Filed 3/9/20 McKillop v. Wallace CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 FIVE

HAZEL MCKILLOP,

Plaintiff and Respondent,

v.

OLUKEMI WALLACE et al.,

Defendants and Appellants.

B292898

(Los Angeles County

Super. Ct. No. YC070181)

APPEAL from a judgment and postjudgment order of the Superior Court of Los Angeles County, Stuart M. Rice, Judge. Affirmed in part, dismissed in part.

Mintz Law Group and Marshall G. Mintz; Law Offices of Renee L. Campbell and Renee L. Campbell for Defendants and Appellants.

Onwaeze Law Group and Ogochukwu Victor Onwaeze for Plaintiff and Respondent.

I. INTRODUCTION

Defendants Olukemi Wallace, M.D. and Healing Hands Oncology and Medical Care, Inc. (Healing Hands) appeal from the trial court’s entry of judgment, following a bench trial, against Healing Hands in favor of plaintiffs Hazel McKillop, M.D. and Innley Medical Group (Innley). They also appeal from a postjudgment order adding Wallace as a judgment debtor. We dismiss the appeal of the underlying judgment and affirm the postjudgment order.

II. BACKGROUND

A. Underlying Action

We discussed the factual background of this case in a prior appeal (McKillop v. Wallace (Jul. 15, 2019, B283783) [nonpub. opn.]) and recount the relevant facts here. This lawsuit arose from a dispute relating to an agreement for the sale of assets and stock of Innley. McKillop owned 100 percent of Innley and Wallace owned 100 percent of Healing Hands. The parties entered into four agreements, which transferred two-thirds of Innley’s stock and assets to a buyer. The parties disputed whether Healing Hands alone or Healing Hands and Wallace had agreed to act as the buyer.

On August 27, 2015, McKillop and Innley filed a complaint against Wallace and Healing Hands, asserting causes of action for breach of contract and common count on an open book account. Healing Hands filed a cross-complaint against McKillop and Innley.

On July 14, 2016, Wallace moved for summary adjudication on plaintiffs’ first and second causes of action arguing that Healing Hands, and not she, was the only party to two of the operative agreements.

On October 26, 2016, the trial court granted Wallace’s motion for summary adjudication.

Remaining parties to the second amended complaint and cross-complaint then proceeded to a bench trial. On May 9, 2017, the court issued a judgment in favor of plaintiffs against Healing Hands on plaintiffs’ second amended complaint, and in favor of Healing Hands on its cross-complaint (the underlying judgment). The trial court found plaintiffs were the prevailing parties.

On July 10, 2017, McKillop filed a notice of appeal from the underlying judgment. (McKillop v. Wallace, supra, B283783.) We affirmed. The remittitur issued on September 18, 2019.

On September 18, 2017, Wallace filed a notice of appeal from the “Amended Judgment After Court Trial.” (McKillop v. Wallace, B285215.) On May 7, 2018, Wallace filed a motion to dismiss her appeal, which we granted.

B. Order Adding Wallace As Judgment Debtor Under Alter

Ego Theory

On March 22, 2018, McKillop moved to amend the underlying judgment to add Wallace as a judgment debtor pursuant to Code of Civil Procedure section 187, under the theory that Wallace was the alter ego of Healing Hands. McKillop submitted voluminous bank records that, she contended, demonstrated Wallace had commingled her funds with those of Healing Hands. Specifically, Wallace had used her personal funds for the operation of the business; and had used Healing Hands’ funds to pay for personal expenses such as life insurance payments, school fees, and maintenance of her personal residence. These bank records also demonstrated that Wallace, close in time to the entry of the underlying judgment, had transferred large amounts of money to a woman, whom McKillop claimed was Wallace’s mother, and a corporate entity, which McKillop claimed was another business owned by Wallace. In addition, McKillop submitted transcripts from Wallace’s debtor’s examination, during which Wallace admitted that she was the sole shareholder and director of Healing Hands; and Healing Hands had failed to hold any general meetings, issue any share certificates, or pass any resolutions. During her debtor’s examination, Wallace also testified that from 2006 to July 2017, Healing Hands owned no assets, which McKillop argued demonstrated that Healing Hands was undercapitalized.

Finally, McKillop argued that equity supported a finding of alter ego liability because Wallace had falsely advised McKillop that Wallace would not close Healing Hands and would take on a partner who would manage and keep Healing Hands operational. Instead, Wallace diverted hundreds of thousands of dollars from Healing Hands to Wallace’s mother, to a different business operated by Wallace, and to herself.

In opposition to the motion to add her as a judgment debtor, Wallace argued that McKillop had not met her burden of demonstrating that Wallace was the alter ego of Healing Hands. Wallace asserted that she had not acted in bad faith or engaged in inequitable conduct; and because the trial court had concluded she was not a party to the agreements, she could not be found liable as an alter ego.

On May 17, 2018, the trial court conducted a hearing on the motion to add Wallace as a judgment debtor. The record, however, does not include a transcript of these proceedings or a suitable substitute, such as a settled or agreed statement.

