Filed 6/12/20 Kobe House Sushi & Steak v. Nguyen CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

KOBE HOUSE SUSHI & STEAK LLC et al.,

Plaintiffs, Cross-defendants and Appellants,

v.

KHANH NGUYEN et al.,

Defendants, Cross-complainants and Respondents.

G056934

(Super. Ct. No. 30-2017-00903460)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, David R. Chaffee, Judge. Affirmed.

Mark S. Rosen for Plaintiffs, Cross-defendants and Appellants.

Wynn Law Group and Richard Wynn for Defendants, Cross-complainants and Respondents Khanh Nguyen, Kobe House USA, Inc., Chau Do and Hong Phuoc Nguyen.

Curd, Galindo & Smith and Joseph D. Curd for Defendants, Cross-complainants and Respondents Danica Capital Corp., Leslie Nguyen and Steven Nguyen.

INTRODUCTION

The complaint of appellant Kobe House Sushi and Steak, LLC (Kobe, LLC) for wrongful eviction spawned three cross-complaints, a complaint in interpleader, enough parties and interested people to cast a good-sized crowd scene, and a nine-day bench trial. Simply keeping track of everyone became one of the trial court’s major tasks.

At the heart of the dispute is a restaurant in Garden Grove, Kobe House Sushi and Steak, known throughout trial as K2. Appellants Phong Le and Cecelia Le managed K2. Kobe, LLC sued for wrongful eviction after the representatives of the restaurant’s lessor, Danica Capital Corporation, locked them out. Danica, in turn, cross-complained against Kobe, LLC, Phong Le, and Cecelia Le for a judicial declaration as to who was entitled to possession of the K2 site as well as for the breach of an agreement to buy the lease from Danica. A group of investors also cross-complained against Phong Le and Cecelia Le for misrepresentations made to get them to put money into K2. Finally, Kobe House USA, Inc. (Kobe, Inc.) cross-complained against Phong Le and Cecelia Le for fraud, alleging that they set up Kobe, LLC to secretly take over K2 from its rightful owner, Kobe, Inc.

Farmers Insurance Exchange interpleaded $114,000 in insurance funds allocated for damage to K2 after serious leaks in the roof caused the restaurant to close repeatedly. Multiple parties were claiming this money.

The trial court entered judgment against Kobe, LLC on the complaint and against Kobe, LLC, Phong Le, and Cecelia Le on all the cross-complaints. The court found that Phong Le and Cecelia Le had committed fraud against the investors and against Kobe, Inc. The court ruled in Danica’s favor as to possession of the K2 premises, finding that Phong Le and Cecelia Le were merely managers, not tenants, and Kobe, LLC had no possessory interest. The insurance money went to Kobe, Inc.

We affirm the judgment. The court had substantial evidence upon which to base its conclusions that Phong Le and Cecelia Le had committed fraud, that Danica was entitled to possession of the K2 premises, and that Kobe, Inc. was the proper recipient of the insurance funds. The court also correctly concluded that Kobe, LLC had no standing to assert any of the rights it had asserted in the action.

FACTS

Phong Le wanted to start a restaurant that included Vietnamese pho soup made with Kobe beef, which he believed would outshine pho soup made with ordinary beef. In March 2013, he and two others set up Kobe U.S. Holdings and Trust (the Trust), which appears to have been some kind of partnership or joint venture rather than an estate planning vehicle. Each partner received a 30 percent interest in the Trust, reserving 10 percent for a future investor. They began operations in June 2013 in a small restaurant in Garden Grove, which they quickly outgrew.

Kobe House USA, Inc. (Kobe, Inc.) was incorporated in 2013 to own the restaurant. At that time, the Trust owned 100 percent of the Kobe, Inc. shares. The partners executed a written trust agreement in March 2014.

In early 2014, Phong Le found more spacious premises near the first restaurant. The building was leased to Danica Capital Corporation, whose principals were Steve Nguyen and Leslie Nguyen. The building had been abandoned for several years and was in disrepair. A purchase agreement between Kobe, Inc. and Danica for the K2 lease was drafted in March 2014 but never signed. Phong Le received the keys to the building in March 2014 from Steve Nguyen and began renovations for the new restaurant.

