Asphalt Professionals v. D and S Homes
Filed 1/18/13 Asphalt
Professionals v. D and S Homes CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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
SECOND
APPELLATE DISTRICT
DIVISION
SIX
ASPHALT PROFESSIONALS, INC.,
Plaintiff and Respondent,
v.
D AND S HOMES, INC. et al.,
Defendants and Appellants.
2d
Civil No. B238597
(Super.
Ct. No. SC044181)
(Ventura County)
ORDER
MODIFYING OPINION
AND
DENYING REHEARING
[CHANGE
IN JUDGMENT]
THE COURT:
It is
ordered that the opinion filed herein on December 19, 2012, be modified as follows:
On page
14, the first sentence of the last paragraph is modified to read: "The judgment is reversed as to
appellants Regina Leon; Regina Leon, trustee of the Leon Family Trust; and the Leon Family Trust."
This
modification changes the judgment.
Appellants'
petition for rehearing is denied.
Filed 12/19/12
Asphalt Professionals v. D and S Homes CA2/6 (unmodified version)
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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
SECOND
APPELLATE DISTRICT
DIVISION
SIX
ASPHALT PROFESSIONALS, INC.,
Plaintiff and Respondent,
v.
D AND S HOMES, INC. et al.,
Defendants and Appellants.
2d
Civil No. B238597
(Super.
Ct. No. SC044181)
(Ventura County)
Defendants
D and S Homes, Inc. (D & S Homes); D & S Development, LLC
(D & S Development); Darin Davis; Stephen Bock; Skyphol, LLC,
California; Skyphol, LLC, Delaware; the Leon Family Trust; Regina Leon, trustee
of the Leon Family Trust; Jose F. Leon, trustee of the Leon Family Trust; Jose
Leon; and Regina Leon appeal a judgment granted in favor of plaintiff Asphalt
Professionals, Inc. (API). The court in
a bifurcated trial found the defendants to be alter egos of T.O. IX, LLC
(T.O. IX). API sued T.O. IX
for breach of a construction contract because it did not pay for all of API's
construction work on a housing development project.
We
conclude, among other things, that: 1)
substantial evidence supports the findings that appellants, with the exception
of Regina Leon and the Leon Family Trust, are alter egos of T.O. IX; and
2) appellants have not shown that they timely and properly raised a defense at
trial based on their claim that an exculpatory provision in a T.O. IX
contract precludes alter ego liability.
We reverse in part and affirm in part.
FACTS
In 2004,
API signed a construction contract with T.O. IX, a limited liability
company (LLC). In the contract,
T.O. IX is listed as the "owner/builder" of a new housing
development project. API was the
subcontractor that agreed to perform asphalt and concrete street improvement
services for the project.
During
construction, there were a number of modifications or "change orders"
to the original contract. The
instructions and communications relating to the changes API had to implement
came from D & S Homes, a small corporation formed by Stephen Bock
and his partner Darin Davis. Bock and Davis had been
partners in the construction business.
In 2005, Bock, Davis and Jose Leon owned 84 percent of D & S Homes. D & S Homes owned 60 percent of
T.O. IX.
On August 11, 2005, D & S Homes gave notice to API that it had violated
provisions of the original 2004 construction contract. In that letter, D & S Homes
referred to that 2004 agreement as "our contract," and it notified
API that it had "no option . . . but to terminate" the
contract. This termination letter did
not mention T.O. IX. The letter was
signed by Davis as the president of D & S Homes.
T.O. IX
did not pay API for all the contracting work it performed on the housing
project. API sued T.O. IX stating causes
of action for breach of contract and foreclosure on a mechanic's lien. It later amended the complaint, added
additional defendants and added causes of action for fraud, conspiracy and
quantum meruit. It alleged that
T.O. IX, an LLC, was "a mere shell and sham without capital, assets,
stock, shareholders, membership interests or members" and that it fell
within the alter ego doctrine because it was "a device to avoid individual
liability" by the persons and entities who controlled it.
