WFG National Title Insurance Co. v. Kim CA2/7

Filed 1/12/23 WFG National Title Insurance Co. v. Kim CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

WFG NATIONAL TITLE B315174
INSURANCE COMPANY,
(Los Angeles County
Plaintiff and Respondent Super. Ct. No. BC672513)

v.

LAURIE KIM, et al.,

Defendants and Appellants.

APPEAL from a judgment of the Superior Court of Los
Angeles County, Mel Red Recana, Judge. Reversed with
directions.
Bahar Law Office and Sarvenaz Bahar for Defendants and
Appellants.
Wright, Finlay & Zak and Olivier J. Labarre for Plaintiff
and Respondent.
 INTRODUCTION

RNA Financial LLC—a now-insolvent company owned by
sisters Laurie and Jamie Kim—purchased a house and obtained
a $340,000 loan from Maggie Investments pursuant to a
promissory note secured by a deed of trust on the property.
Shortly after RNA obtained the loan, the seller rescinded the sale
and refunded the purchase price to RNA. RNA, however, did not
notify Maggie the sale had been rescinded or pay off the principal
owed on the loan. Instead, RNA made interest-only payments on
the loan for six years, then stopped making payments when RNA
ran out of money. Only then did Maggie learn the seller had
rescinded the sale years before.
After Maggie settled a claim against its title insurer, WFG
National Title Insurance Company, WFG filed this action in
subrogation against RNA and the Kims, asserting causes of
action for breach of contract and fraud. WFG alleged that RNA
failed to repay the loan and that the Kims, though they did not
personally guarantee the loan, were liable for the outstanding
debt as alter egos of RNA. RNA did not respond to the complaint,
and the trial court entered RNA’s default. After a nonjury trial,
the court found the Kims were alter egos of RNA and therefore
liable for RNA’s breach of contract.
The Kims appeal from the judgment, arguing substantial
evidence did not support the trial court’s finding they were alter
egos of RNA. We conclude substantial evidence supported the
court’s alter ego finding regarding Laurie, who commingled
RNA’s funds with the funds of other businesses she owned and
used RNA’s account to pay for personal expenses that had no
documented business purpose. We also conclude, however,

2
substantial evidence did not support the court’s alter ego finding
regarding Jamie, who did not participate in the operations of
RNA or know about Laurie’s actions. We also reject the rest of
the Kims’ arguments they are not liable as alter egos because
RNA is not liable for breach of contract, most of which the Kims
forfeited by failing to raise at trial. Therefore, we reverse the
judgment and direct the trial court to enter a new judgment
against RNA and Laurie but in favor of Jamie.

FACTUAL AND PROCEDURAL BACKGROUND

A. RNA Purchases a House at a Foreclosure Sale and
Obtains a Loan
The Kims used RNA to purchase, improve, and resell real
property to third parties, a process the Kims refer to as “flipping
houses.” Laurie was the managing member, president, and
secretary, with sole authority to transfer property on behalf of
the company.
In August 2009 RNA purchased a house in Pasadena at a
foreclosure sale for $488,500 in cash. Soon thereafter, RNA
obtained a $340,000 loan from Maggie, evidenced by a promissory
note and secured by a deed of trust on the property. The terms of
the note required RNA to make monthly, interest-only payments
for three years at the annual rate of 12 percent, with a balloon
payment of all outstanding principal due at the end of the note’s
three-year term. The note provided that, if RNA defaulted,
interest on the outstanding principal would continue to accrue at
the same rate.

3
 B. The Foreclosure Trustee Rescinds the Sale, but RNA
Does Not Notify Maggie
A few months after RNA purchased the house, Executive
Trustee Services (ETS), the trustee who conducted the
foreclosure sale, rescinded the sale and recorded a notice of
recission with the Los Angeles County Recorder.1 RNA received
a refund of the $488,500 purchase price, but did not pay off any
principal on the loan or notify Maggie that ETS had rescinded the
sale. RNA continued to make interest-only payments on the loan
until the three-year term ended. At the end of the term, RNA did
not make the required balloon payment, but for three more years
continued to make the same monthly payments on the loan,
which Maggie accepted.

C. RNA Stops Making Payments, Maggie Tenders a
Claim to WFG, and WFG Sues RNA and the Kims
RNA stopped making payments to Maggie after October
2015. In February 2016 Maggie attempted to initiate foreclosure
proceedings based on the deed of trust it believed secured the
loan, but the trustee advised Maggie the sale to RNA had been
rescinded. Maggie tendered a claim to WFG under its title
insurance policy on the deed of trust, which WFG settled by
paying Maggie $340,000. As part of the settlement, Maggie
assigned to WFG all claims arising from the promissory note.

1 The notice stated the beneficiary of the deed of trust that
previously encumbered the property determined the sale “was
conducted in error due to a failure to communicate timely . . .
notice of conditions which would have warranted a cancellation of
the foreclosure . . . .”

4
 In 2017 WFG filed this action against RNA and the Kims,
asserting causes of action for fraud and breach of contract. WFG
alleged RNA breached the loan agreement “by failing to repay the
sums due under the Promissory Note.” WFG alleged the Kims
were liable for breach of contract as alter egos of RNA because
they did not maintain adequate capital in the company to satisfy
its debts and withdrew funds from the company’s bank accounts
for their personal use. WFG further alleged the Kims concealed
from Maggie that ETS rescinded the sale.

