Court Opinion

ID: 1037160
Source: CourtListenerOpinion
Date Created: 2013-08-12 16:04:46.891072+00
Date Added: 2024-06-11T15:27:55.125965
License: Public Domain

Filed 7/11/13
                            CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                            SECOND APPELLATE DISTRICT

                                    DIVISION FIVE

TOHO-TOWA CO., LTD.,                            B242095

        Plaintiff and Respondent,               (Los Angeles County
                                                Super. Ct. No. BS131357)
        v.

MORGAN CREEK PRODUCTIONS,
INC.,

        Defendant and Appellant.

        APPEAL from an order of the Superior Court of Los Angeles County.
Debre Katz Weintraub, Judge. Affirmed.
        Glaser Weil Fink Jacobs Howard Avchen & Shapiro, Patricia L. Glaser, Joel N.
Klevens for Defendant and Appellant.
        Greenberg Glusker Fields Claman & Machtinger, Charles N. Shephard for
Plaintiff and Respondent.
                                    _______________

                                           1
         Morgan Creek Productions, Inc. ("MCP"), a Delaware corporation with its
principal place of business in Los Angeles, appeals the trial court's order adding it to a
judgment for more than $5.7 million which Toho-Towa Co., Ltd., a Japanese company
("Toho-Towa") was awarded against two MCP-affiliated companies, Morgan Creek
International B.V., a Netherlands company ("B.V.") and Morgan Creek International
Ltd., a Bermuda corporation ("Ltd."). MCP maintains that the trial court erred in ruling
that the three business entities constituted a single business enterprise for purposes of
imposing alter ego liability on MCP for the debts of B.V. and Ltd. We conclude that the
ruling is supported by substantial evidence. MCP also contends that the trial court
abused its discretion in failing to set aside its ruling pursuant to Code of Civil Procedure,1
section 473, subdivision (b). We see no abuse of discretion. Consequently, we affirm the
order.

                      FACTUAL AND PROCEDURAL BACKGROUND2
         In 2005, Toho-Towa negotiated with MCP to acquire Japanese distribution rights
to the MCP-produced motion picture The Good Shepherd (the "Picture"). After the
parties had reached agreement as to the terms of the distribution deal, Howard Kaplan,
MCP's then general counsel, told Toho-Towa that B.V., rather than MCP, would grant
Toho-Towa the distribution rights under the agreement, and that a third entity, Ltd.,
would guarantee B.V.'s contractual obligations to Toho-Towa. Mr. Kaplan indicated to
Toho-Towa that this was the structure MCP used for its international distribution deals.
Mr. Kaplan assured Toho-Towa that B.V. and Ltd. would have sufficient assets to meet
any financial obligations Toho-Towa might be owed with respect to the Picture. As a
consequence of these assurances, Toho-Towa entered into a written agreement with B.V.
to distribute the Picture in Japan. The obligations of B.V. under the agreement were
guaranteed by Ltd.

