NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

McCONNELL, P.J.

I

INTRODUCTION

Richard Lambertus (Lambertus), as Trustee for the Lambertus Family Trust (Trust), appeals from a judgment finding the Trust liable to C.E. Wilson and Patricia Wilson (collectively, the Wilsons) for $22,310 in compensatory damages and $22,310 in punitive damages as the alter ego of defaulted party Liberty Metals Group, LLC (Liberty Metals).1

The Trust contends we must reverse the judgment because there was insufficient evidence to support the trial court's finding the Trust was the alter ego of Liberty Metals and the court both abused its discretion and committed a criminal act by so finding. The Trust further contends we must reverse the judgment because the court was collaterally estopped from finding the Trust liable as an alter ego of Liberty Metals after the court granted nonsuit for the Trust as a direct actor. Finally, the Trust contends the punitive damages award is void for one or more of four alternative reasons: (1) the Wilsons' complaint failed to adequately plead a claim for punitive damages, (2) the judgment against Liberty Metals is only for breach of contract and punitive damages are not available in actions arising from contract, (3) the Wilsons failed to serve a statement under Code of Civil Procedure section 425.115 reserving their right to seek punitive damages before taking Liberty Metals's default, and (4) there is no evidence of Liberty Metals's financial condition to support an award of punitive damages.

We conclude there is substantial evidence to support the court's alter ego findings. We further conclude the doctrine of res judicata does not apply under the circumstances presented. Finally, we conclude the punitive damages award is not void for any of the reasons proffered by the Trust. Nonetheless, in reaching the latter conclusion, we note the judgment incorrectly indicates Liberty Metals only defaulted on the Wilsons' breach of contract claim when Liberty Metals actually defaulted on all of the claims in the Wilsons' complaint, including their claim for intentional misrepresentation. We, therefore, remand the matter to the trial court with directions to modify and correct the judgment accordingly. In all other respects, we affirm the judgment.

II

BACKGROUND

A

Liberty Metals's members include the Trust, John Mark Lonneker, Janet Lonneker, (collectively, the Lonnekers), and two other individuals. The Wilsons purchased 1,000 silver coins from Liberty Metals for $22,310. The salesperson who sold them the coins was Lambertus's father-in-law. The Wilsons paid for the coins in advance with cash and were told they would receive the coins within four to five weeks.

Before the Wilsons purchased the coins, the Lonnekers embezzled more than $1 million from Liberty Metals, causing the company to be insolvent and unable to pay its suppliers. Consequently, some of the company's suppliers would not accept new orders from the company.

After the company repeatedly extended the delivery date for the Wilsons' coins, the Wilsons went to the Liberty Metals's store and spoke with Lambertus, who was Liberty Metals's authorized agent and controlled the company's day-to-day operations. When the Wilsons were at the store purchasing the coins, the store's display cases had gold coins, silver coins, and other items in them. However, when the Wilsons were at the store speaking with Lambertus, the store's display cases were bare.

Lambertus told the Wilsons he did not have their coins or their money and he did not know when or if the coins would be delivered. They never received the coins or a refund.

B

The Wilsons subsequently sued Liberty Metals, Lambertus, John Mark Lonneker, and Lambertus's father-in-law for breach of contract, intentional misrepresentation, and related causes of action. The Wilsons later dismissed Lambertus's father-in-law and added Janet Lonneker and the Trust as defendants in the suit. The Lonnekers filed a bankruptcy case and the Wilsons' suit was automatically stayed as to them. Liberty Metals defaulted.

The case proceeded as a combined default prove-up hearing as to Liberty Metals and a jury trial as to Lambertus and the Trust. As to the Lambertus and the Trust, the main questions presented in the proceedings were whether they were directly liable for intentional misrepresentation and whether they were liable as Liberty Metals's alter egos for breach of contract and intentional misrepresentation.

After the Wilsons rested their case-in-chief, the Wilsons, Lambertus, and the Trust agreed Liberty Metals had breached its contract to provide the Wilsons with 1,000 coins for $22,310. Additionally, the court found by clear and convincing evidence Liberty Metals was guilty of malice, fraud, and oppression.

Lambertus and the Trust moved for nonsuit, arguing the Wilsons had not proved their claims for intentional misrepresentation or alter ego liability. The court granted the motion as to the intentional misrepresentation claim. The court tentatively granted the motion as to the alter ego liability claim, but later denied the motion, finding there was enough evidence to submit the alter ego liability question to the trier of fact. The Wilsons subsequently dismissed their claims against Lambertus as an individual in exchange for a waiver of costs.

