B241675 CPR Pacific Marina

~, "
Case No.
S222843
IN THE
SUPREME COURT OF CALIFORNIA

STEPHEN M. GAGGERO,
Plaintiffand Appellant,
vs.
KNAPP,PETERSEN & CLARKE; STEVEN RAY GARCIA;

STEPHEN M.HARRIS and ANDRE JARDII~TI,
Defendants and Respondents;
PACIFIC COAST MANAGEMENT,INC.; 511 OFW LP;
GINGERBREAD COURT LP; MALIBU BROAD BEACH LP; MARINA
GLENCOE LP; BLU HOUSE LLC;BOARDWALK SUNSET LLC; and
JOSEPH PRASKE as Trustee of
THE GIGAI~TIN TRUST, THE ARENZANO TRUST,
and THE AQUASANTE FOUNDATION
Additional Judgment Debtors and Appellants
After a Decision by the

COURT OF APPEAL,SECOND APPELLATE DISTRICT, DIVISION EIGHT
Case No. B241675
PETITION FOR REVIEW

EDWARD A. HOFFMAN,Bar No. 167240
DAVID BLAKE CHATFIELD,Bar No. 88991
LAW OFFICES OF EDWARD A. HOFFMAN
WESTLAKE LAW GROUP
11755 WILSHIRE BOULEVARD, SUITE 1250
2625 TOWNSGATE RD., SUITE 330
LOS ANGELES, CALIFORNIA 90025
WESTLAKE VILLAGE, CA 91361
(310)442-3600
(805)267-1220
eah@hoffinanlaw.com
davidblakec@yahoo.com
Attorneyfor Additional Judgment
Debtors, and Appellants
Attorneyfor Plaintiff
and Appellant
Pacific Coast Management, Inc., et al.
Stephen M. Gaggero
Case No.
S222843
IN THE
SUPREME COURT OF CALIFORNIA

STEPHEN M. GAGGERO,
Plaint and Appellant,
vs.
KNAPP,PETERSEN & CLARKE; STEVEN RAY GARCIA;
STEPHEN M. HARRIS and ANDRE JARDII~TI,
Defendants and Respondents;
PACIFIC COAST MANAGEMENT,INC.; 511 OFW LP;
GINGERBREAD COURT LP; MALIBU BROAD BEACH LP; MARINA
GLENCOE LP; BLU HOUSE LLC; BOARDWALK SUNSET LLC; and
JOSEPH PRASKE as Trustee of
THE GIGAI~TIN TRUST, THE ARENZANO TRUST,
and THE AQUASANTE FOUNDATION
Additional Judgment Debtors and Appellants
After a Decision by the

COURT OF APPEAL,SECOND APPELLATE DISTRICT, DIVISION EIGHT
Case No. B241675
PETITION FOR REVIEW

EDWARD A. HOFFMAN,Bar No. 167240
DAVID BLAKE CHATFIELD,Bar No. 88991
LAW OFFICES OF EDWARD A. HOFFMAN
WESTLAKE LAW GROUP
11755 WILSHIRE BOULEVARD,SUITE 1250
2625 TOWNSGATE RD., SUITE 330
LOS ANGELES,CALIFORNIA 90025
WESTLAKE VILLAGE, CA 91361
(310)442-3600
(805)267-1220
eah@hoffinanlaw.com
davidblakec@yahoo.com
Attorneyfor Additional Judgment
Debtors, and Appellants
Pacific Coast Management, Inc., et al.
Attorneyfor Plaintiff
and Appellant
Stephen M. Gaggero
TABLE OF CONTENTS
Table of Authorities .................................................. iii
Issues Presented ...................................................... 1
Why Review Should Be Granted ......................................... 1
Statement ofthe Case .................................................. 3
A.
The Estate Plan ........................................... 3
B.
Respondents Serve as Gaggero's Attorneys ..................... 4
C.
The Underlying Malpractice Case ............................. 4
D.
Post-trial Discovery ........................................ 5
E.
The Alter-ego Motion ...................................... 5
F.
The Present Appeal ........................................ 6
LegalArgtunent ...................................................... 8
L
Review Is Necessary to Resolve a Split of Authority over Whether and

When the Assets of an Irrevocable Trust Are Reachable by the Settlor's
Creditors....................................................... 8
II.
Only this Court Can Clarify Whether, and under What Conditions, the
Alter-Ego Doctrine May Apply to Non-Corporate Debts ............... 11
A.
The Doctrine Exists to Address a Problem Unique to Corporate

Debtors, So it May Never Apply to the Debts of an Individual ..... 11
B.
Liability in Other Contexts Is Already Governed by Other Rules ... 12
C.
This Court Has Never Said the Alter-ego Doctrine Applies

Outside the Context of Owner and Corporation, but Lower
Courts Routinely Invoke it in Other Contexts ................... 13
D.
Because Individuals Do Not Have Owners, California Law Says

No One May Be Liable as the Alter Ego of an Individual Debtor ... 15
III.
The Court Should Resolve the Conflict Between Cases Which Say
Alter-Ego Status Requires Actual Ownership and Cases Which Say it
Does Not .............................:....................... 15
IV.
The Court Should Decide Whether Section 15400 Creates an Evidentiary

Presumption That Trusts Are Revocable............................. 20
V.
This Case Presents an Ideal Opportunity for the Court to Address

These Issues .................................................. 22
Conclusion ......................................................... 23
Certificate of Word Count ............................................. 25
pro
Proof of Service ..................................................... 26
TABLE OF AUTHORITIES
STATE CASES
Aguilar v. Aguilar
(2008) 168 Ca1.App.4th 35 ......................................... 1,9
Automotriz del Golfo de Calif. S.A. De C. V. v. Resnick,

(1957)47 Cal.2d 792 ............................................... 11
Bay City View, LLC v. SF Bay Builders, Inc.,

(2014)2014 WI.,4840438 ............................................ 20
Crook v. Contreras,
(2002)95 Cal.App.4th 1194, 12 ....................................... 21
Galdjie v. Darwish
(2003) 113 Cal.App.4th 1331 ....................................... 3, 13
Greenspan v. LADT, LLC

(2011) 191 Cal.App.4th 486 ...................................... passim
Kahrs v. County ofLos Angeles

(1938)28 Cal.App.2d 46 ............................................ 22
Las Palmas Assoc. v. Las Palmas Ctr. Assoc.

(1991)235 Cal.App.3d 1220 ...................................... 16, 18
Laycock v. Hammer
(2006) 141 Ca1.App.4th 25 ....................................... 1, 8, 10
Mesler v. Bragg Management Co.

(1985)39 Ca1.3d 290 ............................................... 11
Minifie v. Rowley
(1921)187 Ca1.481 ................................................ 13
Minnesota Mining &Manufacturing Co. v. Superior Court

(1988)206 Ca1.App.3d 1025 ......................................... 18
Minton v. Cavaney
(1961)56 Cal.2d 576 ............................................ 15, 18
Mt. Whitney Farms LLC v. Sandstone Marketing, Inc.
(2014)2014 WL 3827585 . .......................................... 21
People v. Avanessian
(1999)76 Cal.App.4th 635 ........................................... 22
Postal Instant Press, Inc. v. Kaswa Corp.
(2008) 162 Cal.App.4th 1510 ....................................... 7, 13
Riddle v. Leuschner
(1959)51 Cal.2d 574 ......................................... 13, 15, 16
Roman Catholic Archbishop ofSan Francisco v. Superior Court
(1971) 15 Ca1.App.3d 405 ........................................... 18
Rowe v. Exline
(2007) 153 Ca1.App-4th 1276 ........................................ 18
Schwerin v. Kuhns
(2014)2014 WL 1435898 ........................................... 15
Sonora Diamond Corp. v. Superior Court
(2000)83 Ca1.App.4th 523 ...................................... 8, 14, 19
Steinhart v. County ofLos Angeles
(2010)47 Cal.4th 1298, 13 ............................................ 1
Title Ins. &Trust Co. v. Duffill
(1923)191 Ca1.629 ................................................ 17
Torrey Pines Bank v. Hoffman
(1991)231 Cal.App.3d 308, 31 ....................................... 14
Troyk v. Farmers Group, Inc.
(2009) 171 Ca1.App.4th 1305 ...................................... 14, 16
-iv-
Watson v. Commonwealth Ins. Co. ofN.Y.

(1936)8 Cal.2d 61 ................................................. 11
Wood v. Elling Corp
(1977)20 Cal.3d 353 ............................................... 13
Zoran Corp. v. Chen
(2010) 185 Cal.App.4th 799 .......................................... 19
FEDERAL CASES
Firstmark Capital Corp. v. Hempel Financial Corp.
(9th Cir.1988) 859 F.2d 92 .......................................... 18
In re Schwarzkopf
(9th Cir. 2010)626 F.3d 1032 .................................... passim
Neilson v. Union Bank ofCalifornia, N.A.
(2003)290 F.Supp.2d 1101 .......................................... 18
S.E.C. v. Hickey
~9tn Cir. 2003)322 F.3d
1123 ......................................... 18
Wady v. Provident Life and Accident Ins. Co. ofAmerica

(2002)216 F.Supp.2d 1060 .......................................... 18
Wehlage v. EmpRes Healthcare, Inc.,
(2011)791 F.Supp.2d 774 ........................................... 17
STATE STATUTES
Code of Civil Procedure section 187 ...................................... 5
Code of Civil Procedure section 631.8 .................................... 4
Corporations Code section 15903.03 ..................................... 12
-v-
Corporations Code section 16305 ....................................... 12

Corporations Code section 16307 ....................................... 12
Corporations Code section 17703.4 ...................................... 12
Evidence Code section 452 ............................................. 3
Evidence Code section 453 ............................................. 3
Evidence Code section 602 ............................................ 21
Insurance Code section 1280 ........................................... 16
Probate Code section 15400 ........................................ passim
Probate Code section 15403 ........................................ 1, 9, 10
Probate Code section 18200 .................................. 1, 9, 10, 12, 13
Probate Code section 19001 .................................. 1, 9, 10, 12, 13
STATE COURT RULES

Cal. Rules of Court, rule 8.504(d)(1) ..................................... 29
FEDERAL STATUTES
26 U.S.C.2702 ..................................................... 6
OTHER AUTHORITIES
Miller and Starr, 11 Cal. Real Est.(3d ed.) 10, 20
13 Witkin, Summary 10th(2014 supp.)................................... 10
60 Cal.Jur.3d Trusts .................................................. 10
Ca1.Civ.Prac. Probate and Trust Proceedings 24:171 ....................... 14
Cal.Prac.Guide Bankruptcy ............................................ 10
Ca1.Prac.Guide Probate ............................................... 10
-vi-
ISSUES PRESENTED
1. Probate Code sections 18200 and 19001 say the assets of an irrevocable
trust are not reachable to satisfy claims against the settlor or his estate. May his
creditors obtain trust assets anyway under the alter-ego doctrine?
2. Probate Code section 15400 says a trust is revocable unless it is "expressly
made irrevocable by the trust instrument." Does that statute create a presumption that
a trust is revocable if the instrument is not in evidence?
WHY REVIEW SHOULD BE GRANTED
By definition, an asset in an irrevocable trust is one which the settlor has no
right to reclaim. Probate Code sections 18200 and 19001'-~ say a settlor's creditors
have no more right to trust assets than the settlor himself. A settlor loses the right to
reclaim trust assets once the transfer becomes irrevocable.(Steinhart v. County ofLos
Angeles(2010)47 Ca1.4th 1298, 1319-1320.) Section 15403 says an irrevocable trust
may only be breached with the unanimous consent of its beneficiaries or upon a
finding that its irrevocability is frustrating its purpose. This necessarily means the
settlor cannot breach it unilaterally. Since his creditors have no more right to trust
assets than he does, once he can no longer reach the assets, neither can they. As
Laycock v. Hammer(2006) 141 Cal.App.4th 25 ("Laycocl~') explains,"a settlor's
conduct after an irrevocable trust has been established will not alter the nature of such
a trust."(Id. at p. 31; accord Aguilar v. Aguilar(2008) 168 Cal.App.4th 35, 40.)
Many trillions of dollars of assets have been placed into California irrevocable
trusts precisely because neither the settlor nor his creditors can pry them loose,
ensuring both that the assets will reach the trusts' beneficiaries and that they will not
be depleted to fend off attempts to breach the trust's irrevocability.
Yet a growing body of case law suggests that the alter-ego doctrine gives
creditors a way around the sanctity of irrevocable trusts based on precisely what
'-Statutes cited in this petition are in the Probate Code unless otherwise
stated.
Laycock says can never open the door to such claims the conduct of the settlor after
the trust is created.(See, e.g., In re Schwarzkopf(9th Cir. 2010)626 F.3d 1032, 10381040("Schwarzkopf'); Greenspan v. LADT, LLC(2011) 191 Ca1.App.4th 486, 522
("Greenspan").) The November 7, 2014 decision of the Court of Appeal is just the
latest in this line of cases.
These two sets of authorities are in direct conflict. Either there is a way for
creditors to reach assets in an irrevocable trust or there isn't. Until the law is clear on
this point, Californians will not know how secure their trusts and estate plans against
third-party claims. Probate lawyers will be unable to advise their clients about the
effect of creating an irrevocable trust or of transferring assets into it. Beneficiaries will
have no assurance that assets set aside for their benefit will ever reach them. Creditors
will not know if they can satisfy their claims from trust assets. Trustees will not know
how to defend against a claim by the settlor's creditors. And the courts responsible for
deciding those cases will have to choose between conflicting authorities.
If settlors can now get their hands on assets that were once off-limits, then no
trust is safe. Even trusts which could easily defeat such claims at trial will have
powerful incentives to settle in order to preserve assets for their beneficiaries. If this
Court does not intervene now, there is no telling how many irrevocable trusts will fall
or be forced to settle due to the ambiguity in the governing law. Further, if a settlor's
creditor has no more right to trust assets than the settlor does, then a rule which lets
creditors claim assets in an irrevocable trust necessarily lets settlors claim them as
well. By definition, if the settlor can reclaim those assets, there is no such thing as an
irrevocable trust in this state.
This Court should grant review to resolve the inconsistency between Laycock
and Aguilar on the one hand and Schwarzkopfand Greenspan on the other. Until it
does, there will be no way to know whether or how irrevocable trusts can be breached.
STATEMENT OF THE CASE

