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Dominguez v. Patel

California Court of Appeals, Fourth District, First Division
Jun 20, 2024
No. D082070 (Cal. Ct. App. Jun. 20, 2024)

Opinion

D082070

06-20-2024

LLESENIA DOMINGUEZ, Plaintiff and Respondent, v. ASHA PATEL, et al., Defendants and Appellants

Asha Patel and Bharat G. Patel, in pro. per., for Defendants and Appellants. Gusdorff Law and Janet Gusdorff; Elder &Spencer, Margaret A. Elder, Chandra G. Spencer, and Lanetta D. W. Rinehart for Plaintiff and Respondent.


NOT TO BE PUBLISHED

APPEAL from an amended judgment of the Superior Court of San Diego County, No. 37-2017-00030201-CU-PO-NC Cynthia A. Freeland, Judge. Affirmed.

Asha Patel and Bharat G. Patel, in pro. per., for Defendants and Appellants.

Gusdorff Law and Janet Gusdorff; Elder &Spencer, Margaret A. Elder, Chandra G. Spencer, and Lanetta D. W. Rinehart for Plaintiff and Respondent.

CASTILLO, J.

Asha Patel and Bharat G. Patel appeal from an amended judgment adding them and Shri Janaki Vallabha, LLC (SJV) as alter ego and successor judgment debtors, respectively, to a judgment in favor of Llesenia Dominguez against Radha Damodar Investments LLC (RDI). We conclude on this deficient appellate record that the Patels fail to establish there was insufficient evidence to support the ruling or a violation of due process. We therefore affirm.

I.

As an initial matter, the Patels filed separate yet substantively identical opening and reply briefs. While we agree with Dominguez that the Patels' statements of facts include extra-record facts and fail to adequately summarize and cite the record, we deny her request to strike this portion of the opening briefs, instead (1) accepting her invitation to disregard the Patels' recitation of the facts and (2) relying on the minute order granting the motion to amend the judgment for the pertinent background. (Cal. Rules of Court, rules 8.204(a)(1)(C) &(a)(2)(C); Utility Consumers' Action Network v. Public Utilities Com. (2010) 187 Cal.App.4th 688, 693.) We recite these facts in the light most favorable to the amended judgment (Hoffman v. Superior Ready Mix Concrete, L.P. (2018) 30 Cal.App.5th 474, 478), and we decline to address the Patels' undeveloped request that we judicially notice unspecified facts.

In August 2017, Dominguez filed suit against RDI, a commercial leasing property. The Patels were RDI's sole managers and members, and each held a 50-percent ownership interest. "[T]he Patels initially attempted to defend this action" for RDI, with Bharat filing in propria persona a demurrer to, and a motion to strike portions of, the complaint, with a declaration asking the court to sustain the demurrer "'in my favor.'" Bharat signed the substitution of attorney when counsel substituted into the case, and counsel listed himself as the Patels' attorney of record in opposing Dominguez's motion to amend. RDI eventually filed an answer and cross-complaint but failed to appear at a trial readiness conference. In May 2019, following a hearing at which RDI and its counsel again failed to appear, the trial court struck RDI's answer, dismissed its cross-complaint, and entered RDI's default.

In December 2019, one week prior to the default prove-up hearing, Bharat transferred RDI's sole asset, the property that was the subject of Dominguez's suit, to a trust. The Patels were the sole trustees of the trust, and Bharat testified at a later judgment debtor's examination that he did so "to protect the Property from liability in the present action." In February 2020, Bharat formed SJV, with the Patels as its only members and owners. He transferred the property from the trust to SJV, again to protect it from liability in Dominguez's suit.

In March 2020, the trial court entered judgment against RDI and in Dominguez's favor, then amended it in September 2020 to add the amount of the award, exceeding $100,000.

In November 2022, Dominguez moved to amend the judgment to add the Patels and SJV as judgment debtors, alleging they were RDI's alter egos and successor, respectively. The trial court heard argument, granted the motion, and issued the amended judgment. As relevant here, the trial court found Dominguez met her burden of establishing the Patels were RDI's alter egos, given they "had control of the underlying litigation and were virtually represented in that proceeding." It also found there was sufficient unity of interest and ownership between RDI and the Patels that their separate personalities no longer existed. The trial court concluded that denying the motion "would promote fraud or injustice," because the Patels should not be able to "use [S]V] as a mere instrumentality to avoid the judgment against" RDI.

The court further concluded SJV was the successor of RDI, but that determination is not at issue in this appeal.

II.

