Filed 4/16/14 Talamentes v. All West Iron CA2/7
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN


IGNACIO TALAMENTES,                                                 B244433

         Plaintiff and Appellant,                                    (Los Angeles County
                                                                     Super. Ct. No. BC362390)
         v.

ALL WEST IRON, INC. et al.,

         Defendants and Respondents.



         APPEAL from a judgment of the Superior Court of Los Angeles County, Elihu
Berle, Judge. Affirmed.
         Law Offices of Lisa L. Maki, Lisa L. Maki and Christina M. Coleman for Plaintiff
and Appellant.
         Law Offices of Roger O. Vega and Roger O. Vega; Huprich Law Firm and Joseph
J. Huprich for Defendants and Respondents AWI Builders, Inc. and Zhirayr Mekikyan.


                                          _______________________
       Appellant Ignacio Talamentes worked as a welder for All West Iron, Inc., a
company owned and operated by Zhirayr Robert Mekikyan. Ignacio filed a wage and
hour action against All West Iron, Mekikyan, and a related company, AWI Builders, Inc.,
based on alleged violations of the Labor Code and the Unfair Competition Law (Bus. &
Prof. Code § 17200 et seq.). During the pendency of the litigation, All West Iron filed
for bankruptcy and Talamentes’s claims proceeded to a nonjury trial solely against
Mekikyan and AWI Builders on theories of alter ego and joint employer liability.
The trial court found that All West Iron had failed to provide Talamentes with overtime
pay and meal and rest periods, but entered a judgment in favor of Mekikyan and AWI
Builders on the grounds that Talamentes did not meet his burden of proving alter ego or
joint employer liability. For the reasons set forth below, we affirm.

           FACTUAL BACKGROUND AND PROCEDURAL HISTORY
I.     Overview of Claims
       In November 2006, Talamentes filed this wage and hour action against All West
Iron and Mekikyan in Los Angeles County Superior Court (Case No. BC362390; the
Talamentes action). In his complaint, Talamentes alleged claims for failure to pay
overtime compensation (Lab. Code, §§ 510, 1194), failure to provide meal and rest
periods (Lab. Code, § 226.7), failure to furnish itemized wage statements (Lab. Code,
§ 226), unlawful withholding of wages (Lab. Code, § 221), waiting time penalties (Lab.
Code, § 203), conversion (Civ. Code, § 3336), and unfair competition (Bus. & Prof.
Code, § 17200 et seq.). Talamentes later amended his complaint to add AWI Builders as
a defendant.
       In December 2008, Jose Ventura Robles, Juan Jesus Robles, Felipe Alvarado, and
Iron Workers Union Local 433 filed a related wage and hour action against All West Iron
in Los Angeles County Superior Court (Case No. BC403060; the Robles action). The
plaintiffs in the Robles action also alleged claims for unpaid overtime compensation,
missed meal and rest periods, and other violations of the Labor Code, and later added




                                             2
AWI Builders and a third related company, Construction Contractors Corporation (CCC),
as named defendants.1
       In December 2010, All West Iron filed a petition for Chapter 7 bankruptcy, and as
a result, both the Talamentes and Robles actions were stayed by the bankruptcy court.
The bankruptcy court later lifted the stay as to each of the named defendants except All
West Iron. In June 2011, with the bankruptcy stay as to All West Iron still in effect, the
Los Angeles County Superior Court consolidated the Talamentes and Robles actions for
purposes of trial against the remaining defendants. Both actions proceeded to a nonjury
trial against Mekikyan, AWI Builders, and CCC only in September 2011. A summary of
the relevant evidence presented at trial is set forth below.

II.    Evidence at Trial
       A.     Relationship Between All West Iron, AWI Builders, and CCC
       All West Iron was a steel subcontractor in the construction industry. It was
incorporated in 1990 or 1991. Its business address was 2881 Saco Street in Vernon,
California and it occupied the first floor of the building at that address. Mekikyan was
the president and sole officer and shareholder of All West Iron. He started the business
in 1987 and initially worked on small private projects, such as fences, gates, and railings
in residential homes and apartment buildings. The company’s business gradually grew
and it was awarded its first public works project in 1994 or 1995. As of 2002, All West
Iron was working on projects valued at more than $10 million. Between 2002 and 2008,
All West Iron submitted an average of two to three bids per week on both private and
public projects, and performed steel subcontracting work for a variety of general
contractors. All West Iron ceased business operations in December 2009, and filed for
Chapter 7 bankruptcy on December 14, 2010.
       AWI Builders is a general contractor in the construction industry. It was
incorporated as a C corporation in June 2002 and became a S corporation in January


1      None of the plaintiffs in the Robles action are parties to this appeal.


                                              3
2004. Its business address is 2881 Saco Street and it occupies the second floor of the
building at that address. Mekikyan is the vice president of AWI Builders and his wife,
Anna, is the president. They are the sole officers and shareholders of the company.
Since its incorporation, AWI Builders has acted solely as a general contractor and never
as a subcontractor. The company initially worked on small construction projects valued
at less than $500,000, but by 2011, its business had substantially grown and it was hired
as the general contractor on a public works project valued at $18 million. Approximately
90 percent of the company’s business has been in public works projects. In some
projects where AWI Builders was the general contractor, All West Iron was the steel
subcontractor. However, AWI Builders has been the general contractor on projects that
did not involve any structural steel work, and All West Iron did not perform any work on
those projects.
       CCC is a multi-trade subcontractor in the construction industry. It was
incorporated as a C corporation in June 2004 and began operations in May 2008. Its
business address is 2881 Saco Street and it occupies the first floor space that All West
Iron previously occupied. Mekikyan is the president and sole officer and shareholder
of CCC.2 As a multi-trade subcontractor, CCC performs framing, painting, flooring,
cabinetry, and structural steel work. Approximately 95 percent of its business has been
in public works projects. CCC has submitted subcontracting bids to a variety of general
contractors since it began operations and has worked with general contractors other than
AWI Builders.
       According to Mekikyan, all three companies had to maintain their own general
liability insurance and worker’s compensation insurance as licensed contractors in the
construction industry.3 They also had to obtain their own performance and payment