         1   Further statutory references are to the Code of Civil Procedure.
         2
        These facts are taken from Toho-Towa's motion to add MCP as a judgment
debtor and the supporting documents filed therewith.
                                                 2
      Pursuant to the terms of the distribution agreement, by the end of October 2008,
B.V. owed Toho-Towa approximately $4.5 million in connection with expenses it had
advanced to distribute the Picture. On October 31, 2008, Toho-Towa submitted its
invoice to B.V. requesting payment of this amount. On November 13, 2008, Toho-
Towa's invoice to B.V. was forwarded to MCP's chief financial officer, Gary Stutman.
On December 3, 2008, Mr. Stutman advised Toho-Towa by email that he was "speaking
with our owner, Mr. Jim Robinson, re the payment date." The invoice was never paid.
      On April 22, 2009, Toho-Towa initiated a JAMS arbitration against B.V. and Ltd.,
based on B.V.'s failure to pay the reimbursable costs represented in the October 31, 2008
invoice. MCP's in-house counsel, Don Hardison, retained attorney Alan Gutman to
represent B.V. and Ltd. in the arbitration. Mr. Hardison reviewed the pleadings,
consulted with Mr. Gutman on strategy, reviewed and approved Mr. Gutman's bills, and
forwarded them to MCP's chief financial officer for payment.
      The arbitrator entered a final arbitration award in favor of Toho-Towa against
B.V. and Ltd. in the amount of $5,233,386. A three-judge JAMS appellate panel
unanimously affirmed the arbitration award. On Toho-Towa's motion, the award was
confirmed as a judgment on June 23, 2011. With interest and attorneys' fees, the amount
of the judgment was $5,741,536.
      Neither B.V. nor Ltd. satisfied the judgment entered against them.
      In the fall of 2011, Toho-Towa took examinations under oath, pursuant to section
708.110 et seq., of various MCP representatives, including MCP's former chief financial
officer Gary Stutman, its vice president Brian Robinson, and its general counsel Don
Hardison, to ascertain the relationship between the three Morgan Creek entities. Through
these examinations, Toho-Towa learned that the three Morgan Creek entities were owned
by a single individual, James Robinson; that the work of B.V. and Ltd. was performed by
employees of MCP; and that the companies were operated in such a way that no money
flowed to the foreign Morgan Creek entities. Based on this information, Toho-Towa
moved, pursuant to section 187, to add MCP to its judgment against B.V. and Ltd., on the
theory that MCP was the alter ego of the other two entities ("the section 187 motion").

                                            3
       Toho-Towa's motion, filed on December 30, 2011, was supported by a
memorandum of points and authorities, the declarations of its California counsel Charles
Shephard, its Dutch counsel Frederic Verhoeven, its president Hiroyasu Matsuoka, and
its employee Yusuke Horiuchi. These declarations form the basis of the evidence
presented in support of the motion, the contents of which are discussed below.
       MCP filed its opposition to the motion, together with its memorandum of points
and authorities, objections to the declarations of Messrs. Shephard, Verhoeven, Matsuoka
and Horiuchi, and a request that the court take judicial notice of the fact that MCP is a
Delaware corporation, on January 20, 2012. MCP submitted no declarations to counter
the evidence provided by Toho-Towa.
       On February 3, 2012, the court began the hearing on the motion by announcing its
tentative decision to add MCP to the judgment. The court found the following factors
relevant to its conclusion that MCP was the alter ego of B.V. and Ltd., based on the
declarations Toho-Towa submitted with its motion:3
       (1) The entities were all owned by the same person, James Robinson.
       (2) Mr. Robinson was the only person with authority to resolve the dispute with
Toho-Towa.
       (3) Ltd. had no employees and no bank account.
       (4) B.V.'s financial arrangements were structured so that it never received any
money. Rather, all of B.V.'s licensing income went directly to Ltd.'s lender.
       (5) Employees of MCP negotiated the foreign licensing deals on behalf of the
other Morgan Creek entities.
       (6) Brian Robinson, the owner's son, sold television rights for the international
film library owned by Ltd., even though he was not employed by Ltd. or B.V.
       (7) Don Hardison, MCP's general counsel, handled the legal affairs of Ltd. and
B.V., including drafting contracts and providing legal consultation, though he was not
employed by either of these companies.

       3Of course, all of these facts were undisputed, as MCP submitted no evidence to
controvert Toho-Towa's evidence.
                                             4
        (8) Gary Stutman, MCP's chief financial officer, who was not employed by Ltd.,
provided financial services to Ltd. at least once a month, while MCP's in-house
accountants routinely prepared Ltd.'s financial statements.
        (9) MCP had control over the underlying arbitration, by selecting counsel,
receiving legal bills, reviewing pleadings, consulting on strategy decisions, and
designating one of its own officers as the person most knowledgeable as to why B.V. and
Ltd. did not pay the money they owed to Toho-Towa.
        In response to the court's tentative decision, MCP's counsel complained that Toho-
Towa did not raise the "single enterprise" theory as a basis for imposing liability on MCP
for the debts of B.V. and Ltd. until its reply papers. Consequently, the trial court granted
MCP the opportunity to address the sole issue of the single enterprise theory as a basis for
alter ego liability. The hearing on the section 187 motion was continued until March 16,
2012.
        MCP filed its supplemental brief addressing the single enterprise form of alter ego
liability on February 15, 2012. Again, no evidence was submitted in support of MCP's
position.
        On March 13, 2012, Mr. Gutman substituted out as MCP's counsel, and its current
counsel, Glaser Weil Fink Jacobs Howard Avchen & Shapiro LLP, substituted in. The
next day, MCP applied ex parte to continue the hearing on Toho-Towa's motion to add a
judgment debtor, and to introduce additional evidence. The declaration of Charles L.
Bauermann, MCP's outside accountant, was submitted in support of the ex parte
application. Among the matters to which Mr. Bauermann attested were the
capitalization, assets, and financial status of Ltd. at the time the distribution agreement
was executed; that the three companies had separate board meetings, different directors
and officers, performed different businesses and filed separate tax forms, and observed
the corporate formalities; and that the entities did not commingle funds. The trial court
denied the ex parte application.
        At the continued hearing on the section 187 motion, held on March 16, 2012, the
court summarized the procedural history of this matter, including the ex parte application,

