Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County. No. BS111696 William F. Fahey, Judge. Reversed with directions.
Arvind Shankar, in pro. per., for Plaintiff and Appellant.
Phillip K. Fife for Objector and Respondent.
MALLANO, P. J.
The Labor Commissioner awarded plaintiff Arvind Shankar $49,440.55 in wages, interest, and other compensation from defendant Chu Sarang Medical, Inc. (CSM), and the award was entered as a judgment. Shankar appeals from a September 8, 2008 order denying his motion to amend the judgment to add Jeffrey Chu as an additional defendant and judgment debtor, as the alter ego of defendant CSM. The trial court failed to address the merits of Shankar’s motion, erroneously concluding that the alter ego issue was decided by the Labor Commissioner and that any unresolved issues between the parties should be resolved in another pending action between the parties. Accordingly, we reverse the order and remand to the trial court to consider the merits of the motion.
BACKGROUND
In April 2007, Shankar, a medical doctor, filed a claim for unpaid wages with the Labor Commissioner. A hearing on Shankar’s claim was held in September 2007 before the Labor Commissioner. Chu, also a medical doctor, appeared in propria persona and represented CSM. The Labor Commissioner issued an order, decision, or award (award) dated September 21, 2007, containing the following findings of fact: CSM, a California Corporation, employed Shankar from March 2005 to April 2006. By 2007, CSM was no longer operating and its corporate status was unclear, but during the period of CSM’s operation, Simon Hong, who was not a doctor, acted as CSM’s agent and general manager. Although Chu was president of CSM and signed CSM’s policies and procedures, Chu did not employ Shankar and did not exercise regular control over Shankar’s wages, hours, and working conditions. A Physician’s Employment Agreement between Shankar and CSM provided in paragraph 14 that, “[i]n the event that [CSM] is dissolved, no longer active as a corporation in the State of California, or unable to perform its obligations, Dr. Chu shall assume the obligations of [CSM] under this Agreement.” Chu signed the Physician’s Employment Agreement for CSM.
The Labor Commissioner concluded that Chu, as an individual, did not employ Shankar, but that Shankar was employed by CSM. CSM, but not Chu, was Shankar’s employer within the meaning of the Labor Code and applicable regulations. The Labor Commissioner’s award provided in pertinent part, “The evidence clearly supports that Dr. Chu did not employ [Shankar] during the relevant claim period. Therefore, [Chu] is not liable as an employer. However, Dr. Chu may be liable for monetary debts of [CSM but] this matter [is] not within the jurisdiction of the Labor Commissioner.” The Labor Commissioner awarded Shankar wages, interest, and penalties totaling $49,440.55.
No appeal was taken from the Labor Commissioner’s award and it became final. Upon the request of the Labor Commissioner, the award was entered as a judgment in the Superior Court of Los Angeles County on October 31, 2007. (Shankar v. Chu Sarang Medical, Inc. (Super. Ct. L.A. County, No. BS111696) (hereafter the Shankar action).) No appeal was taken from the judgment in the Shankar action.
Meanwhile, on September 6, 2007, Chu and CSM filed another action in the Superior Court of Los Angeles County for damages, an accounting, and other equitable relief against Hong and Shankar, among others. (Jeffrey C. Chu et al. v. Seong Wook Hong et al. (Super. Ct. L.A. County, No. BC377123) (hereafter the Chu action).) The complaint in the Chu action alleged that Chu was the sole shareholder and president of CSM. The only causes of action against Shankar were for breach of contract and breach of fiduciary duties. The gravamen of the claims was that Shankar failed to keep up-to-date and accurate billing records and patient charts for CSM and failed to keep CSM informed of business matters. A fraud claim asserted against Hong and others alleged that they diverted revenues due to CSM to themselves. In the Chu action on about October 7, 2007, Shankar cross-complained against Chu and CSM for breach of contract, breach of fiduciary duty, wrongful termination of employment, and indemnity. Shankar’s cross-complaint stated that “Shankar is not seeking compensation through this Cross-complaint for loss of past wages earned, nor for loss of vacation days earned, since Shankar has successfully asserted claims for those losses in the Office of the Labor Commissioner....”
