Church of Scientology International Found Debtor in Multi-Million Dollar Judgement

Kendrick L. Moxon cited.





	The motion of plaintiff Lawrence Wollersheim to amend the 
judgment of 7.22.86 against Church of Scientology of California 
("CSC"), to include real party defendants and judgment debtors 
Church of Scientology International ("CSI") and Religious 
Technology Center ("RTC"), is granted.

	The parties do not dispute the general principles of law 
which guide the court in deciding this motion. The court in which a 
judgment is entered has both the inherent power and the duty to 
carry the judgment into effect. (Code Civ. Proc.; C. 187.) This may 
include amending the judgment to add another debtor. (Jack 
Farenbaugh & Son v. Belmont Construction, Inc. (1987) 194 
Cal.App.3d 1023, 1029.)

	The court must determine whether there is substantial 
evidence of the following:

	1.	CSI and RTC are the alter egos of CSC; and
	2.	CSI and RTC controlled the litigation.

(Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415, 
1420, 1421; NEC Electronics, Inc. v. Hurt (1989) 208 Cal.App.3d 
772, 778.)

	The court must also decide if plaintiff is barred by the 
doctrine of laches from seeking amendment in 1997 to a 1986 

	The court is entitled to hear evidence which was not 
presented in the underlying trial, on proper notice to the adverse 
party, to make the judgment speak the truth. (Jack Farenbaugh & 
Son v. Belmont Construction, Inc., supra, 104 Cal.App.3d at p. 
1029.) All parties have submitted evidence in the form of 
declarations and exhibits and the court has reviewed and considered 
only admissible evidence; all objections to the evidence are 
overruled. Plaintiff's request for judicial notice is granted.

	The parties agree that Scientology reorganized its corporate 
structure from 1981 through 1985 during the pretrial phase of the 
instant lawsuit. CSI became the new "mother church," replacing 
CSC. RTC was formed in 1982 With the approval of L. Ron 
Hubbard, Scientology's founder, and is the owner and protector of 
Scientology service marks and products. CSC became an inactive 
corporation with no income, assets, employees or business. Plaintiff 
claims the reorganization occurred partly to prevent him from 
collecting on his judgment against CSC, which he would win one 
year later in 1986. Based on the evidence outlined below, the court 
agrees and concludes that the Scientology leaders acted in bad faith 
which would result in an injustice to plaintiff if CSI and RTC's 
corporate separateness were maintained and they were not added as 
judgment debtors.

	Alter ego

	"Where there is such a unity of interest and ownership that 
the separateness of the corporation has ceased and the facts are 
such that an adherence to the fiction of separate existence of the 
corporation would under the particular circumstances sanction a 
fraud or promote an injustice, separate identity will be disregarded. 
[Citation.]" (Ukegawa Brothers v. Agriculture Labor Relations Bd. 
(1989] 212 Cal.App.3d 1314, 1323.)

	"To prevail on a claim of 'alter ego,' the [judgment creditor] 
must show (1) there is such a unity of interest that the separate 
personalities of the corporations no longer exist; and (2) inequitable 
results will follow if the corporate separateness is respected. 
[Citation.] Certainly, the facts of each case vary." (Tomaselli v. 
Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1285.)

	A finding of actual fraud is not required; only bad faith 
which would result in fraud or injustice if accomplished (Associated 
Vendors, Inc. v. Oakland Heat Co. (1962) 210 Cal.App.2d 825, 

	Unity of interest

	Among the facts which will be considered [in deciding if 
there is a 'unity of interest'] are:

	1.   Financial issues (e.g. was the corporation adequately 

	2.   Corporate formality questions (e.g. was stock issued, 
are minutes kept and officers and directors elected, are corporate 
records segregated?); 

	3.   Ownership issues {e.g. what is the stock ownership 
picture?); and 

	4.   Commingling issues (e.g. are corporate assets 
commingled, does the parent company merely use the corporate 
shell of the subsidiary to obtain goods and services for the parent 
company?); etc. [Associated Vendors, Inc. v. Oakland Meat Co., 
supra, 210 Cal.App.2d at p.p. 838-840.]"'

(Tomaselli v. Transamerica Ins. Co., supra, 25 Cal.App.4th at p 
1285, fn. 13.)

	Applying these rules to the instant case, there is sufficient 
evidence that CSI and RTC had a unity of interest with defendant 

	1. Financial issues

		a. Claiming responsibility for the debt of the other 
(Associated Vendors, Inc., supra, at p. 838)

		CSI has claimed (to the IRS) as its own debt the $30 
million judgment [later reduced) plaintiff won against CSC. 

		CSI paid CSC's lawyers' fees in this case. (Exh. A, p. 
60.) 1

		CSI is responsible for CSC's debt in another lawsuit 
between these parties, CSC v. Wollersheim (1996) 42 Cal.App.4th 
628. (Exh. II, p. 14.}

		CSC's counsel Chodos has acknowledged his other 
client, CSI, is responsible for CSC's debts and has said it renders 
moot any alter ego issue. (Exh. II, pp. 8-11.)

