Court Opinion

ID: 4092654
Source: CourtListenerOpinion
Date Created: 2016-10-25 21:02:42.680074+00
Date Added: 2024-06-11T14:35:43.520946
License: Public Domain

Filed 10/25/16
                 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                  SECOND APPELLATE DISTRICT

                        DIVISION FOUR

WOLF METALS INC.,                       B264002

       Plaintiff and Respondent,        (Los Angeles County
                                        Super. Ct. No. VC055239)
       v.

RAND PACIFIC SALES INC. et
al.,

       Defendants and Appellants.

     APPEAL from a judgment of the Superior Court of Los
Angeles County, Roger Ito, Judge. Affirmed in part,
reversed in part.
     David S. Kim & Associates, David S. Kim and Arman
Matevosyan for Defendants and Appellants Donald Koh and
South Gate Steel, Inc.
     Ferruzzo & Ferruzzo and James F. Rumm for Plaintiff
and Respondent.
      In the underlying action, the trial court entered a
default judgment in favor of respondent Wolf Metals Inc., on
its complaint against Rand Pacific Sales, Inc. (RPS).
Following efforts to enforce the judgment, Wolf Metals
requested that the judgment be amended to name
appellants Donald Koh and South Gate Steel, Inc. (SGS) as
additional judgment debtors. The trial court granted the
request, concluding that Koh was RPS’s alter ego and that
SGS was RPS’s successor corporation. On appeal, Koh and
SGS challenge the amendment to the default judgment. We
conclude that pursuant to our Supreme Court’s decision in
Motores de Mexicali v. Superior Court (1958) 51 Cal. 2d 172
(Motores), the default judgment could not be amended to add
Koh as an alter ego to the judgment. We further conclude
that the judgment was properly amended to add SGS as a
corporate successor. Accordingly, we reverse the amended
judgment in part and affirm it in part.

      RELEVANT FACTUAL AND PROCEDURAL
                      BACKGROUND
     Wolf Metals’s complaint, filed December 23, 2009,
asserted claims for open book account, account stated, and
breach of contract against RPS. The complaint alleged that
from March 2008 to August 2009, Wolf Metals sold sheet
metal to RPS pursuant to an oral agreement. The complaint
further alleged that RPS owed Wolf Metals the sum of
$292,055.93, which RPS had failed to pay despite Wolf

                             2
Metals’s demand. In February 2010, RPS answered the
complaint.
       In June 2010, RPS filed a petition for Chapter 7
bankruptcy protection (11 U.S.C. § 701 et seq.). The petition
was executed by Koh as RPS’s president. As a result of the
bankruptcy proceeding, the underlying action was stayed.
In the course of the bankruptcy proceeding, Wolf Metals
asserted a claim for $298,805.91 as an unsecured creditor on
the basis of “[g]oods sold.” Koh and SGS also asserted
claims as unsecured creditors. On July 14, 2011, the
bankruptcy court ordered the case closed. In connection
with that order, the docket for the bankruptcy proceeding
states, “no discharge.” (Capitalization omitted.)
       In September 2011, upon notice by Wolf Metals that
the bankruptcy proceeding had closed without a discharge,
the trial court authorized Wolf Metals to resume litigation of
its claims against RPS. After RPS’s counsel repeatedly
failed to attend scheduled hearings, the court ordered RPS’s
answer stricken and entered RPS’s default. On July 20,
2012, the trial court entered a default judgment in Wolf
Metals’s favor, awarding $292,055.093 in damages, together
with $70,400 in pre-judgment interest and $430.00 in costs.
       RPS did not satisfy the judgment. In December 2012,
in an effort to enforce the judgment, Wolf Metals arranged
for a judgment debtor examination of Koh and his wife, who
is RPS’s secretary and treasurer. After initially refusing to
answer questions, they were examined and excused. Later,
when Wolf Metals propounded discovery seeking RPS’s

