Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Appeal from a judgment of the Superior Court of Orange County, Super. Ct. No. 05CC06654, David T. McEachen, Judge.
Robert Petrokofsky for Plaintiff and Appellant.
Denis A. O’Mahoney for Defendant and Respondent.
OPINION
MOORE, J.
The court entered judgment in favor of plaintiff and appellant Robert Habib (Habib) and against defendant Car Guys, Inc. (Car Guys), an unregistered automotive repair dealer, on theories of conversion, breach of contract, and fraud. Habib claims the court erred in failing to impose personal liability upon defendant and respondent James Suehr (Suehr), the owner, and an officer and director of Car Guys, especially considering evidence that Car Guys is no longer in operation and has no remaining assets, if indeed it ever had any. Habib appeals from the judgment to the extent it does not impose personal liability on Suehr and from the order denying Habib’s motion to vacate, again to the extent it relates to the personal liability of Suehr.
We agree with Habib that the court erred in failing to hold Suehr, the owner, chief executive officer, chief financial officer, and director of Car Guys, liable as officer and director, for the tortious act of Car Guys that Suehr himself directed, i.e., conversion. Accordingly, we reverse and remand with directions to modify the judgment to hold Suehr liable for conversion to the same extent as Car Guys. Also, we deny Habib’s request for judicial notice, for reasons we shall explain.
I
FACTS
In May 2005, Habib filed a complaint against Car Guys and Suehr for conversion, breach of contract, fraud, and certain other causes of action, in connection with work agreed to be performed on his 1969 Camaro. Before trial, the parties filed a joint list of stipulated facts, in which they agreed: “1. [Habib] is the owner of a 1969 Chevrolet Camaro. [¶] 2. Suehr was the owner, Chief Executive Officer, Chief Financial Officer, and director of Car Guys. [¶] 3. In 2004, Car Guys conducted business in the City of Orange, selling, restoring and repairing, used cars. [¶] 4. In April of 2004, [Habib] brought the Camaro to Defendants for repair and restoration work including, without limitation, repainting the exterior, refurbishing the passenger area and other work on other items and areas of the car. [¶] 5. On May 1, 2004, Suehr prepared and provided [Habib] with written Auto Repair Orders of Car Guys for repair and restoration work on the Camaro. [¶] 6. Defendants were paid the total sum of $32,500 for parts and labor for work done on the Camaro. [Habib] also provided various car parts to Defendants to install in the Camaro. [¶] 7. Defendants claim that they are owed additional money by [Habib] for modifications they claim were requested by [Habib]. [¶] 8. Defendants claim that they are entitled to a lien on the Camaro for payment and have thus refused to return the car to [Habib].”
Car Guys and Suehr filed cross-complaints against Habib. However, Habib filed demurrers to those cross-complaints and the demurrers were sustained. The cross-complaints were dismissed.
After a bench trial lasting less than eight hours, the court made its statement of decision on the record. It found that Car Guys had contracted to perform work for which it was not registered with the Bureau of Automotive Repair, with the result that Car Guys did not have a right to assert a lien against the Camaro. The court further found that Car Guys wrongfully failed to return the Camaro to Habib when requested to do so, such that Car Guys committed an act of conversion. In addition, the court found that Car Guys breached its contract with Habib. Furthermore, the court found that Car Guys committed fraud, by failing to disclose to Habib the lack of proper registration and by misrepresenting the amount of time it would take to perform the work.
In addition to the foregoing, the court found that Habib had not proven that Suehr was the alter ego of Car Guys. The court also found that Habib had not proven that Suehr was otherwise individually liable.
Habib filed a request to amend his complaint to conform to proof. He sought to add causes of action against both Car Guys and Suehr for slander of title and quiet title with respect to the Camaro. Although Habib has provided no copy of any ruling on his request, it would appear that the request was denied.
