Santos vs. Crenshaw Manufacturing Inc.

(Angel Lynn Realty, Inc. v. George (2025) 114 Cal.App.5th 655, 663 (Angel Lynn Realty).)

Based on due process concerns, however, a default judgment may not be amended to add a nonparty alter ego. (See Motores de Mexicali, S.A. v. Superior Court (1958) 51 Cal.2d 172, 175-176; Wolf Metals Inc. v. Rand Pac. Sales, Inc. (2016) 4 Cal.App.5th 698, 703-704, 708- 709; NEC Electronics, Inc. v. Hurt (1989) 208 Cal.App.3d 772, 779.)

“‘“Usually, a disregard of the corporate entity is sought in order to fasten liability upon individual stockholders. . . .”’” (Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096, 1107 (Toho-Towa).) “In California, common principles apply regardless of whether the alleged alter ego is based on piercing the corporate veil to attach liability to a shareholder or to hold a corporation liable as part of a single enterprise. In both cases, ‘[t]he law as to whether courts will pierce the corporate veil is easy to state but difficult to apply.’ [Citation.]

Because it is founded on equitable principles, application of the alter ego ‘is not made to depend upon prior decisions involving factual situations which appear to be similar. . . . “It is the general rule that the conditions under which a corporate entity may be disregarded vary according to the circumstances of each case.”’ [Citations.] Whether the evidence has established that the corporate veil should be ignored is primarily a question of fact which should not be disturbed when supported by substantial evidence. [Citations.]” (Toho-Towa, supra, 217 Cal.App.4th at p. 1108.)

To prevail on a motion to amend a judgment to add a nonparty, “‘the judgment creditor must show, by a preponderance of the evidence, that “(1) the parties to be added as judgment debtors had control of the underlying litigation and were virtually represented in that proceeding; (2) there is such a unity of interest and ownership that the separate personalities of the entity and the owners no longer exist; and (3) an inequitable result will follow if the acts are treated as those of the entity alone.”’”

What constitutes sufficient control depends on the facts of each individual case. For example, Control was shown where the nonparty alter ego hired counsel to represent the corporation, was the person with whom the corporate defendant’s counsel primarily dealt, was kept fully informed of the suit’s progress, was familiar with all the issues, and helped draft documents for the litigation. (Alexander v.

Abbey of the Chimes (1980) 104 Cal.App.3d 39, 46.) But control was not shown where sole owner hired and discharged corporation’s attorneys, appeared at settlement conferences and financed the litigation, but was not named individually, knew the corporation was on the verge of dissolution, and had no personal duty to defend the underlying action. (Katzir's Floor & Home Design, Inc. v. M-MLS.com (9th Cir. 2004) 394 F.3d 1143, 1149-1150.)

In determining whether there is a sufficient unity of interest the many factors the courts consider include “‘one individual’s ownership of all stock in a corporation; use of the same office or business location; commingling of funds and other assets of the individual and the corporation; an individual holding out that he is personally liable for debts of the corporation; identical directors and officers; failure to maintain minutes or adequate corporate records; disregard of corporate formalities; absence of corporate assets and inadequate capitalization; and the use of a corporation as a mere shell, instrumentality or conduit for the business of an individual.’ [Citation.]

Other recognized factors include “‘the use of the corporate entity to procure labor, services or merchandise for another person or entity’ and ‘the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors.”’ [Citation.]” (JPV I L.P. v. Koetting (2023) 88 Cal.App.5th 172, 194-195.) “Critically, ‘“‘[n]o single factor is determinative, and instead a court must examine all the circumstances to determine whether to apply the doctrine.’”’ [Citation.] ‘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.’ [Citation.]” (Id. at p. 195.)

An inequitable result is shown as a matter of law where the judgment debtor is insolvent due to the actions of an alter ego. (Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership (2013) 222 Cal.App.4th 811, 816.) “‘“Application of the alter ego doctrine does not depend upon pleading or proof of fraud.”’ [Citations.] It is enough that ‘adherence to the fiction of the separate existence of the corporation would promote injustice or bring about inequitable results.’ [Citation.]” (Angel Lynn Realty, supra, 114 Cal.App.5th at p. 1109, fn. 5.)

“Difficulty in enforcing a judgment or collecting a debt does not satisfy” the inequitable result element. (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 539.) “The alter ego doctrine does not guard every unsatisfied creditor of a corporation but instead affords

protection where some conduct amounting to bad faith makes it inequitable for the corporate owner to hide behind the corporate form.” (Ibid.)

“Alter ego ‘is an extreme remedy, sparingly used.’ [Citation.] ‘“The standards for the application of alter ego principles are high, and the imposition of [alter ego] liability . . . is to be exercised reluctantly and cautiously.”’ [Citation.] Still, ‘“[t]he greatest liberality is to be encouraged”’ in allowing judgments to be amended to add the ‘real defendant,’ or alter ego of the original judgment debtor, ‘“in order to see that justice is done.”’ [Citations.]” (Highland Springs Conference Training Center v. City of Banning (2016) 244 Cal.App.4th 267, 281.)

Here, Santos has failed to present sufficient evidence to meet her burden by a preponderance of the evidence. As stated above, Santos must establish three elements to meet that burden. The failure on any one of the elements requires the motion to be denied. Santos’s evidence is highly conclusory and some of it is inadmissible.

The motion’s most glaring shortcomings is on the unity of interest element, especially when viewed in light of the evidence Mansour presents in opposition. Santos argues this element is met because Mansour owned and controlled Crenshaw, but the court finds more is needed to meet this element. For example, there is no showing regarding the capitalization, adherence to corporate formalities, commingling of asset, or any of the other factors identified above. Not all of these factors are required and no single factor is essential, but something more than ownership and control is needed. If not, every sole shareholder who runs a corporation would be an alter ego.

Based on the foregoing, the motion is DENIED WITHOUT PREJUDICE. Any future motion must provide a much more detailed factual showing on each of the three required elements. Santos also should more fully address the argument the decision is this case was the equivalent of a default judgment, which would prevent the amendment of the judgment.

As for Mansour’s evidentiary objections, they are SUSTAINED as to objection nos. 1, 3, 4, 5, and 6 and OVERRULED as to all others.

Santos’s counsel is ordered to give notice of this ruling.