Court Opinion

ID: 9910925
Source: CourtListenerOpinion
Date Created: 2023-12-18 20:02:16.593778+00
Date Added: 2024-06-11T12:55:01.060583
License: Public Domain

Filed 12/18/23 Lopez v. Bellafaire CA4/3

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FOURTH APPELLATE DISTRICT

                                                 DIVISION THREE

 HIPOLITO LOPEZ,

      Plaintiff and Appellant,                                         G061534

           v.                                                          (Super. Ct. No. 30-2018-01006762)

 PHILLIP BELLAFAIRE et al.,                                            OPINION

      Defendants and Respondents.

                   Appeal from a judgment of the Superior Court of Orange County, Martha
K. Gooding, Judge. Affirmed.
                   Employee Justice Legal Group, Kaveh S. Elihu, Matias N. Castro and
Samuel Moorhead for Plaintiff and Appellant.
                   Callahan & Blaine, Edward Susolik and Brett E. Bitzer for Defendants and
Respondents.

                                             *               *               *
              Plaintiff Hipolito Lopez filed a wrongful termination case against his
employer, Saddleback Golf Cars, Inc., pleading causes of action under the Fair
Employment and Housing Act (Gov. Code, § 12900 et seq.) (FEHA), and several related
claims. During the litigation, he filed Doe amendments to name an individual and several
entities as Doe defendants, alleging they were the alter egos of his employer.
              Before the first phase of a trifurcated trial, the parties stipulated that two of
the parties – Saddleback Electric Cars, Inc., and Bellafaire Enterprises, were the alter
egos of Lopez’s employer, Saddleback Golf Cars, Inc. After a one-day bench trial, the
trial court concluded that Lopez had failed to prove the two remaining Doe defendants –
individual Phillip Bellafaire and Semit Properties, LLC – were alter egos of the
employer. We agree with the court and find Lopez failed to meet his burden to establish
those two defendants were the alter egos of the employer corporation. Accordingly, we
affirm the judgment.

                                                I
                                           FACTS
A. The Parties
              1. The Original Saddleback Golf Cars, Inc.
              Saddleback Golf Cars, Inc., was founded in the 1970’s. Its business was
the sale, service, and rental of golf cars. It was a family-owned business, and two of the
owners, Mike and Doug Boyd, were friends of defendant Phillip Bellafaire (Bellafaire).

              2. Bellafaire Enterprises, Inc.
              In May 2005, Bellafaire, who had numerous business interests, formed
Bellafaire Enterprises, Inc. The purpose of forming Bellafaire Enterprises was to
purchase Saddleback Golf Cars once the Boyd family was prepared to sell. Bellafaire
was Bellafaire Enterprise’s President, CEO, and Operations Manager. Bellafaire

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Enterprises completed the purchase of Saddleback Golf Cars in June 2005. At that time,
the company had approximately 17 to 21 employees. Bellafaire Enterprises assumed
Saddleback Golf Cars’ commercial lease and opened bank accounts in its name.

              3. Bellafaire Enterprises Becomes the Second Saddleback Golf Cars, Inc.
              In September 2005, after the Boyd family dissolved its corporation,
Bellafaire Enterprises changed its corporate name to Saddleback Golf Cars, Inc.
(Saddleback Golf). Bellafaire Enterprises ceased to exist at that point. Saddleback Golf
paid its employees’ wages, opened bank accounts, and maintained insurance policies
under that name. It maintained a separate set of financial records, engaged the services of
an accountant, and used an outside payroll service. It continued to do so until
approximately April 2014.

              4. Saddleback Electric Cars, Inc.
              In October 2011, Bellafaire incorporated Saddleback Electric Cars, Inc.
(Saddleback Electric). Bellafaire was the sole shareholder. Saddleback Electric was
created to reflect an expansion into electric cars other than golf cars. Bellafaire’s counsel
also recommended that he use one corporation for “‘factory or fabrication . . . and the
other for running the business.’” Ultimately, a manufacturing business did not occur. In
2014, Saddleback Electric took over the business of Saddleback Golf, and Saddleback
Golf became “just a corporation only doing nothing” with no employees and no business.
Saddleback Electric took over payroll for the employees of Saddleback Golf, maintained
a separate bank account, paid taxes, and carried insurance. Saddleback Electric continues
to operate Saddleback Golf.