At the beginning of 2014, a new investor turned up, Lam Tran. Lam Tran had a Japanese restaurant in North Carolina, and Phong Le talked to him about including Japanese cuisine with Vietnamese in the new restaurant, to be called Kobe House Sushi and Steak, referred to during trial as K2. Lam Tran invested in the Trust in January 2015. The partners’ shares were adjusted to 25 percent each. After several modifications, as of April 2015 the Trust was owned by Lam Tran (50 percent), Phong Le (25 percent) and another of the original partners (25 percent). In July 2015, Phong Le lost his position as “executive trustee” and became just one of the partners.

Beginning in January 2015, Phong Le persuaded several people to put money into Kobe, Inc. Khanh Nguyen invested $400,000 in return for 40 percent of the shares of Kobe, Inc. and his appointment as its CEO. Chau Do received 30 percent of the shares of Kobe, Inc., for her investment of $75,000. The Trust retained 30 percent ownership of Kobe, Inc. During this same period, Rose Suriya, aka Hong Phuoc Nguyen, (Rose), Chau Do’s mother, lent the company a total of $38,000. Khanh Nguyen, Chau Do, and Rose will be referred to collectively as the Khanh Group.

Phong Le testified that in January 2015 the parties contemplated an eventual split between the ownership of the first restaurant, K1, and the new, larger restaurant, K2. The Trust would own 75 percent of K2, Khanh Nguyen would own 15 percent, and Chau Do would own 10 percent. It does not appear from the record that any effort to formalize this split of ownership was ever undertaken.

K2 opened on March 1, 2015, and closed at the end of August 2015. Phong Le, who had been managing K2, resigned as manager in July. K2 reopened again at the end of November 2015, but closed again almost immediately. It was open between January and November 2016 and consistently lost money. K2 closed for good in December 2016.

Part of the reason for the closures was the deteriorated roof. During heavy rains of winter 2015 and winter 2016, the restaurant could not operate because of water damage to the interior of the restaurant. A claim was made on the restaurant’s insurance policy. Farmers Insurance Exchange allocated $114,538 to the December 2016 claim for business interruption and water damage to the premises. When multiple parties stepped forward to claim the funds, Farmers interpleaded them with the court.

By August 2015, the relationships among the people who had put money into Kobe, Inc. were going from bad to worse. Lam Tran filed suit against Kobe, Inc., Khanh Nguyen, Phong Le, and Rose. In an effort to resolve all the disputes, VNTDC Foundation, through its board member attorney Martin Nguyen, stepped in to negotiate a deal that would end the infighting. VNTDC is a non-profit foundation that promotes Vietnamese businesses. Phong Le and his friend Martin Nguyen were also on VNTDC’s board.

After negotiation, an agreement was entered into on September 15, 2015. On one hand, the parties were Khanh Nguyen, Chau Do, on behalf of themselves and of Kobe Inc., and Lam Tran, on his own behalf and, presumably, that of the Trust. On the other was VNTDC, represented by Martin Nguyen. Under the terms of the agreement, VNTDC purchased K2. The deal included a payment plan whereby Khanh Nguyen and Chau Do would recoup a portion of the money invested in K2. Lam Tran dismissed his lawsuit and was included in the payment plan as a creditor. As “executive trustee” of the Trust, Lam Tran relinquished any claim by the Trust to K2. The agreement allowed VNTDC to appoint managers for K2, and Martin Nguyen appointed Phong Le and Cecelia Le.

Unbeknownst to the other parties, Martin Nguyen had a secret deal with Phong Le and Cecelia Le whereby they would become K2’s owners. To that end, Kobe House Sushi and Steak, LLC (Kobe, LLC), was formed in early March 2016. Cecelia Le was the CEO, and Lan Dang (of whom more anon) was a member. Licenses and accounts formerly belonging to Kobe, Inc. were transferred to Cecelia Le.

