Zheng v. Amwest Environmental Group

Filed 9/7/06 Zheng v. Amwest Environmental Group CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Kern County. Sidney P. Chapin, Judge.

Rosenlieb & Kimball, Thomas V. DeNatale, Jr., Catherine E. Bennett, Dawn O. Bittleston, Terrence T. England and David Cooper for Defendants and Appellants.

Law Offices of John R. Walton, John R. Walton and Roger Furman for Plaintiff and Respondent.

-ooOoo-

This is an action for judicial foreclosure of a deed of trust in which the plaintiff also sought to hold several nondebtor defendants liable for any deficiency on the theory the debtor had acted as their alter ego. The debtor defaulted. The nondebtor defendants answered the complaint and filed a cross-complaint in which they alleged, in effect, that the plaintiff had waived his right to recover a deficiency. The trial court, after having imposed several lesser sanctions for discovery abuse, eventually ordered that the answer and cross-complaint be stricken and the nondebtor defendants' default be entered. They appeal from this order.

We will conclude the order is appealable, and will affirm it.

FACTS AND PROCEEDINGS

Hui Zheng, also known as Howard Zheng, was one of a group of several individuals, many of whom evidently lived in China (the Zheng group), who collectively invested some $1.4 million in a Nevada corporation called the American Rubber Group, Inc., but more often known simply as Amber, Inc. (Amber). Amber, in turn, was one of a number of companies created by the Amwest Environmental Group, Inc. (Amwest) and its principal owners, James Cheng Shyong Lu and William Dan Qun Fang . Amber's purpose was to build and operate tire recycling plants. One such plant was to be located on a 155-acre parcel of undeveloped land in Kern County that Amwest had conveyed to Amber when Amber was formed in 1996, in exchange for a substantial ownership interest in the new company. Lu and Fang, as Amber's founders, also received large numbers of shares in the company, and they were named its chairman and president, respectively. Zheng became a director.

Zheng subsequently became concerned about his group's investment in Amber, so arrangements were made with the company to convert the group's equity interest into a secured debt. On March 5, 1998, Amber gave Zheng, on behalf of himself and the other investors in his group, a promissory note for $1.26 million plus interest at 7 percent, payable in full after 12 months.^[1] The note was secured by a first deed of trust on the Kern County property (said to be worth $600,000); by Amber's as-yet unacquired interest in the DIHO Supermarket in southern California; and by Amber's interest in the â€