The Section includes periodically sends email with New Case Alerts to its members. Recent New Case Alerts are listed below. Most cases can be found on the California Courts website. Please note: Opinions more than 120 days old can be found through the process described HERE.
19 Cal.App.5th 864
Fourth District, Div. One
By Daniel C. Kim
Weintraub Tobin Chediak Coleman Grodin Law Corporation
“Grandfather” Gaynor died in 1983, leaving a trust estate split three ways, one share for each of this three children and their issue. Following litigation concerning management and control of the trust, the prevailing beneficiaries filed a surcharge petition against the co-trustees, and later added James Bulen based on his alleged de facto trustee status. The beneficiaries sued for breach of fiduciary duty consisting of distributing income only to the senior generation, transferring the primary asset to an LLC to gain further control, failing to provide accountings, concealing the mental incompetence of a co-trustee, seeking modification of the trustee succession plan, and numerous other claims. Bulen filed an anti-SLAPP motion to strike the claims against him, which was denied. The court found the claims at issue were not governed by the anti-SLAPP statute.
The appellate court affirmed. To invoke the anti-SLAPP statute, Bulen was required to show that the claims against him arose from constitutionally-protected activity. The appellate court found that Bulen failed to meet this initial burden. Although Bulen’s filing of petitions related to trust litigation was constitutionally protected, the alleged breaches of fiduciary duty arose from conduct other than the protected activity. Having affirmed that Bulen had failed to meet his initial burden, the court did not evaluate the second step of the anti-SLAPP statute relating to the probability of success.
18 Cal.App.5th 1072
By Golnaz Yazdchi
Sheppard Mullin Richter & Hampton LLP
Lee C. (L.C.) was charged with corporal injury to a cohabitant. The trial court found L.C. incompetent to stand trial and committed him to a state hospital. The hospital reported that L.C. would not be restored to competency in the foreseeable future, and recommended that the court consider initiating a Murphy conservatorship investigation. A Murphy conservatorship is a type of Lanterman-Petris-Short (“LPS”) conservatorship for individuals who: (1) have been found incompetent to stand trial; (2) have a pending complaint, indictment, or information, after a finding of probable cause, for a felony involving death, great bodily harm, or a serious threat to the physical well-being of another person; and (3) are presently dangerous. L.C.’s counsel subsequently requested a preliminary hearing to determine whether there was probable cause to support the charges prior to the defendant’s competency hearing. The trial court found probable cause to support the charges against L.C. and referred the case to the Public Guardian to investigate a Murphy conservatorship.
The Public Guardian objected to the referral, claiming (1) the preliminary hearing violated L.C.’s due process rights because it was held while L.C. was incompetent; (2) the corporal injury charge was insufficiently serious as it did not involve death, great bodily injury, or a serious threat to the well-being of another; and (3) there were no funds to pay for L.C.’s placement at a state hospital. The court overruled the Public Guardian’s objections. The Public Guardian thereafter submitted an investigation report and concluded that although L.C. was a danger to others, the criteria of a pending information and a charge of a felony involving death, great bodily injury, or a serious threat to the well-being of another, were not satisfied. On that basis, the Public Guardian stated that it would not petition for appointment as conservator.
The People requested a hearing on the Public Guardian’s refusal to file a Murphy conservatorship petition. The trial court found that the Public Guardian’s failure to file was an abuse of discretion and ordered the Public Guardian to file the petition. The Public Guardian complied with the court’s order and filed for a Murphy conservatorship over L.C., but prayed that the petition not be granted. Notwithstanding county counsel’s representation that he and his client (the Public Guardian) did not believe the petition had merit, the court ordered county counsel to proceed to a trial. The People then sought to disqualify county counsel due to county counsel’s reluctance to file and prosecute the petition. The trial court agreed, disqualified county counsel, and instead appointed the district attorney to prosecute the Murphy conservatorship petition. The Public Guardian appealed.
The subject of the appeal was whether the trial court’s order compelling the Public Guardian to file and prosecute the petition for a Murphy conservatorship was lawful. The Court of Appeal held that the term “initiate conservatorship proceedings” as it relates to the initiation of Murphy conservatorships, means to refer a case to the conservatorship investigator for investigation—but it is the investigator, not the court, who decides whether to file a petition for conservatorship. In this case, the Public Guardian was the conservatorship investigator. Had the Legislature intended to provide the court with the authority to order the conservatorship investigator to file a Murphy conservatorship petition, as opposed to ordering an investigation, it could have said so in the statutory scheme. It did not. The Court of Appeal vacated the trial court’s orders compelling the Public Guardian to petition for a Murphy conservatorship, compelling the Public Guardian to proceed to trial, and disqualifying county counsel and appointing the district attorney to prosecute the Murphy conservatorship petition over L.C. Furthermore, the court held that the Public Guardian abused his discretion in determining that the pending charge was invalid, and that the felony charge was insufficient as a matter of law to support a Murphy conservatorship. Thus, the case was remanded to allow the Public Guardian to exercise his discretion and decide whether to file a petition for a Murphy conservatorship in accordance with the applicable law.