On October 16, 2006, judgment was entered in favor of Habib and against Car Guys in the amount of $44,321.09, on the causes of action for conversion, breach of contract and fraud. The amount of the award consisted of $32,500 for money Habib paid for the car restoration, $6,500 for parts Habib furnished for the car restoration, and interest in the amount of $5,321.09. The judgment stated that Habib recovered nothing for the amount he paid to purchase the Camaro. The judgment also specified that Habib took nothing against Suehr on the complaint. However, the judgment confirmed the prior awards of monetary sanctions, in the total amount of $6,600.32 against Suehr and in the total amount of $5,342.28 against Car Guys, for discovery abuses. It also confirmed an additional award of monetary sanctions against Suehr in the amount of $1,500. Finally, the judgment provided that no return of the Camaro or the car parts would be required.
Habib filed a motion to vacate the judgment. In that motion, he requested that the judgment be modified to hold Suehr personally liable for damages, in addition to Car Guys, to quiet title to the Camaro in Habib, and to increase the total amount of damages by $16,000 — the amount Habib paid to purchase the Camaro. The court denied the motion in part and granted it in part. The court amended the judgment to add $16,000 to the total award, as against Car Guys only, so that Habib could recover, in addition to the amounts previously awarded, the value of the Camaro that was never returned to him. On December 26, 2006, a new judgment was entered accordingly (the Judgment).
Habib filed a notice of appeal from the Judgment, as against Suehr only, and from the order denying his motion to vacate, also as against Suehr only.
II
DISCUSSION
A. INTRODUCTION:
Habib makes numerous assertions of error. He claims Suehr individually converted the Camaro to his personal use, and is therefore individually liable for conversion. Habib also says Suehr is individually liable for both conversion and fraud because of his actions as an officer and director of Car Guys and as an agent thereof. He also argues that Suehr is liable as the alter ego of Car Guys. He contends that, contrary to the court’s finding, the evidence is sufficient to show that Suehr is the alter ego of Car Guys, and even if the evidence were insufficient, Suehr should be deemed to be the alter ego of Car Guys as a sanction for discovery abuses. Finally, Habib maintains that the court erred in denying him leave to amend his complaint to conform to proof, and in denying his motion to vacate so as to hold Suehr individually liable. We address these contentions in turn, along with Habib’s request for judicial notice.
B. OFFICER AND DIRECTOR LIABILITY:
(1) Conversion
It is undisputed that Car Guys refused to return the Camaro to Habib on his request and that it asserted a right to a lien on the vehicle. It is also undisputed that Suehr was the owner, chief executive officer, chief financial officer, and director of Car Guys.
The record contains a copy of a May 5, 2005 letter from Habib’s attorney to Suehr and his son, Matt. That letter demanded the return of the Camaro. At trial, Suehr admitted to having received the letter.
The record also contains a copy of a letter dated May 11, 2005, addressed to Habib’s attorney. The letter is written on Car Guys stationery and appears to be signed by “James Suehr,” without any specification as to his capacity. At trial, Suehr admitted that he either signed the letter himself or directed that it be signed on his behalf.
The handwriting is unclear.
The scathing letter lays out Car Guys’s grievances against Habib and indicates that the Camaro will not be returned as requested. To the contrary, the letter says the “car will be [liened] by the time you receive this from my attorney and a suit filed . . . .” It also states the Camaro “will be moved for safe keeping [as] allowed by the Civil Code on bailment . . . .”
At trial, Suehr admitted that the letter was sent at his direction. He further admitted that he personally made a decision that the Camaro would not be returned to Habib. At the same time, in his reply brief on appeal, Suehr makes no suggestion that the trial court erred in finding that Car Guys was lacking in proper registration with the Bureau of Automotive Repair and that, consequently, it had no entitlement to a lien on the Camaro and no right to retain it. Yet the record clearly reflects that Suehr directed Car Guys to refuse to return the Camaro to its owner on demand.
