The statutes covering financial elder abuse and the cases interpreting those statutes continue to evolve. Below are summaries of some of the more recent and important California cases involving financial elder abuse issues.

Mahan v. Charles W. Chan Ins. Agency, Inc.
(August 23, 2017) 14 Cal. App. 5th 841
 
By Christopher D. Carico
Carico Macdonald Kil & Benz LLP
www.caricofirm.com

Fred and Martha Mahan purchased two life insurance policies in the mid-1990s, initially naming their children as beneficiaries.  Together the policies provided death benefits of approximately $1,000,000 and cost approximately $14,000 per year in annual premiums.  The policies were placed into a revocable trust established by the children (the “Children’s Trust”) of which the Mahan’s daughter Maureen as the trustee.  The Mahans put enough cash into the trust to sustain the premiums for years to come.  Approximately 20 years later, with the Mahans’ cognition declining, defendant insurance agents carried out an elaborate scheme to have the Mahan family surrender one of the life insurance policies and replace it with a new policy involving a massive premium increase and less death benefit.  The premiums increased by more than $100,000 per year and the transaction generated approximately $100,000 in commissions for the defendants.  Maureen as trustees and the Mahans separately brought suit against defendants, with the Mahans alleging (among other things) financial elder abuse.  The defendants filed demurrers to the Mahan’s financial elder abuse cause of action in the first amended complaint arguing that the real party in interest was the Children’s Trust, which owned the policies and suffered the depravation.  Per the defendants, since the Children’s Trust is not an individual over age 65, there could be no financial elder abuse claim.  The trial court sustained the demurrers and the Mahans appealed.  The California Court of Appeal reversed. 

Noting that the Elder Abuse Act is a remedial statute, the appellate court agreed with the Mahans’ argument that they were deprived of their rights in three pieces of property, namely, (1) damage to their estate plan, (2) loss of money they felt compelled to transfer to the Children’s Trust to pay the massive increase in premiums and (3) loss of the money that they felt compelled to transfer to the Children’s Trust to pay defendants commissions.  The appellate court determined that a deprivation for financial elder abuse purposes does not require “the direct taking by one person of the property of another,” nor does it necessitate the satisfaction of “some kind of privity requirement.”  Mahan at 861-62.   The appellate court also concluded that the Mahans, like every person, had an insurable interest in their own lives, including the right to take out policies on their lives, and the defendants jeopardized these rights by surrender a policy that they could never reacquire for a same or similar price.

http://www.courts.ca.gov/opinions/archive/A147236A.PDF

Hilliard v. Harbour, et al.
(June 1, 2017) 12 Cal. App. 5th 1006

 By Ciarán O’Sullivan
The Law Office of Ciarán O’Sullivan
www.cosullivanlaw.com

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.

http://www.courts.ca.gov/opinions/archive/A146330.PDF

​​Tepper v. Williams
(April, 19, 2017) 10 Cal. App. 5th 1198By Christopher D. Carico
Carico Macdonald Kil & Benz LLP
www.caricofirm.com

Plaintiff Tepper brought an action for financial elder abuse on behalf of her mother Eileen against her three siblings who were serving as trustees of her mother’s revocable trust. Eileen filed a complaint in intervention alleging that she was the real party in interest and Tepper lacked standing.  The three siblings/trustees filed answers and moved for judgment on the pleadings.  The trial court granted the motion but gave leave to amend.  Tepper filed a first amended complaint substantially repeating the same allegations of financial elder abuse.  The defendant trustees demurred and the trial court sustained defendants’ demurrer without leave to amend on the basis that Tepper failed to allege facts showing she had standing. The trial court’s decision was affirmed on appeal. 

Section 15657.6 of the Welfare and Institutions Code permits the action to be brought by the elder’s representative during the elder’s lifetime where the elder lacks capacity or has an unsound mind.  Section 15610.30, subdivision (d) defines “representative” to include the elder’s conservator, trustee and attorney-in-fact acting within the authority of the power of attorney.  Tepper was none of them.  Instead, Tepper asserted that, as Ellen’s daughter, she had standing as an “interested party” within the meaning of Section 15600, subdivision (j) of the Welfare and Institutions Code and Section 48 of the Probate Code.   In rejecting Temper’s argument the appellate court held that to qualify as an “interested person” for purpose of bringing the elder abuse litigation on behalf of her mother, Tepper had to have property claim or right that is affected by the proceeding.  Tepper never claimed to have an interest in her mother’s revocable trust and even if she were a beneficiary of her mother’s revocable trust, her interest would be “merely potential,” that could evaporate on the whim of Eileen.  Tepper’s reliance on Estate of Giraldin (2012) 55 Cal. 4th 1058 was misplaced as the beneficiaries did not sue until after the settlor died and the trust became irrevocable, giving them actual interests in the trust estate. 

