Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Fresno County No. 09CECG00100 Alan M. Simpson, Judge.
Connie Flores, in pro. per., for Plaintiff and Appellant.
Wild, Carter & Tipton and Russell G. VanRozeboom for Defendant and Respondent.
OPINION
Detjen, J.
This is an appeal from a judgment of dismissal after the state trial court granted the general demurrer of defendant and respondent Judith Yeramian. Plaintiff and appellant Connie Flores contends the state trial court erred in applying the doctrine of collateral estoppel to bar relitigation of issues raised by her complaint and that, in any event, the demurrer addressed only the first of her three causes of action. We affirm the judgment.
On appeal from judgment on a sustained demurrer, we accept as true all facts properly pleaded in the complaint, together with such facts as may properly be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Here, the trial court properly took judicial notice of the documents filed in Flores v. DDJ, Inc. (E.D.Cal. 2004) No. CIV F-99-5878 AWI DLB. (See Evid. Code, § 456.)
Appellant and others recovered a judgment in United States District Court against DDJ, Inc. and DDJ, LLC (the “DDJ defendants”). Appellant joined in a posttrial motion to add as additional judgment debtors certain individuals and entities alleged to be alter egos of the DDJ defendants. (See Code Civ. Proc., § 187.) Respondent was one of the individuals appellant sought to add as an additional judgment debtor. In support of her motion in the federal district court, appellant submitted documentary evidence and deposition testimony. After opposition was filed and appellant had responded, she requested a continuance of the hearing on the motion to permit her to conduct additional discovery. The continuance was granted, but appellant submitted no further evidence. While the motion to add judgment debtors was pending, the DDJ defendants filed for bankruptcy and the federal district court stayed proceedings. Appellant eventually obtained relief from that stay and, in 2007, the federal district court reset appellant’s motion to add judgment debtors. The federal district court issued a detailed, 29-page memorandum opinion on November 28, 2007, denying her motion. Appellant filed a motion to reconsider. The federal district court denied that motion by written order dated September 24, 2008.
On January 12, 2009, appellant and another of the federal court plaintiffs, together with James E. Salven as bankruptcy trustee for the DDJ defendants, filed a complaint in the state trial court. The complaint asserted three causes of action: “ALTER EGO LIABILITY, ” “BREACH OF FIDUCIARY DUTY AND CONSTRUCTIVE FRAUD, ” and “CONSTRUCTIVE TRUST.” The complaint named various individuals and entities, including respondent, and asserted a claim for general damages in the amount of $1,450,000 on behalf of “Joe Flores and Connie Flores, ” and a claim for punitive damages. Respondent filed a general demurrer asserting that “the issue of alter ego liability was actually determined in the former federal court action … and final judgment on the merits was rendered therein so that the issues of alter ego liability cannot therefore be relitigated in this action.” Appellant joined in Salven’s opposition to the demurrer and filed her own supplemental opposition. The state trial court issued a tentative ruling and Salven’s attorney requested a hearing. At that hearing on September 24, 2009, at which appellant did not appear on the record, the state trial court adopted its tentative ruling, sustaining respondent’s demurrer to all causes of action. On October 14, 2009, judgment was entered dismissing the action as to respondent. Appellant filed a timely notice of appeal. (The other plaintiffs did not appeal.)
Discussion
Appellant contends the state trial court erred in sustaining respondent’s demurrer, arguing that collateral estoppel is not appropriate where respondent was neither a party to, nor in control of, the federal district court litigation. In addition, she contends the state trial court erred in sustaining the demurrer to the entire complaint when the issues decided on the demurrer only addressed her first cause of action. We begin with this latter contention.
Appellant’s first cause of action was premised on alter ego liability, that is, the theory that the defendants were responsible for the payment of the DDJ defendants’ judgment debt because they, the state trial court defendants, in equity should be considered alter egos of the DDJ defendants. The relevant law concerning individual liability for corporate debts was aptly summarized by this court in Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538-539:
“Ordinarily, a corporation is regarded as a legal entity, separate and distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations.… A corporate identity may be disregarded—the ‘corporate veil’ pierced—where an abuse of the corporate privilege justifies holding the equitable ownership of a corporation liable for the actions of the corporation.… Under the alter ego doctrine, then, when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners.… The alter ego doctrine prevents individuals or other corporations from misusing the corporate laws by the device of a sham corporate entity formed for the purpose of committing fraud or other misdeeds….
