Opinion
G052083
04-21-2017
PETRO-DIAMOND, INC., Plaintiff and Respondent, v. ARIE MAZUR, Defendant and Appellant.
Arie Mazur, in pro. per.; Law Offices of Jim P. Mahacek and Jim P. Mahacek for Defendant and Appellant. Manatt, Phelps & Phillips, Benjamin G. Shatz, Robert R. Begland, and Viral Mehta for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2011-00483442) OPINION Appeal from a judgment of the Superior Court of Orange County, Ronald L. Bauer, Judge. Affirmed as modified. Arie Mazur, in pro. per.; Law Offices of Jim P. Mahacek and Jim P. Mahacek for Defendant and Appellant. Manatt, Phelps & Phillips, Benjamin G. Shatz, Robert R. Begland, and Viral Mehta for Plaintiff and Respondent.
* * *
This is an appeal from a judgment after a bench trial in which defendant Arie Mazur was held to be the alter ego of Verdeo, Inc. (Verdeo). The court also found Mazur liable for fraudulent transfers. The court had previously granted summary adjudication against Verdeo for breach of contract and awarded damages to plaintiff Petro-Diamond Inc. (Petro-Diamond), in the amount of $2,550,000. On appeal, Mazur attacks all aspects of the judgment on both procedural and substantive grounds. We affirm.
FACTS
Verdeo's Underlying Breach of Contract
Although this appeal is largely about the court's finding that Mazur was the alter ego of Verdeo, and thus liable to Petro-Diamond for Verdeo's breach of contract, it is helpful to also understand the basics of the underlying transaction that gave rise to Verdeo's breach. We thus begin by summarizing the facts resulting in Verdeo's liability to Petro-Diamond.
The transactions at issue in this lawsuit began in September 2010. Under the Energy Policy Act of 2005 (Pub.L. No. 109-58 (Aug. 5, 2005) 119 Stat. 594), the Environmental Protection Agency sets annual quotas determining what percentage of the motor fuels produced in the United States must include renewable fuels (e.g., biodiesel). Under the Renewable Fuel Standards program, companies that refine, import, or blend fossil fuels must meet certain renewable fuel quotas. To track that requirement, each gallon of renewable fuel that is produced or imported is assigned a renewable identification number (RIN). The parties subject to the renewable fuel standards program demonstrate satisfaction of their quota by retiring RINs. Excess RINs may be sold on the open market. (See Monroe Energy, LLC v. E.P.A. (D.C. Cir. 2014) 750 F.3d 909, 912-913) Petro-Diamond is in the business of trading petroleum products in Southern California and thus needs RINs. Verdeo traded RINs (though not the actual fuel) as a commodity.
In September 2010, Petro-Diamond entered into five separate contracts to purchase five million RINs from Verdeo (one million RINs per contract). The purchase price was approximately $2.9 million In December 2010, Verdeo asked for more time to deliver the five million RINs, offering to reduce the price per RIN; Petro-Diamond agreed. Under the modification, two million RINs were to be delivered in January 2011, two million more in February 2011, and the final million in March 2011.
In January 2011, Verdeo delivered two million RINs at the modified price. In February, however, Verdeo said it needed additional time to deliver the next two million RINs, which Petro-Diamond agreed to in exchange for further price concessions. In March, when the remaining three million RINs were due, Verdeo again negotiated an extension in exchange for further price concessions.
Verdeo never delivered the remaining three million RINs By the time Verdeo defaulted on the contracts, the market price for RINs had risen, and Petro-Diamond had to purchase the RINs on the open market for $4,067,500, which was $2,550,000 more than the modified contract price.
Mazur as the Alter Ego of Verdeo and the Fraudulent Transfers
As to Mazur's status as Verdeo's alter ego, we begin our recitation of the facts with a finding that becomes a prism through which we view the evidence. Mazur testified via videotaped deposition. The court, to put it mildly, was not impressed. It described Mazur as a "fabulist" and "the paradigm false witness." His "words and body language amply supported the conclusion that he had no respect for the truth or for these proceedings." "[T]he court has rarely, if ever, seen a witness who looked, acted, and spoke while testifying in a manner that so vividly expressed such a scornful and dismissive attitude toward this case and toward the giving of testimony. To the extent that the defendants had testimony to rebut the plaintiff's claims, it came largely from Mazur, and it did the defendants no good." Elsewhere the court described Mazur's and his business partner's testimony as "implausible, undocumented, and evasive." Since this appeal largely presents a substantial evidence challenge, we would normally disregard any conflicting evidence anyway, but the court's credibility finding renders even Mazur's uncontradicted testimony worthless. To the extent that Mazur's testimony undermines the judgment in any way, therefore, we disregard it.