“‘It is well settled by the great weight of authority in this country that the officers of a corporation are personally liable to one whose . . . property has been . . . converted by them to the uses of the corporation, although they derived no personal benefit therefrom and acted merely as agents of the corporation. The underlying reason for this rule is that an officer should not be permitted to escape the consequences of his individual wrongdoing by saying that he acted on behalf of a corporation in which he was interested. [Citations.]’ [Citations.]” (Granoff v. Yackle (1961) 196 Cal.App.2d 253, 257.)
This notwithstanding, the trial court did not hold Suehr liable for the acts of Car Guys that he directed. While the trial court explained that Habib had not provided financial records that would show that Suehr and Car Guys acted with such a unity of interest that the corporate form should be disregarded and Suehr should be held personally liable as the alter ego of the corporation, it did not articulate a reason why Suehr should not be held liable for having directed the corporation to convert the Camaro.
“‘Judgments and orders of the lower courts are presumed to be correct on appeal. [Citation.]’ [Citation.] ‘We imply all findings necessary to support the judgment, and our review is limited to whether there is substantial evidence in the record to support these implied findings. [Citations.]’ [Citations.]” (Virtanen v. O’Connell (2006) 140 Cal.App.4th 688, 709.) Consequently, we imply a finding that Suehr did not direct Car Guys to retain possession of the Camaro despite Habib’s formal demand for its return. However, this implied finding is not supported by substantial evidence. (See Granoff v. Yackle, supra, 196 Cal.App.2d at p. 257.) To the contrary, the evidence clearly shows that Suehr directed Car Guys to retain possession.
As explained by our Supreme Court, “It is well settled that corporate directors cannot be held vicariously liable for the corporation’s torts in which they do not participate. Their liability, if any, stems from their own tortious conduct, not from their status as directors or officers of the enterprise. [Citation.] ‘[A]n officer or director will not be liable for torts in which he does not personally participate, of which he has no knowledge, or to which he has not consented. . . . While the corporation itself may be liable for such acts, the individual officer or director will be immune unless he authorizes, directs, or in some meaningful sense actively participates in the wrongful conduct.’ [Citation.]” (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 503-504; accord, PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1379.)
“This liability does not depend on the same grounds as ‘piercing the corporate veil,’ on account of inadequate capitalization for instance, but rather on the officer or director’s personal participation or specific authorization of the tortious act. [Citation.]” (Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d at p. 504.) “To maintain a tort claim against a director in his or her personal capacity, a plaintiff must first show that the director specifically authorized, directed or participated in the allegedly tortious conduct [citation]; or that although they specifically knew or reasonably should have known that some hazardous condition or activity under their control could injure plaintiff, they negligently failed to take or order appropriate action to avoid the harm [citations]. The plaintiff must also allege and prove that an ordinarily prudent person, knowing what the director knew at that time, would not have acted similarly under the circumstances.” (Id. at pp. 508-509.)
Here, Habib showed that Suehr was aware that the owner of the Camaro had demanded its return, and indeed had hired legal counsel to obtain its return, and that Suehr nonetheless specifically authorized and directed the retention of the Camaro. Habib met his burden to show that Suehr, as the officer and director who blocked the return of the Camaro to its rightful owner, should be held individually liable for that tortious act. (See Granoff v. Yackle, supra, 196 Cal.App.2d 253; McClory v. Dodge (1931) 117 Cal.App. 148, disapproved on another point in Mary Pickford Co. v. Bayly Bros., Inc. (1939) 12 Cal.2d 501; Vujacich v. Southern Commercial Co. (1913) 21 Cal.App. 439.)
In his reply brief, Suehr does not address any legal authority on the issue, but asserts simply that “[t]he evidence adduced at trial does not, as a matter of law, establish personal liability against [him] for conversion and fraud by the defendant corporation.” While it is not the function of this court to reweigh the evidence (In re Marriage of Balcof (2006) 141 Cal.App.4th 1509, 1531), where, as here, there is no substantial evidence to support the implied finding of the trial court, we must reverse (see Virtanen v. O’Connell, supra, 140 Cal.App.4th at p. 709 [substantial evidence standard applied to implied findings]; Granoff v. Yackle, supra, 196 Cal.App.2d at p. 257 [reversal upon lack of substantial evidence]).
