Court Opinion

ID: 6328312
Source: CourtListenerOpinion
Date Created: 2022-03-30 18:01:58.828977+00
Date Added: 2024-06-11T09:21:16.698075
License: Public Domain

Filed 3/30/22 Poodles, Inc. v. Kuhn CA1/1
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                   DIVISION ONE

 POODLES, INC., et al.,
           Plaintiffs and Appellants,                                   A161161

 v.                                                                     (San Francisco City & County
 ROGER C. KUHN et al.,                                                   Super. Ct. No. CGC-16-550634)
           Defendants and Respondents.

         Plaintiffs Poodles, Inc. (Poodles), Patrick & Friends, Inc. (PFI) and Jill
Williamson filed a complaint against defendants Roger C. Kuhn, James W.
McIntyre, Joseph Lynch, Michael Ina, Eugene F. Lynch, Sherman Wong,
Lawrence Bennett, All Animals Properties, LP (AAP), 1333 Ninth Avenue,
LLC, and All Animals Emergency Hospital, Inc. (AAEH) (jointly, defendants)
asserting defendants engaged in fraudulent conduct and breached various
agreements associated with the purchase of defendants’ animal hospital and
specialty practice. The trial was bifurcated, and the initial jury trial resulted
in a verdict in plaintiffs’ favor on almost all counts. Following the
subsequent bench trial, the court vacated a portion of the jury verdict on the
basis that the statute of frauds defense applied to bar certain oral referral
agreement claims. The court also concluded in relevant part that there was
no alter ego liability between defendants.
      On appeal, plaintiffs contend the trial court erred by applying the
statute of frauds, utilized an erroneous legal standard in evaluating alter ego
liability, and improperly failed to reopen evidence on the issue of alter ego
liability. Plaintiffs also contend the trial court erred in barring evidence and
argument of delay damages in advance of the jury trial. We disagree and
affirm the judgment.
                                        I.
                                BACKGROUND
A. Factual Background
      In August 2012, Poodles leased from AAP two parcels of commercial
property (property). The lease provided for an option to purchase the
property “ ‘for the fair market value of the property at the time that Tenant
exercises this option, and on such other mutually agreed terms.’ ” At the
same time the lease was executed, PFI executed a “Purchase and Sale of
Assets Agreement” with AAEH to purchase all tangible and intangible real
and personal property of AAEH’s emergency veterinarian business, including
in part, “All of the goodwill and going concern value of AAEH,” for $1.7
million (asset purchase agreement).1 PFI made an initial payment of
$170,000 and executed a promissory note in the principal amount of $1.53
million (note).
      Williamson subsequently invested approximately $500,000 to improve
the property, and informed AAP that Poodles wished to exercise its option to
purchase the property.
      After the parties were unsuccessful in negotiating the purchase option,
Poodles filed a lawsuit against AAP and 1333 Ninth Avenue LLC, a general
partner of AAP, to compel the sale of the property (Poodles, Inc. v. All

      1   Jill Williamson is the majority owner of both Poodles and PFI.

                                        2
Animals Properties, LP (Super. Ct. S.F. City & County, 2016, No. CGC-15-
545260) (Poodles I). Poodles alleged it repeatedly requested that AAP
negotiate a mutually agreeable purchase and sale agreement, but AAP had
refused to do so. The complaint sought specific performance and attorney
fees.
        Following a bench trial, the trial court entered judgment in favor of
Poodles. The court ordered that Poodles “shall have until April 25, 2016” to
exercise its right to purchase the property for $1.35 million. The court also
ordered the outstanding balance on the note to be paid in full as part of the
sale.
B. Procedural Background
        In February 2016, approximately three months before judgment in
Poodles I, Poodles filed the present lawsuit against defendants (Poodles II).
The complaint alleged breach of contract, breach of the implied covenant of
good faith and fair dealing, and intentional misrepresentation. The
complaint alleged defendants failed to maintain and repair the property
during the term of the lease, refused to honor the option to purchase the
property, and acted in bad faith to prevent the purchase of the property in
order to collect a monthly rent higher than the market value. The complaint
further asserted defendants intentionally misrepresented that they would
sell the property, while knowing they did not intend to do so. The complaint
sought compensatory and punitive damages.
        Defendants subsequently filed a motion for judgment on the pleadings.
They asserted that Poodles I and Poodles II shared the same primary right,
i.e., that defendants breached Poodles’s option to purchase the property.
Defendants alleged Poodles should have sought damages for overpayment of
rent in Poodles I, and its failure to do so barred it from seeking such damages

                                         3
in Poodles II. Defendants thus requested the court enter judgment against
the complaint in its entirety.
      The trial court granted the motion without leave to amend, in part, and
with leave to amend, in part. Specifically, the court granted the motion
without leave to amend as to the breach of the implied covenant of good faith
and fair dealing and the intentional misrepresentation claims because it
concluded Poodles “improperly split its causes of action arising out of
Defendant’s [sic] failure to comply with [the] option provision of the lease.”
The court granted the motion with leave to amend as to the breach of
contract claim arising from defendants’ alleged failure to maintain the
property.
      Poodles filed an amended complaint, followed thereafter by a second
amended complaint (SAC). The SAC added, in relevant part, PFI and
Williamson as plaintiffs and AAEH as a defendant. The SAC alleged breach
of the asset purchase agreement, breach of oral referral agreements, breach
of the lease agreement, fraud and misrepresentation, breach of contract, and
promissory estoppel. The claims were based on allegations that defendants
improperly refused to sell the property to Poodles, refused to honor oral
agreements to refer patients to plaintiffs, and improperly required plaintiffs
to preemptively repay the note as a condition for exercising the option to
purchase. The SAC also asserted defendants breached the lease agreement
by failing to maintain and make necessary repairs to the property.
      Defendants again filed a motion for judgment on the pleadings. They
asserted all of the claims were either barred by res judicata because plaintiffs
could have—but failed to—litigate the issue in Poodles I, or barred by the
statute of frauds and/or the statute of limitations.

