Communist Party v. 522 Valencia, Inc

In Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980, the national Communist Party (Party) sought to have imposed a constructive trust in its favor against two public benefit corporations in order for the Party to gain an ownership interest in property acquired by the corporations. The appellate court reversed the trial court's imposition of such constructive trusts, and specifically rejected the party's attempt to invoke the alter ego doctrine, observing that the purpose of the doctrine is "to prevent a corporation from using its statutory separate corporate form as a shield from liability only where to recognize its corporate status would defeat the rights and equities of third parties; it is not a doctrine that allows the persons who actually control the corporation to disregard the corporate form." (Id. at p. 994.) The court held that the Party could not assert the alter ego doctrine, concluding: " 'Alter ego is a limited doctrine, invoked only where recognition of the corporate form would work an injustice to a third person. ' Alter ego is utilized to prevent two parties with the same interest from inequitably using the corporate form to thwart a third party's rights; it is not designed to unite two separate entities with opposing interests for the benefit of the one claiming to control the other. In this case, there is no third party; the Party claims that it itself is identical to the corporations. The Party has cited no case authority, and we have found none, in which rather than being used to reach behind the corporate form to attach liability to another individual or entity, the alter ego doctrine has been employed to establish a relationship of identity between the defendant corporation and the plaintiff itself, in order to allow the plaintiff to obtain for itself the assets of the corporation. To the contrary, our Supreme Court has stated that the corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require. The Party cannot use the alter ego doctrine to 'pierce the corporate veil' of a separate corporation which it claims it set up to conceal its property from the federal government and to circumvent the laws of the state concerning duties of corporate directors." (Id. at p. 995.)