Paul v. Palm Springs Homes Inc.

• Decision Date: 09 June 1961
• Citation: 192 Cal.App.2d 858,13 Cal.Rptr. 860
• Court: California Court of Appeals Court of Appeals
• Parties: John Ronald PAUL, Plaintiff and Respondent, v. PALM SPRINGS HOMES INCORPORATED et al., Defendants, Palm Springs Homes Incorporated and Pauline K. Boltz, Defendants and Appellants. Civ. 6542.

Page 860

13 Cal.Rptr. 860

192 Cal.App.2d 858

John Ronald PAUL, Plaintiff and Respondent, v. PALM SPRINGS HOMES INCORPORATED et al., Defendants Palm Springs Homes Incorporated and Pauline K. Boltz, Defendants and Appellants.

Civ. 6542.

District Court of Appeal, Fourth District, California.

June 9, 1961.

Hearing Denied Aug. 2, 1961.

Maurice J. Hindin, Beverly Hills, for appellants.

Claude L. Rowe, Fresno, for respondent.

GRIFFIN, Presiding Justice.

In an amended complaint, plaintiff and respondent John Ronald Paul sought judgment against defendants and appellants Plam Springs Homes Incorporated and Pauline K. Boltz and defendants Walker Boltz, individually and doing business as Palm Springs Homes, Inc., and also doing business as Annandale Corporation, which was alleged to be the alter ego of defendants F. Walker Boltz and Pauline K. Boltz. In the first count, plaintiff alleges that defendants executed and delivered to plaintiff a certain promissory note attached to the complaint in the sum of $37,500, and that there is a balance due thereon of $25,000 principal plus $1,250 interest. The note is signed 'Annandale Corporation, by F. Walker Boltz, President, attest: J. E. Forbes.'

The second cause of action is based on an unpaid note for $10,000, dated March 10, 1958, payable to plaintiff and signed 'Palm Springs Homes Incorported, F. Walker Boltz, President, J. E. Forbes, Secretary.' It is alleged that said note was executed by Palm Springs Homes Incorporated for itself and as the alter ego of defendants j. Walker Boltz and Pauline K. Boltz.

The third cause of action alleges that on January 10, 1958, Plam Springs Homes Incorporated, for itself and as alter ego for defendants F. Walker Boltz and Pauline K. Boltz, at Fresno, executed and delivered to plaintiff a promissory note in consideration of $10,000 paid to F. Walker Boltz, which inured to the benefit of defendants Palm Springs Homes Incorporated and Pauline K. Boltz and F. Walker Boltz, and was in fact a promissory note of said Palm Springs Homes Incorporated and that $5,000 plus interest of $2,566.67 was due thereon. The total judgment sought against each and all of defendants was $47,608.34.

Preceding these allegations which were incorporated in each cause of action are general and specific allegations that defendants Pauline Boltz and F. Walker Boltz were doing a real estate and subdivision business under several different names, including California Dream Homes Company, Palm Springs Homes, Inc., Palm Springs Homes Incorporated, Annandale Corporation, Fortune Mortgage Company, and Palm Springs Country Club Estates, and that each was the alter ego of defendant Boltz and his wife, and that the acts, signatures and liabilities of these firms were the acts and signatures and the liability of these individual defendants. It was alleged that F. Walker Boltz was judgment proof and a list of unsatisfied judgments against him was set forth. It is then alleged that Boltz and his wife, for the purpose of defrauding their existing and future creditors, and to conceal their assets from their creditors, caused these corporations to be formed; that none was adequately financed and no permit to issue stock was issued to Palm Springs Homes Incorporated until January 26, 1959 when 200 shares of $100 par value stock were issued to Pauline K. Boltz and J. E. Forbes in cancellation of an alleged indebtedness to Pauline K. Boltz and J. E. Forbes and said stock was taken in the name of J. E. Forbes, sister of F. Walker Boltz, solely as agent for and on bhalf of F. Walker Boltz and that he and his wife were the real owners of said stock and completely controlled said corporation and used it as their alter ego and business conduit in the conduct of their business.