The
trial court bifurcated the case. The
first phase involved API's causes of action for breach of contract, foreclosure
on a mechanic's lien and quantum meruit.
The second phase involved fraud and alter ego issues.
After
trial on the first phase, the trial court awarded API damages and attorney
fees.
After
trial on the second phase, the trial court found that every appellant was
"the alter ego of" T.O. IX.
It said, "T.O. IX was an undercapitalized shell used to
conduct business for Mr. Davis, Mr. Bock, and Mr. Leon, who dominated control
of it to shield them from liability for their actions." It found they utilized "different
undercapitalized LLC's" to conduct business and acted in "bad
faith," and that "an inequitable result will follow" if alter
ego liability is not imposed. The court
said that Davis, Bock and Jose Leon used company assets for "their own
personal benefit" in "a manner inconsistent with accepted arms length
corporate practices"; that "employees of the entities" they
controlled "were being used interchangeably" at T.O. IX,
D & S Homes, D & S Development and Skyphol; and
that Bock, Davis and Jose Leon had "interlocking control" over those
entities and there was a lack of "independent financial accountability"
in these companies.
DISCUSSION
Substantial Evidence
Appellants
contend the evidence is insufficient to support a finding that they are alter
egos of T.O. IX.
Alter Ego Liability
"The
alter ego doctrine arises when a plaintiff comes into court claiming that an
opposing party is using the corporate form unjustly and in derogation of
plaintiff's interests." (
Cal.3d 290, 300.) Where shareholders
abuse the corporate structure, it may be "disregarded and the corporation
looked at as a collection or association of individuals" who are
"liable for acts done in the name of the corporation." (Ibid.)
"There
is no litmus test to determine when the corporate veil will be pierced; rather
the result will depend on the circumstances of each particular case." (Mesler
v. Bragg Management Co., supra,
39 Cal.3d at p. 300.) "There
are, nevertheless, two general requirements:
'(1) that there be such unity of interest and ownership that the
separate personalities of the corporation and the individual no longer exist and
(2) that, if the acts are treated as those of the corporation alone, an
inequitable result will follow.'" (
Several
factors may be relevant in determining whether business entities are alter egos
of individuals. These include whether
the company was used as an undercapitalized "shell" to conduct
business for individuals who dominated and controlled it to shield them from
liability for their actions. (
Cal.App.4th 799, 811, 812-813.) An alter
ego status also may be shown by "the disregard of legal formalities and
the failure to maintain arm's length relationships [between the entities]"
and the individuals. (
segregate the funds of the separate entities, diverting corporate assets for
the benefit of individual shareholders, using the same employees for the
different entities, and the lack of any independent and separate corporate
management structure. There are numerous
other factors that may be considered.
"'No single factor is determinative, and instead a court must
examine all the circumstances to determine whether to apply the
doctrine.'" (Id. at p. 812.)
API
alleged that T.O. IX as an LLC was "a mere shell and sham without
capital" and assets, and Bock, Davis, Jose Leon
used it as "a device to avoid "individual liability." An LLC "'is a hybrid business entity
that combines aspects of both a partnership and a corporation.'" (Warburton/Buttner
v. Superior Court (2002) 103 Cal.App.4th 1170, 1187.) LLC's are modern entities, but
"'"[a] member of a limited liability company shall be subject to
liability under the common law governing alter ego liability."'" (Id.
at p. 1188.)
In
reviewing the sufficiency of the evidence, we do not weigh the evidence or
decide credibility of the witnesses. (
1642, 1647; Church of Merciful Saviour v.
Volunteers of America (1960) 184 Cal.App.2d 851, 856.) We look to the evidence supporting the
findings and draw all reasonable inferences to support the judgment. (Griffith
Co. v. San Diego College for Women
(1955) 45 Cal.2d 501, 508.)
In
contending the trial court's findings are not supported by the evidence,
appellants primarily rely on the evidence they produced at trial. They do not cite API evidence. This is tantamount to a waiver of this
argument on appeal. "[A]n attack on
the evidence without a fair statement of the evidence is entitled to no
consideration when it is apparent that a substantial amount of evidence was
received on behalf of the respondent."