                                        4
      The trial court granted the motion with leave to amend as to the breach
of oral referral agreements and promissory estoppel claims in order to allow
plaintiffs to plead all material terms of the alleged oral agreements. The
court also granted the motion without leave to amend as to the breach of
contract claim because repayment of the note was adjudicated in Poodles I.
Finally, the court denied the motion as to the breach of the asset purchase
agreement, the breach of the lease agreement, and the
fraud/misrepresentation claims.
      Plaintiffs filed a third amended complaint, followed thereafter by a
fourth amended complaint (FAC). The FAC contained the same claims
against defendants as were in the SAC, apart from the fifth cause of action
regarding the note. Defendants filed an answer, which asserted various
affirmative defenses including that the referral agreements were barred by
the statute of frauds.
      1. Phase One—The Jury Trial
      Prior to trial, defendants filed two motions in limine to exclude
evidence and argument regarding damages caused by the delay in selling the
property to Poodles. First, defendants sought to exclude plaintiffs’ expert
from offering an opinion regarding such damages on the basis that such
testimony would be speculative. Second, defendants asserted any evidence or
argument regarding delay damages is barred by claim preclusion. The court
granted these motions.
      Additionally, defendants filed a motion to “establish the order of proof
at trial.” Defendants asked the court to first conduct a bench trial on various
issues and equitable affirmative defenses, such as standing, alter ego
liability, estoppel, res judicata/claim preclusion, the statute of limitations,
and waiver. Defendants then proposed a second phase in which a jury would

                                         5
decide any remaining issues apart from punitive and exemplary damages,
which the court would decide in a third phase. The court declined to adopt
this approach, and proceeded with a jury trial followed by a bench trial on
various remaining issues.
      The court conducted a jury trial on the breach of asset purchase
agreement, breach of oral referral agreements, breach of lease, and false
promise causes of action. Following that trial, the jury returned a verdict in
plaintiffs’ favor as to all causes of action except false promise, and awarded
various damages.
      2. Phase Two—The Bench Trial
      Prior to the bench trial, the parties submitted various briefs regarding
alter ego liability and promissory estoppel. As part of the briefing on
promissory estoppel, defendants argued the oral referral agreements were
invalid under the statute of frauds.
      Following the bench trial, plaintiffs submitted an opposition brief to
defendants’ statute of frauds defense. Plaintiffs argued the issue should have
been raised prior to the jury trial as a motion in limine, or as a motion for
directed verdict or nonsuit. Plaintiffs also raised various arguments for why
the court should find the statute of frauds inapplicable. Plaintiffs again
challenged the merits of the statute of frauds defense in their closing brief,
but did not reassert that defendants had waived the defense by failing to
raise it during the jury trial.
      The trial court subsequently issued a tentative decision and proposed
statement of decision as to the following issues: (1) was AAP an alter ego of
AAEH; (2) were AAEH steering committee members or shareholders alter
egos of AAEH; (3) was the breach of oral referral agreements claim barred by
the statute of frauds; (4) should judgment issue for plaintiffs on the

                                        6
promissory estoppel claim; and (5) were defendants entitled to any setoff for
the settlement paid to plaintiffs by their former counsel. The court rejected
plaintiffs’ argument that AAP, AAEH steering committee members, or AAEH
shareholders were alter egos of AAEH. The court further concluded there
was no writing to support the oral referral agreements and the evidence
supports an interpretation that the agreements could not be performed
within a year. Accordingly, the court concluded the statute of frauds barred
the breach of oral referral agreements cause of action. Next, the court
considered the promissory estoppel claim. The trial court found the evidence
regarding the agreements too indefinite and denied the claim. Finally, the
court denied defendants’ request for a setoff for damages paid by plaintiffs’
former counsel.
        After considering plaintiffs’ various objections to the proposed
statement of decision, the trial court adopted its proposed statement of
decision and entered judgment in accordance with its order. Plaintiffs timely
appealed from the judgment.
                                         II.
                                  DISCUSSION
        Plaintiffs assert the trial court erred by (1) applying the statute of
frauds to bar the oral referral agreements; (2) employing the wrong legal
standard to evaluate alter ego liability; (3) abusing its discretion by refusing
to reopen evidence of alter ego liability; and (4) barring fraud claims and
underlying evidence on res judicata grounds. We address each argument in
turn.
A. Statute of Frauds
        Plaintiffs raise two arguments with respect to the statute of frauds.
First, they contend defendants waived the defense by failing to assert it at

                                          7
the jury trial. Second, plaintiffs argue defendants failed to establish that the
statute of frauds applies because the agreement could have been performed
within one year. We disagree for the reasons set forth below.
      1. Waiver
      Plaintiffs contend defendants waived the statute of frauds defense by
failing to raise it before or during the jury trial. “The statute of frauds is
treated as a rule of evidence which, if not properly raised, may be forfeited.
[Citations.] The California Supreme Court explained, ‘it is settled that . . . a
defendant waives his right to rely upon any provisions of the statute of frauds
[citation] by failing to (a) demur to the complaint, (b) object to the
introduction of testimony to prove the oral agreement at the time of trial, or
(c) make a motion to strike such testimony.’ [Citation.] A general denial in
an answer is sufficient to preserve a statute of frauds objection [citation], as
is a general demurrer.” (Secrest v. Security National Mortgage Loan Trust
2002-2 (2008) 167 Cal.App.4th 544, 551–552, citing Pao Ch’en Lee v.
Gregoriou (1958) 50 Cal.2d 502, 506 and Howard v. Adams (1940) 16 Cal.2d
253, 257.)
      Here, defendants asserted the statute of frauds in a motion for
judgment on the pleadings in connection with the SAC and their demurrer to
the third amended complaint. In response, plaintiffs included approximately
two and a half pages of argument in the FAC regarding why the statute of
frauds did not apply. Defendants did not again demurrer but asserted the
statute of frauds as an affirmative defense in their answer to the FAC.
      Prior to the start of the jury trial, defendants submitted a proposal for
establishing proof regarding various legal and equitable issues, although the
statute of frauds was not specifically listed. Defendants then filed a pretrial
brief in which they contested the validity of the oral referral agreements,

