KING, J.—
In these consolidated California Environmental Quality Act (CEQA) Pub. Resources Code, § 21000 et seq.) actions, several plaintiffs, including plaintiffs and appellants Highland Springs Conference and Training Center (Highland Springs) and Banning Bench Community of Interest Association (Banning Bench) successfully challenged the certification by defendant and respondent, City of Banning (the City), of an environmental impact report (EIR) for a 1,500-acre real estate development project known as the Black Bench project. (Pub. Resources Code, § 21000 et seq.) In their writ petitions, filed in November 2006, Highland Springs and Banning Bench named "SCC/Black Bench, LLC, dba SunCal Companies" (SCC/BB), as the only real party in interest. (Pub. Resources Code, § 21167.6.5.)
SCC/BB appealed the April 2008 judgments entered in favor of plaintiffs on their writ petitions, but its appeal was dismissed in September 2008 after it failed to deposit the costs of preparing the record on appeal. (Cal. Rules of Court, rule 8.140.) By that time, SCC/BB was in default on two purchase money loans for the Black Bench property, and by the end of 2008 SCC/BB lost the property in foreclosure.
Following initial and supplemental briefing, three hearings, and several rounds of evidentiary submissions, the trial court, relying on Alexander v. Abbey of the Chimes (1980) 104 Cal.App.3d 39, 47-48 [163 Cal.Rptr. 377] (Alexander), denied the motion to amend the judgments on the sole basis that plaintiffs failed to act with due diligence in bringing the motion. The court reasoned plaintiffs knew, or reasonably should have known, of SCCA's alleged alter ego relationship to SCC/BB long before plaintiffs moved to amend the judgments in October 2012. Still, the court indicated the equities favored granting the motion and the court "likely" would have granted it had it been filed earlier.
In this appeal, Highland Springs and Banning Bench claim the motion to amend their judgments was erroneously denied. They claim SCCA failed to demonstrate that it was prejudiced by plaintiffs' over four-year delay in filing the motion; they presented ample evidence that SCCA controlled the CEQA litigation against SCC/BB; SCCA was the alter ego of SCC/BB, and it would be unjust not to hold SCCA liable for paying their attorney fees and costs awards against SCC/BB.
In 2006, the City certified an EIR, approved a general plan amendment and a specific plan, and took other actions in approving the development of an approximately 1,500-acre property known as the Black Bench Ranch, located in the City and just south of the San Bernardino National Forest. In November 2006, Highland Springs, Banning Bench, and three other plaintiffs filed four separate CEQA actions challenging the City's certification of the EIR and other project approvals. The actions were later consolidated, apparently for all purposes.
In April 2008, the trial court issued judgments and peremptory writs of mandate, setting aside and vacating the City's certification of the EIR and related project approvals. As noted, SCC/BB appealed, but its appeal was dismissed in September 2008 after it failed to deposit the costs of preparing the record on appeal. (Cal. Rules of Court, rule 8.140.) The remittitur in SCC/BB's appeal was issued in November 2008.
Meanwhile, in August 2008, Highland Springs, Banning Bench, and two of the three other plaintiffs, namely the two Cherry Valley entities,
By September 2008, it was apparent to all of the parties to the CEQA litigation that SCC/BB was having financial difficulties. In a notice of nonopposition to the attorney fees motions, filed in September 2008, the City represented that, while the City was engaged in discussions with SCC/BB to resolve the matter of SCC/BB's contractual obligation to reimburse the City for the City's attorney fees and costs incurred in the CEQA litigation, "[i]t became readily apparent . . . that the Real Party [SCC/BB] was in financial distress. Real Party defaulted on both its loans for the property where the proposed project was to [be] built, and on its agreement to defend and indemnify the City in this litigation." (Italics added.) The City explained it was supporting plaintiffs' motion for attorney fees and costs because a settlement agreement between the City and plaintiffs allowed the City to be reimbursed by Banning Bench for certain attorney fees and costs the City
In October 2008, the trial court awarded $1,081,545.97 in attorney fees to the four moving plaintiffs and against SCC/BB: Highland Springs was awarded $412,819.96; Banning Bench was awarded $288,920.01; and the two Cherry Valley entities were awarded $379,806.