(Nwosu v. Uba (2004) 122
Cal.App.4th 1229, 1246.) "Thus,
appellants who challenge the decision of the trial court based upon the absence
of substantial evidence to support it '"are required to set forth in their
brief all the material evidence on
the point and not merely their own
evidence. Unless this is done the
error is deemed waived."'" (
But even so, from our review of the record, we conclude substantial
evidence supports the judgment.
The Finding That T.O. IX Was a Shell Entity
The
trial court found that T.O. IX was a "shell" entity which the
defendants used as a "subterfuge" for "contracting without a
license." Appellants have not shown
this finding is unsupported by the record.
In
2004, API signed a "subcontract agreement" to provide paving services
to T.O. IX. T.O. IX was listed
as the owner and "builder" of homes in the contract. But T.O. IX was cited by the
Contractor's State Licensing Board (CSLB) for contracting without a
license. It was ordered to cease
contracting activities. A company's
functional incapacity is a relevant factor in determining alter ego
status. (Zoran Corp. v. Chen, supra,
185 Cal.App.4th at p. 811.) The
CSLB action supports a finding that T.O. IX could not be the builder of the
homes. The building permits for the
T.O. IX project were not filed by T.O. IX. They were prepared by Davis and
D & S Development.
API
signed the subcontract with T.O. IX, but the agreement provides the
parties are API, the subcontractor, and a "Contractor" that is not
identified. After signing the contract,
API learned that T.O. IX was not the builder. D & S Homes and
D & S Development notified API that they were the entities that
would work with API on this project. On
August 11, 2005, Davis, the president of D & S Homes, notified
API that he was terminating the T.O. IX contract. In that letter he referred to that agreement
as "our contract," not as T.O. IX's contract.
A
summary D & S Homes prepared regarding the T.O. IX housing
project lists "D & S Homes" and T.O. IX as the "Property Owner." API correctly notes that the trial court
could reasonably infer that D & S Homes considered itself to be
an owner. That conflicts with
T.O. IX's representations about its ownership of the project in the
subcontract.
API
presented evidence showing that T.O. IX had insufficient assets to pay
bills. An accountant from
D & S Homes testified that "if T.O. IX needs to cut a
check, somehow the money gets transferred from D & S Homes, Inc.,
to T.O. IX." The trial court
could reasonably infer T.O. IX was not able to independently conduct
business.
"'[T]he
attempt to do corporate business without providing any sufficient basis of
financial responsibility to creditors is an abuse of the separate
entity . . . ."
(Claremont Press
Cal.App.2d 813, 816.) T.O. IX's
"undercapitalization" is a factor supporting a finding that it was a
"shell" used for the benefit of another entity or person. (Zoran
Corp. v. Chen,
have a separate business identity. T.O. IX and D & S
Development shared the same office. But
T.O. IX paid no rent.
D & S Homes paid that obligation. An employee of D & S Homes
performed accounting services for T.O. IX.
D & S Homes had access to a T.O. IX bank
account. These factors support an alter
ego finding. (Ibid.) Appellants have not
shown the trial court erred by finding T.O. IX was a shell entity.
Evidence of Interlocking Control by Bock, Davis and
Jose Leon
A major
task in deciding alter ego status is determining the persons "actually
controlling" the alter ego entities.
(Sonora Diamond Corp.
523, 538.) Here the trial court could
reasonably infer that Bock, Davis and Jose Leon had the actual and interlocking
control over T.O. IX and a series of other entities they used to conduct
business.
Bock
testified that he owned Emaron Homes, LLC.
Emaron Homes owned 50 percent of
D & S Development.
Bock and Davis formed D & S Development to construct homes
in 1999. In a city business tax
certificate, Davis said D & S Development was "a subsidiary
of" T.O. IX.
D & S Homes was the successor to D & S.
Development.
