Yesterday our office received the good news that our client had been victorious on an appeal. Our client was added to a judgment of a corporation from 2009, after the corporation failed to respond to a complaint (default judgment). The Court of Appeal reviewed two key cases, Motores de Mexicali, S.A. v. Superior Court of Los Angeles County (1958) 51 Cal.2d 172 (“Motores“), and NEC Electronics Inc. v. Hurt (1989) 208 Cal.App.3d 772 (“NEC“). In each of the cases the plaintiffs sued corporations, but not the individual shareholders. After the defendant corporations failed to litigate the cases, the superior courts awarded the plaintiffs judgments in each case. Later, the plaintiffs sought to add the individual shareholders to the judgments without allowing the shareholders to defend the merits of each case. The courts in Motores and NEC held that to add a party to the judgment without giving him or her an opportunity to defend the merits of the case violated the due process rights of the shareholders.
In our case, the Superior Court allowed the judgment to be amended to add the shareholder. The Court of Appeal reviewed both Motores and NEC and held that our client did not have the due process right to defend his case. The Court ordered the Superior Court to reverse the judgment to exclude the individual shareholder.
Here is the opinion for the Court: