Court Opinion

ID: 5127179
Source: CourtListenerOpinion
Date Created: 2021-11-18 18:03:17.514175+00
Date Added: 2024-06-11T08:22:58.039663
License: Public Domain

Filed 11/18/21
                 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                 SECOND APPELLATE DISTRICT

                           DIVISION SIX

BLIZZARD ENERGY, INC.,                 2d Civil No. B305774
                                   (Super. Ct. No. 17CVP-0266)
     Plaintiff and Respondent,       (San Luis Obispo County)

v.

BERND SCHAEFERS et al.,

     Defendants and Appellants.

       It all started with the idea of turning old tires into fuel
through pyrolysis. Whether this will work is not the issue. It did
not work for respondent Blizzard Energy, Inc., which invested in
a tire pyrolysis project in Kansas. A Kansas jury returned a
$3.825 million fraud judgment in favor of respondent and against
appellant Bernd Schaefers (Schaefers). We are not in Kansas
anymore. The fraud judgment was entered in California. The
instant appeal flows from the California trial court’s decision to
add a judgment debtor pursuant to the “outside reverse veil
piercing” doctrine.
       Outside reverse veil piercing differs from traditional veil
piercing, which is permitted pursuant to the well-known alter ego
doctrine. “‘The alter ego doctrine prevents individuals or other
corporations from misusing the corporate laws by the device of a
sham corporate entity . . . .’” (Curci Investments, LLC v. Baldwin
(2017) 14 Cal.App.5th 214, 221 (Curci).) In appropriate
circumstances, traditional veil piercing permits a party to pierce
the corporate or limited liability company (LLC) veil “so that an
individual shareholder [or LLC member] may be held personally
liable for claims against the corporation [or LLC].” (Postal
Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510,
1513 (Postal Instant Press).) “Rather than seeking to hold an
individual responsible for the acts of an entity, reverse veil
piercing seeks to satisfy the debt of an individual through the
assets of an entity of which the individual is an insider.” (Curci,
supra, at p. 221.) “Outside reverse veil piercing arises when the
request for piercing comes from a third party outside the targeted
business entity.” (Ibid.)
       Here, the targeted entity was BKS Cambria, LLC (BKS
Cambria). Schaefers owns a 50 percent interest in the LLC.
Schaefers’ wife, Karin Schaefers (wife), owns the other 50
percent. Neither wife nor BKS Cambria was a defendant in the
Kansas action. The California trial court found that BKS
Cambria is Schaefers’ alter ego. Pursuant to the outside reverse
veil-piercing doctrine, the court modified the Kansas judgment to
add BKS Cambria as a judgment debtor. Schaefers and BKS
Cambria appeal from the order modifying the judgment.1
       We agree with respondent that the evidence is sufficient to
support the trial court’s finding that BKS Cambria is Schaefers’
alter ego. But we reverse and remand for further proceedings so

      1 BKS Cambria is represented by counsel; Schaefers
represents himself. Each has filed a separate brief. Schaefers
states that he joins in the BKS opening brief.

                                 2
that the trial court may weigh competing equities that bear on
the veil-piercing issue. Respondent is entitled to recover the
damages awarded by the Kansas judgment, but wife may be an
innocent third party who would suffer substantial harm if
respondent’s recovery is accomplished through the reverse veil
piercing of BKS Cambria. Wife has a 50 percent ownership
interest in the LLC, but there is no indication that she was
involved in the fraud committed against respondent by Schaefers.
As we shall explain, she may be an innocent spouse. And she
may not be responsible for debts incurred by him after their
separation in 1996. (See pp. 18-24, post.) On remand, “the court
should weigh the competing equities and grant or deny relief
depending on the balance of those equities.” (Kapner v.
Meadowlark Ranch Assn. (2004) 116 Cal.App.4th 1182, 1190.)
                Factual and Procedural Background
        Schaefers and wife married in 1981. In March 1996 they
signed a separation agreement. In 2001 they formed BKS
Cambria and BKS Energy, LLC (BKS Energy), hereafter
collectively referred to as “the BKS entities.”2 Both LLCs have
two members – Schaefers and wife. Each owns a 50 percent
interest in the LLCs. Wife lives in New Jersey. In May 2019, she
filed a complaint in New Jersey seeking the dissolution of her
marriage to Schaefers.
       BKS Cambria owns approximately 34 acres of land in
Cambria, California. It allegedly purchased the property for $2
million in 2005. Schaefers is the manager of the LLC. He and
his son reside on the property, which has been leased to wireless

     2  Appellants note that “BKS stands for Bernd [Schaefers’
first name] Karin [wife’s first name] Schaefers.”

                               3
carriers for the use of cell phone towers. In 2014 BKS Cambria
sold several leases for approximately $2 million.
       In September 2017 a Kansas jury awarded respondent
damages of $3.825 million in a fraud action against Schaefers
and other defendants. In October 2017 the Kansas judgment was
entered in California pursuant to the Sister State Money
Judgments Act (Code Civ. Proc., § 1710.10 et seq.), hereafter “the
Act.”3 In a published opinion, we affirmed an order denying
Schaefers’ motion to vacate the Kansas judgment. (Blizzard
Energy, Inc. v. Schaefers (2020) 44 Cal.App.5th 295.)
       In June 2019, and pursuant to section 187, respondent
moved in the California trial court to amend the Kansas
judgment to add the BKS entities “as judgment debtors under the
reverse piercing doctrine.” Respondent claimed that the BKS
entities “are the alter egos of Schaefers and that recognition of
the privilege of separate existence would promote injustice.”
       In July 2019 Schaefers filed a voluntary Chapter 11
bankruptcy petition. In September 2019 the bankruptcy court
ordered that the trial court “may hear and decide . . . the Motion
to Amend Judgment to add BKS Cambria, LLC and BKS Energy,
LLC as Judgment Debtors without violation of the Automatic
Stay in this Chapter 11 case.”
       In February 2020 the trial court granted respondent’s
motion. It concluded that “the BKS Entities are the alter egos of
Schaefers and that failing to add them to the judgment will
create an unjust result.” The court amended the judgment to add
the BKS entities as judgment debtors. Schaefers and BKS
Cambria appealed.