Mazur entered the biodiesel business in 2007 when he, with two others, formed Bioversal Inc. (Bioversal). At around the same time, Mazur formed Bioversal Trading, Inc., which was a wholly owned subsidiary of Bioversal. Both Bioversal and Trading were Canadian corporations. A few months later, Mazur formed Verdeo, a Delaware corporation. All three corporations had the same principal place of business.
Actually, the Delaware corporation was initially named Bioversal Trading, Inc., like the Canadian corporation, and later was renamed Verdeo, Inc. For simplicity's sake, we always refer to it as Verdeo.
Verdeo's initial owner was Trading, which was issued 1,000 shares. In 2008, Verdeo authorized the repurchase of all outstanding shares from Trading for $1, increased the number of authorized shares to one million, and authorized the sale of 870,000 shares to five individuals, including Mazur, who was allotted the largest fraction at 320,000 shares.
Approximately one-month later, Mazur and the other director cancelled the sale of shares as no longer in the best interests of the corporation. Instead, all one million of the authorized shares were directed to be sold to Sergey Ptushkin for $1. Ptushkin was named chief executive officer and Mazur named secretary. Mazur claimed he conveyed the corporation to Ptushkin to address some sort of personal debt, but when asked the amount of the debt, Mazur did not "feel comfortable" talking about it and refused to answer the question. He described it as a "substantial" amount of money, but refused to even provide a range, other than to say it was more than $200,000. Upon conveying the stock to Ptushkin, Mazur made no effort to value the stock. In conjunction with the conveyance, Mazur and the other director resigned from the board.
Nonetheless, Mazur continued to have complete control of Verdeo. After Mazur took the above steps to formally remove himself, Verdeo signed a "management agreement" with Trading (which was controlled by Bioversal, of which Mazur was the majority shareholder). Pursuant to the management agreement, Trading agreed to provide "advisory, consulting and other services (the 'Oversight Services') in relation to the operations of the Company, strategic planning, supply chain management, commodity trading, corporate finance, including treasury management and maintenance of the financial records, book keeping, domestic and international marking and financial oversight and including, without limitation, advisory and consulting services in relation to the selection, retention and supervision of independent auditors, the selection, retention and supervision of outside legal counsel." In practice, this meant total control, as Ptushkin testified that he knew virtually nothing about the business, was not managing the company, was not in charge of operations, had no idea what the revenue of the company was, and had no idea what the assets of the company were. He did not even know if Verdeo had an office. Further, Mazur did not ask Ptushkin's permission to do anything on behalf of Verdeo. Indeed, Ptushkin summed it up nicely when asked what Verdeo's assets were: "I don't know anything." Although under the agreement Trading was supposed to be paid $300,000 for its services, it was never paid.
Approximately one month after the board resolved to transfer ownership to Ptushkin, Trading and Verdeo borrowed money based on their combined operations. Mazur personally guaranteed the funds that were borrowed. This included placing a lien on Mazur's residence.
At trial, Petro-Diamond's expert opined "that Verdeo was presented and treated as a consolidated entity with Bioversal, Inc. as well as Bioversal Trading." This was based on several facts. For example, Verdeo's financial statements contained many notations for "interco," which is "short for intercompany," which is used among accountants in reference to transactions among companies under common control. Verdeo's bank accounts were referenced as "Bioversal, Inc." through July 2010. More importantly, the bank account was in fact used by all three entities. And there was extensive comingling of funds between Verdeo and Trading.
One of the major events that supported Petro-Diamond's expert's testimony occurred in early 2010. Verdeo forgave a $12.5 million account receivable from Bioversal in exchange for a $14 million receivable from a company called Orense. This was a material transaction as it was Verdeo's largest asset at the time. There was no evidence, however, that the receivable from Orense was real or collectible. The transaction, moreover, was documented to have occurred in early 2010, but was not booked into Verdeo's financial records until December 2010, resulting in a greater loss for Verdeo at a time when the transactions with Petro-Diamond were going sideways. Moreover, Orense never paid the debt, nor did Verdeo attempt to collect it. The result of the transaction was to leave Verdeo insolvent.
