Curci Invs., LLC v. Baldwin

221 Cal. Rptr. 3d 847, 14 Cal. App. 5th 214, 2017 WL 3431457, 2017 Cal. App. LEXIS 698
CourtCalifornia Court of Appeal, 5th District
DecidedAugust 10, 2017
DocketG052764
StatusPublished
Cited by45 cases

This text of 221 Cal. Rptr. 3d 847 (Curci Invs., LLC v. Baldwin) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Curci Invs., LLC v. Baldwin, 221 Cal. Rptr. 3d 847, 14 Cal. App. 5th 214, 2017 WL 3431457, 2017 Cal. App. LEXIS 698 (Cal. Ct. App. 2017).

Opinion

THOMPSON, J.

*217Respondent James P. Baldwin (Baldwin), a prominent real estate developer, is no stranger to the complicated world of business entity structuring. Over the course of his lifetime, he has formed and held interest in hundreds of corporations, partnerships and limited liability companies. This appeal concerns one of those limited liability companies, JPB Investments LLC (JPBI).

Appellant Curci Investments, LLC (Curci) sought to add JPBI as a judgment debtor on a multi-million dollar judgment it had against Baldwin personally. Curci asserted Baldwin held virtually all the interest in JPBI and controlled its actions, and Baldwin appeared to be using JPBI as a personal bank account. Curci argued, under these circumstances, it would be in the interest of justice to disregard the separate nature of JPBI and allow Curci to access JPBI's assets to satisfy the judgment against Baldwin.

Citing Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 77 Cal.Rptr.3d 96 ( Postal Instant Press ), the court denied Curci's motion based on its belief the relief sought by Curci, commonly known as reverse veil piercing, is not available in California.

On appeal, Curci asserts Postal Instant Press is distinguishable, and urges us to conclude reverse veil piercing is available in California and appropriate in this case.

*218We agree Postal Instant Press is distinguishable, and conclude reverse veil piercing is possible under these circumstances. Therefore, we will reverse and remand for the court to make a factual determination as to whether JPBI's veil should be pierced.

*849FACTS AND PROCEDURAL HISTORY

In January 2004, Baldwin formed JPBI, a Delaware limited liability company, for the exclusive purpose of "hold[ing] and invest[ing] [Baldwin and his wife's] cash balances." JPBI has two members, Baldwin with a 99 percent member interest and his wife with a one percent member interest. Baldwin is a manager and the chief executive officer (CEO) of the company. In these roles, and given his member interest, Baldwin determines when, if at all, JPBI makes monetary distributions to its members-i.e., Baldwin and his wife.

Two years after forming JPBI, Baldwin, individually, borrowed $5.5 million from Curci's predecessor in interest. The loan was memorialized in a promissory note executed by Baldwin and the managing member of Curci's predecessor (the Curci note). In the Curci note, Baldwin agreed to pay back the principal amount of the loan, with interest, by January 2009. Curci was assigned the lender's interest in the Curci note shortly after it was executed.

One month after executing the Curci note, Baldwin settled eight family trusts to provide for his grandchildren during and after their college years (the family trusts). Baldwin's children are the designated trustees. At least one of his sons, however, is unaware of the family trusts despite his signature on the trust documents.

Not long after the family trusts were settled, JPBI loaned a total of approximately $42.6 million (the family notes) to three general partnerships (the family partnerships) formed by Baldwin for estate planning purposes. Because the partners of the family partnerships are various combinations of the family trusts, certain of Baldwin's children signed the family notes in their capacity as trustees. Baldwin signed the family notes in his capacity as manager of JPBI. Each family note indicated the principal amount of the loan was to be repaid by July 2015. Although all the family notes are in favor of JPBI, Baldwin and his wife list them as "Notes Receivable" on their personal financial statements.

When the Curci note came due in January 2009, Baldwin had not made any payments. Curci filed a lawsuit against him to recover the amount owed. Not long thereafter, the parties entered into a court-approved stipulation establishing a payment schedule for Baldwin to avoid entry of judgment.

*219About a year later, the court approved an amended stipulation that modified the payment schedule due to Baldwin's continued failure to make the agreed upon payments.

Baldwin ultimately failed to make the agreed upon payments, so Curci sought entry of judgment against him. In October 2012, the court entered judgment in favor of Curci and against Baldwin in the amount of approximately $7.2 million, including prejudgment interest and attorney fees and costs.

In the year after entry of judgment, Curci propounded extensive post-judgment discovery requests aimed at understanding the nature, extent and location of Baldwin's personal assets. Baldwin did not timely respond to the discovery, and Curci filed a motion to compel. Though the motion was moot by the time it was heard, the trial court awarded sanctions against Baldwin.

As of February 2014, no payments had been made on the family notes. Baldwin, as manager of JPBI and for reasons unexplained, chose to execute amendments to the family notes to extend their terms by five years-to July 2020. No consideration was provided in exchange for the extensions. A few days later, Baldwin responded *850to a discovery request made by Curci one year earlier. Among the documents he produced were the family notes, including the five-year payment extensions.

Based on Baldwin's discovery responses, and Baldwin's failure to pay any of the judgment, Curci filed a motion seeking charging orders against 36 business entities in which Baldwin had an interest. Among those entities was JPBI. The court granted Curci's motion in August 2014. From and after that date, any monetary distributions made by JPBI to Baldwin, in his capacity as a member, were ordered to be paid to Curci instead.

Curci has received no money as a result of the charging order. Although Baldwin caused JPBI to distribute approximately $178 million to him and his wife, as members, between 2006 and 2012, not a single distribution has been made since the October 2012 entry of judgment on the Curci note. Also, there have been no payments made by the family partnerships to JPBI on the family notes.

In June 2015, Curci filed a motion to add JPBI as a judgment debtor pursuant to Code of Civil Procedure section 187. Curci based its motion on the outside reverse veil piercing doctrine. It argued that JPBI was Baldwin's alter ego, that Baldwin was using JPBI to avoid paying the judgment and that an unjust result would occur unless JPBI's assets could be used to satisfy Baldwin's personal debt. Baldwin did not initially oppose the motion.

*220The court issued a tentative ruling denying Curci's motion based on Postal Instant Press . Following additional briefing from the parties on that issue, and a hearing, the court adopted its tentative ruling as its final decision.

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Bluebook (online)
221 Cal. Rptr. 3d 847, 14 Cal. App. 5th 214, 2017 WL 3431457, 2017 Cal. App. LEXIS 698, Counsel Stack Legal Research, https://law.counselstack.com/opinion/curci-invs-llc-v-baldwin-calctapp5d-2017.