
Plaintiff and
Respondent,
v.
DENNIS ADRIAN VASQUEZ et al.,
Defendants and
Appellants.
G042693
(Super. Ct.
No. 30-2007-00100248)
O P I N I O
N
Appeal from a judgment
of the Superior Court
of
County, Robert J. Moss, Judge.
Affirmed. Respondent’s motion for
sanctions denied.
Sakamaki &
Baumgartner and Francis Sakamaki for Defendants and Appellants.
Silverstein &
Huston, Steven A. Silverstein, Mark W. Huston and Robert I. Cohen, for
Plaintiff and Respondent.
INTRODUCTION
Appellants Dennis Adrian
Vazquez, Melissa Huerta, and All Blueprint, Inc. (All Blue), appeal from a
judgment rendered against them and in favor of AAA Blueprint & Digital
Reprographics, Inc. (AAA Blueprint), after a two-day
appellants had tried to hinder the collection of a judgment entered in 2006 for
AAA Blueprint and against Alliance Reprographics, a rival company owned by
Vazquez.
The trial court found
that Vazquez and Huerta had indeed sought to frustrate AAA Blueprint’s efforts
to collect its 2006 judgment by transferring Alliance’s
assets to the newly formed All Blue, a competing printing shop. The court also found that all the defendants
in this action – Vazquez, Huerta, All Blue, and Alliance
– were alter egos of each other. The
court issued an injunction preventing any of the defendants from disposing of
assets pending the installation of a receiver.
We affirm the
judgment. The issues appellants have
raised in this court –lack of standing, lack of injury, and insufficient
evidence of alter ego – are all without merit.
AAA Blueprint also moved
for sanctions against Vazquez and his attorney, Francis Sakamaki, on the ground
the appeal is frivolous. While we agree
that appellants’ briefs are dismal specimens of appellate advocacy, we must be
careful not to equate poor lawyering with frivolousness. However ineptly, appellants raised issues not
totally devoid of merit. We therefore
deny the motion for sanctions.
FACTS
title="">[1]
2006, AAA Blueprint was the plaintiff in a case against Alliance
and one Jimmy Ibarra, an employee who had quit and gone to work for Alliance. Ibarra brought with him pricing information
for AAA Blueprint’s customers, allowing him to lure them to Alliance
by undercutting his former employer’s prices.
AAA Blueprint sued Alliance
and Ibarra for misappropriation of trade secrets and won a judgment of over
$250,000 which included both compensatory and punitive damages. We affirmed the judgment in an unpublished
opinion. (AAA Blueprint & Digital Reprographics v. Ibarra (Oct. 24, 2007, G037831) [nonpub.
opn.].)
After the trial court’s
judgment, Vazquez offered Peter Bouchier, AAA Blueprint’s principal, $100,000
to settle the case. If Bouchier did not
accept the offer, Vazquez promised to close down Alliance
and open another company across the street.
AAA Blueprint would recover nothing on its judgment. Bouchier rejected the settlement offer.
Vazquez proceeded to do
just as he had threatened. With the help
of his sometime girlfriend Huerta, Vazquez opened up All Blue, blocks away from
Alliance’s place of business.
printing equipment, most of it leased, went to All Blue. Alliance’s
employees – Huerta, her father, her brother, and eventually Vazquez himself –
went to work for All Blue. Alliance’s
customers became All Blue’s customers.
All Blue used Vazquez’s personal cars to make deliveries, without any
discernible documentation for reimbursement.
Money began flying about between people and between companies and
people. For example, Vazquez lent Huerta
$40,000 interest-free, most of which she used to start All Blue. Huerta in turn lent money to Vazquez, who was
being paid only $1,500 per month to work at All Blue. He nevertheless repaid these loans, despite
the fact that she had made no payment on his $40,000 loan to her. Vazquez lent All Blue $3,000 in July
2008. All Blue paid hefty American
Express bills for which statements were not produced, creating the inference
the company was paying for Huerta’s and Vazquez’s personal expenses. All Blue paid all the expenses for two BMWs
for Vazquez (both cars registered in his name).
It also made payments on two cars belonging to Vazquez that All Blue was
using to make deliveries. Vazquez
personally guaranteed a loan to All Blue.
Checks from Alliance customers
to pay Alliance invoices were
altered to make the payee All Blue or were simply deposited into All Blue’s
account without alteration. And true to
Vazquez’s promise, AAA Blueprint collected nothing on its judgment against Alliance,
now stripped of all its assets.
