Filed 11/13/14 Vartelas v. Universal Enterprises Internat. CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
TAKIS VARTELAS, D063246
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2009-00089472- CU-EN-CTL) UNIVERSAL ENTERPRISES INTERNATIONAL, INC., et al.,
Defendants and Respondents,
SAMME LADCKIE,
Defendant and Appellant.
APPEALS from judgments of the Superior Court of San Diego County, Lisa
Foster, Gonzalo P. Curiel, and Timothy B. Taylor, Judges. Affirmed.
Del Mar Law Group and David P. Hall for Plaintiff and Appellant.
The Cabrera Firm and Guillermo Cabrera for Defendants and Respondents.
Allen Matkins Leck Gamble Mallory & Natsis and Charles Lewis Pernicka for
Defendant and Appellant. Plaintiff Takis Vartelas appeals judgments in favor of defendants Universal
Enterprises International, Inc. (Universal), Dublin Square Authentic Irish Pub & Grill
LLC (Dublin Square), and Samme Ladckie. In separate orders sustaining defendants'
demurrer, without leave to amend, and granting defendants' motion for summary
judgment, the trial court found (1) Vartelas had not alleged sufficient facts to hold
Universal and Dublin Square liable as "alter egos" for a judgment Vartelas previously
obtained against Ladckie; (2) Vartelas had not sufficiently pled causes of action for
fraudulent transfer and declaratory relief; and (3) Vartelas had not established a triable
issue of fact on his claim that Dublin Square possessed unpaid wages or other monies due
to Ladckie that could be recovered by Vartelas in a creditor's suit. In this appeal, Vartelas
contends each of these findings was in error.
Ladckie filed a protective cross-appeal, arguing that the court should have granted
his earlier motion to vacate Vartelas's underlying judgment and for judgment on the
pleadings. Vartelas moved to dismiss Ladckie's cross-appeal as untimely, and we
deferred decision on Vartelas's motion.
We conclude the trial court did not err in sustaining defendants' demurrer, without
leave to amend, or in granting defendants' motion for summary judgment. We therefore
affirm the judgments. In light of our disposition, Ladckie's cross-appeal and Vartelas's
motion to dismiss are moot.
FACTUAL AND PROCEDURAL BACKGROUND
In 1998, Vartelas sued Ladckie, Ladckie's ex-wife, and two corporate entities
associated with Ladckie's car rental business in Nevada state court. Among other claims,
2 Vartelas alleged that he was wrongfully terminated from his employment with the
defendants. Two years later, Vartelas obtained a default judgment after the defendants
failed to appear for trial. At the time of the judgment, Ladckie was known as Sam Ladki.
The next year, Ladckie legally changed his name from Sam A. Ladki to Samme Garren
Ladckie. We will refer to him as Ladckie throughout this opinion for clarity.
While the Nevada lawsuit was pending, or shortly thereafter, Dublin Square was
formed to operate an Irish pub in San Diego. Tax records show that Dublin Square is
wholly owned by Universal. After the Nevada default judgment was entered, Dublin
Square entered into an employment agreement with Ladckie, who agreed to act as Dublin
Square's general manager. Dublin Square provided Ladckie an annual salary of $60,000,
a bonus based on performance, and various benefits. The employment agreement was
later amended and renewed several times. Clive Dakin, identified as a "member," signed
Ladckie's employment agreements on Dublin Square's behalf.
Several days after the Nevada default judgment, and shortly before signing his
employment agreement with Dublin Square, Ladckie filed for Chapter 7 bankruptcy
protection. Ladckie represented that he was unemployed and had few assets. Although
the bankruptcy proceedings were active after Ladckie's employment agreement with
Dublin Square was signed, the bankruptcy docket does not show that he disclosed his
new employment relationship. After objections from Ladckie's creditors, the federal
court dismissed Ladckie's bankruptcy petition without discharge. Dublin Square also
filed for bankruptcy protection. Ladckie signed Dublin Square's bankruptcy petition as
3 its manager. The federal court later confirmed Dublin Square's repayment plan and
closed the bankruptcy case.
Pursuant to a 1992 judgment, Ladckie was required to pay $4,300 per month in
spousal support to his ex-wife. This amount was later reduced to $2,500 per month. To
fulfill his spousal support obligations, Ladckie directed Dublin Square to garnish his
paychecks and withhold the required amounts. Ladckie prepared a draft earnings
assignment order that, if entered by the court and served, would have legally required
Dublin Square to garnish Ladckie's paychecks. There is no record, however, that that
order was entered or served at the time. Dublin Square nonetheless began garnishing
Ladckie's wages voluntarily. After several years of such garnishments, Ladckie obtained
a valid earnings assignment order and served it on Dublin Square. However, during the
period of voluntary garnishment (and for a time thereafter), Dublin Square did not pay
any money garnished from Ladckie's paycheck's to Ladckie's ex-wife. Ladckie explained
that Dublin Square garnished his wages but was unable to make the payments because it
did not have the funds to do so. At the time, Dublin Square did not have enough money
to meet its payroll expenses.