D. WFG and the Kims Go to Trial
RNA did not respond to the complaint, and the trial court
entered its default. The Kims, however, did respond and went to
trial on WFG’s causes of action against them.
At trial Laurie testified that RNA had only one bank
account and that she was the only person who had a checkbook or
debit card for the account. WFG introduced into evidence RNA’s
bank records from April 2012 (a few months before the end of the
original three-year loan term) to September 2015. During that
period RNA generally had less than $50,000 in its account, and
often as little as several thousand dollars or even a few hundred
dollars. RNA received two large deposits during those years: one
for $100,000 from a company Laurie admitted she owned, and
another for $153,000. After receiving each deposit, RNA almost
immediately paid a third party for either the same or nearly the
same amount. RNA received a handful of smaller deposits from
companies Laurie also admitted she owned, but otherwise
received little income.
The bank records reflected that RNA made numerous,
recurring purchases at department stores, clothing stores

5
(including children’s clothing stores), restaurants, and cosmetic
stores, plus occasional purchases at, for example, sporting goods
stores, bookstores, and for children’s “school lunch programs.”
Laurie stipulated she made all the purchases. She testified that
the purchases at restaurants were during meetings with
“potential investors” and that the purchases at department stores
and shops were “marketing expenses” to “build . . .
relationship[s]” and “get more business.” Laurie admitted,
however, she never documented what she purchased or to whom
she gave any of the items. She also could not recall the purpose
of several purchases, other than to say they “could” have been for
networking events.
WFG presented little evidence Jamie participated in RNA’s
operations. The parties stipulated that “[a]t all relevant times”
Jamie had no knowledge of the Pasadena property, the loan from
Maggie, or the recission. Between April 2012 and September
2015, RNA’s records reflected three deposits, totaling $3,000,
from an account jointly held by Laurie and Jamie. During that
same period RNA made one $30,000 payment to Jamie. Jamie
testified Laurie performed all of RNA’s business operations.

E. The Court Rules for WFG
The trial court ruled in favor of WFG on its breach of
contract cause of action against RNA and against WFG on its
fraud cause of action. The court, in a statement of decision, found
RNA “breached its contractual obligations to Maggie . . . by
failing to repay the principal amount of the Loan when due, by
defaulting on the interest-only payments, and by failing to
disclose the existence of the Recission to Maggie.” The court
further found that each of the Kims was liable for the breach

6
under the alter ego doctrine. The court found that Laurie “had
complete control” over RNA’s account; that Laurie “routinely
used her own funds to finance RNA’s business operations,
through cash infusions”; and that RNA’s bank statements
“reflect[ed] numerous personal expenses . . . that had nothing to
do with the real estate business of RNA . . . .” The court stated
that, “[a]lthough the Kims testified that some of the expenses . . .
were incurred for business reasons,” the Kims “failed to present
evidence that the bulk of the transactions . . . were not incurred
for personal reasons.” The court’s only specific findings regarding
Jamie were that Jamie performed “numerous administrative
tasks for RNA over the years, including signing checks and
executing all of the various Secretary of State filings for RNA,”
and that Jamie received the $30,000 payment from RNA.
The court entered judgment in favor of WFG and against
RNA and the Kims, jointly and severally, in the amount of
$556,853.20, consisting of $340,000 in principal that RNA owed
on the loan, plus $216,853 in interest that had accrued since
November 2015, when RNA stopped making payments. The
Kims timely appealed from the judgment.

DISCUSSION

A. Standard of Review
On appeal from a judgment based on a statement of
decision following a court trial, we “review questions of law
de novo and we review the trial court’s findings of fact under the
substantial evidence standard.” (Gajanan Inc. v. City and County
of San Francisco (2022) 77 Cal.App.5th 780, 791-792; see
Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.) “We

7
construe findings of fact liberally to support the judgment;
consider the evidence in the light most favorable to the judgment;
draw all reasonable inferences in support of the findings; and
infer that the trial court ‘“impliedly made every factual finding
necessary to support its decision.”’” (Gajanan, at pp. 791-792; see
Thompson, at p. 981; Barickman v. Mercury Casualty Co. (2016)
2 Cal.App.5th 508, 516.)

B. Alter Ego Doctrine
The Kims argue the trial court erred in ruling they were
alter egos of RNA and therefore liable for the judgment against
it. They are half right: Substantial evidence supported the
court’s finding Laurie was the alter ego of RNA, but not the
court’s finding Jamie was.

1. Applicable Law
“‘“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.”’” (Eleanor
Licensing LLC v. Classic Recreations LLC (2018) 21 Cal.App.5th
599, 615; see Leek v. Cooper (2011) 194 Cal.App.4th 399, 411.)
“In certain circumstances,” however, “the court will disregard the
corporate entity and will hold the individual shareholders liable
for the actions of the corporation: ‘As the separate personality of
the corporation is a statutory privilege, it must be used for
legitimate business purposes and must not be perverted. When
[the privilege] is abused it will be disregarded,’ and the
individuals will be ‘liable for acts done in the name of the
corporation.”’ (Mesler v. Bragg Management Co. (1985) 39 Cal.3d
290, 300; see Cam-Carson, LLC v. Carson Reclamation Authority

8
(2022) 82 Cal.App.5th 535, 550; Kao v. Holiday (2020)
58 Cal.App.5th 199, 205;.)
“‘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.’” (Cam-Carson, LLC v. Carson
Reclamation Authority, supra, 82 Cal.App.5th at p. 549; see
Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1341.)
“We uphold a trial court’s ruling of alter ego liability if it is
supported by substantial evidence, as the invocation of alter ego
liability ‘is primarily one for the trial court and is not a question
of law.’” (Kao v. Holiday, supra, 58 Cal.App.5th at p. 206; see
Baize v. Eastridge Companies, LLC (2006) 142 Cal.App.4th 293,
302; Alexander v. Abbey of Chimes (1980) 104 Cal.App.3d 39, 47.)

