Court Opinion

ID: 9720878
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:43:48.803318+00
Date Added: 2024-06-11T18:24:21.944847
License: Public Domain

SPENCER, P. J.
I concur in the result. However, in my view, the question of causation is encompassed within United Community Church’s undisputed fact No. 12. Defendants understood fact No. 12 in this fashion, and the issue of causation was fully briefed in the pleadings on the motion. Additionally, I do not view any evidentiary defect in United Community Church’s statement of undisputed facts as fatal to the motion. Hence, I would reach the question *340of whether defendants successfully demonstrated the existence of a triable issue of material fact as to causation.
To be sure, fact No. 12 expresses an ultimate fact rather than a detailed evidentiary fact: Because defendants failed to file an answer, United Community Church (UCC) lost the case and was injured by the resulting judgment. However, implicit in the statement that defendants’ nonfeasance caused UCC to lose the underlying case is the assertion no other circumstance, such as the lack of a meritorious defense, contributed to the loss. In other words, fact No. 12, if true, would require or permit the ruling UCC desired.
That fact No. 12 adequately informed defendants of UCC’s causal claim is evident in their response to it. Defendants disputed the fact and presented evidence which, they asserted, demonstrated UCC would not have prevailed in the underlying action had Garcin timely filed an answer. Clearly, defendants were aware of what evidence was required to dispute fact No. 12. Judgment against UCC was secured in the underlying action on the theory UCC and all other underlying corporate defendants had an alter ego relationship with McBirnie and thus no separate corporate identities. Defendants knew this and consequently realized that to prove causation, UCC must establish it did not have an alter ego relationship with the other underlying defendants. Thus, the due process aspect of the separate statement requirement was satisfied.
Moreover, that fact No. 12 is not sufficiently “evidentiary” in form, and UCC’s separate statement of undisputed facts thus does not include the “evidentiary” fact is not a fatal defect. As the majority acknowledges, the failure to comply with the requirement of providing a separate statement of all material facts the moving party contends are undisputed—as opposed to the failure to present evidence establishing or negating essential material facts—confers on the trial court the discretion to deny the motion on this ground. Denial is not mandatory. (Code Civ. Proc., § 437c, subd. (b).) Whatever the prevailing view may be on when the trial court appropriately overlooks the failure to comply, the fact remains that the matter is one of discretion. Where, as here, the opposing party is not misled or confused and all essential material, clearly identified, is before the court, it is hardly an abuse of discretion for the trial court to eschew this ground for denial of the motion. So long as the essential evidentiary framework is present, the court is entirely within its rights in granting the motion. {Id., subd. (c).)
That UCC had failed to include such evidence in its initial moving papers did not automatically entitle defendants to denial of the motion under all circumstances. Contrary to the majority’s assertion, the opportunity to present evidence in support of the motion was not then closed to UCC.
*341In Weiss v. Chevron, U.S.A., Inc. (1988) 204 Cal.App.3d 1094 [251 Cal.Rptr. 727], the plaintiff was suing on a theory of vicarious liability. When the defendant moved for summary judgment, it argued the plaintiff had no evidence of a principal-agent relationship and no knowledge of the existence of such evidence. (At p. 1098.) The plaintiff opposed the motion, arguing the defendant had the burden of negating such a relationship. The defendant then submitted a reply which incorporated the declaration of a management employee and sales and lease contracts between the defendant and the purported agent. From this evidence, the trial court found there was no agency relationship and granted summary judgment. (Ibid.)
On appeal, the plaintiff argued the court was precluded from considering the evidence since it did not accompany the original moving papers. The appellate court found no error. (Weiss v. Chevron, U.S.A., Inc., supra, 204 Cal.App.3d at p. 1098.) “Code of Civil Procedure section 437c, subdivision (b), permits the filing of ‘[a]ny reply to the opposition . . .’ and does not expressly or impliedly prohibit the inclusion of evidentiary matter with the reply. Moreover, subdivision (c) states that the motion ‘shall be granted if all the papers submitted show that there is no triable issue . . . ,’ and the court ‘shall consider all of the evidence set forth in the papers' except that to which objections have been sustained. (Italics added.) This unqualified reference to ‘the papers’ before the court, without limitation to documents submitted with the original motion, also supports the reasonable inference that the court should consider all admissible evidence of which the opposing party has had notice and the opportunity to respond. [Citation.]