In 2008, following renewal of his judgment in Nevada, Vartelas applied for entry
of the Nevada judgment in San Diego County Superior Court under Code of Civil
Procedure section 1710.25. The court entered judgment against the Nevada defendants,
including Ladckie. A year after that, Vartelas undertook a judgment debtor examination
of Ladckie. Soon thereafter, Vartelas filed this action.
4 Ladckie again filed for bankruptcy protection, this time under Chapter 13.
Vartelas moved to dismiss Ladckie's bankruptcy petition or, in the alternative, convert it
to a proceeding under Chapter 7. Before Vartelas's motion was heard, Ladckie
voluntarily dismissed his bankruptcy petition.
Following several rounds of pleading in this action, Vartelas filed his operative
third amended complaint (TAC). The TAC alleged that Ladckie had formed a number of
corporate entities, including Dublin Square and Universal, while Vartelas's earlier
Nevada lawsuit had been pending. During this time, the TAC alleged, Ladckie developed
a plan to conceal his assets, including his ownership interests in his businesses. As part
of this plan, Ladckie and Dublin Square entered into the employment agreement
classifying Ladckie as a "manager" and identifying a third person, Dakin, as Dublin
Square's owner.
Despite the employment agreement, the TAC alleged, Ladckie had previously
represented himself as the owner of Dublin Square and personally obligated himself for
debts of Dublin Square. Ladckie allegedly received several hundred thousand dollars in
"draw[s]" and personal expenses from Dublin Square. The TAC further alleged that
Universal and Dublin Square failed to follow corporate formalities, that they were
undercapitalized, and that they operated as a single enterprise with Ladckie's other
businesses. The TAC also alleged that Universal had entered into a lease of a 1984
Ferrari, with the option to purchase it. Universal transferred the lease to Dublin Square,
which eventually obtained ownership of the car.
5 On the basis of these allegations, Vartelas's TAC contained four causes of action.
First, Vartelas sought to amend the underlying judgment against Ladckie, his ex-wife,
and Ladckie's prior car rental businesses to include Dublin Square and Universal as
judgment debtors. Vartelas requested that "Dublin [Square] and Universal be found to be
part of the single enterprise of Ladckie and be added" to the underlying judgment.
Second, Vartelas sought to maintain a creditor's suit under Code of Civil Procedure
section 708.210 against Dublin Square. Vartelas alleged that Dublin Square "has
possession and/or control of property in which Ladckie has some interest, including but
not limited to earned but unpaid salary, vacation time and bonuses." Third, Vartelas
alleged that the transfer of the Ferrari from Universal to Dublin Square was made with
the intent to defraud creditors (including Vartelas) and should be set aside as a fraudulent
transfer under Civil Code section 3439.07, subdivision (a)(1). Fourth, Vartelas requested
declaratory relief regarding Ladckie's ownership interests in Dublin Square and
Universal.
Dublin Square and Universal demurred to the first, third, and fourth causes of
action in the TAC. Ladckie joined. Dublin Square and Universal argued that the TAC
failed to allege facts sufficient to hold Dublin Square or Universal liable on the
underlying judgment under an alter ego or single enterprise theory. Since Dublin Square
and Universal were not liable to Vartelas, they argued, Vartelas's claims for fraudulent
transfer and declaratory relief were likewise deficient. Dublin Square and Universal also
noted that Vartelas's judgment had been improperly renewed in Nevada. After the
Nevada judgment had been entered in California, the Nevada state court subsequently
6 voided its renewal. (Earlier in the litigation, citing the Nevada court's order, Ladckie had
filed a motion to vacate the California judgment and for judgment on the pleadings. The
court denied Ladckie's motion.)
The trial court sustained defendants' demurrer without leave to amend. The three
challenged causes of action were dismissed with prejudice. Because the dismissal of
these causes of action resulted in a complete resolution of Vartelas's claims against
Universal, the court entered judgment in Universal's favor.