AAA Blueprint sued
Vazquez, Huerta, Alliance, and All
Blue for fraudulent transfer and alter ego.
After a two-day bench trial in July 2009, the court issued its ruling,
finding that Vazquez and All Blue are alter egos of Alliance,
and Vazquez and Huerta are alter egos of All Blue. The court also found that Vazquez and Huerta
conspired to transfer Alliance’s
assets to All Blue to avoid paying AAA Blueprint’s judgment. The court issued an injunction forbidding
defendants from disposing of any assets pending the appointment of a receiver
and issued writs of attachment against all defendants. The court’s alter ego findings made all
defendants liable for the Alliance
judgment, so the court did not award any additional damages. It also did not award punitive damages,
because of insufficient evidence of the defendants’ wealth.
Vazquez, Huerta, and All
Blue appealed from the judgment. Their
opening brief specified three grounds for the appeal. First, at the time judgment was entered in
2006, AAA Blueprint was not separately incorporated, but was merely the
fictitious business name for another corporation. It did not exist as a separate legal
entity. It therefore had no standing to
sue, and a judgment entered in favor of AAA Blueprint is void. Second, the transfer of assets to All Blue
did not injure Alliance, because
the only evidence of the monetary value of Alliance
property transferred to All Blue was paper and toner worth $600. Finally, Vazquez is not the alter ego of Alliance
or of All Blue.
DISCUSSION
the Judgment
main issue is AAA Blueprint’s lack of standing to sue. They elicited testimony at trial from
Bouchier that back in 2006, when the company got its judgment against Alliance,
AAA Blueprint was not a corporation. It
did not become incorporated until after the fraudulent transfer action was
filed in December 2007. Before that
time, including when the judgment against Alliance
was entered, AAA Blueprint was the fictitious business name of another
corporation, Graafikko, Inc.
As we understand
appellants’ argument on appeal, they are now asserting that the 2006 judgment
was void – because it was rendered in AAA Blueprint’s favor and not in favor
Graafikko – and therefore AAA Blueprint was not a legitimate judgment creditor,
because it was not the real party in interest in the 2006 case. The transfer of Alliance’s
assets to All Blue was not a fraudulent transfer, because AAA Blueprint had no
interest in them.
There are at least two
problems with this argument. First,
appellants explicitly repudiated it at trial.
When appellants’ counsel began questioning Bouchier about AAA Blueprint’s
corporate status, AAA’s counsel objected on relevance grounds. The court inquired as to the relevance of
this line of questioning, and appellants’ counsel stated, “We have an unclean
hands argument, Your Honor, and the date of incorporation is relevant to
that.†Based on that representation, the
court allowed further questions on this subject. After a few more questions, AAA’s counsel
objected again: “Your Honor,
relevance. We have a judgment.†After still more questioning along these
lines, AAA Blueprint’s counsel protested yet again: “Your Honor, you can’t attack an underlying
judgment. . . .†“I’m not attacking the
judgment,†responded appellants’ counsel.
During closing argument, appellants’ counsel revisited this issue, but
only in the context of unclean hands. He
argued that AAA Blueprint was just as bad as appellants in the
disregarding-corporate-formalities department, because it had represented to
the court in 2005 and 2006 that it was a corporation when it was not and
because Bouchier did not properly distinguish between himself and AAA
Blueprint. There is also some indication
appellants’ counsel persuaded AAA Blueprint’s counsel not to introduce rebuttal
evidence on the standing issue by representing that the testimony he had
elicited went only to unclean hands.
Appellants never brought up any standing problem with the underlying
judgment during the fraudulent transfer trial.
In this court,
appellants are doing what they specifically said they were not doing in the
trial court: attacking the 2006
judgment. This brings us to the second
problem with appellants’ argument.
“A litigant may
collaterally attack a final judgment for lack of personal or subject matter
jurisdiction, or for granting relief that the court had no power to grant, but
it may not collaterally attack a final judgment for nonjurisdictional errors. [Citations.]
‘“If a judgment, no matter how erroneous, is within the jurisdiction of
the court, it can only be reviewed and corrected by one of the established
methods of direct attack.â€
[Citation.]’ [Citation.]†(Estate
of Buck (1994) 29 Cal.App.4th 1846, 1854.)