In
2005, Bock, Davis and Leon owned 84 percent of D & S Homes. Bock owned 28 percent, Davis owned 28
percent, and Leon's family trust owned 28 percent. Bock was the D & S Homes' CEO. Davis was the president. Jose Leon was the D & S Homes'
secretary and the former chairman of the board.
The D & S Homes' controller took orders from Bock, Davis
and Jose Leon.
Davis
was both the president of D & S Homes and the T.O. IX
officer who signed the T.O. IX contract.
Bock filed the T.O. IX articles of organization with the Secretary
of State. He is listed as the
T.O. IX "organizer."
D & S Homes had a controlling interest in T.O. IX
because it owned 60 percent of that company.
Skyphol, LLC owned 20.38 percent of T.O. IX. Jose Leon was the managing member of Skyphol
and he and his family trust owned Skyphol.
In
addition to this evidence of interlocking control, the trial court could
reasonably infer that the entities that Bock, Davis and Leon controlled lacked
separate identities. In 2003, Skyphol
deeded the real property for the housing project to T.O. IX. In the Quitclaim Deed, Leon certified the
"Grantors and Grantees are comprised
of the same parties." (Italics
added.) In a water permit, Bock listed
the "property owner" of the T. O IX project as Skyphol and
T.O. IX. In a business tax
declaration, Davis declared that D & S Development was a
"subsidiary of" T.O. IX.
Constance Davis, a former D & S Homes' customer service
manager, testified that she considered D & S Homes and
D & S Development to be the same entity.
Bock
and Davis had a pattern of forming new LLC entities for new construction
projects. Appellants have not shown why
the trial court could not reasonably infer their motive was to avoid legal
liability. The court asked why companies
would adopt a practice of having new LLC's for new projects. The D & S Homes' accountant
said there was an industry trend toward forming such multiple entities. He said, "[T]he separate LLC allowed
these companies to sort of constrain any potential lawsuits or liability."
Evidence Showing a Lack of Arm's Length Relationships
A
"failure to maintain arm's length relationships [between the
entities]" and individuals is a relevant factor in determining alter ego
liability. (Zoran Corp. v. Chen, supra,
185 Cal.App.4th at pp. 811-812.) Bock
claimed that D & S Homes was a "separate entity." But he admitted that it did not issue payroll
checks for its employees. It did not
prepare W-2's or 1099 forms. Those tasks
were performed by another company Bock owned called Real Estate Spectrum. Bock said Real Estate Spectrum also
"obtained workers' compensation insurance in its own name for the
employees of D & S Homes, Inc." But later D & S Homes and Real
Estate Spectrum switched positions so that D & Homes assumed "the
payroll process" for its own employees.
Their ability to switch their roles with respect to these obligations is
a factor supporting the trial court's findings.
The
trial court could also infer a lack of arm's length relations from the way the
Bock, Davis and Leon entities distributed funds to each other. When D & S Homes was unable to
pay its bills, it received money from Jose Leon and his family trust to cover
the obligations. D & S
Homes paid the rent for D & S Development. The D & S Homes' controller
testified D & S Homes disbursed funds to D & S
Development and Real Estate Spectrum without providing invoices or financial
documentation. It also paid
T.O. IX's rent. D & S
Homes paid the invoices for legal services for Davis and Bock individually and
for the legal services provided to the other companies they owned. Those individuals and companies never
reimbursed D & S Homes for those payments.
for the Different Companies
The use
of the same employees to perform services for the various entities is a factor
supporting alter ego liability. (
p. 811.) Pat Lee, a
D & S Homes' employee, performed accounting services for that
company. But Bock and Davis also
required her to perform accounting services for other companies they
owned. When she performed those
services, she did not "allocate" her time "amongst these
entities," and she did not bill them.
James Paules was employed by D & S Homes as a
controller. But he also was performing
accounting for T.O. IX, D & S Development, Real Estate
Spectrum, and Emaron Homes. He was paid
by D & S Homes.