                                         8
although again without specifically addressing the statute of frauds, and
again requested that “[s]everal issues, such as the resolution of equitable
issues and affirmative defenses such as claim preclusion” be resolved by the
court prior to the jury trial. The court rejected defendants’ proposal and
concluded, “I do think we can proceed efficiently by having most of the
testimony necessary for the affirmative defenses and the alter ego issues
heard by the jury with any additional issues heard by the Court on a day that
we don’t have the jury here.”
      During phase one of trial—the jury trial—plaintiffs presented
testimony regarding the oral referral agreements. Defendants did not object
to such evidence but their witnesses testified that no such agreements
existed, and defendants later relied on plaintiffs’ testimony when arguing the
applicability of the statute of frauds.
      Following the jury trial, defendants and the court identified the statute
of frauds defense as an issue to be tried in phase two of trial—the bench trial.
Plaintiffs’ counsel objected, stating it should have been raised prior to the
matter being submitted to the jury because “[i]f there was a legal defense to
[the second cause of action for breach of the oral agreements], it shouldn’t
have gone to the jury.”
      Both defense counsel and the court noted the ongoing ambiguity and
confusion regarding the scope and terms of the oral referral agreements prior
to the jury trial. The court stated, “[I]t seems to me it was always anticipated
by the plaintiffs that there might be a statute of frauds defense. [¶] My
understanding, although we never discussed it, is that we wouldn’t address
this issue until we found out whether the jury, as a matter of fact, found that
there was an oral contract. . . . [¶] . . . [¶] . . . So I never expected I would be
addressing this issue until after the verdict came in since I think it was a

                                          9
hotly contested issue as to whether or not, first, there was [an] oral contract
between the plaintiffs and any of the defendants and, if so, what it was, what
it’s [sic] terms and conditions were.” The court then concluded, because the
jury found such contracts to exist, it would now “make a determination as to
whether or not the statute of frauds applies or whether there’s an exception
to it.”
          Plaintiffs rely primarily on Bank of America National Trust & Savings
Association v. Hutchinson (1963) 212 Cal.App.2d 142 to contend these steps
were insufficient to preserve the objection, and it was required to be raised at
trial. We find Bank of America distinguishable. In that matter, a bank
employee made certain representations that induced certain bank customers
to borrow money and lend it to another bank customer. (Id. at pp. 144–145.)
On appeal, the bank argued testimony regarding its employee’s
representations should have been barred under section 1974 of the Code of
Civil Procedure, “which provide[d]: ‘No evidence is admissible to charge a
person upon a representation as to the credit of a third person, unless such
representation, or some memorandum thereof, be in writing, and either
subscribed by or in the handwriting of the party to be charged.’ ” (Bank of
America, at pp. 148–149.) The court noted the appellants failed to challenge
such evidence until two weeks after trial concluded. (Id. at p. 149.) The
appellate court thus concluded, “appellants are now foreclosed by the fatal
fact that they tried their entire case without making any objection
whatsoever to the reception of such evidence, although it was apparent
throughout the trial, and prior thereto, (as witnessed by the joint pretrial
statement) that respondents were relying upon said oral representations.”
(Ibid.) Likewise, Howard v. Adams, supra, 16 Cal.2d 253 and Pao Ch’en Lee
v. Gregoriou, supra, 50 Cal.2d 502 are equally inapplicable. Those cases

                                         10
involved situations in which the defendants asserted either a general denial
or an affirmative defense in their answer but did not pursue the defense
further or raise any objection to testimony about the oral agreements at trial.
(Howard, at p. 257; Pao Ch’en Lee, at pp. 505–506.)
      Here, defendants raised the issue in response to the operative
pleadings and again before the bench trial. We are unaware of any authority
suggesting defendants’ repeat assertions of the statute of frauds—including
during trial, albeit the second phase of trial—are insufficient to preserve the
issue. Moreover, while the parties’ discussion of the bifurcated trial did not
expressly discuss the statute of frauds prior to the jury trial, the trial court
explained in its statement of decision that it consistently understood that the
statute of frauds would be part of the second phase of trial and be decided by
the court rather than submitted to the jury. And the court further noted that
the parties expressly identified the statute of frauds as an issue prior to the
bench trial. Based on the foregoing, we cannot conclude the trial court
abused its discretion in finding defendants did not waive the defense. (See
Rubinstein v. Fakheri (2020) 49 Cal.App.5th 797, 805 [“We review for abuse
of discretion the trial court’s ruling that [defendant] did not timely raise the
defense.”].)2
      2. Applicability of Statute of Frauds
      Civil Code section 1624, subdivision (a)(1) invalidates an oral contract
“that by its terms is not to be performed within a year from the making

      2 Plaintiffs also argue the trial court erred by improperly shifting the
burden onto them to proactively challenge the statute of frauds defense.
However, the issue was whether the statute of frauds defense was required to
be raised during the first phase of trial—the jury trial—rather than during
the second phase. Accordingly, the trial court evaluated whether plaintiffs
waived or were equitably estopped from demanding a jury trial on the statute
of frauds.

