FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In Re, 

ALEXIS HILL SCHWARZKOPF, AKA

Alexis Michaels, AKA Alex

Michaels; JOANNE LOUISE

MICHAELS, AKA Joanne Louise

Schwarzkopf,

Debtors,

ROBERT L. GOODRICH, Chapter 7 No. 08-56974

Trustee,  D.C. No. Appellant, 5:07-cv-01547-SJO

v.

JUAN BRIONES, Trustee for Kokee

Family Trust 1992, AKA The

Apartment Trust; ALEXIS HILL

SCHWARZKOPF, AKA Alexis

Michaels, AKA Alex Michaels;

JOANNE LOUISE MICHAELS, AKA

Joanne Louise Schwarzkopf,

Appellees. 

18709
In the Matter of: JOANNE LOUISE 

MICHAELS, AKA Joanne Louise

Schwarzkopf and ALEXIS HILL

SCHWARZKOPF, AKA Alexis

Michaels, AKA Alex Michaels,

Debtors,

JUAN BRIONES, Trustee for Kokee No. 08-57026

Family Trust 1992, AKA The D.C. No. Apartment Trust; ALEXIS HILL  5:07-cv-01547-SJO SCHWARZKOPF, AKA Alexis

Michaels, AKA Alex Michaels; OPINION

JOANNE LOUISE MICHAELS, AKA

Joanne Louise Schwarzkopf,

Appellants,

v.

ROBERT L. GOODRICH, Chapter 7

Trustee,

Appellee. 

Appeal from the United States District Court

for the Central District of California

S. James Otero, District Judge, Presiding

Argued and Submitted

June 9, 2010—Pasadena, California

Filed November 23, 2010

18710 IN RE SCHWARZKOPF
Before: Alfred T. Goodwin and Johnnie B. Rawlinson,

Circuit Judges, and Algenon L. Marbley, District Judge.*

Opinion by Judge Goodwin

*The Honorable Algenon L. Marbley, District Judge for the Southern

District of Ohio, sitting by designation. 

IN RE SCHWARZKOPF 18711
COUNSEL

Gary A. Pemberton, Shulman Hodges & Bastian, Foothill

Ranch, California, for the plaintiff-appellant-cross-appellee.

Martha A. Warriner, Reid & Hellyer, Riverside, California,

for the defendants-appellees-cross-appellants.

IN RE SCHWARZKOPF 18713
OPINION

GOODWIN, Senior Circuit Judge:

Robert L. Goodrich, the Chapter 7 trustee for the bankruptcy estates of Alex Michaels, aka Alexis Michaels, aka

Alex Schwarzkopf (“Michaels”), and Joanne Louise

Michaels, aka Joanne Louise Schwarzkopf (collectively, “the

Debtors”), seeks to recover for the estates’ benefit approximately $4 million in assets. Goodrich alleges that the Debtors

fraudulently transferred those assets to two irrevocable trusts

known as the Apartment Trust and the Grove Trust and that

the district court erred in holding that neither trust is

Michaels’s alter ego. On cross-appeal, the Debtors contend

that the district court erred in holding that the Apartment

Trust is invalid and may therefore be disregarded. 

“We apply the same standard of review to the bankruptcy

court findings as does the district court: findings of fact are

reviewed under the clearly erroneous standard, and conclusions of law, de novo.” Christensen v. Tucson Estates, Inc. (In

re Tucson Estates, Inc.), 912 F.2d 1162, 1166 (9th Cir. 1990).

On de novo review of the district court’s decision, id., we

conclude that the Apartment Trust is invalid and that the

Grove Trust is Michaels’s alter ego. We therefore affirm the

district court’s decision in part and reverse it in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

The Debtors created both the Apartment Trust and the

Grove Trust on June 15, 1992. They named their minor child,

Sydnee Michaels (“Sydnee”), beneficiary and appointed Juan

Briones (“Briones”) trustee. 