Lack of Financial Separation and Company Payment for
Personal Expenses
API
presented evidence to support the trial court's finding that there was a lack
of financial separation between the entities and individuals. D & S Homes used a T.O. IX
bank account to issue checks. As a
D & S Homes' employee, Lee made "personal bank
deposits" for Bock and Davis.
Financial controllers provide a safeguard to prevent the improper use of
company assets by requiring invoices and financial documentation before issuing
company checks. Here the trial court
could find there were no safeguards because the controller had to issue checks
on demand without knowing why he was making these disbursements. Paules testified that he was
"instructed" to issue checks from Real Estate Spectrum to Bock, Davis
and Jose Leon as "compensation."
But he did not "believe they were performing any services for Real
Estate Spectrum." There were no
"time sheets, billing statements, invoices" or any financial
documentation to "backup" the authority for issuing these
checks. There was no withholding for
payroll taxes for Bock, Davis and Leon.
Paules
said he was instructed to issue a check to Davis and make an entry that it was
payment for a "note payable."
But he was not given any financial documentation to verify that the
company owed money to Davis. Several
companies controlled by Bock and Davis shared the office space at the
D & S Homes' headquarters.
But only D & S Homes paid the rent. The other entities were not billed for their
"pro rata" share.
There
was evidence that D & S Homes' assets were used to pay for
shareholders' personal expenses. Jose
Leon instructed D & S Homes to issue him a $30,000 check so he
could purchase a Corvette automobile.
The company paid his private automobile "lease payments." API presented evidence showing that Bock or
his wife obtained a Lexus automobile paid for by D & S Homes'
funds.
At
trial, Paules was asked, "Can you tell us which employee at
D & S [Homes] or Real Estate Spectrum was receiving payments for
their Honda Odyssey?" He replied,
"It was Martin Barrett, our treasurer." Lee testified that Davis required her to make
payments from a Fairland Construction account, a company Davis owned, to pay
for a Harley Davidson motorcycle. But
that company did not own a motorcycle.
Bock
and Davis had a D & S Homes' company credit card. But the company's controller could not
determine whether they used it for business or personal expenses. He had to rely on Bock and Davis to decide
how to account for the expenses. The
lack of an internal financial control mechanism to prevent company assets to be
used for personal matters is evidence supporting alter ego liability. (McKee
v. Peterson (1963) 214 Cal.App.2d 515, 531.) The evidence supports a finding that there
was a "failure to maintain arm's length relationships" and no
financial barrier between the entities and the individuals. (Zoran
Corp. v. Chen, supra, 185
Cal.App.4th at p. 811.)
Appellants
suggest the trial court should have relied on their version of the facts. But it either rejected the facts they relied
on or gave them less weight. We may not
overturn such determinations. Deciding
the weight of evidence and credibility are matters reserved for the trial
court. (Church of Merciful Savior v. Volunteers of America, Inc.,
support the judgment against all appellants, with the exception of appellants
Regina Leon and the Leon Family Trust.
Did Appellants Properly Raise a Defense to Bar Alter
Ego Liability?
Appellants
contend a provision in the contract between API and T.O. IX precludes
alter ego liability and requires reversal of the judgment.
Section
20.2 of the contract provides, in relevant part, "Notwithstanding any
other provision in this Agreement to the contrary, no officer, shareholder,
director or other representative of Contractor . . . shall have any
personal liability for the performance of any obligations or in respect of any
liability of Contractor under this Agreement, and no monetary or other judgment
shall be sought or enforced against any such individuals or their
assets . . . ."
API
contends appellants did not raise the applicability of this provision during
trial, during an earlier bifurcated trial in this case, or in two prior
appeals. It argues this issue was waived
because it was not timely raised. We
agree.
Appellants
did not raise the section 20.2 issue at the start of trial on alter ego issues
on January 7, 2011. Nor did they claim
that they would be relying on any contract provision to bar alter ego
liability. Trial ended on October 14,
2011, when the last witness testified.
During post-trial argument on December 1, 2011, almost one year after
the first day of trial, appellants' counsel mentioned this provision and
claimed it precluded alter ego liability.