                              3
records, Koh replied that he had none, stating that all such
documents had been transferred to the bankruptcy trustee
or discarded. In September 2014, Wolf Metals filed motions
to compel responses to its post-judgment special
interrogatories and request for the production of documents.
The trial court granted the motions and issued an award of
sanctions against RPS totaling $1,245. In January 2015,
Wolf Metals conducted a second judgment debtor
examination of Koh.
      Following that examination, Wolf Metals filed a
motion under Code of Civil Procedure section 187, seeking to
amend the default judgment to name Koh and SGS as
additional judgment debtors. On March 19, 2015, the trial
court issued a written order granting the request,
concluding that Koh was RPS’s alter ego and that SGS was
a successor corporation of RPS. Koh and SGS noticed their
appeal from that order. On May 4, 2015, the court entered
an amended default judgment naming Koh and SGS as
additional judgment debtors.1

1     Appellants’ notice of appeal was premature, as only the
amended default judgment is appealable. (See McClellan v.
Northridge Park Townhome Owners Assn. (2001) 89
Cal. App. 4th 746, 751.) However, because Wolf Metals has
not objected to the premature notice of appeal, we find good
cause to treat the notice as having been filed immediately
after the May 4, 2015 judgment. (Cal. Rules of Court, rule
8.104(d)(2); Stonewall Ins. Co v. City of Palos Verdes Estates
(Fn. is continued on next page.)

                                   4
                       DISCUSSION
     Koh and SGS contend the trial court erred in
amending the default judgment to include them as judgment
debtors. For the reasons discussed below, we agree that
under controlling authority Koh was improperly named a
judgment debtor on an “alter ego” theory, but conclude that
SGS was properly named as a judgment debtor as RPS’s
successor corporation.

      A. Governing Principles
      Under Code of Civil Procedure section 187, “the trial
court has jurisdiction to modify a judgment to add additional
judgment debtors.”2 (McClellan, supra, 89 Cal.App.4th at
p. 752.) The decision to modify the judgment is consigned to
the trial court’s discretion. (Greenspan v. LADT LLC (2010)
191 Cal. App. 4th 486, 508.) To the extent the exercise of that
discretion relies on factual findings, we review those

(1996) 46 Cal. App. 4th 1810, 1827-1828; see McClellan,
supra, 89 Cal.App.4th at p. 751.)
2     Code of Civil Procedure section 187 provides: “When
jurisdiction is, by the Constitution or this Code, or by any
other statute, conferred on a Court or judicial officer, all the
means necessary to carry it into effect are also given; and in
the exercise of this jurisdiction, if the course of proceeding
be not specifically pointed out by this Code or the statute,
any suitable process or mode of proceeding may be adopted
which may appear most conformable to the spirit of this
code.”

                               5
findings for the existence of substantial evidence.
(McClellan, supra, 89 Cal.App.4th at pp. 751-752.)

              1. Addition of Judgment Debtor as Alter Ego
        Modification of a judgment may be proper when the
newly-named defendant is an existing defendant’s alter ego.
(McClellan, supra, 89 Cal.App.4th at pp. 752-757.) “Under
the alter ego doctrine, . . . when the corporate form is used to
perpetrate a fraud, circumvent a statute, or accomplish
some other wrongful or inequitable purpose, the courts will
ignore the corporate entity and deem the corporation’s acts
to be those of the persons . . . actually controlling the
corporation, in most instances the equitable owners.
[Citations.] The alter ego doctrine prevents individuals
. . . from misusing the corporate laws by the device of a
sham corporate entity formed for the purpose of committing
fraud or other misdeeds. [Citation.]” (Sonora Diamond
Corp. v. Superior Court (2000) 83 Cal. App. 4th 523, 538.)
        In the case of default judgments, the application of the
alter ego doctrine is subject to a limitation arising from
considerations of due process. Under Code of Civil
Procedure 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 . . .
controlled the litigation, thereby having had the opportunity
to litigate, in order to satisfy due process concerns. The due
process considerations are in addition to, not in lieu of, the

