Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BS101025 Terry A. Green, Judge.
Law Offices of James A. Kim and James A. Kim for Defendants and Appellants.
Gubler, Koch, Degn & Gomez and Thomas W. Degn for Plaintiff and Respondent.
WOODS, Acting P. J.
Appellants William Kang and Andrew Kang timely appeal a judgment against them in the amount of $365,551.85 plus interest and fees. Appellants contend the Los Angeles County Superior Court erred in allowing them to be named as additional judgment debtors in connection with a case filed in an Alabama court originally naming only U & C America Corporation as a judgment debtor. We conclude that the superior court properly added appellants as judgment debtors under California Code of Civil Procedure sections 187 and 1710.10 et seq. We affirm.
All statutory references are to the Code of Civil Procedure.
FACTUAL AND PROCEDURAL SYNOPSIS
I. The Original Alabama Case
On September 14, 2005, respondent Cottonseed, LLC, obtained a judgment against U & C America Corporation, a California corporation doing business internationally, in the Circuit Court of Lawrence County, Alabama (Original Alabama Judgment) in the amount of $365,551.85. Pursuant to section 1710.25, respondent domesticated this judgment against only U & C America Corporation in California on January 6, 2006, in the amount of $369,276.52 which included accrued fees and costs (Original California Judgment). The underlying Original Alabama Judgment and the corresponding Original California Judgment are not contested on appeal.
Upon being deemed liable for the Original California Judgment, U & C America Corporation ceased doing business, which made it difficult for respondent to collect the $369,276.52 as a judgment creditor. Respondent saw these actions as an attempt to become judgment proof in order to avoid paying the Original Alabama Judgment so it sought to name other individuals and corporations to collect the judgment. Respondent subsequently filed an amended complaint in Alabama (Second Amended Complaint) to include appellants on an alter-ego theory since appellants seemed to be acting as principals for U & C America Corporation by doing the same business as U & C America Corporation under different company names.
Respondent moved to amend the Original Alabama Judgment and served appellants with the Second Amended Complaint, which added both appellants as judgment-debtors, at their Los Angeles place of business. Respondent made three attempts to serve the summons and Second Amended Complaint on appellants during business hours on August 9, 10, and 11, 2006. Respondent served via substituted service on a responsible person in the Crenshaw office, Gary Kang, appellants’ brother, on August 11, 2006. Respondent mailed a copy of the summons and Second Amended Complaint via first class mail. Appellant William Kang then attempted to settle the debt via phone conversation with respondent and an e-mail to respond.
II. The New Alabama Judgment
Appellants did not attend the second Alabama proceeding based on the Second Amended Complaint to add appellants as judgment debtors. Consequently, the Alabama court accepted respondent’s theory that appellants were liable for the debts of U & C America Corporation because they acted as alter-egos of the corporation. The Alabama court entered a default judgment (Second Alabama Judgment) against appellants on November 15, 2006. Respondent then sought to have the Original California Judgment amended to reflect the new Second Alabama Judgment. Respondent attempted to use the same type of judicial council forms that it used to obtain the Original California Judgment to reflect that appellants were added as judgment debtors in the Alabama court. The court clerk rejected this application with instructions that respondent needed to amend the Original California Judgment by a noticed motion and not merely by filing the same judicial council form used to get the Original California Judgment. Respondent followed the court’s directions and filed a noticed motion to amend the sister-state judgment to name appellants as additional judgment debtors under section 187 and sections 1710.10 et seq., which govern the entry of sister-state judgments.
The motion simply desired to reflect the change in the named judgment debtors pursuant to the Second Alabama Judgment. Appellants opposed the motion with a brief, but again failed to appear and argue their case at the hearing. As a result, the court granted respondent’s motion to add appellants as judgment debtors. Appellants then filed a motion to set aside the judgment. After reviewing the evidence and conducting two hearings on the matter, the court found no basis to set aside the judgment. The court stated:
The fact of the matter is there’s a judgment in Alabama. The fact of the matter is there’s been nothing raised here which gives me any reason to believe the judgment in Alabama was not final and unconditional. I have no reason to believe it was obtained by extrinsic fraud. I have no reason to believe it was entered in excess of Court’s jurisdiction. [¶] I have every reason to believe it was enforceable.