                                        11
thereof.” This portion of the statute of frauds applies only to those contracts
that, by their terms, cannot possibly be performed within one year. (Foley v.
Interactive Data Corp. (1988) 47 Cal.3d 654, 671 (Foley).) Thus, if a condition
terminating an oral contract may occur within one year of its making, then
the contract is performable within a year and does not fall within the statute
of frauds. (Id. at p. 673.) In other words, a contract, otherwise within Civil
Code section 1624, subdivision (a)(1), may be taken out of its operation by the
fact that a party may rightfully terminate the contract within a year.
(Plumlee v. Poag (1984) 150 Cal.App.3d 541, 550.) This is true even though
performance of the contract may extend for longer than one year if the
contingency by which performance may be terminated does not occur. (Foley,
at p. 673.)
      In Foley, the Court of Appeal had affirmed a demurrer on the basis that
inclusion of a term in an oral contract allowing termination only for cause
created “ ‘a reasonable expectation of employment for more than one year (in
which case the statute of frauds does apply, barring this action).’ ” (Foley,
supra, 47 Cal.3d at p. 672.) The Supreme Court reversed, holding, “Even if
the original oral agreement had expressly promised plaintiff ‘permanent’
employment terminable only on the condition of his subsequent poor
performance or other good cause, such an agreement, if for no specified term,
could possibly be completed within one year. [Citation.] Because the
employee can quit or the employer can discharge for cause, even an
agreement that strictly defines appropriate grounds for discharge can be
completely performed within one year—or within one day for that matter.”
(Id. at pp. 672–673.) The court affirmed “the general rule that if a condition
terminating a contract may occur within one year of its making, then the
contract is performable within a year and does not fall within the scope of the

                                       12
statute of frauds. This is true even though performance of the contract may
extend for longer than one year if the condition does not occur.” (Id. at p. 673,
italics added.) Courts have subsequently applied Foley to contracts with
definite terms. (See, e.g., Abeyta v. Superior Court (1993) 17 Cal.App.4th
1037, 1044–1045.)
      We must look to the terms of the oral referral agreements to determine
whether the statute of fraud applies. (See Lacy v. Bennett (1962)
207 Cal.App.2d 796, 800 (Lacy) [“The test for determining whether an oral
contract is not to be performed within a year lies wholly within its terms.”].)
At issue is the duration of the referral agreements and whether those
agreements obligated defendants to make such referrals for longer than a
one-year period.
      Plaintiffs argue the referral agreements could, in fact, have been
performed within a year. They assert Williamson’s testimony that she
“anticipated the referrals continuing through the life of the [note], and
beyond that ‘as long as we did a good job,’ ” does not preclude the possibility
of the note being repaid within a year. Rather, plaintiffs contend such
testimony merely suggests it was “unlikely” for the note to have been repaid
within a year, which is insufficient to subject the agreements to the statute of
frauds.
      We agree a low probability of performance within a year does not, by
itself, make an agreement fall within the scope of the statute of frauds. (See
Lacy, supra, 207 Cal.App.2d at pp. 800–801 [“The fact that performance
within one year is not probable under the terms of the agreement does not
bring it within the statute of frauds.”].) However, the record does not reflect
a possibility of repayment within a year.

                                       13
      Williamson testified the referral agreement was for the duration of the
note, stating, “[T]here was no expectation to me that they would go . . .
beyond paying off the note.” However, the record does not demonstrate that
plaintiffs could have repaid the note within a year. While plaintiffs offered to
repay the note as part of their attempts to exercise the purchase option in the
lease agreement, the record is devoid of evidence demonstrating they had the
funds to do so. To the contrary, as of July 2013, Williamson testified that she
was “working hard” to get a loan to pay off the note—indicating plaintiffs
neither had the assets to repay the note nor had yet secured funding to do so.
      Plaintiffs argue the referral agreements were not tied to repayment of
the note, but rather based on plaintiffs’ performance.3 This position
contradicts Williamson’s testimony. She repeatedly testified she “hoped” the
referrals “would be indefinite, but I didn’t—there was no expectation to me
that they would go, more than likely, beyond paying off the note. [¶] At that
point, I’d hoped I’d gained their referral business because I was doing a good
job.” Nothing in this testimony indicates the oral agreements contained a
contract term that the referrals would continue as long as Williamson did “a
good job.”
      Accordingly, the record demonstrates the terms of the oral referral
agreements were not purely performance based, as in Foley, supra, 47 Cal.3d
654, and could not have been performed within a year. The trial court thus
did not err in applying the statute of frauds.4

      3 Plaintiffs fail to cite any evidence demonstrating a negotiated term of
the referral agreement was that it would continue as long as they provided
adequate services.
      4 The trial court noted plaintiffs’ introduction of damages through July
2019—despite the note being paid in full by April 2016—and the scope of the
verdict’s award of damages indicates a “finding by the jury that the oral
agreements which they found to have been breached by the individual
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B. Alter Ego Liability
      Appellants contend the trial court erred in concluding there was no
alter ego liability. They assert the court ignored relevant evidence and
improperly considered wrongful intent. We disagree.
      1. General Legal Principles
      “Whether a party is liable under an alter ego theory is normally a
question of fact. [Citations.] ‘The conditions under which the corporate
entity may be disregarded, or the corporation be regarded as the alter ego of
the stockholders, necessarily vary according to the circumstances in each case
inasmuch as the doctrine is essentially an equitable one and for that reason
is particularly within the province of the trial court.’ [Citation.]
Nevertheless, it is generally stated that in order to prevail on an alter ego
theory, the plaintiff must show that ‘(1) there is such a unity of interest that
the separate personalities of the corporations no longer exist; and
(2) inequitable results will follow if the corporate separateness is respected.’
[Citation.]
      “ ‘The alter ego test encompasses a host of factors: “. . . [c]ommingling of
funds and other assets, failure to segregate funds of the separate entities,
and the unauthorized diversion of corporate funds or assets to other than
corporate uses[;] . . . the treatment by an individual of the assets of the
corporation as his own[;] . . . the failure to maintain minutes or adequate
corporate records, and the confusion of the records of the separate entities[;]
. . . the failure to adequately capitalize a corporation; the total absence of
corporate assets, and undercapitalization[;] . . . the use of a corporation as a

defendants extended beyond the term of the [note] . . . .” We need not opine
on this analysis. At most it suggests the jury concluded the duration of the
referral agreements exceeded the duration of the note.