In October 2012, Highland Springs, Banning Bench, and the two Cherry Valley entities moved to add SCCA to the judgments as an additional judgment debtor and render SCCA liable for paying their attorney fees and costs awards. (§ 187.) By October 2012, no part of the awards had been paid. The trial court denied the motion and later denied plaintiffs' motion for a new trial. Only Highland Springs and Banning Bench appealed. (§ 904.1, subd. (a)(2).)
In their motion to amend, plaintiffs claimed SCCA was the alter ego of SCC/BB and it would be unjust not to hold SCCA liable for paying plaintiffs' attorney fees and costs awards. Plaintiffs presented evidence that both SCCA and SCC/BB conducted business under the names "SunCal" and "The SunCal Companies," in connection with procuring the Black Bench property, obtaining the project approvals, and in the CEQA litigation. Plaintiffs adduced a fictitious business name statement, recorded in Orange County on June 1, 2006, showing that "SCC Acquisitions, Inc.," or SCCA, conducted business as "SunCal Companies," and claimed that "[r]eview of documents regarding the history of the project" showed that "SunCal" was the entity that applied to the City to develop the property; "SunCal" was identified as the property owner in the City's notice of scoping meeting preceding the City's preparation of the EIR; and reports prepared for the EIR were prepared for "SunCal," not SCC/BB.
Plaintiffs also adduced letters and correspondence indicating that SunCal or SCCA was involved in negotiating the project approvals with the City and in attempting to settle the matter of plaintiffs' attorney fees claims and awards. For example, in September 2006, Edward J. Casey, counsel for SCCA and the attorney of record in the CEQA litigation for SCC/BB, wrote a letter to the City, "`on behalf of [the] Suncal Companies ("Suncal"),'" whom Mr. Casey identified as "`the project applicant for the Black Bench Specific Plan,'" urging the city council to approve the project. Plaintiffs presented additional evidence that SCC/BB and SCCA had the same chief executive officer, agent for service of process, and principal executive office. Over 70 other business entities, many with "SCC" in their names, also had the same office address and agent for service of process as SCCA and SCC/BB.
In opposing the motion, SCCA denied it was the alter ego of SCC/BB and claimed SCC/BB "was formed and kept as a separate entity, with its own assets, its own bank accounts, and its own accounting." "All corporate formalities were followed," and SCC/BB "was not `undercapitalized.'" SCCA did not dispute that its representatives used the names "SunCal" and "SunCal Companies" interchangeably, and to refer to SCCA, SCC/BB, and other SunCal entities. SCCA was "one of the parent companies" of many "SunCal entities," and for this reason conducted business under the fictitious business name "SunCal Companies." "SunCal" was not a "legal entity," but, like Coca-Cola and McDonald's, was a "brand name for a business that operate[d] through multiple legal entities," and "[a]lmost all, if not all, real estate developers and home builders operate[d] in the same manner."
SCCA explained that "single purpose entit[ies]," like SCC/BB, were commonly used in the real estate development industry. SunCal's practice had been "to hold and own property in a variety of wholly owned and partially owned subsidiaries and joint ventures with equity and debt capital provided by institutional investors, including at one time . . . Lehman Brothers. . . ." SCCA would enter into purchase contracts with property sellers, or take an assignment of a purchase contract already in place, then assign its purchase rights to "a newly formed single purpose entity" in which SCCA typically had an indirect ownership interest, "at times no more than 5%." The property would then be purchased by the newly formed single purpose entity, and "the development is then owned, operated and pursued by
The Black Bench property was acquired in four separate transactions with four property owners, and SCCA either entered into contracts with the property owners or acquired the rights to purchase the property from unrelated third parties. After forming SCC/BB, SCCA assigned its rights to purchase the Black Bench property to SCC/BB, which then took title to the entire property. The acquisition of the property was financed through "seller carry-back financing" and equity contributions from SCC/BB's "immediate member (not SCCA)," which member was formed as a vehicle through which various projects, including the Black Bench project, were financed. During one of the hearings on the motion to amend the judgments, counsel for SCCA revealed that SCCA owned 65 to 70 percent of SCC/BB.
