Premium Stones Trading v. AMS Stones Warehouse CA4/1
California Court of Appeal Sep 24, 2013 No. D061619Unpublished
Filed 9/24/13 Premium Stones Trading v. AMS Stones Warehouse CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
PREMIUM STONES TRADING D061619 CORPORATION,
Plaintiff, Cross-Defendant, and Respondent, (Super. Ct. No. 37-2010-00099871- CU-BC-CTL) v.
AMS STONES WAREHOUSE, INC.,
Defendant, Cross-complainant, and Appellant,
CARLA MCEWEN,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of San Diego County, Joel M.
Pressman, Judge. Affirmed in part, reversed in part, remanded with directions.
Fasel & Fasel, Frank R. Fasel; Law Offices of Yasmine Djawadian and Yasmine
Djawadian for Defendants and Appellants.
No appearance for Plaintiff and Respondent.
AMS Stones Warehouse, Inc. (AMS) and Carla McEwen (McEwen) appeal from a
judgment following a bench trial wherein the trial court found in favor of Premium
FBR Marble, Inc. (FBR), and Hikmet Aksel (Aksel) (AMS, McEwen, Faber, FBR, and
Aksel collectively referred to as Defendants) for breach of oral contract, goods sold and
delivered, open book account, account stated, and claim on dishonored checks. The
gravamen of the complaint involved Premium Stones's contention that AMS failed to pay
it pursuant to an oral consignment agreement. Premium Stones also alleged McEwen,
Faber, FBR, and Aksel were all alter egos of AMS.
AMS brought a cross-complaint against Premium Stones, Mauro Pitanga (Mauro),
and Claudia Pitanga (Claudia) for breach of contract, negligent misrepresentation,
intentional misrepresentation, accounting of joint venture, quantum meruit, and
promissory estoppel. AMS's primary contention was that it entered into a joint venture
with Premium Stones and Premium Stones breached that agreement by failing to infuse
cash into the joint venture and taking more than one-third of the profits of the joint
venture. AMS also claimed Mauro and Claudia were employees of Premium Stones,
who acted on the company's behalf.
The claims in both the operative complaint and the cross-complaint were tried in a
bench trial.
3
Premium Stones's Case
Mauro is president of Premium Stones. Premium Stones's business consists of
exporting granite from Brazil and selling it on consignment. Premium Stones's typical
consignment agreement involves providing a retailer with granite, and the retailer selling
the granite to the consumer and paying Premium Stones its costs plus 50 percent of the
profit.
Premium Stones started operating in 2007. At that time, it was incorporated in
Florida under the name Premium Stones Corporation. However, Premium Stones
Corporation's accountant, Derek Nakagawa (Nakagawa), advised Mauro to move the
company to California because all of the company's business was there. Premium Stones
moved to California and was incorporated under the name "Premium Stones Trading
Corporation" in 2008. Mauro added "Trading" to the company's name to make it "a little
bit different" and to better represent its style of business. When Premium Stones moved
to California, Nakagawa transferred all of Premium Stones Corporation's assets, debts,
and liabilities to Premium Stones. Premium Stones continued to serve the same clients as
Premium Stones Corporation and operated under previously existing consignment
agreements entered into by Premium Stones Corporation.
In early 2007, Mauro's friend introduced him to McEwen. McEwen was the
owner of Brazil Stones located at 7988 Miramar Road in San Diego. The physical
location of Brazil Stones consisted of a spacious yard with "slabs" of material like granite
as well as a large doublewide trailer containing an office, kitchen, and bathroom.
4
Premium Stones and Brazil Stones entered into a written consignment agreement
(the Written Agreement).1 Under the Written Agreement, McEwen selected the granite
she wanted from Premium Stones based on the granite Premium Stones had available at
that time. Premium Stones then delivered the selected granite to Brazil Stones. Upon
delivery, McEwen inspected the granite to ensure that she received what she ordered and
provided Premium Stones with confirmation that she had received the material ordered.
Mauro informed McEwen of the cost of the granite. Brazil Stones then sold the granite
and paid Premium Stones the cost plus 50 percent of the profit after the sale. Mauro
returned to Brazil Stones's warehouse every 15 days or so to check on the amount of
granite sold. McEwen sometimes provided Mauro with written confirmation of what was
sold and for what price, and at other times, McEwen informed Mauro verbally of the
sales.