After further litigation, Dublin Square filed a motion for summary judgment on
Vartelas's remaining cause of action, a creditor's suit seeking allegedly unpaid salary,
vacation time, and bonuses. Ladckie again joined. Dublin Square argued that the
applicable statute of limitations barred Ladckie (and thus Vartelas) from recovering any
benefits allegedly owed prior to 2005. As to later benefits, Dublin Square argued that it
did not owe Ladckie anything. In a sworn declaration, Ladckie confirmed that Dublin
Square did not owe him any unpaid salary, bonuses, or unused vacation days. In fact,
Ladckie stated that he owed Dublin Square several hundred thousand dollars in debt,
including approximately $150,000 in personal charges on his company account (later
amended to $225,000) and at least $275,750 on an interest-bearing promissory note in
favor of Dublin Square. Even if it owed some unpaid salary or other benefits to Ladckie,
Dublin Square argued those debts were far outweighed by Ladckie's debts to Dublin
Square. Vartelas opposed, arguing that benefits prior to 2005 were not barred by the
statute of limitations, that bankruptcy and tax records raised triable issues of fact
regarding the debts and payments claimed by Dublin Square, and that Dublin Square was
7 in possession of wages voluntarily withheld or garnished as spousal support for Ladckie's
ex-wife (but not paid to her).
The trial court determined that no triable issue of fact existed and granted
summary judgment. The court found that the statute of limitations barred recovery of any
wages or other amounts due prior to 2005. The court was unpersuaded that wages
voluntarily garnished by Dublin Square were recoverable because any claim by Ladckie's
ex-wife to such sums had priority over Vartelas's claim in this creditor's suit. The court
further concluded that "much of the evidence submitted in the opposition papers supports
the notion that [Ladckie] owes Dublin Square money, not the other way around. The
opposition papers fail to set forth a discrete amount allegedly owed by Dublin Square to
[Ladckie], and the assertions that some amount is due are speculative." The court entered
judgment in favor of Dublin Square and Ladckie. These appeals followed.
DISCUSSION
I
A
Vartelas first contends the trial court erred in granting defendants' demurrer
without leave to amend. On appeal from a judgment dismissing an action after sustaining
a demurrer without leave to amend, the "reviewing court gives the complaint a reasonable
interpretation, and treats the demurrer as admitting all material facts properly pleaded.
[Citations.] The court does not, however, assume the truth of contentions, deductions or
conclusions of law. [Citation.]" (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962,
967.) "[W]e give the complaint a reasonable interpretation, reading it as a whole and its
8 parts in their context." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) We consider the
sufficiency of Vartelas's operative complaint de novo. (First Aid Services of San Diego,
Inc. v. California Employment Development Dept. (2005) 133 Cal.App.4th 1470, 1476.)
However, "it is an abuse of discretion to sustain a demurrer without leave to
amend if the plaintiff shows there is a reasonable possibility any defect identified by the
defendant can be cured by amendment." (Aubry v. Tri-City Hospital Dist., supra, 2
Cal.4th at p. 967.) Thus, "[w]hile the decision to sustain or overrule a demurrer is a legal
ruling subject to de novo review on appeal, the granting of leave to amend involves an
exercise of the trial court's discretion." (Lazar v. Hertz Corp. (1999) 69 Cal.App.4th
1494, 1501.) We will address each of the relevant causes of action in turn.
B
Vartelas's first cause of action seeks to amend his judgment against Ladckie and
the other Nevada defendants to include Dublin Square and Universal. Vartelas maintains
that such an amendment is proper under a "single enterprise" theory, which is a form of
alter ego liability.
Traditional alter ego liability reaches beyond the corporate form (or "pierc[es] the
corporate veil") to hold an individual corporate shareholder or owner liable for the
corporation's debts. (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th
1510, 1522 (Postal Instant).) "Traditional piercing of the corporate veil is justified as an
equitable remedy when the shareholders have abused the corporate form to evade
individual liability, circumvent a statute, or accomplish a wrongful purpose." (Ibid.)
" 'There is no litmus test to determine when the corporate veil will be pierced; rather the
9 result will depend on the circumstances of each particular case. There are, nevertheless,
two general requirements: "(1) that there be such unity of interest and ownership that the
separate personalities of the corporation and the individual no longer exist and (2) that, if
the acts are treated as those of the corporation alone, an inequitable result will follow." ' "
(Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, 511.)
However, alter ego liability does not work in reverse. "The same abuse of the
corporate form does not exist when the judgment debtor is the shareholder. In that
situation, the corporate form is not being used to evade a shareholder's personal liability,
because the shareholder did not incur the debt through the corporate guise and misuse
that guise to escape personal liability for the debt." (Postal Instant, supra, 162
Cal.App.4th at p. 1522.) California courts have therefore rejected such
"reverse" piercing and prevented creditors from holding corporations liable for the debts
of shareholders and owners. (See id. at p. 1519; see also Wise v. DLA Piper LLP (US)
(2013) 220 Cal.App.4th 1180, 1193.)