It is also alleged that defendant Annandale Corporation was likewise inadequately financed; that no permit to issue stock was issued until January 10, 1957; that 50 shares of stock having a par value of $10 per share were then issued; tnat, as their alter ego, Boltz and his wife got plaintiff to lend them, through said corporation, $25,000, as evidenced by said note; that they allowed said corporation's powers to lapse and that its corporate powers were suspended on January 21, 1959 and said corporation was used as a front by Boltz and his wife; that the corporation was controlled by them and was used as a business conduit by them, for perventing plaintiff and other creditors from collecting their indebtedness and for hiding the assets of the defendants Boltz. It is then alleged that Boltz and his wife, since the execution of these notes, caused Palm Springs Homes Incorporated to transfer most of the real property standing in its name to defendant Pauline K. Boltz in order to dissipate the corporation's assets and to cause its corporate powers to lapse; that Mr. Boltz has an interest therein and Mrs. Boltz has taken title thereto to prevent plaintiff and other creditors of Mr. Boltz from levying execution upon or attaching said property; that Boltz and his wife are the sole owners of Palm Springs Homes Incorporated and that by reason of the foregoing fraud, injury will result to plaintiff if the corporate fiction and corporate veil of the defendant corporations are not pierced. Affidavits in opposition to the motions to quash attachment set forth in more detail these general allegations.

Appellant Mrs. Boltz contends on appeal: (1) that no attachment could lie as to her property under the allegations of the amended complaint and affidavits used in support of the attachment because the first cause of action is based on an alleged indebtedness of Annandale Corporation and insufficient facts are alleged to show that it was the alter ego of Mrs. Boltz or Palm Springs Homes Incorporated (citing such authority as O'Connell v. Walker, 12 Cal.App. 694, 108 P. 668; Estate of Greenwald, 19 Cal.App.2d 291, 65 P.2d 70; Shafford v. Otto Sales Co., Inc., 119 Cal.App.2d 849, 260 P.2d 269); (2) that an action to disregard a corporate entity and hold an individual liable as its alter ego is equitable in nature and will not support the provisional remedy of attachment, particularly where no ownership of stock in the corporation is alleged (citing Hallidie v. Enginger, 175 Cal. 505, 166 P. 1; Stowe v. Matson, 94 Cal.App.2d 678, 211 P.2d 591; Talcott Land Co. v. Hershiser, 184 Cal. 748, 195 P. 653; Shea v. Leonis, 14 Cal.2d 666, 96 P.2d 332); (3) that the value of the properties held under attachment greatly exceeds the amount of the indebtedness and accordingly it constituted an excessive attachment and the excess should be released (citing Code Civ.Proc., secs. 538, 540; Barceloux v. Dow, 174 Cal.App.2d 170, 344 P.2d 41); and (4) that the levy of an attachment creates a specific lien upon the real property so attached and under Code of Civil Procedure, section 537, subdivision 1, plaintiff may not secure an attachment for that portion of the claim which is 'secured by any mortgage * * * or lien,' and that plaintiff may not jointly attach property standing in the name of separate defendants (citing such authority as Bank of South San Francisco v. Pike, 53 Cal.App. 524, 200 P. 752).

I. Alter Ego Allegation

In answer to appellant's argument that the amended complaint and affidavits presented did not sufficiently show that Annandale Corporation and Palm Springs Homes Incorporated were being operated as the later ego of Pauline K. Boltz, we are convinced that there was a sufficient showing made to the trial court, although the evidence may be conflicting, that the alleged corporations were acting as the alter ego of Pauline K. Boltz and her husband. The trugh of these allegations can be determined after evidence upon the issue of liability is formally presented at the trial of the action. 6 Cal.Jur.2d 11, sec. 108; Asamen v. Thompson, 55 Cal.App.2d 657, 131 P.2d 839. Appellant did not order the original complaint brought up to this court as a part of the record on appeal. We will assume it contains similar provisions to those set forth in the amended complaint. It is the general rule that on a motion to discharge an attachment the motion cannot serve the purpose of a demurrer to test the sufficiency of the complaint. Minor v. Minor, 175 Cal.App.2d 277, 345 P.2d 954; Wolford v. Neustadter, 21 Cal.App.2d 417, 418, 69 P.2d 909. The amended complaint does state a cause of action...