Cite as B283132
Filed January 19, 2018
Second District, Div. Five
By Daniel C. Kim
Weintraub Tobin Chediak Coleman Grodin Law Corporation
Kerkorian executed a will in July 2013 and married Una Davis about a year later. Two days prior to the wedding, he gave Anthony Mandekic $10 million dollars with instructions to give the money to Davis outside of Kerkorian’s estate or any testamentary transfer, and Mandekic complied. The day before the wedding, Davis signed a waiver, relinquishing any right to Kerkorian’s estate, including the right of an omitted spouse. Kerkorian died a year later, and his will did not name Davis as a beneficiary. Davis filed a petition seeking a distribution as an omitted spouse. As executor, Mandekic petitioned for court approval to oppose Davis’s petition pursuant to Probate Code section 11704. The court granted Mandekic’s petition finding, inter alia , that Mandekic was familiar with the estate and Kerkorian’s intentions; that he had no financial interest having already received his distribution and he was not otherwise improperly motivated; and that his participation would be helpful in determining the rightful beneficiaries in accordance with Kerkorian’s intent.
The appellate court affirmed. On appeal, Davis argued that the lower court had misapplied section 11704 in granting Mandekic’s petition for approval to oppose Davis’s petition. Specifically, Davis argued that the lower court had failed to make an express finding that Mandekic’s participation was “necessary to assist the court.” However, the appellate court held that such an express finding of “necessity” was unnecessary because a “good cause” finding under section 11704 naturally incorporated a contemplated level of necessary assistance by the petitioning party. The appellate court further found that the Legislature intended the term “necessary” to mean “useful” or “appropriate” and that the lower court had not abused its discretion in finding good cause.
Cite as B280003
Filed December 21, 2017
California Court of Appeal, Second District, Div. 5
By Golnaz Yazdchi
Sheppard Mullin Richter & Hampton LLP
Francine S. Yeh and her husband, Shu Hsun Tai, purchased a condominium as joint tenants. To obtain a better interest rate on the loan, Francine signed a quitclaim deed to transfer the condominium to Shu’s name. Shu promised Francine that he would put her name back on the title to the property. Francine and Shu remained married until Shu’s death. Three days before Shu died, Shu told Francine that the property was all hers. After Shu’s death, Francine learned that Shu had transferred the condominium to a trust he established during their marriage without Francine’s knowledge, naming his children from a prior marriage as beneficiaries. About 18 months after Shu’s death, Francine filed an action alleging that Shu breached his fiduciary duties to Francine during the marriage, and sought an order to void the deed transferring the condominium to the trust, directing the beneficiaries of Shu’s trust to convey the property to Francine, and for attorney’s fees. The trial court sustained the beneficiaries’ demurrer without leave to amend on the grounds that Francine’s claims were time barred because they were brought more than a year after Shu’s passing.
The Court of Appeal reversed. It held that when a spouse brings a breach of fiduciary duty claim against a deceased spouse under Family Code section 1101, the limitations period provided in Code of Civil Procedure sections 366.2 and 366.3 do not apply. The limitations period provided under Family Code section 1101, subdivision (d) applies instead. It provides in pertinent part that an action be commenced within three years of the date a petitioning spouse had actual knowledge that the transaction or event occurred, and further, that an action may be commenced on the death of a spouse without regard to the three-year time limit. Acknowledging the conflict between the Family Code and the Code of Civil Procedure, the court reasoned that when two statutes of limitations are applicable, the specific statute takes precedence over the general statute. Because Francine brought her claim under the Family Code, its statute of limitations applied.