(2) Fraud
In his discussion of officer and director liability, Habib says that Suehr “necessarily failed to make the disclosures as to the lack of a[n] automotive repair registration, if not the affirmative misrepresentations as well, upon which the trial court based its finding of fraud. The trial court’s denial of [Suehr’s] liability for fraud is thus also erroneous as a matter of law.” (Fn. omitted.) However, Habib provides no record references in support of his assertion that Suehr “necessarily” committed the fraud that the court found Car Guys had committed.
Therefore, Habib failed to “show that [Suehr] specifically authorized, directed or participated in the allegedly tortious conduct . . . .” (Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d at p. 508.) Rather, we note that Habib, in his lengthy factual recitations, noted that his first contact with Car Guys was with a man named Joe. Joe was the one who wrote up the initial estimate. Habib did not meet Suehr until a week or two after work had begun on the Camaro. Based on this information, it is not apparent that any representation Suehr made could have formed the basis for Habib’s decision to have Car Guys undertake the work or that Suehr was responsible for any nondisclosure where the lack of registration was concerned. Given this, we cannot say that the trial court’s finding that Suehr was not individually liable for fraud was unsupported by substantial evidence so as to require a reversal with respect to the fraud cause of action.
C. ALTER EGO:
(1) Evidence
Suehr gave vague and inconsistent trial and deposition testimony about the assets of Car Guys. At one point, Suehr said that Car Guys never really had any assets. Then he clarified that it had ownership of cars from time to time. He also said that it had some equipment. But Suehr also said that the equipment actually consisted of his own personal tools. In addition, he said that as of November 2005, Car Guys had been shut down. Suehr also mentioned that, as of the time of trial, his son Matt ran a business called Old Car Specialties, that Suehr had turned over to him. Suehr also indicated that while he personally owned Car Guys’s equipment in 2004, it mainly belonged to Matt at the time of trial. In addition, at trial, as in the May 11, 2005 letter, Suehr frequently referred to Car Guys and himself somewhat interchangeably, saying “we,” “I,” or “me” in connection with the operation of the Car Guys business. The trial court found the evidence insufficient to show alter ego.
(2) Case law
“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone. [Citations.] ‘Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other.’ [Citations.] Other factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. [Citations.] No one characteristic governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied. [Citation.] Alter ego is an extreme remedy, sparingly used. [Citation.]” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538-539.)
Habib was successful in providing some evidence in support of his assertion that the separate personalities of Car Guys and Suehr did not in reality exist — the first requirement for the imposition of alter ego liability. Indeed, Suehr’s vague testimony gave rise to suspicions of either questionable capitalization or the possible transfer of corporate assets for personal use, and of a possible disregard of any distinction between the corporate form and Suehr individually. However, the trial court was unpersuaded by the proffered evidence, and noted Habib’s failure to provide financial records to prove his point.
(3) Discovery abuses
Habib contends that his hands were tied in trying to produce documentary evidence necessary to show alter ego. He draws our attention to a March 21, 2006 notice of deposition and notice to produce documents at deposition. That notice demanded the production of corporate books and records, books of account, and financial statements. However, Habib claims no such records were ever produced. His claim is supported by the trial testimony of Suehr. Suehr admitted that no corporate bylaws, minutes, or similar items were produced, although he claimed that an attorney maintained such records. Suehr also said that an accountant maintained Car Guys’s accounting books and records, but that none of those items were produced, either.
Habib also points out that after Car Guys failed to produce the documents, he filed his motion in limine No. 1, seeking in part to preclude the introduction of evidence in opposition to the alter ego allegation, and a motion to deem Suehr to be the alter ego of Car Guys. However, the court denied the motion in limine on this particular point and denied the motion to deem Suehr to be the alter ego of Car Guys. Habib complains that he cannot produce the required evidence if Car Guys and Suehr are permitted to get away with discovery abuses and that the court erred in failing to grant his motions.