2. The Trial Court Did Not Err in Ruling Laurie
Was Liable Under the Alter Ego Doctrine

a. The Doctrine of Implied Findings Applies
As a preliminary matter, the Kims contend the doctrine of
implied findings does not apply to the trial court’s determination
Laurie was liable as an alter ego of RNA. “‘[U]nder the doctrine
of implied findings, the reviewing court [generally] must infer,
following a bench trial, that the trial court impliedly made every
factual finding necessary to support its decision.’” (Thompson v.
Asimos, supra, 6 Cal.App.5th at p. 981; see Fladeboe v. American
Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 48.) Code of Civil

9
Procedure section 634 establishes an exception: “When a
statement of decision does not resolve a controverted issue, or if
the statement is ambiguous and the record shows that the
omission or ambiguity was brought to the attention of the trial
court” before entry of judgment, “it shall not be inferred on
appeal . . . that the trial court decided in favor of the prevailing
party as to those facts or on that issue.”
In finding each of the Kims was an alter ego of RNA, the
trial court made numerous relevant findings, but did not use the
words “unity of interest” or “inequitable result.” The Kims
objected to the proposed statement of decision, asserting the
court did not identify “specific factors upon which the trial court
relied to find a unity of interest and an equitable result justifying
application of the alter ego doctrine.” The Kims argue that,
because the trial court did not “mention the two mandatory
conditions for alter ego liability,” this court should “limit its
review to the trial court’s express findings set forth in the
statement of decision . . . .”
The Kims are incorrect. Even where a party brings
omissions or ambiguities in a proposed statement of decision to
the attention of the trial court, “‘[t]he trial court is not required to
respond point by point to the issues posed . . . . The court’s
statement of decision is sufficient if it fairly discloses the court’s
determination as to the ultimate facts and material issues in the
case.’” (Thompson v. Asimos, supra, 6 Cal.App.5th at p. 983; see
Pannu v. Land Rover North America, Inc. (2011) 191 Cal.App.4th
1298, 1314, fn. 12; Golden Eagle Ins. Co. v. Foremost Ins.
Co. (1993) 20 Cal.App.4th 1372, 1379-1380.) The trial court “is
not expected to make findings with regard to ‘detailed evidentiary
facts or to make minute findings as to individual items of

10
evidence.’” (Thompson, at p. 983; see Nunes Turfgrass, Inc. v.
Vaughan-Jacklin Seed Co. (1988) 200 Cal.App.3d 1518, 1525.)
No doubt it would have been better if the trial court had
specified which facts supported the court’s implied finding there
was a unity of interest between each of the Kims and RNA and
which facts supported the court’s implied finding there would be
an inequitable result if the Kims were not liable as alter egos for
RNA’s breach of contract. (See Thompson v. Asimos, supra,
6 Cal.App.5th at p. 983 [“‘the term “ultimate fact” generally
refers to a core fact, such as an essential element of a claim’”].)
In requesting a statement of decision, however, the Kims
identified 57 issues they deemed the “principal controverted
issues” at trial, making it nearly impossible for the trial court to
determine which issues the Kims deemed necessary for the court
to resolve prior to entering judgment. (See People v. Casa Blanca
Convalescent Homes, Inc. (1984) 159 Cal.App.3d 509, 525 [trial
court “was not required to provide specific answers” to a request
for statement of decision asking the court “to answer over
75 questions and make a list of findings on evidentiary facts”];
Kanner v. Globe Bottling Co. (1969) 273 Cal.App.2d 559, 567
[“[p]laintiffs’ request for 66 special findings was properly denied
by the trial court” because Code of Civil Procedure “[s]ection
634 does not require that a finding be made as to every minute
matter on which evidence is received at the trial”].) The Kims
also did not identify proposed findings in their request; they
simply listed the 57 issues in the form of questions without
proposed answers. (See In re Marriage of Falcone & Fyke (2012)
203 Cal.App.4th 964, 981-982 [court did not have to respond to a
request for statement of decision “that made a laundry list of
52 demands” and did not “suggest[ ] the specific factual finding

11
requested”; “‘“[t]he established practice presupposes that counsel
desiring such special findings will draft and propose them in the
usual form,”’” and “‘“[t]he action of the court in approving or
disapproving them will constitute the ruling”’”].) Moreover, in
objecting to the court’s proposed statement of decision, the Kims
did not make clear whether they were requesting a general
finding on all facts relevant to the court’s alter ego determination
or whether they were asking for separate findings on the issues of
unity of interest and inequitable result. While the Kims did
mention both conditions, they defined the controverted issues as
Laurie’s and Jamie’s “Liability as an Alter Ego of RNA” and
asked the trial court to “state the legal and factual basis for its
holding that” Laurie and Jamie each acted as “an alter ego of
RNA.”
In any event, the trial court fairly and sufficiently
identified the facts that supported its finding of alter ego
liability—at least for Laurie. The court found RNA never had
any employees or offices, had limited assets, and followed few
corporate formalities. The court found Laurie used her personal
funds to finance RNA, used RNA funds to make purchases
unrelated to RNA’s business, and failed to show a business
purpose for the purchases. The court also found Laurie never
notified Maggie of the recission or that Maggie had lost its
security interest in the Pasadena property. And, the court found,
rather than “paying off Maggie’s unsecured loan,” RNA used the
funds from the recission for other purposes and “benefitted from
the fact that Maggie did not call the [l]oan due” at the end of the
three-year term because RNA otherwise could not have continued
to operate. Because the court sufficiently explained the basis of
its finding Laurie was an alter ego of RNA, we infer all findings

12
necessary to support the judgment against her. (See Yield
Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547,
559 [“it is settled that the trial court need not, in a statement [of]
decision, ‘address all the legal and factual issues raised by the
parties’”]; Whitney Inv. Co. v. Westview (1969) 273 Cal.App.2d
594, 604 [purpose of Code of Civil Procedure section 634 is to
“provide sufficient guidance to enable a reviewing court to
determine how the trial court resolved material issues in the
case”].)

b. Substantial Evidence Supported the
Finding Laurie Was an Alter Ego of RNA
The many factors (Associated Vendors, Inc. v. Oakland
Meat Co. (1962) 210 Cal.App.2d 825, 838-840) relevant to the first
condition—unity of interest and ownership—include
(1) “[c]ommingling of funds and other assets, failure to segregate
funds of the separate entities, and the unauthorized diversion of
corporate funds or assets to other than corporate uses”; (2) “the
treatment by an individual of the assets of the corporation as his
own”; and (3) “the disregard of legal formalities and the failure to
maintain arm’s length relationships among related entities.”
(Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, 512-513,
internal quotation marks omitted; see Kao v. Holiday, supra,
58 Cal.App.5th at p. 206.) An additional important factor “is that
a legal entity is so undercapitalized that it is likely to have no
sufficient assets to meet its debts.” (Triyar Hospitality
Management, LLC v. WSI (II)—WHP, LLC (2020) 57 Cal.App.5th
636, 642; see Butler America, LLC v. Aviation Assurance Co.,
LLC (2020) 55 Cal.App.5th 136, 146.) “No single factor is
determinative, and instead a court must examine all the