2      At a prior deposition in this action, Mekikyan testified that he did not have an
interest in any companies other than All West Iron and AWI Builders.
3      On a general liability policy that was issued by Century Surety Company in March
2009, however, both All West Iron and CCC were named insureds on the same policy.


                                             4
bonding from surety insurers to work on public works projects, which required each
company to prepare separate financial statements and maintain separate bank accounts to
demonstrate independent bonding capacity. As a general contractor, AWI Builders was
required to pre-qualify for surety bonding to bid on certain public works projects. In
the five years preceding trial, AWI Builders was pre-qualified to bid on 20 to 25 public
works projects, including multi-million dollar construction projects, based on its bonding
capacity.
       Mekikyan held three types of contractor licenses for All West Iron, AWI Builders,
and CCC: (1) a Class C51 license for steel structural fabrication, (2) a Class C23 license
for wrought iron fabrication and installation, and (3) a Class B license for a general
building contractor. Mekikyan was the managing officer responsible for maintaining the
licenses for each company. He also was the person most responsible for overseeing the
day-to-day operations of each company. All three companies had the same written
employment policy entitled Company Safety Rules and Discipline Guide, and All West
Iron and CCC had the same Injury and Illness Prevention Plan. None of the companies
provided employees with any health, pension, or vacation benefits, and none had any
written policies pertaining to meal and rest periods, hours of work, or overtime pay.
       Between 2005 and 2008, All West Iron and AWI Builders entered into a number
of subcontracting agreements. At times, a secretary signed the agreements on behalf of
All West Iron, and Mekikyan signed them on behalf of AWI Builders. All West Iron and
AWI Builders also entered into a number of purchase order agreements. Mekikyan
would initial the agreements on behalf of his wife for AWI Builders, and then sign them
in his own name on behalf of All West Iron. Mekikyan’s wife, who is a doctor, stopped
performing any work for AWI Builders in 2006 or 2007. Mekikyan testified that any
transfers of money from AWI Builders to All West Iron or CCC were payments for
subcontracting work. He also testified that All West Iron did not make any transfers of
money to Mekikyan, AWI Builders, or CCC within six months of its bankruptcy filing,
and that he and his wife did not use any of All West Iron’s funds to pay for their personal



                                             5
expenses. Mekikyan drew a salary of approximately $100,000 from AWI Builders and
$70,000 from CCC in 2010.
       All West Iron leased the building located at 2881 Saco Street until it ceased
operations in December 2009. All West Iron occupied the first floor of the building and
subleased the second floor to AWI Builders. Some of the sublease agreements between
the two companies did not set forth a specific amount of rent and instead stated that the
rent was “to be determined.” The first floor of the building included office space, two
work areas, and a 50,000 square foot shop. A large overhead crane in the shop was used
by All West Iron, but was the property of the building owner. In November 2010, about
a year after All West Iron closed, CCC entered into a lease agreement with the building
owner, and began occupying the first floor space that had been occupied by All West
Iron. CCC uses the shop for its business, including the overhead crane, and uses the
tables and benches that were left in the work areas. According to Mekikyan, the other
machinery and equipment that All West Iron owned, including welding tools and
overstock material, were scrapped by the building owner after All West Iron vacated the
premises. Like All West Iron, CCC continued to sublease the second floor to AWI
Builders.4
       All West Iron owned four trucks which have been parked at the 2881 Saco Street
property since the company closed. Mekikyan testified that CCC does not use any of the
trucks owned by All West Iron, and does not lease or own any other vehicles. AWI
Builders leases a pickup truck and a small sedan for use by its employees and a Porsche
for use by Mekikyan’s wife.
       All West Iron did not disconnect its business telephone number after it ceased
operations. Instead, CCC began using that telephone number for its business. As of trial,
when the number was dialed, the caller would hear a voicemail greeting for CCC and


4      The sublease agreement between CCC and AWI Builders took effect in November
2010, but for unexplained reasons, had been signed by both Mekikyan and his wife 11
months earlier in January 2010.


                                             6
then a list of employees with their telephone extensions. The list included employees of
both CCC and AWI Builders. A number of managerial and administrative employees
and independent contractors who worked for All West Iron later worked for CCC. Those
individuals included Irma Parra, Carlos Leonor, Danielle Bogdanovich, George
Caradanian, George Sarkisyan, Jessie Abubo, Artem Mkrtchyan, and Nidia Hernandez.5
Apart from Irma Parra who did bookkeeping for all three companies, none of these
individuals ever worked for or were paid by AWI Builders.
       At some point, AWI Builders obtained a permit from the city of Burbank to build
a family residence for Mekikyan. As of trial, AWI Builders still held title to the property,
but the residence had not been built. Mekikyan testified that AWI Builders purchased the
property as an investment and that he did not presently intend to move there with his
family. He also testified that the money used to purchase the property came solely from
AWI Builders and not from All West Iron.
       Mekikyan produced corporate records for All West Iron and AWI Builders at trial.
With respect to All West Iron, its bylaws were unsigned and included numerous blank
spaces. There were records of a 2006 annual meeting of shareholders and directors
which were signed by Mekikyan, but no records of any other corporate meetings.
Mekikyan testified that All West Iron’s last board meeting occurred in 2009 or 2010 and
was held at the company with all of All West Iron’s employees, but he did not have any
minutes or other records of that meeting. AWI Builders’ bylaws were not produced.
Other corporate compliance documents for AWI Builders, including shareholder and
director consent forms, were unsigned and undated. Some of the documents referred
to the company as AWI Builders while others referred to it as AWI Construction
Corporation.