                                        15
mere shell, instrumentality or conduit for a single venture or the business of
an individual or another corporation[;] . . . . [¶] This long list of factors is not
exhaustive. The enumerated factors may be considered “[a]mong” others
“under the particular circumstances of each case.” ’ [Citations.] ‘No single
factor is determinative, and instead a court must examine all the
circumstances to determine whether to apply the doctrine.’ ” (Zoran Corp. v.
Chen (2010) 185 Cal.App.4th 799, 811–812.)
      2. Analysis
      The trial court concluded plaintiffs failed on both prongs of the
analysis—namely, that (1) the individual defendants and AAP were not alter
egos of AAEH, and (2) respecting the corporate formalities would not cause
inequitable results.
             a. Evidence of Unity of Interest
      In February 2017, AAEH made a distribution of the majority of its
assets—approximately $1.5 million—to its shareholders. Plaintiffs assert
that distribution happened after their counsel alerted AAEH that it would be
added as a defendant in the SAC. Plaintiffs argue the trial court erred by
failing to consider this distribution of assets from AAEH to its shareholders
in determining whether alter ego liability should apply as to the individual
defendants. They argue if the court had considered such evidence, it would
have reached a different conclusion on alter ego liability. The record suggests
otherwise.
      Plaintiffs focus on the trial court’s statement that it “give[s] no weight”
to the evidence of the distribution to suggest the trial court ignored such
evidence. To the contrary, the statement of decision discussed the
distribution at length. The trial court began by discussing testimony by
plaintiffs’ counsel that he had multiple telephone conversations with AAEH’s

                                         16
counsel in which he requested mediation pursuant to the asset purchase
agreement and advised AAEH’s counsel that AAEH would be sued in the
SAC.
       The trial court also discussed defendants’ evidence regarding the
distribution. Specifically, it noted evidence that the distribution was
preceded by a notice of election to dissolve the corporation. It also discussed
testimony by Michael Ina and Phil Freund5 that they were unaware that
claims would be asserted against AAEH at the time of the distribution.
       In considering this evidence, the trial court did not find plaintiffs’
counsel’s testimony persuasive. The trial court explained the asset purchase
agreement contained a fee-shifting provision that required a demand for
mediation which, if refused by the losing party, would give rise to an attorney
fee claim. As a result, the trial court expected a contemporaneous e-mail or
other documentation to memorialize the mediation demand and preserve the
attorney fee claim. The court noted no such correspondence was produced.
Instead, the record only contained an April 2017 e-mail addressing the
mediation and stating, “ ‘I hereby give you notice,’ ” which the court found
inconsistent with plaintiffs’ position that notice had been given in January.
The trial court thus concluded plaintiffs’ evidence was insufficient to support
their burden of proof, and found it of “no weight . . . for purposes of the alter
ego analysis.”
       “ ‘Whether the evidence has established that the corporate veil should
be ignored is primarily a question of fact which should not be disturbed when

       5Dr. Ina was a veterinarian who participated in the negotiations over
the sale of the pet hospital as part of AAEH’s management team, and was
involved in the decision to distribute assets. Mr. Freund served as the
bookkeeper and accountant for AAP and AAEH, and made the distribution
payments at issue.

                                         17
supported by substantial evidence.’ ” (Toho–Towa Co., Ltd. v. Morgan Creek
Productions, Inc. (2013) 217 Cal.App.4th 1096, 1108.) Here, the trial court
provided a detailed discussion of the evidence surrounding the distribution.
This analysis identified evidence in favor of a unity of interest finding, such
as (1) the common ownership between AAEH and AAP; (2) the overlap in
address, accountant, and attorneys; and (3) AAP’s flexibility with AAEH’s
rent payments, as well as evidence against a finding of unity of interest, such
as (1) AAEH was a valid business which, for decades, operated an animal
emergency hospital; (2) AAEH was properly capitalized while operating;
(3) AAEH observed the required corporate formalities; and (4) AAP and
AAEH “functioned as two related, but distinct, entities operating separate
businesses.” It also considered evidence regarding the distribution and
ultimately concluded such evidence did not impact its analysis as to whether
there existed a unity of interests. Accordingly, substantial evidence supports
the trial court’s conclusion that there was no unity of interest between AAEH
and the individual defendants or AAP.
            b. Wrongful Intent
      Plaintiffs next challenge the second prong of alter ego liability,
asserting an inequitable result does not require evidence of a wrongful intent.
They contend the trial court erred by focusing on wrongful intent. In
response, defendants argue the trial court properly considered wrongful
intent, in large part because plaintiffs argued the issue before the trial court.
      As an initial matter and as set forth above, substantial evidence
supports the trial court’s holding that there was no unity of interest.
Accordingly, based on that prong alone, plaintiffs cannot prove alter ego
liability. In any event, we conclude while wrongful intent is not necessarily a

                                       18
required element of the inequitable results prong for alter ego liability, a
mere inability to collect a debt is insufficient.
       Historically, the California Supreme Court has set forth various
articulations of the requirements for alter ego liability, including (1) looking
to evidence of “bad faith” (see, e.g., Hollywood Cleaning & Pressing Co. v.
Hollywood Laundry Service, Inc. (1932) 217 Cal. 124, 129 [“Bad faith in one
form or another must be shown before the court may disregard the fiction of
separate corporate existence.”]); (2) not expressly requiring a showing of bad
faith but rather focusing on the issue of an inequitable or unjust result (see,
e.g., Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300 [“ ‘if the acts
are treated as those of the corporation alone, an inequitable result will
follow’ ”]); (3) expressly providing that proof of actual fraud is not required
(see, e.g., Gordon v. Aztec Brewing Co. (1949) 33 Cal.2d 514, 523 [“It is not
necessary that the plaintiff prove actual fraud. It is enough if the recognition
of the two entities as separate would result in an injustice.”]); and
(4) disclaiming any requirement of wrongful intent (see, e.g., Higgins v. Cal.
Petroleum etc. Co. (1898) 122 Cal. 373, 376 [finding constructive fraud even
though the “parties may have supposed, and no doubt did suppose, that the
transaction was a legal and valid one, but in so acting they acted at their
peril”]).
       More recent cases from various Courts of Appeal also have expressly
held that “ ‘[a]pplication of the alter ego doctrine does not depend upon
pleading or proof of fraud.’ [Citations.] The doctrine can be invoked when
adherence to the fiction of the separate existence of the corporation would
promote injustice [citation] or bring about inequitable results.” (Misik v.
D’Arco (2011) 197 Cal.App.4th 1065, 1074, italics omitted (Misik).)