                               6
threshold alter ego issues.” (Triplett v. Farmers Ins.
Exchange (1994) 24 Cal. App. 4th 1415, 1421.)
      The due process-related requirement was first
recognized by our Supreme Court in Motores, supra, 51
Cal. 2d 172. There, three individuals formed a corporation
that engaged in the sale of used cars. (Id. at pp. 173-174.)
When the plaintiff sued the corporation for failure to pay
some loans, neither the corporation nor the individuals
operating it appeared in the action, and a default judgment
was entered against the corporation. (Ibid.) When the
plaintiff sought to modify the default judgment to include
the three individuals as judgment debtors on an alter ego
theory, the trial court declined to do so. (Id. at p. 176.)
Affirming that ruling, the court concluded that the
Fourteenth Amendment of the United States Constitution
precluded the modification, stating: “That constitutional
provision guarantees that any person against whom a claim
is asserted in a judicial proceeding shall have the
opportunity to be heard and to present his defenses.
[Citations.] To summarily add [the three individuals] to the
judgment heretofore running only against [the corporation]
without allowing them to litigate any questions beyond their
relation to the allegedly alter ego corporation would patently
violate this constitutional safeguard. . . . They were under
no duty to appear and defend personally in that action, since
no claim had been made against them personally.” (Motores,
supra, at p. 176.)

                              7
      In NEC Electronics, Inc. v. Hurt (1989) 208 Cal. App. 3d
772, 775-781 (NEC Electronics), the appellate court reached
a similar conclusion, even though the pertinent judgment
arose from the corporate defendant’s failure to litigate its
defenses at trial, rather than from a default. When the
plaintiff sued the corporation for nonpayment of purchased
goods, the corporation filed a general denial. (Id. at p. 775.)
Prior to trial, the corporation’s chief executive officer -- who
was also its sole shareholder -- discussed the corporation’s
potential bankruptcy and reorganization with the plaintiff.
(Ibid.) Shortly before trial, the corporation gave notice that
it would not appear. (Id. at pp. 775-776.) After the plaintiff
presented its evidence at trial, a judgment was entered in its
favor against the corporation, which filed a bankruptcy
petition. (Id. at p. 776.) Later, after the bankruptcy
proceeding closed, the trial court granted the plaintiff’s
petition to add the corporation’s chief executive officer as a
judgment debtor, reasoning that he knew of the lawsuit and
was involved in the corporation’s decisions regarding it.
(Ibid.) Relying on Motores, the appellate court reversed,
concluding that the chief executive officer neither shared the
corporation’s interests nor controlled its defense. (Id. at pp.
780-781.) The court remarked: “There was no defense for
[him] to control. After [the corporation] filed its general
denial, no further proceedings were conducted.” (Id. at
p. 781.)

                               8
            2. Addition of Judgment Debtor As Successor
               Corporation
      Modification of a judgment may also be proper under
the “successor corporation” theory. (McClellan, supra, 89
Cal.App.4th at pp. 753, 754-756, italics omitted.) According
to that theory, when a corporation sells or transfers all of its
assets to another corporation constituting its “‘mere
continuation,’” the latter is also liable for the former’s debts
and liabilities. (Id. at p. 754, fn. 4, quoting Ray v. Alad
Corp. (1977) 19 Cal. 3d 22, 29.) Generally, “‘California
decisions holding that a corporation acquiring the assets of
another corporation is the latter’s mere continuation and
therefore liable for its debts have imposed such liability only
upon a showing of one or both of the following factual
elements: (1) no adequate consideration was given for the
predecessor corporation’s assets and made available for
meeting the claims of its unsecured creditors; (2) one or
more persons were officers, directors, or stockholders of both
corporations. [Citations.]’” (McClellan, supra, 89
Cal.App.4th at p. 754, fn. 4, quoting Ray, supra, 19 Cal.3d at
p. 29.)
      In view of the nexus between a corporation and a
second corporation constituting its “‘mere continuation,’”
when a judgment is entered against the former due to a
failure to present a defense, the judgment may be modified
to name the latter as an additional judgment debtor without
contravening due process. (McClellan, supra, 89
Cal.App.4th at pp. 754, fn.4 & 754-757.) In McClellan, a