K2 continued to perform poorly after the September 2015 agreement, and payments to creditors were not being made according to its terms. Khahn Nguyen and Chau Do threatened Martin Nguyen and VNTDC with a lawsuit. To forestall further difficulty, Martin Nguyen “relinquished” K2 to Kobe, Inc. at the end of November 2016.

Meanwhile, Danica knew nothing about the September 2015 agreement, and Steve Nguyen and Leslie Nguyen continued to negotiate with Phong Le about buying the K2 lease. As of the end of 2016, Kobe, Inc. still owed Danica $112,000 of the purchase price. Phong Le and Cecelia Le introduced Danica to Lan Dang, who was supposed to put up the money to buy the lease. These negotiations came to nothing, as Lan Dang departed for an overseas trip in early January 2017 and could not be reached.

On January 16, 2017, Steve Nguyen, representing Danica, entered the K2 premises, accompanied by Khanh Nguyen and Chau Do as principals of Kobe, Inc. Danica retook possession of the restaurant. Kobe, Inc. and Danica later agreed to cancel the purchase agreement for the lease, and the lease returned to Danica.

Kobe, LLC sued Danica and the Khanh Group in February 2017. Kobe, LLC claimed it had been wrongfully evicted from K2. The complaint evoked three cross-complaints against Kobe, LLC, Phong Le, and Cecelia Le – one each from Danica, from the Khanh Group, and from Kobe, Inc. In addition, Farmers interpleaded the insurance proceeds, since Kobe, Inc., Kobe, LLC, and Danica were claiming the money.

The Danica cross-complaint focused mainly on possession of the K2 premises and on the insurance proceeds. Danica’s causes of action for declaratory relief asked for a judicial determination that it was entitled to possession of both the K2 premises and the insurance money.

The Khanh Group’s cross-complaint was based on fraud, mainly on the alleged misrepresentations made by Phong Le and Cecelia Le to obtain money from the Khanh Group to invest in Kobe, Inc. The specific misrepresentations alleged were (1) Kobe, Inc. owned K2 free and clear; (2) Kobe, Inc., had a lease agreement for K2; and (3) Phong Le and Cecelia Le had successfully operated two other restaurants. The Khanh Group alleged they would not have lent money for K2 or purchased shares in Kobe, Inc. had they known these representations were false. The Khanh Group also alleged that Phong Le and Cecelia Le had forged Chau Do’s signature on an agreement for a $60,000 loan to Kobe, Inc.

Kobe, Inc.’s cross-complaint concentrated on the “straw man” purchase of K2. Kobe, Inc., alleged that the deal would not have happened if its principals had known that Phong Le and Cecelia Le were the true buyers. Kobe, Inc., also alleged “mail fraud,” i.e., that Phong Le and Cecelia Le were stealing Kobe, Inc.’s mail by pretending that Kobe, LLC was a successor to Kobe, Inc.

The bench trial occupied nine days between June 12 and 28, 2018. On June 20, the trial court granted the Khanh Group’s motion for judgment pursuant to Code of Civil Procedure section 631.8 on Kobe, LLC’s complaint. The court issued a statement of decision from the bench on June 28, directing that a copy of the transcript be incorporated into the final written statement of decision. The court made the following findings and conclusions that are relevant to this appeal.

Kobe, Inc., a successor in some undefined way to the Trust, was incorporated in June 2013. In March 2014, Kobe, Inc. and Danica entered into an oral purchase agreement for the restaurant K2. As of the time of Danica’s reentry onto the property, nearly three years later, $112,000 of the purchase price remained unpaid.

Various people invested in the K2 restaurant project at various times over the three years between 2014 and 2017. The restaurant was open only intermittently; the recurring water damage from the failed roof was largely responsible for the K2’s poor performance. Because K2 was operating at a loss, the investors became restive. Lawsuits were filed and threatened. Finally, Martin Nguyen, through VNTDC, stepped in to mediate. To resolve the disputes, VNTDC purchased K2 from Kobe, Inc., in September 2015. The purchase agreement gave VNTDC the right to name the managers of K2, and Martin Nguyen named Phong Le and Cecelia Le as managers.