After SCC/BB acquired the Black Bench property, the "development work" was performed under a contract between SCC/BB and "SunCal Management, LLC." As its name suggested, SunCal Management, LLC, was "affiliated with the SunCal organization," and had "the necessary personnel and business infrastructure to perform such development." This was "routine and customary" in the real estate development industry. SCC/BB, "having no employees, could not have performed such development services by itself."
Still, "[a]ll contracts for entitlement and development services" for the Black Bench property were entered into by SCC/BB, not SCCA or SunCal Management, LLC. SCC/BB paid all amounts owing under such contracts from its own bank accounts, using its own funds. SCC/BB also paid its attorneys to defend the CEQA litigation from its own funds, using its own bank accounts.
SCC/BB "spent over $14 million of its own funds to entitle and develop" the Black Bench property, "all of such funds being equity contributions from its member." This member "changed over the life of the [p]roject due to changes in financing arrangements. The member . . . received loan proceeds, either directly or indirectly, from lenders to finance various projects, which proceeds were then contributed as capital to the single purpose entities that owned those projects, one of which was SCC/Black Bench."
SCCA also pointed out that the CEQA litigation was filed in November 2006, and during the next two years, "the housing market in the United States
SCCA argued it would be inequitable and would violate its due process rights to impose alter ego liability on it and hold it responsible for plaintiffs' attorney fees and costs awards against SCC/BB. "Perhaps more importantly," SCCA claimed, it was not given the opportunity to defend the alter ego claim during the CEQA litigation. SCCA maintained that, "[a]t the very least, if SCCA were named as a defendant in the original action six years ago, documents would have been more readily available and memories would have been fresh in the minds of witnesses." SCCA did not indicate that any documents, witness testimony, or other evidence had been lost or was no longer available.
The motion to amend was heard on December 12, 2012, but the hearing was continued to March 27, 2013, then to November 20, 2013. The second continuance was granted in order to allow the parties to pursue discovery and present additional and rebuttal evidence. Before the continued hearings, plaintiffs and SCCA each filed supplemental briefs and submitted additional evidence.
In a five-page ruling issued on January 27, 2014, the court, relying on Alexander, denied the motion to amend based solely on plaintiffs' delay or "lack of due diligence" in bringing the motion. The court explained: "The motion was filed more than four years after issuance of the orders imposing attorney's fees, and almost six years after the commencement of [the] action. [(Alexander, supra, 104 Cal.App.3d 39.)] While [plaintiffs] may have been misled at the start of the litigation, there is [in]sufficient evidence to justify such a long delay. They should have discovered the relevant facts long ago." The court also noted that, though SCCA did not expressly argue "lack of due diligence" or prejudice in its opposition brief, it discussed the "same issue" in two paragraphs of its original opposition brief under the heading "`due process.'"
The court next observed that: "Absent the delay this court would likely have granted the motion. Edward Casey's e-mail of November 16, 2006
Following the denial of the motion to amend, plaintiffs filed a motion for a new trial along with additional evidence. (§ 657.) That motion was denied following a March 21, 2014, hearing.
SCCA made numerous evidentiary objections to plaintiffs' evidence, principally on foundational and hearsay grounds. The court sustained some of the objections, and plaintiffs challenge those rulings on this appeal. For the most part, plaintiffs claim that what would otherwise have constituted hearsay was admissible for the nonhearsay purpose of showing why plaintiffs' representatives did what they did at various points in time, and ultimately waited until October 2012 to file the motion to amend their judgments.
We find it unnecessary to address the court's many evidentiary rulings. All of the excluded evidence concerned the reasons plaintiffs waited until October 2012 to file the motion to amend and whether their delay in filing the motion was unreasonable. As will appear, the question of whether plaintiffs unreasonably delayed in filing the motion to amend is irrelevant to the merits of plaintiffs' alter ego claim against SCCA. It is only relevant to whether plaintiffs' alter ego claim was barred by the equitable, affirmative defense of laches. As we explain, the claim is not barred by laches because SCCA failed to present sufficient evidence that it was prejudiced by plaintiffs' delay in filing the motion, even if the delay was unreasonable.