In November 2007, Shankar filed notices of related cases in the Shankar action and the Chu action.
On January 30, 2008, in the Shankar action, Shankar filed a motion to amend the judgment to add Chu as a defendant and judgment debtor on the grounds that Chu was the alter ego of CSM, Chu agreed in writing to assume the obligations of CSM, Chu participated in and controlled the proceedings before the Labor Commissioner, and it would be inequitable to permit Chu to avoid liability for Shankar’s wages. A hearing on the motion was scheduled for February 25, 2008, before Judge William F. Fahey.
In support of the motion, Shankar submitted a declaration stating that in March 2005 Chu represented to him that CSM was lawfully formed and a lawfully active professional medical corporation. Chu also told Shankar that Chu was the sole shareholder of CSM and served as its president and treasurer. Chu admitted in verified discovery responses in the Chu action that CSM did not observe many corporate formalities, including the issuance of shares, the election of a board of directors, and the appointment of officers. Chu also admitted that he was authorized to sign checks, review payments made on CSM’s bank account, and review all patient billings submitted on behalf of CSM.
Hong provided a declaration stating that Chu obtained a Medicare billing number and certified under federal law that it was for a lawful professional medical corporation, but CSM did not observe the corporate formalities, did not issue shares, did not have a board of directors or corporate bylaws, and there were no records showing any meetings of directors or shareholders. According to Hong, Chu was the one who signed a contract hiring a billing company to submit CSM’s bills to Medicare and Chu had authority to examine the medical charts of patients and their billing information.
On February 15, 2008, Chu filed opposition to Shankar’s motion. Among other things, Chu argued that the principle of “priority of jurisdiction” required that the matter be determined in the Chu action and not the Shankar action. Chu submitted a declaration stating that in early 2007 he took steps to have a certificate of dissolution filed as to CSM in an effort to thwart any attempts to issue bills to Medicare for services that might not have been rendered or properly recorded in the patients’ charts by Shankar. According to Chu, he learned in 2006 that Hong purported to sell an interest in CSM to Jennifer Kim, that Hong and Kim were fighting about money, and that Kim was trying to operate CSM after Shankar left and without any physician in residence.
At 8:30 a.m. on February 25, 2008, in the Chu action, the court (Judge Robert L. Hess) in Department 24 issued an order relating the Chu action and the Shankar action and ordered the Shankar action transferred to Judge Hess. At 9:30 a.m. on the same day, a minute order was issued in the Shankar action stating, “The motion is placed off-calendar. [¶] The case is being related to BC377123 [the Chu action] by Judge Robert Hess in Department 24. [¶] Judge Hess is in possession of this file.”
After proceedings which are not germane to this appeal, Judge Lee Smalley Edmon issued an order on June 25, 2008, providing that “[t]he order of February 25, 2008 issued in Department 24 relat[ing] BS111696 [the Shankar action] and BC377123 [the Chu action] is severed. The cases are no longer related. BS111696 is returned to Department 78 [Judge Fahey]. This case, BC377123, remains assigned to Department 24.”
Shankar’s motion was reset for hearing on September 8, 2008. Shankar filed a supplemental memorandum and Chu filed a “trial brief” in which Chu asserted that Department 24 [the Chu action] had exclusive jurisdiction over the alter ego issue and requested that Judge Fahey abstain from determining the issue.
After a hearing on the motion, Judge Fahey issued the following ruling: “Dr. Shankar’s Motion is an improper attempt to relitigate an issue which has already been resolved against him by the Labor Commissioner. Further, to the extent that there remains any issue of fact to be resolved between Dr. Shankar and Dr. Chu as to the claim of unpaid wages, that dispute will be resolved in case BC377123 [the Chu action], which was commenced prior to the date Dr. Shankar filed his case in this Court. See CCP 430.10(c).” Shankar appealed from the order. Although Shankar’s briefs raise numerous claims of error, two have merit and are dispositive. We agree with Shankar that the trial court erred in concluding (1) that the alter ego issue was resolved by the Labor Commissioner and (2) that the Chu action was the proper forum to resolve that issue.