Cite as C074846
Filed November 28, 2017, Third District
By Matthew R. Owens
Withers Bergman LLP
Barbara executed a health care power of attorney, naming her niece, Robin, as agent with authority to make health care decisions, including the power to authorize admission to health care facilities. Four years later, Barbara executed a personal care power of attorney, naming her sister, Jean, and Robin as agents for personal matters and litigation. The personal care power of attorney expressly excluded health care decisions. Jean admitted Barbara to a residential care facility and signed an admission agreement containing an arbitration clause. When Barbara died after choking on her lunch at the facility, both Jean and Robin sued the facility for elder abuse and other claims. The facility moved to compel arbitration under the admission agreement. The trial court denied the motion because Jean lacked authority to admit Barbara to the facility under the personal care power of attorney. The appellate court affirmed. The facility was a health care institution authorized by law to provide health care. The facility provided health care to Barbara by, among other things, providing dementia care -- a higher level of care that required specialized training of the facility staff. A health care decision, if made pursuant to a power of attorney, must be made under a health care power of attorney. The facility had a copy of Barbara’s health care power of attorney naming Robin as agent, and was therefore obligated to seek Robin’s consent to the arbitration clause before relying on any authority Jean may have had. Since Jean lacked authority to execute the admission agreement, the agreement and its arbitration clause were void. http://www.courts.ca.gov/opinions/documents/C074846A.PDF
Cite as D071155
Filed November 30, 2017, Fourth District, Div. One
Patrick, an active duty service member, named his wife, Alicja, as beneficiary of his $400,000 life insurance policy issued under a federal statute, the Servicemen’s Group Life Insurance Act. As part of their status-only dissolution judgment, Patrick and Alicja stipulated to an order requiring Patrick to maintain Alicja as beneficiary of the policy. Patrick later changed the policy’s beneficiary to his sister, Mary, who ultimately received the proceeds upon Patrick’s death. Mary requested an order granting her the policy proceeds because the federal statute preempted state law, including the stipulated order. The trial court granted the request, finding the federal statute gave Patrick the right to change the policy beneficiary at any time without notice to Alicja and that Patrick’s exercise of that right did not trigger the fraud exception to federal preemption. The appellate court affirmed. Under the supremacy clause of the United States Constitution, state law is preempted to the extent it conflicts with a federal statute. The federal statute at issue here established an order of precedence for identifying policy beneficiaries and gave first priority to the person Patrick identified. The federal regulations implementing the statute allowed Patrick to change the named beneficiary at any time without the knowledge or consent of the previous beneficiary. Since Patrick had the right to change the beneficiary, his exercise of that right did not constitute fraud, nor did his failure to notify Alicja. http://www.courts.ca.gov/opinions/documents/D071155.PDF
Filed June 1, 2017, First District, Div. Two
Cite as A146330
By Ciarán O'Sullivan
The Law Office of Ciarán O'Sullivan
78-year-old James Hilliard owned a controlling interest in the James Crystal Companies. In 2003 the Companies entered a security agreement with Wells Fargo Bank, and over time the Bank ultimately loaned the Companies approximately $18.9 million. The loan was in continuous default beginning in mid-2004, but the parties repeatedly amended the Agreement to allow Hilliard additional time to repay the loans. Although Hilliard made significant repayments on the Companies’ behalf, he failed to make the final payment because he could not liquidate certain assets by the deadline. The Bank then sold the debt to a third party, which obtained a $17 million judgment against the Companies. Hilliard sued the Bank for financial elder abuse, alleging that the Bank had always ignored prior deadlines, and he had no reason to believe that Bank would actually sell the loan. The trial court sustained the Bank’s demurrer on the grounds that Hilliard lacked standing to sue for the harm suffered by the Companies.
The Court of Appeal affirmed. Any alleged misrepresentations by the Bank were intended to induce action on the part of the Companies, not Hilliard personally. Hilliard would have an individual cause of action if the damages resulted from a special duty the Bank owed to him as a shareholder of the Companies. That was not the case here. Hilliard’s argument that the Bank breached a duty owed to him personally simply because he is an elder, and elder abuse is by definition a personal claim, is circular. Regardless of the fact that he is an elder, Hilliard’s claim originates from his status as a shareholder, and the claim for breach of duty belongs to the
Companies. EADACPA does not confer a claim for elder abuse in such circumstances.
Filed August 3, 2017, First District, Div. 5
Cite as A148614
By Julie R. Woods
Hartog, Baer & Hand, APC
K.W. was conserved under the Lanterman-Petris-Short Act as gravely disabled as the result of a mental disorder, unable to provide for his basic needs for food, clothing, or shelter, and incapable of accepting treatment voluntarily. When his conservator petitioned for reappointment, K.W. demanded a jury trial. The psychiatrist who diagnosed K.W.’s bipolar schizoaffective disorder testified as an expert that K.W. was gravely disabled. His testimony included his personal observations of K.W., medical records from the county health department and its locked facility where K.W. was receiving treatment, and conversations with K.W.’s former outpatient psychiatrist and social worker. The jury found K.W. was gravely disabled due to a mental disorder, and the court reestablished the conservatorship. K.W. appealed, contending the trial court erred in permitting the jury to consider hearsay testimony from an expert witness, and arguing the court should retroactively apply the new rule from People v. Sanchez (2016) 63 Cal.4th 665.