A.
The Estate Plan.
Petitioner Stephen Gaggero, a successful real estate developer and investor,

hired attorney Joseph Praske in 1997 to create an estate plan which would hold
various properties for the benefit of his family.(Trial RT1 602-604; Trial RTS 2720;
CT1 124-125; CT3 411.)~~ Praske created several limited partnerships and limited
liability companies as part of the plan, including petitioners 511 OFW LP,
Gingerbread Court LP, Malibu Broad Beach LP, Marina Glencoe LP, Blu House LLC,
and Boardwalk Sunset LLC.(CT2 314-319, 360-CT3 370.)He also created petitioners
Giganin Trust, Arenzano Trust, and Aquasante Foundation.(CT2 191-193, 360-CT3
370.)Praske is the trustee of each of these trusts.(CT1 166-167; CT2 195; CT3 412.}3
Gaggero transferred one real property to each of the LPs and LLCs, and then
transferred his interests in the LPs and LLCs to trusts within the estate.(CTl 126,
162-163, 191; CT2 191-193, 360-CT3 370.) Separately, he transferred the property
where he lived directly to Giganin, which is a Qualified Personal Residence Trust
within the meaning of26 U.S.C. 2702.(CTl 31; CT2 193-196.)
Each ofthese entities then hired petitioner Pacific Coast Management, Inc.
("PCM")to manage its finances and its real estate holdings.(CT2 187-188, 195-196,
~~The record in this appeal is cited as"CT"and "RT." Citations to "Trial

RT" and "JA" refer to the record in a prior appeal in this case, Gaggero v.
Knapp, Petersen, &Clarke, et al., 2nd Dist. No. B207567. Petitioners
respectfully ask the Court to take judicial notice of the briefing, record and
decision in that appeal pursuant to Evidence Code sections 452, subdivision
(d), and 453.
3~Trusts are not legal entities and may only sue ar be sued in the name
ofthe trustee.(Galdjie v. Darwish(2003)113 Cal.App.4th 1331, 1343-1344.)
That is how they were brought into this case, and how they have litigated ever
since. This petition refers to each trust by its own name for the sake of clarity,
since Praske is trustee of all three and since he also figures in the narrative as
an individual.
269.) Gaggero hired PCM to manage his finances as well.(CT2 252-257; Trial RT4
1836-1839.)
In light of Gaggero's real-estate expertise and his familiarity with the
properties,PCM hired him as an asset manager to oversee the portfolio and to guide
further purchases, sales, or other transactions.(CT1 140; CT2 213-215, 360.)Praske
accepts Gaggero's recommendations when he agrees that they're in the interests of the
estate.(CT2 214:11-13.)
B.
Respondents Serve as Gaggero's Attorneys.
Respondent Knapp, Peterson, &Clarke LLP is a law firm in which respondents

Steven Ray Garcia, Stephen M. Harris, and Andre Jardini are partners. Gaggero hired
them in or around August 2000 to advise and represent him in various matters.(JA2
521-534; Trial RT2 610-615.) They resigned and withdrew their representation in
early 2002.(Trial RT3 908-909, 1278-1279, 1288-1289; Trial RT8 4616; Trial RT10
5750.)
C.
The Underlying Malpractice Case.
Gaggero brought the underlying malpractice case in December 2002.(JA7

1934; CT1 19.) The case was tried without a jury from July 23 to September 10, 2007,
when the trial court granted respondents' motion for judgment under Code of Civil
Procedure section 631.8.(Trial RT10 5737-5738; JA1 147; JA2 366.) The court
entered a defense judgment on February 5, 2008(JA2 421-423) which it amended on
May 19, 2008 to add an award of $1,327,674.40 in fees and costs in respondents'
favor.(JA7 1884-1889.)
The Court of Appeal affirmed both the original and amended judgments in full
on May 6,2010.(Gaggero v. Knapp, Petersen, &Clarke, et al., 2nd Dist. No.
B207567.) The trial court subsequently awarded respondents $193,245.90 in fees and
costs for that appeal, along with $320,591.78 in accrued interest, and amended the
judgment accordingly.(CT1 114-116.)
D.
Post-Trial Discovery.
Respondents took Praske's third-party debtor exam on June 5, 2009.(CT2 357CT3 377.) The order to appear named him individually rather than as a representative
of any entities, and did not seek any documents.(CT2 357-358.) During the exam,
respondents questioned Praske about petitioners 511 OFW,Blu House, and
Boardwalk Sunset. His lawyer instructed him not to answer three particular questions,
and he followed that advice.(CT2 362, 366; CT3 368.) He answered the rest of
respondents' questions.
Respondents served Gaggero with interrogatories and requests for production
in 2001 and later successfully moved to compel further responses as to the
interrogatories.(CT2 291-306.) There is no evidence of what the requests asked for or
of whether they prompted a motion to compel.
Respondents later served Gaggero with another set of document requests
seeking, inter alia, the trust instruments for Giganin, Arenzano, and Aquasante.(CT2
329-354.) His March 20,2012 responses said that he did not have the instruments but
that Praske did.(CT2 333-334.) Respondents did not move to compel fiu-ther
responses, and did not subpoena the documents from Praske.(CT1 24; CT3 354.)
E.
The Alter-Ego Motion.
On April 10, 2012, respondents filed a motion under Code of Civil Procedure
section 187 to deem the other ten petitioners Gaggero's alter egos and to further
amend the judgment by naming them additional judgment debtors.("AJDs".)(CT1
24-58.) None of the AJDs had previously played any part in the case.
Respondents alleged that Gaggero had transferred assets to the estate in the
1990s but neither claimed nor showed he had ever received anything of value from
Aquasante, Arenzano, or any of the LPs or LLCs.4~ They twice acknowledged that
4~The papers did say that Gaggero continued to live on the property he
had transferred to Giganin.(CT1 31:24-26.)
they were invoking the alter-ego doctrine because afraudulent-transfer claim would
have been untimely.(CT1 29:2-4, 42:15-16.)
Respondents did not allege that any of the three trusts was revocable, or
acknowledge that revocability was an issue. They neither submitted the trust
instruments as exhibits nor claimed any of the petitioners had prevented them from
doing so.
The alter-ego motion was heard and granted on May 29, 2012.(RT 28; CT3
540, 541-542.) At the hearing, the AJDs explained that the trusts were irrevocable and
that respondents therefore had to serve their motion on the trust beneficiaries, which
they had not done.(RT 3:14-28.) The court noted that this argument had not been
raised in the opposition(RT 4:23-28), mistakenly said Praske had refused to produce
evidence about the trusts in discovery(RT 7:8-15), and said that the AJDs had not
shown there were any beneficiaries.(RT 11:14-17.) Respondents said they had
documents in their files that they would have brought with them had they known these
issues would arise, and did not claim to lack any such evidence or assign blame for its
absence.(RT 6:10-17.)
The court granted the alter ego motion that same day.(CT3 540-542.)In so
doing, it held the documents' absence against petitioners and said some oftheir key
factual arguments were barred as a result.(CT3 540.)
F.
The Present Appeal.
The Court of Appeal affirmed the alter-ego order in an unpublished decision on

November 7, 2014. The opinion said, inter alia, that the ownership requirement did
not apply because "this case does not involve an individual and a corporation."(Opn.
18.) It instead said equitable considerations justified treating Gaggero as the AJDs'
owner, and that actual ownership is not required "in the trust context."(Opn. 18-19.)
The opinion also held that Laycock's rule is not absolute because that case "did
not involve circumstances where the trustee of the trust was the alter ego of the settlor.
(Opn. 22.) The decision instead relied on Greenspan, which did involve such
D
circumstances.(Opn. 22-23.)
Rejecting the argument that respondents had failed to prove the trusts were
revocable because they did not produce the trust instruments, the court said section
15400 creates a presumption of revocability which petitioners had failed to rebut.
(Opn. 23-24.) The opinion said petitioners had prevented respondents from proving
the trusts were revocable, even though respondents had said nothing about
revocability in their motion.(Opn. 23-25.) It rejected out of hand Gaggero's argument
that the alter-ego order threatened the integrity of estate planning in California.(Opn.
25.) The court did not rule at all on the argument that holding the instruments' absence
against petitioners was an improper issue sanction, instead rejecting a related
argument after acknowledging that petitioners had made both.(Opn. 25; see RP 5-7.)
The opinion relied heavily on Schwarzkopfand on portions of Greenspan,
without addressing petitioners' argument that those cases were wrongly decided.
(Gaggero ARB 32-26; AJD ARB 47-59.)
On November 19, several third parties asked the Court of Appeal to publish its
opinion, explaining it had clarified that irrevocable trusts may be liable as alter egos
and had limited the holding ofPostal Instant Press, Inc. v. Kaswa Corp.(2008) 162
Ca1.App.4th 1510("PIP")that California law forbids outside reverse piercing of the
corporate veil. The court denied that request on November 26.
Gaggero and the AJDs jointly petitioned for rehearing on November 24. The
court summarily denied the petition on December 8.
//
//
LEGAL ARGUMENT
The alter-ego doctrine superficially resembles the law of trust liability, since
both concern the availability of other parties' assets to pay an obligor's debt.s~ But
they are different bodies of law, which are defined by different statutes and which
govern different situations.
Both the trial court and the Court of Appeal thoroughly conflated these distinct
areas of law. They are not alone; many other cases have made similar mistakes. The
laws governing the alter-ego doctrine and trust liability have become tangled,
confused, and contradictory.
I.
REVIEW IS NECESSARY TO RESOLVE A SPLIT OF AUTHORITY

OVER WHETHER AND WHEN THE ASSETS OF AN IRREVOCABLE
TRUST ARE REACHABLE BY THE SETTLOR'S CREDITORS.
There are two conflicting lines of authority about whether a settlor's creditors
may reach assets he placed into an irrevocable trust. Laycock and Aguilar say those
assets are always off limits, while Schwarzkopfand Greenspan say they may be
reached via the alter-ego doctrine.b~ The list of cases on each side of the conflict
continues to grow. That ongoing divergence will only end when this Court intervenes.
Laycock says it is impossible for a settlor to expose the assets in an irrevocable
trust to the claims of his creditors, no matter what he does.(Laycock,supra, 141
5'Other doctrines share this similarity, including agency, fraudulent

transfer, and respondent superior. They are also distinct from the alter ego
doctrine. (See, e.g., Sonora Diamond Corp. v. Superior Court (2000) 83
Cal.App.4th 523, 540 ["Though we think many courts have failed to
distinguish, accurately or at all, between an agency analysis and an alter ego
analysis, the two concepts are different and must be evaluated
independently."])
6~None ofthese cases says whether there might be other exceptions to
the rule against breaching irrevocable trusts, or why the alter-ego doctrine
should be the only one.
Cal.App.4th at p. 31; accord Aguilar, supra, 168 Cal.App.4th at p. 40.) It explains that
this result is consistent with federal tax law, where even "breaches of the terms of a
trust by a settlor will not make the settlor the owner of trust property[.]"(Id. at p. 31.)
As it also explains, this result is mandated by the Probate Code, since "the only means
of terminating the irrevocable nature of a trust" are those set forth in section 15403,
which have nothing to do with the actions of the settlor. (Id. at p. 30, emphasis added.)
Noting that sections 18200 and 19001 place assets in an irrevocable trust offlimits to the settlor's creditors, Laycock notes that "by expressly giving settlors'
creditors the right to reach only the assets of revocable trusts, the Legislature ... has
clearly indicated an intention that creditors are to be bound by the terms of an
irrevocable trust to the same extent settlors, beneficiaries and other claimants are
bound by such an instrument."(Id. at p. 31.) It further explains that what matters is
whether the settlor is the asset's legal owner, as opposed to anon-owner who is able
to exercise authority he does not legally have.(Ibid.)
Just four years later, Schwarzkopfmade an irrevocable trust pay the debts of its
settlor due to his conduct after the trust was created.-'~ Greenspan, which also involved
an irrevocable trust, says that both a trust and its settlor can be the alter egos of
businesses owned within the trust.(Greenspan,supra, 191 Ca1.App.4th at pp. 517522.)8~ It also contains extensive dicta saying that a trust can be liable as the alter ego
of its settlor. (Id. at pp. 518-522.)9
The conflict between these two lines of authority could not be more stark. Yet
'-While Schwarzkopfmentioned in passing that the trust was irrevocable

(Id. at p. 1034), it never considered whether that fact was significant.
$'Like Schwarzkopf,Greenspan mentioned the trust's irrevocabilityjust
once and did not consider whether it mattered.(Id. at p. 497.)
9~This part of the opinion is dicta because the original debtors in
Greenspan did not include the settlor. They were a pair of LLCs which were
owned by other entities owned by the trust. (Id. at pp. 496-498.)
until the present case, there were no decisions either published or unpublished
which cited Laycock and its underlying statutes on the one hand and either
Schwarzkopfor Greenspan on the other. The November 7 opinion in this case is the
first to even acknowledge the possibility of a conflict, but it says none exists because
Laycock states only a general rule which does not apply where the trustee is the
settlor's alter ego.(Opn. 22-23.)
But Laycock announced an absolute rule, not a general one. Under sections
15403, 18200, and 19001, a settlor's creditors can never reach assets in an irrevocable
trust. Nothing in the governing statutes suggests there are any exceptions to this rule.
Yet Schwarzkopfand Greenspan remain on the books and continue to be cited without
question.
Secondary sources only add to this confusion, citing Schwarzkopfand
Greenspan for the rule that creditors can breach an irrevocable trust under an alter-ego
theory. Miller and Starr, for example, cite Schwarzkopfwhen explaining that
"[a]lthough a corporation's assets cannot be reached to satisfy the obligations of an
individual for whom it is an alter ego (sometimes called `reverse piercing'), the assets
of a similarly utilized trust can be executed upon."(11 Cal. Real Est.(3d ed.) 32:27;
see also Cal.Prac.Guide Bankruptcy, 21:302; 13 Witkin, Summary 10th (2014 supp.)
Trusts, 248, p. 236; Cal.Civ.Prac. Probate and Trust Proceedings 24:171 [claiming
that section 18200's "general rule can be subject to exceptions," and citing Greenspan
as such an exception].)
At the same time, other secondary sources and sometimes other sections of
the same sources endorse Laycock's holding while ignoring Schwarzkopfand
Greenspan.(See, e.g., 60 Cal.Jur.3d Trusts 84, 135 fn.l, 313; 13 Witkin,
Summary 10th(2014 supp.) Trusts, 203 p. 227, 260 p. 238; Cal. Prac. Guide
Probate 2:109.)
There is no telling when, or even if, any appellate decisions or secondary
sources will address the conflict unless this Court does so. It is as if the two lines of
10
authorities exist independently of each other a state of affairs which will continue
until this Court puts a stop to it.
II.
ONLY THIS COURT CAN CLARIFY WHETHER,AND UNDER

WHAT CONDITIONS,THE ALTER-EGO DOCTRINE MAY APPLY
TO NON-CORPORATE DEBTS.
A.
The Doctrine Exists to Address a Problem Unique to Corporate

Debtors, So it May Never Apply to the Debts of an Individual.
The alter-ego doctrine arose in the corporate context, to combat a problem

specific to corporations: Owners who treat their corporations as extensions of
themselves but who still invoke the corporations' separateness to evade personal
liability. That problem does not arise in other contexts, so there is no good reason to
apply the solution in other contexts either.
This Court explained more than 50 years ago that the doctrine exists so courts
can "determin[e] whether individuals dealing through a corporation should be held
personally responsible for the corporate obligations[.]"(Automotriz del Golfo de
Calif. S.A. De C. V. v. Resnick(1957)47 Cal.2d 792, 797, emphasis added.) That is
why alter-ego status requires "such unity of interest and ownership that the separate
personalities of the corporation and the individual no longer exist[.]"(Watson v.
Commonwealth Ins. Co. ofN. Y. (1936)8 Ca1.2d 61, 68, emphasis added.) The
doctrine only "arises when a plaintiff comes into court claiming that an opposing party
is using the corporate form unjustly and in derogation of the plaintiff's interests.
[Citation] In certain circumstances the court will disregard the corporate entity and
will hold the individual shareholders liable for the actions of the corporation[.]"
(Mesler v. Bragg Management Co.(1985)39 Cal.3d 290, 301, emphases added.)
These concerns are relevant only where the original obligor is a corporation.
Where, as here, the obligor is an individual, it would make no sense to claim he is
using the form of an individual human being to work an injustice on his creditors. Yet
that is what a court would have to find in order to properly hold any person or entity
11
liable as an individual's alter ego, even assuming the doctrine could apply to noncorporate obligors.
B.
Liability in Other Contexts Is Already Governed By Other Rules.
Another reason not to expand the alter-ego doctrine's scope is that other rules
already govern analogous claims outside the corporate context. The liability of
partnerships for debts of their partners is governed by Corporations Code section
16305, while the liability of partners for debts ofthe partnership is governed by
Corporations Code section 16307. The liability of members for the debts of an LLC,
and of LLCs for the debts oftheir members, is governed by Corporations Code section
17703.4.'~ The respective liabilities of limited partnerships and of their general and
limited partners are governed by Corporations Code sections 15903.03 [liability of
general partner for debts of LP], 15904.03 [liability of LP for debts of general
partner], and 15904.04 [liability of general partner for debts of LP].''~ And as we have
seen, the liability of irrevocable trusts for the debts of their settlars is governed by
Probate Code sections 18200 and 19001, which say there can be no such liability.
Extending the alter-ego doctrine into these contexts would subject noncorporate obligors and their affiliates to inconsistent and conflicting rules. There is no
good reason to extend the doctrine beyond the context of corporation and owner. The
myriad cases which have done so already were all wrongly decided, and there will be
more such cases unless this Court clarifies the law.
' The original obligors in Greenspan were both LLCs,but the case did
not consider whether the alter-ego doctrine applies to an LLC's debt.
''The AJDs explained in the Court of Appeal that there is no evidence
Gaggero has any membership or partnership stake in the limited partnerships.
or LLCs (AJD AOB 54-60; AJD ARB 68-69.) The opinion rejected this
argument because,"certainly in a court ofequity," control over an entity held
by a trust amounts to "an ownership interest in trust assets within the
contemplation of the alter ego doctrine."(Opn. 19, relying on Greenspan.)
12
C.
This Court Has Never Said the Alter-Ego Doctrine Applies Outside
the Context of Owner and Corporation, but Lower Courts
Routinely Invoke it in Other Contexts.
Every time this Court has deemed someone liable as an alter ego, the original
obligor was a corporation and the alter ego was its owner.(See, e.g., Minifre v. Rowley
(1921) 187 Cal. 481,487-488; Riddle, supra, 51 Cal.2d at pp. 580-581.) The closest it
has come to approving any other form of alter-ego liability was in Wood v. Elling
Corp.(1977)20 Cal.3d 353 ("Elling"), which hinted but expressly did not hold
that in some circumstances a corporation might be liable as the alter ego of an owner.
(Elling, supra, 20 Ca1.3d at pp. 365-366.)'- Even there the liability would have shifted
between a corporation and its owner; the direction of the shift would have been
different, but the context would have been the same. Subsequent cases have uniformly
held that California law forbids such outside reverse piercing of the corporate veil.
(See, e.g., PIP,supra, 162 Cal.App.4th at pp. 1512-1513, 1518; Greenspan, supra,
12~Elling rejected an alter-ego claim because the corporations were

owned by trusts and not by the settlors directly. The settlors' lack of any
"ownership interest" meant that the unity ofinterest and ownership necessary
for alter-ego status was absent. (Elling, supra, 20 Ca1.3d at pp. 364-365,
emphasis in original.) The Court added in dicta that, "[i]n the circumstances
of this case, however, we believe that plaintiff should have been given the
opportunity to further amend his complaint. If it were alleged and proven that
the two trusts in question were themselves alter egos of the Wenckes, those
trusts would essentially drop out as independent legal entities[.]"(Id. atp.365,
emphasis in original.) The opinion expressly declined to say whether the law
would support such a claim.(Id. at pp. 365-366.) It also did not say whether
the trusts were revocable, which matters because only revocable trusts could
"drop out" as described. (Galdjie v. Darwish, supra, 113 Cal.App.4th at p.
1349.) To the extent Elling had any bearing on irrevocable trusts when it was
decided in 1977, it was superseded when sections 18200 and 19001 were
enacted in 1986 and 1991, respectively.
13
191 Ca1.App.4th at p. 513.)13 The doctrine thus may only apply to corporate debts,
which may only be transferred to corporate owners.
Yet the Courts of Appeal and the Ninth Circuit have repeatedly said the
doctrine is available in a variety of other contexts.(See, e.g, Greenspan,supra, 191
Ca1.App.4th at pp. 507-514 [settlor liable as alter ego of LLCs owned within
irrevocable trust]; Schwarzkopf, supra, 620 6F.3d at pp. 1038-1039 [irrevocable trust
liable as alter ego of settlor]; Troyk v. Farmers Group, Inc. (2009) 171 Ca1.App.4th
1305, 1341-1342 [affiliates with wholly distinct ownership liable as alter egos];
Torrey Pines Bank v. Hoffman (1991)231 Ca1.App.3d 308, 312-319 [settlors
potentially liable as alter egos of revocable trust]; cf. Sonora Diamond Corp. v.
Superior Court(2000)83 Cal.App.4th 523, 538-540 [holding that doctrine does not
apply to relationship between principal and agent].) A recent unpublished case, which
found a triable issue of fact under Greenspan and Schwarzkopfas to whether a
beneficiary was the real owner of assets in a revocable trust "under the theory of alter
ego," went so far as to say "the evidence suggested [the original obligor] was
effectively the alter ego of herself."(Schwerin v. Kuhns(2014)2014 WL 1435898,
*6.) That a court would entertain the idea a person could be her own alter ego shows
just how dire the need for this Court's authoritative guidance has become.
None of those cases considered whether the doctrine is limited to corporations
and their owners, and none has offered any reason why it should apply in any other
context. They simply presume that it does and proceed from there,just as the Court of
Appeal did in the present case.
13~That is one reason why the AJDs cannot be liable as Gaggero's alter
egos. Since an individual's liability cannot be transferred even to a corporation
that he owns, it necessarily can't be transferred to a corporation he does not
own. There is no reason to treat anon-corporate entity he doesn't own any
differently.
14
D.
Because Individuals Do Not Have Owners, California Law Says No

One May Be Liable as the Alter Ego of an Individual Debtor.
Even if the alter-ego doctrine could shift liability from anon-corporate obligor
to its owners, it could not apply to individuals. Individuals have no owners, so there is
no way a purported alter ego of an individual could satisfy the ownership requirement.
A carollary of the ownership requirement is thus that nobody may ever be liable as the
alter ego of an individual under California law.
III.
THE COURT SHOULD RESOLVE THE CONFLICT BETWEEN

CASES WHICH SAY ALTER-EGO STATUS REQUIRES ACTUAL
OWNERSHIP AND CASES WHICH SAY IT DOES NOT.
This Court has repeatedly held that only actual ownership can satisfy the "unity
of interest and ownership" requirement. It first announced this rule in Riddle v.

Leuschner(1959)51 Ca1.2d 574 ("Riddle"). The original obligors in that case were a
pair of corporations that were managed by family members who treated the assets of
both corporations as their own.(Id. at p. 576.) The plaintiffs claimed that several of
the family members were liable as alter egos, including some who owned stock and
some who did not.(Id. at pp. 576-577.) This Court held that only owners could be the
corporation's alter egos and that non-owners who were equally culpable court not
because, without ownership,"there was not such unity of ìnterest and ownership' ...
that the separate personalities of the corporations and the individual no longer
existed[.]"(Id. at p. 580.)
The Court reiterated this rule in Minton v. Cavaney(1961)56 Cal.2d 576
("Minton"), which held, inter alia, that Riddle's ownership requirement can be
satisfied with equity rather than stock. Unfortunately, it referred to owners of equity as
"equitable owners."(Id. at p. 579, 580.) As we shall see, this phrasing is often misread
as describing an alternative to actual ownership rather than aform of actual
15
ownership, thus turning Riddle's and Minton's holdings on their heads.14~

In a development this Court has yet to consider, Las Palmas Assoc. v. Las
Palmas Ctr. Assoc.(1991)235 Cal.App.3d 1220("Las Palmas") said the ownership
requirement does not mean that either the obligor or the alter ego must own the other,
and that it is enough if both share common ownership.(Id. at pp. 1249-1250.) This is
known as the single-enterprise rule, and it applies only "between sister companies."
(Id. at p. 1249.) Notably, it does not dispense with the required ownership connection
between the alter ego and the obligor; it instead says common ownership can be
enough where the owner treats the obligor and the alter ego as a single entity.
More recently, though, intermediate courts have insisted that alter-ego status
does not require ownership at all. As these holdings build on one another over time,
the doctrine's supposed scope has grown far beyond what Riddle and Minton allowed.
To take but one example, Troyk v. Farmers Group,supra, held that Farmers
Underwriters Association (FGI), one of its subsidiaries, and Farmers Insurance
Exchange(FIE) were alter egos under the single-enterprise rule even though FGI was
a corporation owned by its shareholders while FIE was an exchange owned by its
insureds.15~ (Troyk, supra, 171 Cal.App.4th at p. 1315.) FGI performed administrative
services for FIE and was FIE's attorney-in-fact. (Id. at p. 1315, 1332.) The court
deemed them alter egos even though neither owned the other and even though they did
not share common ownership.(Id. at pp. 1341-1342.) While it invoked Las Palmas's
explanation that "under the single enterprise rule, liability can be found between sister
companies," it inserted the phrase "or affiliated" in brackets after the word "sister".
(Ibid., attributing to Las Palmas, supra, 235 Cal.App.3d at p. 1249, a holding that the
14~That is what happened here, when the Court of Appeal affirmed on

the ground that "equitable ownership in a trust is sufficient to meet the
ownership requirement for purposes ofalter ego liability[.]"(Opn. 19,quoting
Schwarzkopf, supra, 626 F.3d at p. 1039.)
'S~Ins. Code 1280, et seq.
16
rule applies to "sister [or affiliated] companies.") Troyk thus claimed not only that
mere affiliates can be alter egos, but that this had already been the law for 18 years. It
did not cite any of the cases in which this Court held otherwise. And its departure
from precedent was pushed even further by Wehlage v. EmpRes Healthcare, Inc.
(2011) 791 F.Supp.2d 774, 782, which misquoted Troyk's statement that the singleenterprise rule applies "between sister ar affiliated companies" by omitting the
brackets Troyk had placed around "or affiliated."(Id. at p. 782.) It thus removed any
hint that the clause is not part ofthe alter-ego rule.
Both Troyk and Welhage remain on the books, inviting future cases to build on
their errors. Indeed, that has already happened. Troyk helped set the stage for
Schwazkopf, which cited it for the premise that alter-ego status does not require
ownership at all.(Schwarzkopf, supra, 626 F.3d at p. 1039 [incorrectly claiming Troyk
treated one alter ego as "the equitable owner" of the other].)
But Schwarzkopf, which overlooked Riddle completely, did more than just
ignore the ownership requirement. It insisted no such requirement had ever been
announced, either by this Court or by the Courts of Appeal. In the Ninth Circuit's
words,"[n]o California case explicitly addresses the question" of whether "legal
ownership is an absolute requirement for alter ego liability."(Schwarzkopf, supra, 620
6F.3d at p. 1038.) Then, based on Minton's language about "equitable owners" and on
similar language in both Troyk and Torrey Pines, it said "California case law suggests
that equitable ownership is sufficient" for alter-ego status even without actual
ownership.(Id. at pp. 1038-1039.)''
6
These errors have continued to accumulate over time. Greenspan, which found
'-6~The legal owner of assets in an irrevocable trust is the trustee, while
the equitable owners are the beneficiaries. (Title Ins. &Trust Co. v. Duffill
(1923) 191 Cal. 629, 647-648.) The settlor in Schwarzkopffilled neither of
those roles, but the court still deemed him the equitable owner and held that
this was enough to make the trust his alter ego.(Schwarzkopf,supra,626 F.3d
at pp. 1035, 1039.)
17
support in Schwarzkopf, likewise focused on "equitable ownership" rather than actual

