Trusts and Estates

2016 Case Alerts

L.A. County Board of Supervisors v. Superior Court (ACLU of So. California)

Filed December 29, 2016, California Supreme Court
Cite as S226645

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

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.

http://www.courts.ca.gov/opinions/documents/S226645A.PDF

Conservatorship of the Person of B.C.

Filed December 16, 2016, Second District, Div. Six
Cite as B270310

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

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.

http://www.courts.ca.gov/opinions/documents/B270310.PDF

Estate of Dayan

Filed November 3, 2016, Second District, Div. Five
Cite as B268416

By Julie R. Woods
Hartog, Baer & Hand, APC
www.hbh.law

Testator Margor Dayan transferred interests in real property to her children and to her trust in 1986. After numerous quitclaim deeds were signed and after Dayan made her last will in 2009, title to the property was held two-thirds in the trust and one-third by her son, Anthony. In the will, Dayan revoked the trust and transferred her entire interest in the property to another trust for the benefit of her other son, Ermond. The will contained a no-contest clause. After Dayan’s death, Ermond filed a petition under Probate Code section 850 for an order directing Anthony to transfer his interest in the property to the estate. Ermond claimed that although Anthony had legal title to one-third of the property, Dayan retained equitable title to the entire property. Anthony objected to the 850 petition, arguing he was entitled to the one-third interest previously conveyed to him. In response, Ermond filed a petition to enforce the will’s no-contest clause against Anthony under the theory that his objection to the 850 petition sought to invalidate the portion of the will disposing of all of Dayan’s right, title, and interest in the property. The trial court denied the 850 petition and Ermond’s request to enforce the no-contest clause.

The appellate court affirmed. Ermond failed to present sufficient evidence to overcome the presumption of record title showing Anthony was the owner of a one-third interest in the property. Dayan never sought to quiet title to the property after transferring the interest to Anthony, despite having had more than twenty years to do so. The no-contest clause was not triggered because Anthony’s assertion of ownership was not a direct challenge to the will, a challenge to the operative transfer of ownership to him, or a creditor’s claim.

http://www.courts.ca.gov/opinions/documents/B268416.PDF

Humboldt County Adult Protective Services v. Superior Court (Magney)

Filed October 24, 2016, First District, Div. One
Cite as A145981

By Julie R. Woods
Hartog, Baer & Hand, APC
www.hbh.law

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.

http://www.courts.ca.gov/opinions/documents/A145981.PDF

Pratt v. Ferguson

Filed September 6, 2016, Fourth District, Div. Three
Cite as G052385

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

Cynthia Vedder was entitled to all income and mandatory and discretionary distributions from her grandparents’ trust. The trust contained a spendthrift clause, as well as a “shutdown” clause prohibiting certain periodic mandatory principal distributions when those payments become subject to enforceable claims of creditors. Cynthia’s ex-husband obtained judgments against her for wrongfully-taken community property funds and unpaid child support. He petitioned for an order requiring the trustee to pay the child support judgment from trust income and principal, and to impose a lien on the trust to satisfy the community property judgment. The trial court denied the petition based on the shutdown clause.

The court of appeal reversed. A spendthrift clause does not defeat the claims of a support creditor. The shutdown clause does not apply to discretionary payments of income or principal, but only to mandatory principal distributions. Regardless of the nature of the distributions, the shutdown clause cannot defeat the claim of a support creditor. A trustee cannot refuse to satisfy an enforceable child support judgment for an improper purpose, and the court has discretion under Probate Code section 15305 to order a trustee to make distributions to satisfy a support judgment to the extent that it is equitable and reasonable to do so under the circumstances. On remand, the trial court must determine the amount of the income and principal distributions to satisfy the support judgment and future support obligations. The court also reversed as to the community property judgment, which can be satisfied by payment of up to 25 percent of discretionary distributions to a beneficiary.

http://www.courts.ca.gov/opinions/documents/G052385.PDF

Funsten v. Wells Fargo Bank, N.A.

