Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, Ct. No. GC040224 Joseph F. DeVanon, Judge.
Lee & Fields, Edward Y. Lee and Christopher P. Fields for Plaintiffs and Appellants.
Benedon & Serlin, Douglas G. Benedon and Gerald M. Serlin for Defendant and Respondent.
CROSKEY, Acting P. J.
Won K. Lee and Soon A. Lee were awarded a judgment against Nina’s Pizza Kitchen, Inc. (Nina’s Pizza), for breach of a written sublease agreement, but were denied relief against its owner, Nina Y. Ahn, individually. The Lees appeal the judgment, contending (1) the trial court’s finding of no alter ego liability was error; (2) Ahn is personally liable as a guarantor under the agreement; and (3) Ahn expressly assumed the debts and liabilities of Nina’s Pizza upon its dissolution, including its liability under the agreement. We conclude that Lee has shown no error and will affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Nina’s Pizza was incorporated in March 2007. Ahn was its chief executive officer, chief financial officer, and a director, and another individual was its secretary and a director. Nina’s Pizza and the Lees entered into a written agreement on November 13, 2007, for the sublease of real property for use as a restaurant. The term of the lease was five years. In the agreement, the Lees were identified as “Sub-Lessor” and Nina’s Pizza as “Sub-Lessee.”
Ahn’s signature appears on the signature line for “Sub-Lessees, ” but there is no reference in the agreement to the capacity in which she signed it. Under that signature line is a signature line for “Guarantor.” Ahn’s signature appears there as well, again with no reference to the capacity in which she signed it. The agreement contains no guaranty provisions or reference to a guaranty apart from the word “Guarantor” in the signature block.
A dispute arose almost immediately concerning painting the interior. Nina’s Pizza failed to pay any rent due under the agreement. The Lees served a notice of default, a three-day notice to pay rent or quit, and a notice of belief of abandonment. They then leased the premises to another subtenant at a substantially lower rate of rent.
The Lees filed a complaint against Nina’s Pizza and Ahn in January 2008. They allege that Nina’s Pizza failed to pay rent and other charges when due and abandoned the premises, and that they suffered damages and will suffer future damages as a result. They also allege that Ahn is the alter ego of Nina’s Pizza and that she personally guaranteed the rental payments under the terms of the written agreement. The Lees allege counts for (1) breach of written contract, against Nina’s Pizza; (2) breach of oral contract, against both defendants; (3) breach of written guaranty, against Ahn; and (4) several common counts, against both defendants.
Nina’s Pizza filed a certificate of dissolution with the Secretary of State in December 2008. The certificate states, “The corporation’s known debts and liabilities have been adequately provided for by their assumption, ” and identified “NINA AHN” as the person assuming the debts. Ahn signed the certificate under penalty of perjury as “President/Director.”
After a nonjury trial conducted in May and June 2009, the court filed a statement of decision finding Nina’s Pizza liable for breach of contract in the amount of $297,220.33. The court found that there was insufficient evidence that Ahn was the alter ego of Nina’s Pizza and insufficient evidence that the parties intended to create a personal guaranty. The court entered a judgment in the amount of $297,220.33 in favor of the Lees and against Nina’s Pizza, and awarded no relief against Ahn. The Lees timely appealed the judgment.
CONTENTIONS
The Lees contend (1) they presented substantial evidence at trial to support a finding that Ahn was the alter ego of Nina’s Pizza; (2) the written agreement states unambiguously that Ahn personally guaranteed the payments due; and (3) Ahn expressly assumed the debts and liabilities of Nina’s Pizza upon its dissolution, including its liability under the agreement.
DISCUSSION
1. Substantial Evidence Supports the Finding of No Alter Ego Liability
The Lees contend they presented substantial evidence at trial to support a finding that Ahn was the alter ego of Nina’s Pizza. Under the appropriate standard of review, however, the question is whether substantial evidence supports the trial court’s finding that Ahn was not the alter ego of Nina’s Pizza. We conclude that substantial evidence supports the trial court’s finding and that the Lees therefore have shown no error on this ground.
“Ordinarily, a corporation is regarded as a legal entity separate and distinct from its stockholders, officers and directors. Under the alter ego doctrine, however, where a corporation is used by an individual or individuals, or by another corporation, to perpetrate fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, a court may disregard the corporate entity and treat the corporation’s acts as if they were done by the persons actually controlling the corporation. [Citations.]
“In general, the two requirements for applying the alter ego doctrine are that (1) there is such a unity of interest and ownership between the corporation and the individual or organization controlling it that their separate personalities no longer exist, and (2) failure to disregard the corporate entity would sanction a fraud or promote injustice. [Citations.] The doctrine is applicable where some innocent party attacks the corporate form as an injury to that party’s interests. The issue is not so much whether the corporate entity should be disregarded for all purposes or whether its very purpose was to defraud the innocent party, as it is whether in the particular case presented, justice and equity can best be accomplished and fraud and unfairness defeated by disregarding the distinct entity of the corporate form. [Citations.]” (Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980, 993.) The purpose of the doctrine is not to protect every creditor of a corporation, and difficulty in collecting a judgment or debt alone does not satisfy the requirement of a fraud or injustice so as to justify the disregard of the corporate form. (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 539; Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 842.)