Unbeknownst to the other parties to the September 2015 purchase agreement, Martin Nguyen and VNTDC were acting as a straw man for Phong Le and Cecelia Le, not as managers but as buyers. Phong Le and Cecelia intended to own K2 through their as-yet-nonexistent limited liability company, Kobe, LLC which was formed in March 2016.

The restaurant continued to suffer rain damage, and the investors threatened Martin Nguyen with a lawsuit. In late November 2016, Martin Nguyen “relinquished” K2 to Kobe, Inc.

Danica, however, was unaware that K2 had been returned to Kobe, Inc. and continued to negotiate with Phong Le and Cecelia Le. A substantial portion of the purchase price was still owing in late 2016. On January 16, 2017, principals of Danica and Kobe, Inc. entered K2 and took possession of the property. Kobe, Inc. surrendered the property to Danica, which remodeled it and opened it as a different restaurant.

As to the issues raised in the various pleadings, the court found that Kobe, LLC had no standing to assert any claim for wrongful eviction because it had no legal interest in the K2 premises. Kobe, LLC did not exist in September 2015, when the purchase agreement was entered into and VNTDC became the owner of K2. Kobe, LLC likewise had no agreement with Danica. In November 2016, VNTDC transferred ownership of K2 back to Kobe, Inc. Danica and Kobe, Inc. reentered the property in January 2017, as they had the right to do, being sublessor and sublessee. Phong Le and Cecelia Le were properly appointed as K2’s managers, but this appointment did not give them a possessory interest in the premises.

The court also found that Phong Le and Cecelia Le were liable for fraud on several grounds. First, Phong Le and Cecelia Le withheld information from the investors that they, not VNTDC, were the actual buyers of K2. Next, Phong Le and Cecelia Le tried to “slough off” the over $1 million in debts by claiming that the new entity, Kobe, LLC, owned K2. In fact, the September 2015 agreement was between VNTDC and the K2 investors and their entities. Kobe, LLC, Phong Le, and Cecelia Le were not parties; thus they had no contractual obligation to adhere to the payment schedule set up in the September 2015 agreement. Finally, the court found that they never informed Kobe, Inc. or the investors of the transfer of their claims to payment from VNTDC to Kobe, LLC.

The court ruled the money interpleaded by Farmers belonged to Kobe, Inc. as the named insured on the policy. Danica had not been named as a coinsured in any document and was therefore not entitled to the funds.

The court also found that much of Phong Le’s and Cecelia Le’s testimony was not credible. It made the same finding with respect to Steve Nguyen, one of Danica’s principals. The court found the other witnesses to be very credible.

The trial court awarded the following damages: $298,750 to Khanh Nguyen; $131,250 to Chau Do; and $38,000 to Rose. The court awarded no damages to Kobe, Inc. The court also found that Phong Le and Cecelia Le acted with malice, oppression, and fraud.

DISCUSSION

Kobe, LLC has identified one issue on appeal related to its complaint. It claims to be entitled to the K2 premises. As to the two cross-complaints, Phong Le and Cecelia Le object that insufficient evidence supports the trial court’s findings of fraud against them. With respect to the complaint in interpleader, Kobe, LLC maintains that the insurance policy proceeds belong to it, not to Kobe, Inc. Appellants also complain that awarding the Khanh Group fraud damages and awarding Kobe, Inc. the insurance proceeds constitutes double recovery. Appellants further maintain that Kobe, Inc. is a suspended corporation that could not participate in the litigation. Finally, appellants contend that the statement of decision is so deficient as to require reversal.

Two of the many challenges of this case, both in the trial court and in this court, are puzzling out who owned what and, even more importantly, what the effect of the September 2015 purchase agreement was. As the trial court so aptly put it, “There is much to criticize in the numerous undocumented or poorly documented transactions that make up the history of K2.” Failing to document transactions and documenting them poorly have consequences, as will be seen.

There are two candidates for ownership of K2 before the September 2015 agreement. The first is Kobe, Inc. The Trust incorporated Kobe, Inc. in March 2013. At that time, the Trust owned 100 percent of the shares of Kobe, Inc. It seems logical to assume that Kobe, Inc. owned K2, but the record does not refer to any document directly affirming this ownership. As of September 2015, the shares of Kobe, Inc. were distributed to Khanh Nguyen (40 percent), Chau Do (30 percent), and the Trust (30 percent).