                                         19
      The Second Appellate District also directly addressed this issue in
Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership (2013)
222 Cal.App.4th 811 (Relentless). In that case, a judgment creditor moved to
add the debtor partnership’s limited partners and prior and current general
partner corporations as judgment debtors. The trial court found the
individuals and corporations were the debtor’s alter egos, but still denied the
motion, finding the creditor failed to show an inequitable result. (Id. at
p. 813.) The Court of Appeal reversed and held the trial court erred in
requiring the creditor to prove the individuals acted with wrongful intent.
“The law does not require such proof. Relentless was required to prove that
the [individuals’] acts caused an ‘ “ ‘inequitable result.’ ” ’ [Citation.] Here
the [individuals’] intent is beside the point. [¶] . . . Given the trial court’s
finding that the [entities and individuals] are one and the same, it would be
inequitable as a matter of law to preclude Relentless from collecting its
judgment by treating Airborne as a separate entity.” (Id. at p. 816.)
      Defendants challenge the reasoning in Relentless. But we believe Misik
and Relentless are consistent with the articulated public policy behind the
statutory privilege of the corporate form: “ ‘As the separate personality of the
corporation is a statutory privilege, it must be used for legitimate business
purposes and must not be perverted. When it is abused it will be disregarded
and the corporation looked at as a collection or association of individuals, so
that the corporation will be liable for acts of the stockholders or the
stockholders liable for acts done in the name of the corporation.’ ” (Mesler v.
Bragg Management Co., supra, 39 Cal.3d at p. 300.) “ ‘Parties who determine
to avail themselves of the right to do business by means of the establishment
of a corporate entity must assume the burdens thereof as well as the
privileges.’ ” (Shapoff v. Scull (1990) 222 Cal.App.3d 1457, 1470, disapproved

                                         20
on another ground by Applied Equipment Corp. v. Litton Saudi Arabia Ltd.
(1994) 7 Cal.4th 503, 521, fn. 10.)
      While an unjust or inequitable result may be found regardless of
wrongful intent, courts have repeatedly held “it is not sufficient to merely
show that a creditor will remain unsatisfied if the corporate veil is not
pierced . . . . In almost every instance where a plaintiff has attempted to
invoke the doctrine he is an unsatisfied creditor.” (Associated Vendors, Inc. v.
Oakland Meat Co. (1962) 210 Cal.App.2d 825, 842; see also Sonora Diamond
Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 539.) Allowing parties to
pierce a corporate veil merely due to an unsatisfied debt would undermine
the legitimate public policy of limited liability for corporations in the ordinary
case. (See Sonora Diamond Corp., at p. 539; Leek v. Cooper (2011)
194 Cal.App.4th 399, 418.)
      The holding in Relentless turned on the fact that there was a unity of
interest between the defendant corporation and the judgment debtors.
(Relentless, supra, 222 Cal.App.4th at p. 815.) Here, however, no such unity
of interest was found. (See part II.B.2.a., ante.) All plaintiffs have
demonstrated is their difficulty in enforcing a judgment against AAEH. That
alone is insufficient.6
      3. Request to Reopen Evidence
      Finally, plaintiffs contend the trial court abused its discretion in
refusing to reopen the trial to allow additional evidence that AAEH was on
notice—as of the date of distribution—that it would be sued for breach of the
asset purchase agreement.

      6We further note the trial court also found no inequitable result
because plaintiffs received payment for certain damages from their former
counsel’s insurance carrier.

                                       21
      “Trial courts have broad discretion in deciding whether to reopen the
evidence.” (Horning v. Shilberg (2005) 130 Cal.App.4th 197, 208.) A motion
to reopen evidence may be granted only if the moving party makes a showing
of good cause. (Sanchez v. Bay General Hospital (1981) 116 Cal.App.3d 776,
793.) It is proper to deny a motion to reopen evidence if the failure to
introduce evidence earlier is a product of trial tactics. (Rosenfeld, Meyer &
Susman v. Cohen (1987) 191 Cal.App.3d 1035, 1052–1053.) Moreover, “denial
of a motion to reopen will be upheld if the moving party fails to show
diligence or that he [or she] had been misled by the other party.”
(Guardianship of Phillip B. (1983) 139 Cal.App.3d 407, 428.) We review a
trial court’s denial of a motion to reopen evidence for an abuse of discretion.
(Horning, at p. 208.)
      Here, plaintiffs sought to introduce an e-mail from their counsel to
Williamson regarding a conversation he had with AAEH’s counsel, along with
their counsel’s telephone records. Plaintiffs contend this evidence would
demonstrate AAEH was on notice of the pending legal claims prior to its
distribution of assets. However, plaintiffs fail to explain why this evidence
was not originally presented at trial. The timing of the distribution and
notice of the pending legal claim was indisputably at issue, as evidenced by
the competing testimony on the issue. Likewise, the evidence plaintiffs
sought to introduce—an e-mail between their counsel and Williamson and
their counsel’s telephone records—were materials in their (or their counsel’s)
possession. Accordingly, the record suggests plaintiffs’ failure to originally
introduce the evidence at trial was an intentional trial tactic or due to a lack

                                       22
of diligence. Regardless, the trial court did not abuse its discretion in
denying plaintiffs’ motion to reopen evidence.7
C. Delay Damages
      As discussed above, the trial court excluded evidence and argument of
damages resulting from the delayed exercise of the option to purchase on the
grounds that (1) it was barred by res judicata, and (2) expert testimony on
the issue was speculative. Plaintiffs contend the trial court erred in so
holding.
      1. Res Judicata
      Plaintiffs contend the trial court erred in holding the delayed damages
evidence was barred by res judicata.8 Specifically, plaintiffs argue the trial
court misinterpreted prior rulings and erroneously concluded claims arising
from the asset purchase agreement were analogous to the breach of lease
claims that were previously barred by res judicata.
            a. Relevant Background
      In ruling on defendants’ judgment on the pleadings in connection with
the SAC, the trial court granted the motion as to the fifth cause of action
(related to the note), granted it with leave to amend as to those causes of
action arising from the oral referral agreement, and denied the motion as to
the first, third, and fourth causes of action, which related in relevant part to
breach of the asset purchase agreement.

