Filed 5/26/22 Noah’s Ark Processors, LLC v. Value Meats, Inc. CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
NOAH’S ARK PROCESSORS, B312950
LLC,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. VC065433)
v.
VALUE MEATS, INC.,
Defendant;
JAMES DICKMAN et al.,
Respondents.
APPEAL from an order of the Superior Court of Los
Angeles County, Olivia Rosales, Judge. Affirmed.
Law Offices of Ami Meyers and Ami Meyers for Plaintiff
and Appellant.
Nevers, Palazzo, Packard, Wildermuth & Wynner, John
Bamford; Ferguson Case Orr Paterson, and John A. Hribar for
Respondents.
******
A judgment creditor sought to amend a judgment to add
the two brothers who ran the company that was the original
judgment debtor. The trial court denied the creditor’s motion.
This was undoubtedly the right result, so we affirm.
FACTS AND PROCEDURAL BACKGROUND
I. Facts
A. Corporate history of Value Meats, Inc.
Value Meats, Inc. (the company), was founded in 1969 by
the Dickman family and was a flourishing business specializing
in selling processed meats, under the name Charlie’s Pride, for
almost 50 years.
The directors of the company were Charles Dickman and
his two sons, James Dickman and Robert Dickman.1 All of the
company’s stock was also owned equally by these three men and
their respective family trusts. James and Robert started working
for the company in 1980, and later shared the role of CEO. They
drew annual salaries from the company for their services as co-
CEOs.
1 Because the owners of Value Meats all share the same
surname, we use their first names to avoid confusion. We mean
no disrespect.
2
In 2015, the company had between 125 and 145 employees,
and it enjoyed a revenue of between $50 million and $70 million
during the years 2015 and 2016. The company ran its
manufacturing operations out of a building in Vernon, California
owned by an LLC whose sole member was Charles’s family trust.
The company fell on hard times and started experiencing a
“cash shortfall” after it received a batch of diseased meat in 2015.
Charles, James, and Robert all made loans to the company to
keep it afloat. Charles alone was owed $1,189,381.92 as of
January 1, 2016, and he made further loans totaling $357,326.60
in 2016. The company repaid Charles around $330,000 that
same year. Also in 2016, the company made five rental payments
to the LLC that exceeded the maximum monthly amount set
forth in the company’s shareholders’ agreement executed in 2010.
In October 2016, the company entered a general
assignment for the benefit of creditors—that is, James and
Robert voluntarily relinquished control of the company to a third
party tasked with equitably dissolving and distributing the
company’s assets to its creditors.
B. The underlying dispute
Noah’s Ark Processors, LLC (plaintiff) was a vendor who
supplied the company with meat. On April 8, 2016, plaintiff sued
the company for an unpaid balance of $165,952.96.
In September 2016, the parties reached a stipulated
settlement. Under the settlement, the company agreed (1) to pay
plaintiff the outstanding balance in four monthly installments of
$42,107.18, and (2) in the event of default on the installment
payments, to stipulate to the entry of judgment in plaintiff’s favor
in the amount of $180,000 (less any installments paid) plus
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interest and attorney fees. The company was only able to make
one installment before it defaulted.
On November 14, 2016, the trial court granted plaintiff’s
unopposed motion to enforce the settlement and, on November
28, 2016, entered judgment against the company for $137,892.82,
as well as interest and attorney fees.
II. Procedural Background
More than four years later, in December 2020, plaintiff
filed a motion to amend the judgment to add James and Robert
as judgment debtors on the ground that they were alter egos of
the company.
Plaintiff relied on evidence that (1) the company was a
closely-held, family-owned company; (2) the brothers used
company assets during insolvency to repay Charles’s loans, to pay
rent to the LLC, and to pay salaries to themselves;2 (3) the
brothers and the company were represented by the same law
firm; and (4) James selectively failed to remember information
contained within corporate records when questioned about them
but was later able to produce those records.
After further briefing, the trial court denied the motion. As
to Robert, the court ruled that he could not be added as a
judgment debtor because plaintiff failed to present sufficient
evidence that he controlled the underlying litigation against
plaintiff. As to James, the court ruled that James controlled the
company’s litigation against plaintiff, but the court ruled that the
2 Plaintiff also asserted that James and Robert used
company assets to pay for their luxury vehicles, but plaintiff has
abandoned that assertion on appeal (presumably because the
costs were irrefutably authorized by the shareholder agreement)
so we will not discuss it further.