“The conclusion is consistent with the general rule that ‘a trial court has inherent power, independent of statute, to exercise its discretion and control over all proceedings relating to the litigation before it [citation]. One phase of such power. . . is the power to obtain evidence upon which the judgment of the court may rest [citation], . . . [Thus], in summary judgment proceedings, the trial court is vested with discretion to permit the filing of affidavits in addition to those specifically mentioned in the statute and its determination in this respect will not be disturbed on appeal unless an abuse of discretion is clearly shown.’ [Citation.]” (Weiss v. Chevron, U.S.A., Inc., supra, 204 Cal.App.3d at pp. 1098-1099.)
It is indeed true defendants would have been entitled to a denial of the instant motion had they submitted no opposition at all. However, as Weiss makes clear, once they noted the defect and engaged the issue, UCC had a revived opportunity to present evidence in proof of causation, i.e., that it had a complete defense to the underlying action.
Where, as here, the parties have engaged the critical issue fully, briefed it comprehensively and presented the evidence at their disposal, the reversal of *342the judgment on the basis of the perceived procedural defect that fact No. 12 is not sufficiently “evidentiary” raises a spectre of potentially wasted judicial resources. UCC has presented evidence it does not have an alter ego relationship with the other defendants in the underlying action and thus, inferentially, that it had a complete defense to that action. This proves the element of causation. It demonstrates that but for Garcin’s negligence, UCC would have defended the underlying action successfully. (Sukoff v. Lemkin (1988) 202 Cal.App.3d 740, 744 [249 Cal.Rptr. 42].) If the evidence defendants submitted is not adequate to raise a triable issue as to whether UCC did indeed have an alter ego relationship with the other defendants in the underlying action, then reversal would needlessly require a trial of this issue. The trial courts are too crowded and too overworked for this court to countenance such an exercise in futility. To me, this is the overriding consideration. Consequently, I turn my attention to the question of whether defendants demonstrated the existence of a triable issue of fact.
The doctrine of alter ego comes into play when a plaintiff claims a defendant “is using the corporate form unjustly and in derogation of the plaintiff’s interests.” (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300 [216 Cal.Rptr. 443, 702 P.2d 601].) The doctrine operates to prevent individuals from using a corporate entity merely as a shield from liability for bad faith or fraudulent actions. (Clark v. Millsap (1926) 197 Cal. 765, 781-782 [242 P. 918].) As noted in Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838 [26 Cal.Rptr. 806], “while 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 some form or another in those cases wherein the trial court was justified in disregarding the corporate entity. [Citations.]”
To establish the corporate entity is indeed an alter ego, there must be “such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist” and, “if the acts are treated as those of the corporation alone, an inequitable result will follow.” (Automotriz etc. De California v. Resnick (1957) 47 Cal.2d 792, 796 [306 P.2d 1, 63 A.L.R.2d 1042]; accord, Mesler v. Bragg Management Co., supra, 39 Cal.3d at p. 300.) The bad faith or inequitable conduct justifying the invocation of the doctrine must be that of the party against whom it is invoked. That party must have played a part in a course of conduct which constitutes an abuse of the corporate privilege or must be seeking an inequitable advantage from the “fiction” of a separate corporate existence. (United States Fire Ins. Co. v. National Union Fire Ins. Co. (1980) 107 Cal.App.3d 456, 472 [165 Cal.Rptr. *343726].) The same principles apply where the entity sought to be held liable is another corporation rattier than an individual. (Mesler, supra, at p. 300.)