Under the theory of "single enterprise" liability, a corporation may be held liable
for the debts of its affiliate corporations under certain circumstances: "Alter ego liability
is not limited to the parent-subsidiary corporate relationship; rather, 'under the single-
enterprise rule, liability can [also] be imposed between sister [or affiliated] companies.'
[Citation.] Factors for the trial court to consider include the commingling of funds and
assets of the two entities, identical equitable ownership in the two entities, use of the
same offices and employees, disregard of corporate formalities, identical directors and
officers, and use of one as a mere shell or conduit for the affairs of the other." (Troyk v.
10 Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1342.) " ' "In effect what happens is
that the court, for sufficient reason, has determined that though there are two or more
personalities, there is but one enterprise; and that this enterprise has been so handled that
it should respond, as a whole, for the debts of certain component elements of it." ' " (Las
Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1249-
1250 (Las Palmas).)
"Because society recognizes the benefits of allowing persons and organizations to
limit their business risks through incorporation, sound public policy dictates that
imposition of alter ego liability be approached with caution. [Citation.] Nevertheless, it
would be unjust to permit those who control companies to treat them as a single or
unitary enterprise and then assert their corporate separateness in order to commit frauds
and other misdeeds with impunity." (Las Palmas, supra, 235 Cal.App.3d at p. 1249.)
Thus, "even if all the formal elements necessary to establish alter ego liability are not
present, an unnamed party may be included as a judgment debtor if 'the equities
overwhelmingly favor' the amendment and it is necessary to prevent an injustice."
(Carolina Casualty Insurance Co. v. L.M. Ross Law Group, LLP (2012) 212 Cal.App.4th
1181, 1188-1189.)
Vartelas argues that he has pled sufficient facts to hold Dublin Square and
Universal liable as part of a single enterprise with Ladckie and the car rental businesses
named in the underlying judgment. Vartelas alleges that Ladckie formed Dublin Square
with the intent to conceal assets, that Dublin Square is undercapitalized, that Ladckie is
the true owner of Dublin Square and draws substantial sums from its operation, that
11 Dublin Square does not follow certain corporate formalities including holding required
meetings, and that Ladckie failed to file appropriate documentation for Universal and
other entities with the relevant government officials.
These allegations are insufficient to establish Dublin Square's or Universal's
liability under a "single enterprise" theory. Vartelas does not sufficiently allege facts
regarding the relationship of the ownership, assets, and activities of Ladckie's car rental
businesses (which appear to be long defunct), on one hand, and Dublin Square and
Universal, on the other. (See Troyk v. Farmers Group, Inc., supra, 171 Cal.App.4th at p.
1342.) Vartelas does not allege any facts that would show that all of these businesses
operated as part of a single enterprise, such that any debts by Ladckie's car rental
businesses should be applied to Dublin Square and Universal. (See Las Palmas, supra,
235 Cal.App.3d at pp. 1249-1250.) Instead, Vartelas's allegations focus on Ladckie's
relationship to Dublin Square and Universal, which are insufficient.
Although Vartelas disclaims any effort to hold Dublin Square and Universal
directly liable for Ladckie's debts under a "reverse piercing" theory, his allegations show
that Dublin Square's and Universal's liability, if any, would have to be predicated thereon.
Because California has rejected such "reverse piercing" liability (see Postal Instant,
supra, 162 Cal.App.4th at p. 1519), and Vartelas has not alleged sufficient facts to
establish liability based on a "single enterprise" theory, his allegations do not state a
cause of action to amend the underlying judgment to add Dublin Square and Universal.
The trial court did not err in sustaining defendants' demurrer to this cause of action.
12 Vartelas's reliance on Kohn v. Kohn (1950) 95 Cal.App.2d 708 is unpersuasive. In
that case, the plaintiff's former husband formed a corporation to hold two income-bearing
parcels of land after the plaintiff, his former wife, made demands for an accounting of his
income from those parcels. (Id. at p. 717.) The former husband held a one-half interest
in the corporation and admitted that the corporation was formed to shield income from
the plaintiff. (Ibid.) Relying on the alter ego doctrine, the court held that one-half of the
corporation's income should be imputed to the husband for purposes of calculating his
alimony payments to the plaintiff. (Id. at pp. 719-720.) The court limited its holding to
the calculation of the former husband's alimony; it did not hold the corporation directly
liable for the debts of the former husband, its shareholder. (Ibid.) Kohn therefore has no
application here.
