Court Opinion

ID: 9945596
Source: CourtListenerOpinion
Date Created: 2024-02-27 22:05:43.596345+00
Date Added: 2024-06-11T14:25:34.263250
License: Public Domain

Filed 2/27/24 Yuhas v. Gizmo Media CA2/2
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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

                         SECOND APPELLATE DISTRICT

                                        DIVISION TWO

AMELIA A. YUHAS,                                                  B320730

         Plaintiff and Respondent,                                (Los Angeles County
                                                                  Super. Ct. No.
         v.                                                       19TRCV00169)

GIZMO MEDIA, LLC et al.,

         Defendants and Appellants.

     APPEAL from a judgment of the Superior Court of
Los Angeles County. Deirdre H. Hill, Judge. Affirmed.

     Law Offices of Kenneth Gaugh and Kenneth Gaugh for
Defendants and Appellants.

     Richardson Ober, Kelly G. Richardson and Jonathan R.
Davis for Plaintiff and Respondent.

                           ______________________________
      Appellants Gizmo Media, LLC (Gizmo Media) and
Nayeem Ahmed Khan (Khan) (collectively appellants) appeal
from a judgment entered against them and in favor of respondent
Amelia A. Yuhas (Yuhas). Appellants’ only argument on appeal
is that insufficient evidence supports the trial court’s finding that
Khan is the alter ego of Gizmo Media. Finding no error, we
affirm.
         FACTS AND PROCEDURAL BACKGROUND1
I.    The Sale and Subsequent Payment Dispute
      Yuhas and her husband owned a mailbox rental, shipping,
and office supply company called Personal Mailbox, LLC, doing
business as Lomita Post & Parcel (Personal Mailbox).2 Khan was
a customer at the store, and asked Yuhas “to let him know first”
when they were ready to sell the business.
      In 2018, Yuhas decided to sell and began negotiating with
Khan. Initially, she thought that Khan would buy the business
as an individual, listing Khan and his wife as the purchasers on

1      The record on appeal is incomplete, consisting primarily of
(1) most of the pleadings and related motions filed by both
parties; (2) the purchase agreement and escrow paperwork; and
(3) the reporter’s transcripts from the bench trial. It does not
contain the cross-complaint appellants filed against Yuhas, or
any of the numerous exhibits submitted at that trial, including
the parties’ depositions and multiple e-mail and text messages
sent by the parties and various vendors and/or creditors. Where
this summary references these documents, it relies on their
characterization by the parties and their counsel at trial.

2     Prior to the sale at issue in this appeal, all rights to the
business were assigned solely to Yuhas. Accordingly, Yuhas is
the sole plaintiff and respondent in this matter.

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the draft purchase agreement. Khan refused to sign the
document, telling Yuhas for the first time that “‘we’re not doing it
under our name. We’re putting it under the LLC.’” The final
purchase agreement designates Personal Mailbox and Gizmo
Media as the parties, with Yuhas and Khan as their authorized
signers.
        The parties agreed on a purchase price of $45,000 for
Personal Mailbox.3 When Khan had trouble securing a small
business loan, the parties agreed on a $15,000 down payment. At
Khan’s suggestion, the remaining $30,000 balance would be paid
via 20 postdated checks in the amount of $1,500, to be cashed
monthly by Yuhas. When she asked whether these checks would
come from Khan or from Gizmo Media, Khan responded
“‘[w]hichever. Doesn’t matter. It’s the same effect.’” This left
Yuhas with the impression that she “would be able to count on
. . . Khan” if any issues arose regarding payment.
        In addition to transferring the business and its assets to
Gizmo Media, Yuhas agreed to provide 40 hours of training to its
new staff. The purchase agreement also specified that “[t]he sale
is contingent upon [the] [b]uyer obtaining . . . the assignment . . .
[¶] . . . of [Yuhas’s] existing lease” for, among other things, an
industrial copy machine (the copier).
        Yuhas allowed appellants to take over management of
Personal Mailbox on July 24, 2018, the day before escrow was set
to close on the sale of the business. She later learned that they
had not yet paid the $15,000 down payment, delaying the close of
escrow.