The transaction gets even more complicated as Verdeo's second set of accounting books characterizes the transaction completely differently. We need not concern ourselves with the minutia, however, as Petro-Diamond's expert likewise opined Verdeo was insolvent under the alternative facts, and the account in the first set of records supports the court's factual findings.
In December 2010, which was the same time Verdeo was asking for additional time to fulfill its contractual obligations, Verdeo "loaned" Mazur $905,525. The bulk of that, $740,525 was, according to Mazur's discredited testimony, for real estate investments in Florida on behalf of Ptushkin that Mazur "had to purchase" pursuant to the ill-defined debt Mazur allegedly owed Ptushkin. In addition, Verdeo paid $65,000 on Mazur's behalf to Taylored Limousine for "some partying, with friends and stuff" in Miami. Ptushkin participated as well and Mazur paid for it as a "present" to him. This had nothing to do with Verdeo's business. The remaining $100,000 was directed to Praveen Investing Ltd., though Mazur claimed to not remember much about what that money was for other than some sort of investment. There was no documentation for any of the "loans," nor were there any terms such as an interest rate, security, or time of payment.
Meanwhile, as Verdeo was in the process of breaching its obligations to Petro-Diamond, Verdeo was continuing to drain its assets by "loaning" out its money to Mazur and Trading. In the first five months of 2011, Verdeo "loaned" another $283,900 to Mazur. None of the alleged loans were reduced to writing or had any terms of repayment. Moreover, although Verdeo kept a set of accounting records that reflected these transactions as loans to Mazur, and thus assets (on paper, at least), a second set of inconsistent records reflected them not as loans but as expenses. In 2012, Verdeo amended its tax returns to change the transactions from loans to expenses (thus decreasing its taxable income). Also in the first quarter of 2011, Verdeo loaned Trading over $2 million. By June 2011, Verdeo had only $96 in its bank account. Verdeo's expert noted that loans to Mazur did not appear to be in the regular course of business as no such loans occurred prior to December 2010. She also opined the loans were for Mazur's personal benefit, based, inter alia, on the fact that the terms of the "loans" were not documented and the purpose of the loans had nothing to do with Verdeo's business.
The Lawsuit
Petro-Diamond filed suit against Verdeo and Mazur in June 2011 for breach of contract. Mazur was named as an alter ego of Verdeo. Defendants filed a motion to dismiss, or in the alternative, stay the litigation due to forum non conveniens. Petro-Diamond opposed the motion, but agreed as follows: "If the alter ego allegations in [Petro-Diamond's] Complaint are credible, for the reasons set forth above, then Mazur is subject to litigation in California. But as this case is in its initial stages, and discovery has not yet begun, [Petro-Diamond] agrees to dismiss Mazur without prejudice. However, [Petro-Diamond] reserves the right to name Mazur as a defendant if, after discovery has commenced, [Petro-Diamond] obtains sufficient information to make a prima facie showing of alter ego liability. This should alleviate any forum non conveniens concerns that Defendants may have with respect to Mazur." Shortly afterwards Petro-Diamond dismissed Mazur without prejudice, and the court subsequently denied the motion.
In April 2012, Petro-Diamond filed a motion to amend the complaint to rename Mazur as a defendant. The proposed amended complaint also named Bioversal and Trading as alter egos, and added a cause of action for fraudulent transfer. The court granted the motion on May 7, 2012, and the amended complaint was filed the next day.
On June 1, 2012, Petro-Diamond filed a motion for summary adjudication on its breach of contract claim against Verdeo. On June 11, 2012, Mazur filed a motion to quash service of process (it is not clear exactly when he was served, but it was obviously before this date). The next day, Petro-Diamond filed a proof of service of the amended complaint on Mazur. On July 9, 2012, Verdeo opposed the summary adjudication motion. At a hearing on July 17, 2012, Mazur's counsel — the same attorney representing Verdeo — stated the motion to quash was moot and there was apparently never a ruling on the motion. On August 24, 2012, the court granted the motion for summary adjudication, awarding $2,550,000 against Verdeo. Mazur, Bioversal, and Trading answered the amended complaint in October 2012.
The Court's Ruling
The court held a bench trial in December 2013. It issued a detailed statement of decision and entered judgment against Verdeo, Bioversal, Trading, and Mazur in the amount of $2,550,000 plus interest at the legal rate.