                               9
corporation hired a contractor to repair its condominium
complex. (Id. at p. 749.) After the corporation did not pay
for the services, the contractor initiated an arbitration
proceeding against it. (Ibid.) When the corporation failed to
appear at the arbitration, the arbitrator issued a default
award, and the contractor filed a petition for a judgment
confirming the award. (Ibid.) Shortly before that judgment
was entered, the corporation’s board of directors caused the
creation of a new corporation and transferred the
condominium complex to it. (Id. at p. 750.) Later, the trial
court granted the contractor’s request to modify the
judgment to include the new corporation as a judgment
debtor, finding that it was the original corporation’s
successor. (Id. at p. 751.)
       Affirming, the appellate court concluded that the new
corporation was the original corporation’s “mere
continuation.” (McClellan, supra, 89 Cal.App.4th at pp. 755-
756.) In so concluding, the court observed that both
corporations shared the same board, which had transferred
the condominium complex in contravention of the applicable
covenants, conditions, and restrictions, and never dissolved
the original corporation. (McClellan, supra, 89 Cal.App.4th
at pp. 755-756.) The court rejected a contention under NEC
Electronics that the new corporation lacked the opportunity
to litigate in the underlying action, stating: “[The new
corporation] is a mere continuation of the [original
corporation] under a different name. Therefore, [the new
corporation] cannot be heard to complain that because it did

                             10
not exist at the time the arbitration award was entered, its
interests were not represented in the underlying action.”
(Id. at p. 757.)

       B. Underlying Proceedings
       At the January 2015 judgment debtor examination,
Koh testified as RPS’s president. According to Koh, RPS’s
board of directors consisted of Koh and his wife, who also
served as RPS’s secretary and treasurer. The sole
shareholder was a Koh family trust. RPS engaged in “[s]teel
purchase and sales,” that is, it bought steel coil from
suppliers, including Wolf Metals, cut the coil, and then sold
it as a finished product. RPS always conducted its
operations at a single location, and had 10 to 20 employees.
       Koh also operated SGS. As with RPS, Koh’s wife acted
as SGS’s secretary and treasurer. While RPS was active,
SGS supplied steel to RPS and cut the steel for RPS. Koh
denied that SGS engaged in the same business as RPS.
       In the course of RPS’s operations, Koh and RPS made
loans to each other. At some point, RPS secured a loan from
Koh, and discharged the loan by transferring equipment
valued at $29,000 to him. According to Koh, no document
expressly established the existence of the loan. He further
testified that he had no records for RPS because they had
been discarded or transferred to the bankruptcy trustee.
       In 2010, upon initiating bankruptcy proceedings, RPS
stopped doing business and sold its remaining inventory.

                             11
During the proceedings, SGS asserted an unsuccessful claim
for $11,458 as an unsecured creditor.
      After the bankruptcy closed, RPS never resumed
operations. Koh described its current status as “[n]othing”
because it had filed no tax returns for several years. He
further stated that because RPS had been “thrown away,”
SGS had taken possession of RPS’s remaining furniture and
other items, which he described as “abandoned.” When
asked whether SGS employed any of RPS’s employees, Koh
replied, “Yes.” Koh testified that RPS would neither satisfy
the judgment nor pay the sanctions owed to Wolf Metals,
stating that RPS was “no longer there” and that he was “not
[RPS] anymore.”
      Following the January 2015 judgment debtor
examination, Wolf Metals filed its motion to amend the
default judgment, contending that Koh and SGS were RPS’s
alter egos and that SGS was a mere continuation of RPS. In
addition to Koh’s testimony at the January 2015
examination, Wolf Metals submitted evidence that SGS was
engaged in the same business as RPS at its former location,
and that Koh was the agent for service of both entities. Wolf
Metals’s showing included photos of RPS’s building in 2007
and photos of the same building in 2014, which then served
as SGS’s business location. In 2007, the building’s front sign
displayed RPS’s name, two phone numbers, and the
following description of its services: “Specialist on narrow
cut slit coils [] Max capacities ¼ thick to ½” width [] Round
edged flat bars & coils.” In 2014, when SGS occupied the