Generally, the result will depend on the circumstances of a particular case; there is no litmus test for determining the issue. (Mesler v. Bragg Management Co., supra, 39 Cal.3d at p. 300.) “The essence of the alter ego doctrine is that justice be done. . . . Thus the corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require.” (Id. at p. 301.) Consequently, the question generally is one of fact (Jack Farenbaugh & Son v. Belmont Construction, Inc. (1987) 194 Cal.App.3d 1023, 1032-1033 [240 Cal.Rptr. 78]; Associated Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at pp. 836-837.)
All cases in which the courts have found the existence of an alter ego relationship involve such elements as the commingling of funds and other assets, the failure to separate the assets of separate entities, the treatment of the corporation’s assets as those of an individual or other corporation, holding out that the individual or other corporation is personally liable for the first corporation’s debts, the failure to maintain separate records or the commingling of the records of the entities, identical equitable ownership in the two entities, the equitable owners’ domination and control of the entities, the use of the same business location, an identity of employees or attorneys in separate entities, the use of the corporation as a mere shell or instrumentality for the conduct of the affairs of another entity, the failure to maintain arm’s length transactions between entities and the diversion of assets. (Associated Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at pp. 838-840; see also Roman Catholic Archbishop v. Superior Court (1971) 15 Cal.App.3d 405, 411 [93 Cal.Rptr. 338].) In every case, several of these factors are present. (Associated Vendors, Inc., supra, 210 Cal.App.2d at p. 840.)
In support of its position it did not have an alter ego relationship with the other underlying corporate defendants and McBirnie, UCC submitted the declaration of Ron L. Hubbard (Hubbard), in which he states he had worked as a minister on UCC’s staff from May 1975 through June 1982. From 1978 to June 1979, he also was employed part time by Community Churches of America, one of the other underlying corporate defendants. He had a close association with the president and faculty of the California Graduate School of Theology and with the director and staff of Voice of Americanism. Hubbard had a very close relationship with the management of the Concord Senior Housing Foundation. All of these organizations were run solely by McBirnie. Hubbard was familiar with the day-to-day workings, operations and financial dealings of these organizations.
*344According to Hubbard, there never was any commingling of funds between UCC and the other organizations. UCC had an autonomous congregation. Its governing body was the board of deacons, elected by its membership and completely responsible thereto for its decisions. McBirnie was only a pastor/employee of UCC; he was not authorized to act without the consent of the board or membership. On occasions, McBirnie requested that the board take certain actions but his requests were denied. All of the other underlying defendants were controlled by McBirnie; they had no organizational meeting minutes, and their funds were commingled. In contrast, the ownership of UCC was vested in the church members. Members of the board of deacons were not associated with and did not deal with any of the other underlying corporate defendants.
As of the spring of 1977, UCC operated out of a building separate from the headquarters of the other organizations. While there were sales of property between plaintiff and the other organizations, each sale was conducted as an arm’s length transaction. UCC never received or had diverted to it any assets from the other underlying corporate defendants.
It is against the backdrop of this evidence that defendants attempted to demonstrate there was a triable issue of material fact as to whether an alter ego relationship existed. Among the evidence defendants submitted was a declaration executed in the underlying action by the attorney for the underlying plaintiffs, Christ Troupis. UCC objected to this declaration on the ground it was hearsay in its entirety. The objection was not well taken.
An affidavit is any written declaration under oath or under penalty of perjury made without notice to the opposition. (Code Civ. Proc., §§ 2003, 2015.5.) Generally, an affidavit may be used “upon a motion, and in any other case expressly permitted by statute.” (Code Civ. Proc., § 2009.) Code of Civil Procedure section 437c, subdivision (b), expressly provides for the use of affidavits or declarations in support of and opposition to a motion for summary judgment or summary adjudication of issues (Code Civ. Proc., § 437c, subd. (f)). Nothing in the statute requires that an affidavit be created specifically for this purpose.
In the absence of statutory authorization for use, an affidavit is hearsay. (Estate of Fraysher (1956) 47 Cal.2d 131, 135 [301 P.2d 848].) However, statutory authorization for the use of affidavits creates an exception to the hearsay rule and renders affidavits admissible evidence. (See People v. Dickinson (1976) 59 Cal.App.3d 314, 319 [130 Cal.Rptr. 561]; Moon v. Moon (1944) 62 Cal.App.2d 185, 188 [144 P.2d 596].) Accordingly, the Troupis declaration was admissible and remained available for the trial court’s consideration in determining plaintiff’s motion.
