Ukoha v. REGR, LLC CA2/1 ( 2021 )

Filed 3/1/21 Ukoha v. REGR, LLC CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
IFEOMA UKOHA, B295158
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC482976)
v.
ORDER MODIFYING OPINION
REGR, LLC, et al.,
[NO CHANGE IN JUDGMENT]
Defendants and Respondents.
THE COURT:
It is ordered that the opinion filed February 25, 2021, be
modified as follows:
On the title page, John T. Schreiber shall be removed from
counsel for Plaintiff and Appellant and added to counsel for
Defendants and Respondents Gregory Royston and Richard
Enderlin. Counsel listing will read as follows:
Herbert Wiggins and Herbert N. Wiggins for Plaintiff and
Appellant.
Michael Shemtoub; John T. Schreiber for Defendants and
Respondents Gregory Royston and Richard Enderlin.
There is no change in judgment.
____________________________________________________________
ROTHSCHILD, P. J CHANEY, J. FEDERMAN, J.*
*Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
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Filed 2/25/21 Ukoha v. REGR, LLC CA2/1 (unmodified opinion)
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
IFEOMA UKOHA, B295158
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC482976)
v.
REGR, LLC, et al.,
Defendants and Respondents.
APPEAL from an order of the Superior Court of Los
Angeles County, Terry Green, Judge. Affirmed.
Herbert Wiggins and Herbert N. Wiggins; John T.
Schreiber for Plaintiff and Appellant.
Michael Shemtoub for Defendants and Respondents
Gregory Royston and Richard Enderlin.
___________________________________
In 2012, Ifeoma Ukoha filed a complaint against a real
estate investor, REGR, LLC, and several Doe defendants,
alleging defendants wrongfully foreclosed on her property. In
2017, five and a half years later, Ukoha substituted Gregory
Royston and Richard Enderlin, REGR’s principals, for Doe
defendants, but never served them. In 2018, the trial court
granted Royston’s and Enderlin’s motion to quash service of
summons on them, and then granted their motion to dismiss the
action for lack of prosecution.
On appeal, Ukoha contends that a defendant corporation’s
alter ego need not be named as a defendant nor individually
served to establish jurisdiction. We disagree, and therefore
affirm the judgment.
BACKGROUND
We take the facts from the third amended complaint,
accepting them as true for purposes of this appeal. Nothing in
this opinion should be construed as a resolution of a disputed
issue of fact or as a determination that any fact is undisputed.
A. Real Estate Transactions and Bankruptcy
3904 Gibraltar Avenue Trust owned a 17-unit apartment
building located at 3904 Gibraltar Avenue in Los Angeles. The
trustee was either Savvy Real Estate, Inc., (Savvy) or Trustee
Properties, LLC (TPLLC). David Behrend was the owner and
executive officer of both entities. The property was encumbered
by a $1.1 million promissory note for a loan made by Velocity
Commercial Capital Bank (Velocity Bank) to TPLLC at 6.5
percent interest, secured by a deed of trust in favor of the bank.
The deed of trust gave Velocity Bank the right to sell the
property in case TPLLC defaulted on the loan. The note and
deed of trust were recorded on September 30, 2005.
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Two days before the first note and trust deed were
recorded, on September 28, 2005, 3904 Gibraltar Avenue Trust
sold the property for $1.85 million to plaintiff, who made a
$500,000 down payment and executed a second promissory note,
for $1.35 million with a 6.625 percent interest rate, in favor of
3904 Gibraltar Avenue Trust, secured by a second deed of trust.
The second promissory note stated the principal amount
due on the note included the principal balance owed to Velocity
Bank on the first note. The second note also stated that Behrend
would make payments on the first note from payments received
from plaintiff on the second note. However, Behrend informed
plaintiff he owned or controlled Velocity Bank, and she would be
the senior lienholder.
On March 25, 2010, Behrend filed for Chapter 7
bankruptcy reorganization in the United States Bankruptcy
Court for the Central District of California.
Behrend then caused the trustee of 3904 Gibraltar Avenue
Trust to assign the second note and deed of trust to himself in his
personal capacity, making them part of his bankruptcy estate.
At some point the bankruptcy trustee converted Behrend’s
Chapter 7 bankruptcy reorganization to a Chapter 11 liquidation,
and in September 2011 moved in the bankruptcy court for
authorization to sell at auction the estate’s interest in the second
note and trust deed, with a minimum purchase price of $6,000.