Filed August 25, 2016, First District, Div. Four
Cite as A140941

By Julie R. Woods
Hartog | Baer | Hand
www.hbh.law

Robert and Maryon created the Miller Family Trust in 1991.  When Maryon died in1994, the entire trust became irrevocable by its terms.  The trust granted Robert a limited power of appointment for Maryon’s son Peter and his issue, and designated Peter as sole successor trustee after Robert’s death.  Robert died in 2013.  In his will, Robert exercised the power of appointment to create a new trust and designated Peter and his sister Meade as cotrustees.  In 2013, Peter filed a “safe harbor” application under repealed Probate Code section 21320 for a determination that he would not violate the trust’s no-contest clause by filing a petition to determine that he is the sole trustee and challenging Robert’s actions as trustee.  The trial court assumed that the safe harbor procedure was available because the trust became irrevocable prior to 2001, but denied Peter’s application and held that his petition would be a direct contest and violate the trust’s no-contest clause.  Peter appealed.  

The appellate court held the trial court should not have entertained the safe harbor petition.  The safe harbor procedure in former Probate Code section 21320 was repealed by statute in January 2010.  Even if an instrument became irrevocable before 2001, and prior law is applicable to determine the impact of a no-contest clause, the safe harbor procedure is unavailable.  A safe harbor petition for judicial determination that a proposed pleading is not a violation of a no-contest clause is a pleading and not an instrument for the purposes of the no-contest statutes.   

http://www.courts.ca.gov/opinions/documents/A140941.PDF

Greco v. Greco

Filed August 23, 2016, Third District
Cite as C078369

By Julie R. Woods
Hartog | Baer | Hand
www.hbh.law

Clyde Greco, Jr. was the trustee of his parents’ trust and administrator of their estates. He used money from the trust and estates to litigate three actions against his sisters, all of which were dismissed without prejudice or settled. To recover the money, his sister Cara Lyn Greco brought a civil complaint for elder abuse and a probate petition for recovery of property, breach of fiduciary duty, conversion, and constructive fraud, and claimed the prior litigation was a personal vendetta by Clyde. Clyde filed special motions to strike Cara’s lawsuits under Code of Civil Procedure section 425.16 as strategic lawsuits against public participation (the “anti-SLAPP” law), contending that Cara’s claims arose from protected activity. The probate court denied the motions, finding the gravamen of Cara’s complaint was the taking of money from the settlor or the trust, and the protected activity (Clyde’s litigation) was merely incidental to Clyde’s conduct.

The appellate court affirmed the orders, but reversed and remanded as to the cause of action for constructive fraud. Determining whether to grant a special motion to strike is a two-step process. First, the court must determine whether the aggrieved party has made a threshold showing that the challenged cause of action arises from protected activity. Second, if so, the court must consider whether the plaintiff has demonstrated a probability of prevailing on the claim. A cause of action arises from protected conduct if the wrongful, injurious acts alleged by the plaintiff constitute protected conduct. The gravamen of Cara’s claims for elder abuse, breach of fiduciary duty, recovery of property, and conversion was the act of taking trust and estate funds. The taking was not a statement or writing protected by the anti-SLAPP statute, nor did it involve a public issue or an issue of public interest. However, because the gravamen of Cara’s claim for constructive fraud was not the taking, but the alleged misrepresentations about the underlying litigation, the court reversed and remanded with directions to determine whether Cara demonstrated a reasonable probability of prevailing on the merits.

http://www.courts.ca.gov/opinions/documents/C078369.PDF

East Bay Regional Park Dist. v. Griffin, et al.

Filed August 18, 2016, First District, Div. One
Cite as A141625

By Julie R. Woods
Hartog | Baer | Hand
www.hbh.law

Armand Borel left real property in his trust to the East Bay Regional Park District to establish an agricultural park.  Borel and Sidney Corrie entered into an option agreement for a portion of the same property.  After Borel died, Corrie filed a motion for an order instructing the trustee to convey the optioned property to him, which the settlor’s heirs joined but the District opposed.  After the court appointed a new trustee the District petitioned the court under Probate Code section 17200 to order the trustee to receive a loan from the District.  The District alleged the loan was necessary because the trust was nearly insolvent due to a prior trustee’s malfeasance, and needed funds for debts, taxes, and operational costs.  The District also sought an order to distribute the property without conditions. The probate court granted the 17200 petition and ordered the trustee to accept the loan and distribute the property.  Corrie and settlor’s heirs appealed both orders.  On petition by the District under Probate Code section 1310(b), the probate court found that the trust was insolvent, the trust beneficiaries would suffer harm without additional revenue, the only source of revenue was from the District, and the loan would not harm Corrie’s option agreement rights if enforceable.  The court therefore issued the order under section 1310(b) instructing the trustee to accept the loan and deed the property, notwithstanding the appeal.  Corrie also appealed that order.