      3Unless otherwise stated, all statutory references are to
the Code of Civil Procedure.

                                4
             Trial Court’s Order Modifying Judgment Is
          Not Void for Lack of Subject Matter Jurisdiction
       In the prior appeal from the order denying Schaefer’s
motion to vacate entry of the Kansas judgment (B290492), the
remittitur issued on April 27, 2020. More than two months
before the issuance of the remittitur, the trial court ordered that
BKS Cambria be added as a judgment debtor to the Kansas
judgment. “Generally the filing of a notice of appeal deprives the
trial court of jurisdiction of the cause and vests jurisdiction with
the appellate court until the reviewing court issues a remittitur.”
(In re Anna S. (2010) 180 Cal.App.4th 1489, 1499.)
       Appellants contend that, because the order amending the
judgment preceded the issuance of the remittitur, the order is
void for lack of subject matter jurisdiction. They rely on the
automatic stay of section 916, subdivision (a), which provides,
“[T]he perfecting of an appeal stays proceedings in the trial court
upon the judgment or order appealed from or upon the matters
embraced therein or affected thereby, including enforcement of
the judgment or order, but the trial court may proceed upon any
other matter embraced in the action and not affected by the
judgment or order.” “[S]ection 916 . . . divests the trial court of
jurisdiction over the subject matter on appeal—i.e., jurisdiction in
its fundamental sense.” (Varian Medical Systems, Inc. v. Delfino
(2005) 35 Cal.4th 180, 198 (Delfino).)4

      4  “Essentially, the § 916(a) ‘stay’ means that, upon timely
filing of a notice of appeal, . . . [j]urisdiction over the appealed
matters shifts to the court of appeal and is terminated in the trial
court; and the trial court's power to enforce, vacate or modify the
appealed judgment or order is suspended while the appeal is
pending.” (J. Eisenberg et al., Cal. Practice Guide: Civil Appeals
and Writs (The Rutter Group 2020) ¶ 7:2, p. 7-1.)

                                 5
       Section 916 is inapplicable because it applies only to civil
actions. Proceedings under the Act are special proceedings, not
civil actions. Section 916 is in part 2 of the Code of Civil
Procedure. Our Supreme Court “long ago held that Part 2 of the
Code of Civil Procedure extends generally only to civil ‘actions,’
and not to ‘special proceedings.’” (Agricultural Labor Relations
Bd. v. Tex-Cal Land Management, Inc. (1987) 43 Cal.3d 696, 707
(Tex-Cal).) Unlike section 916, the Act is in part 3 of the Code of
Civil Procedure. Part 3 is entitled, “Of Special Proceedings of a
Civil Nature.”
       That the Act is in Part 3 is not determinative of whether a
proceeding under the Act is a special proceeding. (See Hyundai
Securities Co., Ltd. v. Lee (2013) 215 Cal.App.4th 682, 691-693
(Hyundai Securities) [California’s Uniform Foreign-Country
Money Judgment Recognition Act (§§ 1713–1725) is subject to
procedures applicable to actions, not special proceedings, even
though it is in Part 3 of the Code of Civil Procedure].) The
determinative issue is whether a proceeding under the Act is a
civil action.
       “The terms ‘action’ and ‘special proceeding’ have been
distinguished loosely in a number of contexts. However, for
purposes of applicability of Part 2 of the Code of Civil Procedure,
the definitions are those set forth in Code of Civil Procedure
sections 22 and 23.” (Tex-Cal, supra, 43 Cal.3d at p. 707.)
Section 22 provides, “An action is an ordinary proceeding in a
court of justice by which one party prosecutes another for the
declaration, enforcement, or protection of a right, the redress or
prevention of a wrong, or the punishment of a public offense.”
Section 23 provides, “Every other remedy is a special proceeding.”
(§ 23.) “As a general rule, a special proceeding is confined to the

                                 6
type of case which was not, under the common law or equity
practice, either an action at law or a suit in equity.” (Tide Water
Associated Oil Co. v. Superior Court of Los Angeles County (1955)
43 Cal.2d 815, 822 (Tide Water).)
       A pre-Act proceeding to enforce a sister state judgment was
an action within the meaning of section 22. “Prior to the 1974
enactment of the [Act] . . . , ‘[t]he exclusive way to enforce a sister
state money judgment in California [was] to bring an action on
the judgment; when a California judgment [was] obtained, the
execution may issue. This traditional manner of enforcing
judgments of sister states require[d] all the normal trappings of
an original action.’” (Renoir v. Redstar Corp. (2004) 123
Cal.App.4th 1145, 1150-1151, bracketed material in original.)
       A proceeding under the Act is a speedy alternative to the
traditional procedure. It cannot be characterized as an “action at
law” under the common law or a “suit in equity” under equity
practice. (Tide Water, supra, 43 Cal.2d at p. 822.) Unlike the
traditional procedure, a party seeking to enforce a sister state
judgment under the Act does not file an action. “In California,
pursuant to the [Act], in a special proceeding ‘[a] judgment
creditor may apply for the entry of a judgment based on a sister
state judgment by filing an application pursuant to Section
1710.20.’” (Conseco Marketing, LLC v. IFA & Ins. Services, Inc.
(2013) 221 Cal.App.4th 831, 838, italics added.) “Upon simple
application in conformance with the Act [citations], entry by the
clerk of a judgment based upon the application is mandatory (§
1710.25), constituting a ministerial act of the clerk and not a