Behrend, Savvy, TPLLC and 3904 Gibraltar Avenue Trust
colluded with a real estate investor, REGR, LLC, to manipulate
the bankruptcy auction sales price, exclude plaintiff from
bidding, and purchase the note and trust deed for $6,000. On
November 14, 2011, REGR purchased the note and trust deed at
the auction for $6,000.
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Behrend also caused TPLLC to default on the first
promissory note.
On January 23, 2012, REGR, controlled by Royston and
Enderlin, served and recorded a notice of default and election to
sell under the second trust deed, falsely alleging plaintiff was in
default on the second note in the amount of $341,793.88, when
she actually had a credit of more than $200,000. The property
was thereafter sold to a third party.
B. Ukoha’s Complaint
On April 18, 2012, Ukoha sued REGR and 100 Doe
defendants, asserting causes of action for breach of contract,
unfair business practices, slander of title, misrepresentation,
negligence, breach of fiduciary duty, and unjust enrichment,
alleging REGR’s collusion with Behrend to fix the bid price of the
second note and trust deed at the bankruptcy auction, breach of
contract, failure to credit payments she had made, and
institution of foreclosure proceedings when she was not in default
violated federal law and constituted unfair business practices
within the meaning of Business and Professions Code section
17200 et seq.
On September 20, 2017, Ukoha filed a third amended
complaint.
On October 31, 2017, five and a half years after filing the
complaint, Ukoha for the first time substituted Royston and
Enderlin for Doe defendants.
On September 10, 2018, the trial court granted Royston’s
and Enderlin’s motion to quash service of summons, finding any
possible service untimely.
On October 16, 2018, the court granted Royston’s and
Enderlin’s motion to dismiss the complaint under both the two-
4
year discretionary and three-year mandatory provisions of Code
of Civil Procedure section 583.250.
Ukoha appeals from the judgment of dismissal.
DISCUSSION
Ukoha contends that beginning in 2014, Enderlin and
Royston filed several pleadings with the superior court on
REGR’s behalf, even after REGR had dissolved, which
constituted general personal appearances that vested the court
with personal jurisdiction over them as REGR’s alter egos. We
disagree.
“ ‘To sustain a personal judgment the Court must have
jurisdiction of the subject-matter, and of the person.’ ”
(Rockefeller Technology Investments (Asia) VII v. Changzhou
SinoType Technology Co., Ltd. (2020) 9 Cal.5th 125, 138
(Rockefeller).) “ ‘The consistent constitutional rule has been that
a court has no power to adjudicate a personal claim or obligation
unless it has jurisdiction over the person of the defendant.’ ” (Id.
at p. 139.)
A court asserts jurisdiction over a party by service of
process. (Rockefeller, supra, 9 Cal.5th at p. 139; Code Civ. Proc.,
§ 410.50, subd. (a).) “ ‘Process’ signifies a writ or summons issued
in the course of a judicial proceeding.” (Code Civ. Proc., § 17,
subd. (b)(7).)
Service of process performs a second important function.
“From the defendant’s perspective, ‘[d]ue notice to the defendant
is essential to the jurisdiction of all courts, as sufficiently appears
from the well-known legal maxim, that no one shall be
condemned in his person or property without notice, and an
opportunity to be heard in his defence.” [Citation.] Service of
process thus protects a defendant’s due process right to defend
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against an action by providing constitutionally adequate notice of
the court proceeding.” (Rockefeller, supra, 9 Cal.5th at p. 139.)
A party may waive service of process and “voluntarily
submit himself to the jurisdiction of the court.” (Rockefeller,
supra, 9 Cal.5th at p. 139.) “ ‘Process is waived by a general
appearance, in person or by attorney, entered in the action, or by
some act equivalent thereto, such as the filing of a pleading in the
case or by otherwise recognizing the authority of the court to
proceed in the action.’ ” (Ibid., italics omitted.) “A general
appearance by a party is equivalent to personal service of
summons on such party.” (Code Civ. Proc., § 410.50, subd. (a).)
A “summons and complaint shall be served upon a
defendant within three years after the action is commenced
against the defendant. For the purpose of this subdivision, an
action is commenced at the time the complaint is filed.” (Code
Civ. Proc., § 583.210, subd. (a).) If service is not made within this
time, the action must be dismissed. (Code Civ. Proc., § 583.250.)