“‘A judgment in favor of
a person who is not a party to the action is obviously beyond the authority of
the court,’ and hence is void.†(
604, 615, quoting 2 Witkin, Cal. Procedure (5th ed. 2008) Jurisdiction, § 315,
p. 927.) A void judgment is subject to
collateral attack, and it cannot be the basis for any valid future
proceedings. (Id. at p. 616.) In order to
mount a collateral attack on the 2006 judgment, appellants must show that AAA
Blueprint was not a party to the trade-secret litigation. They argue that it was not, because AAA
Blueprint was only a fictitious business name.
Although we have not
found any published case directly on point, there is authority for the
proposition that using a fictitious name does not deprive a plaintiff of
standing or preclude it from being the real party in interest. In Doe
v. Lincoln Unified School Dist. (2010) 188 Cal.App.4th 758 (
mentally unfit for duty sued her school district for failing to use the
procedure mandated by the Education Code in such cases. She used “Jane Doe†as the plaintiff’s name
on her complaint to protect her privacy.
(Id. at p. 762.)
The district argued on
appeal that the teacher had no standing to sue because Jane Doe was not the
real party in interest. (
765.) The court rejected this
argument. Code of Civil Procedure
section 367, cited by the district to support its argument, does not require
that a party sue in his or her own name.
It requires that an action be prosecuted by the real party in
interest. “The question for purposes of
standing is not the name used by the party suing but whether the party suing is
the party possessing the right sued upon.â€
(Ibid.; see also
Cal.App.3d 1, 4 [“a person may sue or be sued in any name in which he or she is
known and recognizedâ€]; Emery v. Kipp
(1908) 154 Cal. 83, 86, [at common law, “a person may adopt any name in which
to prosecute business, and may sue or be sued in such a name.â€].)
In this case, the party
possessing the right sued upon in the 2005 trade-secret case was the company
whose trade secrets were misappropriated by Ibarra and unlawfully used by
Alliance. Whether that party identified
itself as Graafikko or as AAA Blueprint does not alter the facts that confer
standing. “The purpose of [section 367]
is to protect a defendant from harassment from other claimants on the same
demand.†(Redevelopment Agency of San Diego v. San Diego Gas & Electric Co.
(2003) 111 Cal.App.4th 912, 921.) Under
these circumstances, there was no danger of Graafikko’s emerging to sue on the
same right as AAA Blueprint.
The sole case on which
appellants rely, Pinkerton’s, Inc. v.
Superior Court (1996) 49 Cal.App.4th 1342 (Pinkerton’s) rests on different facts and circumstances. In Pinkerton’s,
the problem centered on a defendant
corporation and its fictitious business name.
The plaintiffs dismissed the corporation after it appeared and then sought
to proceed against the corporation’s fictitious business name as if it were a
separate entity. (Id. at pp. 1345-1346.)
Although counsel for the corporation tried repeatedly to explain that
“Pinkerton Security and Investigation Services†was not a separate company but
was a fictitious business name of Pinkerton’s, Inc., which had been dismissed,
the court took the default of Pinkerton Security and Investigation Services
anyway. (Id. at pp. 1346-1347.)
The Court of Appeal
reversed, reasoning that no default could be entered against Pinkerton’s, Inc.,
the corporation, because it had appeared and been dismissed. (Pinkerton’s,
supra, 49 Cal.App.4th at p. 1347.)
Plaintiffs could not proceed against Pinkerton Security and
Investigation Services after the corporation had been dismissed because there
was no such separate legal entity. “‘The
business name is a fiction, and so too is any implication that the business is
a legal entity separate from its owner.’
[Citations.]†(
Pinkerton’s does not support appellants’ argument. The issues here are the plaintiff’s standing
to sue and the identity of the real party in interest, issues totally absent in
Pinkerton’s. The portion of Pinkerton’s having any congruence with the case before us actually
supports AAA Blueprint’s position.
Because AAA Blueprint is a fictitious business name, it is a fiction
that AAA Blueprint is a legal entity separate from Graafikko. It is therefore immaterial whether the
plaintiff was identified as AAA Blueprint or Graafikko, so long as Alliance and
Ibarra were sued by only one plaintiff for trade secret misappropriation.
The 2006 judgment is not subject to
collateral attack, because it exhibits no jurisdictional error or grant of
relief beyond the court’s power. It was
properly the basis for the fraudulent transfer action and for the subsequent
judgment against appellants.