Shortly after Premium Stones and Brazil Stones began doing business, Brazil
Stones changed its name to AMS. Mauro visited Brazil Stones's yard at 7988 Miramar
Road and saw that the yard contained a sign indicating that the company was now called
AMS. Brazil Stones did not provide any written notice to Premium Stones that it was
changing its name nor did it ask Premium Stones to remove any of its unsold granite.
Mauro noticed that the employees were the same at AMS as they were at Brazil Stones.
McEwen told Mauro that she changed Brazil Stones's name to AMS because Brazil
Stones had owed "a bunch of people" money. However, she explained to Mauro that
1 Although the Written Agreement was a trial exhibit that was admitted into evidence, AMS and McEwen did not include it in their appellant's appendix. 5
AMS and Brazil Stones were the same company and AMS would continue to sell
Premium Stones's granite. McEwen also informed Mauro that AMS was her company
and she would continue to operate like nothing had changed.
When Brazil Stones changed its name to AMS, McEwen began working with
Aksel. Aksel was McEwen's partner and had an ownership interest in AMS. He also had
an ownership interest in Faber and FBR, both of which operated similar businesses to
AMS.2 Mauro met Aksel when he learned that Brazil Stones had changed its name to
AMS.
At some point, AMS experienced financial difficulties and fell behind on its
payments to Premium Stones. Premium Stones maintained an account statement that
showed invoices, relating to granite provided to AMS, which had been paid or partially
paid. The account statement illustrated that Premium Stones had billed AMS a total of
$230,237.22 and had an open balance of $119,191.62. The account statement was
created by Nakagawa using a computer accounting system called QuickBooks.
Nakagawa created the account statement for AMS in his usual course of business by
inputting information regarding the purchases of inventory, customer sales, deposits to
the bank, and payment of bills based on information provided to him, such as bills of
lading, invoices, and purchase orders.
During the course of their business relationship, AMS provided Premium Stones
with four checks that were returned for insufficient funds. The first check, numbered
2 Premium Stones unsuccessfully sued Faber and FBR as alter egos of AMS; thus, we do not include any substantive discussion of Faber or FBR. 6
1230, was made payable to Premium Stones in the amount of $6,500 and was dated
February 25, 2008. On the face of that check was a stamp stating: "Return Reason - A
Not Sufficient Funds." The second check, numbered 2077, was made payable to
Premium Stones in the amount of $3,000 and was dated June 20, 2008. On the face of
that check was a stamp providing: "Return Reason - S Refer to Maker." The third check,
numbered 2085, was made payable to Premium Stones in the amount of $6,112.71 and
was dated June 27, 2008. On the face of that check was a stamp avowing: "Return
Reason - A Not Sufficient Funds." The fourth check, numbered 1038, was made payable
to AMS in the amount of $800 and dated September 2008 (the day was illegible). On the
face of that check was a stamp affirming: "Return Reason - C Stop Payment." Premium
Stones provided additional evidence that it did not receive funds to cover any of the
returned checks.
McEwen also wrote a check, numbered 1045, on her personal account made
payable to Premium Stones in the amount of $4,000 and was dated July 8, 2008. The
check was returned for insufficient funds and bore the stamp on the face of the check
stating: "Return Reason – A Not Sufficient Funds." Premium Stones provided additional
evidence that it did not receive funds to cover McEwen's returned check.
McEwen drove one of AMS's company cars, a BMW. She would use an AMS
credit card to buy gas. McEwen also used the AMS credit card to purchase: meals at
restaurants like Outback Steakhouse, McDonald's, and In-N-Out; supplies and materials
from Home Depot; groceries, children's toys, clothing, and veterinary services for
McEwen's dog. AMS's bank records also indicated that mortgage payments were made
7
from the account, but AMS did not have a mortgage. McEwen also caused AMS to make
a $2,000 payment to the Kabbalah Centre. In addition, AMS's bank records showed that
checks were written to McEwen and on McEwen's behalf in relation to real estate
transactions that did not involve AMS. Also, McEwen wrote a $5,000 check on behalf of
AMS for rent.