*345The Troupis declaration contains the following pertinent facts: A December 31, 1980, balance sheet of Community Churches of America incorporates real property assets including a parcel located in Forest Springs, California, which supposedly was the property of UCC. The balance sheet also includes the liabilities of UCC’s World Emergency Relief organization. In preparing the balance sheet, Community Churches of America made no effort to separate its assets from those of other organizations. A copy of the balance sheet is attached to the declaration.
Community Churches of America purchased 5,000 Bibles to be used to raise funds for the California Graduate School of Theology and plaintiff. These were to be distributed to those making contributions solicited through Voice of Americanism broadcasts. The Bibles were imprinted with the names of UCC and the California Graduate School of Theology. While the Hubbard declaration states the Bibles were purchased without the consent of UCC’s board of deacons, and Community Churches of America was reimbursed for the cost of the Bibles, this simply creates a factual conflict which, for the purposes of summary judgment, must be resolved in defendants’ favor. (Zeilman v. County of Kern (1985) 168 Cal.App.3d 1174, 1178 [214 Cal.Rptr. 746].)
Defendants also submitted the testimony Hubbard gave in the default prove-up hearing, in which he stated he worked for McBirnie both as a pastor and pastor-administrator of plaintiff and in estate planning for Community Churches of America. Hubbard further testified it was his understanding “these organizations,” previously listed to include UCC, provided McBirnie with an automobile and an expense account. In addition, defendants submitted articles of incorporation showing that upon dissolution the assets of the California Graduate School of Theology, Community Churches of America, United Community Churches of America, Inc., and the Center for American Studies all would go to UCC unless it too had ceased to exist.
The evidence submitted on the question of the existence of an alter ego relationship thus at a minimum raises questions of fact as to several of the factors pertinent to the inquiry. With respect to the commingling of funds and assets, the failure to segregate assets of various entities, the treatment of one entity’s assets as those of another entity and holding out that one entity is liable for the other entity’s debts, there are two pertinent facts: First, at least one of what appears to be UCC’s real property assets and those of its liabilities related to World Emergency Relief are commingled with those of Community Churches of America on the latter’s December 31,1980, balance sheet. Second, Community Churches of America purchased Bibles to be distributed in part to raise funds for UCC.
*346There is a certain identity of employees among the various organizations. Both Community Churches of America and UCC employed McBirnie and Hubbard. While evidence a defendant is a managing employee of a corporation is insufficient in itself to establish that defendant has an alter ego relationship, i.e., is a/the person for whom the corporation is an alter ego (Riddle v. Leuschner (1959) 51 Cal.2d 574, 580 [335 P.2d 107]), an identity of employees among two organizations remains highly relevant to the inquiry (Roman Catholic Archbishop v. Superior Court, supra, 15 Cal.App.3d at p. 411; Associated Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at p. 839). Finally, with respect to the use of one corporation as a mere shell or instrumentality for the conduct of the affairs of another entity, there is some suggestion of this in all of the foregoing evidence, as well as in the disposition of the other entities’ assets upon dissolution for the benefit of UCC.
In other words, there is at least some evidence tending to show the presence of six of the factors identified in Associated Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at pages 838-840. This is sufficient evidence to have raised a triable issue of material fact on the question of alter ego and thus to require reversal of the judgment for the prejudice attending the trial court’s erroneous failure to permit defendants to try this issue. Moreover, there is another basis upon which the same conclusion must be reached.
In opposing the motion for summary judgment, defendants submitted a declaration informing the trial court they expected to have additional evidence on the question of alter ego in the form of the deposition testimony of one Eloise Mulder, the treasurer of UCC from 1967 through 1987. As Dan Longo, defendants’ counsel declared, “[t]he deposition was conducted on May 22, 1989 in Alexandria, Louisiana and declarant expects to receive a transcript of that deposition on or about June 3, 1989. Immediately upon receipt, declarant will lodge the applicable portions of that deposition testimony with the court as it pertains to this motion.”