ownership while ignoring this Court's holdings about actual ownership completely.
(Greenspan ,supra, 191 Ca1.App.4th at p. 513.) What might otherwise have been seen
as an aberrant ruling by a federal court was thus brought squarely back into California
law by yet another case that failed to cite Riddle.
But while Riddle is the definitive case on this point, it has been nearly forgotten
by the courts. Only two published decisions under California law have cited it in the
past twenty years.(Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1284; S.E.C. v.
Hickey (9`h Cir. 2003)322 F.3d 1123, 1129-1130 ["Riddle ... establish[es] that an
individual must own at least a portion of a corporation before an alter ego relationship
is deemed to exist under California law"].) Only four others cited it in the twenty
years before that, and only three of those citations concerned the ownership
requirement.(Las Palmas,supra, 235 Ca1.App.3d at p. 1249 ["Riddle stands for the
proposition that it would be unfair to impose personal liability on an individual for
corporate conduct unless he had an ownership interest in the company"]; Minnesota
Mining &Manufacturing Co. v. Superior Court(1988)206 Cal.App.3d 1025, 1028;
Firstmark Capital Corp. v. Hempel Financial Corp.(9th Cir.1988) 859 F.2d 92, 9495.)
Courts have forgotten Minton's language about ownership even more
completely than Riddle's, though they sometimes cite the case for other reasons. Aside
from the Ninth Circuit's misreading in Schwarzkopf, it was last cited in a published
case under California law almost 44 years ago in Roman Catholic Archbishop ofSan
Francisco v. Superior Court(1971)15 Cal.App.3d 405, 411, which also mistakenly
said the alter-ego doctrine required only equitable ownership.''~ And Elling's language
''Roman Catholic Archbishop'scitation toMinton was quoted in Wady

v. Provident Life and Accident Ins. Co. of America (2002) 216 F.Supp.2d
1060, 1066 and again in Neilson v. Union Bank ofCalifornia, N.A.(2003)290
(continued...)
18
about the ownership requirement has never been cited in any published cases. It's as if
this Court's pronouncements have vanished from memory, supplanted by lower-court
cases like Schwarzkopfand Greenspan which directly contradict them. Cases which
ignore the ownership requirement are multiplying even as citations to the controlling
cases dwindle. Because Schwarzkopfaffirmatively says there are no contrary
decisions from this Court, that discrepancy is only going to grow unless the Court
intervenes.
The result has been widespread confusion about whether and how the
ownership requirement applies, and a slew of contradictory decisions which do not
even acknowledge that a contradiction exists.(See, e.g., Schwarzkopf, supra;
Greenspan,supra; Zoran Corp. v. Chen (2010) 185 Ca1.App.4th 799, 811-815
[finding triable issue of material fact re alter-ego status based on evidence that alleged
alter-ego merely controlled the obligor]; Sonora Diamond Corp. v. Superior Court,
supra, 83 Cal.App.4th at pp. 538-540 [reversing alter-ego ruling on the facts while
saying doctrine applies to "the persons or organizations actually controlling the
corporation, in most instances the equitable owners"].)
Not one published case which cites Greenspan also cites Riddle, and only two
unpublished decisions besides the one in this case cite them both. One of those
decisions mentioned Riddle only for an unrelated point while doing exactly what
Riddle forbids: holding both a spouse who owned shares of and a spouse who did not
liable as a corporation's alter egos because the extent of their control made both of
them "equitable owners."(Bay Ciry View, LLC v. SF Bay Builders, Inc. (2014)2014
WL 4840438, *5.)'
'
g
''(...continued)
F.Supp.2d 1101, 1115. Along with Schwarzkopf,those are the only cases that
have cited this part of Minton even indirectly since 1971.
'g~The other acknowledges Riddle's ownership requirement without
(continued...)
19
Here again, secondary sources are as confused as the case law. Miller and Starr,
for example, describe Schwarzkopfas "applying California law and rejecting the
contention that alter ego liability cannot be imposed unless the individual is the legal
owner of the entity whose separate existence is to be pierced; equitable ownership
maybe sufficient to support a finding of alter ego."(See, e.g., 11 Cal. Real Est.(3d
ed.) 32:27 fn. 9.)
Like the Schwarzkopfand Greenspan courts before it, the Court of Appeal in
this case deemed ownership unnecessary, holding that an equitable interest in a trust
is
equivalent to ownership not only of a trust, but also of businesses it owns for
purposes of the alter-ego doctrine.(Opn. 18-19.) It ignored Riddle and Minton
completely. This was not an isolated occurrence. Courts will continue to treat
ownership as if it is no longer required for alter-ego status unless this Court reaffirms
that Riddle is still good law.
One reason why the law has departed so radically from this Court's prior
holdings is that the Court has not examined the nature or scope of alter-ego liability
since 1977. It has neither approved nor disapproved appellate decisions which differ
from Riddle or Minton, giving little reason for lower courts to question any of the
subsequent cases. Case law has gone far astray while this Court's attention was
focused elsewhere. It is high time for the Court to revisit the alter-ego doctrine and
rein in the expansion of liability the lower courts have allowed.
IV.
THE COURT SHOULD DECIDE WHETHER SECTION 15400

CREATES AN EVIDENTIARY PRESUMPTION THAT TRUSTS ARE
REVOCABLE.
The AJDs argued on appeal that, as the parties seeking relief in the trial court,
respondents bore the burden of proving the trusts were revocable.(AJD AOB 45-46;
'g~(...continued)
mentioning the contrary holding in Greenspan.(Mt. Whitney Farms LLC v.
Sandstone Marketing, Inc. (2014)2014 WL 3827585, *5.)
20
AJD ARB 10-11.} Because the only way to tell if a trust is revocable is by examining
the trust instrument(Crook v. Contreras(2002)95 Ca1.App.4th 1194, 1206),
respondents had to introduce those instruments in order to carry their burden of proof.
They neither introduced the instruments nor claimed that they had been prevented
from doing so. Accordingly, there was no substantial evidence the trusts were
revocable and no grounds for a court to treat them as if they were.
The Court of Appeal rejected this argument, holding that section 15400 creates
a presumption of revocability and that it was thus petitioners who had to introduce the
instruments in order to overcome the presumption.(Opn. 23.)'-9~
A statute only creates an evidentiary presumption if it says "that a fact or group
of facts is prima facie evidence of another fact[.]"(Evid. Code 602.) Section 15400
contains no such language.20~ It is sometimes labeled "presumption of revocability" in
printed form, but that label was created by publishers and is not part of the statute.
This Court has never said what significance, if any, such labels have when
interpreting a statute. Some appellate decisions have deemed them irrelevant.(See,
19~The court also said the documents were absent '`despite defendants'
extensive attempts to discover them." (Opn. 5.} But the record shows
respondents had asked for the documents only once. (CT1 53:24-54:2.)
Gaggero objected and did not produce them.(CT2 329-354; CT3 468-495.)
There is no evidence respondents even met and conferred about his objections,
let alone that they brought a motion to compel, that the motion was granted,
that anyone failed to comply with it, that there was a subsequent motion for
issue sanctions, or that this second motion was granted. And while the court
acknowledged the AJDs had argued that ruling against them on this basis
improperly imposed both evidentiary and issue sanctions(AJD AOB 22-26),
the opinion addressed only the argument about evidentiary sanctions.(Opn.
25.)Petitioners pointed this out on rehearing, to no avail.(RP 5-7.)
20~Section 15400 says, in pertinent part, "Unless a trust is expressly
made irrevocable by the trust instrument,the trust is revocable by the settlor."
A court which does not know whether "a trust is expressly made irrevocable
by the trust instrument" thus cannot know how the statute applies to that trust.
21
e.g., People v. Avanessian (1999)76 Ca1.App.4th 635, 641-642; Kahrs v. County of

Los Angeles(1938)28 Ca1.App.2d 46,49.)But the decision in the present appeal
shows that the message has not gotten out.
Instead of an evidentiary presumption, section 15400 creates a presumption of
law "a legal assumption that a court is required to make ifcertainfacts are
established and no contradictory evidence is produced."(Black's Law Dictionary (9th
ed. 2009), emphasis added.)
No published decision has held that section 15400 creates an evidentiary
presumption that trusts are revocable. More generally, though, there appear to be no
published California cases which explain the difference between evidentiary and legal
presumptions, or how to apply them. The distinction is simple: legal presumptions say
what courts may presume in the presence of specified types of supporting evidence,
while evidentiary presumptions say what they may presume in the absence of such
evidence. The Court should fill this void so that other courts are not led astray.
V.
THIS CASE PRESENTS AN IDEAL OPPORTUNITY FOR THE

COURT TO ADDRESS THESE ISSUES.
Petitioners' case raises all of these issues in ways that make it an ideal vehicle
for review. The briefing in the Court of Appeal was uncommonly detailed and
extensive, so this Court is not likely to see another case any time soon which
examined the issues in similar depth. Further, because the AJDs were all added to the
judgment long after the trial had ended, they were never deemed liable for their own
conduct. There is no need to figure out whether any oftheir arguments are distinct
from the alter-ego finding, as would often be true where alter egos were part of a case
from the beginning.
Finally, because respondents offered essentially no evidence that was specific
to any of the particular AJDs (see Opn. 20 [acknowledging the lack of"evidence
specific to any of'the AJDs but excusing its absence because the AJDs were part of
22
single enterprise`'], the Court of Appeal's decision was not fact-specific
and hinged
instead on its understanding ofthe law. The arguments raised in this petitio
n likewise
do not hinge on details about the facts, so the Court will not need to wrestle
with the
case's factual or procedural minutiae.
It is hard to imagine any of these issues being presented more cleanly
in
another case. The Court should seize this opportunity to resolve the growin
g conflicts
petitioners have identified.

CONCLUSION
The law governing trust liability in this state is a mess. The law governing
alter-ego liability is even worse. Where the two intersect, the cases and second
ary
authorities are hopelessly confused. Only this Court can resolve the confusi
on. Given
the scale of these problems and the frequency with which they arise a freque
ncy
which will grow dramatically if the alter-ego doctrine is as broad as the
Court of
Appeal held the Court should intervene now.

If assets in an irrevocable trust are not vulnerable, the Court should disapp
rove
Schwarzkopfand the relevant portion of Greenspan before they cause even
more
confusion than they already have. And if the assets are vulnerable after all,
the Court
should say so before even more settlors rely to their detriment on the suppos
ed
protections of an irrevocable trust.

Individuals, trustees, and business entities need to know whether they are
at
risk of being deemed someone else's alter ego and how to avoid such liabilit
y.
Creditors need to know whether they can assert alter-ego claims against
of debtors, and what they need to prove in order to prevail. Courts need
various types
to know how
to resolve such claims when they arise. Nobody is well-served by leaving
the current
ambiguities in place.
~'~The court did not explain how it concluded that they are a single
enterprise without evidence about how each operated.
23
Far the fc~rcgoing reaso~as, petitit~ners res~ectfull~ urge the Court
to ~rai~t
review and re~~erse the Court cif1~ppeal's jud~,zr~ent.
Dated: December 3 7, 2014
Res~ectfuliy submitted,
LAVV {)FFICES (3F El~'4~'ARD A.IIC3F~I~~IAN

f
`.~~
^` ~f~~
~~
,~
Edti~~ard A. Hc~ffii~an
1
Attorneys for Fetitianers Pacific past
Management, Inc. ~ 1 I OFVI~ L.P., Gin~,erl~xead
Court L.F., Malibu Braadl~each, I_..P., Marizia
Glc~~cae I...P., Blu Haase L.I,.C., Board~~~alk St~rlset
L..L.C., Jt~s~ph Praske as Trustee for Giganin Trust,
Arenzano Tnist, and Aquasante Four~datior~
WE,STLAI~E LA~i'GROUP
Dav d Bl~k Chatfield

Attarneys ft~r Petitio~3er Sieph~~~ M.Gaggera
24
CERTIFICATE f~F ~V~RD COUNT

{CaI. R~1es of Court, rile 8.504(dj{1))
I'h~ teYt cif this Brief consists of 7,b i6 words as ctiunted by the C'vrel
Vt~or~3Perfect versicm 1 fi {also kr~c~~x-n as WordPerfect X6)u-c~rd-~rt~cessing scjfti~~are
u~iih which it eras t~~ritten.
~3ATED: December 17, 2014
Respectfull~~ submitted,
E ~~ard t1. Hoffman

Lave Offices atEdward A. Haffinan
Attorney for P~titic~~l~rs Pacific Coast
Management,Inc., S1 l {)~'W L.P..
Gingerbread Court L.P.,1VI~lib~u
Rxoadbeach, L.P., Marina Gle;ncc~e L.P., Blu
House I,.L.C., F3c~ardv~raik Sunset L.L.C.,
Joseph Praske as T'7~ustee fir Ciiganin Trust,
4renzanc~ Trust, anti Ac~uasante Foundation
25
EXHIBIT A
Piled 1 1/7/14
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing
or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT
COURT OF APPEAL SECOND DIST.
DIVISION EIGHT
~OV ~7, ~{}~4
STEPHEN M. GAGGERO et al.,
Plaintiffs and Appellants,
B241675
JOSEPH A. LANE, Clerk
Sinn Lui
(Los Angeles County
Super. Ct. No. BC286925)
Depuri Clerk
v.
KNAPP,PETERSEN & CLARKE et al.,
Defendants and Respondents.
APPEAL from an order of the Superior Court for the County of Los Angeles.
Robert L. Hess, Judge. Affirmed.
Westlake Law Group and David Blake Chatfield for Plaintiff and Appellant
Stephen M. Gaggero.
Law Offices of Edward A. Hoffman and Edward A. Hoffman for Appella
nts
Pacific Coast Management,Inc.; 511 OFW LP; Gingerbread. Court LP; Malibu
Broad
Beach LP; Marina Glencoe LP; Blu House LLC; Boardwalk Sunset LLC; and
Praske, as Trustee of the Aquasante Foundation, the Arenzano Trust, and the
Joseph
Giganin
Trust.
Miller, Randall A. Miller and Steven S. Wang for Defendants and Respondents.
SUMMARY
In May 2010, we affirmed a judgment,including an attorney fee award of more
than $1.2 million, against plaintiff Stephen M. Gaggero in a malpractice
lawsuit he
brought against defendants Knapp, Petersen &Clarke and several of its princip
als.
Plaintiff did not pay the judgment.