5      George Caradanian was the superintendent for the shop and George Sarkisyan was
the superintendent for outside projects at both All West Iron and CCC. They were also
the direct supervisors of the plaintiffs when they worked at All West Iron. Of the 10
individuals who were listed on All West Iron’s 2005 organization chart, nine later
worked for CCC.


                                             7
      In the December 2010 bankruptcy filing for All West Iron, Mekikyan stated that
the company had assets of $1,500 and liabilities of $3 million. The only identified assets
were a checking account and office furniture; no vehicles, machinery, fixtures, or
equipment used in the business were listed. There were 12 unsecured creditors identified,
including the plaintiffs in the Talamentes and Robles actions and in other pending
lawsuits filed against All West Iron.6 Mekikyan represented in the bankruptcy filing that
All West Iron earned no income in 2008 or 2010, and earned $953,900 in income from
AWI Builders in 2009.7 Mekikyan further represented that, within the past two years, no
bookkeepers or accountants had kept records for All West Iron, and no firm or individual
had conducted an audit of records or prepared a financial statement for the company.
Mekikyan also indicated that no inventories had been taken of the company’s property.

      B.     Talamentes’s Employment with All West Iron
      Talamentes worked as a welder for All West Iron from January 2004 to September
2005. He performed all of his work in All West Iron’s shop. Mekikyan’s uncle, who was
known in the shop as “Big George,” hired Talamentes, set his work schedule, recorded
his work hours, and gave him a paycheck every two weeks. Talamentes attended
meetings at All West Iron where Mekikyan spoke to the employees about work issues,
but otherwise had no direct contact with Mekikyan. Big George and Mekikyan worked
in the first floor office space occupied by All West Iron, and at times, Talamentes saw
both of them go into the second floor space occupied by AWI Builders. He never saw
Mekikyan’s wife in the building.



6      Mekikyan initially testified that there were no unpaid judgments pending against
All West Iron at the time it filed for bankruptcy. He later admitted, however, that there
was a judgment entered against All West Iron, AWI Builders, Mekikyan, and his wife in
October 2009 for $897,634, and that such judgment had been stayed by the bankruptcy
court.
7     According to business records presented at trial, however, All West Iron received
a number of payments from AWI Builders in 2008 for subcontracting work.


                                            8
       During his employment, Talamentes was provided with a written policy on work
rules and procedures, which identified All West Iron and AWI Builders in the document
heading and was used by both companies. On one occasion, Talamentes was issued a
written warning by Irma Parra, the bookkeeper for both companies, but he refused to sign
the warning because he did not understand it. Talamentes was given welding tools for
use at work, but no safety tools, and he had to bring his own mask, goggles, and gloves to
work. All West Iron did not provide Talamentes with health insurance or workers’
compensation insurance benefits, and did not pay him when he was injured at work and
had to be out for a period of time.
       Talamentes worked 60 hours a week from Monday through Saturday. He received
his regular rate of pay for any overtime hours worked. Big George told Talamentes that
the company did not pay overtime wages and that if Talamentes did not like it, he could
leave. Talamentes always was paid for his work in checks issued by All West Iron. He
never received any checks from AWI Builders or Mekikyan. Other employees were paid
in both checks and cash, and some of them complained that they received old $100 bills
that could not be used. All employees, including Talamentes, had to pay All West Iron
$5 per week to clean the bathroom in the shop. All West Iron did not provide Talamentes
with any tax reporting forms and did not withhold any taxes from his paychecks.8
Talamentes believed All West Iron and AWI Builders were the same company because
Mekikyan told him that he was the owner of both. Talamentes did not know which
employees worked for which company.

       C.     The Robles Plaintiffs’ Employment with All West Iron
       Jose Robles, Juan Robles, and Felipe Alvarado each worked as a welder for All
West Iron. They regularly worked more than 40 hours a week and often more than 10


8       All West Iron produced copies of certain IRS Forms 1099-MISC, which it claimed
were issued to Talamentes for the 2004 and 2005 tax years. However, the recipient’s tax
identification number was not included on those forms and Talamentes testified that he
never received them.


                                            9
hours a day. They were permitted to take one meal period per day, but no rest periods.
They were not paid overtime wages for any of the overtime hours that they worked.
They also were not paid the prevailing wage rate when they worked on public works
projects. Juan Robles was paid by All West Iron solely in checks. Jose Robles and
Alvarado were paid by All West Iron in both checks and cash. Mekikyan told the
employees that they were receiving some of their wages in cash so that they would not
have to report those wages as income on their tax returns. From the wages that they were
paid, the employees had to pay $5 per week back to All West Iron to clean the bathroom
in the shop. All West Iron did not provide the employees with worker’s compensation
insurance, health insurance, or any other employee benefits.
       Employees from both All West Iron and AWI Builders used the trucks owned by
All West Iron to travel to and from work sites. While working for All West Iron, the
Robles plaintiffs did not work for any other companies. They were paid for their work
solely by All West Iron and did not receive any paychecks from AWI Builders, CCC, or
Mekikyan. Both Jose Robles and Alvarado were fired by Mekikyan, who refused to give
them their final paychecks because they did not sign a release stating that they were
leaving voluntarily.

