Opinion
G052633
11-14-2017
JUDGMENT RECOVERY ASSISTANCE, LLC, Plaintiff and Appellant, v. ALDERWOODS GROUP, INC., et al., Defendants and Respondents.
Law Offices of Sanford M. Passman and Sanford M. Passman for Plaintiff and Appellant. Larson, Garrick & Lightfoot, John M. Garrick and Andrew K. Doty for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2012-00618902) OPINION Appeal from a judgment of the Superior Court of Orange County, James Di Cesare, Judge. Affirmed. Law Offices of Sanford M. Passman and Sanford M. Passman for Plaintiff and Appellant. Larson, Garrick & Lightfoot, John M. Garrick and Andrew K. Doty for Defendants and Respondents.
* * *
The trial court granted summary judgment to defendants Alderwoods Group (California) Inc. (Alderwoods), Stonemor California Subsidiary, Inc. (Stonemor), Service Corporation International (Service Corp.), and Rose Hills Company dba Rose Hills Memorial Park and Mortuary (Rose Hills) in this declaratory relief action brought by plaintiff Judgment Recovery Assistance (JRA), a collection agency. JRA claimed that defendants were liable for default judgment entered in 2003 against entities called Abbey Funeral Center, Inc. (Abbey) and Angels Lawn Cemetery (Angels). The court ultimately concluded that JRA had not shown any triable issue of material fact as to whether defendants were liable for Abbey's alleged conduct. As we shall discuss below, we agree and affirm the judgment.
Defendants also brought a motion to set aside the default judgments against Abbey and Angels. The court granted the motion as to Angels, which we agree was proper, as Angels was only a fictitious business or trade name. Defendants argue, in their respondents' brief, that the court erred by not also granting this motion as to Abbey. Defendants, however, did not notice a cross-appeal, and therefore, that part of the court's judgment is final.
I
FACTS
Many of the facts set forth in JRA's brief fail to include proper record references, in violation of the California Rules of Court. We would be fully justified in striking every such alleged fact. (See Del Real v. City of Riverside (2002) 95 Cal.App.4th 761, 768; Cal. Rules of Court, rule 8.204(a)(1)(C).) While we have attempted to locate the necessary facts in the record, to the extent we have not been able to locate any given fact in the record, it has been disregarded, and any issue with respect to such a fact is deemed waived. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 102.)
In 2012, JRA filed the instant declaratory relief action. JRA's amended complaint (the complaint) alleged that it held a valid assignment of a judgment in favor of one Patsy Cullings, entered in 2003, in a case against Abbey and Angels. In sum, Cullings alleged that she and her husband Phillip purchased six contiguous plots at Melrose Abbey Memorial Park (Melrose) in the 1950s. The cemetery changed owners over the years but remained an operating business. In 1992, Abbey, then owner of Melrose, filed a bankruptcy petition. In 1995, the bankruptcy court ordered the sale of Melrose to A.L. Cemetery, a subsidiary of Loewen Group International (Loewen). The complaint alleged the sale was subject to all of the cemetery's liabilities, including already purchased plots.
Loewen, the complaint alleged, changed its name in 2002 to Alderwoods, and accordingly, A.L. Cemetery was a wholly owned subsidiary of that company, a named defendant in the instant case. In 1992, according to the Cullings, several of their prepurchased plots were sold to third parties without their permission. They learned of this after they went to Melrose in 2001, following a cancer diagnosis for Phillip Cullings. They subsequently filed a lawsuit against A.L. Cemetery as Melrose's owner. The long and the short of it was that A.L. Cemetery claimed it was not responsible for what happened before it was an owner of Melrose. In the interest of resolving the matter, the parties settled, and A.L. Cemetery agreed it was released to the extent it did not own or operate Melrose in 1992. JRA claimed the case was not dismissed, but there is a signed and filed request for dismissal in the record.
The Cullings moved for relief from dismissal. Abbey and Angels were then named as defendants, but A.L. Cemetery chose not to appear for either defendant, and following a default prove-up hearing, judgment for $5 million was entered against Abbey and Angels, and served on A.L. Cemetery.