                                              5
and indicated that it had "considered all the papers and supplemental briefs." The court
quoted from Toho-Towa's original papers filed with its motion: "'The evidence is
overwhelming that the three Morgan Creek entities are the alter egos of each other and
function as a single, unified enterprise under the ownership and control of a single
individual, James G. Robinson.'" The court continued, "Also in the papers on page 7, and
I quote, 'Here, the evidence is overwhelming that the various Morgan Creek entities were
part of a single enterprise.' Thus Morgan Creek's claim is not persuasive that it did not
know that Toho-Towa's alter ego claim was based on a single enterprise theory." In
short, the court concluded that the supplemental briefing was unwarranted, and did not
cause the court to change its tentative decision.
       From the evidence before it, the trial court concluded that B.V. and Ltd. were
corporate shells which existed solely for contracting and asset-holding purposes to shield
MCP from liability. Consequently, the court made final "without change" its tentative
ruling of February 3 granting Toho-Towa's motion to add MCP to its judgment against
B.V. and Ltd.
       After the trial court granted the section 187 motion, MCP's counsel asked for
clarification regarding the evidence the court considered in coming to its decision: "Do I
correctly understand from the court's ruling that the court has declined to review the
declaration of Mr. Bauermann that was filed with the ex parte application?" The court
responded, "The court's reviewed everything, counsel." The court then reminded counsel
that the hearing was not continued in order to allow MCP to reargue the motion, but
solely for the purpose of addressing the supplemental matter of the single enterprise
theory. MCP's counsel inquired, "And by the 'supplemental matter,' you mean
Mr. Bauermann's declaration," to which the court replied: "No. The supplemental matter
was the hearing that the court allowed on the single enterprise because counsel had
indicated, and the court allowed supplemental briefing with respect to the issue dealing
with the single enterprise."
       On April 16, 2012, MCP filed its motion to be relieved from judgment pursuant to
section 473, subdivision (b) ("the section 473 motion") on the grounds of its prior

                                              6
counsel's mistake of law and excusable neglect in failing to introduce evidence in
opposition to Toho-Towa's motion to add MCP as a judgment debtor. In support of this
motion, MCP submitted the declarations of Messrs. Bauermann, Robinson, and Gutman.
       The trial court denied the motion. It determined that the mandatory provisions of
section 473, subdivision (b) did not apply, as there was no default or default judgment
entered against MCP, and the discretionary provisions of the statute did not apply, since
"counsel's failure to discharge routine professional duties is not excusable, nor is
counsel's failure to properly prepare for the hearing the conduct of a reasonably prudent
person."
       MCP timely appealed both the order adding it as a judgment debtor, and the order
denying its section 473 motion.