As Habib notes, the abuse of discretion standard applies to the rulings on his motion in limine No. 1 and his motion to deem Suehr to be the alter ego of Car Guys. (Virtanen v. O’Connell, supra, 140 Cal.App.4th at pp. 699-700 [orders on motions in limine]; Peat, Marwick, Mitchell & Co. v. Superior Court (1988) 200 Cal.App.3d 272, 286-291 [orders on motions to preclude evidence given abuse of litigation process].) In assessing the situation before us, we observe that Car Guys and Suehr repeatedly engaged in discovery abuses and were repeatedly sanctioned by the court.
On October 18, 2005, the court granted Habib’s motions to compel answers to interrogatories, and awarded $114.14 in sanctions against Car Guys and $533.44 in sanctions against Suehr. On January 3, 2006, the court granted in part and denied in part Habib’s November 29, 2005 motions for terminating sanctions, and ordered that Car Guys pay $1,114.14 in sanctions and Suehr pay $1,533.44 in sanctions. Since Car Guys and Suehr remained noncompliant with discovery orders, Habib filed two more motions for terminating sanctions, on January 20, 2006. In its February 21, 2006 order thereon, the court ordered Car Guys to pay $4,114 in sanctions and Suehr to pay $4,533.44 in sanctions.
Exasperated, on May 17, 2006, Habib filed six motions in limine, including the one at issue here, and his motion that Suehr be deemed the alter ego of Car Guys. The court granted Habib’s motions in part and denied them in part. It granted Habib’s motions excluding: (1) “any evidence that . . . is not expressly set forth, and consistent with, defendants’ discovery responses served on 3/8/06; and . . . is introduced for the purpose of showing . . . that defendants are entitled to recover from plaintiff for any [work] performed on plaintiff’s Camaro;” (2) any “evidence regarding purported contract modifications or oral agreement;” (3) any “evidence as to work done on the Camaro;” (4) any evidence of “any work done by Matt Suehr, Gus Lopez and Felipe Ortiz;” and (5) any evidence of Habib’s “purported breaches.” However, the court denied the motion to “exclude evidence that Car Guys is a licensed used car dealer” and the motion “[t]hat James Suehr be deemed an alter ego of Car Guys.”
The record makes clear that Car Guys and Suehr engaged in abusive litigation tactics and that the court took the matter very seriously. It levied progressively steep monetary sanctions against Car Guys and Suehr and in the end granted extensive evidentiary sanctions as well. We cannot, however, say that it was an abuse of discretion for the court to stop short of deeming Suehr to be the alter ego of Car Guys.
(4) Conclusion
While we recognize that Habib’s inability to convince the trier of fact that Suehr was the alter ego of Car Guys may have rested in part on the failure of Car Guys to produce books and records demanded during the discovery process, the failure to treat Suehr as the alter ego of Car Guys will not, in this case, give rise to an inequitable result that would satisfy the second requirement enunciated in Sonora Diamond Corp. v. Superior Court, supra, 83 Cal.App.4th at pp. 538-539. This is because, as we have already shown, Suehr is individually liable for conversion because of his tortious acts as an officer and director of Car Guys. Consequently, we find no error in the failure to impose alter ego liability as well.
D. REQUEST TO AMEND TO CONFORM TO PROOF:
After trial, Habib filed a request to amend his complaint to conform to proof. He sought to add causes of action against both Car Guys and Suehr for slander of title and quiet title with respect to the Camaro. On appeal, Habib contends the court erred in denying his request to quiet title as against Suehr. He says that the evidence that established conversion also established his right to prevail under the quite title cause of action. We review the order denying his request under the abuse of discretion standard. (Glaser v. Meyers (1982) 137 Cal.App.3d 770, 776-777.)