In April 2012, defendants moved to add additional judgment debtors to
the
judgment. These additional judgment debtors included (a) six entities (four limited
partnerships and two limited liability companies)that were owned by plaintiff
in 1998,
with assets then valued at $35 or $40 million;(b)an entity that managed those
assets; and
(c)the trustee, Joseph Praske, of three trusts to which plaintiff had transferred
his
ownership of all the limited partnerships and limited liability companies in 1998.
The
trial court found all of these were plaintiffls alter egos, and added. as additional judgme
debtors the entities and Mr. Praske, in his capacity as trustee ofthe three trusts that
nt
held
all the entities to which plaintiff had transferred his entire estate.
The additional judgment debtors and plaintiff appeal from the court's order,
raising many arguments. They contend they cannot be alter egos as a matter
of law,
because "outside reverse veil-piercing" is a doctrine that applies to them
and is forbidden
in California. They contend the evidence of alter ego status is insufficient,

claiming there
is no "unity of interest and ownership" between them and plaintiff. They conten
d that,
even if they were alter egos, defendants did not prove they controlled the litigati
on.
They contend the trusts are irrevocable (the trust documents are not in evidence),
and irrevocable trusts may never be held liable for the debts of their settlors
. They
contend the trial court's findings that trustee Praske refused to produce the
trust
documents was not supported by the evidence (and that plaintiff's failure to produc
e them
is not attributable to Mr. Praske).
They contend defendants are estopped to claim they are alter egos because
defendants allegedly admitted in the underlying litigation that the additional
debtors and plaintiff were financially separate.
judgment
They contend the trial court invaded the probate court's exclusive jurisdiction over
the internal affairs of the trusts.
They contend the evidence of alter ego status was lcnowrn to defendants before
the
original judgment was entered in ?008, and defendants' failure to act until 2012 waived
their alter ego claim.
And, plaintiff contends that affirming the alter ego finding in this case would
"threaten the integrity of estate planning in California."
We find none of these arguments persuasive. and affirm the order granting
defendants' motion to add the additional judgment debtors to the judgment.
FACTS
This litigation began in 2002, when plaintiff sued defendants for malpractice.
Plaintiff lost, and the trial court granted. defendants' motion for attorney fees. We
affirmed the judgment in an unpublished opinion in May 2010. (Gagge~o v. Knapp,
Pete~sen &Clarke(May 6, 2010, B207567)(Gaggero ~.) In December 2010, the
judgment was amended to include attorney fees and costs on appeal, plus postjud
gment
interest, and amounted to more than $1.8 million.

Defendants' initial efforts to enforce the judgment against plaintiff were
predictably fruitless. We say "predictably' because one of the principal issues
in the
underlying malpractice case involved the tactics plaintiff employed with other
judgment
creditors. These included the assertion that he had no assets and wasjudgment-proof
.
The trial court in the malpractice case described plaintiff's testimony on the
subject this way(a description we found. was fully supported by the record): "Betwe
en
1.995 and 1998,[plaintiff] did extensive èstate planning,' which supposedly resulted
in
al] of his personal assets being transferred to various corporations, trusts and foundat
ions.
Supposedly, he retained absolutely no ownership interest in and no control over
these
assets. Indeed, he testified that he did not even have a checking account. When
asked
how he paid any bills, [plaintiff) said in substance that he submitted them to
the trustee of
his trust, who had absolute discretion to pay or not to pay them. If he wanted cash,
it was
available at the trustee's sole discretion on sufferance, as it were. [] If this
sounds
unusual or unbelievable, the record is clear that [plaintiff) repeatedly used precisely
these
assertions and arguments to discourage creditors who were seeking to collect moneys
he
owed them. The stonewall ...and the claim of no personal assets that could
be liened or
attached, were ...integral parts of the effort to discourage or defeat creditors." (See
Gaggero I, supra, B207567, pp. 13-14 & fn. 8.)
This tactic continued unabated with respect to defendants'judgment, and in April
2012, defendants sought to add the "various corporations, trusts and foundations"
to the
judgment as additional judgment debtors. Below, we describe the creation of what the
parties call plaintiff's "estate plan"; the evidence defendants submitted in support of their
motion to amend the judgment to add additional judgment debtors; and the trial court's
ruling.
1.
The "Estate Plan"

In 1997, plaintiff, a real estate investor and developer, hired Mr. Praske to create
and implement an estate plan. At the time, the net value of the assets in plaintiff's estate
(according to Mr. Praske) was approximately $30 million. (Plaintiff testified the
fair market value of his properties was $35 to $40 million, and that "every asset,
gross
up to the
time I met Joe Praske, was owned 100 percent by me, either by virtue of the member
ship
interest, the shares, or the direct title to the property.'')
The estate plan Mr. Praske designed was structured so that each real property
plaintiff owned was transferred by grant deed to a limited liability company or limited
partnership. These entities are four limited. partnerships(511 OFW LP; Gingerbread
Court LP; Malibu Broad Beach LP and Marina Glencoe LP); and. two limited liabilit
companies(Blu House LLC and Boardwalk Sunset LLC). As the entities themsel
ves say,
each ofthem was created "to own. a distinct piece of[plaintiffs] real property." Plaintif
f
"would be the sole member of the limited liability company, and then would transfer
that
membership interest to a trust." Two trusts (the Aquasante Foundation and
the Arenzano
Trust) were created to hold the limited liability companies and limited partnerships.
A third trust(the Giganin Trust) was created as a qualified personal residence
trust, and
ownership of plaintiff's principal residence (a 1,500-acre property with several

buildings
L!
on it) was in the name of that trust. According to Mr. Praske, the Giganin Trust is
an
irrevocable trust with substantial estate tax benefits, and gives the taxpayer (plaint
iff the
right to reside at the property.

Mr. Praske is the trustee of the three trusts. In June 2005, he testified the
beneficiaries of the Aquasante Foundation and the Arenzano Trust were the same,
namely,"a class of beneficiaries" comprised of"[a]ny member ofthe Gaggero family
."
Mr. Praske said that plaintiff was "a potential beneficiary" of the trusts, and that "[b]ein
a potential beneficiary means that it is up to the trustee to decide each year among the
class of beneficiaries who will be who will receive distributable income." (Plaint
iff
also testified that he was "in a class of beneficiaries" of the Arenzano Trust.)
Mr. Praske had the sole and absolute authority to decide "which beneficiaries
would receive anything from the trust." By 2005, the value ofthe "total estate" the
three trusts had substantially increased, by "[a]t least 30 to 40 percent,'" since
it was
funded in 1998.
Mr. Praske and plaintiff have testified or given sworn statements that the trusts
are
irrevocable. As mentioned before, the trust documents are not in evidence, despite
defendants' extensive attempts to discover them, as described more fully below.
Mr. Praske could not remember whether he had ever distributed cash to plainti
ff
from any of the trusts.

2.
How the "Estate Plan" Works

Mr. Praske, in his capacity as trustee, appointed plaintiff manager of the assets for
the entire estate plan. Plaintiff testified in 2005 that he was the asset manager
for the
Mr. Praske is also the president, secretary and director of Pacific Coast
Management, Inc.(PCM),the corporation that manages the assets, and the general
partner oftwo of the four limited partnerships. According to plaintiff, Mr.
Praske "was
the trustee or managing member or majority membership owner or limited liabilit
y or
limited partnership with the 100 percent ownership of all of those various entities
, i.e.,
limited liability companies, limited partnerships, or trusts that formed general
partnerships." Mr. Praske "had control over the ownership entities of each of
the entities
that they were a part of," and."had control over all of the entities in the estate plan
that he
created."
5
three trusts and for all of the entities owned by them. Plaintiff's duties included.
"[b]uying and selling, financing, trading, everything." His services included "[a]ll
of the
tasks that go along with property management as well as all of the aspects ofthe asset
management, such as refinancing, dealing with tax issues, insurance issues, making
decisions to buy, sell, buy or sell the asset, to improve the asset, overseeing any
improvements to the asset, financing, designing some ultimate disposition of the asset."
PCM,an additional judgment debtor, is the management company for the assets
held by the trusts. PCM paid plaintiff $3,000 a month (as of 2001), plus the use of
a
company vehicle, for his services managing the assets of the additional judgment debtors
Plaintiff testified he was a managing director ofPCM. According to plaintiff, PCM

"manages my estate, entities, and assets." Further,PCM "[m]anaged assets, compan
ies,
me, my life, my fanuly's life, trust, foundation, things of that nature." Plaintiff testifie
d
that "[c)hecks were written by PCM," but "I paid for it, I give PCM the money. PCM
writes the checks. They write checks for me. [] They pay my utilities. They pay
my
credit card, they pay for my dogs' vet bills. I mean PCM manages my life. They
are a
management company for me personally and for other things."
The workings of the "estate plan" are illustrated by testimony Mr. Praske,
plaintiff, and plaintiff's accountant gave in June and July 2005 in the Yura litigati
on.
(This was a lawsuit plaintiff brought alleging failure to close on a real estate transact
ion.
(See Gaggero I, supra, B207567, p. 5,fn. 2.)) Mr. Praske testified he had conferr
ed with
plaintiff about the availability of resources to purchase the property in question in
the
Yura litigation, which plaintiff wanted to purchase. At this conference, plaintif
f"was just
confirming my commitment of the estate to purchase that property ...." Mr.

Praske was
then asked,"What did you say to [plaintiffs?" and he responded,"I said, like I
always do,
I say yes."
Plaintiff also testified in the Yura case. He was questioned about whether he
had
funds available (and from what sources) for the transaction. He said: "[P]art of
the funds
might have come from my trust or all of the funds could have come from my
trust.
[] ... [] ... [T]he funds would have come from me,if that's what you're asking.
C
mean, you're asking where I would have got the funds or would
they be coming from

me? [] ... [] ... It would have come from me into the escrow.
But are you asking
where I would have got them from? ... [] ... [] ... At all times I
commanded the
resources to purchase this all cash or with a mortgage. And if there
happened to be a
1.031 exchange opportunity available, I would have exchanged into
it with
one ofthe
entities that were ov~~ned by my trust." Plaintiff was asked,"[O]n and
after January 1 of
2000 to the present date, have you commanded and do you command
the resources
necessary to close this transaction pursuant to the terms of the purchase
agreement," and
he answered,"Yes." At another point he testified,"Mr. Praske and myself

always had
the ability to ...pull cash directly out of the trust."
Plaintiff also testifed about what would happen once the property was
purchased
in his name. After the close of escrow,"I would have options at that
point.... I would
have the option,just like I did ~~hen I created when I funded the trust
with my asset,
when I took my assets and created my trust, my personal trust. []
I could take this asset
in my name,transfer it to an entity, a linuted liability company, a
limited partnership, a
general partnership, or a corporation, and then have one of the
trusts or the foundation
subsume if that's the right word that entity into the estate plan,
just like I did the other
properties in 1997 and 1998; or I could just keep the property in
my name."
James Walters, a certified public accountant who took over plaintiff's
tax work in
1984 or 1985, testified that since 1988, plaintiff had been involved
in 10 real estate
purchase transactions. He met with plaintiff on all of those transactions,
"to strategize as
to tax planning and also strategize as to the estate planning, and actuall
y to strategize as
to which entities [plaintiff) managed would at times take ownership of

During those meetings, decisions were made on those issues, and
the properties."
plaintiff made those
decisions. Mr. Praske's role was `[a]dvice." Mr. Walters was asked,
"And once
[plaintiffs made the decision, was the decision those decisions
implemented?
" He
answered,"Absolutely." Mr. Walters specifically testified that plainti
ff made the
decision on `'what entity would take title for these 10 various

properties," and that
plaintiff"command[ed) the resources necessary to purchase each
7
of those properties."
Mr. Walters continued: "They all flow the actual gains on these properties
always flow
through [plaintiffs] t~ return, through the trusts and all the other entities
."
3.
Postjudgment Discovery
After the judgment in the malpractice case, defendants conducted various
forms of
postjudgment discovery. On June 8, 2009, defendants took the third party

debtor
examination of Mr. Praske,"concerning property of the judgment debtor in
[his]
possession or control ...."
Mr. Praske was represented by plaintiff's attorney, David Chatfield.
Mr. Praske testified that plaintiff had no ownership interest in 511 OFW
(an
additional judgment debtor), and Mr. Chatfield instructed him not to answer
any further
questions about its operations on the basis of its "privacy rights and trade
secrets" and
irrelevance to the subject matter of the examination.

Mr. Praske further testified plaintiff had no ownership interest in additio
nal
judgment debtors Gingerbread Court LP, Blu House LLC,Boardwalk Sunset
LLC,
Malibu Broad Beach LP, and Marina Glencoe LP. He was instructed not
to answer, on
attorney-client privilege grounds, questions as to what plaintiff received
in 1997 or 1998
in exchange for transferring his ownership in various properties to Ginger
bread Court LP,
Blu House LLC,and Boardwalk Sunset LLC. He did not recall whethe
r plaintiff
received any compensation for transferring property to Malibu Broad
Beach LP,and
testified plaintiff received compensation in exchange for transferring

property to Marina
Glencoe LP, but refused to describe it on counsel's instructions.
Mr. Praske testified that plaintiff has never received money or any
assets from the
Arenzano Trust. Mr. Praske testified the Arenzano Trust was an irrevoc
able,
discretionary trust created under the laws of Anguilla, and plaintiff"has
no
whatsoever to any propei-ry in the possession or control of the trust."
right
He did not recall
whether the Arenzano Trust. had ever made any distributions to any of
plaintiff's family
members.
Defendants served plaintiff with postjudgment special interrogatarie
s (set one) on
Apri125, 2011. On June 21,2011, plaintiff filed responses to defenda

nts" first set
of
production requests. (The interrogatories and production requests themselves are not in
the record.) No documents were produced. Plaintiffs response to the production
requests included objections that defendants' request was "not reasonably limited to
trust
documents reflecting Gaggero's present interest as the beneficiary of a trust and therefo
re
are not relevant to judgment enforcement ...." Plaintiff also objected that the request
invaded his privacy rights and those of third parties, and responded that he "has no
attachable interest as a beneficiary of any trust."
On August 9, 2011, defendants filed a motion to compel, and on October 5, 2011,
the court held a hearing on defendants' motion to compel further responses to
interrogatories. The court granted the motion "in its entirety"; ordered "[c]omplete,
verified, supplemental responses, without further objection," to specified interrogatories,
to be served by October 24,2011; and imposed monetary sanctions of $2.000 on plaintif
f
and his counsel.2
On January 31, 2012, defendants filed a request for production of documents (set
two). The production requests asked, among other things, for documents relating to
the
trusts. On March 20,2012, plaintiff responded, but produced no documents. He objecte
d
on a host of grounds, and repeatedly responded that he had no documents respons
ive to
the requests in his possession or control. Among his objections were that request for
s
documents "relating to assets transferred, sold or liquidated over a decade ago are
clearly
irrelevant to this judgment enforcement and will not be produced by plaintiff."
On April 30,2012(a few weeks after defendants filed their motion to amend.the
judgment to add judgment debtors), plaintiff filed supplemental responses to
defendants'
document requests. Again he produced no documents related to the trusts or his