13
circumstances to determine whether to apply the doctrine.”
(Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1073, internal
quotation marks omitted; see Zoran Corp. v. Chen (2010)
185 Cal.App.4th 799, 812.)
The unity of interest and ownership between Laurie and
RNA was obvious. RNA had only one bank account, and Laurie
admitted she was the only one who controlled the checkbook and
debit card for the account. Laurie admitted she commingled
funds by transferring money into RNA from other companies she
owned. Laurie treated the assets of the corporation as hers and
disregarded legal formalities by regularly making purchases at
department and clothing stores and restaurants without
documenting any of the purchases (much less documenting a
business purpose). She also operated RNA without sufficient
capital to meet its outstanding debts. At all times between April
2012, the earliest date for which RNA presented any bank
records, and November 2015, RNA owed $340,000 in principal to
Maggie under the loan, yet never held more than $50,000 in its
only account for more than a couple of weeks. And while Laurie
testified RNA purchased “dozens” of other real properties during
the six years it was making interest-only payments to Maggie,
Laurie did not present any records showing RNA held title to real
property or owned other assets during that time (the type of
record one might expect a business to keep, or obtain, if it in fact
held title to real property or assets).
Laurie argues WFG “did not satisfy its burden of proof” to
show Laurie’s debit purchases “were incurred for personal
reasons” because “there [were] many possible business-related
reasons” for the purchases. Laurie’s argument misapprehends
the issue. WFG did not have to prove each purchase Laurie made

14
on behalf of RNA was for a personal rather than business reason
(although Laurie admitted that at least some of the payments,
such as those for her children’s school lunch programs, were for
personal reasons). The fact that Laurie regularly made
purchases using RNA’s accounts without documenting the
purpose of the purchases evidenced a unity of interest between
Laurie and RNA. (See Blizzard Energy, Inc. v. Schaefers (2021)
71 Cal.App.5th 832, 850 [owner’s transfer of funds from the
company “without specifying the reason for the transfer” and
“failure to maintain any documentation for when and why funds
[were] distributed” supported a finding of a unity of interest]; Kao
v. Holiday, supra, 58 Cal.App.5th at p. 206 [“[f]actors a trial court
may consider when deciding unity of interest” include “the failure
to maintain . . . adequate corporate records”]; Misik v. D’Arco,
supra, 197 Cal.App.4th at p. 1073 [same].) The court was also
not required to find credible (and in all likelihood no reasonable
person would have found credible) Laurie’s testimony that the
purchases at restaurants, department stores, clothing stores, and
from other merchants were “marketing” expenses, particularly
given that she never documented the transactions and could not
recall specific items she purchased or the actual or potential
clients for whom she allegedly made purchases. (See Butler
America, LLC v. Aviation Assurance Co., LLC, supra,
55 Cal.App.5th at p. 146 [trial court did not err in finding not
credible an owner’s testimony that payments from companies
were “loans”]; Turman v. Superior Court (2017) 17 Cal.App.5th
969, 981 [“assessing credibility and weighing the extensive and
conflicting testimony” on alter ego liability was for the trial court,
not reviewing court].)

15
 For the second requirement of the alter ego doctrine, that
there would be an inequitable result if the acts in question were
treated as those of the corporation, there are few hard-and-fast
rules. “The essence of the alter ego doctrine is that justice be
done. ‘What the formula comes down to . . . is that liability is
imposed to reach an equitable result[ ]’ . . . when the ends of
justice so require.” (Mesler v. Bragg Management Co., supra,
39 Cal.3d at p. 301.) Some courts have stated that “[d]ifficulty in
enforcing a judgment does not alone satisfy this element” and
that “[t]here also must be some conduct amounting to bad faith
that makes it inequitable for [the individual] to hide behind the
corporate form.” (Leek v. Cooper, supra, 194 Cal.App.4th at
p. 418; see Sonora Diamond Corp. v. Superior Court (2000)
83 Cal.App.4th 523, 539.) More recently, other courts have
rejected this authority, stating that the party seeking to hold a
defendant liable under an alter ego theory need not show
wrongful intent, but “that the alter ego’s acts caused an
inequitable result . . . .” (Triyar Hospitality Management, LLC v.
WSI (II)—HWP, LLP, supra, 57 Cal.App.5th at p. 642; see
Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership
(2013) 222 Cal.App.4th at p. 816.)
Laurie contends she did not engage in bad faith because
she had no duty to disclose the recission of the Pasadena house
sale to Maggie. Laurie’s argument again misapprehends the law.
(See Misik v. D’Arco, supra, 197 Cal.App.4th at p. 1074 [“fraud
[is] not required to apply the alter ego doctrine”].) Even if Laurie
did not have a duty to notify Maggie of the recission (and even if
WFG had to show Laurie engaged in bad faith), there was
substantial evidence Laurie deliberately kept RNA without
adequate capital to pay off the principal due on the loan. That

16
was sufficient, for purposes of the alter ego doctrine, to show bad
faith and an inequitable result. As the Supreme Court has
explained, “‘If a corporation is organized and carries on business
without substantial capital in such a way that the corporation is
likely to have no sufficient assets available to meet its debts, it is
inequitable that shareholders should set up such a flimsy
organization to escape personal liability. . . . [T]he policy of the
law [is] that shareholders should in good faith put at the risk of
the business unincumbered capital reasonably adequate for its
prospective liabilities. If the capital is illusory or trifling
compared with the business to be done and the risks of loss, this
is a ground for denying the separate entity privilege.’”
(Automotriz Del Golfo De California S. A. De C. V. v. Resnick
(1957) 47 Cal.2d 792, 797; see Remme v. Herzog (1963)
222 Cal.App.2d 863, 867.)
Here, the parties stipulated RNA had $488,500 in cash
after ETS rescinded the sale of the Pasadena property in January
2010. When RNA received the refund, Laurie knew RNA owed
Maggie $340,000 in principal on the loan, which RNA would have
to pay in approximately two years. Yet Laurie did not direct
RNA to repay Maggie or keep some of the proceeds from the
refund with RNA to cover the outstanding debt. The record does
not reflect where the $488,500 went, but it is clear it did not stay
with RNA.2 By April 2012 RNA had only $44,000 in its bank

2 Laurie testified, and the trial court found, RNA used the
refund to purchase and invest in other properties (even though
Laurie presented no documentary evidence to support her
testimony). Even if RNA used the money on other properties,
there was no evidence RNA retained title to the properties.

17
account, and Laurie presented no evidence RNA held any assets
other than the $44,000 after April 2012. For the next three years
RNA never had more than $50,000 in its account, and Laurie
routinely made purchases from the account that had no
documented business purpose. A reasonable inference from this
evidence was that, in order to avoid paying a known, outstanding
debt, Laurie deliberately chose to remove cash that RNA could
have used to pay the debt. (See Gomez v. Smith 54 Cal.App.5th
1016, 1026 [under implied-findings doctrine, “‘“‘[w]here a
statement of decision sets forth the factual and legal basis for the
decision, any conflict in the evidence or reasonable inferences to
be drawn from the facts will be resolved in support of the
determination of the trial court decision’”’”].) It would be
inequitable if WFG recovered less as a result of Laurie’s actions.
(See Triyar Hospitality Management, LLC v. WSI (II), supra,
57 Cal.App.5th at p. 642 [maintaining separate corporate liability
would cause an inequitable result where the company “never had
sufficient capital” to complete a proposed transaction underlying
the lawsuit and it was “highly unlikely [the company] would ever
have assets to satisfy the judgment”]; Relentless Air Racing, LLC
v. Airborne Turbine Ltd. Partnership, supra, 222 Cal.App.4th at
p. 816 [“it would be inequitable as a matter of law” to maintain
separate liability for a company where the principals used the
company’s funds “to pay their personal debts” and, since the
beginning of litigation, the company never had substantial assets
from which it could satisfy a judgment]; see also Butler America,
LLC v. Aviation Assurance Co., LLC, supra, 55 Cal.App.5th at
p. 139 [“[a] judgment debtor with an empty shell is easy to
crack”].)

18
 3. Substantial Evidence Did Not Support the
Finding Jamie Was an Alter Ego of RNA
Jamie contends the trial court erred in ruling she was
liable for the judgment against RNA under the alter ego doctrine.
Jamie has a point: Substantial evidence did not support the
court’s finding there was a unity of interest between Jamie and
RNA.
As discussed, factors relevant to the unity-of-interest
requirement include that the shareholder commingled funds and
other assets, diverted corporate funds or assets to non-corporate
uses, treated the assets of the corporation as his or hers,
disregarded legal formalities, and kept the corporation
undercapitalized to avoid paying its debts. (Blizzard Energy, Inc.
v. Schaefers, supra, 71 Cal.App.5th at p. 849). The problem for
WFG is that all of the evidence at trial showed Laurie, not Jamie,
was the person who performed each of these acts. The parties
stipulated that only Laurie had the authority to transfer or
borrow against RNA’s properties and that Jamie had no
knowledge of RNA’s purchase of the Pasadena property, the loan
from Maggie, or the recission. There was no evidence Jamie had
a debit card associated with RNA’s account or made any
purchases on behalf of RNA. WFG introduced only two checks
Jamie signed on behalf of RNA, but both had a documented
business purpose: One was a check to the California Franchise
Tax Board and one was a check to the California Secretary of
State. Each check referenced RNA’s Statement of Information.3

3 The trial court found Jamie performed “administrative
tasks for RNA over the years,” but the only evidence was that
Jamie signed the corporation’s governing documents and
documents filed with the Secretary of State.

19
 The only evidence potentially showing a unity of interest
between Jamie and RNA was the series of three checks totaling
$2,000 to RNA from an account jointly held by Laurie and Jamie
(each signed and endorsed by Laurie) and one check from RNA to
Jamie for $30,000 (also signed by Laurie). While there was no
evidence of the purpose of these payments, the evidence was still
insufficient to show the unity of interest necessary to find Jamie
was an alter ego of RNA. (See Kao v. Holiday, supra,
58 Cal.App.5th at p. 205 [trial court must find “such unity of
interest and ownership that the separate personalities of the
corporation and the individual no longer exist”]; Highland
Springs Conference & Training Center v. City of Banning (2016)
244 Cal.App.4th 267, 281 [“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.”].)
To hold an individual liable as an alter ego of a company,
usually that individual “must have been an actor in the course of
conduct constituting the ‘abuse of corporate privilege’ . . . .”
(United States Fire Ins. Co. v. National Union Fire Ins. (1980)
107 Cal.App.3d 456, 472.) That was not the case for Jamie.
Laurie directed essentially all the company’s transactions. Had
Jamie regularly received money from RNA, perhaps WFG might
have been able to show Jamie was an alter ego of RNA. But the
evidence showed Jamie only received one payment, and absent
evidence she was at least aware of or benefitted from Laurie not
using the company for a legitimate business purpose, substantial
evidence did not support the trial court’s implied finding there
was a unity of interest between RNA and Jamie. (See Highland
Springs Conference and Training Center v. City of Banning,
supra, 244 Cal.App.4th, at p. 281 [“courts must consider all of the

20
circumstances of the case in determining whether . . . to
impose alter ego liability”].)