                                       DISCUSSION
       Preliminarily, we must resolve the parties' disagreement about what evidence is
properly before us on this appeal. MCP relies on the declarations of Mr. Bauermann,
submitted with its ex parte application, and Messrs. Bauermann and Robinson, submitted
in support of the section 473 motion, in its "Statement of Facts" in its opening brief.
Toho-Towa contends that, while this evidence was filed in the trial court and considered
by that court in ruling on the ex parte application and the section 473 motion, because the
trial court denied MCP's request to present additional evidence, and the section 473
motion was not heard until after MCP was added to the judgment, MCP may rely on the
evidence contained in those declarations only in connection with the appeal of the rulings
for which they were submitted. And, according to Toho-Towa, because MCP does not
appeal the ruling on the ex parte application, the contents of the Bauermann declaration
submitted in support of that application provides no evidence which MCP may use in its
arguments on appeal. We agree.
       The trial court unequivocally denied MCP's request to present additional evidence
in connection with Toho-Towa's section 187 motion. Thus, Mr. Bauermann's declaration
was not before the trial court and could not provide a basis for that court's ruling. MCP

                                              7
nevertheless argues that, because the Bauermann declaration was filed with the court and
is included in the Appellant's Appendix, and the court stated that it had read and
considered all papers filed in support of MCP's application, it was part of the record
below, and may properly be cited by MCP. We reject this argument.
       When a trial court rules that a party may not present certain evidence, the party
may, of course, cite the evidence to challenge that ruling. In the absence of a challenge to
the ruling, however, it should go without saying that the excluded evidence, though part
of the "record on appeal" (Cal. Rules of Court, rule 8.832) may not be used by this court
to reverse the order of the trial court. In short, MCP may not rely on the contents of a
declaration the trial court specifically ruled it would not permit MCP to introduce,
without first successfully arguing that the court erred in denying the ex parte application
by which MCP sought to introduce the declaration into evidence.
       MCP's argument with respect to the Bauermann and Robinson declarations
submitted in support of its section 473 motion is similarly unavailing. MCP contends
that it is entitled to cite to the section 473 declarations not only in connection with the
order denying its section 473 motion but also the order adding it as a judgment debtor
under section 187 because, as a matter of hornbook law, "'reviewing courts will now, in
determining the existence of substantial evidence, look to the entire record of the appeal.'
Bowers v. Bernard[s], 150 Cal. App. 3d 870, 873 (1984) (italics in original); see also In re
Marriage of Schmir, 134 Cal. App. 4th 43, 50, n.11 (2005) ('In determining the sufficiency
of the evidence an appellate court cannot confine itself to isolated bits of evidence but
must view the whole record.')" MCP misreads the hornbook.
       Perhaps the first rule of appellate practice is that a ruling of the trial court may be
reversed on appeal only if the trial court erred. A trial court's failure to consider evidence
not before it (such as Mr. Robinson's May 22, 2012 declaration when the court issued its
March 16, 2012 order) is not, and cannot be, error.

                                               8
       1.     Alter ego liability
       The authority of a court to amend a judgment to add a nonparty alter ego as a
judgment debtor has long been recognized. (See Mirabito v. San Francisco Dairy Co.
(1935) 8 Cal. App. 2d 54, 60.) "The ability under section 187 to amend a judgment to add
a defendant, thereby imposing liability on the new defendant without trial, requires both
(1) that the new party be the alter ego of the old party and (2) that the new party had
controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy
due process concerns." (Triplett v. Farmers Ins. Exchange (1994) 24 Cal. App. 4th 1415,
1421, original italics.) MCP maintains that the record is devoid of evidence to support
these required findings.
       We begin with the alter ego doctrine. "'Ordinarily, a corporation is regarded as a
legal entity separate and distinct from its stockholders, officers and directors. Under the
alter ego doctrine, however, where a corporation is used by an individual or individuals,
or by another corporation, to perpetrate fraud, circumvent a statute, or accomplish some
other wrongful or inequitable purpose, a court may disregard the corporate entity and
treat the corporation's acts as if they were done by the persons actually controlling the
corporation. . . .' [Citation.]" (Robbins v. Blecher (1997) 52 Cal. App. 4th 886, 892.)
When a court does so, it is said to have "pierced the corporate veil." "Because society
recognizes the benefits of allowing persons and organizations to limit their business risks
through incorporation, sound public policy dictates that imposition of alter ego liability
be approached with caution." (Las Palmas Associates v. Las Palmas Center Associates
(1992) 235 Cal. App. 3d 1220, 1249 (hereafter "Las Palmas").) Indeed, "the corporate
form will be disregarded only in narrowly defined circumstances." (Mesler v. Bragg
Management Co. (1985) 39 Cal. 3d 290, 301; accord Laird v. Capital Cities/ABC, Inc.
(1998) 68 Cal. App. 4th 727, 737 ["Corporate entities are presumed to have a separate
existence, and the corporate form will be disregarded only when the ends of justice
require this result."], disagreed with on another ground in Reid v. Google, Inc. (2010) 50
Cal. 4th 512, 524.)