       D.     Persons Responsible for All West Iron’s Business Records
       Irma Parra worked as an independent contractor for All West Iron and AWI
Builders. She provided bookkeeping services for both companies, and also assisted with
billing and invoicing for CCC. Her job duties when she worked for All West Iron
included bookkeeping, billing and invoicing, and processing payroll checks. She signed
the paychecks that were issued to Talamentes. All of the payroll information that Parra
used to process checks for All West Iron was stored on a computer in the company’s
office. Parra stopped working for All West Iron when it closed, and was unaware of any
financial problems with the company.
       Carlos Leonor worked as an independent contractor for All West Iron and CCC.
He began working for CCC after All West Iron closed. His job title at both companies


                                            10
was payroll officer and his primary job duty was to prepare certified payroll records for
their public works projects. Leonor saved all of the records that he prepared on compact
discs that were stored at the office. In preparing the certified payroll records, he relied on
the pre-printed hours listed on daily sign-in sheets and on the wage rates listed on the
Department of Industrial Relations website. He did not use the actual hours worked by
employees or their actual rates of pay to prepare the records. Some of the employees
who worked for All West Iron later worked for CCC. After All West Iron closed, CCC
took over use of All West Iron’s fabrication shop and office equipment. Leonor used the
same computer and same office furniture when he worked for All West Iron and CCC.
The only person that Leonor believed worked in AWI Builders’ offices on the second
floor was a secretary named Dina.
       Danielle Bogdanovich was an employee of All West Iron from 2005 to 2008. She
began working as an employee of CCC in January 2009. Her job duties when she was
hired at CCC were the same duties she performed at All West Iron. At both companies,
Bogdanovich was responsible for product administration and purchase orders, and also
acted as the custodian of records. She was never paid for her work by AWI Builders or
Mekikyan personally, and she never saw Mekikyan use corporate funds to pay for his
personal expenses. Bogdanovich worked solely on the first floor of the building during
her employment with both All West Iron and CCC, and she did not perform any work on
the second floor occupied by AWI Builders. After All West Iron closed, all of its
business records continued to be stored at the Saco Street address.

       E.     Financial Statements for All West Iron, AWI Builders, and CCC
       Craig Cleveland is a certified public accountant and a partner in the independent
accounting firm of Jones, Henle & Schunck. Cleveland’s firm prepared unaudited annual
financial statements for AWI Builders from 2008 to 2010 and for CCC from 2009 to
2010. The purpose of these financial statements was to allow AWI Builders and CCC to
obtain surety bonds for public works projects. Cleveland was not aware of any instance
where a surety had denied bonding for AWI Builders or CCC. In the course of preparing


                                             11
the financial statements, he never saw anything to suggest that Mekikyan was using either
AWI Builders or CCC as a shell company.
       Cleveland testified that any transfer of funds between AWI Builders and CCC
were disclosed in the financial statements as related party transactions. The financial
statements for AWI Builders identified CCC as a related party that was owed $271,739 as
of December 2009 and $1.99 million as of December 2010. AWI Builders’ financial
statements showed that a shareholder withdrew $791,668 from the company in 2008 and
deposited $750,000 of personal funds back into the company in March 2009. They also
showed shareholder distributions totaling $172,536 as of December 2008, $246,682 as of
December 2009, and $1,734,673 as of December 2010. CCC’s financial statements did
not reflect any shareholder distributions, but did identify shareholder advances totaling
$100,000 as of May 2009 and $45,000 as of May 2010.
       Cleveland’s firm did not prepare any financial statements for All West Iron, and
Cleveland had no personal knowledge as to whether All West Iron had filed for
bankruptcy. All West Iron used a different accountant to prepare its annual financial
statements between 2002 and 2008. The company’s 2008 financial statement reflected a
“note receivable” from an officer for $955,097, but Mekikyan could not recall at trial
whether that amount was ever paid back. All West Iron did not have any financial
statements prepared after June 2008.

III.   The Statement of Decision
       On October 31, 2011, after the close of evidence in the Talamentes and Robles
actions, the bankruptcy case for All West Iron was closed. On June 28, 2012, the trial
court issued its statement of decision in the consolidated actions. With respect to
Talamentes, the trial court found that he worked overtime hours while employed by All
West Iron and that he was not paid overtime compensation or penalties for missed meal
and rest periods. With respect to the Robles plaintiffs, the trial court found that each of
the plaintiffs worked on public works projects while employed by All West Iron, and that




                                             12
each of them was not paid the prevailing wage rate, overtime compensation, or penalties
                                   9
for missed meal and rest periods.
       With respect to the liability of Mekikyan, AWI Builders, and CCC for these wage
and hour violations, the trial court found that the plaintiffs did not meet their burden of
proving by a preponderance of the evidence that AWI Builders, CCC, or Mekikyan was
an alter ego of All West Iron. The trial court further found that plaintiffs did not meet
their burden of proving that AWI Builders, CCC, or Mekikyan was a joint employer of
the plaintiffs, or that AWI Builders or CCC was liable as a successor corporation. The
trial court thus concluded that each of the defendants against whom the case was tried
was entitled to judgment in its favor. On August 9, 2012, the trial court entered a
judgment against the plaintiffs in both the Talamentes and Robles actions and in favor of
AWI Builders, CCC, and Mekikyan. Talamentes thereafter filed a timely notice of
appeal.
                                       DISCUSSION

       On appeal, Talamentes argues that the judgment against him must be reversed
because the trial court erred in finding that AWI Builders, CCC, and Mekikyan were
not liable under the alter ego doctrine, and in finding that CCC was not liable under the
successor liability doctrine. He also asserts that the trial court erred in finding that each
of these defendants was not liable as a joint employer with All West Iron.