The court's statement of decision begins with the severe adverse credibility findings against Mazur described above. Conversely, it found Petro-Diamond's forensic accounting expert to be "sensible and believable." "Among her findings: the defendants used two sets of books for no discernible legitimate purpose; Verdeo loans to Mazur of approximately $1.2 million were for his personal benefit and were wholly undocumented and unsubstantiated with no equivalent value to Verdeo; a loan with Orense, a Cyprus corporation shrouded in mystery, was undocumented and had no apparent terms; . . . and Verdeo did not receive reasonably equivalent value when it forgave a $12.5 million debt owed to it by Bioversal. These and other specific findings by Ms. Irwin, together with the implausible, undocumented, and evasive testimony of Messrs. Ptushkin and Mazur, lead to the court's conclusion that these defendants treated their corporate and personal business accounts as one large piggy bank from which they freely moved assets between and among various of their entities. Mazur continued to control Verdeo even after the remarkable $1 'sale' to Ptushkin, who had little idea what was happening in that business. Funds were loosely transferred from one company to another with no apparent purpose or documentation." The court went on to describe the alter ego factors described in case law as a "Cliff's Notes version of this trial." It also made numerous additional factual findings to support its alter ego determination. Mazur — and only Mazur — timely appealed.
DISCUSSION
Petro-Diamond is Not Estopped from Asserting Alter Ego
Mazur contends Petro-Diamond should have been estopped from asserting alter ego because it first named Mazur as a party, then dismissed Mazur, then obtained summary adjudication, then renamed Mazur at a time when it was too late to contest Verdeo's liability. We disagree.
The law applicable to this issue traces its origins to NEC Electronics, Inc. v. Hurt (1989) 208 Cal.App.3d 772 (NEC) and its progeny. There, the plaintiff sued a debtor on the brink of insolvency. A creditor's committee was formed, hoping to stave off a bankruptcy. After the committee proposed a plan of reorganization, the plaintiff rejected it and indicated its intent to proceed to trial, which was only two days away. The debtor did not participate in the trial and a judgment was entered against it. (Id. at pp. 775-776.) Afterwards, the debtor's sole shareholder was added to the judgment on an alter ego theory. (Id. at p. 776.) On appeal, the shareholder argued he had inadequate opportunity to present a defense on the merits of the underlying debt, and the court of appeal agreed. (Id. at p. 776-777.)
"Judgments are often amended to add additional judgment debtors on the grounds that a person or entity is the alter ego of the original judgment debtor. [Citations.] This is an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant. [Citations.] 'Such a procedure is an appropriate and complete method by which to bind new individual defendants where it can be demonstrated that in their capacity as alter ego of the corporation they in fact had control of the previous litigation, and thus were virtually represented in the lawsuit.' [Citation.] In other words, '[i]f the claim of individual liability is made at some later stage in the action, the judgment can be made individually binding on a person associated with the corporation only if the individual to be charged, personally or through a representative, had control of the litigation and occasion to conduct it with a diligence corresponding to the risk of personal liability that was involved.'" (NEC, supra, 208 Cal.App.3d at pp. 778-779.)
The court then undertook a review of relevant precedents and observed a clear distinction: where "the underlying action was contested and therefore the alter ego's interests were effectively represented by the defense presented by the corporate defendant," amending the judgment was proper. (NEC, supra, 208 Cal.App.3d at p. 780.) "By contrast . . . where the judgment was obtained by default, the court stressed that the alter ego's interests were not represented in the underlying action and also emphasized that adding them as additional judgment debtors would violate due process." (Ibid.) This distinction has continued to prevail in the case law since NEC was decided. (See, e.g., Wolf Metals Inc. v. Rand Pacific Sales Inc. (2016) 4 Cal.App.5th 698, 704 [adding alter ego to judgment improper where original defendant suffered default judgment]; Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096, 1110 [permitting addition of alter ego to judgment and distinguishing NEC on the ground that the underlying liability was actually contested].)