                                              9
       "'Usually, a disregard of the corporate entity is sought in order to fasten liability
upon individual stockholders. . . .'" (Las Palmas, supra, 235 Cal.App.3d at p. 1249,
quoting McLoughlin v. L. Bloom Sons Co., Inc. (1962) 206 Cal. App. 2d 848, 851.) One
such scenario might be where an individual incorporated her business, thereby
immunizing herself from the business's debts, but failed to treat the corporation as a
separate entity and instead continued to operate the business as a sole proprietorship.
Such liability will be found to exist where there is such a unity of interest between a
corporation and its shareholder that separateness has ceased, yielding an inequitable
result. (9 Witkin, Summary of Cal. Law (10th ed. 2005) Corporations, §§ 9-15, pp. 785-
794 (Witkin); Institute of Veterinary Pathology, Inc. v. California Health Laboratories,
Inc. (1981) 116 Cal. App. 3d 111, 119.) Undercapitalization of the business, commingling
of corporate and personal funds, and failure to observe the corporate formalities are
examples of business practices that would leave individual shareholders vulnerable to a
finding of alter ego liability. (See generally, Witkin, supra.)
       A court may also disregard the corporate form in order to hold one corporation
liable for the debts of another affiliated corporation when the latter "'is so organized and
controlled, and its affairs are so conducted, as to make it merely an instrumentality,
agency, conduit, or adjunct of another corporation. '" (Las Palmas, supra, 235
Cal.App.3d at p. 1249, quoting McLoughlin v. L. Bloom Sons Co., Inc., supra, 206
Cal.App.2d at p. 851.) Thus, where there is "such domination of finances, policies and
practices that the controlled corporation has, so to speak, no separate mind, will or
existence of its own and is but a business conduit for its principal" (1 Fletcher Cyc. Corp.
§ 43), the affiliated corporations may be deemed to be a single business enterprise, and
the corporate veil pierced. "Under the 'single business enterprise' doctrine, separate
corporations may operate with integrated resources in pursuit of a single business
purpose." (Ibid.) "The 'single-business-enterprise' theory is an equitable doctrine applied
to reflect partnership-type liability principles when corporations integrate their resources
and operations to achieve a common business purpose." (Ibid; see Leek v. Cooper (2011)

                                              10
194 Cal. App. 4th 399, 411; Tran v. Farmers Group, Inc. (2002) 104 Cal. App. 4th 1202;
Greenspan v. LADT LLC (2010) 191 Cal. App. 4th 486, 512-513.)
       In California, common principles apply regardless of whether the alleged alter ego
is based on piercing the corporate veil to attach liability to a shareholder or to hold a
corporation liable as part of a single enterprise.4 In both cases, "[t]he law as to whether
courts will pierce the corporate veil is easy to state but difficult to apply." (Talbot v.
Fresno-Pacific Corp. (1960) 181 Cal. App. 2d 425, 432.) Because it is founded on
equitable principles, application of the alter ego "is not made to depend upon prior
decisions involving factual situations which appear to be similar. . . . 'It is the general
rule that the conditions under which a corporate entity may be disregarded vary according
to the circumstances of each case."' (McLoughlin v. L. Bloom Sons Co., Inc., supra, 206
Cal.App.2d at p. 853; see Stark v. Coker (1942) 20 Cal. 2d 839, 846; Jack Farenbaugh &
Son v. Belmont Construction, Inc. (1987) 194 Cal. App. 3d 1023, 1033.) Whether the
evidence has established that the corporate veil should be ignored is primarily a question
of fact which should not be disturbed when supported by substantial evidence. (Jack