I.     Standard of Review
       We ordinarily review a challenge to the sufficiency of the evidence supporting a
judgment under the substantial evidence standard of review. Under this standard, “all


9       As discussed, due to the bankruptcy stay, the Talamentes and Robles actions
did not to proceed to trial against All West Iron, and instead proceeded solely against
Mekikyan, AWI Builders, and CCC. The trial court nevertheless found that each of the
plaintiffs had been subjected to various Labor Code violations during their employment
with All West Iron. None of the defendants against whom the actions were tried has
challenged these findings on appeal.


                                              13
conflicts must be resolved in favor of the [prevailing party], and all legitimate and
reasonable inferences indulged in to uphold the [judgment] if possible. … When two or
more inferences can be reasonably deduced from the facts, the reviewing court is without
power to substitute its deductions for those of the trial court.’ [Citation.]” (Western State
Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 571.) “‘[N]either conflicts in
the evidence nor ‘“testimony which is subject to justifiable suspicion . . . justif[ies] the
reversal of a judgment, for it is the exclusive province of the [trier of fact] to determine
the credibility of a witness and the truth or falsity of the facts upon which a determination
depends.’” [Citations.]’” (Lenk v. Total-Western, Inc. (2001) 89 Cal.App.4th 959, 968.)
       As appellate courts have recognized, however, “[i]n the case where the trier of fact
has expressly or implicitly concluded that the party with the burden of proof did not carry
the burden and that party appeals, it is misleading to characterize the failure-of-proof
issue as whether substantial evidence supports the judgment. … [¶] Thus, where the issue
on appeal turns on a failure of proof at trial, the question for a reviewing court becomes
whether the evidence compels a finding in favor of the appellant as a matter of law.
[Citations.] Specifically, the question becomes whether the appellant’s evidence was
(1) ‘uncontradicted and unimpeached’ and (2) ‘of such a character and weight as to leave
no room for a judicial determination that it was insufficient to support a finding.’
[Citation.]” (In re I.W. (2009) 180 Cal.App.4th 1517, 1528; see also Dreyer’s Grand Ice
Cream, Inc. v. County of Kern (2013) 218 Cal.App.4th 828, 838; Sonic Manufacturing
Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 465-466.) The
determination of whether the trial court applied the correct legal standard in making a
finding or order is a question of law subject to de novo review. (Hoover v. American
Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1203; In re Marriage of David &
Martha M. (2006) 140 Cal.App.4th 96, 100-101.)




                                              14
II.    Alter Ego and Successor Liability
       A.     Relevant Law
       “‘“Ordinarily, a corporation is regarded as a legal entity separate and distinct
from its stockholders, officers and directors. Under the alter ego doctrine, however,
where a corporation is used by an individual or individuals, or by another corporation, to
perpetrate fraud, circumvent a statute, or accomplish some other wrongful or inequitable
purpose, a court may disregard the corporate entity and treat the corporation’s acts as if
they were done by the persons actually controlling the corporation. [Citations.] …”’
[Citation.]” (Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217
Cal.App.4th 1096, 1106-1107.) “In California, two conditions must be met before the
alter ego doctrine will be invoked. First, there must be such a unity of interest and
ownership between the corporation and its equitable owner that the separate personalities
of the corporation and the shareholder do not in reality exist. Second, there must be an
inequitable result if the acts in question are treated as those of the corporation alone.
[Citations.]” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523,
538.) “‘[T]he corporate form will be disregarded only in narrowly defined circumstances
and only when the ends of justice so require.’ [Citation.]” (Leek v. Cooper (2011) 194
Cal.App.4th 399, 411; see also Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 810
[“‘[a]lter ego is a limited doctrine, invoked only where recognition of the corporate form
would work an injustice to a third person’”].)
       The factors for the trial court to consider in deciding whether to apply the alter ego
doctrine include the following: “‘[1] [c]ommingling of funds and other assets, failure to
segregate funds of the separate entities, and the unauthorized diversion of corporate funds
or assets to other than corporate uses . . .; [2] the treatment by an individual of the assets
of the corporation as his own . . .; [3] the failure to obtain authority to issue stock or to
subscribe to or issue the same . . .; [4] the holding out by an individual that he is
personally liable for the debts of the corporation . . .; the failure to maintain minutes or
adequate corporate records, and the confusion of the records of the separate entities . . .;
[5] the identical equitable ownership in the two entities; the identification of the equitable