Defendants' Case
Defendants challenged Premium Stones's case with four primary theories. First,
they argued they never did business with Premium Stones because Premium Stones was
incorporated in 2008 after the dispute arose. Instead, Defendants contend they only did
business with Premium Stones Corporation, a Florida corporation that no longer existed
at the time of the trial. Second, Defendants argued that all of Premium Stones's activities
were intended to fraudulently obtain work visas for Mauro and Claudia. The trial court
did not allow any evidence on this matter although Defendants tried numerous times to
offer such evidence. Therefore, we omit any discussion of this theory. Third, Defendants
claimed Premium Stones's employees created purchase orders on AMS's computers; thus,
the purchase orders produced at trial were shams and did not originate from AMS.
Finally, Defendants claimed that they paid Premium Stones far more money than
Premium Stones was seeking in the suit. In other words, there was no open balance.
Aksel handled the "financials" for AMS. Aksel admitted that Premium Stones
Corporation and AMS entered into an oral agreement, but characterized the agreement as
a joint venture. Aksel described the agreement as requiring Premium Stones Corporation
8
to provide granite to AMS, which AMS would sell and pay Premium Stones Corporation
its costs plus one-third of any profits.
Aksel, however, testified that the joint venture agreement never was reduced to
writing despite the parties' attempts to do so. In one of the draft agreements that Aksel
believed McEwen drafted, the draft agreement made clear that liabilities AMS owed to
Premium Stones in the amount of $119,998 would not be paid if the parties agreed to the
joint venture. Although Aksel admitted the $119,998 amount came from AMS's
QuickBooks system, he testified that its profit and loss statements were unreliable as
were some of AMS's inventory and sales reports. In other words, Aksel claimed the
$119,998 listed as a liability AMS owed Premium Stones was not accurate.
Aksel testified that when he made payments to Premium Stones, they were not
related to any invoice. He simply made payments to Premium Stones by check when
Premium Stones requested a check, but the understanding was that Premium Stones
would not deposit the check until AMS collected the funds from AMS's customers.
Aksel testified that AMS had a record of the total amount of payments made to Premium
Stones, but AMS did not produce any such record. Aksel agreed this was true despite the
fact that AMS's accounting software (QuickBooks) had the ability to produce such a
report.
McEwen testified that she sometimes told people she was an owner of AMS
because it was easier to explain than her claim that her mother was an owner and
McEwen had power of attorney over her mother's assets. McEwen took the position that
she was only AMS's employee. She also testified that all her credit card charges with
9
AMS's credit card were for business purposes. However, McEwen admitted that she used
AMS's bank accounts for personal expenses, but she reimbursed those accounts. She
provided no documents to support this testimony.
In addition, McEwen explained that the $72,787 of cash withdrawals from AMS's
bank account was used to pay employees and vendors. McEwen also claimed she made
several payments in cash to Premium Stones, but did not have any documents proving
such.
The Trial Court's Findings
After hearing closing arguments, the trial court granted Premium Stones's motion
for a nonsuit on the cross-complaint. In granting the motion, the court noted that the "the
cross-complainants, in trying to establish the elements of their causes of action lack total
credibility that there was any agreement whatsoever."
The trial court asked Premium Stones's counsel to draft a statement of decision
and provided the following guidance:
"My ruling in this case is and will turn on the credibility of the witnesses. [¶] I have listened to the testimony of the Defendants in this case, and I find each of the individuals to be incredible. I have never – well, that's not true, I can't say 'never,' but the testimony of Ms. McEwen is incredible, her conduct inappropriate, he-she. Well, anyway, I have listened to the explanation of the documents which she purported to deny. [¶] The Defendants did not produce any documents other than attack the Plaintiff's documents and say that they were unreal and unreliable. There were no corporate documents expressed. So, in terms of credibility, I have a list that I will be utilizing when we go review the statement of decisions that are proposed. [¶] As to the alter ego allegations. My tentative is this that judgment clearly is against AMS Stones Warehouse, Inc., a California corporation. It is [clear] to me that Carla McEwen is, in fact, and has, in fact used AMS Stones Warehouse Inc. as an alter
10
ego. She's used the corporation as her personal piggy bank. The cash deposits, the cash that's been withdrawn from ATM, the purchases for clothes, food, all were for personal purposes, all by someone who had the unfettered access to the accounts and she used those freely. And I've gone through the analysis and the criteria and I think that if there was any case that has met the alter ego criteria, Ms. McEwen meets that criteria with AMS Stones."
Premium Stones submitted a proposed statement of decision. The trial court
signed the proposed statement of decision with minor changes not relevant to any of the
issues raised here. Defendants filed an objection to the court's statement of decision
arguing that Defendants were denied an opportunity to propose a statement of decision or
comment on Premium Stones's proposed statement of decision. The court subsequently
entered judgment. AMS and McEwen appealed.
DISCUSSION
I
AMS AND MCEWEN'S CONTENTIONS
AMS and McEwen contend that substantial evidence does not support the
judgment. Specifically, they maintain: (1) the evidence showed Premium Stones lacked
standing to sue and (2) the evidence was insufficient to show a breach of oral agreement,
a cause of action for goods sold and delivered, a claim for open book account, a cause of
action for account stated, a claim on dishonored checks, and that McEwen was AMS's
alter ego.
A. Standard of Review
"In reviewing the sufficiency of evidence on appeal, we resolve all conflicts in
favor of the prevailing party and we indulge all legitimate and reasonable inferences to
11
uphold the verdict if possible. 'It is an elementary, but often overlooked principle of law,
that when a verdict is attacked as being unsupported, the power of the appellate court
begins and ends with a determination as to whether there is any substantial evidence,
contradicted or uncontradicted, which will support the conclusion reached by the
jury. . . .' [Citation.]" (Ortega, supra, 64 Cal.App.4th at p. 1043.) Our review is not
limited to appraising " 'isolated bits of evidence selected by the [appellant].' " (Bowers v.
Bernards (1984) 150 Cal.App.3d 870, 873.) We are required to accept all evidence
which supports the successful party, disregard the contrary evidence, and draw all
reasonable inferences to uphold the verdict. (Minelian v. Manzella (1989) 215
Cal.App.3d 457, 463.) Thus, it is not our role to reweigh the evidence, redetermine the
credibility of the witnesses, or resolve conflicts in the testimony, and we will not disturb
the judgment if there is evidence to support it. (Reichardt v. Hoffman (1997) 52
Cal.App.4th 754, 766; see Leff v. Gunter (1983) 33 Cal.3d 508, 518 (Leff).) Credibility is
an issue of fact for the finder of fact to resolve (Johnson v. Pratt & Whitney Canada, Inc.
(1994) 28 Cal.App.4th 613, 622), and the testimony of a single witness, even that of a
party, is sufficient to provide substantial evidence to support a finding of fact (In re
Marriage of Mix (1975) 14 Cal.3d 604, 614). "The ultimate test is whether it is
reasonable for a trier of fact to make the ruling in question in light of the whole record."
(Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 652.) Because Premium
Stones was the prevailing party at trial, we review the evidence in a light most favorable
to it. (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 787.)
12
Although AMS and McEwen raise a substantial evidence challenge, they fail to
cite appropriately to the record to mount such a challenge. They do not provide us with
the evidence that ostensibly supports the judgment and explain how this evidence
ultimately falls short in supporting the judgment. Instead, AMS and McEwen focus on
evidence they provided during trial. However, the trial court determined that their
evidence, especially Aksel's and McEwen's testimony, was unbelievable. We cannot
reweigh the evidence as AMS and McEwen impliedly urge us to do. (See Scott v. Pacific
Gas & Electric Co. (1995) 11 Cal.4th 454, 465.)
B. Premium Stones's Standing
AMS and McEwen contend that Premium Stones lacks standing to sue. They
argue that any business AMS conducted was with Premium Stones Corporation, a Florida
corporation, that was "dissolved at all times during said litigation." As such, AMS and
McEwen contend that Premium Stones Corporation was the real party in interest, and
Premium Stones, a California corporation, was not the proper plaintiff. We are not
persuaded.
Mauro testified that, on Nakagawa's suggestion, he moved Premium Stones
Corporation from Florida to California. All of Premium Stones Corporation's business
was in California. He renamed the entity Premium Stones Trading Corporation. When
Premium Stones Corporation moved to California, Mauro, through Nakagawa,
transferred all its assets, debts, and liabilities to Premium Stones. The new Premium
Stones continued to serve the same clients as the former Premium Stones Corporation
13
and operated under previously existing consignment agreements entered into by Premium
Stones Corporation.
Further, it was apparent that Aksel and McEwen were aware that Premium Stones
Corporation was operating as Premium Stones. They tried to negotiate a joint venture
agreement between Premium Stones and AMS. Indeed, AMS cross-complained against
Premium Stones for breach of an alleged joint venture agreement.