      7 Because we conclude the trial court did not err, we need not address
plaintiffs’ arguments that any alleged error was prejudicial.
      8 Plaintiffs’ opening brief also argues the trial court erred in holding the
intentional misrepresentation claim was barred by res judicata. Defendants
asserted plaintiffs forfeited this argument by failing to raise it in the lower
court, and plaintiffs concede the issue in their reply brief. Accordingly, we do
not address the issue.

                                       23
      At the hearing on the motion, the parties and the court extensively
discussed whether the claims arose from the option agreement, which had
been litigated in Poodles I. The court stated, “[M]y understanding is this case
is not dealing with the breach of the lease and the option to purchase which
was already resolved. . . . Counsel has already said that and that is part of
the ruling.” The court further stated, “And then on the purchase agreement
in that instance there, who knows. I mean, they’re talking about the value
there, is what I hear you telling me.” The court noted defendants’ motion was
“really just a demurrer,” and these issues may be more appropriate to be
raised “in an MSJ, MSA at this particular point.” The court thus denied the
motion as to the first, third, and fourth causes of action because “[a]t least
partially the[y] do not arise out of issues that were or should have been
previously litigated.”
      Prior to trial, defendants filed two motions to exclude evidence and
argument of damages caused by the delay in executing the option to purchase
the property. The court granted these motions. The court explained it was
bound by its prior rulings on defendants’ motions for judgment on the
pleadings as to the complaint and the SAC. Specifically, it found those orders
struck claims arising from the primary rights litigated in Poodles I—i.e.,
“(1) The right to compliance with the lease with respect to the exercise of the
right to exercise the option to purchase the property; [¶] (2) The right to
compliance with the covenant of good faith and fair dealing with respect to
invoking the option to purchase under the lease; and [¶] (3) The right to be
free of intentional misrepresentations with respect to the option to purchase
under the lease.” The court also commented the 2017 order “necessarily
rejected” a distinction between the lease and asset purchase agreement when
it struck without leave to amend the claim for breach of the asset purchase

                                       24
agreement. However, the court emphasized it would allow evidence of delay
damages provided such damages did not arise from the primary rights barred
by Poodles I. For example, the court explained it would allow evidence of
damages to the value of the business and lost revenue from retaliation and
the discouragement of referrals.
            b. Analysis
      Plaintiffs first assert the court erred by effectively overruling the prior
orders, which allowed the causes of action arising from the asset purchase
agreement to proceed. We disagree.
      In ruling on the motion for judgment on the pleadings, the court
expressly noted the breach of the option to purchase was resolved in
Poodles I. However, it also acknowledged that separate rights and resulting
harms may have been caused under the asset purchase agreement—such as
damage to “the value” of the assets purchased.9 The subsequent order on the
in limine motion to exclude delay damages reflected this distinction between
claims related to the lease and option to purchase versus claims related to the
asset purchase agreement. The trial court acknowledged defendants’
unwillingness to facilitate the option to purchase the property may have
decreased the value of the business purchased. It thus explained, “There is
evidence that some of the departing veterinarians also left due to the delay in
purchasing the property and the consequent inability to improve the
facilities.” And the court did not bar such damages. The court specifically
rejected defendants’ arguments to preclude such damages because “that
result is neither required by the 2016 order and the 2017 order nor

      9 And, in fact, the first and fourth causes of action in the SAC expressly
identified damages to the value and purchase price of the pet hospital and
specialty practice that were the subject of the asset purchase agreement.

                                       25
appropriate, and the evidence will be admitted.” However, the court did bar
evidence of delayed damages arising solely from the delay in exercising the
option agreement because the option provision in the lease agreement had
been resolved in Poodles I.
      Next, plaintiffs argue the court erred by framing the primary right too
generally as the right to exercise the option to purchase the property. We do
not disagree with plaintiffs that the same conduct could result in separate
primary rights related to breaches of the lease agreement—barred under
Poodles I—and the asset purchase agreement. However, plaintiffs fail to
provide any analysis of which damages flowed from which breaches. The
trial court concluded the damages caused by a delay in purchasing the
property were related to the breach of the option agreement in the lease, not
the asset purchase agreement. Conversely, the trial court noted evidence
related to decreased value of the assets purchased as a result of the delayed
purchase would be appropriate. Defendants fail to provide meaningful
analysis of how the delay damages at issue relate to the breach of the asset
purchase agreement.
      Finally, plaintiffs argue res judicata only applies for the “same cause of
action ‘between the same parties or parties in privity with them.’ ” But
plaintiffs’ opening brief does not argue the trial court erred in finding that
the claims arising from Poodles I were barred by res judicata. Rather, they
only challenge the in limine orders excluding evidence of certain damages
because they assert those damages relate to the breach of the asset purchase
agreement claims, not the claims in Poodles I. Accordingly, the trial court’s
order finding the claims in Poodles I were barred by res judiciata is not before

                                       26
this court.10 (See Schubert v. Reynolds (2002) 95 Cal.App.4th 100, 109
[argument on appeal waived by failure to present facts supported by the
record and legal argument supported by authority].)
      2. Expert Testimony
      Plaintiffs also challenge the trial court’s ruling excluding expert
testimony on the issue of delay damages. As discussed in part II.C.1., ante,
the trial court did not err in excluding evidence or argument regarding delay
damages to the extent they arose from the primary rights barred by
Poodles I. The proffered testimony by plaintiffs’ expert appears to fall within
that category of delay damages—damages caused by a delay in executing
plans for an expansion.
      Regardless, we do not conclude the trial court erred in finding the
proposed testimony too speculative. The California Supreme Court set forth
the standard for lost business profits in Sargon Enterprises, Inc. v. University
of Southern California (2012) 55 Cal.4th 747 (Sargon). “Regarding lost