The only authority Mazur cites is a dissent in Dow Jones Co. v. Avenel (1984) 151 Cal.App.3d 144, a case on similar procedural footing to our own. There, the plaintiff sued the defendant for breach of contract and obtained summary judgment over the defendant's opposition. (Id. at p. 146.) Afterwards, the plaintiff filed a motion to add two defendants to the judgment on an alter ego theory. An evidentiary hearing was held and the court made alter ego findings. (Id. at p. 146-147.) On appeal, the alter ego defendants argued their due process rights were violated because they were not given the opportunity to present defenses on behalf of the original defendant. (Id. at p. 149-150.) The majority rejected the argument, reasoning, "While appellants [alter ego defendants], themselves, technically were not given the opportunity to convince the trial court that material issues of fact did exist because they were not then named parties, they were able to do so through the vehicle of [the original defendant]." (Id. at p. 150.) The dissenting justice concluded this did not comport with due process, asking, "How, then, can we say, in the absence of evidence from appellant, that . . . because [the original defendant] presented no cognizable defense, a fortiori appellant had none because of later proof that for some purposes [the original defendant] and appellant were alter egos?" (Id. at p. 152 (dis. opn. of Newsom, J.).)
We conclude Mazur's right to due process was satisfied here. Verdeo had the motive and ability to defend itself and actually did so. Mazur does not point to any inadequacy in that defense, nor does Mazur make any offer of proof as to what he could have possibly added to the summary adjudication motion that could have made any difference. Moreover, the procedural history of this case demonstrates beyond doubt that Mazur had the opportunity to influence Verdeo's defense had he wanted to. The original complaint named Mazur and alleged he was the alter ego of Verdeo. Thus he was clearly on notice. Moreover, it was his motion that resulted in his dismissal, and when Petro-Diamond dismissed him, it specifically advised the court and the parties that it would rename Mazur if evidence uncovered during discovery were to support such a finding. Additionally, Mazur and Verdeo were represented by the same counsel both before Mazur's dismissal and after his reinstatement. Mazur was served with the amended complaint only days after the motion for summary adjudication was filed, and thus had plenty of time to contribute to the defense of the motion. When added to the evidence that Mazur controlled Verdeo through Trading and Bioversal, we have no trouble concluding Mazur's due process rights were satisfied.
Substantial Evidence Supports the Alter Ego Findings
Mazur's principal contention on appeal is that substantial evidence does not support the alter ego findings. (See Baize v. Eastridge Companies LLC (2006) 142 Cal.App.4th 293, 302 [court's alter ego judgment is reviewed for substantial evidence].) We disagree.
We do not always feel the need to spell out the familiar substantial evidence standard of review, but Mazur's disregard of that standard in his brief compels us to do so here. "As we are compelled to reiterate with tiring regularity we cannot disturb a finding based upon such a conflict where there is substantial competent evidence to support it." (Connolly v. Zaft (1942) 55 Cal.App.2d 383, 387.) This means not only do we resolve evidentiary conflicts in favor of the judgment, but we also indulge every reasonable inference in favor of the judgment. "'It is well established that a reviewing court starts with the presumption that the record contains evidence to sustain every finding of fact.' [Citations.] Defendants' contention herein 'requires defendants to demonstrate that there is no substantial evidence to support the challenged findings.' . . . [Citations.] A recitation of only defendants' evidence is not the 'demonstration' contemplated under the above rule. [Citation.] Accordingly, if, as defendants here contend, 'some particular issue of fact is not sustained, they are required to set forth in their brief all the material evidence on the point and not merely their own evidence. Unless this is done the error is deemed to be waived.'" (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.)
Mazur's brief fails to comply. His most flagrant foul is the complete omission of the court's damning credibility findings regarding Mazur and Ptushkin. He also misrepresents the opinions of Petro-Diamond's expert. He does so in sundry and subtle ways, but one particularly glaring example pertains to the Orense transaction, where he states, "Petro's expert opined that this was a good deal for Verdeo." To the contrary, Petro-Diamond's expert stated that it would have been a good deal on paper, but that it was a sham transaction that left Verdeo insolvent. Beyond that, however, his statement of facts is peppered with argument and inferences drawn against the judgment.
Additionally, Mazur's record is materially deficient. Many of the trial exhibits that provide support for the judgment were omitted from the record. As Petro-Diamond explains, "These exhibits include certain balance statements, financial statements, and e-mails surrounding the preparation of Verdeo tax returns — key evidence in an alter ego and fraudulent transfer appeal." Indeed, in our effort to determine whether Petro-Diamond's expert's testimony comported with the evidence, we were hampered by the unavailability of the underlying records. These combined defects warrant a waiver of Mazur's substantial evidence argument. Nonetheless, having independently reviewed the record, we determine below that substantial evidence supports the judgment.