Simultaneously with the creation of the Apartment Trust,

Michaels transferred all the stock of Kokee Woods Apartments, Inc. (“Kokee Woods”), of which he was the sole shareholder, to the Apartment Trust. The bankruptcy court found

18714 IN RE SCHWARZKOPF
that a Texas state-court verdict rendered against Kokee

Woods made the stock potentially worthless at the time of the

transfer. It also found, however, that the Debtors were insolvent and that “Michaels devised [the transfer] to avoid his

creditors’ ability to recover the asset because [he] intended to

pursue an appeal of the Texas Verdict and he did not want to

go through all the effort of an appeal only to have his creditors pursue the Corporation’s stock.” Therefore, it concluded,

the transfer “was made for the fraudulent purpose of avoiding

the Debtors’ creditors.” After the transfer, Michaels successfully appealed the verdict, winning a judgment of

$8,096,120.45 plus interest. The trust paid Michaels consulting fees of $3,000 per week to collect the judgment. 

The only asset placed into the Grove Trust at its inception

was $25.00. In December 1997, however, Michaels’s company Impetrol Corporation purchased four lots of land containing avocado groves (“the Grove Lots”) for the Grove

Trust. The bankruptcy court noted that the assets used to

acquire the Grove Lots belonged to Michaels and that “Impetrol was nothing but a shell . . . to put properties in the corporate name.” It found that the Debtors were insolvent at the

time of the purchase and that “[t]he Grove Trust’s acquisition

of the Grove Lots was a fraud on the creditors of the Debtors.” It also found that Michaels dominated and controlled all

decisions related to both the Grove Lots and the Grove Trust

and that “Briones had no role nor took any action . . . other

than to write checks as demanded by Michaels.” The Grove

Trust paid Michaels at least $105,000 in unexplained fees

from February to September 2002.

Although the trusts paid for Sydnee’s education, clothing,

medical care, car, and golf lessons and tournament expenses,

the Debtors also benefitted from both trusts. The bankruptcy

court found that “Mr. Briones provided payments to Mr.

Michaels from both the Grove Trust and the Apartment Trust

without complete documentation” and that, “[t]hrough his

influence over Mr. Briones, Mr. Michaels received advances

IN RE SCHWARZKOPF 18715
and expedited payments from either the Apartment Trust

and/or the Grove Trust to avoid a creditor about to levy on a

judgment against him.” Michaels asked for and received reimbursement from one of the trusts for another daughter’s wedding and for a life insurance policy; Briones testified that he

did not know who Michaels named as the policy’s beneficiary. The Debtors lived rent-free with Sydnee in a manufactured home that the Grove Trust purchased after acquiring the

Grove Lots and in a house in Temecula, California that the

Apartment Trust purchased in 2003. 

Briones maintained no books or records for either trust

prior to 2000 and often intermingled their funds. The trusts

shared a bank account from October 2002 through January

2003, Briones transferred money between the trusts when he

determined that one needed more, and the Apartment Trust

made purported “loans” to the Grove Trust that were not documented, had no terms for repayment, and were never repaid.

The trusts also paid each other’s expenses. For example, the

parties stipulated that the Grove Trust paid “various amounts

for the maintenance” of the Temecula, California property

held by the Apartment Trust, and that the Apartment Trust

paid water bills and trustee fees for the Grove Trust. 

In October 2003, the Debtors filed bankruptcy petitions

seeking to discharge approximately $5.4 million in debt.

Goodrich, as trustee for the consolidated bankruptcy estates,

filed an adversary complaint seeking to recover approximately $4 million in assets from the Apartment Trust and the

Grove Trust. Following a bench trial, the bankruptcy court

initially concluded that both trusts are valid and that neither

is the alter ego of the Debtors. On Goodrich’s motion for

reconsideration, however, the court partially reversed its earlier ruling, holding that the Grove Trust is Michaels’s alter

ego. As to the Apartment Trust, it reaffirmed its earlier rulings

that the trust is valid because it was created for the benefit of

a minor child and that it is not Michaels’s alter ego.

18716 IN RE SCHWARZKOPF
The district court affirmed the judgment of the bankruptcy

court in part and reversed it in part. First, the district court

held that the Apartment Trust is invalid because one of the

Debtors’ purposes in creating it was to defraud creditors, but

it remanded for the bankruptcy court to determine whether

that issue is time-barred, noting that Goodrich had failed to

argue before the bankruptcy court that the seven-year statute

of limitations did not begin to run until Briones repudiated the

trust. Second, relying on S.E.C. v. Hickey, 322 F.3d 1123 (9th

Cir. 2003), the court held that legal ownership is a prerequisite to alter ego liability in California and that, because

Michaels was neither trustee nor beneficiary of the trusts, they

were not his alter ego. Goodrich appealed to this court, and

the Debtors cross-appealed.

