Motores De Mexicali, S. A. v. Superior Court In and ForLos Angeles County

• Decision Date: 31 October 1958
• Citation: 331 P.2d 1,51 Cal.2d 172
• Court: California Supreme Court
• Parties: MOTORES DE MEXICALI, S.A. (a Corporation), Petitioner, v. The SUPERIOR COURT of the State of California, IN AND FOR The COUNTY OF LOS ANGELES, Respondent, Erwin G. RESNICK et al., Real Parties in Interest. L. A. 25069.

Page 1

331 P.2d 1

51 Cal.2d 172

MOTORES DE MEXICALI, S.A. (a Corporation), Petitioner, v. The SUPERIOR COURT of the State of California, IN AND FOR The COUNTY OF LOS ANGELES, Respondent Erwin G. RESNICK et al., Real Parties in Interest.

L. A. 25069.

Supreme Court of California, In Bank.

Oct. 31, 1958.

Utley & Houck and Alden F. Houck, Los Angeles, for petitioner.

No appearance for respondent.

George W. Rochester, La Habra, for real parties in interest.

SPENCE, Justice.

Petitioner seeks a writ of mandate to compel the respondent court to proceed with the hearing on a petition for an order to show cause why a final judgment, previously entered only against a single defendant, Erbel, Inc., should not be corrected by adding the names of each of the real parties in interest herein as judgment debtors. Respondent court has indicated its intention to dismiss the petition without a hearing on the merits because it believes it lacks jurisdiction to act. The matter has been continued by that court in order to afford petitioner the opportunity to file the petition in this proceeding.

On June 9, 1953, petitioner filed an action in the respondent court to recover the principal and accrued interest due on certain automobile purchase drafts issued in the name of Bi Rite Auto Sales. The complaint named Erbel, Inc., as the sole defendant, and alleged that it was doing business under the fictitious name of Bi Rite Auto Sales. Service was made by delivery of a copy of the summons and complaint to the president of Erbel, Inc., William D. Cowan, one of the real parties in interest here. Neither he nor the other two real parties in interest, Erwin G. Resnick and R. William Cowan, were named as parties or served in their individual capacities. On June 25, 1953, a judgment by default in the amount of $26,900.83, plus interest and costs, was entered against Erbel, Inc., as 'a California corporation, individually, and doing business under the fictitious name of Bi Rite Auto Sales.' Shortly thereafter, Erbel, Inc., went into bankruptcy and turned over its assets to a trustee in bankruptcy. Petitioner filed a claim based on the default judgment and received $6,383.26 in dividends from the bankrupt estate. In addition, it collected $240.64 through an attachment levied on the used cars and other personal property belonging to Erbel, Inc. The default judgment became final. The unpaid balance on it, amounting to $20,520.29, together with the accrued interest now exceeds $26,000.

On March 6, 1957, petitioner filed in respondent court a petition for an order to show cause 'why the judgment entered * * * on June 25, 1953, should not be corrected by adding thereto the names of Erwin G. Resnick, William D. Cowan and R. William Cowan as judgment debtors * * *.' In substance the primary allegations of the petition were as follows: Petitioner sold used automobiles to Resnick and the Cowans, and received in payment bank drafts issued in the name of Bi Rite Auto Sales. The drafts were dishonored upon presentation. An immediate search of the public records disclosed that a California corporation known as Erbel, Inc., had filed the fictitious name certificate for Bi Rite Auto Sales. Relying on that certificate, petitioner brought can action on the drafts against Erbel, Inc., and secured the default judgment which subsequently became final. During the course of the bankruptcy proceedings of Erbel, Inc., and another creditor's action (Automotriz Del Golfo De California S. A. De C. V. v. Resnick, 47 Cal.2d 792, 306 P.2d 1), it finally discovered that Resnick and the Cowans were actually buying and selling used automobiles under the fictitious name of Bi Rite Auto Sales. The corporation known as Erbel, Inc., was under their full control and management, and was simply being used by them as a means for diverting the revenues of the business to themselves as salaries and loan repayments while at the same time avoiding any personal liability for the obligations of the business. They knew that their financial manipulations would ultimately lead the corporation into bankruptcy. The petition concluded with the assertion that Resnick and the two Cowans operated Erbel, Inc., merely as their alter ego, and that they should thus be held individually liable for the debts of the business conducted under the fictitious name of Bi Rite Auto Sales. To accomplish this, it was requested that they be made judgment debtors under the judgment previously entered against Erbel, Inc.

Petitioner now claims that its petition for an order to show cause was an appropriate procedure (see Code Civ.Proc., § 187) for determining whether Resnick and the Cowans were persons who should be bound by the judgment theretofore rendered solely against Erbel, Inc., and that the hearing should have proceeded on the alter ego issue thus raised. It cites Mirabito v. San Francisco Dairy Co., 8 Cal.App.2d 54, 47 P.2d 530, and Thomson v. L. C. Roney & Co., 112 Cal.App.2d 420, 246 P.2d 1017, for the proposition that a trial court has the power to correct its judgment by designating as judgment debtors those persons whom it finds to have used the particular entity named in the original judgment as their alter ego.

However, an examination of the facts of those two cases clearly reveals that they...