Wednesday, April 19, 2017
Court of Appeal Invalidates Support Order Against Debtor’s Medical Corporation
Says Entity May Not Be Held as Liable as Alter Ego of Doctor Who Owes Money To Former Spouse Because It Did Not Exist When Judgment Was Entered
By a MetNews Staff Writer
The Court of Appeal for this district held yesterday that a judge erred in adding a corporation as a joint debtor with its owner, on an alter ego theory, where the corporation did not exist when the owner entered into a stipulated judgment for payment of child and spousal support and attorney fees.
However, Div. Six, in its unpublished opinion by Justice Steven Perren, gave guidance to the judgment creditor, Tania S. Price, as to how she might go about collecting past due amounts from her ex-husband, San Bernardino orthopedic surgeon Michael Mckeon Price, who has stashed his assets in M.D., Inc.
“…Tania has other remedies available to her. For example, to the extent Michael has fraudulently transferred his property to M.D., Inc., Tania may be equitably entitled to have those transfers set aside.”
He said the appeals court agrees with San Bernardino Superior Court Judge Donna D. Geck “that Michael is deliberately evading his agreed-upon obligation,” but declared that “while there may be ways to achieve equity in this matter, joining a corporation that did not exist at the time of the stipulated judgment is not one of them.”
The jurist explained that under Code of Civil Procedure §187, a judgment may be amended to add an alter ego as a debtor, but only where “the new party had controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns.”
“Here, Tania has failed to demonstrate that M.D., Inc. actually controlled the dissolution litigation in a manner that provided it an opportunity to protect itself during the proceeding. It is undisputed that M.D., Inc. did not exist until months after Michael and Tania executed the stipulated judgment resolving their dissolution action. As a result, M.D., Inc. did not and could not engage in some active defense of the underlying claims….It did not finance the litigation, hire the attorneys who represented Michael or direct the course of the action….Although Michael did perform these tasks, he did so on his own behalf and not on behalf of a corporation.”
In a footnote, Perren observed that ordinarily, where a corporation is found to be the alter ego of an individual, the purpose is to hold that individual liable for the corporation’s debts. He said that “many courts,” including the Fourth District’s Div. Three in a 2008 decision, have rejected “outside reverse piercing of the corporate veil.” He said the issue need not be addressed in the present case.
As of about a year ago, Michael Price owed Tania Price $209,340 in support payments and $51,650 in attorney fees.
The case is Marriage of Price, B276415.
Michael Price was represented on appeal by Cynthia A. de Petris and L.E. Becker. Tania Price did not file a brief.
The opinion comes precisely six months after Div. Six filed its first opinion in the case. On Oct. 18, 2016, it affirmed an award to the former wide of $1,500 in attorney fees and $500 in costs in connection with opposing her ex-spouse’s motion for a modification of the child-support amount and a change of venue.
Michael Price wanted the payments lowered in light of having lost his job with the Scheinberg Orthopedic Group and sought to move the case to Los Angeles Superior Court. The appeals court affirmed the orders, noting evidence that the doctor was now gainfully self-employed, and that Tania Price had put forth reasons for opposing the case being shifted here, “not least of which was the comparative congestion and overcrowding in the Los Angeles court system.”
That case is Price v. Price, B263562.
In yesterday’s opinion, Perren noted that in 2015, Michael Price was convicted of six counts of contempt based on failing to make support payments.
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