II. DISCUSSION

1. The Apartment Trust

Goodrich argues that the district court erred in holding that

the Apartment Trust is not Michaels’s alter ego, while the

Debtors, on cross-appeal, contend that it erred in holding that

the Apartment Trust is invalid. We agree with the district

court’s conclusion that the Apartment Trust is invalid, and we

further hold that Goodrich’s claim to invalidate it is not timebarred.1

 Because we hold that the Apartment Trust is invalid

and may therefore be disregarded, we need not address

whether it is Michaels’s alter ego. 

1The district court remanded on the statute of limitations issue, noting

that Goodrich had failed to argue before the bankruptcy court that the

seven-year statute of limitations did not begin to run until Briones repudiated the trust. Although the bankruptcy court did not address that precise

question, however, the parties sufficiently raised the issue—when the statute of limitations began to run—before the bankruptcy court, and the issue

therefore is not new on appeal. Moreover, we note that “[w]e may consider an issue conceded or neglected below if the issue is purely one of

law and the pertinent record has been fully developed,” as is the case here.

United States v. Gabriel, 625 F.2d 830, 832 (9th Cir. 1980). 

IN RE SCHWARZKOPF 18717
[1] “It is well-settled that a trust created for the purpose of

defrauding creditors or other persons is illegal and may be

disregarded.” In re Marriage of Dick, 18 Cal. Rptr. 2d 743,

752 (Cal. Ct. App. 1993); see also Cal. Prob. Code § 15203

(“A trust may be created for any purpose that is not illegal or

against public policy”). Properly designating a minor child as

a beneficiary does not validate a trust that was created with

an improper purpose. See 1A Scott on Trusts § 63 (4th ed.

2001) (“Although the terms of the trust in themselves are perfectly lawful, the trust is illegal where the motive of the settlor

for creating the trust is to defraud creditors or other persons”).

Here, the bankruptcy court found that Michaels transferred

the Kokee Woods stock simultaneously with the creation of

the Apartment Trust and that the transfer “was made for the

fraudulent purpose of avoiding the Debtors’ creditors.” Those

findings are sufficient to establish that Michaels’s purpose in

creating the trust was to defraud creditors. The Apartment

Trust is therefore an invalid trust. 

[2] Moreover, even to the extent it alleges fraudulent transfer, Goodrich’s claim is not time-barred by the seven-year

statute of limitations set forth in California Civil Code

§ 3439.09(c).2 If an express trust fails—if, for instance, it was

formed for a fraudulent purpose—the trustee holds legal title

to the property on a resulting trust for the trustor and his or

her heirs. See Bainbridge v. Stoner, 106 P.2d 423, 429 (Cal.

1940) (In Bank). “[T]he trustee of a resulting trust is considered a voluntary trustee and . . . the statute of limitations does

not begin to run in favor of a voluntary trustee until he repudiates the trust.” Davenport v. Davenport Found., 222 P.2d 11,

16 (Cal. 1950). Because the Apartment Trust is invalid,

Briones is a voluntary trustee on a resulting trust for Michaels

and his heirs. The statute of limitations did not begin to run

2California Civil Code § 3439.09(c) states that “a cause of action with

respect to a fraudulent transfer or obligation is extinguished if no action

is brought or levy made within seven years after the transfer was made or

the obligation was incurred.” 

18718 IN RE SCHWARZKOPF
until Briones repudiated the trust, that is, until he answered

Goodrich’s complaint and denied that the Apartment Trust’s

assets are property of the bankruptcy estate. We therefore

conclude that Goodrich’s claim is not time-barred, and we

affirm the district court’s judgment that the Apartment Trust

is invalid. 

