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Thomas Misik v. Thomas R. D'arco

July 27, 2011


(Los Angeles County Super. Ct. No. GC041193) APPEAL from an order of the Superior Court of Los Angeles County, C. Edward Simpson, Judge.

The opinion of the court was delivered by: Kitching, J.


Reversed with directions.


Plaintiff Thomas Misik appeals from an order denying his motion to amend the judgment to add defendant Thomas R. D'Arco to the judgment as a judgment debtor. The judgment had found a corporate entity, Sayrahan Group, LLC (Sayrahan) liable for breach of contract. The motion to amend the judgment relied on the alter ego doctrine to argue that the trial court should disregard the corporate entity, find that D'Arco was the alter ego of Sayrahan, and hold D'Arco liable for the judgment against Sayrahan. The trial court appears to have denied the motion to amend the judgment because it erroneously believed that procedural grounds precluded it from ruling on that motion. We hold that Code of Civil Procedure section 187 authorizes a trial court to amend a judgment to add a judgment debtor who is found to be an alter ego of a corporate defendant. The alter ego doctrine does not require proof of fraud, and can be satisfied by evidence that adherence to the fiction of the separate existence of the corporation would promote injustice. Finally, a plaintiff's failure to allege the alter ego doctrine in the underlying lawsuit does not preclude a motion to amend the judgment. We reverse the order denying the motion to amend the judgment and remand with directions to the trial court to conduct new proceedings and make a factual determination whether the elements of the alter ego doctrine are satisfied and to rule on whether to grant the motion to amend the judgment to add Thomas R. D'Arco as a judgment debtor.


At the behest of Martin Ballardo, Misik delivered $150,000 in exchange for two interest-bearing notes and deeds of trust. The notes identified Sayrahan as payor and promised Misik 12 percent interest payments commencing on May 17, 2007, and June 18, 2007, respectively. D'Arco signed the notes as Chief Executive Officer of Sayrahan.

Misik had never before heard of Sayrahan, and thought he was lending directly to Ballardo. Misik had not spoken with D'Arco before lending the money, did not know that D'Arco owned Sayrahan, and did not know Sayrahan was going to issue promissory notes.

After delivering loan proceeds, Misik received several post-dated checks representing interest payments. One of these checks was from D'Arco's personal account. Shortly thereafter Sayrahan stopped making payments on the notes. Misik demanded his money back from Ballardo and D'Arco, but they refused to pay him.

On July 22, 2008, Misik filed a complaint alleging breach of contract against Ballardo and Sayrahan and fraud against Ballardo and D'Arco. After a trial by the court, the court found that Sayrahan executed two promissory notes with Misik whereby Misik lent Sayrahan $150,000, promised to pay back the principal within two years and 12 percent annual interest, failed to pay Misik any of the principal due and owing under the notes, and owed 12 percent per annum interest on principal as of April 2008. The trial court further found that Ballardo intentionally defrauded Misik, induced him to remit $150,000 to Sayrahan as a conduit for Ballardo's own financial gain, and thereby obtained Misik's money under false pretenses. On November 4, 2009, the trial court entered judgment for Misik for breach of contract, and found Sayrahan liable to Misik for $150,000 plus 12 percent interest accruing from April 2008 through May 2009. The judgment found Ballardo liable to Misik for fraud in the amount of $150,000, but stated that D'Arco was not liable for fraud.

On January 15, 2010, Misik conducted a judgment debtor examination of Sayrahan through its principal, D'Arco. In the judgment debtor examination, D'Arco gave the following information about Sayrahan:

D'Arco always had 100 percent ownership of Sayrahan. D'Arco alone made all binding decisions for Sayrahan and no one else had the ability to make a decision that could bind Sayrahan. Other than D'Arco, Sayrahan never had any officers or employees.

No one ever prepared or kept corporate meeting minutes for Sayrahan.

Sayrahan never maintained any business address apart from D'Arco's residence, and never maintained any separate phone number from that of D'Arco. Sayrahan never had its own website.

Immediately after Misik delivered money to Sayrahan, Sayrahan's liabilities exceeded its assets. Since 2007, Sayrahan never had a month during which its account starting or ending balance exceeded ...

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