DISCUSSION
The same rules of interpretation apply in ascertaining the meaning of a court order or judgment as in ascertaining the meaning of any other writing. (Verdier v. Verdier (1953) 121 Cal.App.2d 190, 193.) “Absent extrinsic evidence, interpretation of writings, whether a contract, a lease, a will, a statute, pleadings or minute orders, has long been held to be peculiarly an appellate function. [Citation.] It is not only an appellate function, it is one where the appellate court exercises its independent judgment. [Citations.] In this situation, a reviewing court need not defer to the trial court.” (Herman Feil, Inc. v. Design Center of Los Angeles (1988) 204 Cal.App.3d 1406, 1414.)
The Labor Commissioner’s award is unambiguous in showing that the merits of Shankar’s alter ego argument were not determined in that proceeding. We therefore disagree with Chu’s argument in his respondent’s brief that “[t]he Labor Commissioner’s findings make clear that the hearing officer considered whether Shankar’s evidence supported an award against both Chu Sarang Medical, Inc. and [Chu].” What the Labor Commissioner’s award shows is that Chu was found not to be Shankar’s employer within the meaning of the Labor Code. But the Labor Commissioner did not determine the entirely separate issues of whether Chu nevertheless may be liable for the debts of CSM or liable on a judgment against CSM. Chu cites no authority, and we are not aware of any such authority, which provides that Chu’s status as a nonemployer of Shankar shields Chu from liability to Shankar under paragraph 14 of the Physician’s Employment Agreement or from liability on CSM’s judgment under the alter ego theory. Accordingly, the trial court erred in concluding that the issues raised by Shankar’s motion to amend the judgment were resolved against him by the Labor Commissioner.
The trial court also erred in failing to address the merits of Shankar’s motion, stating that the issues raised by the motion will be resolved in the other action pending between the parties, the Chu action. As explained below, a motion to amend the Shankar judgment, made in the Shankar action, was the proper vehicle to add Chu as a defendant and judgment debtor to the judgment.
“The alter ego doctrine traditionally is applied to pierce the corporate veil so that a shareholder may be held liable for the debts or conduct of the corporation.” (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1518.) “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.’ [Citation.] Thus, the ‘constitutional guaranty of the right to a jury trial does not apply to actions involving the application of equitable doctrines and the granting of relief that is obtainable only in courts of equity. Accordingly, a jury cannot be demanded as of right in such actions.’ [Citation.]” (Dow Jones Co. v. Avenal (1984) 151 Cal.App.3d 144, 147–148.) “A trial court has the authority to amend a judgment in order to add additional judgment debtors. Code of Civil Procedure section 187 has often served as the basis for such an amendment of a judgment, pursuant to the alter ego doctrine.” (Dow Jones Co., at p. 148.)
Code of Civil Procedure section 187 (section 187) provides: “When jurisdiction is, by the constitution or this code, or by any other statute, conferred on a court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this code.”
“‘Amendment of a judgment to add an alter ego “is an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant.... ‘Such a procedure is an appropriate and complete method by which to bind new... defendants where it can be demonstrated that in their capacity as alter ego of the corporation they in fact had control of the previous litigation, and thus were virtually represented in the lawsuit.’...”...’ [Citation.]” (Hall, Goodhue, Haisley & Barker, Inc. v. Marconi Conf. Center Bd. (1996) 41 Cal.App.4th 1551, 1555 [trial court had jurisdiction to entertain motion to amend judgment confirming arbitration award to add corporation as additional judgment debtor].)
“There are two general requirements for disregarding the corporate entity. First, there must be ‘such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist.’ [Citation.] Second, it must be demonstrated that ‘if the acts are treated as those of the corporation alone, an inequitable result will follow.’ [Citation.] ‘When considering the application of the alter ego doctrine to a particular situation, it must be remembered that it is an equitable doctrine and, though courts have justified its application through consideration of many factors, their basic motivation is to assure a just and equitable result.’ [Citation.]” (NEC Electronics, Inc. v. Hurt (1989) 208 Cal.App.3d 772, 777.) Thus, “when a corporation ‘is used by an individual or individuals, or by another corporation, to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, a court may disregard the corporate entity and treat the acts as if they were done by the individuals themselves or by the controlling corporation... the court will disregard the “fiction” of corporate entity[.]’ [Citation.]” (McClellan v. Northridge Park Townhome Owners Assn. (2001) 89 Cal.App.4th 746, 752–753 (McClellan) [court may use successor corporation theory to amend judgment to add as judgment debtor the successor corporation to insolvent corporate defendant].)