2. The Grove Trust

Goodrich also argues that Michaels is an equitable owner

of the Grove Trust and that equitable ownership is sufficient

to confer alter ego liability. The Debtors respond that the

Grove Trust is not Michaels’s alter ego because he is not its

legal owner, and that allowing alter ego liability would constitute reverse piercing—that is, “pierc[ing] the corporate veil to

reach corporate assets to satisfy a shareholder’s personal

liability”—which the California Court of Appeal has prohibited in the corporate context. Postal Instant Press, Inc. v.

Kaswa Corp., 77 Cal. Rptr. 3d 96, 97 (Cal. Ct. App. 2008).

In determining whether alter ego liability applies, we apply

the law of the forum state. Towe Antique Ford Found. v.

I.R.S., 999 F.2d 1387, 1391 (9th Cir. 1993). Under California

law, the Grove Trust is Michaels’s alter ego.

[3] California recognizes alter ego liability where two conditions are met: First, where “there is such a unity of interest

and ownership that the individuality, or separateness, of the

said person and corporation has ceased;” and, second, where

“adherence to the fiction of the separate existence of the corporation would . . . sanction a fraud or promote injustice.”

Wood v. Elling Corp., 572 P.2d 755, 761 n.9 (Cal. 1977). Factors suggesting an alter ego relationship include

“[c]ommingling of funds and other assets [and] failure to segregate funds of the separate entities . . . ; the treatment by an

individual of the assets of the corporation as his own . . . ; the

disregard of legal formalities and the failure to maintain arm’s

length relationships among related entities . . . ; [and] the

diversion [of assets from a corporation by or to a] stockholder

IN RE SCHWARZKOPF 18719
or other person or entity, to the detriment of creditors, or the

manipulation of assets . . . between entities so as to concentrate the assets in one and the liabilities in another.” Associated Vendors, Inc. v. Oakland Meat Co., Inc., 26 Cal. Rptr.

806, 813-15 (Cal. Ct. App. 1962) (citations omitted). California courts have applied the alter ego doctrine to trusts. See,

e.g., Torrey Pines Bank v. Hoffman, 282 Cal. Rptr. 354, 359

(Cal. Ct. App. 1991) (holding guarantors of a family trust liable for the trust’s debts under an alter ego theory).

[4] We first address the Debtors’ reverse piercing argument. As they correctly note, the California Court of Appeal

held in Postal Instant Press, Inc. that “a third party creditor

may not pierce the corporate veil to reach corporate assets to

satisfy a shareholder’s personal liability.” 77 Cal. Rptr. 3d at

97. We “must follow the decision of the intermediate appellate courts of the state unless there is convincing evidence that

the highest court of the state would decide differently.” Owen

By and Through Owen v. United States, 713 F.2d 1461, 1464

(9th Cir. 1983) (citations and internal quotation marks omitted). In the context of trusts, however, the California Supreme

Court has allowed alter ego claims where a trust is alleged to

be a debtor’s alter ego. Thus, in Wood v. Elling Corp., the

California Supreme Court gave leave to amend a complaint to

assert alter ego claims, concluding, “If it were alleged and

proven that the two trusts in question were themselves alter

egos of the [defendants], those trusts would essentially drop

out as independent legal entities.” 572 P.3d at 762. In the

absence of further guidance from California courts, therefore,

we cannot extend the prohibition on reverse piercing to the

trust context.

[5] Second, we address the Debtors’ contention that legal

ownership is an absolute requirement for alter ego liability.

No California case explicitly addresses the question, but in

Hickey the Ninth Circuit interpreted California law as implying that ownership is a prerequisite. 322 F.3d at 1128-29.

Hickey addressed the ownership requirement in the corporate

18720 IN RE SCHWARZKOPF
context, concluding that stock ownership is a requirement for

the imposition of alter ego liability. Id. In so concluding, however, Hickey cited with approval Firstmark Capital Corp. v.

Hempel Financial Corp., an earlier Ninth Circuit opinion

applying California law and holding that a wife’s “community

property interest in [her husband’s] stock holdings . . . is sufficient to satisfy the ownership requirement.” 859 F.2d 92, 94

(9th Cir. 1988). Hickey therefore did not foreclose the possibility that equitable ownership might be sufficient in some

contexts. 