C. The Trial Court Did Not Err in Ruling WFG Was
Entitled To Recover Under Equitable Subrogation

1. Applicable Law
Subrogation is “the substitution of another person in place
of the creditor or claimant to whose rights he or she succeeds in
relation to the debt or claim. [Citation.] It provides a method of
compelling the ultimate payment by one who in justice and good
conscience ought to make it—of putting the charge where it justly
belongs.” (Western Heritage Ins. Co. v. Frances Todd, Inc. (2019)
33 Cal.App.5th 976, 983 (Western Heritage), internal quotation
marks omitted; see State Farm General Ins. Co. v. Wells Fargo
Bank, N.A. (2006) 143 Cal.App.4th 1098, 1105 (State Farm).)
“In the case of insurance, subrogation takes the form of an
insurer’s right to be put in the position of the insured in order to
pursue recovery from third parties legally responsible to the
insured for a loss which the insurer has both insured and paid.
[Citation.] The right of subrogation is purely derivative. An
insurer entitled to subrogation is in the same position as an
assignee of the insured’s claim, and succeeds only to the rights of
the insured.” (Western Heritage, supra, 33 Cal.App.5th at p. 983,
internal quotation marks omitted; accord, State Farm, supra,
143 Cal.App.4th at p. 1106; see Garbell v. Conejo Hardwoods,
Inc. (2011) 193 Cal.App.4th 1563, 1571 [“subrogation does no
more than assign to the insurer the claims of its insured against
the legally responsible party”].)

21
 “‘While the insurer by subrogation steps into the shoes of
the insured, that substitute position is qualified by a number of
equitable principles. . . .’” (Western Heritage, supra,
33 Cal.App.5th at p. 984; see State Farm, supra, 143 Cal.App.4th
at pp. 1106-1107.) Even where, as here, the insured assigns its
causes of action to its insurer, the insurer still must show it is
entitled to equitable subrogation to recover against the
defendant. (See San Diego Assemblers, Inc. v. Work Comp for
Less Ins. Services, Inc. (2013) 220 Cal.App.4th 1363, 1368 [“‘“one
who asserts a right of subrogation, whether by virtue of an
assignment or otherwise, must first show a right in equity to be
entitled to such subrogation, or substitution”’”]; see also Meyers v.
Bank of America National Trust & Savings Association (1938)
11 Cal.2d 92, 96; Dobbas v. Vitas (2011) 191 Cal.App.4th 1442,
1446.)
“There are eight elements of an insurer’s cause of action for
equitable subrogation: ‘[1] the insured suffered a loss for which
the defendant is liable, either as the wrongdoer whose act or
omission caused the loss or because the defendant is legally
responsible to the insured for the loss caused by the wrongdoer;
[2] the claimed loss was one for which the insurer was not
primarily liable; [3] the insurer has compensated the insured in
whole or in part for the same loss for which the defendant is
primarily liable; [4] the insurer has paid the claim of its insured
to protect its own interest and not as a volunteer; [5] the insured
has an existing, assignable cause of action against the defendant
which the insured could have asserted for its own benefit had it
not been compensated for its loss by the insurer; [6] the insurer
has suffered damages caused by the act or omission upon which
the liability of the defendant depends; [7] justice requires that

22
the loss be entirely shifted from the insurer to the defendant,
whose equitable position is inferior to that of the insurer; and
[8] the insurer’s damages are in a liquidated sum, generally the
amount paid to the insured.’” (Pulte Home Corp. v. CBR Electric,
Inc. (2020) 50 Cal.App.5th 216, 229; see Western Heritage, supra,
33 Cal.App.5th at p. 983; Interstate Fire & Casualty Ins. Co. v.
Cleveland Wrecking Co. (2010) 182 Cal.App.4th 23, 33-34.) The
Kims contend RFG did not satisfy elements [1], [2], and [7].
In the trial court the Kims did not challenge WFG’s right to
bring this action in subrogation or argue WFG failed to prove any
of the elements of an insurer’s cause of action for equitable
subrogation. The Kims did not raise the issue in their trial brief,
in their request for a statement of decision, or in their objections
to the trial court’s proposed statement of decision. (See Hewlett-
Packard Co. v. Oracle Corp. (2021) 65 Cal.App.5th 506, 548 [“[a]s
a general rule, theories not raised in the trial court cannot be
asserted for the first time on appeal”].) To allow parties like the
Kims to raise such arguments for the first time on appeal is not
only “unfair to the trial court, but manifestly unjust to the
opposing litigant. Only when the issue presented involves purely
a legal question, on an uncontroverted record and requires no
factual determinations, is it appropriate to address new theories.”
Mattco Forge, Inc. v. Arthur Young & Co. (1997) 52 Cal.App.4th
820, 847, internal quotation marks and citations omitted.) And
even then, whether the reviewing court reaches purely legal
issues raised for the first time on appeal is discretionary.
(Meridian Financial Services, Inc. v. Phan (2021) 67 Cal.App.5th
657, 700; Wittenberg v. Bornstein (2020) 51 Cal.App.5th 556, 567.)
The Kims ask us to exercise our discretion here because,

23
according to them, whether WFG has an equitable right to
subrogation is a “question[ ] of law” based on “undisputed facts.”
For the first two elements they challenge ([1] and [2]), the
Kims are correct that the relevant facts are undisputed. The
problem for them, however, is that the undisputed facts are
against them: The insured, Maggie, suffered a loss for which the
defendant (RNA) was liable and for which the insurer (WFG) was
not primarily liable. For the third element—whether WFG’s
equitable position was inferior to that of RNA ([7])—the facts
were not undisputed, and it is not an issue of law we may review
on appeal.

2. RNA Is Liable for Maggie’s Loss, and WFG Was
Not Primarily Liable
The Kims argue that RNA was not liable for Maggie’s loss
and that WFG was primarily liable. According to the Kims,
because RNA did not agree to the recission, ETS (the foreclosure
trustee who rescinded the house sale), not RNA, was responsible
for Maggie’s loss. The Kims argue WFG also (or perhaps
alternatively) was “primarily responsible” for Maggie’s loss
because it had a continuing duty to review the public records of
the Pasadena property and the deed of trust that secured the
loan. Had WFG complied with that duty, the Kims contend,
WFG would have discovered the sale of the property had been
rescinded and would have notified Maggie of the recission, which
would have allowed Maggie to sue RNA while RNA still had
assets.
The Kims’ arguments do not persuade. It was undisputed
RNA took out a loan, had a legal duty to Maggie to pay back the
loan, and breached that duty by failing to do so. Regardless of

