Shaoxing County Huayue Import & Export v. Bhaumik
191 Cal. App. 4th 1189
| Cal. Ct. App. | 2011Background
- Shaoxing County Huayue Import & Export sued ITC and Bhaumik for breach of contract and common counts for $291,612.80.
- The complaint alleged Bhaumik was ITC’s alter ego; ITC allegedly used a unity of interest and control to avoid liability.
- ITC filed a chapter 7 bankruptcy in January 2009; bankruptcy stay was alleged to apply to the alter ego claim.
- Shaoxing voluntarily dismissed ITC in July 2009; Bhaumik argued that only the bankruptcy trustee could pursue alter ego claims.
- The trial court conducted a July 21, 2009 hearing and entered judgment against Bhaumik on July 28, 2009 for the full amount.
- On appeal, the issue was whether Shaoxing’s alter ego claims were property of the bankruptcy estate and subject to the automatic stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are alter ego claims property of the bankruptcy estate and stayed? | Shaoxing argues the alter ego claim seeks relief against an individual for the corporation’s debts, not a standalone corporate action. | Bhaumik contends the alter ego claims belong to the estate; only the trustee may pursue them and the action should be stayed or moot after ITC’s dismissal. | Alter ego claims were not the estate’s property and not stayed. |
Key Cases Cited
- Mesler v. Bragg Management Co., 39 Cal.3d 290 (Cal. 1985) (alter ego standard requires unity of interest and inequitable result)
- Stodd v. Goldberger, 73 Cal.App.3d 827 (Cal. App. 1977) (trustee standing limits: when injury is to corporation, trustee may sue; otherwise claims belong to creditors)
- Ahcom, Ltd. v. Smeding, 623 F.3d 1248 (9th Cir. 2010) (federal view criticizing general state-law alter ego standing separate from underlying action)
- In re Folks, 211 B.R. 378 (9th Cir. 1997) (discussion of alter ego and estate/creditor interests)
- In re Advanced Packaging and Products Co., 426 B.R. 806 (C.D. Cal. 2010) (complex alter ego considerations in bankruptcy context)
- In re Davey Roofing, Inc., 167 B.R. 604 (C.D. Cal. 1994) (modest treatment of alter ego claims in bankruptcy)