In short, substantial evidence shows that Premium Stones Corporation moved to
California, changed its name and continued to do business with the same customers as
before. And Aksel and McEwen drew no distinction between Premium Stones
Corporation and Premium Stones in their business dealings, except that they attempted to
negotiate a joint venture with Premium Stones only.
AMS and McEwen contend, even if we determine Premium Stones assumed all
the liabilities and assets of Premium Stones Corporation, Premium Stones still lacked
standing to sue on behalf of Premium Stones Corporation. (See J.C. Peacock, Inc. v.
Premium Stones Corporation and Brazil Stones entered into a written consignment
contract whereby Premium Stones Corporation would provide Brazil Stones with slabs of
granite, and after Brazil Stones sold the slabs, it would pay Premium Stones Corporation
its costs plus half the profits. When Brazil Stones changed its name to AMS, McEwen,
15
on behalf of AMS, confirmed that AMS would continue to do business with Premium
Stones Corporation under the terms of the written agreement. Premiums Stones
Corporation subsequently changed its name to Premium Stones Trading Corporation and
continued to do business with AMS.
AMS and McEwen argue there was no contract because Premium Stones did not
prove a "meeting of the minds": there was a disagreement between the parties regarding
the amount AMS would pay Premiums Stones. "Evidence" of this disagreement is found
in the testimony of Aksel and McEwen. The court, however, determined their respective
testimony was unreliable. The court believed Mauro's testimony that McEwen agreed to
an oral contract according to the terms testified to by Mauro. One witness's testimony
can establish substantial evidence. (See In re Marriage of Mix, supra, 14 Cal.3d at
p. 614.) Despite the urging of AMS and McEwen, we cannot reevaluate witness
credibility or reweigh evidence on appeal. (Leff, supra, 33 Cal.3d at p. 518.)
We also are satisfied that substantial evidence shows Premium Stones proved its
performance under the oral contract. It offered Mauro's testimony regarding the delivery
of slabs of granite to AMS as well as purchase orders from AMS confirming the granite
received, Premium Stones's invoices, and other documentary evidence showing that
Premium Stones delivered granite slabs to AMS. McEwen's and AMS's challenge goes
to the weight of the evidence considered by the trial court. They argue that AMS did not
16
create the purchase orders, some of the documents were illegible,3 and other documents
were unreliable. It bears repeating that we do not reweigh the evidence on appeal. (Leff,
supra, 33 Cal.3d at p. 518.)
In addition, there was substantial evidence that AMS breached the oral contract
and Premium Stones was damaged. Premium Stones offered an account statement
showing an unpaid balance of $119,191.62. This amount was close to the amount of
liability AMS owed Premium Stones as set forth in a document created by McEwen
based on AMS's records. Further, Premium Stones provided evidence through
Nakawaga's testimony regarding the creation of the account statement and how the
outstanding balance was calculated.
AMS and McEwen challenge the account statement, arguing that it contained the
date "August 1, 2011" and time "6:11 p.m." on the top left corner indicating it was made
"nearly eleven months after the lawsuit was filed." However, this is an argument that
needed to be made to the trial court. AMS and McEwen had the opportunity to probe this
issue during the cross-examination of Mauro and Nakagawa. They did not sufficiently do
so, and there is nothing in the record supporting their argument now. Perhaps, the date
and time stamp on the document indicate when that spreadsheet was printed. Maybe the
date and time stamp are incorrect. On this record, we do not know. As such, we accept
3 There only appears to have been one document admitted into evidence where Defendants objected that it was illegible, but the court admitted only the first page of the document, which was legible. 17
the trial court's reliance on the account statement and consider it substantial evidence of
the amount AMS owed Premium Stones.
Like Premium Stones's claim for breach of oral contract, we are satisfied that
substantial evidence supports the trial court's finding in favor of Premium Stones on its
causes of action for goods sold and delivered and open book. These claims are common
counts. (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 553, p. 680.) "The only
essential [elements] of a common count are '(1) the statement of indebtedness in a certain
sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.'
[Citation.]" (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.) Here, the
same evidence that supports Premium Stones's claim for breach of oral contract supports
these common counts.
In summary, substantial evidence supports the trial court's findings in favor of
Premium Stones that it proved its claims for breach of oral contract, goods sold and
delivered, and open book.