"estate
plan," and objected on multiple grounds, including lack of relevance, privacy rights,
attorney-client privilege and attorney work-product doctrines. He repeatedly
stated he
Plaintiff appealed from the order, and a year later, on October 3, 2012, this court
dismissed the appeal (case No. B236834)on the court's own motion as having been
taken
from a nonappealable order.
2
had no trust documents responsive to the requests in his possession or control, and
repeatedly stated that the trusts were irrevocable; he had no control or interest in them;
they were set up over 13 or 14 years ago, well. before defendants'judgment; and trust
documents 'àre believed by plaintiff to be in the possession and control of the attorney
and Trustee, Joseph J. Praske ...."
4.
The Motion to Amend the Judgment

On April 10, 2012, defendants filed their motion to amend the judgment to add the
three trusts and their assets, seven separate entities, as additional judgment debtors,
presenting the facts we have recited. Plaintiff opposed. the motion, as did the additional
judgment debtors, who made "a special appearance" to oppose the motion.
Counsel David Esquibias represented the seven entities and Mr. Praske in
opposing defendants' motion. They argued (as did plaintiffl that the court had. no
authority to add them to the judgment because California law forbids "outside reverse
piercing"; there was no evidence they were alter egos of plaintiff; they did not control the
litigation between plaintiff and defendants; plaintiff did not represent their interests
during any stage of the litigation; and judicial and collateral estoppel precluded
defendants from claiming they were alter egos because at trial the court "ruled that
[plaintiff) and the Entities were separate and that [plaintiff) had no authority to represent
them [(the entities)], as [defendants] argued at trial."
The trial court granted defendants' motion at a hearing on May 29,2012. At that
hearing, counsel David Esquibias, who filed the opposition on behalf of the seven entities
named in defendants' motion, stated he also represented Mr. Praske, as trustee for the
three trusts that hold title to the seven entities. After the court indicated the motion
appeared to have merit and solicited argument, Mr. Esquibias asserted previously
unmentioned arguments, that the trusts were irrevocable; the probate court had exclusive
jurisdiction over trust matters under Probate Code section 17000; the Probate Code
requires that notice of defendants' motion be given "to the vested current income and
principal and remainder beneficiaries of these trusts"; no such notice had been provided
10
and under section 18200, the assets of an irrevocable trust are not available to the settlor'
creditors.3
The court asked Mr. Esquibias if there was "a reason why, if this is a meritorious
argument, it was not included in the opposition." Mr. Esquibias responded that he was
"specially appearing for the purpose of arguing jurisdiction and notice," and that "I
have
no explanation as to why it wasn't in the opposition. I am late to this party." (No doubt,
the trial court found this to be as strange a response as we do, since Mr. Esquibias himself
submitted the written opposition two weeks previously, denominating it a "notice of
special appearance to oppose and opposition" to defendants' motion.)
When asked why he held back the arguments, counsel said "[i]t was not designed
to ambush the moving party," and perhaps the matter could be continued for briefing.
The court said,"This is the time and place for the hearing on this motion," and then asked
if there was evidence in support of counsel's assertions that the trusts were "irrevocable
and subject to this that and the other." Counsel admitted there was nothing "other than
their [defendants'] own statements in their pleadings which are considered admissions
that the trusts are irrevocable."
Mr. Esquibias said,"We will provide a copy of the trust documents to counsel
upon notice to the beneficiaries," and the court inquired,"How would they know who
the
beneficiaries are?" The court continued: "[Y]ou are asserting a series of things which
find no evidentiary support and the reason they have no evidentiary support ...
is that
you have, as I understand. it, you or Mr. Gaggero have precluded the other side from
access to the very information that you claim is necessary for them to give notice."
Mr. Esquibias responded that he "ha[d] a resolution." He said he was "new to this
case" and stated: "I will make sure that opposing counsel has a copy of the trust
documents, so that she can apprise the situation herself. She can give notice." Counse
l
said he was not present at the depositions (apparently referring to Mr. Praske' third
s
party
Probate Code section 18200 states: "If the settlor retains the power to revoke the
trust in whole or in part, the trust property is subject to the claims of creditors of
the
settlor to the extent of the power of revocation during the lifetime ofthe settlor."
11
debtor examination, at which plaintiff's lawyer, Mr. Chatfield, represented. Mr. Praske)
"but I will tell the court now, and opposing counsel,I now represent Mr. Praske
in his
capacity as trustee of these trusts, and we intend to completely and fully cooperate with
the requests for the documentation. [] There is no reason why it should not be
disclosed."
The court asked if there was a reason why counsel did not have the trust
documents at the hearing, and counsel said he had them, but his notes were on the
documents. He stated his intention "to be fair and clear and transparent," and asked for
an order that the documents not be made public, to which the court responded that
counsel could have applied for a protective order in a timely fashion. The court further
stated that Mr. Praske,"during these preceding times," had not had independent counsel
:
"He has used Mr. Gaggero as [sic] counsel, which suggests to me certainly leads
to an
inference, that the positions taken were coordinated positions." The court concluded
that
this "[s]mells like more delay."
Mr. Esquibias said the delay would be short, and went on to renege on his earlier
statement that "we intend to completely and fully cooperate with the requests for
the
documentation.'' He said: "We would only want to provide information that is either
agreed upon between myself and opposing counsel or if we could not come to some
type
of agreement, whatever this court would determine to be relevant."

The court declined to allow further delay. The court concluded that "these persons
and entities are alter egos of Mr. Gaggero and clearly, clearly, it would be inequitable not
to pierce the veil not to get [at] these entities which are his alter ego. Since he has
this
substantial judgment against him, and he has attempted to use these devices to put
his
assets beyond the reach of legitimate creditors, and we have had a full and fair
opportunity to litigate this.
[] ... [] I know at the moment there is ...zero evidence
in the record to support the position that there is a plethora of I don't know
who these
people are. [] And in fact, I do know that Mr. Praske was extraordinarily vague
when
he was questioned at trial about the identities of these ...supposed beneficiaries.
You know,the decision was made long ago to keep the trust documents out of
12
[]
the hands
ofthe defense, and now to try and invoke the terms of it, you know, without
giving it to
the other side.... [T]his is a situation where these issues have been percola
ting for a
long time, and there is a fundamental unfairness to making [defendants]jump
through. all
these hoops to collect the judgment and saying no, no you can't have
x, y, and z, and then
coming in at the last minute making arguments not set forth in the pleadin
gs [based] on
evidence, not before the court and saying Judge give us a do over. [~]
There is a
fundamental unfairness to that."

On the evidence of alter ego status, the court observed: "[T]he exhibits
attached to
the motion contain testimony of both Mr. Gaggero and Mr. Praske showing
that the only
interest of the specially appearing parties is to protect 100 percent of Mr. Gagger
o's
assets, both personal and business. Praske is the only trustee of the trust and
foundation
involved in the motion. He is one of only two officers in PCM. PCM pays
everything at
Gaggero's wishes without resistance or hesitance. Praske is also the register
ed agent for
service of process at each of the business entities. [Defendants'] evidenc
e shows that
Mr. Gaggero's o~vn accountant testified under penalty of perjury that the
gains and losses
for the assets and the estate plan, ultimately flow through Mr. Gaggero's
tax returns,
which is more evidence of alter ego status. [] Gaggero controlled the

litigation. He did
so by the way ofthe financial assets of the specially appearing parties.
Their interests are
aligned with Mr. Gaggero. Without them without Mr. Gaggero they
wouldn't even
exist. Mr. Praske testified that the sole purpose of the existence of the special
ly
appearing parties is to hold Mr. Gaggero's assets. They are one and the same.
That is the
bottom line."
The court rejected Mr. Chatfield's contention that Mr. Praske's testimony
"Mr. Gaggero makes the recommendation, and he [(Mr. Praske)] makes
concluding that "Mr. Praske is for all intents and purposes a rubber
was that
the decision,"
stamp."
The court's order granting defendants' motion was signed and entered
the same
day. On June 1, 2012, plaintiffs attorney filed a notice of appeal on
behalf of plaintif
and the additional judgment debtors.
13
DISCUSSION
1.
Preliminary Motions
Both sides filed motions during the briefing of this appeal.
The additional judgment debtors ask us to take judicial. notice of several
documents filed in the trial court in this case after the notice of appeal: the August
6,
20]2 third amended judgment; the trial court's November 5,2012 order authori
zing the
receiver appointed in this case (the subject of a separate appeal by additional
judgment
debtors) to approve and facilitate a financing transaction arranged by four of the
additional judgment debtors; and defendants' December 3, 2012 notice of satisfac
tion of
the judgment. These documents are relevant, they say, to show they paid the judgme
nt,
were prejudiced by the order adding them as judgment debtors, and their paymen
t did not
waive their right to seek relief in this court. None ofthese points is at issue in this
appeal. While there is nothing controversial about the documents, they are not
relevant to
any matter at issue in this appeal, and there is no point in judicially noticing them.
Defendants ask us to dismiss plaintiffs appeal on the ground he lacks standin to
g
prosecute it. They say he has not been injured by the order adding judgment
debtors,
because he says he is completely separate from them. We see no point in expend
ing
judicial resources on interesting theoretical issues, or on plaintiff's many argume
nts about
why he is nevertheless aggrieved by the order. Moreover, there is no substantial
difference in the issues plaintiff and the additional judgment debtors raise on
appeal, all
of which we must consider in any event. And, given our disposition of this appeal,
plaintiff is, as a practical matter, very much aggrieved. by the order.
2.
General Principles on Adding Debtors to the Judgment

Code of Civil. Procedure section 187 authorizes a trial court to amend a judgme
nt
to add judgment debtors. (NEC Electronics Inc. v. Hurt(1989)208 Ca1.App.3d
772, 778
(NEC Electronics).) "Judgments are often. amended to add additional judgme
nt debtors
on the grounds that a person or entity is the alter ego of the original judgme
nt debtor."
(Ibid.)
14
The Supreme Court tells us that the alter ego doctrine "arises when a plaintiff
comes into court claiming that an opposing party is using the corporate form unjustl
y and
in derogation of the plaintiff's interests." (Mesle~~ v. BNagg Management Co.(1985)

39 Ca1.3d 290, 300 (Mesler).) Mesler instructs that there is "no litmus test to determi
ne
when the corporate veil will. be pierced; rather the result will depend on the circums
tances
of each particular case." (Id. at p. 300.) There are "two genera] requirements: `(1)
that
there be such unity of interest and ownership that the separate personalities of the
corporation and the individual no longer exist and (2)that, if the acts are treated as
those
ofthe corporation alone, an inequitable result will follow.' [Citation.] And ònly
a
difference in wording is used in stating the same concept where the entity sought to
be
held liable is another corporation instead of an individual.' [Citation.]" (Ibid.)
Mesler explained the alter ego doctrine as follows: "The essence of the alter ego
doctrine is that justice be done. `What the formula comes down to, once shorn of
verbiage about control, instrumentality, agency, and corporate entity, is that liability is
imposed to reach an equitable result.' [Citation.]" (Mesler, supra, 39 Ca1.3d at p.
301
[holding that a parent corporation's liability as alter ego of its subsidiary corpora
tion
continued after settlement with the subsidiary; "[t]o hold otherwise would be to
defeat the
policy of promoting justice that lies behind the alter ego doctrine"].)
Alter ego liability may be applied to a trustee. (Greenspan v. LADTLLC(2010)
191 Ca1.App.4th 486,522(Greenspan)[if the trustee is the alter ego of an individ
ual,
then the individual "may be considered the owner of the [trust's] assets for purposes of
satisfying the judgment'
;
"`[t]rustees are real persons ...and, as a conceptual matter,
it's entirely reasonable to ask whether a trustee is the alter ego of a defendant who
transfer into [the] trust' ";"`[a]lter-ego doctrine can. therefore provide a viable
made a
legal.
theory for creditors vis-a-vis trustees' "]; c Wood v. Elling Corp.(1977)20 Cal.3d
353,
365-366 [allegations that corporate defendants v~~ere alter egos of individual
defenda
nts
were barred by statute of limitations on fraudulent conveyance cause of action,
but
plaintiff should have been allowed to amend his complaint, because "[i]f
it were
and proven that the two trusts in question [which owned the corporate
15
alleged
defendants] were
themselves alter egos of the [individuals], those trusts would essentially drop out as
independent legal entities"].)
"`The decision to grant an amendment ...lies in the sound discretion of the trial
court. "The greatest liberality is to be encouraged in the allowance of such amendments
in order to see that justice is done."'[Citation.]" (Greenspan, supra, 191 Cal.App.4th
at
p. 508.) Where, as here, facts are in dispute, we review the trial court's fact findings for
substantial evidence. (NEC Electronics', supra, 208 Cal.App.3d at p. 777.)
3.
Issues Raised by the Additional Judgment Debtors

We turn to the specific contentions the additional judgment debtors raise on
appeal, discussing first the several bases on which they claim they may not be added
to
the judgment as a matter of law.

a.
"Reverse piercing" of the corporate veil(a red herring)
Additional judgment debtors contend they may not be added to the judgment
because "reverse piercing" of the corporate veil is "forbidden by California law." They
rely on one opinion, Postal Instant Press, Inc. v. KasN~a Corp.(2008) 162 Ca1.App.4th
1 S 10, 1512-1513 (Postal Instant Press)to argue that, while traditional alter ego doctrine
allows an individual shareholder to be held liable for claims against a corparation, it does
not allow a corporation to be held liable for claims against an individual sharehol
der.
Postal Instant Press rejected the "variant of the alter ego doctrine, called third party
or
òutside' reverse piercing of the corporate veil," and held that "a third party creditor
may
not pierce the corporate veil to reach corporate assets to satisfy a shareholder's personal
liability." (Id. at p. 1513.)
The opinion in Postal Instant Press includes a thorough analysis of cases from
California, federal. and other state courts discussing "outside reverse piercing of the
corporate veil," both cases accepting, and others rejecting that theory of alter ego.
Postal Instant Press opinion rejected it as "a radical. and problematic change in
alter ego law." (Postal Instant Press, supra, 162 Ca1.App.4th at p. 1521.)
The
standard
The opinion
explains outside reverse piercing of the corporate veil creates unanticipated exposure
for
innocent investors and secured and unsecured creditors who relied on the
impregnability
ofthe corporate form; and that other remedies are available to the creditor of an
individual shareholder, such as enforcing the judgment against the shareho
lder's assets,
including his shares in the corporation. (Id. at p. 1524.)