Here, the complaint was filed in 2012. Enderlin and
Royston have never been served. Therefore, the trial court had
no choice but to dismiss the complaint.
Ukoha correctly observes that the time limit for service
does not apply if the defendant has made a general appearance.
(Code Civ. Proc., § 583.220.) She argues that because they were
REGR’s alter egos, Enderlin and Royston made general
appearances on their own behalves when they filed pleadings on
REGR’s behalf. We disagree.
“The term ‘appearance’ is defined as . . . a coming into court
as a party to a suit . . . .” (28 Cal. Forms of Pleading and
Practice—Annot. (2020) § 323.61, italics added.) Enderlin and
Royston were not made parties to this lawsuit until October 2017,
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when they were substituted for Doe defendants. Therefore, none
of the documents they filed on REGR’s behalf brought them into
court as parties.
Ukoha argues that Enderlin and Royston at all times
directed and controlled the activities of REGR, including causing
it to dissolve and continue litigation in this case after dissolution,
all of which worked to deceive Ukoha and the court as to the
actual wrongdoers in these proceedings. Whether or not these
allegations are true, Ukoha’s remedy was to name Enderlin and
Royston as defendants and serve them with the complaint within
three years. This she failed to do. The alter ego doctrine works
to fix liability on the true actors behind a faux corporation, but
only once personal jurisdiction exists over them. The doctrine
cannot create personal jurisdiction.
There is a post-judgment exception. Code of Civil
Procedure section 187 provides that once a court has jurisdiction
over a party, it may employ “all the means necessary to carry [its
jurisdiction] into effect.” (Code Civ. Proc., § 187.) “This includes
the authority to amend a judgment to add an alter ego of an
original judgment debtor, and thereby make the additional
judgment debtor liable on the judgment. [Citation.] Amending a
judgment to add an alter ego of an original judgment debtor ‘ “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.” ’ ” (Highland
Springs Conference & Training Center v. City of Banning (2016)
244 Cal.App.4th 267, 280.) No similar procedure exists to
exercise personal jurisdiction over a corporation’s alter egos
before judgment.
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During oral argument, Ukoha’s counsel acknowledged that
Code of Civil Procedure section 187 enables a plaintiff to amend a
judgment by adding the alter ego of a corporate judgment debtor,
but he chose not to rely on this procedure. Instead, he argues
that an alleged alter ego ispo facto waives notice and jurisdiction.
We disagree. To dispense with the requirement to name and
serve a corporation’s alleged alter egos would substantially
change the law for no discernable benefit, given that a plaintiff
could simply name the alter ego as a defendant in the first place
or move to amend the judgment after trial.
That Enderlin and Royston had actual knowledge of the
litigation, and knew that Ukoha alleged their individual
wrongdoing, bodes nothing. Until Ukoha named them as parties,
Enderlin and Royston had no notice that a personal defense
would be required.
Ukoha cites several cases for the proposition that the alter
ego doctrine will pierce the corporate veil so as to vest a court
having jurisdiction over the corporation with subject matter
jurisdiction over the corporation’s alter egos. The point is not in
dispute, but it is irrelevant here.
Ukoha also relies upon Mathes v. National Utility
Helicopters, Ltd. (1977) 68 Cal.App.3d 182, which is inapposite.
There, the court held that jurisdiction over a parent corporation
gives rise to personal jurisdiction over its subsidiary corporation
“if the parent so controls and dominates the subsidiary as in
effect to disregard the latter’s independent corporate existence.”
(Id. at p. 190.) “The basic test is whether the one corporation is
the alter ego of the other.” (Ibid.) But Mathes does not suggest
that personal jurisdiction automatically exists over individuals
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who control a corporation, and we decline to so extend its holding.
Even if we did, that would not solve the due notice problem.
When a corporation is a defendant, appearances on the
corporation’s behalf by its non-party alter egos neither vests the
court with personal jurisdiction over them nor provides notice
that the plaintiff intends also to hold them liable.
DISPOSITION
The judgment is affirmed. Respondents are to recover their
costs on appeal.
NOT TO BE PUBLISHED
CHANEY, J.
We concur:
ROTHSCHILD, P. J.
FEDERMAN, J.*
*Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
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