3     Khan also bought the building in which Personal Mailbox
was located. That sale is not disputed.

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       For nearly four weeks, appellants operated Personal
Mailbox without making any attempt to either pay the down
payment or share any revenue with Yuhas. For several days,
appellants used her employees for free labor. Pursuant to the
purchase agreement, Yuhas would send her employees to the
store to train appellants’ staff, and, finding no one there, the
employees would operate the business by themselves all day.
Khan refused to pay them for their work, telling them to take
their wage complaints to Yuhas. When they did, she paid them a
total of $591.50.
       In or around this period, Yuhas discovered that United
Parcel Service (UPS) mistakenly delivered commission payments
in the amount of $848 to appellants, even though the money was
earned while Yuhas owned the business. UPS directed Khan to
return the check to Yuhas, but he refused. Another dispute arose
from appellants’ failure to take over the lease on the copier.
When the lessor attempted to collect past due payments from
Yuhas, she paid a settlement of $850 to close out the lease.
       On August 12, 2018, Yuhas told Khan that unless he paid
the $15,000 down payment, she would seek legal advice.
Appellants tendered the money nine days later. Escrow on the
business closed on or around August 22, 2018.
       In September 2018, Yuhas deposited the first postdated
check without incident. The following month, the second
postdated check bounced. Upon being informed that Yuhas was
unable to cash the second check, appellants told her that they
had stopped payment on all 19 outstanding checks, and
threatened to sue for Yuhas’s alleged failure to satisfy her
obligations under the purchase agreement.

                               4
II.    The Pleadings
       In February 2019, Yuhas sued appellants for breach of
contract. According to the operative third amended complaint
(TAC), appellants breached the purchase agreement by, inter
alia, stopping payment on the postdated checks. Yuhas also
alleged that “Khan conducted himself and represented himself as
identical to [Gizmo Media], and acted at all times as if he and
[Gizmo Media] were one and the same[.]” Appellants entered a
general denial.
       In August 2020, appellants filed a cross-complaint against
Personal Mailbox for breach of contract. They voluntarily
dismissed the cross-complaint one year later.
III. The Trial
       In February 2022, the matter proceeded to a bench trial. In
addition to numerous exhibits, the parties presented testimony
from Yuhas, Khan, and two of Yuhas’s former employees.
       At several points during the trial, Khan contradicted his
prior deposition testimony. He denied that he had insisted on an
installment plan via postdated checks “because Gizmo Media had
no revenue and no assets”; that “Gizmo Media had no payroll”;
that “Gizmo Media . . . is run by family members of [his] who
work for free”; and that “the way [he] run[s] [Gizmo Media] is
that if there’s any money in the business to take out, [he] and
[his] brother just take [it] out.”
       But at his deposition, Khan testified that he had “requested
the installment payments because Gizmo Media . . . had no assets
or revenue at that point[,]”; that he could not remember the last
time the company “had a paid employee on its payroll”; that his
family members worked at the business for free; and that “if

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there were any” profits from the business, he “would be sharing
as much as possible” with his brother and father.
      Khan also testified that Yuhas agreed to “take care of” the
lease on the copier “during the sale process.” Despite an e-mail
from the leasing agent approving Khan’s application to transfer
the lease to Gizmo Media, he repeatedly insisted that appellants
never agreed to assume the lease on the copier.4
IV. The Judgment and Appeal
      On March 18, 2022, the trial court awarded judgment to
Yuhas in the amount of $36,251.50, plus prejudgment interest,
attorney fees and costs. The court found that Khan was
personally liable for the award as Gizmo Media’s alter ego, and
that appellants “ha[d] not shown that performance under the
contract was excused by any material breaches of [Yuhas].”
      The parties stipulated to immediate entry of judgment,
without a statement of decision. Appellants timely appealed.
                            DISCUSSION
      On appeal, appellants only contest the trial court’s finding
that Khan is personally liable as an alter ego of Gizmo Media.
I.    Applicable Law
      “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.” (Sonora Diamond Corp. v.
Superior Court (2000) 83 Cal.App.4th 523, 538 (Sonora

4     Yuhas testified that the assignment failed because
although appellants “sent the application, . . . [they] did not sign
the contract” required to finalize the assignment.