What follows then is a series of acquisitions and mergers. According to the complaint, A.L. Cemetery merged with Alderwoods, Alderwoods was acquired by Service Corp., and Stonemor purchased the assets of SCI Funeral Services, a subsidiary of Service Corp. A.L. Cemetery allegedly operated under a license held by defendant Rose Hills. The complaint alleged an actual controversy as to whether any of these entities were liable for the judgment.
Defendants moved for summary judgment, and to set aside the prior default judgments against Angels and Abbey. In doing so, the court overruled JRA's evidentiary objections, a ruling they do not now appeal. The court also took judicial notice of numerous documents, mostly prior court records, to the extent they were relevant. The court ultimately granted the summary judgment motion and the motion to set aside the default as to Abbey, but not as to Angels. JRA filed the instant appeal.
II
DISCUSSION
JRA's Brief and the California Rules of Court
Despite listing five "questions presented," JRA does not break any of these down into separate headings or topics within its 24-page discussion section. The table of contents simply lists a section entitled "Argument." JRA's rambling argument moves from one issue to another, again lacking record references and any coherent structure.
Instead of legal principles, JRA's "questions presented" include: "Did the trial court fail to analyze the issues presented to it by the Motion for Summary Judgment . . .?" "Did the trial court fail to apply the evidence to the facts of the case correctly?" Due to the lack of any specificity, and especially combined with the lack of headings and subheadings in its argument section, it is difficult to imagine a list of "questions presented" that might be less helpful to our analysis.
This is improper. Issues on appeal are confined to those issues that are set out in headings and subheadings. (Cal. Rules of Court, rule 8.204(a)(1)(B).) This is sufficient grounds for disregarding JRA's arguments. (Citizens Opposing A Dangerous Environment v. County of Kern (2014) 228 Cal.App.4th 360, 380, fn.16 ["[W]e decline to address these contentions" not listed "'under a separate heading or subheading'"]; Consolidated Irrigation Dist. v. City of Selma (2012) 204 Cal.App.4th 187, 201 [argument "forfeited" by not presenting it "in an appellate brief under a separate heading"]; Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2016) ¶ 9:91, p. 9-32 ["The court may disregard arguments not properly segregated under appropriate discrete headings"].) While in the interests of hearing the issues on the merits we will do our best to parse JRA's arguments, anything we might omit is deemed waived.
Standard of Review and General Principles
Summary judgment is appropriate "if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c).) To prevail on the motion, a defendant must demonstrate the plaintiff's cause of action has no merit. This requirement can be satisfied by showing either one or more elements of the cause of action cannot be established or that a complete defense exists. (§ 437c, subds. (o), (p); Bardin v. Lockheed Aeronautical Systems Co. (1999) 70 Cal.App.4th 494, 499-500.)
All further statutory references are to the Code of Civil Procedure.
"[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) "A prima facie showing is one that is sufficient to support the position of the party in question." (Id. at p. 851.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Id. at p. 850, fn. omitted.)
To meet the burden of a prima facie case, the litigant may not rely on mere "allegations or denials of [the] pleadings." (§ 437c, subd. (p)(2); see Maltby v. Shook (1955) 131 Cal.App.2d 349, 355.) Further, "After-the-fact attempts to reverse prior admissions are impermissible because a party cannot rely on contradictions in his own testimony to create a triable issue of fact. [Citations.]" (Thompson v. Williams (1989) 211 Cal.App.3d 566, 573-574.)
"'On appeal after a motion for summary judgment has been granted, we review the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. [Citation.]' [Citation.]" (Biancalana v. T.D. Service Co. (2013) 56 Cal.4th 807, 813; see § 437c, subd. (c).)
Defendant's Burden on Summary Judgment
As noted above, the party moving for summary judgment has the "initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact." (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850.) In order to make this determination, we review the law and evidence relevant to the circumstances underlying the declaratory relief cause of action.