"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. [Citations.] A corporate identity may be disregarded — the 'corporate veil' pierced — where an abuse of the corporate privilege justifies holding the equitable ownership of a corporation liable for the actions of the corporation. [Citation.] Under the alter ego doctrine, then, when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation's acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners. [Citations.] The alter ego doctrine prevents individuals or other corporations from misusing the corporate laws by the device of a sham corporate entity formed for the purpose of committing fraud or other misdeeds. [Citation.]
"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. [Citations.] 'Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other.' [Citations.] Other factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. [Citations.] No one characteristic governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied. [Citations.] Alter ego is an extreme remedy, sparingly used." (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538-539.)
The sine qua non of an alter ego finding is the inequitable use of corporate privileges. Unquestionably, that occurred here. As Verdeo's business was collapsing, Mazur looted Verdeo of the money it needed to either satisfy its contractual obligations or pay damages to Petro-Diamond. Verdeo, which Mazur controlled, variously characterized these as loans or expenses in separate and inconsistent sets of accounting records. At the same time, Mazur imposed a massive loss on Verdeo through the Orense transaction, which, according to Petro-Diamond's expert, was a sham that effectively cancelled out Trading's debt to Verdeo and rendered Verdeo insolvent. This transaction is particularly suited to alter ego treatment because it not only was fraudulent in nature, but it involved the disregard of the corporate independence of Verdeo from Trading, both of which were under Mazur's control.
Beyond that, there was substantial evidence of blurring the corporate separation between Mazur, Verdeo, Trading, and Bioversal. At the heart of this blurring was the sham ownership structure of Verdeo. A fair inference from the evidence was that Ptushkin was simply a puppet used by Mazur to conceal the true ownership structure of Verdeo and create the appearance of independence where none existed. Mazur's outright refusal to provide straightforward answers about the supposed debt to Ptushkin supported this conclusion, as did Ptushkin's complete ignorance of Verdeo's business and operations. And under the management agreement, Trading, and thus Mazur, had complete control of Verdeo.
Additionally, there was more pedestrian evidence of the blurring of Verdeo's corporate independence. Verdeo's initial place of business was Mazur's home. Subsequently, Verdeo did business from an address shared by the other entities. Mazur executed a guarantee of the debts of Verdeo and Trading, which were pursuing financing together. This included a lien on Mazur's residence. Verdeo failed to issue stock to the five individuals listed in the corporate resolution dated May 29, 2008. There was extensive comingling of funds between Verdeo and Trading. None of these actions are culpable in their own right, but combined with the evidence of wrongdoing, they fully support the court's alter ego finding.
Mazur's response to this evidence principally consists of overemphasizing what we described as "pedestrian" evidence above and viewing the more inculpatory evidence through rose colored lenses. For example, regarding the sham ownership structure, Mazur states, "Petro admitted that Ptushkin owned Verdeo." This is absurd — Petro-Diamond's argument was precisely that the paper ownership was a sham. Regarding the money Mazur looted from the company, he assures us that these were loans that Mazur has an obligation to repay and that "Ptushkin made a business investment to loan money . . . ." We appreciate the invitation to stick our heads in the proverbial sand, but we politely decline. Even if that were one reasonable inference from the evidence (it is not), our duty is to draw reasonable inferences in favor of the judgment. A perfectly reasonable inference is that Mazur's extraction of money from the company — variously characterized as loans or expenses — was fraudulent. That is the inference the trial court drew, and it is supported by substantial evidence.
The Court's Denial of Mazur's Motion for Relief From a Jury Trial Waiver was Harmless
Next, Mazur levels multiple attacks on the fraudulent transfer cause of action. The first is that the court erred in denying Mazur relief from his waiver of a jury trial on the fraudulent transfer cause of action. (See Wisden v. Superior Court (2004) 124 Cal.App.4th 750, 760 [jury is a right in a fraudulent transfer trial].)
There is no dispute that Mazur initially waived his right to a jury trial on the fraudulent transfer claim. The initial trial in this matter was scheduled for April 2013. Mazur did not post jury fees, and apparently did not request a jury. (See Code Civ. Proc., § 631, subd. (f) [a party waives a jury trial by, inter alia, failing to request a jury or failing to post jury fees].)