On or about June 1, 2018, the trial court issued a notice of ruling, which included an order amending the judgment to include Wallace as a judgment debtor. The court found that “[p]laintiff has presented competent evidence that Healing Hands and Wallace commingled funds.” The court cited evidence that Wallace had deposited checks issued in her name into the Healing Hands’ account, that corporate funds had been used for Wallace’s personal expenses, that Wallace had written corporate checks to her family members, and that Wallace had used corporate funds to develop a building that she owned. The court further found that Healing Hands had failed to observe corporate formalities by, among other things, failing to hold meetings, failing to keep minutes of meetings, failing to issue share certificates, and failing to authorize Wallace to operate corporate accounts. It also found that Healing Hands was not adequately capitalized. In the court’s view, failing to add Wallace as a judgment debtor would be unjust because: close in time to the entry of judgment, Wallace had diverted Healing Hands funds to her mother and to herself; she had closed Healing Hands and formed another medical group; and she had controlled the underlying litigation. In support of its conclusion that Wallace had controlled the underlying litigation, the court cited to Exhibit 9, which is not included in the record.

On July 17, 2018, the trial court issued a second amended judgment, adding Wallace as a judgment debtor.

On August 6, 2018, Wallace filed a motion for new trial, pursuant to sections 657 and 660, arguing that newly discovered evidence controverted the evidence supporting a finding of alter ego liability. That motion included a declaration from Wallace’s counsel, who stated that he had substituted in as counsel on March 29, 2018, that is, one week after McKillop filed the motion to add Wallace as a judgment debtor and before Wallace filed her opposition to the motion. According to counsel, “[a]fter discussing the Court’s ruling [granting the motion to add Wallace as a judgment debtor] with [the] client, [he] learned for the first time that her bookkeeping and accounting records ha[d] been maintained for many years by Samuel Omotosho and that Healing Hands’ corporate records had been maintained by [prior counsel].” After instructing Wallace to obtain documents from Omotosho and prior counsel, counsel reviewed those documents and determined that he should challenge the court’s ruling.

Wallace also submitted her own declaration in support of the motion, declaring, among other things, that she “did not fully understand that the records maintained by [prior counsel], nor the financial records maintained by Mr. Omotosho would be needed to oppose [p]laintiff’s motion and was not able to obtain them prior to the hearing on the motion which was [heard] on May 17, 2018 . . . . Only afterward did I become aware that the records alleged by [p]laintiff to have not existed were in [prior counsel’s] and Mr. Omotosho’s possession, respectively.”

Wallace also submitted the declaration of Omotosho, who stated, “I was first contacted concerning the location and nature of these books and records [of Healing Hands] by counsel for Dr. Wallace on or about May 30, 2018. Thereafter I commenced locating and copying these records which were picked up from my office by Dr. Wallace in the middle of June 2018.”

According to defendants’ opening brief on appeal, the trial court denied the motion for new trial. But the record does not include any such order.

On September 14, 2018, Wallace and Healing Hands filed the instant notice of appeal.

III. DISCUSSION

A. Defendants’ Appeal of the Underlying Judgment

Wallace and Healing Hands argue that the trial court erred when it entered judgment in favor of McKillop and Innley. We do not consider the merits of defendants’ challenge to the underlying judgment. We affirmed the underlying judgment in an earlier opinion and the remittitur has issued. Thus, the judgment is final and we lack the ability to modify or amend it. (Martin v. Wagner (1899) 124 Cal. 204, 206.)

Even if that were not the case, Wallace dismissed her earlier appeal of the underlying judgment (which we will assume was timely filed), without expressly making the dismissal without prejudice. That dismissal operates to bar Wallace’s ability to file another appeal. (§ 913.)

Alternatively, defendants did not timely file their notice of appeal of the underlying judgment, which was required to be filed, at the latest, 180 days from May 9, 2017. (Cal. Rules of Court, rule 8.104(a)(1)(C).) Defendants filed the operative notice of appeal on September 18, 2018, well beyond the 180-day time limit.

To the extent defendants assert that the order adding Wallace as a judgment debtor superseded the underlying judgment, this is the same argument that Wallace raised in a motion to dismiss McKillop’s earlier appeal, which we rejected. (McKillop v. Wallace, supra, B283783.) Our conclusion in the prior appeal controls here pursuant to the law of the case doctrine. (Morohoshi v. Pacific Home (2004) 34 Cal.4th 482, 491.) For all these reasons, we dismiss defendants’ appeal of the underlying judgment.

B. Adding Wallace as Judgment Debtor

Defendants next appeal from the trial court’s order amending the judgment to add Wallace as a judgment debtor. Defendants seem to argue that the order was not supported by substantial evidence. We reject this argument on two alternative grounds.