                                   7
judicial act of the court [citations].”5 (Aspen International Capital
Corp. v. Marsch (1991) 235 Cal.App.3d 1199, 1203 (Aspen)).
       Thus, in applying for the entry of a sister state money
judgment under the Act, the judgment creditor is not
“prosecut[ing] another for the declaration, enforcement, or
protection of a right, the redress or prevention of a wrong, or the
punishment of a public offense.” (§ 22.) No action is filed in the
California trial court. The entry of the sister state money
judgment is automatic if the judgment creditor’s application
complies with the requirements of the Act. (§ 1710.25, subd. (a).)
       “Where the judgment debtor fails to challenge the matter
[by moving to vacate the judgment (§ 1710.30, subd. (a))], the
judgment will be entered and the application will have served
its purpose, all without any judicial act having been performed by
the court.” (Aspen, supra, 235 Cal.App.3d at p. 1203.) Here,
appellant moved to vacate the judgment. This required the court
to perform a judicial act. The motion did not convert the special
proceeding into an “action” within the meaning of section 22. The
motion was an authorized step in the special proceeding. (See 16
C.J.S. (Oct. 2021 update) Motions and Orders, § 9, bold omitted
[“A motion is not an action, special proceeding, or independent
right or remedy but implies the pendency of a suit and is confined
to incidental matters arising in it”].)
       In contrast to the Act, a person seeking enforcement of a
foreign-country money judgment under California’s Uniform
Foreign-Country Money Judgment Recognition Act (Foreign-

      5 Section 1710.25, subdivision (a) provides: “Upon the filing
of the application, the clerk shall enter a judgment based upon
the application . . . .”

                                 8
Country Money Judgment Act) must “fil[e] an action seeking
recognition of the foreign-country judgment.” (§ 1718, subd. (a).)
Therefore, even though the Foreign-Country Money Judgment
Act is in Part 3 of the Code of Civil Procedure, it is governed by
procedures applicable to actions, not special proceedings:
“Generally, with respect to special proceedings, the Legislature
has set forth specific procedures, but the only procedure specified
for recognition of a foreign-country money judgment is that it be
raised by filing an action. Thus, . . . we believe the Legislature
intended the procedures for actions to be applicable to
proceedings to obtain such recognition.” (Hyundai Securities,
supra, 215 Cal.App.4th at p. 691.)
       Unlike the Foreign Country Money Judgment Act, the Act
to enforce sister state money judgments does not require the
filing of an action to obtain recognition of the judgment.
Accordingly, the legislature did not intend that the procedures for
actions be applicable to proceedings to enforce a sister state
money judgment under the Act.
       “Unless the statutes establishing a ‘special proceeding’
expressly incorporate the appellate-stay provisions of Part 2, they
are inapplicable, and a final order in the ‘special proceeding’ is
not automatically stayed pending appeal.” (Tex-Cal, supra, 43
Cal.3d at p. 707.) “Nothing in [the Act] expressly incorporates
[the appellate-stay provisions of] [P]art 2 of the Code of Civil
Procedure . . . . Thus, the trial court [order amending the
judgment to add an alter ego judgment debtor] is not
automatically stayed [by Schaefer’s appeal from the denial of his
motion to vacate the judgment pursuant to the Act].” (Veyna v.
Orange County Nursery, Inc. (2009) 170 Cal.App.4th 146, 155.)
“The rule is clear: there is no automatic stay unless the statute

                                9
establishing the special proceeding expressly incorporates [the
stay provisions of] [P]art 2.”6 (Ibid.)
               The Act Does Not Preclude Addition of
              Nonparty Alter Ego as Judgment Debtor
       Respondent could have brought an action in California to
enforce the Kansas judgment. (§ 1710.60, subd. (a).) Instead, it
applied for entry of the judgment pursuant to the Act.
Appellants argue, “Since [respondent] elected to proceed with the
summary proceedings [under the Act] of having the clerk enter
the sister state judgment, its right to amend the sister state
judgment to add a judgment debtor not named in the original
sister state judgment was eliminated unless it sought to do so in
Kansas.”

      6    We need not consider respondent’s alternative argument
that, because Schaefers failed to post an undertaking to stay
enforcement of the judgment pending appeal, “the court had
plenary jurisdiction to amend the judgment” to add BKS Cambria
as a judgment debtor. (See Oyakawa v. Gillett (1992) 8
Cal.App.4th 628, 630, fn. 2 [“subdivision (a) of section 917.1 . . .
provides that ‘[t]he perfecting of an appeal shall not stay
enforcement of the judgment . . . in the trial court if the judgment
. . . is for money . . . unless an undertaking is given.’ . . . [N]o
undertaking was given and, arguably, the amendment adding a
judgment debtor is simply a matter of enforcement”]; but see also
Highland Springs Conference & Training Center v. City of
Banning (2019) 42 Cal.App.5th 416, 425-426 [“Although
the EJL [Enforcement of Judgments Law (§ 680.010 et seq.)] does
not define ‘enforcement’ [citation], the EJL nowhere suggests that
the filing and pursuit of an alter ego motion to amend a judgment
to add an additional judgment debtor, under section 187,
constitutes the enforcement of the judgment the movant seeks to
amend”].)

                                10
       We disagree. Section 1710.35 provides that “a judgment
entered pursuant to [the Act] shall have the same effect as an
original money judgment of the court . . . .” “[S]ection 187
authorizes a trial court to amend a judgment to add a judgment
debtor who is found to be an alter ego of a corporate defendant.”
(Misik v. D'Arco (2011) 197 Cal.App.4th 1065, 1069 (Misik).) The
alter-ego doctrine was extended to LLCs by Corporations Code
section 17703.04, subdivision (b) [“A member of a limited liability
company shall be subject to liability under the common law
governing alter ego liability”].
       Moreover, the trial court did not, as appellants claim,
“amend the sister state judgment to add a judgment debtor not
named in the original sister state judgment.” Instead, the court
“add[ed] a nonparty alter ego as a judgment debtor. [Citations.]
‘This is an equitable procedure based on the theory that the court
is not amending the judgment to add a new defendant but is
merely inserting the correct name of the real defendant.’” (Leek
v. Cooper (2011) 194 Cal.App.4th 399, 419; see also Butler
America, LLC v. Aviation Assurance Co., LLC (2020) 55
Cal.App.5th 136, 145; Misik, supra, 197 Cal.App.4th at p. 1072.)
       A Charging Order Is Not Respondent’s Exclusive Remedy
       A judgment against an LLC member may be enforced by
the issuance of “a charging order against the transferable
interest of the judgment debtor for the unsatisfied amount of the
judgment. A charging order constitutes a lien on a judgment
debtor’s transferable interest and requires the limited liability
company to pay over to the person to which the charging order
was issued any distribution that would otherwise be paid to the
judgment debtor.” (Corp. Code, § 17705.03, subd. (a).)
Appellants claim that “a charging order is the exclusive remedy