The legal question here is whether defendants, as successors or via merger, are liable for the judgment against A.L. Cemetery based on its actions in 1992. The general rule is that an asset purchase does not result in the successor company assuming the liabilities of the seller. "As typically formulated the rule states that the purchaser does not assume the seller's liabilities unless (1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts." (Ray v. Alad Corp. (1977) 19 Cal.3d 22, 28.) To meet their burden, defendants had to establish that none of these exceptions applied; JRA was then required to set forth evidence demonstrating a triable issue as to any of these points. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850.)
Express or Implied Assumption
With respect to an express or implied agreement to assume liabilities, defendants presented the 1995 order of the bankruptcy court approving the sale of Abbey's assets to A.L. Cemetery as a wholly owned subsidiary of Loewen. That order stated that "A.L. Cemetery will assume all of the unsecured, pre-need liabilities," and with the exception of two liens, was subject to "all other liens." The trustee's motion to approve the sale provides some context. The trustee, Theodor C. Albert, stated that the problems he faced handling the bankruptcy "have been severe, complex, and too numerous to fully catalogue here." Albert noted the real property was encumbered to the tune of $2.7 million, well in excess of the property's valuation. All property was further encumbered by IRS tax liens. Abbey's predecessors, going back decades, had sold "pre-need" contracts for cemetery plots and funeral services, and despite the laws stating that such funds much be held in trust, had embezzled the funds. Roughly $1.4 million in "current costs" of providing such services therefore existed as a liability. Albert further noted the physical premises were in disrepair, the records had been poorly managed or destroyed, and the estate was further saddled with an unfavorable long-term lease on a crematorium on the premises.
According to the California Department of Consumer Affairs, a "pre-need" contract in this context simply means payment in advance for a cemetery plot and funeral services. Thus, at the time of death, instead of relatives or others bearing these costs, they have already been paid by the decedent. (<http://www.cfb.ca.gov/consumer/pre_need.shtml> [as of Nov. 14, 2017].)
Albert, therefore, had barely been able to maintain operations and had not been able to service any debt. Albert had "'shopped' the assets to virtually every major cemetery and mortuary concern in the Southland . . . . In most instances, discussions were broken off as soon as the depth of the problems, particularly the pre-need liability, were analyzed." Only two parties, one of which was Loewen, had expressed any interest in the property. Loewen's offer for $125,000 included a term that it would not be responsible for any pre-need liabilities.
This is the context in which the bankruptcy court approved the sale subject to Abbey's "unsecured, pre-need liabilities." There is simply nothing in the trustee's motion or in the bankruptcy court's order to suggest that the asset sale was subject to the assumption of unknown claims based on either tort or contract. JRA argues "the Bankruptcy Court was aware that there was less than appropriate conduct by Abbey, since it is specifically memorialized in [Albert's] Declaration . . . . Furthermore, the original offer made by [Loewen] . . . did not offer to assume pre-need liabilities in the original tender." While true, these facts are irrelevant and prove nothing about what Loewen actually assumed. JRA also argues, without evidentiary support, that it was the bankruptcy court's "intent" that the buyer would satisfy Abbey's obligations, apparently meaning all tort and contract liability, both known and unknown. Again, this is simply without factual support in the record.
In Franklin v. USX Corp. (2001) 87 Cal.App.4th 615 (Franklin), the plaintiffs filed a tort action for asbestos exposure against USX Corp, a successor to the company called Con Cal/WPS, who had owned the property at the time exposure occurred. In determining whether USX Corp. had assumed the prior company's tort liabilities, the court noted: "We first consider the language of the purchase agreement itself, which we conclude unambiguously shows that USX did not assume the tort liabilities of Con Cal/WPS. [Citation.]" (Id. at p. 621.) Indeed, the agreement had express language disclaiming any such liability. Accordingly, "USX assumed only the liabilities specified in the purchase agreement, which did not include the assumption of contingent tort liabilities." (Id. at p. 622.) While such express disclaimer language is not present here, the context provided by the trustee's motion provides sufficient clarity to satisfy defendants' burden on this matter.