The Patels argue "the Judgment was improperly amended under [an] 'alter ego' theory." First, the Patels claim Dominguez failed to prove they "had sufficient control over the litigation that they were virtually represented therein," arguing something more is required than "merely appearing at a Judgment Debtors examination or the filing [of] an answer or crosscomplaint." They claim the record is devoid of evidence showing a risk of personal liability to them such that they had occasion to diligently conduct the litigation. Second, they contend Dominguez "failed to proffer sufficient admissible evidence to establish that a unity of interest and ownership exists . . . such that the separate personalities of the corporation and the shareholder do not exist." Finally, because judgment was entered by default, the Patels, relying on Motores de Mexicali, S.A. v. Superior Court of Los Angeles County (1958) 51 Cal.2d 172 (Motores), claim they had no opportunity to present "an evidence-based defense," so amending the judgment to include them violated due process.

Dominguez counters that the Patels' challenges to the sufficiency of the evidence underlying the trial court's findings fail because the deficient appellate record-consisting solely of an incomplete clerk's transcript containing the minute order on the motion to amend the judgment, the Patels' notices of appeal and record designation, and the Register of Actions- forecloses any meaningful challenge on this basis. She also claims due process was satisfied.

For the reasons below, we agree with Dominguez on both points.

A.

As to the Patels' first two arguments, which challenge the sufficiency of the evidence, we agree with Dominguez that the inadequate record on appeal cannot show error as a matter of law. The Patels fail to address Dominguez's argument in reply.

It is incumbent on the appellant to show error by way of an adequate record. (Null v. City of Los Angeles (1988) 206 Cal.App.3d 1528, 1532.) A trial court's judgment is presumed correct, "and all intendments and presumptions are indulged in favor of its correctness." (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) Moreover, where, as here, there is no reporter's transcript or other record of the oral proceedings below, "[t]he sufficiency of the evidence is not open to review. The trial court's findings of fact and conclusions of law are presumed to be supported by substantial evidence and are binding on the appellate court, unless reversible error appears on the record." (Bond v. Pulsar Video Productions (1996) 50 Cal.App.4th 918, 924.)

With these principles in mind, the Patels' challenges to the sufficiency of the evidence underlying the trial court's alter ego findings fail as a matter of law. We thus need not reach Dominguez's claim that the Patels forfeited these challenges by misrepresenting the trial court's findings.

B.

Given the deficient record on appeal, the Patels' third claim, that the trial court violated due process by amending the default judgment to include them as judgment debtors, fares no better.

Courts have the authority under Code of Civil Procedure section 187 to equitably amend a judgment to add judgment debtors that are the alter egos of the original judgment debtor, the theory being the court is not adding any new defendant but instead the name of the true defendant. (NEC Electronics Inc. v. Hurt (1989) 208 Cal.App.3d 772, 778 (NEC).) However, to do so "requires both (1) that the new party be the alter ego of the old party and (2) that the new party had controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns." (Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415, 1421.) These requirements are "in addition to, not in lieu of, the threshold alter ego issues." (Ibid.) We review for abuse of discretion a trial court's decision to amend the judgment to add a judgment debtor, and we review the court's factual findings for substantial evidence. (Carolina Casualty Ins. Co. v. L.M. Ross Law Group, LLP (2012) 212 Cal.App.4th 1181, 1189.)

The Patels admit that they "dominated" RDI, "knew of [Dominguez]'s suit," "controlled the underlying litigation," and "filed an answer to the underlying complaint." Nonetheless, they claim that because (1) RDI's answer was stricken, (2) RDI "offered no evidence-based defense," and (3) judgment was by default, amending the judgment to add them as judgment debtors violates due process. They contend "they were deprived of the opportunity to conduct separate independent discovery and to defend against the plaintiff's allegations."

Dominguez does not, as the Patels claim, fail to address this argument. Instead, relying on the trial court's fact-based determination that the Patels had an opportunity to present a defense through their direction of RDI's defense and their shared counsel, she distinguishes the facts of the cases the Patels cite, which concluded that adding alter egos after a default judgment violated due process. We agree with Dominguez that on this record, due process was satisfied and the trial court did not abuse its discretion in amending the judgment to add the Patels as judgment debtors.

In Motores, one of the cases on which the Patels rely, the plaintiff sued a corporation to recover unpaid debts and obtained a default judgment a mere sixteen days later. (Motores, supra, 51 Cal.2d at p. 173.) After roughly four years, the plaintiff moved to amend the judgment to add three individuals who were allegedly the corporation's alter egos. (Id. at pp. 173174.) Our Supreme Court confirmed it was improper to add these individuals as judgment debtors because they "in no way participated in the defense" of the suit and "did not have attorneys subsidized by them appearing and defending the action." (Id. at pp. 175-176.) Because they did not "have the opportunity to be heard and to present [their] defenses," due process was not satisfied. (Id. at p. 176.)