                                11
for [respondent] to enforce its judgment against Appellant
Schaefers.” Therefore, “the trial court acted in excess of its
jurisdiction conferred by the Legislature” when it “add[ed] BKS
Cambria as a judgment debtor to the sister state judgment.”
       A contrary conclusion was reached in Curci, supra, 14
Cal.App.5th 214. After obtaining a judgment against Baldwin,
Curci sought to add Baldwin’s LLC as a judgment debtor under
the alter ego doctrine. Baldwin argued that a charging order
under “Corporations Code section 17705.03 provides the sole
remedy available to Curci . . . .” (Id. at p. 220.) The court held
that section 17705.03 does not preclude reverse veil piercing to
add the LLC as a judgment debtor. “[T]he key is whether the
ends of justice require disregarding the separate nature of [the
LLC] under the circumstances. [Citation.] In making that
determination, the trial court should, at minimum, evaluate the
same factors as are employed in a traditional veil piercing case,
as well as whether Curci has any plain, speedy, and adequate
remedy at law.” (Curci, supra, at p. 224.)
       Nine years before Curci, the same court that decided Curci
(Fourth District, Division 3) had decided Postal Instant Press,
supra, 162 Cal.App.4th 1510. Curci noted that in Postal Instant
Press it had held, “‘[A] third party creditor may not [reverse]
pierce the corporate veil to reach corporate assets to satisfy a
shareholder’s personal liability.’” (Curci, supra, 14 Cal.App.5th
at p. 222.) Curci concluded, “[T]he different facts before us, as
well as the nature of LLCs, do not present the concerns identified
in Postal Instant Press.” (Ibid.)
       Appellants contend that Curci was wrongly decided. We
disagree. There is no reason to depart from its sound analysis.

                                12
                   Appellants Have Not Shown that
            Respondent Had an Adequate Legal Remedy
       “Amendment of a judgment to add an alter ego is an
equitable procedure [citation], and before applying outside
reverse piercing, ‘the availability of alternative, adequate
remedies must be considered by the trial court’ [citation].”
(Postal Instant Press, supra, 162 Cal.App.4th at p. 1524.) “‘When
a less invasive, adequate remedy is available, outside reverse
piercing is discouraged.’” (Id. at pp. 1523-1524; see also Curci,
supra, 14 Cal.App.5th at p. 223 [“Although legal remedies–e.g.,
conversion, fraudulent transfer—may be available in many cases,
thereby precluding reverse veil piercing, it is precisely the rare
situations in which they are not that reverse piercing should
deliver justice”].)
       Appellants maintain that respondent “had available
multiple legal remedies under, among others, the [Act], the
CRULLCA [California Revised Uniform Limited Liability
Company Act], and the UVTA [Uniform Voidable Transactions
Act].” But appellants do not explain how these acts provided an
adequate legal remedy. The judgment creditor of a member of an
LLC has limited options. Unlike the creditor of a shareholder of
a corporation, the creditor of a member of an LLC may not “step
straight into the shoes of the debtor. . . . [¶] . . . [T]he creditor
may only obtain a charging order against distributions made to
the member. (Corp. Code, § 17705.03.) The debtor remains a
member of the LLC with all the same rights to manage and
control the LLC, including . . . the right to decide when
distributions to members are made, if ever.” (Curci, supra, 14
Cal.App.5th 214, 223; see In re Shapow (Bankr. C.D. Cal. 2019)
599 B.R. 51, 73, fn. 17 [Curci “concluded that outside reverse

                                 13
piercing is permissible in the context of a limited liability
company because, unlike a corporation, a limited liability
company does not issue shares on which a creditor may levy and
creditors do not have sufficient alternative remedies at law”].)
      Respondent did not have an adequate legal remedy.
Schaefers had filed for bankruptcy protection, and he intended to
make it as difficult as possible for respondent to collect on the
Kansas judgment. In a letter to his accountant dated August 5,
2018, Schaefers wrote: “[T]he only asset I have at this moment is
my 50% interest in the 2 BKS companies [BKS Cambria and BKS
Energy]. [¶] . . . In case we lose in the Kansas appeal, the worst
thing that can happen [is] that they get a charging order for my
interests. . . . [T]hey will get nothing, because the LLCs will not
make distributions for a long time and I will stay on as manager
and I will then appoint my successor as manager.” The trial
court found that “that there is in fact evidence of bad faith and
attempts to avoid paying this judgment, including the letter to
Schaefers’ accountant.”
          Amendment of Judgment to Add BKS Cambria
           as Judgment Debtor under Alter Ego Doctrine
      “Under Code of Civil Procedure section 187, ‘the trial court
has jurisdiction to modify a judgment to add additional judgment
debtors.’ [Citation.] The decision to modify the judgment is
consigned to the trial court's discretion. [Citation.] To the extent
the exercise of that discretion relies on factual findings, we
review those findings for the existence of substantial evidence.”
(Wolf Metals Inc. v. Rand Pacific Sales Inc. (2016) 4 Cal.App.5th
698, 703.)
      “In reviewing a finding of alter ego liability, we must
consider whether the trial court's findings are supported