                                               15
owners thereof with the domination and control of the two entities; identification of the
directors and officers of the two entities in the responsible supervision and management;
sole ownership of all of the stock in a corporation by one individual or the members of a
family . . .; [6] the use of the same office or business location; the employment of the
same employees and/or attorney . . .; [7] the failure to adequately capitalize a corporation;
the total absence of corporate assets, and undercapitalization . . .; [8] the use of a
corporation as a mere shell, instrumentality or conduit for a single venture or the business
of an individual or another corporation . . .; [9] the concealment and misrepresentation
of the identity of the responsible ownership, management and financial interest, or
concealment of personal business activities . . .; [10] the disregard of legal formalities and
the failure to maintain arm’s length relationships among related entities . . .; [11] the use
of the corporate entity to procure labor, services or merchandise for another person or
entity . . .; [12] the diversion of assets from a corporation by or to a stockholder or other
person or entity, to the detriment of creditors, or the manipulation of assets and liabilities
between entities so as to concentrate the assets in one and the liabilities in another . . .;
[13] the contracting with another with intent to avoid performance by use of a corporate
entity as a shield against personal liability, or the use of a corporation as a subterfuge of
illegal transactions . . .; [14] and the formation and use of a corporation to transfer to it
the existing liability of another person or entity.’ [Citation.] … [¶] This long list of
factors is not exhaustive. The enumerated factors may be considered ‘[a]mong’ others
‘under the particular circumstances of each case.’ [Citation.]” (Morrison Knudsen
Corp. v. Hancock, Rothert & Bunshoft (1999) 69 Cal.App.4th 223, 249-250.)
       “Because it is founded on equitable principles, application of the alter ego
[doctrine] ‘“is not made to depend upon prior decisions involving factual situations
which appear to be similar. . . .”’ [Citations]” (Toho-Towa Co., Ltd. v. Morgan Creek
Productions, Inc., supra, 217 Cal.App.4th at p. 1108.) Rather, “‘[t]he conditions under
which the corporate entity may be disregarded vary according to the circumstances in
each case and the matter is particularly within the province of the trial court. [Citations.]’
[Citation.]” (Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1071-1072.) “Whether the

                                               16
evidence has established that the corporate veil should be ignored is primarily a question
of fact which should not be disturbed when supported by substantial evidence.
[Citation.]” (Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc., supra, at p. 1108.)
       The general rule on successor liability provides that “‘where one corporation sells
or transfers all of its assets to another corporation, the latter is not liable for the debts and
liabilities of the former unless (1) the purchaser expressly or impliedly agrees to such
assumption, (2) the transaction amounts to a consolidation or merger of the two
corporations, (3) the purchasing corporation is merely a continuation of the selling
corporation, or (4) the transaction is entered into fraudulently to escape liability for debts.
[Citations.]’ [Citations.]” (McClellan v. Northridge Park Townhome Owners Assn.
(2001) 89 Cal.App.4th 746, 753, italics omitted.) With respect to the third exception,
“‘California decisions holding that a corporation acquiring the assets of another
corporation is the latter’s mere continuation and therefore liable for its debts have
imposed such liability only upon a showing of one or both of the following factual
elements: (1) no adequate consideration was given for the predecessor corporation’s
assets and made available for meeting the claims of its unsecured creditors; (2) one or
more persons were officers, directors, or stockholders of both corporations. [Citations.]’”
(Id. at p. 754, fn. 4.) “[S]uccessor liability, like alter ego and similar principles, is an
equitable doctrine. As with other equitable doctrines, ‘it is appropriate to examine
successor liability issues on their own unique facts’ and ‘[c]onsiderations of fairness and
equity apply.’ [Citation.]” (Cleveland v. Johnson (2012) 209 Cal.App.4th 1315, 1330.)

       B.      Application to the Talamentes Action
       In this case, the trial court found that the plaintiffs had failed to meet their burden
of proving by a preponderance of the evidence that AWI Builders, CCC, or Mekikyan
was an alter ego of All West Iron, or that CCC was a successor corporation of All West
Iron. On appeal, Talamentes contends that the evidence was insufficient to support the
trial court’s alter ego and successor liability findings, and that the trial court did not apply
the correct legal criteria in making its findings. We conclude that these claims lack merit.


                                               17
       In support of their theories of alter ego and successor liability, the plaintiffs in the
Talamentes and Robles actions presented evidence that Mekikyan was the sole officer
and shareholder of All West Iron and CCC, and that Mekikyan and his wife were the sole
officers and shareholders of AWI Builders. Neither All West Iron nor AWI Builders
maintained adequate corporate formation and compliance records. Mekikyan held the
same three types of contractor licenses for All West Iron, AWI Builders, and CCC, and
was the person most responsible for overseeing the day-to-day operations of each
company. All three companies operated out of the same building at 2881 Saco Street in
Vernon, California, and CCC occupied the same first floor fabrication shop and office
space that All West Iron occupied prior to closing. When CCC moved into the building,
it began using the same overhead crane, work benches and tables, and office furniture
that All West Iron used when it occupied the premises. The trucks owned by All West
Iron were used by employees of both All West Iron and AWI Builders, and the trucks
remained on the Saco Street property after All West Iron closed. All West Iron did not
disconnect its business telephone number after it ceased operations and instead allowed
CCC to use that same telephone number for its business. When the number was dialed,
the caller was provided with a list of employees of both CCC and AWI Builders. At least
10 individuals who worked for All West Iron later worked for CCC, including the
majority of All West Iron’s management and administrative team. All West Iron ceased
operations in December 2009 but did not file for bankruptcy until a year later. The
bankruptcy documents that Mekikyan filed on behalf of All West Iron in December 2010
did not disclose all of the company’s assets, income, or recordkeeping information.
       In support of their defense, AWI Builders, CCC, and Mekikyan presented
evidence that All West Iron was incorporated in or about 1990, AWI Builders was
incorporated in 2002, and CCC was incorporated in 2004. While all three companies
worked in the construction industry, All West Iron operated solely as a steel
subcontractor, AWI Builders as a general contractor, and CCC as a multi-trade
subcontractor. In some of the construction projects where AWI Builders was the general
contractor, All West Iron and CCC performed work for AWI Builders as subcontractors