The court of appeal affirmed. Before Sanchez, when an expert’s opinion was based on hearsay, a jury received a limiting instruction to consider hearsay statements only to evaluate the expert’s opinion, but not as proof the information in the statements was true. Sanchez held that out-of-court statements used as the basis of expert opinion testimony are hearsay. When an expert offers case-specific out-of-court statements to explain the bases for his or her opinion, those statements are necessarily considered by the jury for their truth, and are hearsay. Here, although the case-specific hearsay was problematic, other expert testimony was based on the witness’ own experiences, and the medical opinion of K.W.’s incapacity was unimpeached. The court found it was not reasonably probable that the jury would have reached a different result absent the improperly admitted hearsay testimony, and the error was harmless.
Filed April 19, 2017, Second District, Div. 7
Cite as B269900
Belinda Wilkins Tepper sued her three siblings, Geoffrey Wilkins, Martha Wilkins, and Derek Wilkins, on behalf of her 88-year-old mother, Eileen Wilkins, claiming her siblings’ actions individually and as trustees of Eileen’s revocable living trust constituted financial elder abuse. Tepper was not a trustee of Eileen’s revocable trust. Tepper did not allege that she had been personally aggrieved by the actions of her siblings or that she possessed the ability to file suit as Eileen’s conservator or attorney-in-fact. Tepper’s siblings demurred to her first amended complaint, asserting Tepper lacked standing to pursue an action on Eileen’s behalf. Eileen retained her own counsel and intervened in the action, joining the demurrer to Tepper’s amended complaint. The trial court sustained the demurrer without leave to amend and dismissed Tepper’s elder abuse action on standing grounds.
The court of appeal affirmed. The trial court did not err in ruling Tepper lacked standing to bring the elder abuse action. Simply being an elder’s child is not sufficient to confer standing. Probate Code Section 48 defines an “interested person” as a child with an interest in a trust estate or estate of the decedent that may be affected by the proceeding. Tepper did not claim to have any interest in her mother’s revocable living trust, and even if she were named as a beneficiary, her interest would be merely potential and subject to change. Wilkins, not Tepper, was the real party in interest in the elder abuse action; Tepper was not aggrieved by the alleged conduct or otherwise beneficially interested in the controversy. Tepper did not proceed as her mother’s conservator or guardian ad litem, and therefore, she lacked standing to complain for financial elder abuse on her mother’s behalf.
Filed June 2, 2017, First District, Div. Four
Cite as A147236
By Ciarán O'Sullivan
The Law Office of Ciarán O'Sullivan
Fred and Martha Mahan created a revocable Children’s Trust and funded it with two second-to-die insurance policies on their lives, valued at a total of $1 million, and sufficient funds to pay the annual premiums well into the future. Two decades later, Fred, a lawyer at the end of his career, was in cognitive decline and Martha was diagnosed with Alzheimer’s disease. Taking advantage of the couple’s vulnerability, defendant insurance agents and brokers surrendered one policy and replaced the other with a single life policy requiring premium payments of $800,000, on which defendants earned $100,000 in commissions. To pay the increased premiums, the Mahans were forced to sell property and transfer additional money to the trust. The trial court sustained defendants’ demurrer to the Mahans’ financial elder abuse action on the grounds that the trust was not an elder who was protected by the Elder Abuse and Dependent Adult Civil Protection Act, and the Mahans voluntarily paid the premiums; defendants’ actions did not deprive the Mahans of property within the meaning of the Act.
The Court of Appeal reversed. Liability under the Act may flow from transfers made voluntarily. The fact that the Children’s Trust owned the policies did not negate the claim, because defendants’ actions deprived the Mahans of property rights in a number of ways. They made the Mahans’ estate plan more expensive and less valuable, caused them to lose value in their insurance policies, and forced them to spend more money to pay new premiums and defendants’ commissions. Furthermore, defendants’ actions were perpetrated by means of undue influence. Therefore, the Mahans’ complaint properly stated a cause of action for financial elder abuse.
Filed May 9, 2017, Second District, Div. 5
Cite as B265865
After reporting complaints about her short-term memory to her doctor, Maria Higgins added her stepson, W. Clive Higgins, as joint account holder to her checking and savings accounts. Clive later transferred additional accounts of Maria’s into accounts owned by him and his wife, Lupe Higgins, in trust for Maria. When Clive died, Lupe changed the ownership of the accounts to her name alone. When Maria later died, Lupe paid Maria’s funeral expenses and the pecuniary bequests set forth in Maria’s estate plan from the accounts. Lupe also transferred some of the funds to her own family and used the remaining funds for her own purposes. Arthur Higgins, Maria’s executor and successor trustee of her trust, brought an action for constructive trust. The trial court found no constructive trust could be imposed for a wrongful act by Clive because once he was added to Maria’s account as a joint holder, he had a legal right to do as he pleased with the funds and could make Lupe a joint owner. The trial court could find no legal obligation for Lupe to restore the funds and entered judgment in her favor.