[6] California case law suggests that equitable ownership

is sufficient. The California Supreme Court has noted that an

individual’s expectation that he would received shares of a

corporation “supports an inference that he was an equitable

owner” and justifies imposition of alter ego liability. Minton

v. Cavaney, 364 P.2d 473, 475 (Cal. 1961). And in Troyk v.

Farmers Group, Inc., the California Court of Appeal imposed

alter ego liability on a managing agent and attorney-in-fact

although it did not own the interinsurance exchange at issue.

90 Cal. Rptr. 3d 589, 620 (Cal. Ct. App. 2009). Legal ownership was not necessary because, although “[a]n insurance

exchange is ‘owned’ by the subscribers, . . . given that the

subscribers are required to appoint the attorney-in-fact as

managerial agent, the ‘ownership’ element of the alter ego

doctrine is not applicable in this context.” Id. at 620 n.27

(citation and internal quotation marks omitted). In essence,

the managing agent was the equitable owner. See also Sonora

Diamond Corp. v. Superior Court, 99 Cal. Rptr. 2d 824, 836

(Cal. Ct. App. 2000) (where the alter ego doctrine applies,

“courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually

controlling the corporation, in most instances the equitable

owners”). 

[7] In the context of trusts, moreover, equitable interest is

traditionally sufficient to confer ownership rights. Thus, under

California law, trust beneficiaries hold an equitable interest in

IN RE SCHWARZKOPF 18721
trust property and are “ ‘regarded as the real owner[s] of [that]

property.’ ” Steinhart v. County of L.A., 223 P.3d 57, 72 (Cal.

2010) (alterations in original; citation omitted); see also 76

Am. Jur. 2d Trusts § 258 (2010) (the creation of a trust places

legal title in the trustee and equitable title in the beneficiary;

courts will enforce a beneficiary’s equitable interest). We

conclude that, under California law, equitable ownership in a

trust is sufficient to meet the ownership requirement for purposes of alter ego liability. 

[8] Here, Michaels is an equitable owner of the Grove

Trust because he acted as owner of the trust and its assets. See

In re Marriage of Dick, 18 Cal. Rptr. 2d 743, 752-53 (Cal. Ct.

App. 1993) (inferring from husband’s use of assets not in his

name that, “notwithstanding his absence of legal title, husband controlled ownership of [the assets] through the fiction

of a trust”). Having used his own assets and a corporation that

the bankruptcy court termed “nothing but a shell” to acquire

the Grove Lots, Michaels continued to act as owner of the

trust assets and as trustee; Briones, the named trustee, “had no

role nor took any action . . . other than to write checks as

demanded by Michaels.” Michaels also acted as a beneficiary

of the Grove Trust, which purchased a home where he lived

rent-free, paid maintenance expenses for another home where

he lived, again rent-free, and paid Michaels at least $105,000

in unexplained fees. The trusts also paid for a wedding, at

Michaels’s request, and for a life insurance policy with an

unknown beneficiary. Those facts suggest that Michaels is an

equitable owner of the Grove Trust.

[9] Given that Michaels’s equitable ownership is sufficient

to meet the ownership requirement, the bankruptcy court did

not clearly err in finding an alter ego relationship. See Towe

Antique Ford Found., 999 F.2d at 1391 (alter ego determinations are typically findings of fact reviewed for clear error).

As the bankruptcy court found, Michaels “dominated and

controlled all decisions of the Grove Trust.” He also received

payments from the trusts without documentation and to avoid

18722 IN RE SCHWARZKOPF
a creditor and diverted assets to the detriment of his creditors,

using his assets to acquire the Grove Lots at a time when he

was insolvent. Given that the bankruptcy court called the

acquisition of the Grove Lots “a fraud on the creditors of the

Debtors,” failure to find alter ego liability would sanction a

fraud or promote injustice. The bankruptcy court did not err

in finding that the Grove Trust is Michaels’s alter ego.

III. CONCLUSION

[10] We therefore hold that the Apartment Trust is an

invalid trust and that Goodrich’s action to invalidate it is not

time-barred. We also hold that the Grove Trust is Michaels’s

alter ego. 

Costs are awarded to appellant Goodrich.

AFFIRMED IN PART AND REVERSED IN PART.

IN RE SCHWARZKOPF 18723