      10  Plaintiffs also argue without analysis that the ruling on alter ego
liability “would have foreclosed any finding of privity.” But plaintiffs fail to
recognize that the alter ego doctrine rests on considerations distinct from the
concept of privity. (Compare 9 Witkin, Summary of Cal. Law (11th ed. 2017)
Corporations, § 11, p. 811 [“Where a corporation is used by an individual or
individuals, or by another corporation, to perpetrate a fraud, circumvent a
statute, or accomplish some other wrongful or inequitable purpose, a court
may disregard the corporate entity and treat the acts as if they were done by
the individuals or by the controlling corporation.”] with Citizens for Open
Access etc. Tide, Inc. v. Seadrift Assn. (1998) 60 Cal.App.4th 1053, 1069–1070
[“The concept of privity for the purposes of res judicata or collateral estoppel
refers ‘to a mutual or successive relationship to the same rights of property,
or to such an identification in interest of one person with another as to
represent the same legal rights [citations] and, more recently, to a
relationship between the party to be estopped and the unsuccessful party in
the prior litigation which is “sufficiently close” so as to justify application of
the doctrine of collateral estoppel.’ ”].)

                                        27
business profits, the cases have generally distinguished between established
and unestablished businesses.” (Id. at p. 774; see Greenwich S.F., LLC v.
Wong (2010) 190 Cal.App.4th 739, 762–763 (Greenwich) [lost profits are
frequently deemed uncertain and speculative where the business that claims
them was a new venture].) “ ‘Lost profits to an established business may be
recovered if their extent and occurrence can be ascertained with reasonable
certainty; once their existence has been so established, recovery will not be
denied because the amount cannot be shown with mathematical precision.
[Citations.] Historical data, such as past business volume, supply an
acceptable basis for ascertaining lost future profits. [Citations.] In some
instances, lost profits may be recovered where plaintiff introduces evidence of
the profits lost by similar businesses operating under similar conditions.’ ”
(Sargon, at p. 774.)
      “ ‘On the other hand, where the operation of an unestablished business
is prevented or interrupted, damages for prospective profits that might
otherwise have been made from its operation are not recoverable for the
reason that their occurrence is uncertain, contingent and speculative.
[Citations.] . . . But although generally objectionable for the reason that their
estimation is conjectural and speculative, anticipated profits dependent upon
future events are allowed where their nature and occurrence can be shown by
evidence of reasonable reliability.’ ” (Sargon, supra, 55 Cal.4th at p. 774; see
Greenwich, supra, 190 Cal.App.4th at p. 766 [rejecting real property
developer’s lost profits as uncertain and speculative].)
      In evaluating the trial court’s order excluding plaintiffs’ expert, we
utilize the abuse of discretion standard. (Westrec Marina Management, Inc.
v. Jardine Ins. Brokers Orange County, Inc. (2000) 85 Cal.App.4th 1042,
1051.) The trial court has “ ‘wide latitude . . . in determining whether the

                                       28
matters relied upon by [the] expert[ ] in forming opinions are too
speculative.’ ” (Thai v. Stang (1989) 214 Cal.App.3d 1264, 1276.)
      Here, the court disregarded the evidence submitted by plaintiffs—
namely, a document from Williamson’s architect providing several options for
expanding and a letter of interest from the Bank of San Francisco. While
some courts may have considered such evidence, we cannot conclude the trial
court’s refusal to do so constituted an abuse of discretion. For example,
because no plans were drawn or finalized, the scope and cost of any expansion
was unknown. Without specific plans, the cost of any expansion, the
potential scope of additional services, and any resulting profits would
arguably be speculative.
      In Greenwich, our colleagues in Division Two addressed in relevant
part “whether lost profits may be awarded . . . for breach of a real property
sale agreement where the buyer intended to renovate and sell the property at
a profit.” (Greenwich, supra, 190 Cal.App.4th at p. 743.) In rejecting the
claim for lost profits, the court concluded, “The existence of plans for a
development does not supply substantial evidence that the development is
reasonably certain to be built, much less that it is reasonably certain to
produce profits.” (Id. at p. 763.) The court further explained, “The lost
profits claim was based on the assumption that Greenwich S.F. would have
constructed the residence according to the plans and specifications without
changes and that the venture would have been profitable. These
assumptions were inherently uncertain, contingent, unforeseeable and
speculative. The proposed real estate development project here involved
numerous variables that made any calculation of lost profits inherently
uncertain.” (Id. at p. 766; see also Lewis Jorge Construction Management,
Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 975, 978 [lost

                                       29
profits are “frequently denied as too speculative” in circumstances where a
contractor seeks lost profits it might have earned on unawarded contracts].)
      We find the reasoning in Greenwich applicable here. As noted by our
colleagues, the mere existence of plans does not suggest those plans will be
built or reasonably result in profits. And here, plaintiffs did not even present
finalized plans, but rather various options for the expansion. While plaintiffs
may have presented more evidence regarding potential plans if given the
opportunity, their lack of definitive plans makes the proposed expansion
“inherently uncertain, contingent, unforeseeable and speculative.” (See
Greenwich, supra, 190 Cal.App.4th at p. 766.) Accordingly, we cannot
conclude the trial court abused its discretion in excluding plaintiffs’ expert
from testifying about delay damages.
                                       III.
                                DISPOSITION
      The judgment is affirmed. Defendants may recover their costs on
appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)

                                        30
                                           MARGULIES, ACTING P. J.

WE CONCUR:

BANKE, J.

EAST, J.

A161161
Poodles, Inc. v. Kuhn

      
       Judge of the San Francisco Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.

                                      31