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evidence was insufficient “to establish that alter ego liability
should be imposed.” The trial court specifically addressed some
of the evidence of unity of interest and ownership that plaintiff
cited. Regarding the repayments to Charles, the court concluded
that they were for “short-term loans” and that the company still
owed Charles over $1 million, which tended to refute the notion
that Charles was “raiding” the company. Regarding the rent
payments to the LLC, the court concluded that the company and
the LLC “had a valid, written and enforceable lease agreement”
that “require[ed] monthly rental payments.” And regarding the
joint representation, the court concluded that “the Dickmans’
choice of counsel is not a factor in determining alter ego liability.”
Plaintiff timely appealed.
DISCUSSION
Plaintiff argues that the trial court erred in denying its
motion to amend the judgment to add James and Robert as
debtors.
I. Governing Law
A trial court has the equitable discretion to amend a
judgment to name new judgment debtors if (1) “the parties to be
added as judgment debtors had control over the underlying
litigation and were virtually represented in that proceeding”; and
(2) those parties are “the alter ego” of the original judgment
debtor. (Relentless Air Racing, LLC v. Airborne Turbine Ltd.
Partnership (2013) 222 Cal.App.4th 811, 815-816 (Relentless);
LSREF2 Clover Property 4, LLC v. Festival Retail Fund 1, LP
(2016) 3 Cal.App.5th 1067, 1081 (LSREF2); Triplett v. Farmers
Ins. Exchange (1994) 24 Cal.App.4th 1415, 1421 (Triplett); see
generally Code Civ. Proc., § 187.)
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The alter ego element is met if (1) there is “‘“such unity of
interest and ownership that the separate personalities of the
corporation [that was the original judgment debtor] and the
individual[s] [to be added as judgment debtors] no longer exist,”’”
and (2) “‘“an inequitable result will follow”’” if the new judgment
debtors are not added. (LSREF2, supra, 3 Cal.App.5th at p.
1081; Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc.
(2013) 217 Cal.App.4th 1096, 1107-1108; Greenspan v. LADT
LLC (2010) 191 Cal.App.4th 486, 509, 511-512 (Greenspan).
Because the alter ego doctrine marks a departure from the
presumption that collective entities are legally distinct from their
shareholders, piercing the veil is “‘an extreme remedy, [to be]
sparingly used’” (Hasso v. Hapke (2014) 227 Cal.App.5th 107,
155), and the party seeking to invoke it generally bears a “heavy
burden” (Santa Clarita Organization for Planning &
Environment v. Castaic Lake Water Agency (2016) 1 Cal.App.5th
1085, 1105).
In assessing whether the party invoking the alter ego
doctrine has met its burden in showing there is a “unity of
interest and ownership” between the corporate entity and the
individual, courts look to the totality of the circumstances.
(Greenspan, supra, 191 Cal.App.4th at pp. 511-512; Sonora
Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538-
539 (Sonora Diamond).) There is a deluge of relevant
circumstances, including (1) whether there has been a
commingling of funds, (2) whether an individual shareholder has
treated corporate assets as his own, (3) whether the corporation
has failed to obtain authority to issue, or to subscribe to issue,
stock, (4) whether an individual shareholder has represented that
he is personally liable for corporate debts, (5) whether multiple
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corporations have common ownership or common leadership, (6)
whether the individual uses the same business location,
employees, or attorney, (7) whether the corporation was
insufficiently capitalized, (8) whether the corporation was used as
“‘“‘a mere shell,’”’” (9) whether the identity of the true owners or
financial interest of the corporation has been concealed, (10)
whether the corporation disregarded “‘“‘legal formalities’”’” or
failed to maintain “‘“‘arm’s length relationships among related
entities,’”’” (11) whether the corporate entity was used to procure
labor, service or merchandise for another person or entity, (12)
whether assets of the corporation were diverted “‘“‘to the
detriment of creditors,’”’” (13) whether the corporation was used
“‘“‘as a shield against personal liability,’”’” and (14) whether the
corporation was used to transfer liability. (Greenspan, at pp. 512-
513; Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210
Cal.App.2d 825, 838-840.)
In assessing whether an inequitable result will follow if the
new judgment debtors are not added, a plaintiff’s inability to
“collect its judgment” because the original debtor “is insolvent” “is
an inequitable result as a matter of law.” (Relentless, supra, 222
Cal.App.4th at p. 813.) However, such “difficulty in enforcing a
judgment does not alone satisfy” the overall alter ego standard;
unity of ownership and interest is still required. (Leek v. Cooper
(2011) 194 Cal.App.4th 399, 418; Sonora Diamond, supra, 83
Cal.App.4th at p. 539.)