The appellate court reversed, holding that Arthur had established all conditions necessary to impose a constructive trust. So long as all parties are living, an account belongs to the parties who have a present right to payment, in proportion to their contributions, unless there is clear and convincing evidence of a different intent. Clear and convincing evidence showed that Clive and Lupe intended to create irrevocable trust accounts in which Maria had a present beneficial interest in the funds on deposit, and that Lupe continued to hold the funds in trust for Maria after Clive’s death. One who wrongfully detains something, or who gains it by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is an involuntary trustee of the thing for the benefit of the owner. Because Lupe repudiated the trust by removing Maria’s name from the accounts and using the funds for her own purposes, the court found that Arthur was entitled to a constructive trust as a matter of law.
Filed April 20, 2017, U.S. Court of Appeals, 9th Cir.
Cite as 16-10152
By Catherine M. Swafford
Withers Bergman, LLP
After being convicted of theft from an employee benefit plan, Michael Harris was sentenced to jail and ordered to pay $646,000 in restitution. Harris was the beneficiary of two irrevocable trusts. One of the trusts provided that the trustee shall pay income in the trustee’s absolute discretion for Harris’ support, and the other trust provided the trustee may distribute income and principal in the trustee’s absolute discretion for his support. The district court granted the government’s application for a writ of continuing garnishment for any property distributed from the trusts to Harris.
The Ninth Circuit affirmed. Present and future interests in trust distributions fall within the definition of property under federal law, and are subject to garnishment. Despite the trustee’s discretion with respect to both trusts, California law allows Harris to compel distributions from the trusts. Accordingly, a federal government lien may attach to Harris’ right to receive trust distributions. Further, disclaimers and spendthrift clauses do not prevent attachment of federal liens.
Filed April 4, 2017, U.S. Court of Appeals, 9th Cir.
Cite as 14-17404
Michael Bensal and Bensal & Coburn Investments LLC (“BCI”) obtained two loans from Millennium Bank. The Small Business Administration (“SBA”) guaranteed one of the loans. BCI defaulted. Millennium assigned the loans to First Bank & Trust (“FBT”), which sued BCI and Bensal and obtained a judgment. FBT assigned its right to collect the judgment to SBA. Thereafter, Bensal’s father died. Bensal was class="anchor" named as a beneficiary of his father’s trust. Bensal disclaimed his interest in the trust. SBA filed a lawsuit in federal court seeking to void Bensal’s disclaimer under the Federal Debt Collection Procedures Act (“FDCPA”), arguing he fraudulently transferred his interest in the trust to prevent SBA from collecting the debt. The district court granted SBA’s motion for summary judgment, and ordered that Bensal’s interest in the trust be transferred to SBA to satisfy the judgment.
The Ninth Circuit affirmed. Bensal contended the disclaimer was effective under California Probate Code section 283, which provides that a disclaimer is not a voidable transfer. However, section 283 directly conflicts with, and is preempted by, the FDCPA. The disclaimer constituted a voidable transfer under the FDCPA because Bensal had an unqualified right to receive and dispose of his interest in the trust. In addition, the judgment assigned to SBA was a debt within the meaning of the FDCPA because SBA was a party to the underlying loan contracts.
Filed March 28, 2017 , Third District
Cite as C077594
Melissa Reynoso served as trustee of her grandfather’s trust. The trust authorized Reynoso to sell real property to her mother, Karen Bartholomew, for $100,000 below the property’s appraised value. Reynoso agreed to help Bartholomew purchase the property. Reynoso obtained a personal loan, conveyed the property to Bartholomew, and the trust received the loan proceeds. Bartholomew’s son, Anthony Pizarro, and brother, Keith Jensen, filed petitions alleging that Reynoso breached her fiduciary duties, and that the sale must be set aside as a sham. During the litigation, Bartholomew turned against Reynoso and knowingly testified falsely. The trial court denied the petitions, finding the sale was valid and Reynoso did not breach her fiduciary duties. Additionally, exercising its equitable power over trusts, the trial court charged Bartholomew’s and Jensen’s shares of the trust with Reynoso’s attorney fees and costs. To the extent their trust shares were insufficient, the trial court held Bartholomew, Jenson, and Pizarro personally liable for the fees and costs.
The appellate court affirmed in part and reversed in part. Pizarro forfeited any arguments on appeal concerning the sale because his brief lacked clarity and failed to follow appellate procedure. The court properly exercised its equitable power to charge Reynoso’s attorney fees and costs against Bartholomew’s and Jensen’s trust shares. The court has the equitable power to charge a beneficiary’s share with the trustee’s attorney fees and costs if the beneficiary, in bad faith, brings an unfounded proceeding. While Bartholomew did not bring the petition, the court had the equitable power to charge her trust share because she took an unfounded position and acted in bad faith. However, the court could not order the litigants to personally pay the attorney fees and costs because such an order is beyond the court’s equitable power over trusts.