B. AAA Blueprint’s Injury
trial court did not award additional damages to AAA Blueprint for fraudulent
transfer. Instead, it issued an
injunction and ordered the appointment of a receiver and the preparation of a
writ of attachment for all the property of all the defendants. All of these remedies are expressly permitted
under Civil Code section 3439.07, subdivision (a).
Appellants argue that
AAA Blueprint was not damaged by the fraudulent transfer, because there was
nothing for it to collect anyway, except for toner and paper worth $600. The printing equipment transferred from
Alliance to All Blue was leased and did not belong to Alliance.
A fraudulent transfer
plaintiff must present evidence of the value of the transferred assets to
establish that the transfer has injured it.
A transfer of assets in which the debtor has no equity, ones from which
the creditor could not hope to satisfy its debt (perhaps because they are
already encumbered with debt up to their value), is not a fraudulent
transfer. Unless “the transfer puts
beyond [the creditor’s] reach property [it] otherwise would be able to subject
to the payment of [its] debt,†the creditor has not been injured. (See Mehrtash
v. Mehrtash (2001) 93 Cal.App.4th 75, 80.)
Appellants assert that the only property transferred to All Blue – other
than paper and toner – was leased equipment, which was not property belonging
to Alliance but to the lessors.
Vazquez and Huerta did
not transfer only equipment to All Blue; they transferred Alliance’s entire
business, including a stream of revenue from customers (discussed at trial) and
anything else it owned. Because All Blue
is Alliance’s alter ego, its assets are Alliance’s. All Blue is paying $900 a month to lease
Vazquez’s BMW; that money could go to satisfy the judgment. All Blue had $50,000 on average in monthly
sales. Some of that money can go to AAA
Blueprint instead of being used to pay for Vazquez’s car expenses that All Blue has picked up,
along with money spent for entertainment, and for other discretionary
outlays. All Blue paid Huerta substantial
“dividends†in addition to her salary; those could go to AAA Blueprint instead
of to her. Without the fraudulent
transfer to All Blue, these assets would belong to Alliance and could be
available to satisfy the 2006 judgment.
That was the whole reason for the transfer. There was ample evidence at trial of
unencumbered assets that could be used to pay off the judgment.
Vazquez alone argues
that he is not the alter ego of either Alliance or All Blue. In essence, he argues insufficient evidence
supports the court’s alter ego findings.
“‘Where findings of fact
are challenged on a civil appeal, we are bound by the “elementary but often
overlooked principle of law, that . . . the power of an appellate court begins
and ends with a determination as to whether there is any substantial evidence,
contradicted or uncontradicted,†to support the findings below. [Citation.]
We must therefore view the evidence in the light most favorable to the
prevailing party, giving it the benefit of every reasonable inference and
resolving all conflicts in its favor
.
. .’ [Citation.]†(Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053, superseded
by statute on other grounds in Riverwatch
v. County of San Diego (1999) 76 Cal.App.4th 1428, 1439.)
A finding of alter ego
requires the presence of two conditions: (1) a unity of interest and ownership
such that there is no separation between the corporation and the person or
entity behind it; and (2) an inequitable result if the acts are treated as
those of the corporation alone. (
(2000) 83 Cal.App.4th 523, 538.) Courts
have identified a myriad of factors to be used in determining whether to find
one entity the alter ego of another, such as commingling of funds and other
assets, use of same offices and employees, use of one entity as a mere shell or
conduit for the affairs of another, and disregard of corporate
formalities. (Id. at pp. 538-539.)
Vazquez argues that he
was not Alliance’s alter ego because he made a good faith effort to pay
Alliance’s creditors after AAA Blueprint obtained its judgment in 2006. In addition, he insists his decision to
change Alliance’s business was not made in bad faith. Whether either of these arguments is true is
debatable, but irrelevant. The focus
instead is on whether Vazquez used Alliance in such a way as to erase the
distinction between the corporation and him and whether it would be inequitable
to maintain the distinction.
Substantial evidence
supports the trial court’s determination this erasure had occurred. Vazquez alone controlled Alliance and
engineered the transfer of its assets, customers, and employees to All Blue,
leaving Alliance – once a thriving business – an empty shell. In essence, he looted his own corporation to
prevent AAA Blueprint from collecting its judgment. When it suited his purposes, he had no qualms
about destroying Alliance; he could simply assemble all its assets and take
them elsewhere, leading to the conclusion he dealt with Alliance’s assets as if
they were his own.