We review a trial court’s decision declining to amend a
judgment to add debtors for an abuse of discretion. (Relentless,
supra, 222 Cal.App.4th at p. 815), but review subsidiary factual
findings—including whether the individuals to be added as
debtors are the alter ego of the original judgment debtor—for
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substantial evidence. (Las Palmas Associates v. Las Palmas
Center Associates (1991) 235 Cal.App.3d 1220, 1248.) Where, as
here, the substantial evidence challenge is brought by the party
with the burden of proof below, we may overturn factual findings
only if “‘the evidence compels a finding in favor of the appellant
as a matter of law.’” (Dreyer’s Grand Ice Cream, Inc. v. County of
Kern (2013) 218 Cal.App.4th 828, 838.) The fact that there is
evidence in the record to support a contrary finding does not
compel the conclusion that there is no substantial evidence to
support the trial court’s ruling. (Rayii v. Gatica (2013) 218
Cal.App.4th 1402, 1408.) Nor are we permitted to reweigh the
evidence ourselves to come to a conclusion more to the appealing
party’s liking. (Gomez v. Smith (2000) 54 Cal.App.5th 1016,
1043.)
II. Analysis
The trial court did not abuse its discretion in denying
plaintiff’s 2020 motion to add James and Robert as debtors to the
2016 judgment.
As to Robert, plaintiff does not challenge the trial court’s
finding that Robert exerted no control over the company’s
litigation against plaintiff. Without this element, there can be no
alter ego liability. (Relentless, supra, 222 Cal.App.4th at pp. 815-
816.)
As to James, the evidence does not compel a finding that
the company was James’s alter ego. That is because the vast
majority of pertinent factors indicate that the company is not his
alter ego: There is no evidence of a commingling of funds
between James and the company; no evidence that the company
failed to obtain authority to issue its stock; no evidence that
James has represented that he is personally liable for the
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company’s debts; no evidence that James has the same business
location or employees as the company; no evidence that the
company was insufficiently capitalized for the 45 years before it
received a shipment of diseased meat; no evidence that the
company was a “mere shell”; no evidence that the company’s true
owners or their financial interests were ever concealed; no
evidence that the company has not adhered to the formalities of
having a board of directors, having regular meetings, and
maintaining minutes, or that the transactions the company had
with James, Charles, Robert or the LLC in establishing loans or
rental arrangements were not at arm’s length; no evidence that
the company procured labor or services for anyone else; no
evidence that the company was used as a shield against James’s
personal liability; and no evidence that the company was used to
transfer liability away from James. To the contrary, the company
was a family-owned company that had an independent existence
with many employees and a legitimate revenue for nearly half a
century.
Plaintiff makes what boil down to three categories of
arguments in response.
First, plaintiff argues that two of the alter ego factors cut in
favor of a finding that the company is James’s alter ego—namely,
that (1) the same law firm that represented the company prior to
the assignment for the benefit of creditors represented James
individually thereafter, and (2) the company is owned and
controlled by James (as well as other members of the Dickman
family). Although both factors are relevant,3 the evidence
3 Thus, the trial court was incorrect in stating that James’s
“choice of counsel” is “not a factor.” However, its misstatement of
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plaintiff presented does not compel a finding that the company is
James’s alter ego. To begin with, the existence of these two
factors cutting in plaintiff’s favor—even if we accept that they
do—does not somehow negate the other ten-plus factors cutting
against plaintiff, and thus does not compel the finding that the
company is James’s alter ego. (Accord, Zoran Corp v. Chen (2010)
185 Cal.App.4th 799, 812 [“‘[n]o single factor is determinative’”].)
Further, those factors do not strongly cut in plaintiff’s favor in
any event. Plaintiff’s sole evidence that James used the same
lawyer as the company is (1) a proof of claim that the law firm
submitted to the company’s assignee after October 2016 seeking
fees incurred by the company prior to the assignment, and (2)
evidence that James retained the same law firm to represent him
in his individual capacity after the assignment. There is no
evidence that the law firm represented the company and James
at the same time, as the references in the billing statements to
the firm’s interactions with James prior to the assignment reflect
nothing more than the reality that James was one of the
company’s co-CEOs. Plaintiff complains that the law firm
acquired “inside knowledge” during its representation of the
company that it may be using to aid James now, but this seems
inevitable—and hence less problematic—since the only way the
company can speak with a lawyer is through its human
representatives; further, it is unclear how his proffered conflict of
interest makes the company any more likely to be James’s alter
ego. That the company is family owned is also not dispositive.
(Eleanor Licensing LLC v. Classic Recreations LLC (2018) 21
law is of no moment because our task is to review the court’s
result, not to flyspeck its reasoning. (People v. Chism (2014) 58
Cal.4th 1266, 1295, fn. 12.)