                              12
building, RPS’s name was absent, but the building’s front
sign was otherwise unchanged, and advertised the same
services. Wolf Metals also submitted an image of SGS’s Web
site as it appeared in 2011. The description of SGS’s
services on the Web site closely tracked the advertisement
on the building’s front sign.
      Appellants’ opposition neither disputed Wolf Metals’s
evidentiary showing nor offered new evidence. In addition
to contending that the proposed amendments were improper
under Motores and NEC Electronics, appellants argued that
Wolf Metals failed to act with due diligence in seeking the
amendments.
      In granting the motion to amend the default judgment,
the trial court found that Koh and SGS were RPS’s alter
egos and that SGS was RPS’s successor. The court rejected
appellants’ contention that Wolf Metals had failed to act
with due diligence, stating that RPS did not respond to the
post-judgment discovery propounded by Wolf Metals, which
“learned of the extent to which . . . [SGS] stepped into the
shoes of [RPS] at the January 2015 debtor’s examination.”

      C. Analysis
      As explained below, we conclude (1) that under
Motores, Koh was improperly added as a judgment debtor on
an “alter ego” theory, and (2) that SGS was properly added
as a judgment debtor as a mere continuation of RPS.

                             13
             1. No Discharge in the Bankruptcy Proceeding
        At the threshold, we examine appellants’ contention
that the trial court’s ruling contravenes a determination by
the bankruptcy trustee and the bankruptcy court.
Appellants rely on the bankruptcy trustee’s final report
prior to the closing of the bankruptcy proceeding, which
states: “I have made a diligent inquiry into the financial
affairs of the debtor . . . [RPS.] . . . [T]here is no property
available for distribution from the estate over and above
that exempted by law. . . . I hereby certify that the estate of
the above-named debtor(s) has been fully administered. . . .
Claims scheduled to be discharged without payment. . . :
$286,469.47.” Notwithstanding the entry in the bankruptcy
court’s docket reflecting that the proceeding closed with “no
discharge,” appellants argue that the trustee’s report
establishes the existence of a ruling that Wolf Metals’s
claims against RPS were “to be discharged without
payment.” (Underlining omitted.)
        Appellants’ contention fails, as no such ruling is
available in a chapter 7 bankruptcy proceeding. Section
727(a)(1) of title 11 of the United States Code expressly
states: “‘The court shall grant the debtor a discharge unless
. . . the debtor is not an individual.’” Thus, a corporation
may not discharge its debts and liabilities in a chapter 7
proceeding. (N.L.R.B. v. Better Bldg. Supply Corp. (9th Cir.
1988) 837 F.2d 377, 378.)
        As such a proceeding also does not dissolve a
corporation -- which must be accomplished under state

                              14
procedures -- corporate debts and liabilities survive the
closing of the bankruptcy proceeding. (N.L.R.B. v. Better
Bldg. Supply Corp., supra, 837 F.2d at p. 379.) For that
reason, responsibility for those debts and liabilities may be
imposed on other parties under “alter ego” and “successor
corporation” theories. (Id. at pp. 379-380; In re Goodman
(2d. Cir. 1989) 873 F.2d 598, 602.) Accordingly, the
bankruptcy proceeding did not preclude the amendment of
the judgment to include appellants as judgment debtors.3

3     For the first time on appeal, appellants’ reply brief
contends the “findings” of the bankruptcy trustee precluded
Wolf Metals from asserting that SGS is a mere continuation
of RPS. Because they did not raise this contention in their
opening brief, they have forfeited it. (Campos v. Anderson
(1997) 57 Cal. App. 4th 784, 794, fn. 3; 9 Witkin, Cal.
Procedure (5th ed. 2008) Appeal, § 701, pp.769-771.)
Moreover, were we to address it, we would reject it. Under
the doctrine of collateral estoppel, a finding from a prior
proceeding has preclusive effect with respect to an issue only
when that issue was “actually litigated” and “necessarily
decided” in the prior proceeding (People v. Garcia (2006) 39
Cal. 4th 1070, 1077; see Chinese Yellow Pages Co. v. Chinese
Overseas Marketing Service Corp. (2008) 170 Cal. App. 4th
868, 888 [bankruptcy court’s ruling had no preclusive effect
regarding issues not actually adjudicated].) Nothing before
us suggests that those requirements were satisfied here.