Once the only question to be decided was the alter ego liability claim, the Trust objected to the jury deciding the matter. Over the Trust's objection, the court submitted the alter ego liability question to the jury, but indicated the jury's decision would be advisory only if the court subsequently determined the alter ego liability question was for the court to decide. While the jury was deliberating, the parties and the court agreed the question was for the court to decide.

The jury reached a unanimous verdict finding the Trust was an alter ego of Liberty Metals. After hearing further arguments from the parties, the court also found the Trust was an alter ego of Liberty Metals and stated its decision would have been the same even if it did not have the benefit of the jury's verdict. The court based its decision on the following factual findings: (1) Liberty Metals was undercapitalized and could not pay its bills; (2) the Trust learned of the other members' embezzlement eight months before Liberty Metals took the Wilsons' money; (3) the amount of the embezzlement was significant relative to the size of Liberty Metals's operation; (4) on almost a daily basis around the time Liberty Metals took the Wilsons' money, Liberty Metals had trouble placing orders with wholesalers; (5) Lambertus would have known of Liberty Metals's financial situation because he was Liberty Metals's director of business expansion, he was in charge of Liberty Metals's daily operations, and he was the agent authorized to act on behalf of Liberty Metals; and (6) Lambertus's father-in-law made the false statements to the Wilsons. At a subsequent trial on punitive damages, the court awarded the Wilsons punitive damages of $22,310 against the Trust and Liberty Metals, jointly and severally.

III

DISCUSSION

A

The Trust contends we must reverse the judgment because there was insufficient evidence to support the court's finding the Trust was the alter ego of Liberty Metals and the court abused its discretion and committed a criminal act by so finding. We review the court's alter ego findings for substantial evidence. (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 155.) "In evaluating whether evidence is substantial, we ask whether a `"rational trier of fact could find [the evidence] to be reasonable, credible, and of solid value"' and do so while `"view[ing] the evidence in the light most favorable to the [decision]."'" (Santa Clarita Organization for Planning & Environment v. Castaic Lake Water Agency (2016) 1 Cal.App.5th 1084, 1106.)

The alter ego doctrine applies to members of limited liability companies in the same manner as shareholders of corporations. (People v. Pacific Landmark, LLC (2005) 129 Cal.App.4th 1203, 1212.) "The alter ego doctrine arises when a plaintiff comes into court claiming that an opposing party is using the corporate form unjustly and in derogation of the plaintiff's interests. [Citation.] In certain circumstances the court will disregard the corporate entity and will hold the individual shareholders liable for the actions of the corporation: `As the separate personality of the corporation is a statutory privilege, it must be used for legitimate business purposes and must not be perverted. When it is abused it will be disregarded and the corporation looked at as a collection or association of individuals, so that the corporation will be liable for acts of the stockholders or the stockholders liable for acts done in the name of the corporation.' [Citation.]

"There is no litmus test to determine when the corporate veil will be pierced; rather the result will depend on the circumstances of each particular case. There are, nevertheless, two general requirements: `(1) that there be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist and (2) that, if the acts are treated as those of the corporation alone, an inequitable result will follow.'" (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300 (Mesler).)

"The essence of the alter ego doctrine is that justice be done. `What the formula comes down to, once shorn of verbiage about control, instrumentality, agency, and corporate entity, is that liability is imposed to reach an equitable result.' [Citation.] Thus the corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require." (Mesler, supra, 39 Cal.3d at p. 301.)

Among the circumstances which warrant application of the alter ego doctrine is when the equitable owners of a corporation "provide inadequate capitalization and actively participate in the conduct of corporate affairs." (Minton v. Cavaney (1961) 56 Cal.2d 576, 579-580; see Automotriz del Golfo de California S.A. de C.v. v. Resnick (1957) 47 Cal.2d 792, 796-797.) There is substantial evidence this circumstance occurred in this case. Specifically, the evidence shows two members of Liberty Metals embezzled a substantial amount of the company's assets; the embezzlement caused Liberty Metals to have difficulty paying its suppliers; the embezzlement occurred well before Liberty Metals entered into the sales transactions with the Wilsons; the Trust, through Lambertus, knew about the embezzlement; and the Trust, through Lambertus, was actively managing the daily operations of Liberty Metals when Liberty Metals entered into the sales transactions with the Wilsons and was engaging in business practices akin to a Ponzi scheme. Accordingly, we conclude there is sufficient evidence to support the court's finding the Trust was Liberty Metals's alter ego and, concomitantly, the Trust failed to establish the court abused its discretion or committed a criminal act by so finding.