Section 187 contemplates amending a judgment by noticed motion. (Wells Fargo Bank, N.A. v. Weinberg (2014) 227 Cal.App.4th 1, 9 [173 Cal.Rptr.3d 113] [Fourth Dist., Div. Two] (Wells Fargo); see §§ 1003, 1004, 1005, subd. (a)(13)].) The court is not required to hold an evidentiary hearing on a motion to amend a judgment, but may rule on the motion based solely on declarations and other written evidence. (Wells Fargo, supra, at p. 9.)
In determining whether there is a sufficient unity of interest and ownership, the court considers many factors, including "the commingling of funds and
In Kohn v. Kohn (1950) 95 Cal.App.2d 708 [214 P.2d 71], a marriage dissolution case discussed in Greenspan, the court emphasized the case-specific nature of determining whether to impose alter ego liability: "`"The issue is not so much whether, for all purposes, the corporation is the `alter ego' of its stockholders or officers, nor whether the very purpose of the organization of the corporation was to defraud the individual who is now in court complaining, as it is an issue of whether in the particular case presented and for the purposes of such case justice and equity can best be accomplished and fraud and unfairness defeated by a disregard of the distinct entity of the corporate form." . . . "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." . . . However, to the extent the purpose of the corporation was to fraudulently deprive the wife of a fair property settlement, the corporate entity would be disregarded: "The 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." . . . .'" (Greenspan, supra, 191 Cal.App.4th at p. 511.)
Plaintiffs claim the court erroneously denied their motion to amend the judgments to add SCCA as a judgment debtor based solely on plaintiffs' lack of due diligence, or unreasonable four- to six-year delay, in filing the motion. We agree.
Laches is an equitable, affirmative defense which requires a showing of both an unreasonable delay by the plaintiff in bringing suit, "`plus either acquiescence in the act about which plaintiff complains or prejudice to the defendant resulting from the delay.' [Citation.]" (Miller, supra, 27 Cal.3d at p. 624; see Mt. San Antonio Community College Dist. v. Public Employment Relations Bd. (1989) 210 Cal.App.3d 178, 188 [258 Cal.Rptr. 302].) "If, in light of the lapse of time and other relevant circumstances, a court concludes that a party's failure to assert a right has caused prejudice to an adverse party, the court may apply the equitable defense of laches to bar further assertion of the right." (In re Marriage of Fellows (2006) 39 Cal.4th 179, 183 [46 Cal.Rptr.3d 49, 138 P.3d 200].)
The party asserting laches bears the burden of production and proof on each element of the defense. (Miller, supra, 27 Cal.3d at p. 624.) It is important to remember that, in determining whether laches applies, "[p]rejudice is never presumed; rather it must be affirmatively demonstrated by the defendant in order to sustain his burdens of proof and the production of evidence on the issue. [Citation.] Generally speaking, the existence of laches is a question of fact to be determined by the trial court in light of all of the applicable circumstances. . . . [Citations.]" (Ibid.)
The trial court here denied plaintiffs' motion to amend based solely on plaintiffs failure to exercise due diligence, or unreasonable delay, in filing the motion. The court observed the motion was filed on October 26, 2012, slightly more than four years after October 23, 2008, the date the most recent postjudgment attorney fee award order was issued, and nearly six years after plaintiffs' writ petitions were filed in November 2006. As noted, the court found "[in]sufficient evidence to justify" plaintiffs'"long delay" in filing the motion, and observed that plaintiffs "should have discovered the relevant facts long ago."
The court also found that SCCA was prejudiced by the delay, but insufficient evidence supports this finding. The court reasoned that SCCA had "presumably . . . planned its affairs" since 2006 to 2008 "without reference"
In concluding SCCA was prejudiced, the court pointed to two paragraphs on page 8 of SCCA's original opposition brief as "discussing" "[p]rejudice from [the] delay." There, SCCA argued that if had it been named, along with SCC/BB, as an original defendant or real party in interest in the CEQA litigation in November 2006, then SCCA "could have expended its own resources to defend the litigation, including any claim of alter ego, which resources would have been substantial in 2006 to 2008 when the litigation was ongoing. But now, due to the collapse of the real estate housing market, circumstances are much different. Adding SCCA now, six years after the litigation was filed and over four years after the judgment[s] for attorneys' fees was litigated and entered, and with SCCA's circumstances having materially changed in the interim, would violate SCCA's right to due process."