                                  6
Diamond).) “[W]hile the doctrine does not depend on the
presence of actual fraud, it is designed to prevent what would be
fraud or injustice, if accomplished. Accordingly, bad faith in one
form or another is an underlying consideration and will be found
. . . in those cases wherein the trial court was justified in
disregarding the corporate entity.” (Associated Vendors, Inc. v.
Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838 (Associated
Vendors).)
         There is “no litmus test to determine when the corporate
veil will be pierced; rather the result will depend on the
circumstances of each particular case.” (Mesler v. Bragg
Management Co. (1985) 39 Cal.3d 290, 300 (Mesler).) There are
“two general requirements: ‘(1) that there be such unity of
interest and ownership that the separate personalities of the
corporation and the individual no longer exist and (2) that, if the
acts are treated as those of the corporation alone, an inequitable
result will follow.’ [Citation.]” (Ibid.)
         Courts have identified a wide variety of factors that may be
considered in applying the alter ego doctrine, including but not
limited to: “[(1)] the holding out by an individual that he is
personally liable for the debts of the corporation [citations];
. . . [(2)] sole ownership of all of the stock in a corporation by one
individual or the members of a family [citations]; . . . [(3)] the
failure to adequately capitalize a corporation; and [(4)] the total
absence of corporate assets and undercapitalization [citations]
. . . .” (Associated Vendors, supra, 210 Cal.App.2d at pp. 838–840;
see generally Sonora Diamond, supra, 83 Cal.App.4th at pp. 538–
539; Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811.) “No
one characteristic governs, but the courts must look at all the

                                  7
circumstances to determine whether the doctrine should be
applied.” (Sonora Diamond, supra, at p. 539.)
        “The essence of the alter ego doctrine is that justice be
done. ‘What the formula comes down to, once shorn of verbiage
about control, instrumentality, agency, and corporate entity, is
that liability is imposed to reach an equitable result.’” (Mesler,
supra, 39 Cal.3d at p. 301.)
II.     Standard of Review
        The determination of whether a corporation is an alter ego
of an individual is ordinarily a question of fact for the trial court
and will not be disturbed if it is supported by substantial
evidence. (Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1072;
Las Palmas Associates v. Las Palmas Center Associates (1991)
235 Cal.App.3d 1220, 1248.)
        “[W]e resolve all conflicts in the relevant evidence ‘against
. . . appellant[s] and in support of the order.’” (Sonora Diamond,
supra, 83 Cal.App.4th at p. 535.) “The test ‘is simply whether
there is substantial evidence in favor of [Yuhas]. If this
“substantial” evidence is present, no matter how slight it may
appear in comparison with the contradictory evidence, the
judgment must be upheld. As a general rule, therefore, we will
look only at the evidence and reasonable inferences supporting
the successful party, and disregard the contrary showing.’
[Citations.]” (People v. Overstock.Com, Inc. (2017) 12 Cal.App.5th
1064, 1079.)
III. Analysis
        As we noted above, appellants have provided an incomplete
appellate record. Yuhas argues they thus forfeited their appeal.
While we agree that “‘appellant[s] ha[ve] the burden of
affirmatively demonstrating error by providing an adequate

                                 8
record[]’ [citation]” (Rubio v. CIA Wheel Group (2021)
63 Cal.App.5th 82, 103), their failure to do so does not merit the
extreme penalty of forfeiture. It is enough that, “‘[t]o the extent
the record is incomplete, we construe it against’” appellants.
(Ibid.) Regardless, even the partial record before us contains
substantial evidence supporting the trial court’s finding that
Khan is an alter ego of Gizmo Media.