                                14
by substantial evidence.” (Baize v. Eastridge Companies, LLC
(2006) 142 Cal.App.4th 293, 302.) “‘Substantial evidence is
evidence that a rational trier of fact could find to be reasonable,
credible, and of solid value. We view the evidence in the light
most favorable to the [decision] and accept as true all evidence
tending to support the [decision], including all facts that
reasonably can be deduced from the evidence. . . .’” (San Diegans
for Open Government v. City of San Diego (2016) 245 Cal.App.4th
736, 740, bracketed material in original.)
       “Before the alter ego doctrine will be invoked in California
[under traditional veil piercing], two conditions generally must be
met. [¶] ‘First, there must be such a unity of interest and
ownership between the corporation [or LLC] and its equitable
owner that the separate personalities of the corporation [or LLC]
and the shareholder [or member] do not in reality exist. Second,
there must be an inequitable result if the acts in question are
treated as those of the corporation [or LLC] alone.’” (Curci,
supra, 14 Cal.App.5th at p. 221.)
         First Condition: Unity of Interest and Ownership
       As to the first condition – unity of interest and ownership –
relevant factors include “‘“‘[1] [c]ommingling of funds and other
assets, failure to segregate funds of the separate entities, and the
unauthorized diversion of corporate funds or assets to other than
corporate uses . . . ; [2] the treatment by an individual of the
assets of the corporation as his own . . . ; . . . [[3]] the disregard of
legal formalities and the failure to maintain arm's length
relationships among related entities . . . .’”’” (Greenspan v. LADT
LLC (2010) 191 Cal.App.4th 486, 512-513 (Greenspan).) “‘No
single factor is determinative, and instead a court must examine
all the circumstances to determine whether to apply the [alter

                                   15
ego] doctrine. . . . ’” (Zoran Corp. v. Chen (2010) 185 Cal.App.4th
799, 812.)
       “There is [substantial] evidence of a unity of interest and
ownership such that the separate personalities of [BKS Cambria]
and [Schaefers] do not exist.” (Triyar Hospitality Management,
LLC v. WSI (II) - HWP, LLC (2020) 57 Cal.App.5th 636, 642.)
Schaefers owns 50 percent of the LLC and is its manager. The
trial court could reasonably conclude that Schaefers used BKS
Cambria’s bank accounts as if they were his own personal
accounts. Appellants claim that Schaefers “was entitled to
approximately $2500 per month as a stipend for managing and
taking care of the BKS Property. . . . There is no evidence that he
took that salary plus money beyond the salary.” We disagree. In
June 2014 he wrote a $5,000 check drawn on BKS Cambria’s
bank account. The check was payable to an attorney retained to
respond to a Notice of Deficiency concerning the personal federal
income tax return jointly filed by Schaefers and wife. In the
same month he wrote four checks transferring $80,000 from BKS
Cambria’s bank account to his personal bank account. The
checks show that their purpose was to fund a loan to Valentin
Alexandrov, a co-judgment debtor in the Kansas action. In June
2014 Schaefers wired the funds to Alexandrov. In September
2014 Alexandrov wired the $80,000 back to Schaefers. Schaefers
did not return the $80,000 to BKS Cambria. Appellants assert,
“The $80,000 was what was left for [Schaefers’] share of the
profits” from the sale of “cell leases.” If this were true, why on
each of the four checks did Schaefers write “Val loan” instead of
“distribution of profits?”
       Schaefers transferred funds from BKS Cambria to BKS
Energy without specifying the reason for the transfer. In

                                16
February 2014 he wrote two checks totaling $10,000 drawn on
BKS Cambria’s bank account and payable to BKS Energy. The
“memo” portion of both checks simply states “transfer.”
         Schaefers admitted that he lives rent free on BKS
Cambria’s property and that he receives “around $1200 per
month as a loan from” the LLC. He did not specify the interest
rate or repayment schedule for the loan.
         The trial court noted that respondent had listed additional
“facts” showing that BKS Cambria is Schaefers’ alter ego:
“Schaefers makes cash withdrawals from the BKS Entities, . . .
fails to maintain any documentation for when and why funds are
distributed from the BKS Entities, . . . uses BKS Cambria, LLC
funds to pay the expenses of other entities,[7] . . . [and] paid
attorneys and litigation expenses in . . . the Kansas action
. . . from the BKS Entities [even though they were not parties to
the Kansas action] . . . .”8 The court determined that “Schaefers
treats the BKS Entities as his own personal property.”

      7 For example, in October 2015 Schaefers used a BKS
Cambria check to pay $6,000 to the Franchise Tax Board on
behalf of BKS Energy. In November 2014 he used a BKS
Cambria check to pay the property taxes on land owned by CSS
Realty Corp., which was owned by Schaefers and wife. In
February 2014 he used BKS Cambria funds to pay accounting
fees for CSS Realty Corp.; Big Cats, Inc.; BKS Sunset, LLC; and
BKS Energy. Big Cats, Inc., was owned by wife and Schaefers’
daughter. BKS Sunset, LLC, was owned by Schaefers and wife.
      8 In a declaration under penalty of perjury executed in
January 2020, Schaefers admitted “that expenses that I incurred
in defending myself in Kansas were paid in part by BKS Cambria
on my behalf.” In its opening brief BKS Cambria admits that it
paid $22,852 of appellant’s Kansas litigation expenses. BKS

                                 17
             Second Condition: Inequitable Result and
              Whether Wife is an Innocent Third Party
       The trial court concluded that “failing to add [BKS
Cambria] to the judgment will create an unjust result.”
Appellants contend that “an inequitable result will follow if the
trial court order [adding BKS Cambria as a judgment debtor]
stands” because wife “has a 50% membership interest” in BKS
Cambria and the Kansas judgment “is against . . . Schaefers
individually,” not against wife.
       Pursuant to section 387, wife moved to intervene in
respondent’s motion to amend the judgment. She claimed that
she “is an innocent party who would be inequitably and adversely
affected if BKS Cambria . . . [is] brought in as judgment debtor[].”
Wife declared under penalty of perjury that, pursuant to a 1996
“Separation and Property Settlement Agreement,” she has “lived
apart” from Schaefers since March 1996. In 2001 she and
Schaefers “formed [BKS Cambria] for the purpose of real estate
investment and management.” That same year, BKS Cambria
purchased an apartment building in Los Angeles. “All of the
money used to purchase the property . . . came from proceeds
from the sale of my personal separate property located in New
Jersey.” In 2003 or 2004 BKS Cambria sold the apartment
building and the proceeds from the sale were used to purchase

Cambria claims that the payment “was merely reimbursement
for the $2,500 per month salary [Schaefers] received from BKS
Cambria since its inception.” But in his January 2020
declaration Schaefers did not present this justification for the
payment. Schaefers declared that BKS Cambria made the
payment “since it was in the interest of the LLC to see that I was
properly able to defend myself.” Schaefers did not say that the
litigation expenses were paid in lieu of his monthly salary.

