Favila v. Souther CA2/7

Filed 1/21/15 Favila v. Souther CA2/7 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SANDRA CORRALES FAVILA, as B253740 Executor, etc., et al., (Los Angeles County Plaintiffs and Respondents, Super. Ct. No. BC379462)

v.

RALEIGH SOUTHER et al.,

Defendants and Appellants.

APPEAL from a judgment of the Superior Court of Los Angeles County, Deirdre Hill, Judge. Affirmed as modified. Law Offices of Carlos F. Negrete and Carlos F. Negrete for Defendants and Appellants. James K. Cameron & Associates, James K. Cameron; Law Offices of Gary R. Wallace and Gary R. Wallace, for Plaintiffs and Respondents. ________________________

Raleigh Souther appeals from an amended judgment, entered following remand by this court in Sandra Corrales Favila, as Executor etc. v. Souther (Oct. 23, 2012, B230264) (nonpub. opn.) (Souther I), awarding the Estate of Richard Corrales (Estate), through its executor Sandra Corrales Favila, $1,169,514 in compensatory damages for lost income generated by the use of assets of Motion Graphix, Inc. that had been wrongfully transferred by Souther to Get Flipped, Inc., as well as $2,125,238.70 in punitive damages, and imposing a constructive trust in favor of the Estate and against Souther and Get Flipped on all the assets of Motion Graphix transferred to Get Flipped. On appeal Souther contends, having elected imposition of a constructive trust as a remedy for the misappropriation of the Motion Graphix assets, the Estate is not entitled to any award of compensatory damages with respect to those assets. In addition, Souther contends the constructive trust imposed by the trial court improperly applies to 100 percent of the assets of Motion Graphix wrongfully transferred to Get Flipped, rather than just the 51 percent to which the Estate is entitled. We disagree with Souther’s first point, but agree (as does the Estate) with the second. Accordingly, we modify the judgment to limit the reach of the constructive trust and affirm the judgment as modified. FACTUAL AND PROCEDURAL BACKGROUND The history of the business relationship between Souther and Richard Corrales, a photographer and inventor, their joint founding and operation of Motion Graphix, and the two men’s ultimate estrangement, including Souther’s creation of Get Flipped (wholly owned by Souther and his wife) and the sale of Motion Graphix’s assets, including its intellectual property, to the new company is detailed in Souther I. As we discussed, in a complaint filed in October 2007 against Souther and Get Flipped, the Estate alleged Corrales still owned 51 percent of the shares of Motion Graphix when he died in November 2005; those shares passed to the Estate; the Estate never approved Souther’s February 2007 sale of Motion Graphix’s assets to Get Flipped or the March 2007 dissolution of Motion Graphix; the fair market value of Motion Graphix’s intellectual property was between $8 and $12 million; and Souther had engaged in various acts of