       A.    Unity of Interest
       The testimony given at trial demonstrates “‘such unity of
interest and ownership that the separate personalities of [Gizmo
Media] and [Khan] no longer exist.’” (Mesler, supra, 39 Cal.3d at
p. 300.) Yuhas testified that when she attempted to clarify who
would pay her under the purchase agreement, Khan told her it
“‘[did]n’t matter’” whether installment payments came from him
or from Gizmo Media, because “‘[w]hichever[]’” entity issued the
checks, they would have “‘the same effect.’” Khan’s words gave
Yuhas the impression that she could “count on” him if any issues
arose with payment. (Associated Vendors, supra, 210 Cal.App.2d
at p. 838 [unity of interest can be shown by an individual
“holding [himself] out . . . [a]s personally liable for the debts of
the corporation”]; Greenwich S.F., LLC v. Wong (2010)
190 Cal.App.4th 739, 767–768 [the testimony of a single witness
may provide substantial evidence].)
       Further, Khan’s deposition testimony indicated that when
Gizmo Media entered into the purchase agreement, it was
undercapitalized. Khan admitted that he asked to pay the
majority of the sale price in “installment[s]” via postdated checks
“because Gizmo Media . . . had no assets or revenue at that
point.” In fact, Khan could not remember when the company last

                                 9
“had a paid employee on its payroll[;]” when Gizmo Media took
over Personal Mailbox, it staffed the business with Khan’s family
members and did not pay them for their work. (Associated
Vendors, supra, 210 Cal.App.2d at p. 839 [unity of interest can be
demonstrated by “the failure to adequately capitalize a
corporation” and “the total absence of corporate assets and
undercapitalization”].)
       And either in depositions or at trial, Khan admitted that he
would distribute any profits Gizmo Media made to himself, his
brother, and his father. This suggests that only Khan and his
close relatives either own or are entitled to the profits of Gizmo
Media. (Associated Vendors, supra, 210 Cal.App.2d at p. 839
[unity of interest can be shown by “sole ownership of all of the
stock in a corporation by one individual or the members of a
family”].)
       Appellants contend that “there is no evidence in the record
that the [trial] [c]ourt considered ANY of the . . . factors” courts
have enumerated as relevant to the alter ego inquiry. (See, e.g.,
Associated Vendors, supra, 210 Cal.App.2d at pp. 838–840.) To
the extent that their argument is based on the trial court’s failure
to make express findings about these factors, we deem the
argument waived, as appellants did not ask for a statement of
decision. (Acquire II, Ltd. v. Colton Real Estate Group (2013)
213 Cal.App.4th 959, 970 (Acquire II) [a party who “fail[s] to
request a statement of decision when one is available . . . waives
any objection to the trial court’s failure to make all findings
necessary to support its decision”].)
       By not requesting a statement of decision, appellants also
compel us to “appl[y] the doctrine of implied findings and
presume[] the trial court made all necessary findings supported

                                10
by substantial evidence.” (Acquire II, supra, 213 Cal.App.4th at
p. 970.) “The question then becomes whether substantial
evidence supports the implied factual findings.” (Fladeboe v.
American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 58.) As
described above, we find that substantial evidence supports
implied factual findings as to multiple alter ego factors.
(Associated Vendors, supra, at p. 840 [generally, where alter ego
has been found, “several of the[se] factors . . . were present”].)
       B.    Inequitable Result
       The second requirement, that an inequitable result will
follow if Khan is not held liable for Gizmo Media’s actions, is also
supported by substantial evidence. (See Mesler, supra, 39 Cal.3d
at p. 300.) Khan’s deposition testimony casts doubt on whether
Gizmo Media has sufficient assets to pay the judgment.
However, “[d]ifficulty in enforcing a judgment does not alone
satisfy this element. [Citation.] There also must be some
conduct amounting to bad faith that makes it inequitable for
[Khan] to hide behind the corporate form.” (Leek v. Cooper (2011)
194 Cal.App.4th 399, 418.)
       The record contains ample evidence to support a finding
that appellants repeatedly acted in bad faith. Yuhas testified
that although they took over Personal Mailbox before escrow
closed, for one month they neither shared revenue with Yuhas
nor made any attempt to proffer the down payment required to
close escrow and finalize the sale.
       Yuhas and her former employees testified that appellants
took advantage of them during that month, using the employees
to operate the business on days when Yuhas asked them to train
Gizmo Media’s staff pursuant to the purchase agreement. Khan