The issue is whether the court abused its discretion in denying relief from that waiver. On this issue the law skews in favor of granting relief. "The court may, in its discretion upon just terms, allow a trial by jury although there may have been a waiver of a trial by jury." (Code Civ. Proc., § 631, subd. (g).) "[T]he purpose of section 631 of the Code of Civil Procedure is to grant the parties the right to waive a jury trial, but not to make such waiver irrevocable [citation]. Whenever a doubt exists as to the propriety of granting relief from such waiver of jury trial such doubt, by reason of the constitutional guarantee, should be resolved in favor of according a litigant a trial by jury." (Cowlin v. Pringle (1941) 46 Cal.App.2d 472, 476.) "[G]iven the public policy favoring trial by jury, the trial court should grant a motion to be relieved of a jury waiver 'unless, and except, where granting such a motion would work serious hardship to the objecting party.'" (Gann v. Williams Brothers Realty, Inc. (1991) 231 Cal.App.3d 1698, 1703.) "In exercising its discretion, the trial court may consider delay in rescheduling jury trial, lack of funds, timeliness of the request and prejudice to the litigants. [Citation.] A court does not abuse its discretion where any reasonable factors supporting denial of relief can be found even if a reviewing court, as a question of first impression, might take a different view." (Id. at p. 1704.)
The relevant timeline, as best we can make it out from the record, is as follows. March 2013: Petro-Diamond posts jury fees and provides Mazur with jury instructions and a verdict form. Shortly afterwards, and before the April trial date, Petro-Diamond informed Mazur's counsel it intended to proceed without a jury. This was memorialized in an issues-conference brief submitted prior to trial (which is not part of the record). Trial was continued to June and then again to July 2013. Mazur posted jury fees a few days after the July trial date. Mazur's counsel would later claim that he requested a jury at this time, though we have no record of it. Trial was continued to September 2013 and then again to December 2013. In the time period from September to December, counsel met and conferred regarding a jury trial, and though Petro-Diamond did not concede to relieve Mazur from the waiver, it did prepare the necessary documents for a jury trial. At the December trial date Mazur made an oral motion requesting relief from his waiver of a jury trial. The court denied the motion without elaboration.
Doing so was an abuse of discretion. Petro-Diamond did not articulate any prejudice from granting relief. On appeal, Petro-Diamond contends it would suffer "severe prejudice" because it "would have had to make substantial changes to its trial strategy (e.g., converting its expert's testimony into a format suitable for a jury)." We see no prejudice in that. And the court perfunctorily denied the motion without comment. The parties were apparently prepared for a jury trial and thus granting relief would not have resulted in a trial continuance. Accordingly, the court's ruling did not comport with the strong policy favoring relief from a jury waiver.
Nonetheless, we will not reverse on this ground because Mazur has not shown prejudice. He contends, without citation to authority, the court's denial constitutes "structural error." Courts have grappled with this issue, however, and have determined it is not. "Although it is difficult to envision precisely how one shows prejudice from denial of a jury trial aside from that inherent in deprivation of a constitutional right, the . . . reason for allowing the trial court's determination to stand is that a party should not be able to play 'Heads I win. Tails you lose' by waiting until after judgment to seek review of the denial of relief from jury waiver. [Citation.] Thus courts have held that prejudice will not be presumed from the fact that the trial was to the court rather than to the jury. [Citations.] Rather, it is presumed that the party had the benefit of a fair and impartial trial. [Citation] [¶] Consequently, writ of mandate is the appropriate vehicle to secure a jury trial allegedly wrongfully withheld without the usual demonstration of prejudice or miscarriage of justice required to obtain a reversal after judgment." (Gann v. Williams Brothers Realty, Inc. (1991) 231 Cal.App.3d 1698, 1704; see also McIntosh v. Bowman (1984) 151 Cal.App.3d 357, 364 ["a writ of mandate was the proper remedy to secure a jury trial where it was allegedly being improperly withheld by a trial court"]; Winston v. Superior Court (1987) 196 Cal.App.3d 600, 603 [same].) Not only has Mazur failed to offer any theory of prejudice, our review of the record indicates the experienced trial judge conducted an entirely fair trial. As such, the error in denying the motion for relief was harmless.
