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
āChildrenās Trustā) of which the Mahanās 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
Mahansā 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 Mahanās financial elder abuse cause of action in
the first amended complaint arguing that the real party in interest was
the Childrenās Trust, which owned the policies and suffered the
depravation. Per the defendants, since the Childrenās 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 Mahansā
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 Childrenās Trust to pay the
massive increase in premiums and (3) loss of the money that they felt
compelled to transfer to the Childrenās 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 CiarĆ”n O’Sullivan
The Law Office of CiarĆ”n 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 Companiesā 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 Bankās 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. Hilliardās 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, Hilliardās 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
āāTepper 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 motherās 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 defendantsā demurrer
without leave to amend on the basis that Tepper failed to allege facts
showing she had standing. The trial courtās decision was affirmed on
appeal.
Section 15657.6 of the Welfare and Institutions Code
permits the action to be brought by the elderās representative during
the elderās lifetime where the elder lacks capacity or has an unsound
mind. Section 15610.30, subdivision (d) defines ārepresentativeā to
include the elderās 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 Ellenās daughter, she had
standing as an āinterested partyā within the meaning of Section 15600,
subdivision (j) of the Welfare and Institutions Code and Section 48 of
the Probate Code. In rejecting Temperās argument the appellate court
held that to qualify as an āinterested personā 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 motherās revocable trust and
even if she were a beneficiary of her motherās revocable trust, her
interest would be āmerely potential,ā that could evaporate on the whim
of Eileen. Tepperās 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
āHill 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 motherās estate, also
seeking double damages under Probate Code section 859. Fred died during
the proceeding. Fredās 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
fatherās successor, citing Code of Civil Procedure section 377.42. It
provides in effect that in a cause of action against decedentās
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.ās 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.ās 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
elderās 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.
ā
http://www.courts.ca.gov/opinions/archive/A145893M.PDF
ā
Bounds v. Superior Court
(September 2014) 229 Cal. App. 4th 468
Helen
Bounds, age 88, was trustee of her trust, suffered from Alzheimerās
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 Boundās cognitive impairment and
the propertyās 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 attorneyās 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 ātakingā for elder abuse purposes
occurs when the elder āis deprived of any property right, including by
means of an agreement. . .ā 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 āincluding
by means of a performed agreement.ā
ā