We find these are sound principles, consonant with Mesler's directive to look to
"the circumstances of each particular case." (Mesler, supra, 39 Ca1.3d at p. 300.)
Postal Instant Press, the corporation at issue had other shareholders, the plaintiff
In
failed to
show that innocent creditors would be adequately protected, and the plaintiff admitte
dly
did not pursue other available legal remedies because it was "simply more expedi
ent" to
add the corporation as a judgment debtor. (Postal Instant Press, .supra, 162 Ca1.Ap
p.4th
at pp. 1524, 1523.) In other words, the equities of the case did not justify disrega
rding
the corporate form.
The facts and governing law in this case are entirely different. The additional
judgment debtors are Mr. Praske, as the trustee of three tz-usts plaintiff created
for the sole
purpose of holding his assets, and the entities plaintiff transferred into the trusts which
comprise the trust assets. Unlike a corporation, a trust is not a legal person which
can
own property or enter into contracts. Since a trust is not a legal entity, it cannot
sue or be
sued. A trust is a relationship by which one person holds legal title for the
benefit of
another person. (Greenspan,supra, 191 Ca1.App.4th at p. 521.)
We find neither the holding nor the reasoning of Postal Instant Press govern
whether the additional judgment debtors were properly found to be alter egos of
plaintiff
for the reasons set forth more fully below.
b.
The ownership issue
Additional judgment debtors argue that, because plaintiff transferred his

ownership ofthe entities to the trusts, and he is not the trustee, he has no owners
hip
interest in any ofthe additional judgment debtors and, ergo, alter ego doctrine
cannot
apply. They say that defendants repeatedly conceded by simply describ
ing plaintiff's
transfer of his assets to the entities, and then his transfer of ownership of
the entities to
the trusts that plaintiff does not own any of them or their assets, aild
this "binding
judicial admission" is fatal. And so, they think, game over.
17
We reject this simplistic, form-over-substance notion, and conclude on
the
evidence in this case that plaintiff had a sufficient ownership interest to satisfy
alter
ego
doctrine.
i.
Ownership in the trust context
Additional judgment debtors correctly point out that the cases uniformly
one of the "two general requirements" for disregarding the corporate form
say that
is"`that there
be such unity of interest and ownership that the separate personalities ofthe
corporation
and the individual no longer exist ....' [Citation.]" (Mesler, supra, 39 Ca1.3d
at p. 300.)
They further point out that one Ninth Circuit case has said that "ownership
of stock is an
absolute requirement for an alter ego finding." (SEC v. Hickey (9th Cir. 2003)
322 F.3d
1123, 1 ]29, id. at p. 1130.)

But this case does not involve an individual and a corporation. It involves
trusts.
There are no stock owners of a trust. It should go without saying that cases
are not
authority for propositions they have not considered. (And, as many cases
have noted,
"[b]ecause it is founded on equitable principles, application of the alter
ego [doctrine] ìs

not made to depend upon prior decisions involving factual situations which
appear to be
similar,' '" and"` "the conditions under which a corporate entity may be
disregarded vary
according to the circumstances of each case."'[Citations.]'' (Las Palma
s Associates v.
Las Palmas Center Associates(1991)235 Ca1.App.3d 1220, 1248.)
Here, it is of course true that, on paper, plaintiff owns nothing. On paper,
plaintiff
depends, for everything in life (except, perhaps, the $3,000 a month he earns
for
managing a $40-million portfolio of assets), on the generosity of Mr. Praske
. But the law
is not so unyielding that it cannot take account of practical realities. Plainti
ff transferred
his ownership of assets worth tens of millions of dollars to entities that exist
for the sole
purpose of owning his properties, and then transferred his ownership of
those entities to
the trusts, and appointed Mr. Praske the trustee. So, Mr. Praske has
legal title to these
entities in his capacity as trustee. But the evidence demonstrated that
Mr. Praske is
plaintiff's "rubber stamp." Moreover, under general principles of trust
law,"trust
beneficiaries hold àn equitable estate or beneficial interest in' proper
ty held
18
in trust and
are ` "regarded as the real owners] of[that] property."'[Citation.]" (Steinlzart

v.
County ofLos Angeles(2010} 47 Ca1.4th 1298, 1319; see In ~~e Schwartzko~f
(9th Cir.
2010)626 F.3d 1032, 1039 [under California law,"equitable ownership
in a trust is
sufficient to meet the ownership requirement for purposes of alter ego liabilit
y"].)
ii.
Substantial evidence of ownership
Substantial evidence supported the trial court's alter ego findings. Like the
trial
court, we do not believe that Mr. Praske has any actual authority to decide
what to do
with the assets held by the trusts. It is plauitiff who exercises that authori
ty. Plaintiff's
testimony in the Yura litigation showed that he treated the trusts like his own
personal
piggy banks. The trial court described Mr. Praske as plaintiff's "rubber
stamp."
Extending the piggy bank analogy, we find the record shows Mr. Praske
was the rubber
plug on the underside ofthe piggy banks that plaintiff could remove any time
he wanted
to spill funds into his own hands at will.

Plaintiff plainly said that he could get funds from his trust to buy the propert
y, and
then either put the property into the "estate plan" or keep it in his own
name. Since
Mr. Praske said yes,"like I always do," to providing funds from the
trust to purchase
property that plaintiff could keep in his own name, it seems quite clear that
plaintiff(who
is, Mr. Praske admits,"a potential beneficiary" of the trusts) not only control
s the trusts
(and the entities owned by the trusts) but also and certainly in a
court of equity has an
ownership interest in trust assets within the contemplation of alter
ego doctrine. (See
Greenspan, sup~~a, 191 Cal.App.4th at p. 518 [if the trustee is the alter ego of an
individual, then the individual "may be considered. the owner of the [trust'
s] assets for
purposes of satisfying the judgment").) So it is here.

c.
Other alter ego requirements and supporting evidence
Additional judgment debtors also contend that the evidence was insuffi
cient to
establish the required unity of interest and ownership. They rely on
Misik v. D'Arco
(2011) 197 Ca1.App.4th 1065 (Misik), where the court listed some
of the "many factors to
be considered" in deterniining whether there is sufficient unity of interes
t and ownership
that "the separate personalities of the individual and the corporation
19
no longer exist ...."
(Id. at p. 1073.) Additional judgment debtors observe that no evidence was offered
on
most of the factors that Misik lists (such as commingling offunds, failure to maintai
records, inadequate capitalization, and so on).

But the question is not what factors were not present, but what circumstances were
present to establish the required unity of interest and ownership. As Misik also observe
s,
"[t]his list of factors is not exhaustive"; the enumerated factors "may be considered with
others under the particular circumstances of each case"; and no single factor is
determinative. (Misik, supra, 197 Ca1.App.4th at p. 1073.) Instead,"` "a court must
examine all the circumstances to determine whether to apply the doctrine."'[Citation.]"
(Ibia'.)
That is just what the trial court did: it examined all the circumstances. Most of
the laundry list offactors recited in Misik did not apply to the arrangements plaintiff
and
Mr. Praske implemented in this case. Others did: the ownership factor already
considered, and the use of the trusts and the entities "as a mere shell, instrumentality or
conduit for the business of an individual." (Misik, supra, 197 Ca1.App.4th at p.
1073.)
We have recited the established facts at length in parts 1 and 2 of the facts, ante,
and will
not repeat them here. Plainly the evidence was sufficient for the trial court to conclud
e
that "under the particular circumstances"(ibid.) plaintiff and additional judgment
debtors
were "one and the same."

Additional judgment debtors complain that defendants did not present evidence
specific to any of them,"treated all ten of them as a single unit" and did not prove `àny
facts specific to any of the individual trusts, LLCs or LPs." That is because plaintiff
and
Mr. Praske devised a single enterprise which they conveniently denominate an
"estate
plan" controlled by plaintiff to his own ends, one of which was to place his personal
.
assets beyond the reach of legitimate creditors.
Finally, additional judgment debtors say the other alter ego requirement that
adherence to the fiction of separate existence would "sanction a fraud or promot
injustice"(Misik, supra, 197 Ca1.App.4th at p. 1073) is not inet either. The

facts we
have related patently demonstrate otherwise.
20
d.
Control of the litigation
Some authorities tell us that adding a judgment debtor to a judgment require
s both
that the additional.judgment debtor be an alter ego of the original judgme
nt debtor and
"that the new party had controlled the litigation, thereby having had the opportu
nity to
litigate, in order to satisfy due process concerns.'" (Triplett v. Farmers Ins.
Exchange
(1994)24 Ca1.App.4th 14].5, 1421 (Triplett).) "[T]he due process concer

n raised when
new parties are named after judgment is to determine not only alter ego
status but also
whether there was sufficient control over the underlying litigation to
permit the
opportunity to contest the underlying judgment." (Ibid.)

Seizing on this principle, additional judgment debtors point to the trial
express finding that it was plaintiff who controlled the underlying litigation.
this fording necessarily means that they did not control the litigation, and
court's
They say
therefore cannot
be added to the judgment.

While due process considerations are distinct from. alter ego findings, under
the
circumstances here there are no due process considerations that prevent

amendi
ng the
judgment. This is not a case where the interests of the individual
defendant in the
underlying litigation were different from those of the alter egos. Plainti
fffought tooth
and nail to prevent the attorney fee award against him (and, perforce,
to prevent any part
of the assets he had transferred to his alter egos from being used to
satisfy his judgment
creditors). As was the case with the real estate developer in Gf~eenspan
who transferred
his limited liability companies to a trust he managed, plaintiff's interests
were the same
as his trusts and the entities they hold.; if at any point plaintiff wanted
to protect the funds

of a particular entity, he could make a transfer to another entity. In reality,
plaintiff was
the head of a single enterprise and controlled the litigation on behalf of
all of them. (Cf.
Greenspan, supra, 191 Ca1.App.4th at p. 510 [real estate developer who
transferred
ownership of limited liability companies to a trust he managed viewed
all the entities as a
single enterprise, so he did not consider their "distinct" interests
"because, as far as he
was concerned, their interests were identical to his own"].)
21
e.
The irrevocability claim
Additional judgment debtors contend that, as a matter of law,the trustee

be added to the judgment because the trusts are irrevocable, and the assets
may not
of an
irrevocable trust can never be reached by the settlar's creditors. We do

not agree, for
multiple reasons, including absence of the trust documents from the record.
(See pt. 3.f.,
post.) But even if the trusts were irrevocable, that principle has no pertine
nce where the
trustee is the alter ego of the settlor of the trust.
First, we do i~ot agree with additional judgment debtors that Laycock v. Hamme
r
(2006) 141 Ca1.App.4th 25 (Laycock)is controlling here. In Laycock,the
court held that,
once the settlor of an irrevocable trust transferred an insurance policy to the trust,
"he no
longer had any ownership interest in the policy and it was not subject to the claims
of his
creditors." (Id. at p. 27.) The court cited Probate Code provisions4 and said
"[t]here are
no cases that permit the settlor of a trust to make an irrevocable trust revoca
ble by way of
conduct after the trust has been established"(id. at p. 30), and "a settlor'
s conduct after
an irrevocable trust has been established will not alter the nature of such a
trust." (Id. at
p. 31.)
Laycock did not involve circumstances where the trustee of the trust
ego of the settlor (and, as additional judgment debtors themselves have
was the alter
pointed out, cases
are not authority for points they did not consider). Greenspan, on the other
hand, did
involve circumstances where the trustee of a trust was the alter ego ofthe settlor,
and the
trust in that case was an irrevocable trust, created by the settlor for the benefit
of his
children. (Greenspan, sup~~a, 191. Ca1.App.4th at p. 497.} The court held
the plaintiff
4
Probate Code section 18200 states that "[i]f the settlor retains the power
to revoke
the trust in whole or in part, the trust property is subject to the claims of
creditors of the
settlor to the extent of the power of revocation during the lifetime of
the settlor." And
section 19001, subdivision (a} states that, upon his or her death,"the
property of the
deceased settlor that was subject to the power of revocation at the time of
the settlor's
death is subject to the claims of creditors of the deceased settlor's estate
and to the
expenses of administration of the estate to the extent that the deceas
ed settlor's estate is
inadequate to satisfy those claims and expenses."
22
"properly sought to add ...the trustee of the ...Trust, as a judgment debtor"(id. at

p. 518), and that if the trustee is the alter ego of an individual who made a transfer into
the trust, then the individual "may be considered the owner of the [trust's] assets for
purposes of satisfying the judgment." (Ibid.; see In re Schwart:ko~f, supra, 626 F.3d at
p. 1040 [holding that an irrevocable trust (id. at p. 1034) was an individual's alter ego].)
Second, the record is insufficient to conclude the trusts were irrevocable anyway.
As Laycock tells us, Califonua courts considering the issue "have looked to the express
terms ofthe trust instrument in deternuning whether a trust is revocable or irrevocable."
(Laycock, supra, 141 Cal.App.4th at p. 30.) The trust instruments are not in the record,
and that is because plaintiff and Mr. Praske have not produced them. (See part 3.,post.)
This likewise disposes of the assertion that defendants had to prove the trusts were
revocable and did not meet that burden. Probate Code section 15400 provides that
"[u]nless a trust is expressly made irrevocable by the trust instrument, the trust is
revocable by the settlor." Even if defendants were required to produce proof of
revocability (and Greenspan supports the conclusion the issue is irrelevant), it was
plaintiff and Mr. Praske who eliminated the possibility of doing so.
f.
The failure to produce trust documents
In a related argument, additional judgment debtors assert that the trial court
erroneously found, without evidentiary support, that they "had committed misconduct'"
by refusing to produce the trust instruments or identify the beneficiaries ofthe trusts
during postjudgment discovery. (We note parenthetically that the references by
additional judgment debtors to Mr. Praske's "misconduct,""purported misdeeds" and
"wrongful[]" withholding of evidence are strictly their own characterizations, not those
of
the trial court.) Additional judgment debtors say the alter ego decision "rests entirely" on
this finding, and that the trial court was wrong, because Mr. Praske himself never
refused,
and indeed was never asked, to turn over the disputed documents.
This argument ignores the evidence. It ignores plaintiff's response to the
production requests (objecting on grounds of a constitutional right to privacy as well
attorney-client privilege and attorney work product). It ignores the evidence that
23
as
Mr. Praske "always" said yes to plaintiff. It ignores the evidence that plaintiffs counsel
represented Mr. Praske at his third party debtor examination. It ignores the evidence
that
Mr. Praske followed plaintiff's counsel's instructions not to answer questions about
the
operations of the entities to which plaintiff had transferred his properties (except to say
plaintiff did not now own them). And it ignores the~fact that at the hearing, Mr. Praske'
s
own counsel, after first saying that Mr. Praske intended "to completely and fully
cooperate with the requests for the documentation," said,"I know in my mind what
information they need,'' and that he would only provide information either agreed upon
between counsel or ``whatever this court would determine to be relevant." (As the court
observed, this was "a contingent offer" and "of limited scope.")
In other words, we find apt the trial court's description of plaintiff and Mr. Praske
as being "joined at the hip," whose "positions taken were coordinated positions." We
find no error in the trial. court's inference that Mr. Praske had effectively "refused" to
produce the trust documents, with the result that the record was devoid of evidentiary
support for the claims counsel made belatedly and with no excuse at the hearing.
Additional judgment debtors further contend their due process rights were violated
because they `'had no notice that they would need to rebut a claim that Praske had
withheld documents," having "only learned of the accusation at the hearing," and "[a]
ruling that is entered without notice to the affected parties is void." (In a similar vein,
they claim the court's "refusal to let [them] produce the trust documents before
penalizing them" was "reversible per se" and violated their constitutional right to a fair
hearing.)
These are baseless contentions. Additional.judgment debtors are the ones who
generated the issue in the first place, by raising last-minute claims about the trusts
that
they failed to raise in their opposition papers. The only reason they "had no notice"
was
that they gave none. (Defendants' counsel pointed out at the hearing that Mr.
Praske
testified these were offshore trusts, never filed with any United States court, with
"independent confidentiality provisions" and "had we [(the defendants)] any idea
would be an argument they would raise we would have pulled excerpts from the
24
this
debtor
examination to address that.") These claimed "structural" errors, purportedly