D. Account Stated
"The essential elements of an account stated are: (1) previous transactions
between the parties establishing a relationship of debtor and creditor; (2) an agreement
between the parties, express or implied, on the amount due from the debtor to the
creditor; (3) a promise by the debtor, express or implied, to pay the amount due." (Zinn
v. Fred R. Bright Co. (1969) 271 Cal.App.2d 597, 600.) AMS and McEwen assert that
the evidence does support the second element of this cause of action. We agree.
18
There is nothing in the record indicating an agreement between the parties that
AMS would pay Premium Stones a set amount. Although Premium Stones's spreadsheet
and AMS's own documents indicate amounts owed that are close to the same number,
they do not match. No other evidence offered at trial shows that the parties agreed on the
exact amount AMS owed Premium Stones. Thus, substantial evidence does not support
the trial court's finding that Premium Stones proved its cause of action for account stated.
E. The Dishonored Checks
Premium Stones brought claims based on five dishonored checks. Although we
are satisfied that Premium Stones proved that each check was returned for insufficient
funds, we agree with AMS and McEwen that Premium Stones was not entitled to treble
damages under Civil Code section 1719, subdivision (a)(2). That subdivision allows the
payee to recover treble damages capped at $1,500 if the payee sends written demand by
certified mail to the person who passed the check advising him or her that if he or she
does not pay the amount of the check within 30 days from the date of the written demand,
he or she could be liable for treble damages. (Civ. Code, § 1719, subd. (a)(2).)
There is nothing in the record indicating that Premium Stones proved that they
made the required mailings. We note that copies of what purports to be the required
mailings are attached to Premium Stones's complaint, but neither letter was admitted at
19
trial. Without proof of the mailings, Premium Stones was not entitled to treble damages
and the judgment as to the award of treble damages must be reversed.4
F. Alter Ego
The trial court found that McEwen was the alter ego of AMS. McEwen
challenges this finding, arguing it is not supported by substantial evidence. Specifically,
McEwen argues that there was no evidence that she was anything more than an employee
of AMS. She also contends that, even if she was an owner of AMS, there was no
evidence supporting any of the factors warranting an alter ego finding. We disagree.
A corporation is ordinarily regarded as a legal entity, separate and distinct from its
shareholders, officers, and directors. (Sonora Diamond Corp. v. Superior Court ( 2000)
83 Cal.App.4th 523, 538 (Sonora).) Nonetheless, a corporate identity may be
disregarded "where an abuse of the corporate privilege justifies holding the equitable
ownership of a corporation liable for the actions of the corporation." (Ibid.) Alter ego
liability affords relief when "some conduct amounting to bad faith makes it inequitable
for the corporate owner to hide behind the corporate form." (Id. at p. 539.)
4 AMS and McEwen insist that Premium Stones was awarded damages equaling the entire open balance, which included the amount of the returned checks. AMS and McEwen therefore argue that any damages awarded for the dishonored checks are improper "double" damages. We disagree. The judgment does not award Premium Stones both the amount of the open book in addition to the amount of the checks. Instead, in regard to the dishonored checks, the court awarded Premium Stones treble damages under Civil Code section 1719, subdivision (a)(2) only. These damages are in addition to the amount of the checks, which the court did not award Premium Stones in addition to the damages for the open book. The treble damages would have been proper if Premium Stones had proven the required mailing occurred. 20
Two conditions must be met to find alter ego liability: (1) "[T]here 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"; and
(2) if the acts in question are treated as those of only the corporation, the result will be
inequitable. (Sonora, supra, 83 Cal.App.4th at p. 538.)
Among the factors to be considered in applying the alter ego doctrine are
(1) commingling of funds and other assets, (2) the holding out by one entity that it is
liable for the debts of the other, (3) identical equitable ownership in the two entities, (4)
use of the same offices and employees, (5) use of one entity as a mere shell or conduit for
the affairs of the other, (6) inadequate capitalization, (7) disregard of corporate
formalities, (8) lack of segregation of corporate records, and (9) identical directors and
officers. (Sonora, supra, 83 Cal.App.4th at pp. 538-539.) "No one characteristic
governs, but the courts must look at all the circumstances to determine whether the
doctrine should be applied." (Id. at p. 539.) The trial court's alter ego finding is reviewed
for substantial evidence. (Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210
Cal.App.2d 825, 837.)