“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone. [Citations.] ‘Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other.’ (Roman Catholic Archbishop v. Superior Court [(1971)] 15 Cal.App.3d [405, ] 406, 411.…) Other factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers.… No one characteristic governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied….”
Appellant’s second cause of action was for breach of fiduciary duty and constructive fraud. The complaint does not allege the existence of a fiduciary relationship between respondent and appellant, apart from respondent’s actions that form the basis for the alter ego claim. While the complaint alleges in general terms that the fraudulent acts that resulted in the underlying judgment were actually committed by some or all of the individual defendants, appellant does not sue respondent or the other defendants for their fraudulent acts or contend that those acts were a breach of fiduciary duty owed to appellant. (See Minton v. Cavaney (1961) 56 Cal.2d 576, 581.) Instead, the complaint alleges respondent and the other defendants, as officers and shareholders, had a fiduciary duty to the DDJ defendants, and that the breach of that duty injured the DDJ defendants, which affected appellant’s ability to collect from them on the federal district court judgment.
Similarly, the third cause of action for constructive trust does not allege a basis for liability apart from any liability established through the alter ego doctrine. It is well established that “constructive trust” is not a cause of action, but is merely a remedy by which equity may correct an underlying wrong. (13 Witkin, Summary of Cal. Law (10th ed. 2005) Trusts, § 319, p. 892.) Breach of fiduciary duty can constitute such an underlying wrong (id., § 322, p. 897), as can fraud (id., § 320, pp. 894-895). The third cause of action, however, does not allege an underlying wrong except insofar as it may be deemed to incorporate the alter ego allegations of the first cause of action; it alleges that the inequitable conduct of respondent and the other defendants that created alter ego liability also constitutes a basis for imposing the constructive trust remedy on their property.
In light of the substance of the three causes of action, we conclude that the complaint alleges in three different ways a single basis for liability, namely, that the defendants, including respondent, are liable on the federal district court judgment under the alter ego theory. Accordingly, to the extent the state trial court was correct in concluding appellant could not relitigate the alter ego issue, it was correct in dismissing the entire complaint. We turn now to the issue of whether the alter ego theory was barred by collateral estoppel.
The theory of alter ego liability can be asserted by postjudgment motion (see Code Civ. Proc., § 187) or by a separate equitable action (Taylor v. Newton (1953) 117 Cal.App.2d 752, 756; see also Wood v. Elling Corp. (1977) 20 Cal.3d 353, 363-364). In either form of action, the elements required to be shown to pierce the corporate veil are the same. Here, appellant first asserted alter ego liability by appropriate postjudgment motion in the federal district court action and, having lost, subsequently asserted the same theory of recovery in the separate equitable action in the state trial court.
“Collateral estoppel precludes the relitigation of an issue only if (1) the issue is identical to an issue decided in a prior proceeding; (2) the issue was actually litigated; (3) the issue was necessarily decided; (4) the decision in the prior proceeding is final and on the merits; and (5) the party against whom collateral estoppel is asserted was a party to the prior proceeding or in privity with a party to the prior proceeding. (Lucido v. Superior Court (1990) 51 Cal.3d 335, 341.…) Even if the minimal requirements for application of collateral estoppel are satisfied, courts will not apply the doctrine if considerations of policy or fairness outweigh the doctrine’s purposes as applied in a particular case (id. at pp. 342-343), or if the party to be estopped had no full and fair opportunity to litigate the issue in the prior proceeding.” (Zevnik v. Superior Court (2008) 159 Cal.App.4th 76, 82.)
Apart from her claim that her second and third causes of action state claims in addition to the alter ego claims of her first cause of action, which we have rejected in the foregoing discussion, appellant does not contend the issues in the present case differ from those in the federal district court motion proceeding. Nor does she contend the issues were not actually litigated or that they were not necessarily decided. Appellant does contend, however, that respondent was not a party to the prior proceeding, that the motion proceeding did not result in a final decision on the merits, and that she did not have a full and fair opportunity to litigate the issues.
In arguing that respondent was not a party or in privity with a party in the federal district court action, appellant has confused the two aspects of that action. First, there was the federal district court action resulting in the monetary judgment against the DDJ defendants. Respondent was not a named defendant in that action, and the federal district court found as a matter of fact that respondent and the other state court defendants did not “control” the defense of that federal district court action. Second, there was the postjudgment motion in federal district court to add respondent and the others as additional judgment debtors. Respondent was a named party in that proceeding and fully participated in opposition to that motion.