Filed March 23, 2017, Supreme Court of California
Cite as S224985
Under his parents’ spendthrift trust, Reynolds is entitled to receive an initial distribution of $250,000 and periodic distributions from trust principal amounting to over one million dollars. Reynolds filed for Chapter 7 bankruptcy before receiving the trust’s first payment. The trustees sought a declaratory judgment on the extent of the bankruptcy trustee’s interest in the trust. The bankruptcy court held that the bankruptcy trustee could reach only up to 25 percent of Reynolds’s interest in the trust under Probate Code section 15306.5, and the bankruptcy appellate panel affirmed. The bankruptcy trustee appealed to the Ninth Circuit, which asked the California Supreme Court if Probate Code section 15306.5 limits a bankruptcy estate’s access to a spendthrift trust to 25 percent of the beneficiary’s interest, where the trust pays the beneficiary entirely out of principal.
The California Supreme Court held the Probate Code does not impose an absolute limit on a general creditor’s access to trust principal. A bankruptcy trustee, standing as a hypothetical judgment creditor, can reach a beneficiary’s interest in a trust that pays entirely out of principal in two ways under the section 15306.5 exception to spendthrift provisions. First, it may reach up to the full amount of any distributions of principal that are currently due and payable to the beneficiary, even though they are still in the trustee’s hands, unless the trust instrument specifies that those distributions are for the beneficiary’s support or education and the beneficiary needs those distributions for either purpose. Separately, the bankruptcy trustee can reach up to 25 percent of any anticipated payments made to, or for the benefit of, the beneficiary, reduced to the extent necessary by the support needs of the beneficiary and any dependents.
Filed March 21, 2017, First Appellate District, Div. Three
Cite as A144558
After their removal, former trustees Klein, Reynolds, and Pair sought to withhold documents relating to their two prior trust accountings on the basis of attorney-client privilege from successor trustee Fiduciary Trust International of California (FTI) and sole non-contingent trust beneficiary Hughes. FTI demanded the former trustees produce documents that included communications between the former trustees and their legal counsel. The probate court permitted the former trustees to withhold only 45 of the 234 documents identified in their supplemental privilege log, because FTI as successor trustee now held the attorney-client privilege. Both parties appealed. Both took issue with how the court distinguished confidential attorney-trustee communications concerning advice and guidance on matters of trust administration and those concerning matters on which the trustee seeks guidance out of concern for possible charges of breach of fiduciary duty.
The appellate court affirmed in part and reversed in part. The character of the relationship between the trustee and counsel determines whether the communication is privileged. To assert the attorney-client privilege as the basis for withholding documents from the successor trustee, the predecessor trustee must have hired a separate lawyer, paid for the advice out of its personal funds, and taken steps to preserve the confidentiality of the communication. The party claiming the privilege has the burden to establish the preliminary facts necessary to support its claims of privilege by distinguishing his own interests from those of the beneficiaries. Here, the former trustees did not make a prima facie showing the 45 withheld documents were privileged when they merely stated the documents concerned their defense of a petition for removal or surcharge. On remand, the trial court must reconsider the privilege status of the 45 documents.
Filed February 9, 2017; mod. 3/10/17, Second District, Div. Two
Cite as B260762
Valerie Yale sued estate planning attorney Robert R. Bowne, II for malpractice. During her marriage to Bryan Knight, Yale removed her house from her trust and vested title in her class="anchor" name as separate property to obtain a line of credit. The lender required Yale and Knight to co-sign on the loan. This required that title to the house be conveyed from Yale as trustee of her separate trust to her as her separate property, then to her and Knight as community property. After the loan was recorded, Yale encountered problems in deeding the house back to herself, and Bowne completed the transfers as she wanted. When Yale subsequently had Bowne update her estate plan, she expressly instructed him to maintain her assets as her separate property. When she transferred property to her new trust, she read the words “community property” in two deeds, but did not ask Bowne about the effect of that term. Later, during divorce proceedings, Yale discovered her property might not have been restored as her separate property in her estate plan. In Yale’s legal malpractice action against Bowne, the trial court instructed the jury that it could find comparative fault on Yale’s part. The jury found Bowne was 90 percent negligent and Yale was 10 percent negligent. Yale appealed, contending the jury instruction on comparative fault was erroneous.
