Case Number: BC641882 Hearing Date: March 05, 2018 Dept: 53

tsann kuen (zhangzhou) enterprise co., ltd. vs. mtn products, inc. , et al., BC641882, MARCH 5, 2018

[Tentative] Order RE: DEFENDANTS WATER SOLUTIONS, MTN PRODUCTS, INC. AND GREGORY SPEAR’S MOTION FOR SUMMARY JUDGMENT, OR SUMMARY ADJUDICATION; AND/OR JUDGMENT ON THE PLEADINGS

Defendants WATER SOLUTIONS, MTN PRODUCTS, INC. and GREGORY SPEAR’s Motion for Summary Adjudication is GRANTED.

Background

Plaintiff Tsann Kuen (Zhangzhou) Enterprise Co., Ltd (“Plaintiff”) filed this action on November 23, 2016, against Defendants MTN Products, Inc. (“MTN”), Water Solutions (Hong Kong) Ltd. (“Water Solutions”), DS Services of America, Inc., and Gregory Spear (“Spear”) (collectively, “Defendants”). The claims arise from alleged breaches of a series of agreements between the parties for the development, manufacture, and sale of coffee brewing machines. Plaintiff alleges Defendants accepted the coffee brewing machines for further distribution, but failed to pay for shipments of the machines. The operative FAC asserts causes of action for: (1) breach of contract, (2) account stated, (3) breach of implied covenant of good faith and fair dealing, (4) violation of business and professions code § 17200, (5) alter ego, and (6) conversion.

Defendants’ motion for summary judgment, or in the alternative, summary adjudication came on for hearing on January 29, 2018, and was mooted by the Court’s rulings on judgment on the pleadings, except as to the issue of alter ego liability. The Court now considers summary adjudication of the fifth cause of action for alter ego liability.

EVIDENCE

The Court sustains Defendants’ objection to the entire declaration of Rain Lim for failure to comply with Code of Civil Procedure section 2015.5. The Court notes that Defendants also object to the entire declaration on the basis that there is no foundation that Mr. Lim understands his declaration because he used a Mandarin interpreter during his deposition. However, Defendants’ Exhibit F to the Declaration of Michael J. Perry in reply, which purports to support this fact, is blank. Therefore, the Court does not have sufficient evidence to rule on the objection on that ground.

DISCUSSION

A. Legal Standard

“[A] motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (CCP §437c (c).) A defendant moving for summary judgment must show either: “that one or more elements of the cause of action … cannot be established”; or “that there is a complete defense to that cause of action.” (CCP § 437c(p)(2).) To prevail, the defendant need not “conclusively negate” a required element of the plaintiff’s claim; “all that is required is a showing that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.” (Wall St. Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1176 (internal quotations omitted).)

The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) If the moving party carries this burden, the burden shifts to the opposing party to make a prima facie showing that a triable issue of material fact exists. (Id.)

B. Alter Ego

To invoke the alter ego doctrine, the plaintiff must plead unity of interest and ownership and that an inequity will result if the corporate entity is treated as the sole actor. (See Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.) Factors to consider in applying the doctrine include the commingling of funds and other assets, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, inadequate capitalization, and disregard of corporate formalities. (Sonora Diamond Corp. v Superior Court (2000) 83 Cal.App.4th 523, 538-39.) Importantly, “[a] claim based upon an alter ego theory is not itself a claim for substantive relief. (Leek v. Cooper (2011) 194 Cal.App.4th 399, 418-419 [citation omitted].) It is merely a “procedural device by which courts will disregard the corporate entity in order to hold the alter ego individual liable on the obligations of the corporation. (Ibid.) Nevertheless, “it is well-settled that the alter ego doctrine is ‘essentially an equitable one and for that reason is particularly within the province of the trial court.’” (Dow Jones Co. v. Avenel (1984) 151 Cal.App.3d 144, 147 [quoting Stark v. Coker (1942) 20 Cal.2d 839, 846].)

The Court finds that there is no triable issue of fact regarding the alter ego issue. Defendants submit evidence, in the form of a declaration from Spear, that MTN and Water Solutions have different employees, that they have separate places of business, that they have separate business functions, that neither MTN nor Water Solutions’ assets are diverted to any use but their own corporate or limited company use, that each company has assets that were not transferred between each other or to Spear, and that Spear does not completely dominate or control either company. [Defendants’ Separate Statement, Nos. 41-52] The Court finds that this is sufficient evidence to make a prima facie showing that Plaintiff cannot establish alter ego liability between or among the Defendants. Moreover, because the Court has sustained the objection to the Declaration of Rain Lim, there is no admissible evidence proffered by Plaintiff to raise a triable issue of fact. Even if the Court accepted the Declaration of Rain Lim, the Court would still find that there was no triable issue of fact as to alter ego. The only facts presented by Plaintiff that demonstrate alter ego are that “Spear represented both MTN and Water Solutions,” that Spear “presented the two companies as a parent-subsidiary relationship that was solely owned and controlled by Spear,” that Plaintiff “had the understanding that MTN and Water Solutions were the same company,” that “Water Solutions and MTN would interchangeably order the Products,” and that “Purchase Orders have been issued to both business entities.” [Plaintiff’s Separate Statement, Nos. 41-52] Additionally, there is no evidence that there would be an inequitable result if the acts in question are treated as those of the corporation or company alone.

CONCLUSION

Based on the foregoing, the Court GRANTS Defendants’ motion for summary adjudication as to the issue of alter ego liability.

Defendants are ordered to provide notice of this ruling.

DATED: March 5, 2018

_____________________________

Howard L. Halm

Judge of the Superior Court