 http://www.courts.ca.gov/opinions/archive/B269900.PDF

​Hill v. Superior Court
(February 2016) 244 Cal. App. 4th 1281

By Christopher D. Carico
Carico Macdonald Kil & Benz LLP
www.caricofirm.com

Petitioner/co-executors filed an action under Probate Code section 850 against their stepfather Frank to recover property belonging to their mother’s estate, also seeking double damages under Probate Code section 859.  Fred died during the proceeding.  Fred’s son, Fred Jr., substituted into the probate proceeding as respondent and filed a motion for summary adjudication, alleging that double damages cannot be recovered against him as his father’s successor, citing Code of Civil Procedure section 377.42.  It provides in effect that in a cause of action against decedent’s successor, all damages that would have been recoverable against decedent are recoverable against his or her successor other than damages under Civil Code section 3294 or other punitive or exemplary damages.  Fred Jr. asserted that double damages under Probate Code section 859 are punitive damages and therefore not recoverable against him as the successor.  The trial court granted Fred Jr.’s motion.  Petitioners sought a writ that the appellate court ultimately granted requiring the trial court to set aside its order granting the motion for summary adjudicating and to enter an order denying Fred Jr.’s motion. 

In Hill, the appellate court determined that a mandatory statutory penalty (like 859) is fundamentally different that a discretionary punitive damages award (like 3294), citing to a number of cases where both have been separately granted.  In distinguishing the 859 damages from punitive damages, the appellate court also found that punitive damages required some form of mal-intent, such as oppression, fraud or malice.  Section 859 does not.  A person is liable for double damages under 859 if the person takes the property of the elder through the commission of financial elder abuse.  The Elder Abuse Act does not require any subjective intent to defraud or harm the elder.  The deprivation of the elder’s property is actionable as financial elder abuse if the defendant should have known his or her actions were harmful to the elder irrespective of whether the abuser actually knew he or she was harming the elder.

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http://www.courts.ca.gov/opinions/archive/A145893M.PDF

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Bounds v. Superior Court
(September 2014) 229 Cal. App. 4th 468

Helen Bounds, age 88, was trustee of her trust, suffered from Alzheimer’s disease but had not yet been diagnosed.  For a number of years, the adjacent property owner had been attempting to buy her property held in trust.  A family member informed the neighbor that she was suffering from diminished capacity.  Nonetheless, the neighbor persisted and eventually coerced Bounds as trustee into first signing an letter of instructions and later escrow instructions to sell her property for a price that was substantially below market, which the neighbors knew.  Bounds had no professional advisor at the time, and unable to read or understand the LOI or escrow instructions.   Bounds trusted the neighbor and mistakenly believed that the sale would remedy her financial problems. Bounds eventually consulted counsel, who canceled the escrow instructions, informing the neighbor of Bound’s cognitive impairment and the property’s real value.  The neighbors sued Bounds seeking specific performance of the contract to sell the property and recorded a lis pendens against the property.  The Trust and Bounds filed a cross-complaint against the neighbors alleging causes of action for financial elder abuse, rescission and declaratory relief, seeking compensatory damages, punitive damages and attorney’s fees.  The neighbors filed demurrers to the financial elder abuse claim, asserting that there had been no taking of property since the contract was still executory.  The trial court sustained the demurrer without leave to amend.  Bounds petitioned for a writ to set aside sustaining of the demurrer to the elder abuse claims.  The court of appeal issued its order granting the petition and issuing the writ. 

 The appellate court focused on the statutory language.  Subdivision (c) of Section 15610.30 provides that a “taking” for elder abuse purposes occurs when the elder “is deprived of any property right, including by means of an agreement. . .”  The LOI and escrow instructions constituted agreements that deprived Bounds of significant property rights, preventing her from being able to sell her property for the best possible bargain or borrow against her property.  The appellate court rejected the argument that no deprivation occurs without a transfer of title, which would essentially re-write the statute to read “including by means of a performed agreement.”  

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