The appellate court affirmed. The facts and circumstances supported the trial court’s giving of the jury instruction. Comparative fault principles may apply in malpractice actions if the lawyer’s breach of duty causes damage to the client and if the client’s own deficient conduct results in sharing responsibility for the harm caused. Bowne breached the standard of care when he failed to follow Yale’s express instruction to maintain her assets as separate property. But Yale had sufficient knowledge to ask Bowne about the clauses in the deeds before she signed them and chose not to question Bowne. Because Yale contributed to the harm for which she sought damages, the trial court correctly instructed the jury on the principles of comparative fault.
Filed March 9, 2017, U.S. Court of Appeals, Ninth Circuit
Cite as 15-56034, 15-56047
Richard Zanowick sued defendants, alleging that their products exposed him to asbestos which led to his terminal mesothelioma. Richard’s wife, Joan Clark-Zanowick, also sued defendants for loss of consortium. Richard died, and Joan failed to file a timely motion to substitute a new party for Richard within 90 days as required by Rule 25(a)(1), Federal Rules of Civil Procedure. Joan moved to dismiss the action voluntarily without prejudice, or alternatively, to substitute a new party or extend the deadline. Defendants contended that Rule 25(a)(1) required dismissal with prejudice. The district court granted Joan’s motion to voluntarily dismiss the action without prejudice pursuant to Rule 41(a)(2). Defendants appealed.
The Court of Appeals affirmed. The panel held that Rule 25(a)(1) permitted the district court to allow a late substitution if requested, and did not require the district court to dismiss the federal action with prejudice. The district court did not abuse its discretion in granting the Rule 41(a)(2) motion for dismissal without prejudice.
Filed January 31, 2017, Second District, Div. Six
Cite as B265745
In 2008, William Morgan established an irrevocable subtrust for Beverly Morgan. William told Beverly about the subtrust at least twice in 2009. Thereafter, Beverly was unable to pay her mortgage. She decided to quitclaim her house to her sister, Connie Morgan. At the time, the house was worth less than the mortgage. In 2012, Connie sold the house for $48,000 less than the mortgage. The same year, Beverly contacted co-trustee Thomas Brooks for the first time to discuss the subtrust. Thomas and co-trustee Barton Clemens subsequently resigned. Successor trustee Joanne Williamson sued Thomas, Barton, Connie, and William for damages. Williamson alleged Thomas and Barton failed to keep Beverly informed about the subtrust, and had she been made aware of it, she would have used subtrust assets to prevent the loss of her home. The trial court denied the petition.
The appellate court affirmed. Williamson failed to prove breach of fiduciary duty because she did not establish damages. Trustees may be held liable for losses incurred by a trust. They are not liable for personal damages suffered by beneficiaries, or opportunities lost for not distributing trust assets. Williamson failed to prove the subtrust was harmed and suffered damages. Moreover, Beverly was informed about the subtrust and had ample opportunity to obtain more information about it before she quitclaimed the house to Connie.
Filed December 29, 2016, California Supreme Court
Cite as S226645
By Ciarán O'Sullivan
The Law Office of Ciarán O'Sullivan
The ACLU of Southern California submitted a Public Records Act (“PRA”) request for invoices sent to the County Counsel from outside law firms who defended excessive force actions by L.A. County Jail inmates, claiming that the invoices might prove that the law firms had engaged in “scorched-earth litigation tactics” that were against the public interest. When the County objected, the Superior Court required production of invoices from closed cases, but allowed the redaction of an attorney’s legal opinion, advice, mental impressions, or theories of the case, and ruled that all parts of an invoice in a pending case are privileged from disclosure. The Court of Appeal reversed, concluding that the entirety of a legal invoice, even from a closed case, is entirely privileged if it was confidentially transmitted within the course of the attorney-client relationship, regardless of the content.
The Supreme Court reversed, holding that the attorney-client privilege does not categorically shield everything in a billing invoice from PRA disclosure because the privilege does not apply to every single communication between an attorney and a client. The attorney-client privilege protects only communications made “for the purpose of legal consultation,” such as those containing legal opinion, advice, mental impressions, work product, or theories of the case. The amount of a legal invoice is not sent for the purpose of legal consultation but to ensure payment. In a pending case the mere amount of an invoice may reveal legally sensitive information such as an uptick in legal work, or preparation for trial, and thus the entire invoice in a pending matter is privileged. In a closed case, however, the mere amount of an invoice cannot reveal any legally sensitive information, and the amount billed for closed cases is therefore not privileged.