                                              18
and were paid for their work by AWI Builders pursuant to subcontracting agreements.
However, both All West Iron and CCC worked for a variety of general contractors other
than AWI Builders, and AWI Builders worked as a general contractor on projects where
neither All West Iron nor CCC were used as subcontractors. Each company prepared
separate financial statements, which were submitted to surety insurers to obtain bonding
for public works projects, and each company showed sufficient bonding capacity to be
hired on such projects. Any transfers of funds between the companies or distributions to
shareholders were disclosed in AWI Builders’ and CCC’s annual financial statements,
and the certified public accountant who prepared their 2008 to 2010 financial statements
testified that he saw no evidence that either corporation was being used as a shell
company. The evidence showed payments from AWI Builders to All West Iron and CCC
for their subcontracting work, but no commingling of funds between the companies.
       The defense also presented evidence that All West Iron and AWI Builders
occupied separate floors of the building at the Saco Street address pursuant to a sublease
agreement between the two companies. CCC did not begin occupying the first floor of
the building until All West Iron’s lease expired and CCC entered into a separate lease
agreement with the building owner and a separate sublease agreement with AWI
Builders. While it appears that CCC took possession of some of the office furniture and
equipment owned by All West Iron, Mekikyan testified that most of the machinery and
materials in the fabrication shop either belonged to the building owner or were scrapped
by the building owner when All West Iron vacated the premises. Mekikyan also testified
that CCC did not use any of the trucks that All West Iron left on the property. Although a
number of All West Iron’s employees were later hired by CCC in essentially the same job
positions, there was no evidence that All West Iron transferred any funds or other assets
to CCC or AWI Builders when it ceased business operations. Each of the plaintiffs,
including Talamentes, solely worked for All West Iron, and none ever worked for or were
paid by AWI Builders, CCC, or Mekikyan personally.
       In its statement of decision, the trial court set forth the correct legal criteria for
determining the applicability of the alter ego doctrine. The court accurately described the

                                               19
unity of interest and equitable interest requirements, and identified the long list of factors
that may be considered by the trier of fact in making its determination. The court also
summarized the evidence presented by each side to support its position on whether alter
ego or successor liability should be imposed under the circumstances of the case. The
record reflects that the trial court carefully weighed the evidence presented at trial and
considered the closing arguments of counsel. The court acknowledged that some of the
evidence supported the plaintiffs’ position and other evidence supported the defense.
Based on the totality of the evidence, however, the trial court found that the plaintiffs had
failed to prove by a preponderance of the evidence that AWI Builders, CCC, or
Mekikyan was the alter ego of All West Iron, or that CCC was a successor corporation of
All West Iron. Given the conflict in the evidence presented, Talamentes cannot show that
he was entitled to a contrary finding as a matter of law.
       Talamentes argues on appeal that any failure by the plaintiffs to prove alter ego or
successor liability was the result of the defendants’ failure to produce complete corporate
and financial records in response to the plaintiffs’ notices to produce such documents at
trial. The transcript of the trial proceedings reflects that Talamentes’ counsel did raise a
concern about the defendants’ failure to produce all of the requested documents, and was
advised by the trial court to bring a motion to compel production of the missing records.
Although Talamentes later offered into evidence copies of his notices to Mekikyan and
AWI Builders to appear and produce documents at trial, there is nothing in the record to
suggest that his counsel ever moved to compel production of any documents. In any
event, the record reflects that, during the parties’ closing arguments and post-trial
briefing, the trial court gave due consideration to the defendants’ failure to produce
complete business records and the reasonable inferences to be drawn therefrom. The
court ultimately concluded that the evidence did not support a finding of alter ego or
successor liability under the circumstances of the case. It was the exclusive province of
the trial court to resolve the conflicts in the evidence, to determine the credibility of the
witnesses, and to draw reasonable inferences from the facts, and it is not the role of this
court to substitute its view of the evidence for that of the trial court. (Western State

                                              20
Petroleum Assn. v. Superior Court, supra, 9 Cal.4th at p. 571; Lenk v. Total-Western,
Inc., supra, 89 Cal.App.4th at p. 968.) Considering the totality of the evidence,
Talamentes has failed to demonstrate any error in the trial court’s findings on alter ego
and successor liability.

III.   Joint Employer Liability
       A.     Relevant Law
       California’s Industrial Welfare Commission (IWC) promulgated Wage Order No.
16, codified at California Code of Regulations, title 8, section 11160 (Wage Order 16), to
regulate the wages, hours, and working conditions in the construction industry.10 Wage
Order 16, like all of the IWC wage orders, defines the term “employ” as “to engage,
suffer, or permit to work,” and the term “employer” as “any person as defined in § 18 of
the Labor Code, who directly or indirectly, or through an agent, or any other person,
employs, or exercises control over the wages, hours, and/or working conditions of any
person.” (Cal. Code. Regs., tit. 8, § 11160, subd. (2)(G), (2)(I).) Section 18 of the Labor
Code defines “person” as “any person, association, organization, partnership, business
trust, limited liability company, or corporation.” (Lab. Code, § 18.)
       The California Supreme Court first construed the definition of “employer” as used
in the IWC wage orders in Reynolds v. Bement (2005) 36 Cal.4th 1075 (Reynolds). The
plaintiff in Reynolds, a former employee of an auto painting company, sued both the
company and its individual officers and directors to recover unpaid overtime wages under
Labor Code section 1194. The individual defendants demurred on the ground that they
were not the plaintiff’s employer. The Supreme Court in Reynolds first observed that
“the plain language of [the applicable wage order] defining employer does not expressly
impose liability under [Labor Code] section 1194 on individual corporate agents.” (Id. at
p. 1086.) The Court then applied the common law test of employment under which

10     The IWC is the state agency empowered to formulate regulations (known as wage
orders) governing minimum wages, maximum hours, and overtime pay in California.
(Heyen v. Safeway Inc. (2013) 216 Cal.App.4th 795, 816, fn. 2.)