The second candidate is the Trust, at least as to a majority interest. According to minutes of a meeting of Kobe, Inc.’s board dated January 30, 2015, the Trust owned 75 percent of K2, Khanh Nguyen owned 15 percent, and Chau Do owned 10 percent. These percentages do not appear to have changed as of the time of trial.

If the Trust, Khanh Nguyen, and Chau Do owned K2, then it is not clear what Kobe, Inc. owned as of the September 2015 agreement and what, therefore, VNTDC acquired from it pursuant to the agreement. If Kobe, Inc. owned K2, then the Trust was a mere 30 percent shareholder in Kobe, Inc. and did not directly own the restaurant. Shareholders do not own corporate property. (Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 229.) Moreover, unless VNTDC owned Kobe, Inc. as of September 2015, the licenses and accounts in the corporation’s name could not be transferred to Kobe, LLC.

Martin Nguyen thought VNTDC was buying Kobe, Inc. in September 2015, even though the agreement stated VNTDC was buying K2, and Kobe, Inc. was among the parties releasing all interest in K2. He also testified to a meeting the day after the agreement was executed among Phong Le, Cecelia Le, and himself in which they all agreed that Lam Tran, Khanh Nguyen, and Chau Do no longer had any interest in either K2 or Kobe, Inc. Nothing indicates that Lam Tran, Khanh Nguyen, or Chao Do knew about this meeting.

What is certain is that VNTDC never transferred whatever it owned to Kobe, LLC or to Phong Le and Cecelia Le. Thus Phong Le and Cecelia Le could not transfer whatever assets VNTDC acquired in September 2015 to Kobe, LLC, even if what VNTDC acquired was Kobe, Inc. itself.

Whatever effect the September 2015 agreement had, it was canceled out in November 2016, when Martin Nguyen, acting for VNTDC – and possibly Phong Le and Cecelia Le as well – returned the restaurant to whatever entity or group of entities had turned it over in 2015. Where the turnover left the parties with their various interests in the Trust and in Kobe, Inc., is a morass into which we need not wade.

I. Fraud – Khanh Group Cross-Complaint

Our review of this issue is complicated by the failure to fulfill the requirements of Code of Civil Procedure sections 632 and 634 pertaining to statements of decision. While we discuss this more fully below, a few observations should be made at the outset to make what follows easier to understand.

The Khanh Group alleged specific misrepresentations by Phong Le and Cecelia Le that induced them to put money into Kobe, Inc. These were: (1) Kobe, Inc., owned K2 free and clear; (2) Kobe, Inc. had a lease for K2; and (3) Phong Le and Cecelia Le had successfully operated two other restaurants. The members of the Khanh Group testified at trial regarding at least two of these allegations.

But the statement of decision gives no explanation regarding the misrepresentations of the Khanh Group’s cross-complaint, even though appellants asked for such findings. The statement of decision merely states, “[A]lso Khanh Nguyen, et al. vs. Phong Le et al., the court finds in favor of cross-complainants and against cross-defendants. By clear and convincing evidence, the court finds that Phong Le and Cecelia Le acted with malice, oppression, and fraud in their investment activities and scheme.” The court then specified an amount of damages for each member of the Khanh Group.

The court appears to have assumed that the Khanh Group, like Kobe, Inc., based their fraud claim on the straw man transaction. They did not. They alleged they invested their money in Kobe, Inc. in reliance on specific representations regarding K2 and the experience of Phong Le and Cecelia Le in operating restaurants.

The next problem is that although Phong Le and Cecelia Le filed objections to the court’s proposed statement of decision, they did not object to the failure to make factual findings about the misrepresentations alleged in the Khanh Group’s cross-complaint. After citing Hall v. Department of Adoptions (1975) 47 Cal.App.3d 898 to the effect that it was error to fail to make findings on material issues with respect to fraud in a statement of decision, Phong Le and Cecelia Le objected to the court’s findings that they acted with malice, oppression, and fraud and that they engaged in self-dealing. They did not object to the lack of findings about the misrepresentations themselves.