DISCUSSION
I. Standard Of Review
Appellants contend that respondent did not properly add them as judgment debtors under the applicable statutes. Appellants’ central issues on appeal only involve application of California law to undisputed facts relating to whether respondent presented sufficient evidence to obtain a judgment in the superior court and whether respondent properly served appellants. A court reviewing a pure question of law is required to employ de novo review. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.)
It is true that a trial court’s granting of a motion to amend a judgment under section 187 is reviewed on whether its findings are supported by substantial evidence. However, this case does not involve substantive issues of alter-ego liability and addition of judgment debtors as alter-egos under section 187 as the Dow Jones and NEC cases did. (Dow Jones Co. v. Avenel (1984) 151 Cal.App.3d 144, 147; NEC Electronics Inc. v. Hurt (1989) 208 Cal.App.3d 772, 777.) Instead, the material holdings center on whether respondent followed proper procedural rules in obtaining a judgment over appellants. The proper standard is de novo.
II. The Trial Court Did Not Err By Refusing To Require Further Evidence Of Appellants’ Alter-Ego Liability Because As A Matter Of Law The Court Ministerially And Properly Added Them Under Section 187
The critical issue presented on appeal is a novel one of whether a lower court errs under section 187 when it does not require a judgment creditor from a foreign state to present more than a certified sister-state default judgment against in-state judgment debtors before adding them to the judgment on an alter-ego theory.
Appellants argue that respondent failed to present sufficient evidence to establish whether they acted as alter-egos of U & C America Corporation. (NEC Electronics Inc. v. Hurt, supra, 208 Cal.App.3d at p. 777.) Appellants urge that while a judgment may be amended if the judgment debtor corporation is controlled by an alter-ego, under NEC, a motion to add them as judgment debtors can be granted only if the judgment creditor can show by a preponderance of the evidence that the alter ego controlled the underlying litigation and that there is a commonality of interests between the corporation and the alter ego such that the alter ego’s interests were represented in the underlying action. (Id., at pp. 777-778.) Appellants posit that respondent made an insufficient evidentiary showing in the lower court since it only presented a certified Alabama judgment from a trial court in Lawrence, Alabama and minimal substantive evidence showing that appellants acted as alter-egos of U & C America Corporation.
Respondent argues that the Second Alabama Judgment provides sufficient evidence to add appellants as judgment debtors under sections 187 and 1710.10 et seq. Section 187 provides that, “When jurisdiction is, by the constitution or this code, or by any other statute, conferred on a court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this code.”
Under this language, respondent argues that the addition of appellants as judgment debtors is a proper ministerial action by the court pursuant to sections 187 and 1710.10 et seq. Respondent contends that the court needs no further substantive showing because their status as judgment debtors has already been established under Alabama state law. It would be improper for this court to consider substantive issues of alter ego liability since that has already been proven in Alabama.
Sections 1710.10 et seq. govern the collection of sister-state money judgments. They are supplemented by section 187 which grants to every court the inherent power to use any proper means to carry its jurisdiction into effect, even if those means are not explicitly laid out in the code. (NEC Electronics Inc. v. Hurt, supra, 208 Cal.App.3d at p. 778.) The inherent power granted by section 187 encompasses the general authority to amend a judgment to add additional judgment debtors. (Dow Jones Co. v. Avenel, supra, 151 Cal.App.3d at p. 148.) Adding judgment-debtors is an equitable action taken by the court based on the premise that the court is not substantively changing the judgment to add new defendants, but is merely inserting the correct name of the true defendants. (NEC Electronics Inc. v. Hurt, supra, 208 Cal.App.3d at p. 778; Thomson v. L. C. Roney & Co. (1952) 112 Cal.App.2d 420, 427-430.) It is often necessary to make such additions in order to provide a plaintiff with a proper means to collect its judgment against an evasive corporate judgment debtor. (See generally Mirabito v. San Francisco Dairy Co. (1935) 8 Cal.App.2d 54.)