24
whether other parties also contributed to Maggie’s loss, there was
no dispute Maggie suffered a loss for which RNA is liable “as the
wrongdoer whose act or omission”—failing to repay the loan—
“caused the loss . . . .” (Pulte Home Corporation v. CBR Electric,
Inc., supra, 50 Cal.App.5th at p. 229.) WFG satisfied the first
element of its equitable subrogation cause of action.
It was also undisputed that WFG was not “primarily liable”
for Maggie’s loss. (Pulte Home Corporation v. CBR Electric, Inc.,
supra, 50 Cal.App.5th at p. 229.) Usually this element is only at
issue when multiple insurers are potentially liable for a covered
loss, and one insurer seeks to recover from the other. For
example, as between primary and excess insurers, “the primary
insurer is obligated to defend the insured and must bear 100
percent of the defense costs until the primary limits have been
exhausted. [Citations.] Thus, an excess insurer that pays
defense costs will frequently obtain a full recovery against the
primary insurer,” who is primarily liable for the loss for purposes
of equitable subrogation. (Maryland Cas. Co. v. Nationwide
Mutual Ins. Co. (2000) 81 Cal.App.4th 1082, 1089; see Fireman’s
Fund Ins. Co. v. Maryland Cas. Co. (1998) 65 Cal.App.4th 1279,
1298-1299.)
The Kims cite no authority that an insurer is “primarily
liable” for a loss when the insurer seeks to enforce subrogation
rights against a wrongdoer who caused the loss, rather than
against another insurer who (also) indemnified against the loss.
In any event, WFG is not primarily liable because its alleged
negligence in failing to discover the recission was not the primary
cause of Maggie’s loss; at most, WFG’s negligence prevented
Maggie from mitigating its damages caused in the first instance
by RNA’s misconduct. The purpose of the deed of trust on the

25
property was to secure the loan if RNA did not repay the loan.
True, WFG may have been a little careless in failing to
adequately research who held title to the property and failing to
discover the recission. But for Maggie to suffer any loss as a
result of WFG’s negligence, RNA first had to breach the note by
failing to pay back the principal. WFG was not primarily liable
for the loss. (See Fireman’s Fund Ins. Co. v. Morse Signal
Devices (1984) 151 Cal.App.3d 681, 686, 688 [where a premises
insurer brought a subrogation action against a fire and burglar
alarm company alleging the alarms “failed to function properly,”
the “primary cause of the loss [was] the creator of the fire or the
burglar,” and the alarm companies’ “alleged negligence [was]
secondary”]; Continental Ins. Co. v. Morgan, Olmstead, Kennedy
& Gardner, Inc. (1978) 83 Cal.App.3d 593, 604 [where a bank’s
insurer brought a subrogation action against a broker who had
purchased treasury bills stolen from the bank by a third party,
“the primary cause of the loss was the theft . . . of the treasury
bills,” and any negligence by the broker in failing to discover facts
regarding the theft was “secondary”].)

3. The Undisputed Facts Did Not Show WFG’s
Equitable Position Was Inferior to RNA’s Position
The Kims also argue the undisputed facts showed WFG’s
equitable position was inferior to RNA’s position. The facts on
this issue, however, were not undisputed.
“In comparing the relative positions of the parties,” for
purposes of determining which party has the superior equitable
position, “a court is required to determine who ultimately ought
to bear the loss. [Citation.] However, ‘there is no facile formula
for determining superiority of equities, for there is no formula by

26
which to determine the existence or nonexistence of an equity
except to the extent that certain familiar fact combinations have
been repeatedly adjudged to create an equity in the surety or the
third party. . . . [Ultimately] the right of subrogation “may be
invoked against a third party only if he is guilty of some wrongful
conduct which makes his equity inferior to that of the [surety or
insurer].”’” (State Farm, supra, 143 Cal.App.4th at p. 1112; see
Golden Eagle Ins. Co. v. First Nationwide Financial Corp., supra,
26 Cal.App.4th at p 171.) “[E]ach case comes down to the
question of fault of some kind,” although “not necessarily
negligence or proximate negligence.” (State Farm, at p. 1112; see
Hartford Acc. & Indem Co. v. All Am. Nut Co. (1963)
220 Cal.App.2d 545, 558.)
Although the Kims assert the facts were undisputed, the
parties dispute whether, and to what extent, WFG was negligent
in failing to discover the recission. (See Hernandez v. Jensen
(2021) 61 Cal.App.5th 1056, 1064 [on a negligence cause of
action, the element of “breach of duty” is “ordinarily [a]
question[ ] of fact”]; Minnegren v. Nozar (2016) 4 Cal.App.5th
500, 508 [“‘on the question of negligence or contributory
negligence of a party[,] . . . if the party involved did exercise
some care, the question of whether or not that care was all that
an ordinarily reasonable person would have taken under the
circumstances of the case continues to be a question of fact for
determination of the court or jury’”]; Lindstrom v. Hertz Corp.
(2000) 81 Cal.App.4th 644, 652 [“‘“[i]n general, the issue of a
defendant’s negligence presents a question of fact”’”].) Dawn
Weller, WFG’s claims officer, testified WFG would have received
a copy of the notice of recission in its “document bank,” which
WFG could have searched. The Kims argue WFG was negligent

27
because it failed to search the document bank after WFG received
a copy of the notice of recission. Weller also testified, however,
that its document bank is no more than “a mirror of the county’s
records” and that WFG does not search for the title records of a
property “after a policy has been issued” unless the insured
submits a request “for additional coverage” or tenders a claim.
(See State Farm, supra, 143 Cal.App.4th at p. 1113 [whether a
party fails to “adher[e] to certain prescribed procedures” is
relevant to whether the party has the superior equitable
position].)
The trial court never determined whether, or to what
extent, WFG was negligent, nor did the court exercise its
discretion in weighing the parties’ comparative levels of fault to
determine which party held a superior equitable position.4

4 Generally, an insurer has a superior equitable position to
that of the person who was “the direct cause of the loss (e.g., a
dishonest employee, burglar, or fire starter).” (State Farm,
supra, 143 Cal.App.4th at pp. 1112-1113.) “The insurer need only
show a causal connection between the direct wrongdoer’s act or
omission and the loss,” and the “direct wrongdoer, having caused
the loss, cannot be considered an innocent party.” (Ibid.) As one
treatise has explained, “[a]rguably where the subrogated claim is
based on breach of contract,” like WFG’s claim, “the breaching
party is directly responsible for the loss for purposes of the
superior equities doctrine.” (Croskey et al., Cal. Practice Guide:
Insurance Litigation (The Rutter Group) ¶ 9:61.11; see Fireman’s
Fund Ins. Co. v. Wilshire Film Ventures, Inc. (1997)
52 Cal.App.4th 553, 558-559 [insurer of leased camera equipment
had a superior equitable position to the lessee because the lessee
“was obligated to return the equipment or pay for it, . . . did
neither, and [was] therefore in breach of its contractual
obligation”].)