In the present action, respondent asserts the preclusive effect of the determinations made in the motion proceeding in which she did participate; respondent does not assert the preclusive effect of determinations made in the underlying monetary judgment in which she did not participate. It is the ruling on the motion proceeding, not the underlying monetary judgment, that was given collateral estoppel effect by the state trial court. Appellant is incorrect when she contends that such a conclusion denied respondent due process of law.
Appellant next contends the denial of her motion in federal district court was not final for purposes of collateral estoppel because she “could have renewed her motion to amend the judgment … after [the] order denying [her] motion for reconsideration ….” In support of this proposition, appellant cites Hall, Goodhue, Haisley & Barker, Inc. v. Marconi Conf. Center Bd. (1996) 41 Cal.App.4th 1551 (Marconi), which she says is indistinguishable from the present case. Appellant’s reliance on Marconi is misplaced. Marconi does not stand for the proposition that a Code of Civil Procedure section 187 motion is not final for collateral estoppel purposes.
In Marconi, the plaintiff filed a motion to add an alter ego judgment debtor in an action filed to confirm an arbitrator’s award. The trial court denied the motion on the basis that it had no jurisdiction over the proposed judgment debtor, which had not been a party to the arbitration agreement. Three months later, the plaintiff renewed its motion, attaching an additional contract to establish that “management” of the original nonprofit defendant was vested in the proposed additional judgment debtor. Again, the trial court denied the motion. (Marconi, supra, 41 Cal.App.4th at pp. 1553-1554.) The issue on appeal was whether the procedure for adding judgment debtors under Code of Civil Procedure section 187 was available in proceedings to confirm arbitrations. The appellate court found that the procedure was equally available after both ordinary civil judgments and after arbitration confirmation judgments. (Marconi, supra, at p. 1555.) In Marconi, no issue was presented concerning finality for collateral estoppels purposes.
Restatement Second of Judgments, section 13, defines a final judgment for purposes of collateral estoppel (which it refers to as “issue preclusion”) as including “any prior adjudication of an issue in another action that is determined to be sufficiently firm to be accorded conclusive effect.” Collateral estoppel does not apply when a party, as a matter of law, could not have obtained review of the original judgment. (Rest.2d Judgments, §28(1).) Appellant acknowledges that the order of the federal district court denying her motion to add a judgment debtor was an appealable order—indeed, she contends it was a correct order and appealing it would have been futile. We conclude the postjudgment order in the federal court action was final for purposes of collateral estoppel.
Appellant asserts for the first time in her reply brief that the federal court postjudgment motion proceeding did not provide her a full and fair opportunity to litigate the alter ego issues, as required for application of collateral estoppel. (See Lucido v. Superior Court, supra, 51 Cal.3d at p. 341; see also Rest.2d Judgments, § 28(3) [collateral estoppel not applied where “quality or extensiveness” of original proceeding warrants new determination of issues].) Appellant relies on Groves v. Peterson (2002) 100 Cal.App.4th 659, 667-668, for the proposition that any proceeding in which she was not entitled to present live witnesses does not constitute a full and fair litigation opportunity.
Issues raised for the first time in a party’s reply brief generally are deemed waived. (See 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, §723, p. 790.)
In any event, Groves v. Peterson, supra, 100 Cal.App.4th at page 667, states that its holding applies “[i]n the specific context of the present case, where the issue is whether the prior denial of a motion in the underlying case to set aside a default and default judgment should be given collateral estoppel effect ….” In such circumstances, the court notes, a party usually does not have the right to “compel witnesses to attend for deposition or cross-examination, ” nor to compel other discovery in the absence of permission from the court. (Id. at p. 668.)
In the present case, by contrast, appellant’s federal district court motion was based on extensive discovery, including deposition transcripts, and she expressly waived the right in federal district court to conduct additional discovery.
Appellant had every opportunity to present her case to the federal district court, both in her initial motion and on motion for reconsideration. She received an extensive, thorough, written determination of every issue she raised. She had a full and fair opportunity to litigate the alter ego issues in the federal proceeding. We conclude she is estopped to relitigate the same issues in this state court proceeding.
Disposition
The judgment is affirmed. Respondent is awarded costs on appeal.
WE CONCUR: Wiseman, Acting P.J., Kane, J.