The superior court in this case properly exercised its authority to carry out a valid sister-state judgment under these statutes. Appellants attempt to factually analogize their case to NEC Electronics, Inc. v. Hurt, supra, 208 Cal.App.3d at pages 777-778, where the court denied a motion to add in-state judgment debtors on an alter-ego theory. However, NEC is distinguishable since it did not involve a judgment creditor who already held a valid out of state judgment against the defendant. (Id., at pp. 775-777.) There, the plaintiff judgment creditor sought to add the defendant as a judgment debtor to a judgment which was rendered in our own state of California. (Ibid.) The dispute under section 187 in that case was a substantive dispute under California corporate law concerning whether the defendant, a third party shareholder of a judgment debtor corporation, acted as an alter-ego of the judgment debtor corporation. (Id., at pp. 777-781.)
But, in the case at bar, those issues are not to be decided here in California. In NEC and other cases where a California court denied a motion to add judgment debtors, no constitutional questions of full faith and credit arose because the plaintiff did not present the court with a valid sister-state judgment which already adjudged that shareholder to be an alter-ego of the corporation.
The instant case is distinguishable. Here, it is undisputed that respondent holds an authentic Second Alabama Judgment indicating that the Alabama court found appellants to be judgment debtors of U & C America Corporation. This case does not involve a substantive dispute over whether appellants legally acted as alter-egos because the Alabama court already validly made that determination under Alabama state law, thus preventing this court from reviewing that determination. Instead, this case presents only a procedural question of whether respondent followed proper procedural rules for domesticating a sister-state judgment. Respondent followed such procedures by filing a noticed motion, as the superior court required it to do. All substantive arguments made by appellants in regard to alter-ego liability are misplaced and improper attempts to re-litigate an unfavorable result achieved in the Alabama court.
Despite appellants’ contentions, allowing the valid judgment to be enforced now in California does not violate due process since all procedural rules under Alabama and California law have been followed, in full satisfaction of due process in both states. (See §§ 415.10-415.30; AL. Rules Civ. Proc., Rule 4.) If appellants sought to dispute whether they would be liable for the debts of U & C America Corporation, then they had a duty to answer the Second Amended Complaint which respondent properly served upon them according to Alabama and California rules of service.
III. Forcing A California Court To Re-Litigate Alter-Ego Liability Would Violate The Full Faith And Credit Clause As A Matter Of Law
Appellants unpersuasively ask this court to extend NEC to allow a California court to weaken a valid and final judgment made in a sister-state by requiring more evidence and argument to be taken on the issue of alter-ego liability; a question which has already been finalized in an Alabama court. Pursuant to the United States Constitution (Art. IV, § 1), the Full Faith and Credit Act mandates that the “judicial proceedings” of any State “‘shall have the same full faith and credit in every court within the United States... as they have by law or usage in the courts of such State... from which they are taken.’” (Matsushita Elec. Industrial Co. v. Epstein (1996) 516 U.S. 367, 373.) To give merit to appellants’ contentions by extending NEC in this way would indeed violate the full faith and credit clause of the United States Constitution.
The full faith and credit clause requires California to respect final judgments of sister-states by allowing them to be carried out according to proper procedural rules. (See National Equipment Rental, Ltd. v. United Lumber Co. (1972) 24 Cal.App.3d 1012, 1016-1017.) “‘California must, regardless of policy objections, recognize the judgment of another state as res judicata.’” (Silbrico Corp. v. Raanan (1985) 170 Cal.App.3d 202, 207.) Respondent followed those rules in this case by properly serving appellants via substitute service which it was forced to do when appellants seemed to be evading personal service. (See §§ 415.10-415.30; AL. Rules Civ. Proc., Rule 4.)