                                18
the 34-acre property that it presently owns. Wife further
declared: “I am 75 years old and retired. . . . [¶] I had no
involvement with Bernd Schaefers’ business dealings with
[respondent]. I only recently became aware of the people
involved, the nature of the business, and the underlying lawsuit
in this matter.”
       The trial court denied wife’s motion to intervene reasoning
her 50 percent membership interest is “presumptively community
property” and her claim that it is separate property “is a
proceeding within the jurisdiction of the Bankruptcy Court, not
this Court.” The trial court concluded: “[B]ecause the BKS
Entities are community property, and [wife] has not gone to the
Bankruptcy Court and established that her membership interests
in the BKS Entities are in fact separate property, the Court finds
that [wife] lacks sufficient interest in the action to intervene.”9

      9 Wife did not appeal the trial court’s order denying her
motion to intervene. “‘An order denying a motion for leave to
intervene is directly appealable because it finally and adversely
determines the moving party’s right to proceed in the action.’”
(Van Sickle v. Gilbert (2011) 196 Cal.App.4th 1495, 1515.)
Because wife did not appeal, we cannot review the trial court’s
order denying her motion to intervene. (see § 906 [“The
provisions of this section do not authorize the reviewing court to
review any decision or order from which an appeal might have
been taken”]; Van Sickle, supra, at p. 1515, fn. 14 [“Since the
order denying the motion to intervene was separately appealable
[and the moving party did not file a timely appeal], we . . . cannot
consider here [on appeal from the final judgment] whether the
trial court erred in its ruling on that motion”].)

                                 19
       In its subsequent ruling granting respondent’s motion to
amend the judgment to add the BKS entities as judgment
debtors, the court stated, “[I]f [wife’s] interest [in the BKS
entities] is community property and therefore may be reached to
satisfy the judgment, there would be no innocent third party
harmed by the reverse veil piercing.” The court was apparently
relying on Family Code section 910, subdivision (a), which
provides, “[T]he community estate is liable for a debt incurred by
either spouse before or during marriage, regardless of which
spouse has the management and control of the property and
regardless of whether one or both spouses are parties to the debt
or to a judgment for the debt.”
       The trial court continued: “The general presumption is
that all property acquired during marriage is community
property. (Fam. Code, § 760.) Schaefers has produced a
Separation Agreement entered into over 20 years ago showing
that [he and wife] intended to keep their property separate,
however [respondent] has shown that Schaefers and his wife
have, in recent years, treated the BKS Entities as disregarded
entities and community property for tax purposes (IRS Revenue
Procedure 2002-69), which is inconsistent with sentiments set
forth in the 20 year old Separation Agreement. . . . [¶] Schaefers
has failed to explain or rebut the treatment of the BKS Entities
on the tax returns, or establish that the characterization of the
BKS Entities in the returns is consistent with an intent to treat
them as the separate property of Schaefers and his wife.”
       The tax returns referred to by the trial court are California
Limited Liability Company Return of Income forms (Form 568)
filed by BKS Cambria for the tax years 2013 through 2017. The
forms show that the LLC was disregarded for federal tax

                                 20
purposes and that Schaefers was the sole member of the LLC.
BKS Cambria would qualify as a disregarded entity only if it
were wholly owned by Schaefers and wife as community property.
“[I]f spouses file joint income tax returns, . . . LLCs owned
entirely as community property are disregarded for federal
income tax purposes. Thus, the . . . LLC would not be required to
file separate [federal] income tax returns[, i.e., separate from the
spouses’ joint federal income tax returns]. In contrast, if the . . .
LLC is owned as separate property, the . . . LLC would not be
a disregarded entity and would be required to file separate
[federal] income tax returns.” (Ware & Orr, Oh, What a Relief It
Is: Curing Estate Plans That No Longer Make Sense in Light of
the American Taxpayer Relief Act of 2012, 2016 ABATAX-CLE
0506048, italics added.)
       The trial court erroneously assumed that wife is bound by
BKS Cambria’s filing of California tax returns stating that it is a
disregarded entity. Only Schaefers’ name appears on the tax
returns, which were prepared by BKS Cambria’s accountant.
Schaefers was the manager of the LLC. Respondent has not
referred us to evidence in the record showing that wife reviewed
the LLC’s tax returns before they were filed or that she
understood the significance of the designation of the LLC as a
disregarded entity. The tax returns answer “yes” to the question,
“[I]s this LLC a business entity disregarded for tax purposes?”
The returns do not explain that an LLC owned by a husband and
wife qualifies as a disregarded entity only if it is wholly owned as
community property.
       Furthermore, the trial court erred in invoking “[t]he
general presumption . . . that all property acquired during
marriage is community property. (Fam. Code, § 760.)” Wife

                                 21
acquired her 50 percent interest in BKS Cambria years after her
March 1996 separation from Schaefers. Family Code section 771
provides, “The earnings and accumulations of a spouse . . . after
the date of separation of the spouses, are the separate property of
the spouse.” “The term accumulation ‘applies “to any property
which a person acquires or retains” except for property obtained
in exchange for community property or community funds.’” (In re
Marriage of Stephenson (1984) 162 Cal.App.3d 1057, 1085.) Wife
declared that the funds used to purchase BKS Cambria’s real
property “came from proceeds from the sale” of her separate
property in New Jersey.
       Even if wife’s membership interest in BKS Cambria were
community property, this would not necessarily mean that her
interest would be liable for Schaefers’ judgment debt to
respondent. The summary of the facts in the Kansas Court of
Appeals’ opinion shows that respondent’s fraud action was based
on Schaefers’ conduct beginning in 2011, 15 years after the
spouses had separated. Family Code section 910, subdivision (a)
provides, “[T]he community estate is liable for a debt incurred by
either spouse before or during the marriage . . . .” But the
community’s liability “does not include [a debt incurred during]
‘the period after the date of separation . . . and before a judgment
of dissolution of marriage or legal separation of the parties.’
[Fam.C. § 910(b)] [¶] Thus, debts incurred by either spouse after
separation are the debtor spouse's separate obligation, neither
chargeable against nor reimbursable from the community estate.
[Citations.]” (Hogoboom & King, Cal. Practice Guide: Family
Law (The Rutter Group June 2021 update) ch. 8-D, ¶ 8:746.) “In
the case of a tort, [a debt is incurred] at the time the tort occurs.”

