SAN FRANCISCO -- The First District Court of Appeal of California has decided to uphold the rulings in the cases of Mary Frances Truebridge, et al. vs. Michael Thaler et al., Jane Yoon vs. Dena Thaler, and Jane Yoon vs. Herb Leibowitz, allowing plaintiffs and the defendant to collect their costs through appeal.
In its decision filed March 30, the appeals court said the most important issue in the appeal it heard was ''whether the trial court erred in concluding that the founders of a closely held corporation were subject to alter ego liability for the corporation’s activity."
The court wrote in its decision that the superior court awarded Truebridge $145,398.42 in March 2009 after she initially filed suit against California Trust Deeds in January 2008 and won her case, which she sued over ''various grounds, including breach of contract and fraud.''
The appeals court wrote 'in response to a notice of default sent by CTD, the debtor sent CTD the payoff of $66,517.18. which CTD received and deposited in a checking account.' The appeals court added ''Gladney diverted the funds to pay other CTD clients, CTD expenses, and personal expenses, and Truebridge never received the $66,517.18.''
The appeals court wrote Truebridge could not receive the money, which factored in "$66,517.18 in principal, $33,000 in punitive damages, $9,683.74 in interest, and $36,297.50 in attorney fees," because CTD shut down and ''no assets'' were available. The appeals court wrote that that caused Truebridge to bring the new suit in April 2009.
The court wrote in Yoon's case that ''CTD sent the debtor notices of default, and in response the debtor sent CTD $214,773.16, which CTD deposited in its checking account.'' According to the court decision, ''Gladney paid only $125,000 of that amount to Yoon, and diverted the rest to himself and to CTD expenses [and] Yoon was owed an additional $89,773.16.'' The court wrote that Yoon sued for the additional money in February 2009.
The appeals court said Yoon sent in a fifth amended complaint in 2013 that ''names not only CTD and Gladney as defendants, but also Michael, Herb, and Dena, CTD’s retained counsel from the time of its founding through January 2009.''
The appeals court wrote the superior court combined the two lawsuits and sent the case to a 'bench trial.' The appeals court wrote that the superior court decided in favor of Truebridge, calling Herb Thaler and Leibowitz company alter egos. The appeals court wrote in its decision that the superior court decided in Yoon's favor in her lawsuit against Leibowitz and in Dena Thaler's favor in Yoon's lawsuit against her.
The appeals court wrote in its decision, Yoon won $89,77.16 plus prejudgment interest vs. Gladney, Herb and CTD, but ''the court awarded no damages to CTD as involuntary plaintiff against Dena and awarded Dena costs and attorney fees from CTD.''
The appeals court said it used substantial evidence to go over the superior court's rulings on alter-ego liability. The appeals court ruled that ''substantial evidence supports the trial court’s conclusion that Michael was CTD’s alter ego, and the findings on which the conclusion rests, including the under-capitalization of CTD and Michael’s domination and control of CTD.'' The court also ruled ''substantial evidence supports the trial court’s finding that it would be inequitable to treat CTD’s actions with regard to Truebridge as the actions of CTD alone, rather than as the actions of CTD and Michael.''
The appeals court also decided ''substantial evidence supports the trial court’s conclusion that Herb Thaler was CTD’s alter ego, and the findings on which the conclusion rests, including its findings that Herb dominated and controlled CTD such that there was identity of interest between him and CTD, that he concealed and misrepresented the identity of the responsible ownership and management, and that he held himself out as personally liable for CTD’s debts, commingled his funds with CTD’s, failed to observe corporate formalities, and failed to adequately capitalize CTD.''
The appeals court also decided substantial evidence made Herb Thaler ''liable to Yoon as CTD’s alter ego.''
Regarding Yoon's appeal, the appeals court decided Yoon did not have a strong enough argument that Thaler had legal responsibility to her.