This was insufficient to show prejudice. It was not enough for SCCA to simply assert, without specifics or supporting evidence, that it no longer had the same resources it had before the real estate market "collapsed" in 2008 and that other unspecified "circumstances [had] materially changed." SCCA did not show that any evidence relevant to its defense to the motion had been lost or destroyed or that any witnesses were no longer available. (Cf. Pratali v. Gates (1992) 4 Cal.App.4th 632, 644 [5 Cal.Rptr.2d 733] (Pratali) [death of key witness may constitute prejudice].) To the contrary, it appears that little to no relevant evidence concerning SCCA's relationship to SCC/BB, and the equities of imposing alter ego liability on SCCA, had been lost or destroyed since 2008.
Indeed, SCCA did not even argue it was prejudiced by plaintiffs' four-year delay in filing the motion to amend, or plaintiffs' near six-year delay in attempting to bring SCCA in as a party to the consolidated CEQA actions. Rather, SCCA claimed its due process rights would be violated if it were forced to defend the motion so long after plaintiffs could have asserted their alter ego claim against SCCA in the CEQA actions. But whether SCCA's due process rights would be violated by imposing alter ego liability upon it—that
In denying the motion to amend, the court relied on Alexander. Plaintiffs claim Alexander is "an outlier; an anomalous departure from settled case law" and in relying on it the court created an impermissible "ad hoc statute of limitation[s]" to bar their motion to amend the judgment. We agree that Alexander is a departure from settled case law. The plaintiffs in Alexander obtained two judgments against a corporation, Abbey of the Chimes (Abbey), one on a promissory note signed by Abbey and another on assignment of commissions owed by Abbey. (Alexander, supra, 104 Cal.App.3d at pp. 42-43.) Abbey incurred the obligations before McCormac, an individual, became its sole shareholder in 1965. (Id. at p. 43.) In 1966, the plaintiffs sued Abbey on the note and on the assignment, without naming McCormac as a defendant, and judgments in favor of the plaintiffs were entered in February 1971. (Id. at pp. 42-43.) Meanwhile, in 1969, McCormac sold Abbey's assets in a bulk sale transfer to another corporation, Skylawn, and the sales agreement required Skylawn to assume Abbey's liability for paying the judgments. (Id. at p. 43.) The plaintiffs never attempted to satisfy their judgments against Abbey or Skylawn. (Ibid.)
In 1977, nearly seven years after the judgments were entered, the plaintiffs moved to amend the judgments to add McCormac as a judgment debtor, claiming he was Abbey's alter ego. (Alexander, supra, 104 Cal.App.3d at p. 43.) The trial court granted the motion. (Id. at p. 42.) On appeal, McCormac claimed his due process rights had been violated because he was not present at the underlying trial. (Id. at p. 44.) The Alexander court rejected this claim, finding there was sufficient evidence that McCormac controlled the underlying litigation. (Id. at pp. 44-46.) The court also found sufficient evidence to support a finding that McCormac was Abbey's alter ego, and it would be unjust not to hold McCormac liable for the judgments, given that he caused Abbey to sell all of its assets, leaving Abbey "a hollow shell without means to satisfy its existing and potential creditors." (Id. at pp. 46-47.) Nonetheless, the court reversed the order amending the judgments on the sole ground that the motion was untimely, while emphasizing that the alter ego doctrine was an equitable one and that the court's task in applying it was to ensure a just and equitable result. (Id. at pp. 47-48.) The court reasoned it was inequitable to hold McCormac liable as an alter ego of Abbey, given the
The Alexander court did not use the term "laches" in reversing the order amending the plaintiffs' judgments. (Alexander, supra, 104 Cal.App.3d at pp. 47-48.) Specifically, the court did not require McCormac to show he was prejudiced by the plaintiffs' unexplained, seven-year delay in filing the motion to amend. (Miller, supra, 27 Cal.3d at p. 624.) Alexander is thus inconsistent with settled case law that an action is barred by laches only if the defendant shows the plaintiff unreasonably delayed in bringing suit, and the defendant was either prejudiced by the delay or the plaintiff acquiesced in the actions it complains of. (Miller, supra, 27 Cal.3d at p. 624; Conti v. Board of Civil Service Commissioners (1969) 1 Cal.3d 351, 359 & fn. 8 [82 Cal.Rptr. 337, 461 P.2d 617].)