“[A] motion pursuant to the procedural mechanism of section 187 enables the court to consider disregarding the corporate entity on any of several theories in order to add an additional judgment debtor. [¶] Once the trial court properly acquired jurisdiction of the matter before us by virtue of [the plaintiff’s] motion to amend the judgment, section 187 enabled the trial court to utilize ‘any suitable process or mode of proceeding’ to resolve the issue.” (McClellan, supra, 89 Cal.App.4th at pp. 754–755.)
As in McClellan, the trial court properly acquired jurisdiction of the matter by virtue of Shankar’s motion to amend the judgment. Section 187 authorized the trial court to resolve the issue of whether Chu should be liable on the judgment under either or both the alter ego doctrine and a contract theory based on paragraph 14 of the Physician’s Employment Agreement. Shankar is thus entitled to a hearing on the merits of his motion to amend the judgment.
The trial court also erred in concluding that Shankar’s motion was subject to a plea in abatement pursuant to Code of Civil Procedure section 430.10, subdivision (c).
Code of Civil Procedure section 430.10 provides: “The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer..., to the pleading on any one or more of the following grounds: [¶]... [¶] (c) There is another action pending between the same parties on the same cause of action.”
“Under [former] section 430 of the Code of Civil Procedure the pendency of another action between the same parties for the same cause is made a ground for demurrer. The plea is dilatory in its nature and is not favored. It may be made only when the face of the complaint shows that the causes of action and the issues in the two suits are substantially the same. [Citations.]... [¶] As a test for determining whether the causes of action are the same or different, it is the universal rule that a plea in abatement may be maintained only where the claim sued upon in the second action is such that a final judgment in the first one could be pleaded in bar as a former adjudication [under the doctrine of res judicata].” (Lord v. Garland (1946) 27 Cal.2d 840, 848 (Lord).)
“[A] plea of a prior action pending applies only where the plaintiff in both suits is the same person and both suits are commenced by him.” (Healy v. Stationers Corp. (1964) 228 Cal.App.2d 601, 603; accord, Conservatorship of Pacheco (1990) 224 Cal.App.3d 171, 176 [plea was designed to protect defendants from burden of defending against unnecessary and duplicative suits brought by the same plaintiff].)
Under the foregoing principles, the Shankar action is not subject to a plea in abatement. The Shankar action was commenced first, with the filing of a claim for unpaid wages with the Labor Commissioner in April 2007, before the filing of the Chu action in September 2007. Accordingly, the Chu action was not pending when the Shankar action was commenced. A plea in abatement “is a ground for abatement of the second action but never for abatement of the first.” (California Union Ins. Co. v. Trinity River Land Co. (1980) 105 Cal.App.3d 104, 109.)
Even if we assume for purposes of argument that the Chu action was filed first, the plaintiff is not the same in both suits, as Shankar did not initiate the Chu action. And although Shankar filed a cross-complaint in the Chu action, his cross-complaint expressly excluded therefrom his claim and award for unpaid wages. Further, the circumstances presented here do not meet the Lord court’s res judicata test, which requires that the judgment in the Chu action operate as a bar to the Shankar action. Because the claims in the Shankar action were reduced to a final judgment first, any judgment in the Chu action could not be pleaded as a bar in the Shankar action. As the circumstances here do not establish the requirements for a plea in abatement, the trial court erred in subjecting Shankar’s motion to such plea.
Shankar is thus entitled to a hearing on the merits of his motion to amend the judgment.
DISPOSITION
The order of September 8, 2008, is reversed, and on remand the trial court is directed to conduct a hearing on Arvind Shankar’s motion to amend the judgment in Shankar v. Chu Sarang Medical, Inc. (Super. Ct. L.A. County, No. BS111696). Shankar is entitled to costs on appeal.
We concur: CHANEY, J., JOHNSON, J.