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Judicial estoppel and related claims

Additional judgment debtors assert that in the underlying litigation, “[b]ased on [defendants’] argument, the trial court expressly found that Gaggero was separate from the estate he had created years earlier,” so judicial estoppel prevents defendants from making an alter ego claim. The quoted statement distorts the facts, which provide no basis for a finding of judicial estoppel.

In fact, there were neither arguments nor trial court findings that plaintiff was “financially separate” from PCM or the other additional judgment debtors. The arguments and findings were that plaintiff so testified, and that he failed to produce any evidence that he personally paid any attorney fees to anyone who represented him, or that he had any obligation to repay the sums that PCM or others paid for him. The trial court said, “As far as the evidence goes, the entities paid whatever sums were expended entirely gratuitously.” In short, the trial court concluded that, because plaintiff took the position throughout the litigation that “he ha[d] no control over any funds, in an attempt to put his assets outside the reach of creditors,” the doctrine of judicial estoppel “would apply to prevent any change in position,” so it “is appropriate to take Mr. Gaggero at his word on this point and let him now accept the consequences. Since he paid nothing, he can recover nothing.” This was obviously not a finding that plaintiff and additional judgment debtors were actually separate financially.



In sum, there was no argument, and no finding, precluding an alter ego claim. For the same reasons, the argument by additional judgment debtors that the (nonexistent) finding of financial separation is “law of the case” is equally baseless. Likewise, their contention that the amended judgment adding them as debtors “directly contradicts the original judgment” and therefore cannot stand – which is based on the same nonexistent trial court finding of financial separation – necessarily has no merit.

  1. Probate court jurisdiction

Additional judgment debtors claim that the trial court had no jurisdiction to amend the judgment to add them as judgment debtors because the probate court “has exclusive jurisdiction of proceedings concerning the internal affairs of trusts.” (Prob. Code, § 17000, subd. (a).) The trial court did not consider this claim because additional judgment debtors failed to assert it in their opposition papers. (See pt. 3.f., ante.) It has no merit in any event. This is not a proceeding concerning the internal affairs of the trusts, and none of the authorities that additional judgment debtors cite suggests otherwise. The probate court does not have exclusive jurisdiction of actions and proceedings “by or against creditors or debtors of trusts” or actions and proceedings “involving trustees and third persons.” (§ 17000, subd. (b)(2)&(3); cf. Greenspan, supra, 191 Cal.App.4th at p. 522 [civil action where the plaintiff “properly sought to add . . . the trustee of the . . . Trust, as a judgment debtor”].)

  1. Waiver

Additional judgment debtors claim that a judgment may not be amended to include alter ego debtors if the judgment creditor was aware of the alter ego relationship before the judgment was entered. The only case authority they cite for this proposition is Jines v. Abarbanel (1978) 77 Cal.App.3d 702 (Jines), which does not support it. In Jines, the trial court added a medical corporation to a malpractice judgment against the physician after the judgment, and the Court of Appeal reversed. The medical corporation was defendant’s employer. There was “no suggestion of any . . . abuse” of the corporate privilege, and no need to disregard the separateness of the employer and employee in order to do justice, because a corporate employer is liable for the torts of its employee in the course of employment, and could have been sued on that basis. (Id. at pp. 715-716.) In short, alter ego doctrine simply did not apply, and so there was no legal basis for a postjudgment order adding the corporation as a judgment debtor. (Id. at p. 716.) That is not this case.
Additional judgment debtors then say defendants did not act with due diligence in adding them as judgment debtors, relying on Alexander v. Abbey of Chimes (1980) 104 Cal.App.3d 39 (Alexander), where the court found ample evidence for disregarding the corporate entity, but found the motion to amend the judgment had not been timely made. (Id. at p. 47.) In that case, the plaintiffs waited nearly seven years after the judgment was final to seek to add the alter ego to the judgment, even though they knew or should have known of the alter ego status either at the time of the original proceedings or shortly thereafter. (Id. at p. 48.) Further, there was “no suggestion that [the plaintiffs had] ever made any effort to satisfy the judgment” before they filed the motion to amend the judgment. (Ibid.)

Here, the original judgment was entered on February 5, 2008, and plaintiff’s appeal resulted in an automatic stay of enforcement until May 2010, when the judgment was affirmed on appeal. The amended judgment including costs on appeal was not entered until December 2010. Defendants moved to add judgment debtors on April 10, 2012, after conducting various forms of postjudgment discovery during 2011 and 2012. In short, this is not a case like Alexander, where the plaintiff did nothing at all for seven years after the judgment was final.

The general rule is that “ ‘ “a court may amend its judgment at any time so that the judgment will properly designate the real defendants.” ’ ” (Greenspan, supra, 191 Cal.App.4th at p. 508, italics added.) The procedure is an equitable one, and the decision lies in the court’s sound discretion. We see no reason on this record to find any absence of diligence by defendants in bringing their motion.


  1. The “estate planning” argument

Finally, plaintiff contends that affirming the trial court’s alter ego finding will “threaten the integrity of estate planning in California” and that “no estate plan will ever be safe in a California court.” No such consequences flow from this opinion. We merely recognize the previously established principle that alter ego doctrine may be applied to a trustee, and if the trustee is the alter ego of an individual, then the individual “may be considered the owner of the [trust’s] assets for purposes of satisfying the judgment.” (Greenspan, supra, 191 Cal.App.4th at p. 522.) The Mesler court’s observation in the context of corporations likewise apply here: “ ‘In the instant case there may well have been various business reasons sufficient to justify and support the formation or continuation of the corporation on the part of defendant. For such purposes the [corporation] still stands,’ ” but “ ‘[t]he law of this state is that the separate corporate entity will not be honored where to do so would be to defeat the rights and equities of third persons.’  [Citations.]” (Mesler, supra, 39 Cal.3d at pp. 300-301.) The same is true here.

DISPOSITION

The order is affirmed. Defendants shall recover their costs on appeal.

GRIMES, J.

We concur:

RUBIN, Acting P. J.

FLIER, J.



1 Mr. Praske is also the president, secretary and director of Pacific Coast Management, Inc. (PCM), the corporation that manages the assets, and the general partner of two of the four limited partnerships. According to plaintiff, Mr. Praske “was the trustee or managing member or majority membership owner or limited liability – or limited partnership with the 100 percent ownership of all of those various entities, i.e., limited liability companies, limited partnerships, or trusts that formed general partnerships.” Mr. Praske “had control over the ownership entities of each of the entities that they were a part of,” and “had control over all of the entities in the estate plan that he created.”

2 Plaintiff appealed from the order, and a year later, on October 3, 2012, this court dismissed the appeal (case No. B236834) on the court’s own motion as having been taken from a nonappealable order.


3 Probate Code section 18200 states: “If the settlor retains the power to revoke the trust in whole or in part, the trust property is subject to the claims of creditors of the settlor to the extent of the power of revocation during the lifetime of the settlor.”

4 Probate Code section 18200 states that “[i]f the settlor retains the power to revoke the trust in whole or in part, the trust property is subject to the claims of creditors of the settlor to the extent of the power of revocation during the lifetime of the settlor.” And section 19001, subdivision (a) states that, upon his or her death, “the property of the deceased settlor that was subject to the power of revocation at the time of the settlor’s death is subject to the claims of creditors of the deceased settlor’s estate and to the expenses of administration of the estate to the extent that the deceased settlor’s estate is inadequate to satisfy those claims and expenses.”


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