                                              3
             5. Semit Properties, LLC
             In January 2017, Bellafaire formed Semit Properties, LLC (Semit).
Bellafaire is the sole managing member of Semit, which was formed for the purpose of
purchasing real property in Laguna Woods. Semit, which obtained its own employer
identification number, obtained a loan for approximately $4.1 million to purchase the
desired property. Bellafaire testified he used personal funds to pay the down payment on
the property and was a personal guarantor for the mortgage. Shortly thereafter, Semit and
Saddleback Golf entered into a lease for the property, with a monthly rent of
approximately $24,000. Bellafaire signed the lease on behalf of both Semit and
Saddleback Golf, which according to Bellafaire’s testimony, was operating as a
corporation “only doing nothing” by this time frame.

             6. Phillip Bellafaire
             In sum, Bellafaire was the sole shareholder of Bellafaire Enterprises before
it became Saddleback Golf. At all times relevant, he was the sole shareholder of
Saddleback Golf and Saddleback Electric, and the sole managing member of Semit.

             7. Hipolito Lopez
             Plaintiff Hipolito Lopez began his employment with Saddleback Golf in
approximately 2003 as a painter/mechanic. According to the complaint, in 2014, Lopez
began to experience vision impairment and was told he required surgery on his right eye.
He informed his supervisor of the upcoming surgery in May 2015 and requested medical
leave. He returned to work in June, and requested a transfer out of the painting
department to allow his eye to heal. In September, his supervisor informed him that if he
did not return to the painting department, he would be terminated. He did so, but
complained that he was suffering from symptoms in his right eye.

                                            4
              In July 2016, the complaint alleged, Lopez lost vision in his right eye. He
subsequently requested accommodations including time off. He underwent additional
surgery in August 2016 and was placed on leave for 15 days. When Lopez informed his
supervisor that he could return, he was told he had been terminated.

B. The Instant Lawsuit
              In July 2018, Lopez filed a complaint alleging eight causes of action related
to his termination, mostly under FEHA. Lopez named Saddleback Golf and Does 1
through 20 as defendants. Discovery proceeded.
              On June 25, 2019, Lopez filed four Doe amendments, naming four
defendants – Bellafaire (Doe 1), Saddleback Electric (Doe 2), Bellafaire Enterprises (Doe
3), and Semit (Doe 4). Thereafter, the trial court trifurcated the case into phases, with the
first phase to determine the issue of alter ego liability only. Before trial, defendants
stipulated that Saddleback Golf, Saddleback Electric, and Bellafaire Enterprises were the
alter egos of each other. That left the issues of whether Bellafaire and/or Semit
(collectively defendants) were alter egos of Saddleback Golf. The one-day trial
proceeded on January 5, 2022. We will discuss the evidence presented at trial, to the
extent necessary, below.
              Two days after the alter ego phase of the trial, the court determined that
plaintiff had failed to prove that Bellafaire or Semit were alter egos of Bellafaire
Enterprises, Saddleback Golf, or Saddleback Electric. Neither party requested a
statement of decision, accordingly, the court’s order did not review the evidence, but
stated that after considering all the applicable factors, Lopez did not prove the requisite
unity of interest between Saddleback Golf and either Bellafaire or Semit. The court
issued judgment in favor of Bellafaire and Semit on May 11, 2022. Lopez now appeals.

                                              5
                                              II
                                       DISCUSSION
A. General Principles of Law
              “‘In California, two conditions must be met before the alter ego doctrine
will be invoked. First, there must be such a unity of interest and ownership between the
corporation and its equitable owner that the separate personalities of the corporation and
the shareholder do not in reality exist. Second, there must be an inequitable result if the
acts in question are treated as those of the corporation alone. [Citations.] . . . Alter ego
is an extreme remedy, sparingly used.’” (Hasso v. Hapke (2014) 227 Cal.App.4th 107,
155.)
              “‘Generally, alter ego liability is reserved for the parent-subsidiary
relationship. However, under the single-enterprise rule, liability can be found between
sister companies. The theory has been described as follows: “‘In effect what happens is
that the court, for sufficient reason, has determined that though there are two or more
personalities, there is but one enterprise; and that this enterprise has been so handled that
it should respond, as a whole, for the debts of certain component elements of it.’”’”
(Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, 512.)