                                11
compounded the issue by refusing to pay Yuhas’s employees for
their work, forcing Yuhas to cover their wages.
       Appellants refused to forward Yuhas commission money
mistakenly paid to appellants by UPS, even after the company
directed Khan to do so. And, despite clear language in the
purchase agreement obligating them to take over the lease for the
copier, appellants failed to finalize the assignment of the lease,
allowing past due payments to accrue on Yuhas’s account. At
trial, Khan repeatedly claimed that he never understood that
appellants had a contractual obligation to take over the lease,
even though the leasing agent previously informed him that his
application to take over the lease had been approved. Appellants’
actions imposed additional expenses on Yuhas, as she had to pay
the lessor to close out the lease.
       Lastly, appellants stopped payment on 19 of the 20
postdated checks they gave to Yuhas and threatened to sue her
for allegedly breaching the purchase agreement. Appellants
argue that cancelling the checks cannot be considered evidence of
bad faith because the decision was “based on [their] good faith
dispute with [Yuhas] over [the] contention that [Yuhas] had
committed seven (7) material breaches of the” purchase
agreement. But appellants did not follow through on their threat
to pursue legal action until over a year after Yuhas sued them;
even then, they voluntarily dismissed their cross-complaint
against Yuhas, and, when defending against her complaint, failed
to prove that she committed any material breach of the
agreement.5 This suggests that appellants’ reasons for reneging

5     On appeal, appellants do not challenge the trial court’s
finding that appellants “ha[d] not shown that performance under
the contract was excused by any material breaches of [Yuhas].”

                               12
on over half the total purchase price were weak at best and
specious at worst.6
        Appellants’ conduct raises the inference that they
repeatedly failed to comply with the terms of the purchase
agreement in bad faith. Such behavior supports the finding that
Khan used Gizmo Media to shield himself from any liability that
would accrue to the company for breaching its obligations under
the purchase agreement. It would be inequitable to allow Khan
to profit—at Yuhas’s expense—from misusing the corporate form.
        Appellants dispute our conclusion, insisting that the record
does not contain substantial evidence of bad faith. In addition to
the arguments already discussed above, appellants contend that
“there [is] no evidence in the record that . . . Gizmo Media . . . was
insolvent or judgment proof,” emphasizing that “Khan gave
several minutes of uncontroverted testimony that Gizmo Media
. . . was and is, a profitable, active, business venture.”
        This argument ignores contradictory evidence that Gizmo
Media was undercapitalized when it entered into the purchase
agreement, and that at times it was seemingly unable to
maintain funds for basic business expenses such as payroll. (IIG
Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 639 [“Substantial
evidence may be contradicted or uncontradicted.”]; Wells Fargo
Bank, N.A. v. Weinberg (2014) 227 Cal.App.4th 1, 8 [“[t]he
appellate court has no power to judge the effect or value of the

6     In their opening brief, appellants argue that they paid
“31,500 of the $45,000 due” to Yuhas. Their arithmetic does not
hold up to modest scrutiny. In the same paragraph, appellants
agree that they “stopped payment on . . . 19 postdated $1,500
checks[;]” in other words, they admit to withholding $28,500 from
Yuhas and only paying her $16,500.

                                 13
evidence, to weigh the evidence, to consider the credibility of
witnesses, or to resolve conflicts in the evidence or in the
reasonable inferences that may be drawn from the conflicts”].)
       This is especially true where, as here, the only evidence
relied on by appellants is the purportedly “uncontroverted”
testimony of a witness who contradicted himself numerous times
at trial. (Brenner v. Haley (1960) 185 Cal.App.2d 183, 186 [“The
trier of facts . . . [i]s entitled to disbelieve much or all of [the]
testimony” of a witness who “impeached himself on several
occasions by contradictory statements”].)
                               DISPOSITION
       The judgment is affirmed. Yuhas is entitled to costs on
appeal.
       NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

                               _____________________, J.
                               ASHMANN-GERST

We concur:

________________________, P. J.
LUI

________________________, J.
HOFFSTADT

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