Many factors may tend to support a finding of alter ego liability, depending on the particular circumstances of the case, including commingling of funds and other assets; an individual’s treatment of corporate assets as his or her own; failure to issue stock; an individual’s representation that he or she is personally liable for corporate debts; failure to maintain minutes or adequate corporate records; identical equitable ownership and control of separate entities; common directors and officers; ownership of all of the stock in a corporation by one individual or family; use of the same office or business location; employment of the same employees or attorney; inadequate capitalization; use of a corporation as a mere instrumentality for a single venture or for the business of another; concealment of the identity of the responsible ownership, management, and financial interest; disregard of legal formalities and failure to maintain arm’s-length relationships among related entities; use of the corporation to procure labor, services, or merchandise for another; diversion of assets to the detriment of creditors; use of a corporation to avoid performance of a contract and to avoid contractual liability; and use of a corporation to transfer to it the existing liability of another person or entity. (Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69 Cal.App.4th 223, 249-250; Associated Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at pp. 838-840.) No single factor is determinative. (Sonora Diamond Corp. v. Superior Court, supra, 83 Cal.App.4th at p. 539.) “Alter ego is an extreme remedy, sparingly used.” (Ibid.)
The alter ego doctrine is an equitable doctrine. (Stark v. Coker (1942) 20 Cal.2d 839, 846.) We review a finding as to whether a person or entity is the alter ego of a corporation under the substantial evidence standard. (Baize v. Eastridge Companies (2006) 142 Cal.App.4th 293, 302; Associated Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at p. 837.) Substantial evidence is evidence that a rational trier of fact could find to be reasonable, credible, and of solid value. We view the evidence in the light most favorable to the judgment and accept as true all evidence tending to support the judgment, including all facts that reasonably can be deduced from the evidence. We must affirm the judgment if an examination of the entire record viewed in this light discloses substantial evidence to support the judgment. (Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 429; Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633.) Accordingly, we can conclude that the trial court’s finding that Ahn was not the alter ego of Nina’s Pizza was error only if the evidence compels the conclusion as a matter of law that she was the corporation’s alter ego.
The Lees cite evidence that Ahn drafted checks from her personal checking account for the benefit of Nina’s Pizza and that the certificate of election to wind up and dissolve stated that Nina’s Pizza had issued no shares of stock, and the absence of any written evidence in the record that Nina’s Pizza maintained minutes and other corporate records. The latter two matters are controverted by evidence in the record. Ahn testified that the statement in the certificate that the corporation had issued no shares was incorrect and that shares were issued to her. Ahn’s stock certificate was included in the record. Ahn also testified that Nina’s Pizza maintained a “corporate book, ” although she apparently was never questioned at trial specifically as to whether the corporation maintained minutes and other corporate records. We must presume that the trial court credited the evidence of the issuance of shares and the reasonable inference of the maintenance of corporate records, and the Lees have not shown that it was error to do.
Ahn’s payments from her personal checking account for the benefit of Nina’s Pizza may tend to show a commingling of funds, but that evidence alone is not compelling evidence of a unity of interest between the individual and the corporation. Moreover, those payments do not show either an intent to deceive the Lees as creditors or that the Lees were misled concerning the identity of the responsible party under the agreement. (Sonora Diamond Co. v. Superior Court, supra, 83 Cal.App.4th at p. 539.) Nor is there any other evidence that the Lees were misled in this regard or that disregarding the corporate form is necessary to avoid an injustice. We conclude that the evidence in the record does not compel the conclusion either that there was a unity of interest between Ahn and Nina’s Pizza or that failure to disregard the corporate entity would sanction a fraud or promote injustice. We therefore conclude that the Lees have shown no error in the trial court’s finding that Ahn was not the alter ego of Nina’s Pizza.
2. Substantial Evidence Supports the Finding that There Was No Mutual Intention to Create a Personal Guaranty
A contract of guaranty is interpreted under the ordinary rules of contract interpretation. (Civ. Code, §§ 2787, 2837; Superior Wholesale Elec. Co. v. Cameron (1968) 264 Cal.App.2d 488, 492.) Our goal in interpreting a contract is to give effect to the mutual intention of the contracting parties at the time the contract was formed. (Civ. Code, § 1636.) We ascertain that intention solely from the written contract if possible, but also consider the circumstances under which the contract was made and the matter to which it relates. (Id., §§ 1639, 1647.) We consider the contract as a whole and interpret its language in context so as to give effect to each provision, rather than interpret contractual language in isolation. (Id., § 1641.) We interpret words in accordance with their ordinary and popular sense, unless the words are used in a technical sense or a special meaning is given to them by usage. (Id., § 1644.) If contractual language is clear and explicit and does not involve an absurdity, the plain meaning governs. (Id., § 1638.)