"reversible
per se," are neither. They are arguably as far from due process violations
as it is possible
to get.
Next, additional judgment debtors characterize the court's ruling as "an
evidentiary and/or issue sanction for discovery abuses,'" and then tell us all the
reasons
why such a discovery sanction is improper. The short answer to these claims
is that the
court did not impose an evidentiary sanction. The court refused to continue the
hearing,
concluding it would be fundamentally unfair to do so in light of the history
of the
litigation. And the trial court did not "presume" that plaintiff and additio
nal judgme
nt
debtors were "one and the same"; the court found they were "one and the same"
based on
the evidence we have described at length. The court's refusal to continue the
hearing was
within the trial court's sound discretion, and we see no basis upon which to find.
any
error.
g.
Judicial estoppel and related claims
Additional judgment debtors assert that in the underlying litigation, "[b]ased
on
[defendants'] argument, the trial court expressly found that Gaggero was separat
e from
the estate he had created years earlier," so judicial estoppel prevents defenda
nts from
making an alter ego claim. The quoted statement distorts the facts, which
provide no
basis for a finding ofjudicial estoppel.
In fact, there were neither arguments nor trial court findings that plaintiff
was
"financially separate" from PCM or the other additional judgment debtors. The
arguments and findings were that plaintiff so testified, and that he failed to produc
e any
evidence that he personally paid any attorney fees to anyone who represented
he had any obligation to repay the sums that PCM or others paid for him_
him, or that
The trial court
said,"As far as the evidence goes, the entities paid whatever sums were expend
ed
entirely gratuitously." In short, tl~e trial court concluded that, because
plaintiff took the
position throughout the litigation that "he ha[d] no control over any funds,
in an
attempt
to put his assets outside the reach of creditors," the doctrine ofjudicial estoppe
l "would
apply to prevent any change in position," so it "is appropriate to take Mr.

25
Gaggero at his
word on this point and let him now accept the consequences. Since he paid
nothing, he
can recover nothing." This was obviously not a finding that plaintiff
and additional
judgment debtors were actually separate financially.
In sum,there was no argument, and no finding, precluding an alter ego
claim. For
the same reasons, the argument by additional judgment debtors that. the
(nonexistent)
finding offinancial separation is "law of the case" is equally baseless. Likewi
se, their
contention that the amended judgment adding them as debtors "directly contrad
icts the
original judgment" and therefore cannot stand which is based on the
same nonexistent
trial court finding of financial separation necessarily has no merit.
h.
Probate court jurisdiction
Additional judgment debtors claim that the trial court had no jurisdiction
to amend
the judgment to add them as judgment debtors because the probate court
"has exclusive
jurisdiction of proceedings concerning the internal affairs of trusts." (Prob.
Code,
~ 17000, subd.(a).) The trial court did not consider this claim becaus
e additional
judgment debtors failed to assert it in their opposition papers. (See pt. 3.f.,
ante.) It has
no merit in any event. This is not a proceeding concerning the intenlal
affairs ofthe
trusts, and none of the authorities that additional judgment debtors cite
suggests
otherwise. The probate court does not have exclusive jurisdiction of

actions and
proceedings "by or against creditors or debtors of trusts" or actions and
"involving trustees and third persons." ( 17000, subd.(b)(2)&(3); c
proceedings
Ureenspan,supra,
191 Ca1.App.4th at p. 522 [civil action where the plaintiff"properly sought

to add ...the
trustee of the ...Trust, as a judgment debtor"].)
i.
Waiver
Additional judgment debtors claim that a judgment may not be amend
ed to include
alter ego debtors if the judgment creditor was aware ofthe alter ego relatio
nship before
the judgment was entered. The only case authority they cite for
this proposition is Jines
v. Abarbanel(1978)77 Ca1.App.3d 702 (Jives), which does not
support it. In Jives, the

trial court added a medical corporation to a malpractice judgment
against the physician
after the judgment, and the Court of Appeal reversed. The medica
l corporation was
defendant's employer. There was "no suggestion of any ...abuse" of the corpor
ate
privilege, and no need to disregard the separateness of the employer and. emplo
yee
order to do justice. because a corporate employer is liable for the torts of its
employee in
the course of employment, and could have been sued on that basis. (Id. at pp.
In short, alter ego doctrine simply did not apply, and so there was no legal
in
715-716.)
basis for a
postjudgment order adding the corporation as a judgment debtor. (Id. at p.

716.) That is
not this case.
Additional judgment debtors then say defendants did not act with due diligen
ce in
adding them as judgment debtors, relying on Alexander v. Abbey ofChime
s(1980) 104
Ca1.App.3d 39(Alexander), where the court found ample evidence for disreg
arding
corporate entity, but found the motion to amend the judgment had not been timely
(Id. at p. 47.) In that case, the plaintiffs waited. nearly seven years after the
final to seek to add the alter ego to the judgment, even though they knew
the
made.
judgment was
or should have
known ofthe alter ego status either at the time of the original proceedings
or shortly
thereafter. (Id. at p. 48.) Further, there was "no suggestion that [the plainti
ffs had] ever
made any effort to satisfy the judgment" before they filed the motion to amend
the
judgment. (Ibid.)
Here,the original judgment was entered on February 5, 2008, and plainti
ff's
appeal resulted in an automatic stay of enforcement until May 2010, when
the judgment
was affirmed on appeal. The amended judgment including costs on appeal

was not
entered until December 2010. Defendants moved to add judgment debtors on April
10,
2012, after conducting various forms of postjudgment discovery during
2011 and 2012.
In short, this is not a case like Alexander, where the plaintiff did nothing
at all for seven.
years after the judgment was final.
The general rule is that"` "a court may amend its judgment at any time so
judgment will properly designate the real defendants."'" (Greenspan,
that the
supra, 191
Ca1.App.4th at p. 508, italics added.) The procedure is an equitable one,

and the decision
lies in the court's sound discretion. We see no reason on this record to
find any absence
of diligence by defendants in bringing their motion.
27
j.
The "estate planning" argument
Finally, plaintiff contends that affirming the trial court's alter ego finding will
"threaten the integrity of estate planning in California" and that"no estate plan will
ever
he safe in a California court." No such. consequences flow from this opinion. We merely
recognize the previously established principle that alter ego doctrine may be applied
to a
trustee, and if the trustee is the alter ego of an individual, then the individual "may
be
considered the owner of the [trust's] assets for purposes of satisfying the judgment."
(Greenspan, supra, 191 Ca1.App.4th at p. 522.) The 1l~Iesler court's observation in the
context of corporations likewise apply here: "Ìn the instant case there may well
have
been various business reasons sufficient to justify and support the formation or
continuation ofthe corporation on the part of defendant. For such purposes the
[corparation] still stands,' "but"`[t]he law ofthis state is that the separate corpora
te
entity will not be honored where to do so would be to defeat the rights and equities of
third persons.' [Citations.]" (Mesler, supra, 39 Ca1.3d at pp. 300-301.) The same
is true
here.
DISPOSITION
The order is affirmed. Defendants shall recover their costs on appeal.
GRIMES, J.
We concur:
RUBIN, Acting P. J.
FLIER, J.
28
EXHIBIT B
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT
DNISION 8
December 8, 2014
STEPHEN M. GAGGERO et al.,

Plaintiffs and Appellants,
v.
KNAPP PETERSON & CLARK.E,
Defendant and Respondent.
B241675
Los Angeles County No. BC286925
THE COURT:
Appellants' motion for judicial notice and petition for rehearing are denied.
cc:
David Blake Chatfield

Randall A. Miller
Steven Seawhan Wang
Edward A. Hoffman
Karen I Gold
File
PR40F OF SERVICE
C, F.~ii~ard A. ~ IoE~man, declare as ft~llows:
I am over ~i~hteen {18)years t~f ale ar~d nc~t a pa~-t~- fio the within action.
I~'I~=
birsin~;ss address is 117 5 Vr'ilshire Bc~ulec-ard, Suite 1250, Los Angeles, California
9002. On Decerr~ber 17, 201,1 served the ~~ithin
PETITIC}N FOR REVIEW
on each tat the fc~llo;~~ing, by placing a true cop}F thereaf in a sealed enz~elc~pe
~~ith
pc~sta~e fully prepaid, in the United States mail at Lc~s Angeles. California,
addressed
~s foll~~~s:
Randall A. Miller
t~ffice cif the Clerk

Caurt~ ~l.t~ppeal, See~and ~ppelIatc
District, Division :Fight
3017 South S~rin~ S~rect
Lt~s Angeles, C~ 90013
~1~V~I1 W 1ti~
.~lttarne~rs
Miller I,I.,P
X15 St~utt7 ~'Ic~u;~r ~tr~~t, Suite ~15{~
L<~s ~ng~;les, CA 900 l -22U 1
Clerk a~~ Gc~urt Citiil
Las Angeles Su~a~ric~r Court.
111 l~io~t~ Hill Street
Lfls ~giics, CA 9GU12
David ~3lake C:haif-i~id

Attorney
~~stla3~e La~c~v Graup
2625 Tc~wnsgate Rc~., Suite 33fl
L~'estlak.~ Village, CA 91361
Clerk, I)epartznent 24
I,c~s ~n~eles SuperYor Court
i 11 North ~-Iill Street
Las Angeles, C'A 9OD 12
{C:ourtesy c'op~~ for I~eli~7en' tc~ tl~e Ho~~.
Rc~t~ert L. Hess)
I declare under pelialty t~f perjury that the for~gois7g is tree and correct and
that
I signed this declaration ~n Dece~~ber 17, 2014 at Las Angeles, California.
r
i/
~~~~ V
Erl~~%ard A.Hoffman
27
{.,~

B241675 CPR Pacific Marina

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~, "

SUPREME COURT OF CALIFORNIA

KNAPP,PETERSEN & CLARKE; STEVEN RAY GARCIA;

After a Decision by the

PETITION FOR REVIEW

Pacific Coast Management, Inc., et al.

SUPREME COURT OF CALIFORNIA

After a Decision by the

PETITION FOR REVIEW

The Estate Plan ........................................... 3

Respondents Serve as Gaggero's Attorneys ..................... 4

The Underlying Malpractice Case ............................. 4

Post-trial Discovery ........................................ 5

The Alter-ego Motion ...................................... 5

The Present Appeal ........................................ 6

Review Is Necessary to Resolve a Split of Authority over Whether and

The Doctrine Exists to Address a Problem Unique to Corporate

Liability in Other Contexts Is Already Governed by Other Rules ... 12

This Court Has Never Said the Alter-ego Doctrine Applies

Because Individuals Do Not Have Owners, California Law Says

The Court Should Decide Whether Section 15400 Creates an Evidentiary

This Case Presents an Ideal Opportunity for the Court to Address

Proof of Service ..................................................... 26

Automotriz del Golfo de Calif. S.A. De C. V. v. Resnick,

Bay City View, LLC v. SF Bay Builders, Inc.,

Greenspan v. LADT, LLC

Kahrs v. County ofLos Angeles

Las Palmas Assoc. v. Las Palmas Ctr. Assoc.

Mesler v. Bragg Management Co.

Minnesota Mining &Manufacturing Co. v. Superior Court

Watson v. Commonwealth Ins. Co. ofN.Y.

Wady v. Provident Life and Accident Ins. Co. ofAmerica

Corporations Code section 16305 ....................................... 12

STATE COURT RULES

STATEMENT OF THE CASE

The Estate Plan.

Petitioner Stephen Gaggero, a successful real estate developer and investor,

~~The record in this appeal is cited as"CT"and "RT." Citations to "Trial

Respondents Serve as Gaggero's Attorneys.

Respondent Knapp, Peterson, &Clarke LLP is a law firm in which respondents

The Underlying Malpractice Case.

Gaggero brought the underlying malpractice case in December 2002.(JA7

The Alter-Ego Motion.

The Present Appeal.

The Court of Appeal affirmed the alter-ego order in an unpublished decision on

REVIEW IS NECESSARY TO RESOLVE A SPLIT OF AUTHORITY

5'Other doctrines share this similarity, including agency, fraudulent

'-While Schwarzkopfmentioned in passing that the trust was irrevocable

ONLY THIS COURT CAN CLARIFY WHETHER,AND UNDER

The Doctrine Exists to Address a Problem Unique to Corporate

The alter-ego doctrine arose in the corporate context, to combat a problem

Liability in Other Contexts Is Already Governed By Other Rules.

12~Elling rejected an alter-ego claim because the corporations were

Because Individuals Do Not Have Owners, California Law Says No

THE COURT SHOULD RESOLVE THE CONFLICT BETWEEN

of interest and ownership" requirement. It first announced this rule in Riddle v.

ownership, thus turning Riddle's and Minton's holdings on their heads.14~

14~That is what happened here, when the Court of Appeal affirmed on

support in Schwarzkopf, likewise focused on "equitable ownership" rather than actual

''Roman Catholic Archbishop'scitation toMinton was quoted in Wady

THE COURT SHOULD DECIDE WHETHER SECTION 15400

e.g., People v. Avanessian (1999)76 Ca1.App.4th 635, 641-642; Kahrs v. County of

THIS CASE PRESENTS AN IDEAL OPPORTUNITY FOR THE

single enterprise`'], the Court of Appeal's decision was not fact-specific