		RTC and CSC claimed the judgment in this case as 
their own debt as an element of their damages in another 

1  All references to exhibits are to plaintiff's exhibits filed on
in support of this motion. 

lawsuit between the parties, RTC and CSI v. Wollersheim (9th Cir. 
1992) 971 F.2d 364. (Exh. U, p. 4.) Further, CSI and RTC filed a 
notice of appeal, not only on their own behalf, but also on CSC's 
behalf, even though CSC was not a party. (Exh. Z.)

		CSI settled a lawsuit between CSC and another ex-
Scientologist, Gerald Armstrong, in late 1986, even though CSI 
was not a party.

		b. Failure to adequately capitalize new corporation 
or maintain capital in old corporation.

		Monthly management fees from local California 
Scientology branches, which had been sent to CSC, became payable 
to CSI. (Exh. B, p. 151414.)

	2. Ownership issues

		a. Diversion of assets from a corporation to another 
to the detriment of creditors, or manipulation of assets and 
liabilities between entities so as to concentrate the assets in one and 
the liabilities in the other.

		CSC's net worth in 1981 (a year after plaintiff filed 
this action) was $340 million. (Exh. I.] By May 1985 (a year before 
plaintiff won judgment against CSC), all of CSC's assets had been 
divested and transferred to CSI and RTC. (Exh. J, pp. 14309-
14310; Young decl., paras. 20,21.)

		b. Identical equitable ownership in the two entities 
or the identification of the equitable owners, directors, or officers 
w/ domination and control of the various entities or management of 
the corporations' affairs.

		Authority over CSC and its affairs was handed over 
to CSI and RTC, especially David Miscavige, who controls both 
corporations and all of Scientology after the death of L. Ron 
Hubbard. "Sea Org" is the unincorporated association which, is the 
power center -- Miscavige is its highest ranking member. (Exh. B, 
p. 153819.) Miscavige is also chairman of RTC and ASI (Author 
Services, Inc.).

		Scientology's corporate officers and trustees are 
intermingled at will.

	3. Commingling issues

		a. Use of corporation as a shell for the other 

		CSI provided the funds to open an account at 
Republic Bank in New York in CSC's name. (Exh. A, p. 47.)

		b. Same employees or attorneys (at p. 839)

		RTC's lawyer, Kendrick L. Moxon, was also CSC's 
lawyer in the instant case in post-trial matters and in Wollersheim 
IV. (Exhs. N, U, V, HH)

	Inequitable result

	It is sufficient that it appear that recognition of the acts as 
those of the corporation only will produce inequitable results. 
(Associated Vendors, Inc. v. Oakland Meat Co., supra, at p. 837.) 
In light of the closeness of corporations involved, and the ongoing 
litigation between these corporations and plaintiff, the court 
concludes it would be inequitable to recognize the acts of CSI and 
RTC regarding plaintiff's lawsuit against CSC to be separate from 
those of CSC.

	Control of litigation

	"Control of the litigation sufficient to overcome due process 
objections may consist of a combination of factors., usually 
including the financing of the litigation, the hiring of attorneys, and 
control over the course of the litigation. [Citation.] Clearly, some 
active defense of the underlying claim is contemplated. [Citation]" 
(NEC Electronics Inc. v. Hurt, supra, 208 Cal.App.3d at p. 781.) 

	Applying these rules to the instant case, there is sufficient 
evidence that CSC and RTC controlled this litigation.

		Financing the lawsuit

		CSI paid CSC's defense costs. (Exh. A, P. 60.)

		CSI then funded CSC's 1993 SLAPP suit against 
plaintiff. (Exh. A, pp. 59-60.)

		There is no written agreement for CSC to repay CSI 
for the defense costs. (Exh. A, p. 60.)

		CSI's counsel on 4.11.97 stated in a hearing in 
Department 14 of this court that CSI financed Wollersheim IV.

		Hiring attorneys

		Earle Cooley was hired to simultaneously represent 
CSC in the instant case and RTC and CSI in Wollersheim II.

		Participation in the defense

		RTC's present chairman and highest officer in the 
power hub "Sea Org," David Miscavige, supervised and controlled 
the defense, along with a few other persons in the corporation ASI. 
(Young decl., para. 25; exh. S; pp. 364-366.}

		Miscavige attended a portion of the trial. (Exh. K.)

		Other factors

		Miscavige ordered Vicki Aznaran to destroy certain 
files the court had ordered CSC to produce to plaintiff. (Exh. S, p. 


	Plaintiff's delay in bringing this motion is excused; further, 
CSI and RTC have not demonstrated prejudice by the delay. 

	RTC and CSI did not exist when plaintiff filed his complaint 
in 1980, so they could not have been joined as defendants. While he 
could have amended the complaint, his failure to do so is not fatal. 
As this court has concluded CSI and RTC are the alter egos of 
CSC, their interests were adequately represented and protected at 
trial. Finally, the parties have been in litigation ever since the 
judgment was rendered, both in federal court and on appeal in state 
court. Indeed, the notice of final judgment in the instant case did 
not issue until 1994. (Exh. V.)

Dated: 10-29-97  	[Signature]		

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