First, defendants have presented an inadequate record on appeal. (Cal. Rules of Court, rule 8.120(b).) As we discussed above, there is no record of the May 17, 2018, hearing, during which the trial court concluded that McKillop had submitted sufficient evidence to demonstrate that Wallace was the alter ego of Healing Hands. “[I]t is a fundamental principle of appellate procedure that a trial court judgment is ordinarily presumed to be correct and the burden is on an appellant to demonstrate, on the basis of the record presented to the appellate court, that the trial court committed an error that justifies reversal of the judgment. [Citations.] ‘This is not only a general principle of appellate practice but an ingredient of the constitutional doctrine of reversible error.’ [Citations.] ‘In the absence of a contrary showing in the record, all presumptions in favor of the trial court’s action will be made by the appellate court. “[I]f any matters could have been presented to the court below which would have authorized the order complained of, it will be presumed that such matters were presented.”’ [Citation.] ‘“A necessary corollary to this rule is that if the record is inadequate for meaningful review, the appellant defaults and the decision of the trial court should be affirmed.”’ [Citation.] ‘Consequently, [the appellant] has the burden of providing an adequate record. [Citation.] Failure to provide an adequate record on an issue requires that the issue be resolved against [the appellant].’” (Jameson v. Desta (2018) 5 Cal.5th 594, 608–609.) Defendants’ failure to provide an adequate record on appeal therefore warrants affirmance of the order adding Wallace as a judgment debtor. (Id. at pp. 609–610 [listing court of appeal cases declining to reach merits of appeal because of absence of record of hearing].)

But even if we were to consider the merits of defendants’ appeal on the record provided, we would conclude that the trial court did not abuse its discretion in adding Wallace as a judgment debtor. “To prevail on the motion, the judgment creditor must show, by a preponderance of the evidence, that ‘(1) the parties to be added as judgment debtors had control of the underlying litigation and were virtually represented in that proceeding; (2) there is such a unity of interest and ownership that the separate personalities of the entity and the owners no longer exist; and (3) an inequitable result will follow if the acts are treated as those of the entity alone.’” (Highland Springs Conference & Training Center v. City of Banning (2016) 244 Cal.App.4th 267, 280.) “The trial court’s decision to amend a judgment to add a judgment debtor is reviewed for an abuse of discretion. [Citations.] Factual findings necessary to the court’s decision are reviewed to determine whether they are supported by substantial evidence.” (Carolina Casualty Ins. Co. v. L.M. Ross Law Group, LLP (2012) 212 Cal.App.4th 1181, 1189.)

According to defendants, there was no evidence that Wallace acted in bad faith or that the result would be inequitable. The application of alter ego liability, however, does not require proof of wrongful intent. (Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership (2013) 222 Cal.App.4th 811, 816; see Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 511.) Moreover, the court expressly found that an inequitable result would follow if Wallace was not determined to be an alter ego of Healing Hands. To the extent Wallace complains there was insufficient evidence to support that finding, Wallace cannot meet her burden to demonstrate error because there is no record of the hearing. Further, the record that we do have on appeal amply supports the trial court’s finding. The hundreds of pages of bank records that McKillop submitted demonstrated that Wallace used Healing Hands’ proceeds as her own and transferred large amounts of money to her mother and another business that Wallace owned. In addition, Wallace’s testimony from her debtor’s examination demonstrated that she did not observe corporate formalities and had undercapitalized Healing Hands. Accordingly, we conclude the court did not abuse its discretion in granting McKillop’s motion to amend the judgment to add Wallace as a judgment debtor.

C. Denial of Motion for New Trial

Defendants also challenge what they contend is the trial court’s erroneous denial of their motion for new trial. We review a trial court’s ruling on a motion for new trial for an abuse of discretion. (Richardson v. Superior Court (2009) 43 Cal.4th 1040, 1047.)

The record does not include an order denying the motion for new trial or the reasons for the trial court’s purported denial. Thus, we have no record of any findings by the trial court and cannot determine, for instance, whether the trial court credited Wallace’s explanation for why she did not earlier locate the documents she submitted in support of her new trial motion or whether the trial court’s finding of alter ego liability would have been different had it considered the new documents. Defendants therefore cannot demonstrate, based on the record provided, that the trial court abused its discretion in denying the motion for new trial. (Jameson v. Desta, supra, 5 Cal.5th at pp. 608–609.)

Even if we were to consider the merits of defendants’ argument based on the record before us, we would conclude that the trial court did not err. Although defendants contend that Wallace was entitled to a new trial based on newly discovered evidence, the declarations submitted in support of her motion demonstrated, at best, that neither Wallace nor her lawyer appreciated the relevance of certain documents to McKillop’s motion until after the trial court granted it. The failure to recognize the relevance of documents, however, does not support the granting of a new trial based on newly discovered evidence: “Section 657 . . . makes no provision for a new trial on account of mistake of law of a party or his attorney.” (Slemons v. Paterson (1939) 14 Cal.2d 612, 615; Hoffman-Haag v. Transamerica Ins. Co. (1991) 1 Cal.App.4th 10, 14.)

The remainder of defendants’ arguments on appeal are, at bottom, a challenge to the sufficiency of the evidence that supported the trial court’s finding of alter ego liability. As we discussed above, we conclude the trial court’s order adding Wallace as a judgment debtor was supported by sufficient evidence. The court did not abuse its discretion in denying the motion for new trial.

IV. DISPOSITION

The appeal of the judgment is dismissed. The postjudgment order is affirmed. McKillop is entitled to recover her costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

KIM, J.

We concur:

RUBIN, P. J.

BAKER, J.