There are two reasons why the court did not abuse its discretion in failing to grant Habib the requested relief. First, a dialogue on the record shows that when the court asked whether Habib requested the return of the Camaro, his counsel indicated that, given the disassembled condition of the vehicle, an award of monetary damages would be preferable and more appropriate. Habib is bound to the agreement on the record. (Sperber v. Robinson (1994) 26 Cal.App.4th 736, 742-743.) Second, under the Judgment, the defendants were left free to dispose of the vehicle inasmuch as Habib was awarded $16,000 as the price he had paid to purchase it (in addition to other sums as described above). If title to the vehicle were quieted in Habib, he would receive a double recovery.
E. ATTORNEY FEES AND COSTS:
Habib requests an award of attorney fees and costs. However, “‘[t]he general rule is that attorneys’ fees are not a proper item of recovery from the adverse party, either as costs, damages or otherwise, unless there is express statutory authority or contractual liability therefor [citations]. Section 3336 of the Civil Code, which sets out the measure of damages in conversion actions, does not expressly provide for attorneys’ fees for the converting of property. It has long been held that such fees are not within the rule of damages provided for by that section [citations].’ [Citations.]” (Haines v. Parra (1987) 193 Cal.App.3d 1553, 1559; accord, Gladstone v. Hillel (1988) 203 Cal.App.3d 977, 991-992.) Therefore, Habib is not entitled to an award of attorney fees. However, he is entitled to an award of costs on appeal, as the prevailing party. (Cal. Rules of Court, rule 8.278(a).)
F. REQUEST FOR JUDICIAL NOTICE:
Habib has filed a request for judicial notice. He requests that this court take judicial notice of 6 items: (1) a complaint in Suehr v. Gunns (Super. Ct. Orange County, 2007, No. 05CC06479), filed May 23, 2005 (the Gunns Litigation); (2) Suehr’s January 5, 2006 general denial to cross-complaint filed in Gunns Litigation; (3) Suehr’s July 5, 2007 opposition to Habib’s motion for leave to intervene in the Gunns Litigation, together with attached memorandum of points and authorities and exhibit A thereto; (4) July 20, 2007 minute order denying Habib’s motion for leave to intervene and request for judicial notice in the Gunns Litigation; (5) reporter’s transcript of July 20, 2007 in the Gunns Litigation; and (6) Secretary of State’s September 6, 2007 Certificate of Status for Orange Car Guys, Inc.
Habib contends that the items in question are relevant to the issue of alter ego in the matter pending before us. Habib claims that, based upon the positions Suehr asserted in the Gunns Litigation, he should be judicially estopped to deny in the present litigation that he is the alter ego of Car Guys.
We decline to take judicial notice of the proffered items. First, the majority of the items would be irrelevant inasmuch as they would not form the basis of a judicial estoppel as Habib claims. The doctrine of judicial estoppel provides that a party who successfully asserts one position in a judicial proceeding is estopped from asserting an inconsistent position in a subsequent proceeding. (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181-183.) “The party invoking judicial estoppel must show that (1) the party against whom the estoppel is asserted took an inconsistent position in a prior proceeding and (2) that the position was adopted by the first tribunal in some manner such as by rendering a favorable judgment. [Citation.]” (People ex rel. Sneddon v. Torch Energy Services, Inc. (2002) 102 Cal.App.4th 181, 189.)
Here, the majority of the items in question are items that arose after the conclusion of trial in the matter before us. Therefore, they cannot form the basis of an estoppel in this proceeding. It does not appear that the remaining items were drawn to the attention of the trial court. An appellate “‘court will not normally take judicial notice of matters which were not brought to the attention of the trial court . . . . [Citation.]’ [Citation.]” (County of Orange v. Smith (2005) 132 Cal.App.4th 1434, 1450.) Consequently, we do not take judicial notice of the items in this matter.
III
DISPOSITION
We reverse and remand with directions to modify the judgment to hold Suehr liable for conversion to the same extent as Car Guys. Habib shall be entitled to his costs on appeal.
WE CONCUR: BEDSWORTH, ACTING P. J., ARONSON, J.
Reversed and remanded.
Request for judicial notice denied.