We also find no abuse of discretion in the trial court's decision to sustain
defendants' demurrer without leave to amend. Vartelas contends that he could add
additional allegations of undercapitalization, personal obligations for corporate debts,
failure to hold meetings, and failure to file corporate documentation. However, even with
these additional allegations, Vartelas still could not state a viable cause of action. The
additional allegations again focus on Ladckie's relationship to Dublin Square and
Universal, rather than their existence as a single enterprise with Ladckie's other
businesses. Because Vartelas has not shown a reasonable possibility that the defects in
this cause of action may be cured by his proposed amendment, leave to amend was
properly denied. (See Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at p. 967.)
13 C
Vartelas's next cause of action is for fraudulent transfer. "A transfer made or
obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim
arose before or after the transfer was made or the obligation was incurred, if the debtor
made the transfer or incurred the obligation as follows: [¶] (1) With actual intent to
hinder, delay, or defraud any creditor of the debtor." (Civ. Code, § 3439.04, subd. (a).)
For purposes of the statute, a "debtor" is "a person who is liable on a claim." (Id.
§ 3439.01, subd. (e).) A "creditor" is "a person who has a claim . . . of a debtor." (Id.
§ 3439.01, subd. (c).)
Vartelas alleges that Universal fraudulently transferred its interest in a 1984
Ferrari to Dublin Square. Vartelas's allegations rely on Universal being considered a
"debtor" of Vartelas for purposes of the statute. However, because we have rejected the
basis for Universal's liability pled in the complaint, Vartelas's fraudulent transfer cause of
action fails as well. Vartelas does not identify any other basis for considering Universal a
debtor of Vartelas, and he does not suggest that leave to amend should have been granted.
The trial court therefore properly sustained defendants' demurrer to this cause of action,
without leave to amend.
D
Vartelas's final cause of action subject to defendants' demurrer seeks declaratory
relief. The relevant statute provides: "Any person . . . who desires a declaration of his or
her rights or duties with respect to another . . . may, in cases of actual controversy
relating to the legal rights and duties of the respective parties, bring an original action or
14 cross-complaint in the superior court for a declaration of his or her rights and duties . . . ."
(Code Civ. Proc., § 1060.)
" ' "The purpose of a declaratory judgment is to 'serve some practical end in
quieting or stabilizing an uncertain or disputed jural relation.' " [Citation.] "Another
purpose is to liquidate doubts with respect to uncertainties or controversies which might
otherwise result in subsequent litigation [citation]." [Citation.]' [Citation.] ' "One test of
the right to institute proceedings for declaratory judgment is the necessity of present
adjudication as a guide for plaintiff's future conduct in order to preserve his legal rights." '
[Citation.]" (Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 647.) "Declaratory
relief generally operates prospectively to declare future rights, rather than to redress past
wrongs. [Citations.] It serves to set controversies to rest before they lead to repudiation
of obligations, invasion of rights or commission of wrongs. In short, the remedy is to be
used in the interests of preventative justice, to declare rights rather than execute them."
(Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.)
"[A] complaint for declaratory relief is sufficient if it alleges facts demonstrating
the existence of an actual controversy between the parties about their legal rights and
duties and requests adjudication of the controversy." (Longshore v. County of Ventura
(1979) 25 Cal.3d 14, 29; see Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th
594, 615.) "Whether a claim presents an 'actual controversy' within the meaning of [the
statute] is a question of law that we review de novo." (Environmental Defense Project of
Sierra County v. County of Sierra (2008) 158 Cal.App.4th 877, 885.)
15 Vartelas alleges that "[a] dispute has arisen between Vartelas, on one hand, and
Dublin [Square], Universal and Ladckie, on the other hand, concerning the ownership of
the Dublin [Square] and Universal. Vartelas seeks a declaration of rights that Ladckie is
a member of Dublin [Square] and shareholder of Universal." Vartelas argues that these
allegations establish an actual controversy because Vartelas has the ability to execute his
judgment against any ownership interests that Ladckie may have in Dublin Square and
Universal. We disagree. As discussed in part I.B. ante, Vartelas may not hold Dublin
Square and Universal directly liable for his judgment against Ladckie. As such,
Vartelas's allegations show only a factual dispute about Ladckie's alleged assets, which is
not the type of controversy that may be resolved through a declaratory relief action.
In order to state a claim for declaratory relief, Vartelas's allegations must establish
a dispute as to the "legal rights and duties" of the opposing parties in the lawsuit. (See
Longshore v. County of Ventura, supra, 25 Cal.3d at p. 29; see also Code Civ. Proc.,
§ 1060.) "Before a controversy is ripe for adjudication it ' "must be definite and concrete,
touching the legal relations of the parties having adverse legal interests." ' " (Alameda
County Land Use Association v. City of Hayward (1995) 38 Cal.App.4th 1716, 1722.)
