Case Number: GC050500    Hearing Date: October 31, 2014    Dept: A

Barun Electronics v Vantage Investments Corp.

MOTION FOR UNDERTAKING

Calendar: 21
Case No: GC050500
Date: 10/31/14

MP: Defendant, Vantage Investment Corp., Perfectly Incorporation, Inc.,
VG-Mart, Inc., and Jackson Change
RP: Plaintiff, Barun Electronics Co., LTD

RELIEF REQUESTED:
Order requiring Plaintiff to post an undertaking in favor of each Defendant

DISCUSSION:
This case arises from the Plaintiff’s claim that the Defendants breached a contract to provide computer memory cards to the Plaintiff by failing to provide acceptable goods. When the goods were returned to the Defendants, the Defendants refused to return the money paid by the Plaintiff. The Plaintiff seeks damages for the breach of the contract.
Trial is set for March 30, 2015.

At this hearing, the Defendants seek orders compelling the Plaintiff to file undertakings to secure each of the Defendants’ ability to recover costs as prevailing parties. The Defendants’ notice of motion seeks relief under CCP section 1020. Section 1020 permits notice to be given by registered mail and states that the produced of a returned receipt signed by the addressee creates a disputable presumption that the notice was received. It is not authority for an undertaking.

The correct statutory authority is CCP section 1030, which permits the Court to order a plaintiff to file an undertaking when the plaintiff resides outside of California and there is a reasonable possibility that the defendant will obtain judgment. CCP section 1030(b) requires the motion to be accompanied by a declaration including facts providing an accounting for the amount requested.
The purpose of CCP section 1030 is to enable a California resident sued by an out-of-state resident to secure costs since it will be more difficult to obtain costs from a person who is not within the Court’s jurisdiction. Yao v. Superior Court (2002) 104 Cal. App. 4th 327, 331. The statute also acts to deter out-of-state residents from filing frivolous lawsuits against California residents. Id.
The Defendants state that the Plaintiff is an out-of-state resident because it is identified itself as a “Korean Corp.” in the caption. The Plaintiff does not dispute that it is an out-of-state resident. Accordingly, the first requirement is satisfied.

Under CCP section 1030(b), the Defendants are required to provide facts demonstrating that it is reasonably possible that they will prevail. It is not required to show that there is no possibility that the Plaintiff could win at trial. Baltayan v. Estate of Getemyan (2001) 90 Cal. App. 4th 1427, 1432.
The Defendants rely upon a single declaration by the Defendant, Jackson Chang. As noted above, this motion seeks an undertaking with respect to four Defendants:

1) Vantage Investment Corp.;
2) Perfectly Incorporation, Inc.;
3) VG-Mart, Inc.; and
4) Jackson Change

Mr. Chang offers facts regarding the liability of Vantage Investment Corp. by stating that it is the victim of fraud perpetrated by Edward Huang aka Ethan Lee. Mr. Chang states in paragraph 11 that he is a shareholder and officer of Vantage Investment Corp. However, Mr. Chang offers no facts to demonstrate that he has personal knowledge of the contractual relationship between the Plaintiff and Vantage Investment Corp. Mr. Chang does not offer facts to demonstrate that he is the custodian of records with regards to the transaction at issue. Since Mr. Chang does not demonstrate that he has personal knowledge of any facts concerning the Defendant, Vantage Investment Corp., his declaration does not include sufficient facts to support its burden under CCP section 1030(b).
Mr. Chang offers no facts regarding the liability of Perfectly Incorporation, Inc. Accordingly, there are no facts to demonstrate that the Defendant, Perfectly Incorporation, Inc., has met its burden under CCP section 1030(b).
Mr. Chang offers no facts regarding the liability VG-Mart, Inc. Accordingly, there are no facts to demonstrate that the Defendant, VG-Mart, Inc., has met its burden under CCP section 1030(b).
Mr. Chang states in paragraph 5 that he did not sign the contract and did not authorize anyone to sign the contract on his behalf. These facts are insufficient because the basis for liability against Mr. Chang is that he is the alter ego of the corporate entities. The alter ego doctrine is used to hold the persons controlling the corporation liable for the acts of the corporation when the persons are using the corporate form to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or unequitable purpose. Sonora Diamond Corp. v. Superior Court (2000) 83 Cal. App. 4th 523, 538. Courts liberally apply the alter ego doctrine when the equities and justice of the situation call for it rather than restricting it to technical requirements of pleading and procedure. First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal. App. 2d 910, 915. It is essential principally that a showing be made that there is a unity of interest and that permitting the fiction of corporate separate existence is unjust. Id.
There are no facts to demonstrate that there is no unity of interest between Jackson Chang and Vantage Investment Corp. Further, there are no facts to demonstrate that permitting the fiction of a corporate, separate existence is unjust. Since Mr. Chang has not addressed the theory that Vantage Investment Corp. was his alter ego, Mr. Chang’s has not met his burden under CCP section 1030.

The Defendants also rely upon allegations in the pleadings, exhibits attached to the pleadings, and discovery responses. None are attached to the motion. Further, allegations in the pleadings are not facts that support the required finding under CCP section 1030 that the Defendants have a reasonable possibility of prevailing at trial.
In addition, the Defendants cites to legal authority holding that the Court, upon demurrer, may treat the allegations that contradict facts in an exhibit as surplusage and give precedence to the facts in the exhibits. Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal. App. 4th 1028, 1033 n2 (italics added for emphasis). Since the pending motion is not a demurrer, this authority cannot be used to make an evidentiary showing. Instead, the Defendants must produce facts to meet their burden under CCP section 1030(b).

Finally, even if the Defendants had each met their burden and offered admissible facts to demonstrate that they had a possibility of prevailing, their motion lacks facts to support any amount for an undertaking. The Defendants seek a total $150,000 in undertakings, i.e., four undertakings for $37,500
Under CCP section 1030(b), the motion must be supported by an affidavit setting forth the nature and amount of the costs and attorney’s fees the defendant has incurred and expects to incur by the conclusion of the action or special proceeding.
The Defendants failed to provide a declaration that sets forth the nature and amount of costs and attorney’s fees incurred and expected to be incurred by Vantage Investment Corp., Perfectly Incorporation, Inc., VG-Mart, Inc., and Jackson Chang. Mr. Chang states in paragraph 11 that Vantage Investment Corp. has spent approximately $30,000 in attorney’s fees and costs; however, there are no facts to demonstrate that this amount may be recovered as costs under CCP section 1030, e.g., facts regarding the nature of the expenses to demonstrate that they are recoverable under CCP section 1030. Further, Jackson Chang does not offer any facts to demonstrate that he has personal knowledge of the amounts incurred by Vantage Investment Corp. in this case.
In their reply, the Defendants argue that the Court can determine the undertaking. The Defendants offer no legal authority to support this. Further, the argument is contradicted by the express requirement in CCP section 1030 that the Defendants support their motion with an affidavit identifying the nature and amount of costs and attorney’s fees. Since the Defendants did not provide the required facts in an affidavit, they have failed to comply with this requirement.

Accordingly, the Court will deny the Defendants’ motion in its entirety.

RULING:
DENY motion.