JRA also attempts to assert there was a breach of contract claim, and even if defendants were not liable for unknown tort claims, they were liable for "other liens" as stated in the bankruptcy court's order, based on their subjective belief they "owned" the burial plots. We need not tarry long over this argument. Even if the purchase of a burial plot vested title in the buyer (which it does not), the Cullings did not obtain their default judgment based on contract damages. In their default prove-up brief, the Cullings expressly stated they were seeking tort damages only. "Plaintiff concedes that her Special Damages do not exceed the amount of her prior settlement with [A.L. Cemetery]. Therefore, she is only seeking General (Emotional Distress) and Punitive Damages against the Defaulting Defendants." The default judgment, accordingly, is based entirely on tort, not contract damages. Defendants met their burden to establish no assumption of such liability ever took place. JRA does not set forth any evidence to demonstrate a triable issue of material fact on this point; its argument rises to little more than speculation and assumption.
JRA claims this was never raised in the court below, yet if they assert it created a triable issue of fact, the burden was on them, not defendants, to raise it.
See Pomona Cemetery Association v. Board of Supervisors (1942) 49 Cal.App.2d 626, 630, "[T]he transfer of a cemetery lot does not convey title, but merely an interest to be used exclusively for the purpose indicated, namely, burial."
Consolidation or Merger
The de facto merger exception applies "where one corporation takes all of another's assets without providing any consideration." (Ray v. Alad, supra, 19 Cal.3d at p. 28.) The type and adequacy of consideration is of "overriding significance" in determining whether a merger occurred. (Franklin, supra, 87 Cal.App.4th at p. 626.) Here, the court's order indicated the sale was for $125,000; given the circumstances, this is prima facie evidence of adequate consideration. We are unable to pinpoint any triable issue of material fact JRA raises on this point.
Continuation of the Seller's Existence
Another exception to the lack of successor liability exists where the buyer is a mere continuation of the seller. "[I]t has long been held that 'corporations cannot escape liability by a mere change of name or a shift of assets when and where it is shown that the new corporation is, in reality, but a continuation of the old. Especially is this well settled when actual fraud or the rights of creditors are involved, under which circumstances the courts uniformly hold the new corporation liable for the debts of the former corporation.' [Citation.]" (Cleveland v. Johnson (2012) 209 Cal.App.4th 1315, 1327.) Such continuity may be established by showing either that no adequate consideration was given for the seller corporation's assets, or that one or more persons were directors, officers, or stockholders of both corporations. (Ibid.)
As we have already noted, adequate consideration was paid to acquire Abbey's assets. Defendants presented evidence demonstrating there was no carry over of management. A.L. Cemetery was a wholly owned subsidiary of Loewen, which had no connection to Abbey. Defendants met their burden.
JRA argues that Cleveland v. Johnson, supra, 209 Cal.App.4th at page 1334, also included the statement that "it is probable that no single factual element, standing alone, would establish or negate successor liability." While that is indisputably true, it does not stand for the proposition that triable issues of fact exist in every case. It is up to the party opposing summary judgment to present them, which JRA has failed to do.
JRA then goes on to quote part of the minute order the court issued overruling a demurrer in this case, and states that "much of what is contained in the Minute Order re the Demurrer, is not carried over to the Court's Order on the Motion for Summary Judgment, and no explanation is given as to why . . . ." It should, but apparently does not, go without saying that a demurrer and a motion for summary judgment are entirely different, both substantively and procedurally. Something that seems apparent at the time a demurrer is considered may be completely contradicted when evidence is present in the context of a summary judgment motion. In any event, JRA offers no authority for the proposition that an earlier court order, rather than evidence, can be used to create a triable issue of material fact.
Asset Sale was Attempt to Defraud
The final exception is similar to a fraudulent conveyance. If the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts, the law disregards the conveyance. (Daniell v. Riverside Partners I, L.P. (2012) 206 Cal.App.4th 1292, 1301.) The successor is then "liable only to the extent of the assets fraudulently conveyed." (Ibid.)