B. Standard of Review
              While Lopez concedes the general standard of review for a trial court’s
alter ego findings is substantial evidence, he argues that here, our review should be de
novo because “there is no conflict or dispute in the facts.” But most of the cases he cites
on this point have nothing to do with alter ego findings. (Espejo v. The Copley Press,
Inc. (2017) 13 Cal.App.5th 329, 342-343 [employer versus independent contractor
findings]; Serafini v. Superior Court (1998) 68 Cal.App.4th 70, 77-78 [personal
jurisdiction findings]; Great-West Life Assurance Co. v. Guarantee Co. of North America
(1988) 205 Cal.App.3d 199, 204 [personal jurisdiction findings]; Long v. Mishicot

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Modern Dairy, Inc. (1967) 252 Cal.App.2d 425, 427-428 [also personal jurisdiction
findings].) The only case Lopez cites that mentions alter ego findings, Sonora Diamond
Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 530, only considered alter ego
allegations in the context of a motion to quash for lack of personal jurisdiction.
              Given the lack of any authority directly on point, and many alter ego cases
citing substantial evidence as the correct standard, we conclude our review is for
substantial evidence. (See Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc.
(2013) 217 Cal.App.4th 1096, 1108; Greenspan v. LADT LLC, supra, 191 Cal.App.4th at
p. 512 [Whether alter ego has been established “‘is primarily a question of fact which
should not be disturbed when supported by substantial evidence’”].) Given that the alter
ego determination is equitable in nature, substituting our judgment for the trial court’s
would be particularly inappropriate. “‘[S]ince this determination is . . . not a question of
law, the conclusion of the trier of fact will not be disturbed if it is supported by
substantial evidence.’” (Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1071-1072.)
              Accordingly, our review seeks to determine whether any substantial
evidence—contradicted or uncontradicted—supports the trial court’s ruling. (Sweatman
v. Department of Veterans Affairs (2001) 25 Cal.4th 62, 68.) “We view the evidence
most favorably to the prevailing party, giving it the benefit of every reasonable inference
and resolving all conflicts in its favor. [Citation.] Substantial evidence is evidence of
ponderable legal significance, reasonable, credible and of solid value.” (Oregel v.
American Isuzu Motors, Inc. (2001) 90 Cal.App.4th 1094, 1100.) We do not “reweigh
the credibility of witnesses or resolve conflicts in the evidence.” (Rufo v. Simpson (2001)
86 Cal.App.4th 573, 622.) The testimony of a single witness is sufficient to prove a fact.
(Pope v. Babick (2014) 229 Cal.App.4th 1238, 1247.)
              Lopez argues that “substantial evidence shows” a unity of interest between
Saddleback Golf, Saddleback Electric, Semit, and Bellafaire such that “the separate
personalities of the companies and Bellafaire do not in reality exist.” (Capitalization &

                                               7
boldfacing omitted.) But this argument “attempts to turn the standard of review on its
head. We do not review the evidence to see if there is substantial evidence to support the
losing party’s version of events, but only to see if substantial evidence exists to support
the [ruling] in favor of the prevailing party.” (Pope v. Babick, supra, 229 Cal.App.4th at
p. 1245.)