The trial court said, "[Y]ou just
raised it. But you didn't raise it over the course of this case." (Italics added.) The court found the issue was not raised on a
prior summary judgment motion, during a prior appeal or at any time during
"five years" of litigation.
Appellants
may not challenge the trial court's implied finding that they waived this issue
because they did not produce a complete record.
Appellants' appendix does not include their answer to the
complaint. Consequently, we cannot
determine whether they raised this issue as an affirmative defense. (Hughes
v. Nashua Mfg. Co. (1968) 257 Cal.App.2d 778, 783 ["An affirmative
defense must be raised in the answer or else it is waived"].) There was a prior trial phase in this
case. But appellants have not included
the record from that proceeding. Where
the record is silent we presume the trial court's findings are supported by
matters not before us. (
conclude appellants raised this issue as a defense in their pleadings or before
or during any of the trials in this action.
But
even from the record we have, the result does not change. During closing argument, API objected
that: 1) the section 20.2 clause was
ambiguous, and 2) there was no factual showing whether it applied to
T.O. IX or other unidentified entities.
API's counsel noted that the provision mentions a
"Contractor," but T.O. IX was not a contractor and there was no
contractor named in the agreement.
T.O. IX was listed as an "owner/builder." But evidence showed it was not licensed or
the actual builder. API claimed it was
deceived by T.O. IX and it did not waive its right to sue. Given these contentions, the applicability of
section 20.2 could not be resolved in appellants' favor by simply reviewing the
face of the provision. (
Cal.App.4th 375, 389; Estate of Black (1962)
211 Cal.App.2d 75, 86.)
The
trial court could reasonably find that for appellants to prevail on this issue
they had to present evidence: 1) to resolve
the ambiguities (Christie v.
1412; Estate of Black,
2) to prove who were the parties subject to this clause; 3) who was the
unidentified "contractor"; 4) whether section 20.2 could be applied
to shield defendants who were not parties to the agreement; 5) whether applying
it was consistent with the parties' mutual intent; 6) whether the parties
intended this clause as a waiver of alter ego claims; and 7) how a shell entity
could validly prepare or enforce this provision.
But
appellants did not request the trial court to re-open the trial. They did not request permission to amend
their pleadings. They did not ask the
court to allow them to give notice to API so the issue could be tried as an
alter ego liability defense. They did
not provide a valid justification for not raising the issue earlier. Nor did they explain how raising the issue at
this late date was not prejudicial to API.
Appellants suggest that API should have raised the section 20.2
issue. But a plaintiff is not required
to raise the opposing party's defenses.
Nor should it be subject to a trap for the unwary that is sprung as a
post-trial eleventh-hour surprise.
Appellants waived this issue. (
"by failing to raise issue before trial"]; Color-Vue, Inc. v. Abrams
(1996) 44 Cal.App.4th 1599, 1605 [failure to raise issue before trial
constituted waiver]; Villa Pacific
233 Cal.App.3d 8, 11; Hughes v. Nashua
Mfg. Co., supra, 257 Cal.App.2d
at p. 783 [issue is waived where it is not included as an affirmative
defense]; Steward v. Paige (1949) 90
Cal.App.2d 820, 825.)
But
even so, appellants' remaining contentions are not meritorious. They claim section 20.2 constituted a waiver
of API's right to sue. But "the
right to pursue claims in a judicial forum is a substantial right and one not
lightly to be deemed waived." (
"clearly and unequivocally" relate to the type of claims involved in
plaintiff's action may not be applied to bar judicial relief. (Fahey
v. Gledhill (1983) 33 Cal.3d 884, 894.)
Here section 20.2 does not "clearly and unequivocally" refer
to alter ego liability claims. (
Moreover,
appellants' contention that provisions similar to this have been enforced in
other contexts misses the point. The
trial court found that applying it in
this case would be inequitable given the facts showing alter ego liability. It
found this was a "stock boilerplate" provision; and that
"T.O. IX was an undercapitalized shell used to conduct business for
Mr. Davis, Mr. Bock, and Mr. Leon, who dominated control of it to shield them
from liability for their actions."
The court added that appellants' "bad faith" was
"pervasive throughout the case" and they had used "different
undercapitalized LLC's." It said
that "under the particular circumstances of this case," applying it
to bar alter ego liability would "sanction a fraud or promote
injustice."
Contractual
clauses are not enforced if they have the effect of relieving parties of the
consequences for their bad faith acts or actions that contravene public
policy. (Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1101;
Cal.App.2d 87, 100; Halliday v. Greene
(1966) 244 Cal.App.2d 482, 488.) The
trial court found that T.O. IX was not the entity it claimed to be in the
contract. It was a shell and defendants
deceived API. "'[A] party who has
induced the other party to enter into the contract based on . . . an
intentional misrepresentation . . . cannot be relieved of liability
by any . . . exculpatory clause, or other clause waiving liability,
contained in the contract.'" (
(2007) 146 Cal.App.4th 1486, 1501, italics omitted.) Because appellants have not set forth the
evidence supporting the judgment, they are not in a position to challenge the
court's findings that applying section 20.2 to defeat alter ego liability would
sanction fraud and be inequitable. (
Regina Leon and The Leon Family Trust
Regina
Leon contends the trial court erred because it imposed alter ego liability on
her because of her actions as a trustee of a trust and it improperly imposed
liability on the Leon Family Trust. She
claims the alter ego doctrine does not apply to trusts. She is correct that a trust cannot be
designated as an alter ego. (
impossible for a trust to be anybody's alter ego.'" (Id.
at p. 521.) Consequently, the
judgment against the Leon Family Trust must be reversed.
But the
alter ego doctrine "may apply to a trustee" such as Regina Leon. (Greenspan
v. LADT LLC, supra, 191
Cal.App.4th at p. 518.) Regina Leon
claims the evidence is insufficient to subject her to alter ego liability
because of the passive nature of her trust-related actions. We agree.
The
trial court found that Jose Leon and Regina Leon were trustees of the Leon
Family Trust and that the trust wired money into a D & S Homes'
bank account. But unlike Jose Leon, the
trial court did not find that Regina Leon affirmatively exercised control over
T.O. IX with Bock and Davis.
Instead, it found that in conducting her trust functions, Regina Leon
followed the instructions of her husband Jose Leon. It said, "[S]he intentionally does not
read documents she is asked to sign" (boldface omitted), and she is
"indifferent" and "has no concern" about "what he does
or what his businesses do." At
trial she testified that she did not know whether she signed "personal
commercial guarantees" for T.O. IX because she did not read
them.
Regina
Leon may have neglected her duties as a trustee. But that does not make her subject to
T.O. IX alter ego liability. She
"'must have been an actor in the course of conduct constituting the
"abuse of corporate privilege."'" (American
Home Ins. Co. v. Travelers Indemnity Co.
(1981) 122 Cal.App.3d 951, 966.) The
evidence in the record about her passive actions is insufficient for alter ego
liability.
Appellants
claim that there are errors in the trial court's statement of decision. These alleged errors do not merit grounds for
reversal. The trial court's material
findings are amply supported.
We have
reviewed appellants' remaining contentions and we conclude they have not shown
error.
The
judgment is reversed as to appellants Regina Leon and the Leon Family
Trust. In all other respects, the
judgment is affirmed. Each party shall
bear their own costs on appeal.
NOT
TO BE PUBLISHED.
GILBERT,
P. J.
We concur:
YEGAN,
J.
PERREN,
J.
>
Glen M. Reiser, Judge
Superior Court County of Ventura
______________________________
Semper
Law Group, LLP, Leonard M. Tavera; Chassman & Seelig, LLP, Mark B.
Chassman; Henrichs Law Firm, John D. Henrichs for Defendants and Appellants.
Law
Offices of Ray B. Bowen, Jr., Ray B. Bowen for Plaintiff and Respondent.
