Alter Ego Gotcha Fails on Appeal

Lopez v. Escamilla, No. B300439 (D2d6 May 4, 2020)

Plaintiff got a money judgment against an entity that turns out to have been severely undercapitalized. She wants to add the company’s owner as an alter ego judgment debtor. She does so by filing a new action. The new defendant, however, argued that was improper. He claimed by the creditor was required bring a motion to add an alter ego defendant under Code of Civil Procedure § 187 in the case in which the judgment was rendered. The trial court agreed and dismissed the case.

The Court of Appeal disagrees. Citing the maxim that the law values substance over form, Civil Code § 3528, the court holds that a § 187 motion is sufficient, not necessary. The alleged alter ego can also be sued in a separate action. Moreover, because the purpose of an alter ego amendment is to substitute the true debtor and not to re-litigate the claim, the applicable statute of limitations is the ten-year limit on enforcing a judgment, not the statute of limitations that governed the underlying liability. 

Reversed.