C. Unity of Interest and Ownership
              The first factor in the alter ego determination, as noted above, is whether
there is “‘such a unity of interest and ownership between the corporation and its equitable
owner that the separate personalities of the corporation and the shareholder do not in
reality exist.’” (Hasso v. Hapke, supra, 227 Cal.App.4th at p. 155.)
              “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.’” (Troyk v. Farmers Group,
Inc. (2009) 171 Cal.App.4th 1305, 1341–1342.)1

1
 Among the many other factors considered by courts in determining whether to pierce
the corporate veil to hold an individual shareholder liable for corporate debts are “the
commingling of funds and other assets; the failure to segregate funds of the individual
and the corporation; the unauthorized diversion of corporate funds to other than corporate
purposes; the treatment by an individual of corporate assets as his own; . . . the
representation by an individual that he is personally liable for corporate debts; the failure
to maintain adequate corporate minutes or records; the intermingling of the individual
and corporate records; . . . the concealment of the ownership of the corporation; the
disregard of formalities and the failure to maintain arm’s-length transactions with the
corporation; and the attempts to segregate liabilities to the corporation.” (Mid–Century
Insurance Co. v. Gardner (1992) 9 Cal.App.4th 1205, 1213, fn. 3; see Zoran Corp. v.
Chen (2010) 185 Cal.App.4th 799, 811-812.) This list is far from exhaustive, and the
court must consider the individual circumstances of each case.

                                              8
                Lopez asserts, citing Associated Vendors, Inc. v. Oakland Meat Co. (1962)
210 Cal.App.2d 825, that “the most important factor appears to be undercapitalization or
inadequate capitalization.” But the cited pages of that case do not so state.2 Indeed, the
court explicitly states that the factors “‘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. Only general rules may be laid down for
guidance.’” (Id. at p. 837.) Lopez does not point to any case that explicitly states one
factor is the “most important,” and he admits “[n]o one factor is determinative and the
court will look at the totality of circumstances.”
                For their part, defendants claim “[t]he case of Leek v. Cooper (2011) 194
Cal.App.4th 399, is both factually and legally on point and compels this Court to affirm
the trial court’s findings . . . .” Setting aside the lack of horizontal stare decisis in the
California Court of Appeal,3 Leek v. Cooper held “[a] determination that a person is the
alter ego of a corporation does not make the alter ego an employer. Rather, it makes the
alter ego liable for the obligations of the corporation.” (Id. at p. 409.) In the context of a
summary judgment motion, the trial court determined the plaintiff’s alter ego allegations
were insufficiently pleaded in the complaint. (Id. at p. 416.) Accordingly, in the
defendant’s motion for summary judgment, it “had no burden to show that plaintiffs’ alter
ego claim could not be established.” (Ibid.) The court further held no abuse of discretion
in failing to permit leave to amend on the facts present.
                In Leek v. Cooper, supra, 194 Cal.App.4th 399, while it has certain features
in common with the present case, it is not the slam-dunk defendants seem to believe it is.
2
 Lopez’s counsel needs to be more careful when citing cases. He claims Turman v.
Superior Court (2017) 17 Cal.App.5th 969, 974, held that alter ego established where
corporation was “not a profitable business.” That was not the court’s holding with
respect to the alter ego issue. The court remanded that issue to the trial court with
instructions. (Id. at p. 981.)
3
    See Sarti v. Salt Creek Ltd. (2008) 167 Cal.App.4th 1187, 1193.

                                                9
This is not summary judgment; we have a record of trial, and we must still determine,
based on the individual facts of this case, whether there is substantial evidence to support
the court’s decision.
              Turning to that question, Lopez’s opening brief discusses the factors he
asserts support his claim of unity of interest and ownership between Saddleback Golf,
Semit, and Bellafaire. But as we mentioned above, this is a review for substantial
evidence. Rather than reviewing Lopez’s contrary evidence to determine whether it is
substantial or not, our task here is only to review the evidence in favor of defendants and
determine whether it meets the substantial evidence test, contradicted or uncontradicted.
(Pope v. Babick, supra, 229 Cal.App.4th at p. 1245.) Again, the only question here is
whether Bellafaire, individually, or Semit were alter egos of Saddleback Golf/Saddleback
Electric.
              The trial court had evidence before it that Semit was a single purpose
entity, established to purchase and hold real property. Semit had its own employer
identification number and its own bank account. Bellafaire funded Semit and acted as
guarantor for the mortgage. Semit leased the property back to Saddleback Golf
(eventually assumed by Saddleback Electric), which paid rent to Semit from its bank
account. Semit pays its mortgage to its lender from its own bank account.
              The trial court also had evidence that Bellafaire Enterprises, which became
the second incarnation of Saddleback Golf in 2005, maintained its own bank accounts.
Bellafaire testified that he never paid for personal expenses from Saddleback Golf’s
account. Saddleback Golf, until taken over by Saddleback Electric, had insurance in its
own name and maintained its own financial records. Once Saddleback Electric was
incorporated, it took over payroll from Saddleback Golf, paid taxes, and had insurance in
its name.
              Even if we were to consider the facts Lopez raises, we would find them
unpersuasive. Ultimately, “[i]t is the plaintiff’s burden to overcome the presumption of