The declaration sought by Vartelas would not establish Vartelas's legal rights or relations
with respect to Ladckie, Universal, or Dublin Square. Vartelas's ability to legally execute
on any assets owned by Ladckie, for example, would be unaffected by the requested
declaration. The declaration sought by Vartelas would address merely the existence of
any such assets.
16 Unlike the authorities cited by Vartelas, his allegations do not establish a dispute
over the respective legal rights and obligations of parties to a contract or insurance policy
(see Osseous Technologies of America, Inc. v. Discovery Ortho Partners LLC (2010) 191
Cal.App.4th 357, 365; Ludgate Insurance Co. v. Lockheed Martin Corp. (2000) 82
Cal.App.4th 592, 603; but see Meyer v. Sprint Spectrum L.P., supra, 45 Cal.4th at p. 646)
or a dispute over the validity of a city ordinance or administrative agency policy (see
Qualified Patients Association v. City of Anaheim (2010) 187 Cal.App.4th 734, 753;
Californians for Native Salmon & Steelhead Association v. Department of Forestry
(1990) 221 Cal.App.3d 1419, 1429). At most, as we have explained, Vartelas's
allegations establish a factual dispute regarding the extent of Ladckie's assets. The trial
court thus properly sustained defendants' demurrer to this cause of action as well. And,
in the absence of any argument that Vartelas could cure the deficiencies in this cause of
action by amendment, leave to amend was properly denied.
II
Vartelas further contends that the trial court erred in granting defendants' summary
judgment motion on his remaining cause of action, a creditor's suit against Dublin
Square. "A defendant's motion for summary judgment should be granted if no triable
issue exists as to any material fact and the defendant is entitled to a judgment as a matter
of law. [Citation.] The burden of persuasion remains with the party moving for
summary judgment. [Citation.] When the defendant moves for summary judgment, in
those circumstances in which the plaintiff would have the burden of proof by a
17 preponderance of the evidence, the defendant must present evidence that would preclude
a reasonable trier of fact from finding that it was more likely than not that the material
fact was true [citation], or the defendant must establish that an element of the claim
cannot be established, by presenting evidence that the plaintiff 'does not possess and
cannot reasonably obtain, needed evidence.' " (Kahn v. East Side Union High School
Dist. (2003) 31 Cal.4th 990, 1002-1003 (Kahn).)
" 'Once the defendant . . . has met that burden, the burden shifts to the
plaintiff . . . to show that a triable issue of one or more material facts exists as to that
cause of action or a defense thereto. The plaintiff . . . may not rely upon the mere
allegations or denials' of his 'pleadings to show that a triable issue of material fact exists
but, instead,' must 'set forth the specific facts showing that a triable issue of material fact
exists as to that cause of action or a defense thereto.' " (Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 849 (Aguilar).)
"We review the record and the determination of the trial court de novo." (Kahn,
supra, 31 Cal.4th at p. 1003.) "In performing our de novo review, we must view the
evidence in a light favorable to plaintiff as the losing party [citation], liberally construing
[the plaintiff's] evidentiary submission while strictly scrutinizing defendants' own
showing, and resolving any evidentiary doubts or ambiguities in plaintiff's favor."
(Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) "Although our review of a
summary judgment is de novo, it is limited to issues which have been adequately raised
and supported in plaintiff['s] brief. [Citations.] Issues not raised in an appellant's brief
18 are deemed waived or abandoned." (Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466,
fn. 6.)
Code of Civil Procedure section 708.210 establishes the basis for Vartelas's
creditor's suit: "If a third person has possession or control of property in which the
judgment debtor has an interest or is indebted to the judgment debtor, the judgment
creditor may bring an action against the third person to have the interest or debt applied
to the satisfaction of the money judgment." Here, Vartelas alleged in his TAC that
Dublin Square "has possession and/or control of property in which Ladckie has some
interest, including but not limited to earned but unpaid salary, vacation time and
bonuses." As we will explain, we conclude that the court did not err in granting summary
judgment on this cause of action.
Vartelas first contends that the trial court erred in finding that the statute of
limitations barred recovery of benefits due to Ladckie under his employment agreement
prior to 2005. The statute of limitations for Vartelas's creditor's suit is governed by Code
of Civil Procedure section 708.230. That statute establishes that a creditor's suit "shall be
commenced . . . before the expiration of the later of the following times: [¶] (1) The time
when the judgment debtor may bring an action against the third person concerning the
property or debt. [¶] (2) One year after creation of a lien on the property or debt
pursuant to this title if the lien is created at the time when the judgment debtor may bring
an action against the third person concerning the property or debt." (Code Civ. Proc.,
§ 708.230, subd. (a).) Vartelas does not contend that he obtained a lien on any property
19 or debt, so subdivision (a)(2) of the statute is inapplicable. Subdivision (a)(1) therefore
governs this issue.