McEwen's first argument challenging the court's finding that she is an alter ego of
AMS rests on a faulty premise: there was no evidence that McEwen was anything more
than an employee of AMS. This is untrue. The only evidence presented at trial that
McEwen was an employee came from the testimony of Aksel and McEwen. The court
found such testimony unbelievable.
21
To the contrary, Premium Stones presented substantial evidence supporting the
conclusion that McEwen was an owner of AMS. Mauro testified that McEwen told him
she was an owner. McEwen had a company credit card, signed company checks,
withdrew money out of AMS's bank account, and attempted to make a payment from her
personal account on behalf of AMS. When Premium Stones and AMS were negotiating a
joint venture, McEwen was a signatory on all the draft documents and mentioned by
name in the documents. McEwen even admitted that she told people she was an owner of
AMS.
Further, we are satisfied that substantial evidence supports a unity of interest and
ownership between AMS and McEwen that the separate personalities of AMS and
McEwen do not in reality exist. In addition to the evidence offered to show McEwen was
an owner of AMS, Premium Stones presented evidence that (1) McEwen used the AMS
credit card to buy personal items, such as clothing, groceries, and meals; (2) AMS's funds
were used to make mortgage payments for property not owned by AMS and Aksel had no
knowledge of those payments; and (3) McEwen withdrew cash from AMS's bank account
for personal use. Also, the court noted that AMS never produced any corporate
documents. Moreover, although asked several times regarding the capitalization of AMS
at its creation, none of the witnesses questioned (Aksel and McEwen) were able to
provide coherent testimony about its capitalization, warranting the inference that the
company was not sufficiently capitalized.
McEwen ignores most of this evidence. For the evidence she does acknowledge,
McEwen argues about the weight of the evidence. For example, she claims that Premium
22
Stones did not sufficiently cross-examine her about the credit card charges. Again, this
argument goes to the weight of the evidence. Premium Stones raised the question of the
credit card charges in its examination of Aksel. McEwen tried to explain away the
questionable charges when she was questioned by her attorney, but the trial court did not
believe her. In conducting a substantial evidence review, we must accept the fact finder's
credibility determinations. (See Johnson v. Pratt & Whitney Canada, Inc., supra,
28 Cal.App.4th at p. 622.) As we discuss above, we cannot reweigh the evidence.
(Reichardt v. Hoffman, supra, 52 Cal.App.4th at p. 766.) This is precisely what McEwen
asks us to do.
Finally, substantial evidence supports the second prong necessary to invoke alter
ego liability. Here, it is apparent that AMS lacked funds. They owed Premium Stones
over $100,000. If the court did not find McEwen was the alter ego of AMS, it leads to
the possibility that any judgment against AMS would go unsatisfied. While this in itself
does not create an inequitable result, under the circumstances here, it is apparent that
McEwen's conduct at least partly led to AMS's financial woes. Put differently, a finding
of no alter ego liability would sanction McEwen's behavior, which, in the words of the
trial court, consisted largely of treating AMS "as her personal piggy bank." The trial
court's finding of alter ego liability thus prevented an inequity.
DISPOSITION
The judgment is reversed as to the claims for account stated and the award of
treble damages for the dishonored checks. The judgment is otherwise affirmed. We
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remand this matter to the trial court for further proceedings consistent with this opinion,
if necessary. The parties shall bear their own costs on appeal.
HUFFMAN, Acting P. J.
WE CONCUR:
HALLER, J.
O'ROURKE, J.
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AI Brief
AI-generated · verify before citing
Holding. The court affirmed the judgment in favor of Premium Stones for breach of oral contract and alter ego liability, but reversed the judgment regarding the account stated claim and the award of treble damages for dishonored checks.
Issues
Whether substantial evidence supports the trial court's judgment in favor of Premium Stones.
Whether Premium Stones had standing to sue as a successor to Premium Stones Corporation.
Whether the evidence supports the finding that Carla McEwen was the alter ego of AMS Stones Warehouse, Inc.
Whether the evidence supports the award of treble damages for dishonored checks and the claim for account stated.
Disposition. Affirmed in part, reversed in part, remanded with directions.
Quotations verified verbatim against the opinion
“We agree that substantial evidence does not support the court's finding in favor of Premium Stones on the claim for account stated or the award of treble damages for the dishonored checks, and we reverse the judgment as to these two claims.”