In addition to absolving the defendant of proving the prejudice element of laches, the denial of a motion to amend a judgment to add an alter ego defendant based solely on the moving party's unreasonable delay in filing the motion, allows the court to create, by judicial fiat, a de facto limitations
In denying plaintiffs' motion to amend, the court posed an analogy based on an action for breach of a written contract: the court explained that if SCCA had breached a written contract to pay plaintiffs their attorney fees on October 23, 2008, the date of the latest attorney fee award, a lawsuit filed more than four years later, on October 26, 2012, the date the motion to amend was filed, would have been time-barred. (§ 337 [four-year limitations period applies to action on written contract].) This analogy was inapt, because SCCA was not a party to these CEQA actions when plaintiffs obtained their attorney fees and costs awards in October 2008, and SCCA did not have a contractual obligation to pay the awards. Thus, the four-year limitations period on an action for breach of a written contract (§ 337) did not apply to plaintiffs' motion to amend the judgments. (Cf. United States Capital Corp. v. Nickelberry (1981) 120 Cal.App.3d 864, 867 [174 Cal.Rptr. 814] ["An action based on a judgment is an action based on contract. The judgment becomes a debt which the judgment debtor is obligated to pay and the law implies a contract on his part to pay it." (italics added)].)
Alternatively, the judgment may be renewed by bringing an independent action on the judgment within the 10-year limitations period of section 337.5. (§ 683.050; Pratali, supra, 4 Cal.App.4th at pp. 636-638; OCM, supra, 168 Cal.App.4th at pp. 193-195.)
Because a section 187 motion to amend a judgment to add a judgment debtor is an equitable procedure, and is not subject to a fixed limitations period, we discern no reason why laches may not be raised as defense to the motion. As the United States Supreme Court recently observed: "[L]aches is a defense developed by courts of equity; its principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation. [Citation.]" (Petrella v. Metro-Goldwyn-Mayer, Inc. (2014) 572 U.S. ___, ___ [188 L.Ed.2d 979, 134 S.Ct. 1962, 1973].)
In denying plaintiffs' motion to amend, the trial court observed that the equities favored granting the motion, and the court "likely" would have granted the motion if plaintiffs had filed it earlier. The matter must now be remanded to the trial court to determine whether plaintiffs proved their alter ego claim against SCCA. Specifically, the court must determine whether plaintiffs met their burden of demonstrating, by a preponderance of the evidence, that (1) SCCA effectively controlled the CEQA litigation with plaintiffs and was virtually represented in the litigation, (2) there was such a unity of interest and ownership in SCCA and SCC/BB that separate personalities of the two entities did not exist, and (3) an inequitable result will follow unless SCCA is held liable for paying plaintiffs' attorney fees and costs awards. (Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership, supra, 222 Cal.App.4th at pp. 815-816.)
The January 27, 2014, order denying plaintiffs' motion to amend the April 2008 judgments to add SCCA as an additional judgment debtor is reversed, and the matter is remanded to the trial court for further proceedings consistent with this opinion. The parties shall bear their respective costs on appeal. (Cal. Rules of Court, rule 8.278.)
Ramirez, P. J., and McKinster, J., concurred.
Another comment on clause (b), not observed in Alexander, explains when a party's unreasonable delay in seeking relief from a judgment, or delay in seeking to amend a judgment, is likely to produce a hardship or prejudice. It states: "Laches. Elements to be considered. A bill for equitable relief is not barred merely by lapse of time; relief is denied only if it would be unjust to allow it to be granted. The existence of such injustice depends on an affirmative answer to two questions: Has the party seeking relief been unreasonable in his delay after learning the facts; [and] has the delay made it unfair to permit the action either because a hardship would result to the respondent or to third persons because of a change of circumstances or because there would be a substantial chance of reaching an erroneous decision as to the facts?" (Rest., Judgments, § 129, com. on cl. (b), p. 625, second italics added.) This comment comports with settled case law that laches does not apply based solely on an unreasonable delay, but prejudice from the delay must be affirmatively shown. (Miller, supra, 27 Cal.3d at p. 624.)