B

The Trust further contends we must reverse the judgment because the court was collaterally estopped from finding the Trust liable as an alter ego of Liberty Metals after it granted nonsuit for the Trust as a direct actor. However, the doctrine of res judicata does not apply in this case because a claim of alter ego liability is not a claim for substantive relief, and the issue of whether the Trust was Liberty Metals's alter ego is separate and distinct from the issue of whether the Trust is directly liable for breach of contract or intentional misrepresentation. (See Wells Fargo Bank, N.A. v. Weinberg (2014) 227 Cal.App.4th 1, 6-8)

C

Finally, the Trust contends we must reverse the punitive damages portion of the judgment for one or more of four alternative reasons: (1) the Wilsons' complaint failed to adequately plead a claim for punitive damages, (2) the judgment against Liberty Metals is only for breach of contract and punitive damages are not available in actions arising from contract, (3) the Wilsons failed to serve a statement under Code of Civil Procedure section 425.115 reserving their right to seek punitive damages before taking Liberty Metals's default, and (4) there is no evidence of Liberty Metals's financial condition to support an award of punitive damages.

1

Regarding the first ground, "to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. [Citation.] These statutory elements include allegations that the defendant has been guilty of oppression, fraud or malice. [Citation.] . . . `"Fraud"' is `an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.'" (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63.) The Wilsons' complaint alleges Liberty Metals and its alter egos, through Lambertus's father-in-law, intentionally defrauded the Wilsons by taking the Wilsons' money and falsely representing the Wilsons would receive the coins they ordered even though Liberty Metals and its alter egos knew the company's business practices were such that the company could not follow through on its representation. These allegations were sufficient to state a claim for punitive damages based on fraud.

2

Regarding the second ground, the default judgment against Liberty Metals has the effect of an express admission of the material facts alleged in the complaint. (Estate of Williams (1950) 36 Cal.2d 289, 294; Brown v. Brown (1915) 170 Cal. 1, 5 ["Where a defendant is served with a summons and complaint stating the facts upon which he is required to act, and he makes default, he is presumed to admit all the facts which are well pleaded in the complaint."]; Carlsen v. Koivumaki (2014) 227 Cal.App.4th 879, 898-899.) The material facts alleged in the Wilsons' operative complaint support both breach of contract and intentional misrepresentation claims. As previously discussed, the material facts supporting the Wilsons' intentional misrepresentation claim are sufficient to support their punitive damages claim.

Although the judgment indicates Liberty Metals only defaulted on the Wilsons' breach of contract claim, this is a clerical error. Liberty Metals defaulted on all of the claims in the Wilsons' complaint and, after the default, the Wilsons were not required to prove Liberty Metals's liability for any adequately pled claims, including the intentional misrepresentation claim.2 (Carlsen v. Koivumaki, supra, 227 Cal.App.4th at pp. 898-901.) We will, therefore, remand the matter to the trial court to modify and correct the judgment accordingly.

3

Regarding the third and fourth grounds, Liberty Metals has not appealed the default judgment against it. (Steven M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th 813, 824 [a defendant may appeal a default judgment on questions of jurisdiction, sufficiency of the pleadings, and excessive damages].) Consequently, the effect of the Wilsons' failure to comply with Code of Civil Procedure section 425.115 and the propriety of the amount of the punitive damage awarded against Liberty Metals are not properly before us in this appeal.3

The Wilsons' failure to comply with Code of Civil Procedure section 425.115 has no effect on the punitive damages award against the Trust because the judgment against the Trust was not a default judgment and it is separately enforceable (Mesler, supra, 39 Cal.3d at p. 301). In addition, the Trust fully participated in the trial court proceedings, including the punitive damages phase, which obviates the due process concerns underlying Code of Civil Procedure section 425.115. (See Behm v. Clear View Technologies, supra, 241 Cal.App.4th at pp. 8-9.) As for the amount of punitive damages awarded against the Trust, the Trust has forfeited the right to complain about the sufficiency of the evidence to support the amount because the Trust failed to comply with the court's order to produce its financial records for the court's consideration during the punitive damages phase of the trial court proceedings. (Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308, 1337-1338; Caira v. Offner (2005) 126 Cal.App.4th 12, 41; Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, 608-609; Hanson v. Sunnyside Products, Inc. (1997) 55 Cal.App.4th 1497, 1503, fn. 1.)

IV

DISPOSITION

The matter is remanded to the trial court with directions to modify the judgment to correctly reflect Liberty Metals defaulted on all of the causes of action in the Wilsons' complaint. The judgment is affirmed in all other respects. The Wilsons are awarded their appeal costs.

BENKE, J. and O'ROURKE, J., concurs.