In NEC, the other principal case the Patels cite, the plaintiff, NEC, sued a corporation, Ph, for amounts due, and Ph filed a general denial. (NEC, supra, 208 Cal.App.3d at p. 775.) NEC met with Ph to discuss Ph's financial difficulties "and its need to compromise the claims of unsecured creditors." (Ibid.) A creditors' committee proposed a joint reorganization plan, but two days before trial, NEC informed Ph it was rejecting the plan and would prosecute its case. (Ibid.) Ph told NEC it would not appear. (Ibid.) Following a brief trial in Ph's absence, the court entered judgment against Ph. (Id. at pp. 775-776.) Shortly after, Ph filed for bankruptcy. (Id. at p. 776.) NEC sought to amend the judgment to add Ph's sole shareholder and CEO as a judgment debtor. (Ibid.)

The court of appeal reversed the trial court's grant of NEC's request. (NEC, supra, 208 Cal.App.3d at p. 775.) It confirmed that the CEO was Ph's alter ego but concluded due process had not been satisfied because the CEO "did not control or have an opportunity to present a defense in the underlying action." (Id. at p. 778.) The court concluded that, because "Ph did not appear at trial and did not make any attempt to defend the NEC lawsuit," the CEO's interests were not represented. (Id. at p. 780.) More importantly, the interests of Ph and the CEO "were not the same." (Ibid.) "The evidence reveals that Ph believed it had a defense to the NEC action but nevertheless let the matter proceed uncontested because it planned to file" for bankruptcy and thus "had no incentive to defend." (Ibid.) "This situation contrasts with the usual scenario where the interests of the corporate defendant and its alter ego are similar so that the trial strategy of the corporate defendant effectively represents the interests of the alter ego." (Ibid.) Finally, while the CEO attempted to satisfy Ph's creditors, he was "never actively involved in defending the NEC lawsuit." (Id. at p. 781.)

The Patels cite NEC for their assertion that due process requires presentation of an "evidence-based defense." NEC does not so hold. However, a subsequent case, Wolf Metals Inc. v. Rand Pacific Sales, Inc. (2016) 4 Cal.App.5th 698, made that leap. In concluding it was improper to add an alleged alter ego as a judgment debtor where judgment was entered by default after the defendant answered the complaint, filed for bankruptcy, and then ceased appearing at hearings, the court of appeal reasoned that, "[l]ike the defendant corporation in Motores," the defendant "offered no evidence-based defense in the underlying action." (Id. at pp. 708-709.)

While Wolf Metals arrived at the right conclusion on its facts, we do not believe an evidence-based defense is necessarily required for due process to be served where amendment to add judgment creditors is sought after a default judgment. As the Patels themselves acknowledge, due process merely requires the opportunity to defend, not that they actually and fully defended the suit. (See Dow Jones Co. v. Avenel (1984) 151 Cal.App.3d 144, 150.) Here, the Patels had that opportunity and pursued it for the first year and a half of the litigation. They attempted to appear on RDI's behalf, subsequently hired an attorney to defend RDI, and admittedly controlled the litigation. Given they were the sole members and owners of RDI, "[w]ho else had authority to employ attorneys and provide for the expense? Who else was interested in the fate of [RDI]? If not [the Patels], who else?" (Schoenberg v. Romike Properties (1967) 251 Cal.App.2d 154, 168.) Initially, they and counsel made efforts to defend the suit on the merits, with the filing of an answer and a cross-complaint and motion practice on a demurrer and motion to strike.

Yet the Patels, and RDI, abruptly stopped defending the suit. The most reasonable inference, particularly given the strong presumptions against the Patels on this deficient record, is that they, as RDI's "sole alter ego[s]," decided that, rather than provide "a defense to a meritorious lawsuit, the corporation should incur a default judgment to insulate [them] from liability and to save [them] from spending money on a frivolous defense." (Lopez v. Escamilla (2022) 79 Cal.App.5th 646, 654.) Because again, if not the sole members and owners of RDI, who else would be liable for the judgment? These facts are thus materially different from those in Motores, where no one ever appeared to contest the case, and NEC, in which the divergent interests of the alter ego were not represented by the original judgment debtor.

In sum, on this record, the trial court did not abuse its discretion by amending the judgment to add the Patels as judgment debtors. The trial court, weighing evidence not before us, concluded equity required that the Patels, as the true defendants, be liable for the judgment. (NEC, supra, 208 Cal.App.3d at p. 778.) The Patels have failed to show the trial court violated their due process rights in so concluding.

III.

We affirm. Dominguez is entitled to her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)

WE CONCUR: O'ROURKE, Acting P. J. KELETY, J.


Summaries of

Dominguez v. Patel

California Court of Appeals, Fourth District, First Division
Jun 20, 2024
No. D082070 (Cal. Ct. App. Jun. 20, 2024)
Case details for

Dominguez v. Patel

Case Details

Full title:LLESENIA DOMINGUEZ, Plaintiff and Respondent, v. ASHA PATEL, et al.…

Court:California Court of Appeals, Fourth District, First Division

Date published: Jun 20, 2024

Citations

No. D082070 (Cal. Ct. App. Jun. 20, 2024)