                                            21
“corporate agents acting within the scope of their agency are not personally liable for the
corporate employer’s failure to pay its employees’ wages.” (Id. at p. 1087.) Based on the
common law test, the Court held that the plaintiff could not state a Labor Code section
1194 cause of action against the individual defendants. (Id. at pp. 1087-1088.) The
Court also held that, while corporate directors may be “‘jointly liable with the corporation
and may be joined as defendants if they personally directed or participated in . . . tortious
conduct,’” the “failure to comply with statutory overtime requirements . . . does not
qualify” as tortious conduct. (Id. at pp. 1089-1090.)
       In Martinez v. Combs (2010) 49 Cal.4th 35 (Martinez), the California Supreme
Court reexamined the IWC’s definition of employer in actions to recover unpaid wages
under Labor Code section 1194. The plaintiffs in Martinez were seasonal agricultural
workers who sued their former employer, a strawberry farmer, for failing to pay
minimum wages and violating other provisions of the Labor Code. The farmer had been
discharged in bankruptcy and the plaintiffs sought to hold two produce merchants and a
field representative for one of the merchants liable as joint employers. The Supreme
Court held that the IWC’s definitions of the employment relationship applied in actions
to recover unpaid wages under Labor Code section 1194. (Id. at p. 52.) The Court also
held that the term “employ” as used in the IWC wages orders “has three alternative
definitions. It means: (a) to exercise control over the wages, hours or working
conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a
common law employment relationship.” (Id. at p. 64.) The Martinez court partially
abrogated the Reynolds decision to the extent it held that the common law, rather than the
applicable wage order, defined the employment relationship for purposes of an action
under Labor Code section 1194. (Id. at pp. 63-64.) However, the Martinez court
reaffirmed its prior holding in Reynolds that “the IWC’s definition of ‘employer’ does not
impose liability on individual corporate agents acting within the scope of their agency.”
(Id. at p. 66, citing Reynolds, supra, at p. 1086.)
       Accordingly, under Reynolds and Martinez, a plaintiff may not bring an action to
recover unpaid wages under the Labor Code against individual officers or directors of a

                                              22
corporate employer acting within the scope of their agency. A plaintiff seeking to hold
an affiliated corporation liable for unpaid wages as a joint employer must demonstrate
that such entity meets the IWC’s definition of “employer” as set forth in Martinez.

       B.     Application to the Talamentes Action
       In its statement of decision, the trial court found that the plaintiffs had failed to
meet their burden of proving by a preponderance of the evidence that AWI Builders,
CCC, or Mekikyan was a joint employer of the plaintiffs. Talamentes asserts that there
was insufficient evidence to support the trial court’s finding that the joint employer
theory of liability did not apply. We see no error in the trial court’s ruling.
       With respect to Mekikyan, he was named as a defendant in the Talamentes action
based on his position as an officer and shareholder of All West Iron and AWI Builders.
There was no evidence that Mekikyan ever acted outside the scope of his agency as All
West Iron’s president and managing officer when he failed to provide Talamentes with
statutorily mandated overtime compensation and meal and rest periods. Nor was there
any evidence that Mekikyan misappropriated the unpaid wages to himself for his
independent advantage. Based on the holdings in Reynolds and Martinez, Mekikyan
cannot be held individually liable for All West Iron’s Labor Code violations.
       With respect to AWI Builders and CCC, the evidence does not mandate a finding
as a matter of law that either company met the IWC’s definition of employer for purposes
of imposing joint employer liability. Talamentes admitted that he worked exclusively in
All West Iron’s shop during his employment with the company. His paychecks were
issued solely by All West Iron and he did not receive any payments from AWI Builders
or Mekikyan. He was hired and supervised by “Big George” Caradanian, who was an
All West Iron employee at the time Talamentes worked for the company. There was
evidence that Talamentes received a written policy on work rules and procedures, which
identified both All West Iron and AWI Builders in the document heading and applied to
employees of both companies. There was also evidence that all three companies used the
same versions of other employment policies. However, there was no evidence that AWI


                                              23
Builders or CCC exercised any control over Talamentes’s wages, hours, or working
conditions, ever suffered or permitted him to work, or engaged him in any work.
Although Talamentes believed that All West Iron and AWI Builders were the same
company, he testified that he based his belief on the fact that Mekikyan said that he was
the owner of both. Given this record, Talamentes has failed to show that he was entitled
to a finding of joint employer liability as a matter of law. The trial court did not err in
granting judgment in favor of AWI Builders and Mekikyan on Talamentes’s claims.

                                      DISPOSITION

       The judgment is affirmed. Respondents shall recover their costs on appeal.



                                                   ZELON, J.


We concur:




       PERLUSS, P. J.




       WOODS, J.




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