Code of Civil Procedure section 708.230, subdivision (a)(1), provides that a
creditor's suit must be commenced within the statute of limitations governing the
judgment debtor's action against the third person. In effect, this provision borrows the
statute of limitations that governs the underlying claim the judgment debtor would have
against the third person. (See Ahart, Cal. Practice Guide: Enforcing Judgments and
Debts (The Rutter Group 2014) ¶¶ 6:1398-6:1399.) Because the statute of limitations for
breach of Ladckie's written employment agreement is four years (see Code Civ. Proc.,
§ 337), Vartelas is barred from recovering any amounts due under Ladckie's agreement
more than four years prior to the date Vartelas filed suit.
Vartelas contends that the statute's use of the term "judgment debtor" means that
the underlying statute of limitations cannot begin to run until judgment is entered. (See
Code Civ. Proc., § 708.230, subd. (a)(1).) In Vartelas's view, Ladckie could not have
become a "judgment debtor" until judgment is entered, so the statute could not have
begun to run until Vartelas obtained his California judgment against Ladckie. We
disagree. The statute uses the phrase "judgment debtor" descriptively. The statute of
limitations on Ladckie's underlying claim began to run when it accrues as to him, whether
or not he had attained the status of a "judgment debtor" at that time. A creditor like
Vartelas is bound by the same time limitation. (Ibid.) This principle flows logically from
the nature of the creditor's suit itself, in which the creditor stands in the shoes of the
judgment debtor in his claim against the third person. (See Ilshin Investment Co., Ltd. v.
20 Buena Vista Home Entertainment, Inc. (2011) 195 Cal.App.4th 612, 627.) The
legislative history cited by Vartelas does not support a contrary interpretation.
Unlike the wrongful death cause of action at issue in Kincaid v. Kincaid (2011)
197 Cal.App.4th 75, 80, cited by Vartelas, a creditor's suit is not a fully independent
cause of action with its own statute of limitations. Instead, a creditor's suit is expressly
limited to the statute applicable to the judgment debtor's underlying claim against the
third person. (Code Civ. Proc., § 708.230, subd. (a)(1).) Contrary to Vartelas's
contention, such a result is not inequitable. Vartelas, as Ladckie's creditor, is able to
recover any amounts that Ladckie himself would be able to recover at the time Vartelas
filed his creditor's suit. To hold otherwise would subject third persons to an extended
period of suit through no fault of their own. Vartelas's analogy to the Uniform
Fraudulent Transfer Act is unpersuasive given its differing statutory language, context,
and history. (Cf. Cortez v. Vogt (1997) 52 Cal.App.4th 917, 929.)
We therefore conclude that the trial court properly interpreted the statute of
limitations applicable to Vartelas's creditor's suit. Any amounts due to Ladckie under his
employment agreement with Dublin Square prior to May 11, 2005, i.e., four years before
Vartelas brought his creditor's suit, are not recoverable by Vartelas in this action. (See
Code Civ. Proc., §§ 337, 708.230, subd. (a)(1).)
C
Because we have determined that the statute of limitations bars Vartelas's recovery
of any pre-May 2005 wages, we need not further consider Vartelas's contentions
regarding such wages. However, even if his suit is limited by the statute of limitations,
21 Vartelas argues that the court erred in determining that no triable issues of fact exist on
Ladckie's entitlement to certain post-May 2005 wages. He raises the following issues:
(1) whether Dublin Square paid Ladckie his wages for the remainder of 2005 and (2)
whether Vartelas may recover amounts that Ladckie directed Dublin Square to withhold
or garnish from his wages as spousal support for Ladckie's ex-wife (but which Dublin
Square did not pay to her).
Dublin Square offered a sworn declaration from Ladckie that "[t]here is no unpaid
portion" of Ladckie's salary currently due to him. This evidence was sufficient to shift
the burden of production to Vartelas to produce admissible evidence creating a triable
issue of fact. (See Aguilar, supra, 25 Cal.4th at p. 849.) In response, Vartelas submitted
a 2005 form W-2 showing that Ladckie had been fully paid for that year. This evidence
corroborated Ladckie's declaration and did not create a triable issue of fact. Vartelas also
submitted Dublin Square's 2005 tax return. This return listed no compensation under the
line item "Compensation of officers" but showed approximately $515,000 in "Salaries
and wages." Vartelas claims that Dublin Square's return shows that it did not pay
Ladckie any salary because later Dublin Square tax returns listed Ladckie's salary under
the "Compensation of officers" line item. Dublin Square counters that Ladckie's wages
were included in the "Salaries and wages" line item for that year
Even viewing Vartelas's evidence liberally, as we must, we cannot conclude that
Vartelas has adequately raised a triable issue of fact as to Ladckie's 2005 wages. "A
party cannot avoid summary judgment based on mere speculation and conjecture
22 [citation], but instead must produce admissible evidence raising a triable issue of fact.