In the interim, Attorney Longo summarized the contents of that testimony which he considered pertinent. In short, he represented Mrs. Mulder had testified McBirnie actively controlled UCC during the years Mrs. Mulder served on the board, and members “invested” funds with UCC which then were funneled to Community Churches of America at a profit to UCC. In addition, she testified to numerous real property transactions between UCC and the other entities, some of which involved the cancellation of promissory notes those entities had signed in favor of UCC’s members. Attorney Longo also represented that McBirnie’s deposition had yet to be taken and he expected it to yield further evidence the other entities were the alter egos of *347UCC. On the basis of this declaration, defendants requested a continuance of the hearing on the motion should the deposition transcripts prove unavailable at the time of the hearing. The transcripts were indeed unavailable at the time of the hearing; although the McBirnie deposition had begun, it was not completed.
Thus, by affidavit, defendants provided a sound basis for concluding “facts essential to justify opposition may exist but cannot, for reasons stated, then be presented.” (Code Civ. Proc., § 437c, subd. (h).) This required the court to grant a continuance or deny the motion. (Ibid.; American Continental Ins. Co. v. C & Z Timber Co. (1987) 195 Cal.App.3d 1271, 1280 [241 Cal.Rptr. 466]; Nazar v. Rodeffer (1986) 184 Cal.App.3d 546, 556 [229 Cal.Rptr. 209].)
To be sure, the declaration of UCC’s attorney, Harry Scolinos, characterizes the Mulder deposition testimony differently as it concerns McBirnie’s involvement in UCC’s operation and the nature of the “investment” and real property transactions. In addition, it states the first portion of McBirnie’s deposition, then concluded, establishes UCC had no alter ego relationship with the other entities. However, the fact remains these deposition transcripts were unavailable at the time of the hearing; the McBirnie deposition was not even completed. There is no reason to accept at face value Attorney Scolinos’s characterization of the deposition testimony while rejecting Attorney Congo’s characterization. Moreover, it is clear the trial court did not do so. Rather, as the majority notes, the court expressed the erroneous view defendants were foreclosed from attempting to raise a triable issue of fact as to UCC’s alter ego relationship with the other underlying corporate defendants. Hence, had it not been for the trial court’s erroneous ruling on causation, it is clear defendants were entitled to a continuance of the hearing on the motion.
It is equally clear the error was prejudicial. If the deposition testimony is as defendants represent it to be, then it adds weight to those factors suggesting the existence of an alter ego relationship of which there already is evidence and provides support for additional factors. Most importantly, the Mulder deposition testimony would provide evidence of the diversion of assets from one entity to another and a failure to maintain arm’s length transactions between the entities. Even if the six factors already supported by some evidence were not enough to create a triable question of fact, the evidence supporting these two additional factors assuredly would be adequate when added to that already presented. There is more than a suspicion here that these entities, including UCC, have “such unity of interest and ownership that the separate personalities of the corporation and the individ*348ual no longer exist” (Automotriz etc. De California v. Resnick, supra, 47 Cal.2d at p. 796); there is a genuine question which requires a full trial.
Of the second requirement, that an inequitable result will follow if the acts are treated as those of the corporation alone (Automotriz etc. De California v. Resnick, supra, 47 Cal.2d at p. 796), there also is at least some evidence. The listing of UCC’s assets and liabilities on the Community Churches of America balance sheet and the indications of the “investment” funneling and real property transactions purportedly to be found in the Mulder deposition testimony clearly suggest UCC played a part in a course of conduct which constitutes an abuse of the corporate privilege (United States Fire Ins. Co. v. National Union Fire Ins. Co., supra, 107 Cal.App.3d at p. 472). Accordingly, I would reverse the judgment on the ground that defendants did indeed demonstrate the existence of a triable issue of material fact, and the trial court’s refusal to permit them to try this issue thus was prejudicial.