Motion to Amend Judgment to Add Third Party Judgment Debtors

Ruling: Off Calendar – no hearing will be held. Judgment Creditor’s Motion to Amend Judgment to Add Third Party Judgment Debtors is DENIED, without prejudice.

A court has inherent power to use “all the means necessary” to carry its jurisdiction into effect. (Code Civ. Proc., § 187.) This includes amending a judgment against a corporation to add a nonparty alter ego as a judgment debtor. (See Hall, Goodhue, Haisley & Barker, Inc. v. Marconi Conference Ctr. Board (1996) 41 Cal.App.4th 1551, 1554–1555; Tokio Marine & Fire Ins. Corp. v. Western Pac. Roofing Corp. (1999) 75 Cal.App.4th 110, 116.)

On the other hand, a trial court is not authorized to amend a judgment to add a corporation as a judgment debtor to satisfy a shareholder’s debts when doing so is based on outside reverse piercing of the corporate veil, i.e., where a third party attempts to reach corporate assets to satisfy claims against an individual shareholder. (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1517–18.)

Under appropriate circumstances, the trial court may amend its judgment to add an alter ego of a corporate defendant as a judgment debtor. The theory is that the court is not amending the judgment to add a new defendant ,but is merely inserting the correct name of the real defendant: “Such a procedure is … appropriate … where it can be demonstrated that (the new defendants) in their capacity as alter ego of the corporation … in fact had control of the previous litigation, and thus were virtually represented in the lawsuit.“ (NEC Electronics, Inc. v. Hurt (1989) 208 Cal.App.3d 772, 778, emphasis and parentheses added; Hall, Goodhue, Haisley & Barker, Inc. v. Marconi Conference Ctr. Board (1996) 41 Cal.App.4th 1551, 1555—judgment confirming arbitration award amended to add alter ego as corporate defendant; see Leek v. Cooper (2011) 194 Cal.App.4th 399, 419.) The failure to allege the alter ego doctrine in the underlying action does not preclude a motion to amend the judgment to include the alter ego. (Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1069.)

Amending the judgment may also be proper to name a successor corporation created as a mere continuation of an insolvent corporate defendant: “(I)f a corporation organizes another corporation with practically the same shareholders and directors, transfers all the assets but does not pay all the first corporation’s debts, and continues to carry on the same business, the separate entities may be disregarded and the new corporation held liable for the obligations of the old.” (McClellan v. Northridge Park Townhome Owners Ass’n, Inc. (2001) 89 Cal.App.4th 746, 753, internal quotes omitted—where predecessor corporation declared bankruptcy to avoid paying judgment and successor corporation created by same persons to run same business, judgment properly amended to add successor corporation.)

The ordinary “preponderance of the evidence” standard applies in determining whether to grant a post-trial motion to add an alleged alter ego as a judgment debtor. (Wollersheim v. Church of Scientology (1999) 69 Cal.App.4th 1012, 1014.)

Here, Judgment Creditor has not sustained its burden to add all three potential judgment debtors to the judgment. The Court notes that after litigating this matter for over a year, Plaintiff was never put on notice three other defendants should be added as alter egos of Grace International Churches and Ministries, Inc.

The Declaration of William Lieb, Esq., suggesting Randy Woolstrum admitted the church was actually operated by and through Grace OC, is hearsay. Nothing about Mr. Lieb’s declaration, or what Mr. Woolstrum apparently admitted, suggests Pastor Woolstrum is the alter ego of Defendant Grace International Churches and Ministries, Inc. As Mr. Lieb admits the “form of Grace OC is unknown” it is impossible to know if it is an alter ego, successor corporation, etc. of Defendant. There is even less known of CBI. Simply because CBI made a payment on “GRACE OC”’s behalf on a totally separate loan (not the subject of this lawsuit), does not convert it into the alter ego of Grace International Churches and Ministries, Inc.