This evidence regarding the circumstances of the bankruptcy sale of Abbey's assets is sufficient prima facie evidence that the sale of the assets to Loewen was not fraudulent. As the trial court aptly characterized matters, Abbey "was heavily encumbered, in marked disrepair, and essentially asset-less. There was no value in the transfer but for the bankruptcy court's power to wipe out the encumbrances and give the memorial park a chance to survive. . . . Besides, a transfer effectuated through the bankruptcy court, where the successor had no common nucleus with the debtor, cannot by definition be a fraudulent conveyance to escape liability."
JRA offers no pertinent evidence to the contrary on this point and has failed to raise a triable issue of material fact. As JRA failed to show that any of the exceptions to the general rule of not assuming liability applies here, summary judgment was properly granted.
Set Aside of the Default Judgment Against Angels
In addition to the summary judgment motion, defendants also moved to set aside the default judgments against Angels and Abbey. The court granted the motion as to Angels. JRA contends, in another rambling argument not structured in any recognizable manner, that this was error.
With respect to Angels, defendants sought to have the default set aside based on lack of proper service, the fact that Angels was not a separate entity, and extrinsic fraud. The trial court granted the motion pursuant to the second argument, finding that whether proper service was made on Angels was irrelevant since "Angels was never any sort of cognizable legal entity subject to legal process and plaintiff's assertion that it was an 'ostensible entity' is nonsensical."
The court continued: "Based on the evidence submitted by both sides, the most that can be said about Angels is that it was a catchy name used in various machinations by many different owners of the memorial park. It was used by both Abbey and A.L. [Cemetery], and appears to have been used by the trustee in bankruptcy. Entities just used the ' Angels' moniker without concern over the technical legal requirements for registering dba's and changing names on the licensure. There is no question that A.L. [Cemetery] elected to formally register a version of the name 'Angels' with the [Department of Consumer Affairs] and the County recorder after the bankruptcy sale was completed in early 1995, but as for who was using that moniker in 1992 when the plots were resold . . . [that] remains a mystery." The court further found that whomever was using it under whatever authority, A.L. [Cemetery] was yet to exist. "In any event . . . for purposes of due process, a default judgment entered against the fictitious name of a business operator is not effective to run against the operator itself. [Citations.]"
JRA claims the set aside of the default was time-barred, but this is incorrect. A void judgment can be set aside at any time. (§ 473, subd. (d); Falhati v. Kondo (2005) 127 Cal.App.4th 823, 829-830.)
With respect to the substance of the court's ruling, JRA deems it "legal sophistry." It argues that despite the fact that various entities used "Angels" as sort of a trade name, it was a violation of the fictitious business name statute not to register. Therefore, the argument goes, it could not sue the Cullings, or anyone else.
Frankly, we cannot make heads or tails of this argument. To put it bluntly, even if this is true - so what? Lack of a registered fictitious business name does not make a judgment without a legal entity behind it valid. A fictitious business name cannot be sued, registered or not. (See Pinkerton's, Inc. v. Superior Court (1996) 49 Cal.App.4th 1342, 1348.) Even if Angels was conducting business as Angels in 1992, as JRA claims, it is of no import. Anyone who wishes to sue "Angels" must still sue the entity behind the name. While we agree that an entity required to register a fictitious business name which failed to do so cannot hide behind that failure to avoid process or a judgment, the fact is there is still no legal entity involved when the fictitious name is sued. The same holds true after Angels did file its fictitious business name statement. Accordingly, we find no error in the trial court's decision to deem the default against "Angels," void.
Set Aside of the Default Judgment Against Abbey
As we noted above, the trial court agreed the default judgment against Angels should be set aside, but denied the motion as to Abbey. In their respondent's brief, defendants argue the court should also have set aside the default as to Abbey. Defendants, however, never filed a notice of appeal, and we have no jurisdiction to grant affirmative relief to a respondent without such a notice, proper briefing, and the opportunity for the other party to respond. (§ 906 ["The provisions of this section do not authorize the reviewing court to review any decision or order from which an appeal might have been taken"].)
III
DISPOSITION
The judgment is affirmed. Defendants are entitled to their costs on appeal.
MOORE, J. WE CONCUR: BEDSWORTH, ACTING P. J. THOMPSON, J.