Substantial Evidence Supports the Fraudulent Transfer Judgment
Next, Mazur attacks the evidence supporting the fraudulent transfer judgment. It seems, however, he fundamentally misunderstands the cause of action. His entire argument is directed to his claim that there is no evidence Mazur produced false paperwork to Verdeo, nor any evidence that Mazur directed Verdeo to enter into the underlying contracts with no intention to perform. He seems to be confusing fraudulent transfer with fraud and promissory fraud. Unsurprisingly, there is not a single citation to legal authority in this section of Mazur's brief.
Under the Uniform Fraudulent Transfers Act, a transfer is fraudulent if it is made "[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor." (Civ. Code, § 3439.04, subd. (a)(1).) Even in the absence of fraudulent intent, a transfer may be fraudulent if the debtor did not receive "a reasonably equivalent value in exchange for the transfer" and "the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation." (Civ. Code, § 3439.05, subd. (a).)
Since Mazur failed to discuss the applicable law, we need not belabor the point here with an exhaustive discussion of the evidence. A fair inference from the evidence is that the loans to Mazur were part of a thinly veiled attempt to loot the company to hinder Petro-Diamond from obtaining performance or damages from Verdeo. Moreover, Petro-Diamond's expert opined that Verdeo did not receive reasonably equivalent value when it "loaned" money to Mazur and also opined Verdeo was insolvent at the time. The evidence supported the judgment.
Mazur also complains the judgment awarded Petro-Diamond $2,550,000 in damages for fraudulent transfer, which is excessive in relation to the actual amount of transfers to Mazur. (See Civil Code, § 3439.08, subd. (b)(1) [damages limited to "the value of the asset transferred . . . or the amount necessary to satisfy the creditor's claim, whichever is less," italics added].) That is not how we interpret the judgment. The judgment does not break down Mazur's liability by cause of action. Rather, it simply specifies his total liability: $2,550,000. That is the correct amount based on the alter ego finding and the underlying breach of contract judgment.
Mazur is correct, however, that the judgment is ambiguous concerning whether the $2,550,000 liability imposed on Verdeo is joint and several with the $2,550,000 liability imposed on Mazur. Accordingly, we will modify the judgment to clarify the ambiguity. (Code of Civ. Proc., § 43.)
Summary Adjudication was Properly Granted
Mazur's final argument is that summary adjudication was improperly granted against Verdeo. We review the court's ruling de novo. (Unilab Corp. v. Angeles-IPA (2016) 244 Cal.App.4th 622, 636.) We disagree.
Mazur contends the evidence was disputed concerning whether Verdeo entered into any contracts with Petro-Diamond, and, if so, whether there was agreement on the modifications to the original contract. The evidence, however, was conclusive that both occurred.
Regarding the formation of a contract, we are at a loss to understand how Mazur could doubt a contract was formed. Verdeo's response to Petro-Diamond's statement of undisputed facts admits the formation of the initial contracts for the purchase of five million RINs.
Regarding the modifications, Verdeo disputed that any modifications occurred, as opposed to mere negotiations, but an examination of the record left no doubt that the modifications were agreed to. To begin with, Verdeo admitted in response to interrogatories that modifications were made to "price and delivery" on December 28, 2010, and March 4, 2011.
With regard to the December 28 modification, the verified complaint set it out in detail, and Verdeo's verified answer admitted the allegations. Verdeo did not present any contrary evidence.
The evidence of the March 4 modification was that it was an oral agreement. Petro-Diamond sent a confirming e-mail, and Verdeo never contradicted it. Instead, the Verdeo representative replied by saying the "price structure is agreeable" but noted he was not certain he would be able to deliver by March 15 (the oral agreement required deliver by March 25, but requested that they be sent "ASAP, if possible"). This was not enough to contradict the evidence that an oral agreement was, in fact, reached, particularly since Verdeo admitted in an interrogatory that the contract was modified on March 4. If there really had been any dispute on this fact, the natural way to put it at issue would have been with testimony from Verdeo's representative denying the oral agreement. Verdeo presented no such witnesses. The only evidence, therefore, was that the contract was modified on March 4, 2011. Accordingly, summary adjudication was properly granted.
DISPOSITION
The amended judgment, filed April 16, 2015, is modified to add the following: "This judgment confers a single award of $2,550,000, plus interest, for which all defendants are jointly and severally liable." In all other respects, the judgment is affirmed. Petro-Diamond shall recover its costs incurred on appeal.
IKOLA, J. WE CONCUR: ARONSON, ACTING P. J. FYBEL, J.