                              15
           2. Judgment Improperly Amended Under “Alter
              Ego” Theory
      We turn to appellants’ contention that the judgment
was erroneously amended to include Koh as a judgment
debtor on the basis of an “alter ego” theory. That
amendment was improper under Motores, which involved
facts materially identical to those presented here. Like the
defendant corporation in Motores, RPS offered no evidence-
based defense in the underlying action, and the judgment
against RPS was entered by default.4 Although Koh
dominated RPS and knew of Wolf Metals’s suit against RPS,
his circumstances do not differ from the individuals who
dominated the defendant corporation in Motores. Because
Motores held that the latter individuals were improperly
added as judgment debtors, it precludes the inclusion of Koh
as judgment debtor on an “alter ego” theory.5

4    We recognize that unlike the defendant corporation in
Motores, RPS filed an answer that was later stricken.
However, that factual difference is not material in view of
NEC Electronics, in which the defendant corporation filed an
answer but failed to present an evidence-based defense
before judgment was entered against it. (NEC Electronics,
supra, 208 Cal.App.3d at pp. 775-781.)
5     Wolf Metals argues that declining to recognize Koh as
a judgment debtor would encourage alter egos of
corporations to avoid corporate liabilities by ensuring that
the corporations default in actions against them. While we
recognize the merits of that policy consideration, the rule
(Fn. is continued on next page.)

                                   16
      The decisions upon which Wolf Metals relies are
distinguishable, as in each case, the original corporate
defendant presented an evidence-based defense prior to the
amendment of the judgment. (Schoenberg v. Romike
Properties (1967) 251 Cal. App. 2d 154, 166-167 [judgment
properly amended to include defendant corporation’s
shareholders and officers following jury trial]; Farenbaugh
& Son v. Belmont Construction, Inc. (1987) 194 Cal. App. 3d
1023, 1026-1031 [judgment properly amended to include
defendant corporation’s president following bench trial];
Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc.
(2013) 217 Cal. App. 4th 1096, 1110 [arbitration-based
judgment against two corporations properly amended to
include additional corporation as judgment debtor, as
arbitration was contested].) As explained above, RPS
offered no defense to Wolf Metals’s suit, and the judgment
against it was entered by default. Accordingly, the trial
court erred in amending the default judgment to include
appellants as judgment debtors on the basis of an “alter ego”
theory.

established in Motores over half a century ago is binding on
us. (Auto Equity Sales, Inc. v. Superior Court (1962) 57
Cal. 2d 450, 455.)

                             17
            3. Judgment Properly Amended With Respect to
               SGS Under “Successor Corporation” Theory
      We reach the contrary conclusion regarding the
amendment relating to SGS based on the “successor
corporation” theory. Under that theory, “‘corporations
cannot escape liability by a mere change of name or a shift
of assets when and where it is shown that the new
corporation is, in reality, but a continuation of the old.
Especially is this well settled when actual fraud or the
rights of creditors are involved, under which circumstances
the courts uniformly hold the new corporation liable for the
debts of the former corporation.’” (Cleveland v. Johnson
(2012) 209 Cal. App. 4th 1315, 1327 (Cleveland), quoting
Blank v. Olcovich Shoe Corp. (1937) 20 Cal. App. 2d 456,
461.) The application of the theory presents “‘equitable
issues to be examined ‘on their own unique facts . . . .’”
(Cleveland, supra, 209 Cal.App.4th at p. 1330, quoting
CenterPoint Energy, Inc. v. Superior Court (2007) 157
Cal. App. 4th 1101, 1122.)
      Here, the evidence establishes that although SGS’s
creation predated RPS’s bankruptcy proceeding, SGS merely
continued RPS’s business operations under a different name.
According to Wolf Metals’s showing, Koh “ran” both
corporations, which share the same president, secretary,
treasurer, business location, and agent for service. After the
bankruptcy proceeding closed, RPS was never dissolved.
SGS took possession of RPS’s remaining assets and offered
services identical to those provided by RPS, using RPS’s