                                 22
(Fam. Code, § 903, subd. (b).) The fraud tort in the Kansas action
occurred no earlier than 2011.
       Thus, the trial court’s determination that it would be
inequitable not to add BKS Cambria as a judgment debtor was
based in part on mistakes of law and findings unsupported by the
record. The court concluded that wife is not an innocent third
party who would be harmed by reverse veil piercing because her
membership interest in the LLC is presumptively community
property and the LLC’s California tax returns manifested wife’s
intent to treat her 50 percent interest as community property.
But the presumption of community property is inapplicable. If
wife’s interest in the LLC were community property, her interest
would not be liable for Schaefer’s debt to respondent because the
debt was incurred long after the date of separation. Moreover,
the court failed to consider that wife may not have been aware of
the significance of the tax returns’ designation of BKS Cambria
as a disregarded entity. The trial court’s legal mistakes and
unsupported factual findings irretrievably flaw its ruling.
       As to whether the reverse veil piercing would be
inequitable to wife, Curci, supra, 14 Cal.App.5th 214, is
distinguishable. (See the discussion of Curci at page 12, ante.)
Curci observed: “Baldwin, the judgment debtor, holds a 99
percent interest in [the LLC]. His wife holds the remaining 1
percent interest, but she is also liable for the debt owed to Curci.
(See Family Code, § 910 [community estate generally liable for
debt incurred by either spouse before or during marriage].)
There simply is no ‘innocent’ member of [the LLC] that could be
affected by reverse piercing here.” (Id. at p. 222, second
bracketed material in original.) In contrast to Curci, in the

                                23
present case there may be an innocent member (wife) of BKS
Cambria who would be adversely affected by reverse piercing.
       “The essence of the alter ego doctrine is that justice be
done. ‘What the formula comes down to . . . is that liability is
imposed to reach an equitable result.’ [Citation.] Thus the
corporate form will be disregarded . . . only when the ends of
justice so require.” (Mesler v. Bragg Management Co. (1985) 39
Cal.3d 290, 301; see also Estate of Bielec (1972) 8 Cal.3d 213, 219,
fn. 5 [“We may look through a corporation to its alter ego if the
preservation of the corporate fiction of a distinct entity would
have an inequitable result or promote injustice”].)
       We must remand the matter to the trial court for further
proceedings on the equitable issue consistent with the views
expressed in this opinion. We do not suggest that wife is, or is
not, an innocent third party. Nor do we suggest that the court
should deny respondent’s motion if on remand it finds that wife is
an innocent third party who would be harmed by the addition of
BKS Cambria as a judgment debtor. Whether the motion should
be granted or denied is within the trial court’s sound discretion.
The court must “weigh the equities to ‘“‘accomplish ultimate
justice.’”’” (Hartford Casualty Ins. Co. v. Travelers Indemnity Co.
(2003) 110 Cal.App.4th 710, 724.)
                   Alleged Violation of Due Process
       Appellants argue: “BKS Cambria was denied its due
process rights because its property was taken away without an
opportunity to be heard in the Kansas action.” (Bold and
capitalization omitted.) The argument is forfeited because
appellants failed to raise it below. (Fourth La Costa Condo.
Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 585.)

                                24
       The argument is also forfeited because it is not supported
by meaningful analysis with citation to authority. (Gunn v.
Mariners Church, Inc. (2008) 167 Cal.App.4th 206, 217-218.) The
argument is set forth in a single paragraph at page 71 of BKS
Cambria’s opening brief. The paragraph contains the following
conclusionary statement: “The ultimate effect of the trial court’s
order . . . is to strip BKS Cambria of its significant real property
holdings without due process of the law as required by the due
process clauses of the United States and California Constitutions
for all the reasons stated above in its previous arguments.”
(Italics added.) There are no citations to the “previous
arguments.” BKS Cambria cannot expect us to search through
its brief in an attempt to find these arguments.
       Respondent states, “The crux of Appellants’ [due process
argument] is that the trial court’s order is erroneous because
BKS [Cambria] did not control the Kansas litigation that led to
the judgment against Schaefers.” The argument lacks merit
because under the alter ego doctrine “the original party
[Schaefers] and the new party [BKS Cambria] were one and the
same. Adding the alter ego entity after judgment, therefore,
amounted to little more than correcting a misnomer in naming
the defendant.” (Triplett v. Farmers Ins. Exchange (1994) 24
Cal.App.4th 1415, 1420; see also Greenspan, supra, 191
Cal.App.4th at p. 509 [“Simply put, section 187 [authorizing
amendment to add alter ego as judgment debtor] recognizes ‘the
inherent authority of a court to make its records speak the
truth’”].)
       Respondent asserts, “Schaefers also appears to contend
that his due process rights were violated because the court did
not hold a full evidentiary hearing on the motion to amend the