The failure to object to these deficiencies in the statement of decision means that the usual rule about the presumption of correctness applies. As our Supreme Court explained in In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, “A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness. [Citations.] [¶] [Code of Civil Procedure] [s]ections 632 and 634 (both as amended in 1981) set forth the means by which to avoid application of these inferences in favor of the judgment. When the court announces its tentative decision, a party may, under section 632, request the court to issue a statement of decision explaining the basis of its determination, and shall specify the issues on which the party is requesting the statement; following such a request, the party may make proposals relating to the contents of the statement.

Thereafter, under section 634, the party must state any objection to the statement in order to avoid an implied finding on appeal in favor of the prevailing party. The section declares that if omissions or ambiguities in the statement are timely brought to the trial court’s attention, the appellate court will not imply findings in favor of the prevailing party. The clear implication of this provision, of course, is that if a party does not bring such deficiencies to the trial court’s attention, that party waives the right to claim on appeal that the statement was deficient in these regards, and hence the appellate court will imply findings to support the judgment. Furthermore, section 634 clearly refers to a party’s need to point out deficiencies in the trial court’s statement of decision as a condition of avoiding such implied findings, rather than merely to request such a statement initially as provided in section 632.” (Id. at pp. 1133-1134; see Denham v. Superior Court (1970) 2 Cal.3d 557, 564 [“‘A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown. This is not only a general principle of appellate practice but an ingredient of the constitutional doctrine of reversible error.’ [Citation.]”].)

In this case, we must imply findings to support the trial court’s judgment in favor of the Khanh Group on the misrepresentations alleged in their cross-complaint. Phong Le and Cecelia Le did not raise the lack of findings as to these misrepresentations when they objected to the statement of decision or when they moved for a new trial.

All three members of the Khanh Group testified regarding the concealments that induced them put their money into K2. All three of them testified that they knew nothing about the debt to Danica or about the absence of a lease in Kobe, Inc.’s name until November 2016, long after they invested their money. This testimony supports the trial court’s conclusion that Phong Le and Cecelia Le had committed fraud. We imply findings that the concealments were deliberate, that the Khanh Group would not have parted with their money had they known the truth, and that they were damaged thereby. (See Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)

II. The Insurance Funds

The trial court found that the named insured on the Farmers policy was Kobe, Inc. and awarded the interpleaded insurance money accordingly. Kobe, LLC argues that it should have received the insurance money because Phong Le and Cecelia Le paid the premiums between September 2015 and December 2016. But the policy was never assigned to Kobe, LLC, which, in any event, did not exist until March 2016, and Kobe, LLC was never named as an additional insured. Kobe, Inc. was the named insured, and the named insured entitled to the policy proceeds. (See InfiNet Marketing Services, Inc. v. American Motorist Ins. Co. (2007) 150 Cal.App.4th 168, 177.)

Nor does awarding the insurance money to Kobe, Inc. constitute a double recovery. The insurance money was compensation paid to the corporation under a contract of insurance for the damage the leaking roof did to the restaurant. The awards to the Khanh Group represented the court’s determination of the loss each member individually incurred by investing his or her money in K2 as a result of fraud. The two awards have nothing to do with each other.

III. Kobe, Inc.’s Status

Appellants argue that Kobe, Inc. could not participate in the litigation because it was a suspended corporation. As evidence at trial, they proffered a printout of a page from the California Secretary of State website. The court refused to take judicial notice of the printout during trial as evidence because it was not a certified record. No admissible evidence was presented during trial regarding Kobe, Inc.’s corporate status.

Since the claim of suspension against Kobe, Inc. is in the nature of a plea in abatement (see Cadle Co. v. World Wide Hospitality Furniture, Inc. (2006) 144 Cal.App.4th 504, 512), it was appellants’ burden to present admissible evidence to support the claim. (See Paladini v. Municipal Markets Co. (1921) 185 Cal. 672, 674.) They failed to do so during the trial.