The inequity of allowing
Vazquez to get away with the scheme is patent.
He as much told Bouchier when the 2006 judgment came down that he would
do what he could to stymie AAA Blueprint’s efforts to collect. And so he did. Pretending that Alliance existed
independently of Vazquez’s whim would countenance fraud and injustice.
Vazquez also argues he
is not All Blue’s alter ego because he did not own any All Blue shares and was
not a director or officer of the corporation.
Vazquez overlooks the process by which he could be found to be All
Blue’s alter ego. The court found that
Alliance is All Blue’s alter ego, and Vazquez is Alliance’s alter ego. Vazquez is All Blue’s alter ego through Alliance.
There is certainly
nothing inequitable about this finding.
All Blue is Alliance with a different name. Alliance’s equipment, customers, employees,
vehicles all went to All Blue, a competitor, with minimal to no documentation
and no discernible benefit to Alliance, other than preventing AAA Blueprint from collecting on its
judgment. The trial court had
substantial evidence upon which to base its alter ego findings with respect to
Vazquez.
Motion for Sanctions
AAA Blueprint has moved
for sanctions on the ground this appeal is frivolous. As our Supreme Court has stated, “[A]n appeal
should be held to be frivolous only when it is prosecuted for an improper
motive – to harass the respondent or delay the effect of an adverse judgment –
or when it indisputably has no merit – when any reasonable attorney would agree
that the appeal is totally and completely without merit.†(In re
Marriage of Flaherty (1982) 31 Cal. 3d 637, 650.) “An appeal that is simply without merit is
not incur sanctions.†(
The power to punish attorneys for prosecuting frivolous appeals “should
be used most sparingly to deter only the most egregious conduct.†(Id.
at p. 651.)
We agree that
appellants’ briefs could be used in law school classes on appellate advocacy as
examples of how not to do an appellate brief.
Violations of the rules of court and of accepted appellate practice
occur on almost every page. For example,
appellants repeatedly cite to documents (i.e., defense trial exhibits) that are
not in the record before us. (See Cal.
Rules of Court, rule 8.204(a)(1)(C).)
Appellants do not give a comprehensive summary of the evidence presented
at trial, as they are obliged to do when they identify
Myers v. Trendwest Resorts, Inc.
(2009) 178 Cal.App.4th 735, 749.) The
sole case on which they rely to support their lack of standing argument,
with the issue.
Disregarding the rules,
however, has certain consequences.
Appellate courts can refuse to entertain arguments that come unsupported
by legal authority or proper citations to the record. (Doe v.
Lincoln Unified School Dist., supra, 188 Cal.App.4th at p. 767 [citation to
authorities needed to support legal argument]; Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 990
[statement of facts must be supported by proper citation to record].) They can treat insufficient evidence
arguments as waived in the absence of a complete and evenhanded statement of
facts. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881; see
also Mendoza v. City of West Covina
(2012) 206 Cal.App.4th 702, 713-714; Clark
v. Superior Court (2011) 196 Cal.App.4th 37, 52-53.) With these penalties in effect, the most
likely outcome for a plaintiff-appellant is an affirmance.
This appeal was not
totally without merit, however. The main
issue, whether a judgment rendered in favor of a corporation’s fictitious
business name is enforceable, does not appear to have been addressed in
published opinions applying California law.
There are plenty of cases upholding an individual’s right to sue under a
fictitious name (see Doe v. Lincoln
Unified School Dist., supra, 188 Cal.App.4th at pp. 766-767), but the
reasons for permitting this practice do not pellucidly apply to corporations.
case on point supporting their position, AAA Blueprint was equally unable to
provide us with a published case affirming a corporation’s ability to sue under
its fictitious business name.
name="_ftnref5" title="">[5] Under the circumstances, we cannot conclude
that the only purpose for filing this appeal was delay or that any reasonable
attorney would regard it as totally and completely without merit.
DISPOSITION
judgment is affirmed. The motion for
sanctions is denied. Respondent is to
recover its costs on appeal.
___________________________
BEDSWORTH,
J.
WE CONCUR:
O’LEARY, P.
J.
RYLAARSDAM,
J.
name="_ftn1" title=""> [1] We recite the facts in the form
most favorable to the judgment. (See
Five Bridges Foundation (2012) 203 Cal.App.4th 549, 552.)
name="_ftn2" title=""> [2] Both businesses were located on
West Commonwealth Street in Fullerton, just a few blocks apart.