4       There has been some criticism of and confusion concerning the relationship
between the single business enterprise and alter ego. (See Presser, The Bogalusa
Explosion, "Single Business Enterprise," "Alter-Ego," and Other Errors: Academics,
Economics, Democracy, and Shareholder Limited Liability: Back Towards a Unitary
"Abuse" Theory of Piercing the Corporate Veil (2006) 100 Nw. U. L. Rev. 405.) The
relationship has been described as "muddled." (West and Bodauer, Annual Survey of
Texas Law (2006) 59 SMU L. Rev. 1143, 1145.) One authority has warned that the
"'integrated enterprise' and 'agency' tests may offer some opportunity to avoid the strict
'injustice' requirement of the standard 'alter ego' test for piercing the corporate veil.…
[G]iven the possibility for manipulation of these doctrines, this is an area that will have to
be closely watched by the friends of limited liability in California." (Stephen B. Presser,
Piercing the Corporate Veil at § 2:5 (2013).) But it is acknowledged that California has
accepted the single enterprise theory, including the abuse or injustice requirement. The
disregard of the corporate form is employed to prevent abuse. (Ibid; see also comments
in Witkin, supra, § 9, p. 786; Presser, supra, 100 Nw. L. Rev. at p. 435.)

                                              11
Farenbaugh & Son v. Belmont Construction, Inc., supra, at p. 1032.)" (Las Palmas,
supra, 235 Cal.App.3d at p. 1248.)
       "Factors for the trial court to consider include the commingling of funds and assets
of the two entities, identical equitable ownership in the two entities, use of the same
offices and employees, disregard of corporate formalities, identical directors and officers,
and use of one as a mere shell or conduit for the affairs of the other. [Citation.] 'No one
characteristic governs, but the courts must look at all the circumstances to determine
whether the doctrine should be applied. [Citation.]' [Citation.]" (Troyk v. Farmers
Group, Inc. (2009) 171 Cal. App. 4th 1305, 1341-1342; accord Wehlage v. EmPress
Healthcare, Inc. (N.D. Cal. 2011) 791 F. Supp. 2d 774, 782.)
       Appellant maintains that "almost none" of the factors relevant to the single
enterprise theory of alter ego analysis are present in this case. There is substantial
evidence for the trial court's finding that MCP, B.V. and Ltd. were part of a single
business enterprise: The entities were all owned by the same person, who was the sole
decision maker for all of the Morgan Creek entities; the three entities exploited the same
assets; the "work" of B.V. and Ltd. was performed by the employees of MCP, so that
Brian Robinson negotiated distribution deals on behalf of, Don Hardison provided legal
services to, and Gary Stutman provided financial services, to B.V. and Ltd., though not
employed by them; and although B.V. entered into contracts which required that
monetary payments be made to them, no money was remitted, but rather was transferred
directly to Ltd.'s lender. This evidence supports the trial court's conclusion that the
Morgan Creek entities, though formed as separate corporations, were operated with
integrated resources in pursuit of a single business purpose, and that MCP so dominated
the finances, policies and practices of B.V. and Ltd. that the latter had no separate "mind,
will or existence" of their own, but were merely conduits through which MCP conducted
its business.
       There is also substantial evidence for the court's conclusion that it would be
inequitable to uphold B.V.'s separate existence under the circumstances of this case.
Toho-Towa negotiated the distribution rights to the Picture with MCP. When that

                                             12
negotiation was concluded, MCP told Toho-Towa that the contract would actually be
with B.V., not MCP, because this was how MCP conducted its distribution business.
MCP assured Toho-Towa that there would be sufficient assets to pay Toho-Towa any
monies due under the agreement. Toho-Towa was not told and did not know that B.V.'s
financial operations were structured by MCP in such a way that it never received any
money from its licensees, and thus would not have funds to meet its payment obligations
under the agreement. In sum, it would be inequitable to permit MCP, the alter ego of
B.V., to shift liability to B.V. after ensuring that B.V. would have no funds to pay its
debts.5 These factors combined fulfill the requirements for the use of the single
enterprise doctrine to disregard the corporate form in this case.
       Finally, MCP maintains that it did not control the underlying arbitration in this
matter, and thus cannot be added as a judgment debtor to Toho-Towa's judgment against
B.V. and Ltd. Specifically, MCP relies on NEC Electronics, Inc. v. Hurt (1989) 208
Cal. App. 3d 772 and Katzir's Floor & Home Design, Inc. v. M-MLS.com (9th Cir. 2004)
394 F.3d 1143 to argue that, where the original defendants (here B.V. and Ltd.) mounted
a lackluster defense and failed to contest the lawsuit effectively, due process prohibits
adding the alter ego to the judgment.
       The cited cases do not support MCP's position. In NEC Electronics Inc. v. Hurt,
supra, 208 Cal. App. 3d 772, after answering the complaint, the defendant "let the matter
proceed uncontested." (Id. at p. 780.) The defendant "did not appear at trial and did not
make any attempt to defend the NEC lawsuit." (Ibid.) In effect, the matter proceeded as
if it were a default. Similarly, in Katzir's Floor & Home Design, Inc. v. M-MLS.com,