IV. Fraud and Malice – Kobe, Inc., Cross-Complaint

The cross-complaint of Kobe, Inc. concentrated on the straw man transaction, alleging that Phong Le and Cecelia Le secretly plotted to take over K2 – Kobe, Inc.’s main asset – by pretending VNTDC was buying the restaurant. The trial court found that Phong Le and Cecelia Le acted fraudulently by concealing their intentions from the other parties to the September 2015 agreement. Phong Le and Cecelia Le argue that insufficient evidence supported the finding of fraud and also the related finding they acted with “malice, oppression, and fraud in their investment activities and scheme.”

“[U]nder the substantial evidence test, the court views the evidence in a light most favorable to the respondent. In other words, factual matters will be viewed most favorably to the prevailing party. [Citation.] . . . An appellate court’s ‘. . . power begins and ends with a determination as to whether there is any substantial evidence to support [the factual findings]; [it has] no power to judge of the effect or value of the evidence, to weigh the evidence, to consider the credibility of the witnesses, or to resolve conflicts in the evidence or in the reasonable inferences that may be drawn therefrom.’ [Citation.]” (Orange County Employees Assn. v. County of Orange (1988) 205 Cal.App.3d 1289, 1293.)

The court had evidence upon which it could base the conclusion that the straw man transaction was fraudulent. For example, Chau Do testified that she was not informed that Phong Le and Cecelia Le would own K2 and she would not have signed the September 2015 agreement if she’d had this information. Khanh Nguyen testified that he thought he was selling K2 to VNTDC. The evidence showed that the people involved in the transaction knew that Phong Le and Cecelia Le would be running K2, but not that they would own it.

The court did not believe Phong Le and Ceceila Le, whom it explicitly found “not credible,” when they protested that they were doing their best in the face of a lot of bad luck and had no intention of stiffing anyone. Instead, the court found they had deliberately set up a scheme with Martin Nguyen to slip out of the massive debt that had accumulated over the years during which they operated K2. Kobe, LLC, Phong Le, and Cecelia Le were not parties to the September 2015 agreement. Phong Le maintained that everyone involved in the September 2015 agreement knew he and Cecelia Le were really buying K2, but his testimony on the subject of how and when they came by this knowledge can most charitably be described as difficult to disentangle. Phong Le knew and Cecelia Le must have known that the other side would not have entered into the agreement if the nature of their intended participation had been acknowledged.

But Martin Nguyen got cold feet before the scheme could come to fruition. Faced with the threat of a lawsuit for breach of the September 2015 agreement, he returned K2 to the opposition. If he had not done so and Khanh Nguyen, Chau Do, and Lam Tran had sued for breach of the agreement when the payments stopped, Phong Le and Cecelia Le could have looked bewildered and protested that they could not breach an agreement to which they were not parties. Kobe, LLC could have made the same protest. Meanwhile, the restaurant and the licenses formerly used to operate K2 in Kobe, Inc.’s name now appeared to belong to Kobe, LLC or to Cecelia Le.

The trial court’s finding of malice, oppression, and fraud seems to relate only to the straw man transaction of September 2015, which pertained only to Kobe, Inc.’s cross-complaint. Kobe, Inc., was not awarded any damages for fraud, and the court awarded no punitive damages.

Code of Civil Procedure section 475 provides in pertinent part, “No judgment, decision, or decree shall be reversed or affected by reason of any error, ruling, instruction, or defect, unless it shall appear from the record that such error, ruling, instruction, or defect was prejudicial, and also that by reason of such error, ruling, instruction, or defect, the said party complaining or appealing sustained and suffered substantial injury, and that a different result would have been probable if such error, ruling, instruction, or defect had not occurred or existed. There shall be no presumption that error is prejudicial, or that injury was done if error is shown.” (See Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 574 [no reversal “unless there is a reasonable probability that in the absence of the error, a result more favorable to the appealing party would have been reached.”].) Phong Le and Cecelia Le have not addressed how the finding prejudiced them, that is, how they suffered “substantial injury” from having no compensatory damages and no punitive damages assessed against them for fraud. We therefore find no basis for reversal.