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Cal.App.5th 599, 616 [alter ego finding reversed where based
solely on fact that companies were “closely held family
businesses”].)
Second, plaintiff argues that the company is an alter ego for
James because James breached his fiduciary duty, as the officer
of an insolvent company, not to prioritize himself and his family
above the company’s creditors when he (1) made loan repayments
on Charles’s loans to the company, and (2) paid the company’s
rent to the LLC at a rate that exceeded the rate authorized by the
company’s bylaws. For support, plaintiff cites Pepper v. Litton
(1939) 308 U.S. 295; Title Ins. & Trust Co. v. California Dev. Co.
(1915) 171 Cal. 173; and Berg & Berg Enterprises, LLC v. Boyle
(2009) 178 Cal.App.4th 1020 (Berg). It is unclear whether
plaintiff is arguing that James’s preferential treatment of his
family’s debts to the debts of outsiders is (1) meant to show the
unity of ownership between himself and the company in support
of an alter ego theory, or (2) meant to constitute an independent
basis for adding him (as well as Robert) as a judgment debtor
apart from alter ego liability. Even if we accept as a given
plaintiff’s assertions that James (and, for that matter Robert)
was breaching a fiduciary duty by repaying his father’s loans and
by paying the rent to a company owned by a family trust,4 those
assertions do not entitle plaintiff to add James (or Robert) as
judgment debtors.
To the extent these considerations are proffered as part of
the alter ego analysis, James’s preferential treatment of family
4 Because we are accepting these assertions as true, we have
no occasion to consider plaintiff’s subsidiary arguments regarding
evidentiary rulings that bear only on the truth of those
assertions.
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creditors over other creditors—even if doing so may have
breached a duty he had to rank creditors differently—speaks to
how James should run the company, not that James is the
company. At best, this consideration supports the existence of
one additional factor—whether the assets of the corporation were
diverted to the detriment of creditors—but that one factor is not
dispositive, and does not outweigh the cascade of factors
counseling a finding of no unity of ownership and identity.
To the extent these considerations are offered as an
alternate legal theory beyond alter ego with which to make both
James and Robert liable (because Robert’s lack of control over the
litigation would not matter), we reject this argument as a matter
of law. As the court in Triplett observed many years ago, there
are no cases “extending section 187 to permit addition of a
defendant by postjudgment motion except where the added
defendant was found to be the alter ego of the original
defendant.” (Triplett, supra, 24 Cal.App.4th at p. 1420.) This is
no accident. Adding a person to a judgment when that person
had no notice and opportunity to be heard in the proceeding that
produced that judgment is permissible under an alter ego theory
(and only an alter ego theory) because, in that situation, the
person’s control over and identity with the judgment debtor
means that the person was, in effect, a party to the prior
proceeding and accorded due process, so the motion to amend
“amount[s] to little more than correcting a misnomer in naming
the defendant.” (Ibid.; Wolf Metals Inc. v. Rand Pacific Sales Inc.
(2016) 4 Cal.App.5th 698, 703.) Here, plaintiff is seeking to add
James and Robert as judgment debtors because they breached a
duty they had to the company rather than because they are the
company. Because a corporate officer’s liability under the
12
precedent plaintiff cites requires proof of additional elements
(such as proof that the officer’s conduct involved “actions that
divert, dissipate, or unduly risk corporate assets that might
otherwise be used to pay creditors[’] claims” (Berg, supra, 178
Cal.App.4th at p. 1041, italics omitted)), adding James and
Robert as corporate defendants under plaintiff’s proffered theory
would violate due process because they were not virtually
represented in the proceeding that resulted in the judgment
against the company-debtor, and thus most certainly would
exceed the scope of what is permitted under Code of Civil
Procedure section 187.
Third, plaintiff cites several other facts that, in its view,
support a finding of unity of ownership and control—namely, that
(1) James had “selective memory” in recalling what was
contained in the company’s records, (2) James committed
“multiple perjuries in trying to evade responsibility for looting a
corporation,” and (3) the law firm “betrayed [the company as] its
former client.” These facts are either wholly irrelevant or, even if
they speak to one or two relevant factors, do not otherwise compel
a finding of a unity of ownership and identity.
* * *
In light of our conclusion that the evidence does not compel
a finding in plaintiff’s favor as a matter of law on the unity-of-
interest requirement, we have no occasion to reach the
requirement that an inequitable result will follow if James and
Robert are not added as judgment debtors.
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DISPOSITION
The order is affirmed. James and Robert are entitled to
their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
______________________, J.
HOFFSTADT
We concur:
_________________________, Acting P. J.
ASHMANN-GERST
_________________________, J.
CHAVEZ
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