                                25
judgment.” This contention is also without merit. “Code of Civil
Procedure section 187 contemplates a noticed motion. The trial
court is not required to hold an evidentiary hearing. [Citation.]
Evidence in the form of declarations or deposition testimony is
sufficient.” (Wells Fargo Bank, N.A. v. Weinberg (2014) 227
Cal.App.4th 1, 9.)
                              Choice of Law
                               Kansas Law
       Appellants claim that, instead of applying California law,
the trial court should have applied “Kansas law . . . which does
not recognize the outside reverse veil piercing doctrine.” In
support of their claim that a conflict exists between Kansas and
California law, appellants cite only one case: Floyd v. IRS (10th
Cir. 1998) 151 F.3d 1295. There, the federal court was asked to
determine whether reverse veil piercing should be applied to a
Kansas corporation, not an LLC. The federal court noted that
Kansas courts had not considered whether to permit reverse veil
piercing of a corporation. (Id. at p. 1300.) The federal court
concluded, “[I]n the absence of a clear statement of Kansas law by
the Kansas courts, we will not assume that such a potentially
problematic doctrine [reverse veil piercing of a corporation]
already has application in that state.” (Ibid.)
       The parties have not cited, and we have not found, any
Kansas case, published or unpublished, that discusses whether
reverse veil piercing of an LLC is permissible under the alter ego
doctrine. Accordingly, as to this issue there is a false conflict
between California and Kansas law. “[I]f the laws and interests
of the concerned states are not in conflict, the result is deemed a
‘false conflict’ or no conflict at all. The court need not engage in
any choice-of-law analysis where no conflict is established

                                26
between laws of the states that are potentially applicable. . . .
[¶] . . . [¶] . . . In a false-conflicts situation, the law of the forum
jurisdiction will usually govern.” (15A C.J.S. (June 2021 update)
False Conflicts, § 31, fns. omitted; see also Pereira v. Thompson
(2009) 230 Ore.App. 640, 670, fn. 6 [“our two-step process for
determining what law applies in a case first requires us to
determine whether there is a material difference between the
substantive laws at issue; if there is no difference, it is a
‘false conflict’ and Oregon law governs”].)
        Because there is a false conflict between California and
Kansas law, California law applies. Curci, supra, 14 Cal.App.5th
214, permits reverse veil piercing of an LLC.
                                New Jersey Law
        In May 2019 wife filed in New Jersey a “Complaint for
Divorce/Dissolution.” Appellants argue that, in determining the
nature of wife’s 50 percent interest in BKS Cambria, the trial
court should have applied New Jersey law because “the divorce
proceedings are in New Jersey where [wife] lives and where
Appellant Schaefers has conceded jurisdiction.” Since New
Jersey “is a non-community property state,” wife “would be
significantly damaged by applying the alter ego doctrine and thus
the motion to amend should have been denied.”
        Appellants’ argument is forfeited because they do not
explain why the mere filing by wife of divorce proceedings in New
Jersey required the California trial court to apply New Jersey
law. BKS Cambria is a California LLC that does business and
owns property in California, not New Jersey, and Schaefers is a
resident of California. “It is the responsibility of the
appellant . . . to support claims of error with meaningful
argument and citation to authority. [Citations.] When[, as here,

                                  27
meaningful] legal argument with citation to authority is not
furnished on a particular point, we may treat the point as
forfeited . . . .” (Allen v. City of Sacramento (2015) 234
Cal.App.4th 41, 52 (Allen).)
       In any event, there is no merit to appellants’ argument that
New Jersey law on the division of property should prevail. Wife’s
complaint for divorce requested only dissolution of the marriage.
It did not request division of the parties’ property. Schaefers
signed a consent to entry of a judgment of divorce in which he
stated, “The Plaintiff and I are not seeking Equitable
Distribution of property and/or assets . . . .”
          Arguments Personally Made by Schaefers Alone
       Schaefers has filed his own opening brief in which he
makes additional arguments. He contends that, pursuant to
Evidence Code section 352, the trial court abused its discretion by
permitting the admission of inflammatory, unduly prejudicial
evidence. The contention is forfeited for failure to show that he
objected on Evidence Code section 352 grounds in the trial court.
(People v. Valdez (2012) 55 Cal.4th 82, 138-139.) If the
contention were not forfeited, Schaefers would not prevail
because he fails to establish an abuse of discretion or a
miscarriage of justice.
       Schaefers claims that the trial court required him to
disclose privileged income tax returns and that it erroneously
relied upon them. The claims are forfeited because they are not
supported by meaningful argument with citations to the record
and authority. (Allen, supra, 234 Cal.App.4th at p. 52; Nwosu v.
Uba (2004) 122 Cal.App.4th 1229, 1246.)
       Finally, Schaefers maintains that the trial court ignored
patents that, “[i]f professionally pursued, . . . could be worth tens

                                 28
of millions of dollars . . . .” He alleges that respondent has
“unclean hands by patenting intellectual property belonging to
Appellant Schaefers and hiding the fact from Appellant
Schaefers, the Kansas judge and the jury in the Kansas
proceedings.” This argument is also forfeited. We do not consider
the underlying Kansas proceedings. In addition, this argument is
not supported by meaningful analysis with citations to the record
and authority.
                                Disposition
       The order modifying the judgment by adding BKS Cambria
as a judgment debtor is reversed. The matter is remanded to the
trial court with directions to conduct a noticed hearing on
whether it would be inequitable to add BKS Cambria as a
judgment debtor because of wife’s 50 percent membership
interest in the LLC. The court may receive additional evidence
on this issue. It shall reconsider the issue in light of the views
expressed in this opinion, weigh the equities, and determine
whether to grant or deny respondent’s motion. We offer no
opinion on how the trial court should rule. The parties shall bear
their own costs on appeal.
             CERTIFIED FOR PUBLICATION.

                                                YEGAN, J.
We concur:

             GILBERT, P. J.

             TANGEMAN, J.

                               29
                     Linda D. Hurst, Judge

           Superior Court County of San Luis Obispo

                ______________________________

     Bernd Schaefers, in propria persona, for Defendant and
Appellant.

     Tardiff Law Offices and Neil S. Tardiff, for Defendant and
Appellant, BKS Cambria.

      Rogers, Sheffield & Campbell, John H. Haan, Jr., Nathan
C. Rogers, for Plaintiff and Respondent.