V. Statement of Decision

We now come to the completion of the discussion of the statement of decision begun earlier in this opinion. “In rendering a statement of decision under Code of Civil Procedure section 632, a trial court is required only to state ultimate rather than evidentiary facts; only when it fails to make findings on a material issue which would fairly disclose the trial court’s determination would reversible error result. [Citations.] Even then, if the judgment is otherwise supported, the omission to make such findings is harmless error unless the evidence is sufficient to sustain a finding in the complaining party’s favor which would have the effect of countervailing or destroying other findings. [Citation.] A failure to find on an immaterial issue is not error. [Citations.] The trial court need not discuss each question listed in a party’s request; all that is required is an explanation of the factual and legal basis for the court’s decision regarding the principal controverted issues at trial as are listed in the request. [Citation.]” (Hellman v. La Cumbre Golf & Country Club (1992) 6 Cal.App.4th 1224, 1230.)

Appellants submitted a request for a statement of decision containing 32 items. Very few of them involved “ultimate facts.” Many were repetitive. Some concerned claims that were never alleged and were not tried.

Appellants’ subsequent objections to the proposed statement of decision did not concentrate on ambiguities or failures to resolve controverted issues. Instead they mainly reargued the evidence or argued issues that played no part in the court’s decision. For example, there is a lengthy discussion of “promoter liability,” when this was not an issue determined at trial.

The opportunity to object to a proposed statement of decision is not a chance to reargue the evidence or to tell the trial court where it went wrong. (Heaps v. Heaps (2004) 124 Cal.App.4th 286, 292-293.) The purpose of the objections is to alert the trial court to a discrepancy between what the court ruled or what was at issue during trial and what the statement of decision says or does not say. (See Code Civ. Proc., § 634.)

Except as noted above with respect to the Khanh Group’s cross-complaint for fraud, the statement of decision dealt with all the principal controverted issues in the pleadings. The court determined that Kobe, LLC had no standing to assert any cause of action against any of the parties. It was, in effect, a separate creation of Phong Le and Cecelia Le, with no relationship to either VNTDC or Kobe, Inc. That finding takes care of all the issues regarding right to possession of the K2 premises and of the insurance money. The court also dealt with the fraud issues raised in Kobe, Inc.’s cross-complaint.

Phong Le’s and Cecelia Le’s main argument is that they made all the payments for K2’s expenses after September 2015, so they should have the restaurant. This argument ignores the legal realities of September 2015 and November 2016, realities engineered by their use of a straw man to try to obtain K2. After September 2015, VNTDC owned K2, and Phong Le and Cecelia Le managed it for the foundation. Payments for rent, utilities, etc., as well as the payments due under the September 2015 agreement, were VNTDC’s responsibility, to be made in the first instance out of the proceeds of the restaurant. If Phong Le and Cecelia Le put their own separate money into operating K2 after September 2015, they can take this up with VNTDC. Because VNTDC owned K2, and was being threatened with a lawsuit for breach of the September 2015 agreement, it was within its rights to give the restaurant back in November 2016. Phong Le and Cecelia Le as individuals were managers, not owners, in November 2016, and had no legal grounds to prevent VNTDC from doing what it wanted with its property. Likewise, neither they nor Kobe, LLC, held an interest in the K2 premises, and they were not entitled to the protections afforded as tenants. Danica’s deal, such as it was, was with Kobe, Inc., not Kobe, LLC, or VNTDC. As of January 2017, when Danica reentered the premises, VNTDC had already repudiated the September 2015 agreement and its interest in K2.

Phong Le and Cecelia Le regarded compliance with legal and corporate formalities as mere “paperwork,” which they could complete when they cared to or simply ignore. They were mistaken. Corporations and limited liability companies are entities separate from their shareholders and members and must be treated as such. Failing to do so leads to muddles such as the one presented in this appeal.

DISPOSITION

The judgment is affirmed. Respondents are to recover their costs on appeal.

BEDSWORTH, ACTING P. J.

WE CONCUR:

MOORE, J.

GOETHALS, J.