       5 In this regard, we note that "'Application of the alter ego doctrine does not
depend upon pleading or proof of fraud.'" (Misik v. D'Arco (2011) 197 Cal. App. 4th
1065, 1074, quoting Engineering etc. Corp. v. Longridge (1957) 153 Cal. App. 2d 404,
415.) It is enough that "adherence to the fiction of the separate existence of the
corporation would promote injustice or bring about inequitable results." (Misik v.
D'Arco, supra, at p. 1074, internal citations omitted.)
13
supra, 394 F.3d 1143, the matter did proceed as a default, with no defense being provided
in the underlying case. (Id. at p. 1147.)
       Such was not the situation here. Toho-Towa's arbitration claims were contested:
B.V. and Ltd. filed a responsive pleading, participated in discovery, opposed summary
judgment, and pursued a JAMS appeal. Not only was a defense provided, but it was
provided courtesy of MCP, which retained counsel, consulted with counsel on strategy,
supervised the arbitration, and paid the legal fees. These facts amount to substantial
evidence that MCP controlled the underlying litigation. As Toho-Towa observes,
quoting from a similar case: "There was no showing below, and there is not the slightest
suggestion in the briefs of appellants, that anyone, other than [the alter ego], had control
of the litigation. Who else had authority to employ attorneys and provide the expense?
Who else was interested in the fate of the corporation? If not [the alter ego], who else?
Appellants do not say. Manifestly, [the alter ego] had control of the defense of the action
by the [primary defendant]." (Schoenberg v. Romike Properties (1967) 251 Cal. App. 2d
154, 168.)
       In sum, substantial evidence supports the trial court's order adding MCP to Toho-
Towa's judgment against B.V. and Ltd.

       2.     Denial of motion to set aside the judgment
       MCP contends that the trial court abused its discretion in denying its section 473
motion.
       Section 473, subdivision (b) provides in pertinent part: "The court may, upon any
terms as may be just, relieve a party or his or her legal representative from a judgment,
dismissal, order, or other proceeding taken against him or her through his or her mistake,
inadvertence, surprise, or excusable neglect." The court has "wide discretion" to grant
relief under this statute. (Berman v. Klassman (1971) 17 Cal. App. 3d 900, 909.) Indeed,
"[A] trial court order denying relief is scrutinized more carefully than an order permitting
trial on the merits." (Rappleyea v. Campbell (1994) 8 Cal. 4th 975, 980.)