If this court were to adopt appellants’ argument and require more alter-ego evidence to be introduced, then this court would effectively be deciding the issue in the face of a finalized Alabama judgment. The conclusions about Alabama business law may be inaccurate and may also be in excess of this court’s jurisdiction. These two risks are precisely what the full faith and credit clause is meant to prevent. Whether appellants legally were the alter-egos of U & C America Corporation is an issue controlled by Alabama state law since it was the forum reasonably chosen by respondent. It was never properly disputed by appellants. Instead, they chose to default. The proper place to now dispute the default determination is in an Alabama court, not a California one.
IV. The Lower Court Properly Found As A Matter Of Law That The Alabama Court Maintained Jurisdiction Over Appellants Under Section 1710.40
Appellants next point to various reasons to vacate the superior court holding under section 1710.40. Section 1710.40 provides that, “A judgment... may be vacated on any ground which would be a defense to an action in this state on a sister state judgment.” A sister state money judgment entered may be vacated in California only when the statutory ground or grounds have been established. (World Wide Imports, Inc. v. Bartel (1983) 145 Cal.App.3d 1006, 1009.) These grounds traditionally include: (1) the judgment is not final and unconditional; (2) the judgment was obtained by extrinsic fraud; (3) the judgment was rendered in excess of jurisdiction; (4) the judgment is not enforceable in the state of rendition; (5) the plaintiff is guilty of misconduct; (6) the judgment has already been paid; or (7) the suit on the judgment is barred by the statute of limitations in the state where judgment is sought. (Silbrico Corp. v. Raanan, supra, 170 Cal.App.3d at p. 207.)
Specifically, appellants claim that the Alabama court acted in excess of its jurisdiction, that the judgment was obtained by extrinsic fraud, and that respondent is guilty of misconduct. None of these grounds have been met. The Alabama court did not act in excess of its jurisdiction. Respondent properly followed laws of serving out-of-state defendants when respondent served the Second Amended Complaint. Respondent attempted to personally serve appellants three times at their place of business. Since appellants could not reasonably be found, respondent followed proper Alabama service of process procedures by substitute serving the person seemingly in charge of the office, Gary Kang. (AL. Rules Civ. Proc., Rule 4.) The service procedure was complete and proper under Alabama law. The Alabama court had proper jurisdiction over appellants. Consequently, section 1710.40 does not apply to require this court to vacate the judgment of the lower court on this ground.
Appellants allege that the sister-state judgment should be vacated since the Alabama court did not have jurisdiction over them due to their lack of notice of the pending lawsuit. Appellants argue that because no “actual notice” was given, respondent improperly served them. The fact that one appellant made phone calls and sent e-mails to respondent attempting to settle the case calls this assertion into question. but merely followed established legal procedure which at times presents varying amounts of practical hardship upon the parties.
V. Respondent Properly Served Appellant Andrew Kang Because As A Matter Of Law Respondent Complied With Section 415.20
Finally, appellants argue that while William Kang may have been properly served, Andrew Kang, a college student, was not. Appellants cite to Commercial Nat. Bank of Peoria v. Kermeen (1990) 225 Cal.App.3d 396, 398 for the principle that a judgment may not be based solely on a sister state judgment obtained pursuant to a contractual provision in a bank promissory note where the debtor received no notice or opportunity to be heard in the foreign action and where there was nothing in the record to show these rights were knowingly or voluntarily waived. In Commercial Nat. Bank of Peoria, the court denied allowing additional judgment debtors to be added since there was no opportunity to present a defense in the underlying action and no notice was given to them. (Id., at pp. 401-403.) Commercial Nat. Bank of Peoria is distinguishable from this case because both appellants were properly served under section 415.20. Appellants here had ample notice and opportunity to avoid being named as judgment debtors but, for whatever reason, they defaulted in the second Alabama proceeding. Since respondent properly served Andrew Kang via substitute service in this case, Andrew Kang cannot escape being added to the judgment.
DISPOSITION
The judgment is affirmed. Respondent to recover costs on appeal.
We concur: ZELON, J. JACKSON, J.