                                             10
the separate existence of the corporate entity.” (Mid–Century Insurance Co. v. Gardner,
supra, 9 Cal.App.4th at p. 1212.) Lopez’s attempt to assert “commingling” of assets
based on benign facts such as Bellafaire’s personal use of a corporate vehicle and the fact
that Bellafaire’s home address in San Clemente is also used by Saddleback Golf as its
business mailing address are unimpressive. Bellafaire testified that “[i]t’s not the
principal place of business. It’s just a mailing address” and Lopez cites nothing to
establish otherwise.
              Lopez also complains about a lack of meetings and voting for single-
member LLC Semit, but ignores Corporations Code section 17703.4, subdivision (b),
which states “that the failure to hold meetings of members or managers or the failure to
observe formalities pertaining to the calling or conduct of meetings shall not be
considered a factor tending to establish that a member or the members have alter ego or
personal liability for any debt, obligation, or liability of the limited liability company
where the articles of organization or operating agreement do not expressly require the
holding of meetings of members or managers.”
              Regardless, Lopez’s countervailing facts are not at issue here – only
whether the facts in defendants’ favor constitute substantial evidence. Importantly, there
was no evidence of improper commingling of assets, nor was there evidence of
undercapitalization. Lopez cites a portion of testimony stating that Saddleback Electric’s
current assets, at the time of trial, were less than its liabilities. But Saddleback
Golf/Saddleback Electric has been an ongoing business since the 1970’s. Lopez does not
cite authority for the proposition that a company’s current debt – particularly a company
with a long history – is proof of undercapitalization.
              We find the trial court had sufficient evidence from which to conclude
defendants were not alter egos of Semit or Bellafaire.

                                              11
D. Equities
              The second factor in determining alter ego status that “‘there must be an
inequitable result if the acts in question are treated as those of the corporation alone.’”
(Hasso v. Hapke, supra, 227 Cal.App.4th at p. 155.) The true heart of Lopez’s argument
lies here – that if there is a judgment, Saddleback Golf/Saddleback Electric, alone, will
not be able to pay it. (“As discussed above, [Saddleback Golf] and [Saddleback Electric]
are both insolvent as going concerns.”) But “[d]ifficulty in enforcing a judgment does
not alone satisfy this element.” (Leek v. Cooper, supra, 194 Cal.App.4th at p. 418.) The
plaintiff must also produce evidence of some conduct amounting to bad faith. (Ibid.)
              At the end of the day, all that the evidence shows here is an individual
(Bellafaire) who owns a longstanding business through a corporate entity (Saddleback
Golf/Saddleback Electric) who used an LLC (Semit) to purchase the real property where
the business operates. This is simply not malfeasance, bad faith, or fraud. The trial court
had substantial evidence to support its conclusion that Bellafaire and Semit were not the
alter egos of Saddleback Golf/Saddleback Electric.

E. Attorney Fees
              In an argument of less than two pages, Bellafaire and Semit request we
award them attorney fees for a frivolous appeal. Defendants’ request is procedurally
deficient, and we therefore decline to consider it. (Cal. Rules of Court, rule 3.1702(c).)
Moreover, even if we were to consider it, we would not find that Lopez’s arguments were
objectively without foundation. (Williams v. Chino Valley Independent Fire Dist. (2015)
61 Cal.4th 97, 115.)

                                              12
                                             III
                                       DISPOSITION
              The judgment in favor of Bellafaire and Semit is affirmed. They are
entitled to their costs on appeal. Their request for attorney fees is denied.

                                                   MOORE, ACTING P. J.

WE CONCUR:

GOETHALS, J.

DELANEY, J.

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