                                             14
       MCP based its section 473 motion on two separate grounds: Its attorney's mistake
of law, and its attorney's excusable neglect.
       With respect to the former ground for relief: "It is well settled that relief may be
granted for mistake of law by a party's attorney. (See 8 Witkin, supra, § 150, p. 551.)
An honest mistake of law is a valid ground for relief where a problem is complex and
debatable. (A & S Air Conditioning v. John J. Moore Co. [(1960)] 184 Cal.App.2d [617,]
620.) The issue of which mistake of law constitutes excusable neglect presents a
question of fact. The determining factors are the reasonableness of the misconception
and the justifiability of lack of determination of the correct law. (Fidelity Fed. Sav. &
Loan Assn. v. Long (1959) 175 Cal. App. 2d 149, 154.)" (Brochtrup v. Intep (1987) 190
Cal. App. 3d 323, 329.)
       MCP described the mistake of law as follows: "MCP's prior counsel, Alan
Gutman, found no authority that expressly stated that MCP's Opposition to Petitioner's
Motion to add MCP as a judgment debtor as an alter ego of [Ltd.] and [B.V.] required
admission of evidence by MCP.6 Mr. Gutman's mistaken understanding of this complex
and debatable issue of law . . . caused Mr. Gutman to neglect to investigate facts to
support MCP's Opposition. . . . [¶] Instead, Mr. Gutman incorrectly presumed that,
because Petitioner bore the burden of proving alter ego liability, MCP did not need to
introduce evidence of its own to rebut Petitioner's evidence. Mr. Gutman also mistakenly
failed to appreciate that MCP's failure to introduce evidence of its own could lead the
Court to infer that no helpful evidence existed. As a result of Mr. Gutman's good faith
belief that MCP did not bear the burden of rebutting Petitioner's evidence, MCP did not
introduce evidence in support of its Opposition."7 In sum, the motion argued that MCP's
counsel did not know that the trial court would decide the case based on the evidence
presented to it. This was not a winning argument, given the fact that Mr. Gutman had

       6 It is not surprising that Mr. Gutman found no such authority, as there is no such
requirement.
       7 Again, Mr. Gutman's "good faith belief" was correct; MCP did not bear the
burden of rebutting Toho-Towa's evidence if, as Mr. Gutman concluded, that evidence
did not support a finding that MCP was the alter ego of B.V. and Ltd.
                                                15
been practicing law for 28 years, had experience representing entertainment clients,
including MCP, in litigation, had conducted over 50 jury trials, and had obtained several
multi-million dollar verdicts and settlements. The trial court did not abuse its discretion
in concluding that there was no mistake of law subject to relief pursuant to section 473,
subdivision (b).
       Alternatively, MCP argued that its failure to introduce "compelling evidence to
show that it is not the alter ego of [Ltd.] or [B.V.], . . . [e]vidence, which was available to
MCP, but which Mr. Gutman mistakenly failed to obtain and offer into evidence . . ."
constituted excusable neglect under section 473, subdivision (b).
       "'A party who seeks relief under section 473 on the basis of mistake or
inadvertence of counsel must demonstrate that such mistake, inadvertence, or general
neglect was excusable because the negligence of the attorney is imputed to his client and
may not be offered by the latter as a basis for relief.' (Generale Bank Nederland v. Eyes
of the Beholder Ltd. (1998) 61 Cal. App. 4th 1384, 1399.) In determining whether the
attorney's mistake or inadvertence was excusable, 'the court inquires whether "a
reasonably prudent person under the same or similar circumstances" might have made the
same error."' (Bettencourt v. Los Rios Community College Dist. (1986) 42 Cal. 3d 270,
276, italics added.) In other words, the discretionary relief provision of section 473 only
permits relief from attorney error 'fairly imputable to the client, i.e., mistakes anyone
could have made.' (Garcia [v. Hejmadi (1997)] 58 Cal.App.4th [674,] 682.) 'Conduct
falling below the professional standard of care, such as failure to timely object or to
properly advance an argument, is not therefore excusable. To hold otherwise would be to
eliminate the express statutory requirement of excusability and effectively eviscerate the
concept of attorney malpractice.' (Ibid.)." (Zamora v. Clayborn Contracting Group, Inc.
(2002) 28 Cal. 4th 249, 258; see also, Garcia v. Hejmadi, supra, 58 Cal.App.4th at
p. 683.) The failure to introduce readily available, compelling evidence which supports
the client's position that it is not the alter ego of a sister corporation with a $5.7 million
outstanding judgment is not a mistake that a reasonably prudent person in the same
circumstances might have made but rather conduct falling below the professional

                                               16
standard of care. Consequently, the trial court acted within its discretion in denying
MCP's section 473 motion based on its attorney's excusable neglect.

                                      DISPOSITION
       The judgment is affirmed.
       CERTIFIED FOR PUBLICATION

                                                 O'NEILL, J.*

We concur:

              MOSK, Acting P. J.

              KRIEGLER, J.

       * Judge of the Ventura Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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