Winning a lawsuit does not always mean collecting the judgment will be easy, particularly when the business activities behind the dispute involve multiple individuals and related entities.

A recent California Court of Appeal decision demonstrates that, in appropriate circumstances, a court may amend a judgment to reach parties who were not originally named as defendants.

In 8451 Melrose Property, LLC v. Akhtarzad, a dispute involving a commercial lease in West Hollywood, a landlord obtained a judgment of more than $10.5 million. The lease named Sina Akhtarzad individually as tenant, although the landlord later contended that the family partnership was the actual business enterprise behind the lease.

After extensive litigation, the landlord prevailed and the judgment was affirmed on appeal.

Years later, however, discovery in related bankruptcy proceedings revealed considerably more about the business arrangement behind the lease.

According to evidence presented to the trial court, Akhtarzad, his brothers, and their wives had operated for decades through what their accountant described as a “one-for-all” family partnership.

The landlord contended that the partnership, not Akhtarzad individually, had actually been the business enterprise behind the lease, and that Amey Enterprise Inc., a family-controlled corporation, served as the partnership’s vehicle for real estate leasing.

The trial court agreed and amended the judgment under California Code of Civil Procedure section 187 to add four family members and Amey as judgment debtors, jointly and severally. When the defendants appealed, the Court of Appeal affirmed.

Section 187 gives California courts authority to amend a judgment to identify persons or entities who were, in substance, the real defendants.

The doctrine is commonly associated with alter ego liability, but the Court of Appeal emphasized that its reach is not confined to traditional alter ego cases.

That does not mean every partner can automatically be added to a judgment against another partner. Due process remains important. As the court explained, a judgment against a partnership does not, by itself, make every partner personally subject to the judgment.

The facts here were what made the difference.

The court found substantial evidence that the lease was treated internally as a partnership transaction; the partnership financed the litigation; every partner knew about the lawsuit; and Akhtarzad vigorously defended the case through two trials and two appeals.

The appellate court concluded that the partners had effectively accepted Akhtarzad’s representation of their common interests, and they had sufficient control of the litigation to support adding them to the judgment.

A Practical Lesson for Business Owners

The decision is a reminder that courts may look beyond corporate names, signatures, and formal organizational boundaries when the underlying facts demonstrate that several people or entities are operating as a single business enterprise.

Business owners who use partnerships and related corporations should pay careful attention to maintaining meaningful distinctions among entities, documenting which entity is undertaking an obligation, and keeping business and personal financial arrangements appropriately separated.

There is an equally significant lesson for judgment creditors: the party whose name appears on the judgment may not always be the end of the collection inquiry.

By Robert C. Weiss