Contractual language is ambiguous if it is susceptible of more than one reasonable interpretation in the context of the contract as a whole. (MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 648.) Whether contractual language is ambiguous is a question of law that we review de novo. (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912; American Alternative Ins. Corp. v. Superior Court (2006) 135 Cal.App.4th 1239, 1245.) Contract interpretation, including the resolution of any ambiguity, is solely a judicial function, unless the interpretation turns on the credibility of extrinsic evidence. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) If contractual language is ambiguous and extrinsic evidence on point is in conflict, the trier of fact must resolve the ambiguity by deciding as a question of fact the mutual intention of the contracting parties. (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 913.) We review that factual finding under the substantial evidence standard and must uphold an interpretation of ambiguous contractual language by the trier of fact if the interpretation is reasonable and is based on substantial evidence. (In reMarriage of Fonstein (1976) 17 Cal.3d 738, 746-747; Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407.)
The sublease agreement begins by stating that the agreement is between Nina’s Pizza, identified as “Sub-Lessee, ” and the Lees, identified as “Sub-Lessor.” The agreement refers to “Sub-Lessee” and “Sub-Lessor” throughout, and does not identify Ahn individually. The agreement includes no guaranty provisions and no mention of a guaranty apart from the final signature block at the end of the agreement, which states “Guarantor.” Ahn’s signature appears in that final signature block above her handwritten name, with no express indication of the capacity in which she signed. Her signature and handwritten name appear in the same manner in the signature block for “Sub-Lessees.” The agreement includes an integration clause.
We believe that the absence of any provision explaining the nature of the guaranty and the identity of the guarantor and the fact that Ahn signed the agreement as “Guarantor” in the same manner that she signed as “Sub-Lessees” render the agreement ambiguous as to those matters. The trial court properly considered extrinsic evidence to resolve the ambiguity. (Code Civ. Proc., § 1856; Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343-344.) Ahn testified that there was no discussion of a guarantee. Citing this evidence, the trial court concluded in its statement of decision, “there was insufficient evidence to establish the parties’ intention to create a guaranty.” We construe this to mean that the trial court considered the extrinsic evidence and resolved the ambiguity regarding the purported guaranty by finding that the parties did not intend to create a personal guaranty of the corporation’s obligations under the agreement. We conclude that substantial evidence supports this finding and that the trial court’s construction of the agreement in light of this finding was reasonable. We therefore conclude that the Lees have shown no error on this ground.
3. The Lees Failed to Prove an Assumption of Liability
The Lees also contend Ahn assumed the debts and liabilities of Nina’s Pizza upon its dissolution by expressly so declaring in the certificate of dissolution. They did not allege this theory of liability in their complaint, although they introduced the certificate of dissolution as evidence at trial and argued the matter briefly in closing argument. The trial court did not address this theory of liability in its statement of decision. We will assume without deciding that the Lees did not waive this issue by failing to request leave to amend their complaint to conform to proof at trial or by failing to adequately address this issue in the trial court.
Corporation’s Code section 1905, subdivision (a)(2) provides that a certificate of dissolution must state that the corporation’s “known debts and liabilities have been actually paid, or adequately provided for, or paid or adequately provided for as far as its assets permitted, or that it has incurred no known debts or liabilities, as the case may be. If there are known debts or liabilities for payment of which adequate provision has been made, the certificate shall state what provision has been made, setting forth the name and address of the corporation, person or governmental agency that has assumed or guaranteed the payment.... ”
The certificate of dissolution states that Ahn assumed the “known debts and liabilities” of Nina’s Pizza. Ahn testified that she did not understand the legal terminology, but that she understood that by making this statement in the certificate of dissolution she was only forgiving the corporation’s debt to her individually for her personal loans to Nina’s Pizza. The Lees argue to the contrary that the statement in the certificate of dissolution is clear and unambiguous and that Ahn assumed the corporation’s liability under the agreement. Yet they cite no authority for the proposition that a corporation’s “known debts and liabilities” necessarily include a claim in pending litigation in which the corporation contests liability, as Nina’s Pizza did at the time the certificate was filed with the Secretary of State. The Lees also fail to cite authority for the proposition that Ahn’s understanding and intention at the time she signed the certificate are irrelevant to the legal effect of the statement in the certificate. Even if we assume that the Lees did not waive the issue by failing to plead or adequately address the issue in the trial court, we conclude that they have failed to show either that they are entitled to judgment as a matter of law based on the undisputed facts or that the trial court erred.
DISPOSITION
The judgment is affirmed. Ahn is entitled to recover her costs on appeal.
We Concur: KITCHING, J. ALDRICH, J.