28
Therefore, there is nothing for us to review. (See Carter v. Pulte
Home Corp. (2020) 52 Cal.App.5th 571, 579 [trial court’s
determination whether a defendant’s equitable position is inferior
to an insurer’s is reviewed for abuse of discretion]; Die den v.
Schmidt (2002) 104 Cal.App.4th 645, 654 [because “the trial court
should be given the opportunity to balance the equities and
exercise its discretion,” reviewing court would “not consider
[doctrine of equitable subrogation] in the first instance”].)
Moreover, because RNA did not argue in the trial court its
equitable position was superior to WFG’s position, RNA deprived
WFG of the opportunity and incentive to present all evidence
relevant to its level of fault. The record also does not reflect
whether RNA held proceeds from the refund long enough after
the recission such that, even if WFG was negligent in failing to
discover the recission, Maggie could have recovered anything
from RNA had WFG discovered the recission within a reasonable
time and notified Maggie. Therefore, we decline to exercise our
discretion to consider the Kims’ argument for the first time on
appeal.

D. The Kims’ Remaining Arguments Are Meritless
The Kims raise several other arguments in their opening
brief, none of which has merit. First, the Kims argue the trial
court erred in failing to rule in its favor on its affirmative defense
of “failure to exercise ordinary care.” Although not entirely clear,
it appears the Kims intended to raise a comparative fault
defense. (See Yale v. Bowne (2017) 9 Cal.App.5th 649, 657.) In
their request for a statement of decision, the Kims asked the
court to find Maggie “fail[ed] to exercise due diligence in ensuring
that its loan was still secured” after RNA did not make the

29
balloon payment due at the end of the initial three-year term.
Comparative fault is not, however, a defense to a cause of action
for breach of contract. (Kransco v. American Empire Surplus
Lines Ins. Co. (2000) 23 Cal.4th 390, 406-407; Shaffer v. Debbas
(1993) 17 Cal.App.4th 33, 42; see Considine Co. v. Shadle, Hunt
& Hagar (1986) 187 Cal.App.3d 760, 770 [“where one party has
promised to perform a particular act, upon breach the injured
promisee should not face a comparative negligence defense”].)
Second, the Kims argue the trial court erred in declining to
rule in their favor on their affirmative defenses of failure to
mitigate damages, unclean hands, and failure to state a cause of
action.5 The Kims, however, did not raise these defenses in their
trial briefs or in their request for a statement of decision. When a
party requests a statement of decision under Code of Civil
Procedure section 632, “[f]ailure to request findings on specific
issues results in a waiver as to those issues.” (Atari Inc., v. State
Bd. of Equalization (1985) 170 Cal.App.3d 665, 675.) The Kims
forfeited these defenses. (See City of Coachella v. Riverside
County Airport Land Use Com. (1980) 210 Cal.App.3d 1277, 1292
[“Having failed to specify that the statement of decision should
address the issue of laches, the [defendant] is deemed to have
waived its right to object to the failure of the statement of
decision to do so.”].)

5 On appeal the Kims contend WFG did not state a cause of
action because they did not cause Maggie’s loss. This contention
is forfeited and meritless (at least as to Laurie). As discussed,
RNA caused WFG’s loss because it failed to repay the loan, and
substantial evidence supported the trial court’s finding Laurie
was liable for RNA’s conduct as an alter ego of RNA.

30
 Finally, the Kims contend the trial court erred in
calculating the amount of damages. Without citing any
applicable authority, the Kims assert that, because the loan
provided for a balloon payment due at the end of the three-year
term, no interest accrued on the outstanding principal after the
end of the term, which means, the Kims say, that all of RNA’s
payments after the end of the original three-year term should
have offset the outstanding principal owed on the loan. Put
another way, the Kims contend RNA received an interest-free
loan from Maggie after it was in default at the end of the three-
year term, which it could pay off at its leisure (or at least until
Maggie or WFG obtained a judgment).
The court correctly ruled, however, RNA’s payments to
Maggie “covered interest-only payments under the Note through
October 1, 2015.” The promissory note provided that RNA would
be in default if it did “not pay the full amount of each payment”
on its due date, including the balloon payment due at the end of
the three-year term. The note further provided that interest
would “be charged on unpaid principal until the full amount of
Principal [had] been paid” and that RNA would “pay interest at a
yearly rate of 12.000% . . . both before and after any default.”
(Italics added.) The trial court correctly ruled that interest on
the outstanding principal continued to accrue after the default
and that each of RNA’s payments to Maggie covered only
interest. (See Civ. Code, § 1639 [the mutual intention of the
parties at the time the contract if formed “is to be inferred, if
possible, solely from the written provisions of the contract”]; TRB
Investments, Inc. v. Fireman’s Fund Ins. Co. (2006) 40 Cal.4th 19,
27 [“[t]he clear and explicit meaning of contractual provisions,

31
interpreted in their ordinary and popular sense, . . . controls
judicial interpretation,” internal quotation marks omitted].)

DISPOSITION

The judgment is reversed. The trial court is directed to
enter a new judgment in favor of WFG and against RNA and
Laurie in the amount of $556,853.20, jointly and severally, and in
favor of Jamie and against WFG. The parties are to bear their
costs on appeal.

SEGAL, J.

We concur:

PERLUSS, P. J.

FEUER, J.

32