Filed October 24, 2016, First District, Div. One
Cite as A145981
Dick Magney appointed his wife, Judith Magney, as his agent in a valid advance health care directive in 2011. The directive contained Dick’s health care instructions, expressed his personal values, and gave his agent the power to exercise her discretion to refuse medical treatment on his behalf. In 2015 he was hospitalized with a serious heart infection. After reviewing Dick’s medical history and recent tests, and consulting with Dick and Judith, his primary physician concluded that further treatment would be futile and would greatly diminish Dick’s quality of life. Upon investigation into possible caretaker abuse or neglect, Humboldt County Adult Protective Services filed an ex parte petition without notice to remove Judith as agent and to compel immediate medical treatment. The court granted the petition the same day. After she was served with the order, Judith filed a petition contesting the merits, seeking dismissal, and for statutory attorney fees. When Humboldt withdrew its petition, the court vacated the treatment order and denied Judith’s request for attorney fees.
The court of appeal reversed and remanded to determine and award Judith’s attorney fees. Probate Code section 4771 allows for a discretionary award of attorney’s fees to the agent under a power of attorney for health care if the court determines that the proceeding was commenced without reasonable cause. Reasonable cause is determined under an objective, reasonable person standard, and the petition must be supported by competent evidence. Humboldt’s petition deliberately misled the trial court of the law and facts. Humboldt lacked reasonable cause to commence the proceeding: its allegations of neglect were unsubstantiated and its view of Dick’s best interests was inconsistent with his instructions and personal values expressed in his advance directive. The Health Care Decisions Law (Prob. Code sec. 4600, et seq.) protects the fundamental right of competent adults to control decisions concerning their own health care.
Filed April 15, 2016, Fourth District, Div. Three
Cite as G050964
By Catherine M. Swafford
Withers Bergman, LLP
Robert Obarr contracted to sell a mobile home park to S.C.D. Enterprises, who assigned the purchase agreement to Westminster. After escrow opened, Obarr contracted to sell the mobile home park to Pham. Westminster and Pham filed actions against Obarr, who died during the litigation. After Obarr's death, Pham filed the declaration of Obarr's bookkeeper describing Obarr’s retention of attorney Kimes, and attaching an e-mail and letter to Obarr from Kimes. The special administrator sought orders to exclude this evidence on the ground it was protected by the attorney-client privilege, and to disqualify Pham’s counsel for improperly obtaining and using the privileged documents. The trial court conducted an in camera review of the evidence and determined the attorney-client privilege did not apply because statements by Obarr's attorney in the communications indicated he did not represent Obarr, and the statutory exceptions provided in Evidence Code sections 957, 960, and 961 applied. The special administrator appealed.
The appellate court reversed. The court cannot review the contents of communications to determine whether the attorney-client privilege applies. The privilege attaches to all confidential communications between an attorney and client. When the proponent makes a prima facie showing of a confidential attorney-client communication, the court must presume the communication is privileged, and the burden shifts to the opponent to establish waiver, an exception, or some other reason the privilege does not apply. The special administrator made a prima facie showing of a confidential attorney-client communication, which was not rebutted. Section 957 is based on the assumption a decedent would want the privileged communication disclosed to ensure his intent is carried out. Section 957 did not apply here because the parties made claims against, not through, Obarr. The purpose of sections 960 and 961 is to permit an attorney to testify about a client’s intent regarding an instrument affecting an interest in property. There was no showing the disputed evidence consisted of the type of communications about which an attesting witness would testify. The appellate court remanded the case to determine if Pham’s counsel should be disqualified.
Filed December 16, 2016, Second District, Div. Six
Cite as B270310
Appellant B.C. suffered cardiac arrest and brain damage from the combined effects of methamphetamine and alcohol usage, resulting in physical and mental deficits. B.C. later married Jessie M., with whom she had previously abused drugs and had a daughter. A neuropsychologist determined that B.C.’s cognitive deficits made her vulnerable to fraud. When B.C.’s aunt C.S. petitioned for appointment as probate conservator of B.C.’s person, B.C. and Jessie hired a private attorney to oppose the petition, and that attorney demanded a jury trial. Because of B.C.’s lack of capacity to hire a lawyer, the Court appointed instead a public defender who did not renew the demand for a jury trial. After a bench trial, the court appointed C.S. as conservator of B.C.’s person.
The court of appeal affirmed. Prior cases held that the trial court must obtain the personal waiver of a jury trial from the conservatee in conservatorship proceedings under the Lanterman-Petris-Short Act. Similarly, a personal waiver is required in cases involving the involuntary commitment of a mentally disordered offender. But, those situations are distinguishable because a probate conservator has no power to place a conservatee in a locked facility against her will. While the Probate Code allows a jury trial in conservatorship cases, it does not mandate one in every case where it is not affirmatively waived, which is the rule in involuntary commitment situations. The trial court here erred when it failed to advise B.C. of her right to a jury trial, but the error was harmless because she was represented by counsel who had authority to forego a jury trial. Similarly, B.C’s argument that the court did not consult her about the conservatorship failed because her sentiments were represented to the Court by her attorney.