                              18
employees. Koh testified that RPS had been “thrown away”
and was “no longer there,” and that he was “not [RPS]
anymore.” Wolf Metals’s evidence also showed that prior to
RPS’s bankruptcy, Koh obtained RPS’s equipment as the
purported repayment of a loan to RPS. As the trial court
observed, at the January 2015 judgment debtor
examination, Koh was unable to explain his transactions
with RPS and SGS “whereby the funds and assets of [RPS]
were com[m]ingled with [those] of [SGS] and his own
personal finances.” In view of this evidence, the court
reasonably concluded that SGS was a mere continuation of
RPS.
      Appellants contend the trial court violated SGS’s due
process rights in amending the default judgment because
SGS’s interests differed from RPS’s interests in the
underlying action, and it lacked control over RPS’s defense.
In our view, that contention fails in light of McClellan,
which concluded that when a judgment is entered against a
corporation due to its failure to litigate a defense, due
process is not contravened by the amendment of the
judgment to include a corporation that is the defendant’s
mere continuation. (McClellan, supra, 89 Cal.App.4th at
pp. 756-757.)
      In a related contention, appellants suggest that there
was no evidence that SGS paid inadequate consideration for
the assets it received from RPS. Inadequacy of
consideration, however, is not required for the application of
the “‘successor corporation’” theory. (Cleveland, supra, 209

                              19
Cal.App.4th at pp. 1332, 1333-1334.) Furthermore, the
record discloses evidence sufficient to establish that factor.
Following RPS’s bankruptcy proceeding, SGS simply took
possession of RPS’s remaining furniture and other items. In
addition, prior to the bankruptcy proceeding, Koh secured
equipment from RPS valued at $29,000, a sum that exceeds
the $11,458 claim that SGS asserted in the proceeding. Koh
provided no document establishing the existence of the
purported loan underlying the transfer of the equipment. As
the record shows that contrary to Koh’s testimony, SGS
operated in a manner identical to RPS at RPS’s business
location, the trial court reasonably could have concluded
that Koh’s purported acquisition of the equipment was, in
fact, a consideration-free transfer of equipment to SGS.
      Pointing to McIntire v. Superior Court (1975) 52
Cal. App. 3d 717, appellants contend the trial court erred in
determining that Wolf Metals exercised due diligence in
seeking the amendment relating to SGS. In McIntire,
following the dismissal of fictitious defendants and the
presentation of evidence at trial, the plaintiffs entered into a
settlement with the named defendants, which the court
approved. (McIntire, supra, 52 Cal.App.3d at p. 717.) After
the time for an appeal from the approval passed, the
plaintiffs sought to amend the complaint to name as
defendant an individual who had testified at trial. (Id. at
pp. 719-721.) The appellate court held that any such
amendment was improper, as the plaintiffs were aware of
the individual’s potential involvement in the action before

                              20
trial. (Id. at p. 721.) Relying on McIntire, appellants argue
that the amendment relating to SGS was improper because
Wolf Metals conducted business with Koh before RPS’s
bankruptcy proceedings, in which Wolf Metals, Koh, and
SGS asserted claims.
      We reject that contention, as nothing suggests that
prior to Koh’s January 2015 judgment debtor examination,
Wolf Metals knew, or should have known, that SGS was a
mere continuation of RPS. The records from the bankruptcy
proceedings show only that SGS identified itself as an
unsecured creditor of RPS. Although Wolf Metals conducted
a judgment debtor examination of Koh and his wife in
December 2012, the record does not disclose their testimony.
As the trial court observed, RPS otherwise failed to respond
to Wolf Metals’s post-judgment discovery prior to the
January 2015 judgment debtor examination, which alerted
Wolf Metals to SGS’s close relationship to RPS. The trial
court thus reasonably rejected appellants’ contention that
Wolf Metals failed to act with due diligence. In sum, SGS
was properly named as a judgment debtor on a “successor
corporation” theory.

                             21
                      DISPOSITION
     The amended judgment is reversed insofar as it names
Koh as a defendant, and is affirmed in all other respects.
The parties are to bear their own costs on appeal.
     CERTIFIED FOR PUBLICATION

                                     MANELLA, J.

We concur:

EPSTEIN, P. J.

COLLINS, J.

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