[Citation.]" (Crouse v. Brobeck, Phleger & Harrison (1998) 67 Cal.App.4th 1509,
1524.) The technical inconsistencies noted by Vartelas in Dublin Square's tax returns
show no more than the possibility, based on speculation, that Ladckie was not paid in
2005. Such evidence is insufficient to carry Vartelas's burden of production to show a
triable issue of material fact on this issue. (See ibid.; see also Yuzon v. Collins (2004)
116 Cal.App.4th 149, 166 [triable issue of fact cannot be created by speculation,
conjecture, conclusory assertions or mere possibilities].)
In response to Dublin Square's evidence that Ladckie had been fully paid, Vartelas
raises another issue: whether Ladckie (and thus Vartelas) can recover wages withheld by
Dublin Square for spousal support but not paid to Ladckie's ex-wife. Vartelas
acknowledges that he has no claim to wages garnished after Ladckie served Dublin
Square with a valid spousal support earnings assignment order. (See Fam. Code,
§§ 5241-5243.) However, Vartelas argues that any wages voluntarily garnished or
withheld before service of that order, and not paid to Ladckie's ex-wife, are "property in
which [Ladckie] has an interest" pursuant to Code of Civil Procedure section 708.210.
Vartelas relies on the general proposition that " '[e]arned but unpaid salary or
wages are vested property rights.' " (Reyes v. Van Elk, Ltd. (2007) 148 Cal.App.4th 604,
612; see Pineda v. Bank of America, N.A. (2010) 50 Cal.4th 1389, 1401.) However, the
wages here are not "unpaid" in the typical sense. Ladckie's W-2 forms and check stubs
from the period show that he was fully paid. Dublin Square did not refuse to pay
23 Ladckie's wages. Instead, Ladckie gave back some of those wages (in the form of
voluntary garnishment or withholding) and directed Dublin Square to pay those wages to
his ex-wife. Ladckie thus relinquished his interest in the garnished wages. In his
declaration, Ladckie confirms that he is not owed any salary from Dublin Square.
Although Dublin Square was not obligated to garnish any amounts pursuant to the
Family Code because it had not been served with a valid assignment order, Dublin
Square made the garnishments and agreed to pay them to Ladckie's ex-wife. Dublin
Square's subsequent failure to make payments may give rise to a cause of action, but
Vartelas has not shown that Ladckie retains a property interest in the garnished wages
that can be recovered through Vartelas's creditor's suit. (See Code Civ. Proc., § 708.210.)
Dublin Square holds the garnished wages for payment to Ladckie's ex-wife. Ladckie
(and his creditors) no longer have an interest in them. The voluntary withholding or
garnishment alleged by Vartelas is thus insufficient to create a triable issue of fact on
Vartelas's creditor's suit.
Because Vartelas has not created a triable issue of fact as to his ability to recover
property from Dublin Square in which Ladckie allegedly has an interest, we need not
consider the parties' additional arguments regarding (1) the scope of Vartelas's allegations
in the TAC and (2) any potential offsets resulting from Ladckie's alleged indebtedness to
Dublin Square.
III
In his cross-appeal, Ladckie contends that the court erred in denying his motion to
vacate the underlying California judgment and for judgment on the pleadings. Vartelas
24 filed a motion to dismiss Ladckie's cross-appeal as untimely. Because we have
concluded that the trial court did not err in granting defendants' demurrer or their motion
for summary judgment, we affirm the judgment in Ladckie's favor. As such, we will
dismiss Ladckie's cross-appeal as moot. (See Hewlett v. Squaw Valley Ski Corp. (1997)
54 Cal.App.4th 499, 510, 546 [dismissing protective cross-appeal as moot upon
affirmance of opposing party's appeal].) Vartelas's motion to dismiss Ladckie's cross-
appeal is therefore moot as well, and we deny it on that basis.
DISPOSITION
The judgments are affirmed. Ladckie's cross-appeal is dismissed as moot.
Vartelas's motion to dismiss Ladckie's cross-appeal is denied as moot. Universal, Dublin
Square, and Ladckie are entitled to costs on appeal.
McINTYRE, J.
WE CONCUR:
HUFFMAN, Acting P. J.
NARES, J.