The appellate court dismissed the appeals on the Section 1310(b) and 17200 petitions, and affirmed the decision that the option agreement was unenforceable.  Section 1310(b) allows a probate court to direct the exercise of the powers of the fiduciary for the limited purpose of preventing injury or loss to a person or property while an appeal is pending.  Actions taken by the trustee pursuant to section 1310(b) are valid, irrespective of the outcome of an appeal.  The appellate court could not reverse the orders on the 17200 petitions without invalidating the trustee’s actions on those orders.  Because there was no relief that could be granted to the appellants, the court of appeal dismissed their appeals.

http://www.courts.ca.gov/opinions/documents/A141625.PDF

Gregge v. Hugill

Filed July 13, 2016, Sixth District
Cite as H040663

By Catherine M. Swafford
Withers Bergman LLP
withersworldwide.com

William Hugill executed a trust amendment reducing Edward Bennett Gregge’s beneficial interest in the trust.  After William died, Gregge filed a petition to determine the validity of the amendment under Probate Code section 17200, alleging it was invalid based on William’s lack of capacity and susceptibility to undue influence.  Respondent-trustee Michael Hugill obtained a disclaimer from another beneficiary to disclaim his interest in the trust, conditioned upon dismissal of the petition.  Respondent-trustee argued that Gregge lacked standing because the disclaimer restored Gregge’s pecuniary interest to the pre-amendment amount.  The court viewed the disclaimer as a settlement resolving Gregge’s damages, and dismissed the petition under Probate Code section 17202 on the ground that the proceeding was not reasonably necessary to protect the interests of the trust or a beneficiary.

The Court of Appeal reversed.  The conditional disclaimer and the trial court’s dismissal under Section 17202 were contrary to public policy, which promotes effectuating the settlor’s intent and deterring elder abuse.  The trial court’s interpretation of the disclaimer as a settlement was incorrect because Gregge did not agree to settle the case.  Gregge was deprived of his right to challenge the trust amendment and was entitled to a trial on his petition. 

http://www.courts.ca.gov/opinions/documents/H040663.PDF

Torjesen v. Mansdorf

Filed July 5, 2016, Second District, Div. Four
Cite as B263377

By Catherine M. Swafford
Withers Bergman LLP
www.withersworldwide.com

On January 31, 2012, John Torjesen obtained a judgment against Harry Mansdorf. Mansdorf died on August 27, 2012, and Torjesen subsequently sought to enforce his judgment under Code of Civil Procedure section 680.010 et seq., the Enforcement of Judgments Law (EJL). On September 17, 2012, Torjesen obtained a writ of execution. On October 11, 2012, the sheriff’s department levied on Mansdorf’s property. In March 2013, Jaime Gonzalez filed a third party claim for ownership and possession of the property Torjesen levied. Torjesen filed a petition to invalidate Gonzalez’s third party claim, which the trial court granted. Gonzalez did not appeal this order. Two years later, Gonzalez moved to vacate the trial court’s order on the ground it was void ab initio because Torjesen was required to enforce his judgment under the Probate Code.

The trial court denied Gonzalez’s application, and he appealed. The Court of Appeal affirmed. The EJL provides that after a judgment debtor dies, the Probate Code governs the enforcement of judgments against a decedent’s property. Under the Probate Code, money judgments are payable in the course of administration and are not enforceable under the EJL, unless the property is levied upon before the decedent’s death. The manner in which Torjesen enforced his judgment after Mansdorf’s death, i.e., through the EJL, was improper because he was required to proceed under the Probate Code. The issue was whether the statutory scheme deprived the superior court of fundamental jurisdiction, or whether the court simply acted in excess of its jurisdiction. Because the superior court has jurisdiction over the enforcement of judgments and claims relating thereto, the trial court’s error was an act in excess of its jurisdiction, and the order was voidable, not void ab initio. The trial court’s order became final when Gonzalez did not timely appeal from the order.

http://www.courts.ca.gov/opinions/documents/B263377.PDF

Conservatorship of Jesse G.

Filed June 23, 2016, First District, Div. 
Two Cite as A145749

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

Jesse G. had a history of multiple mental health hospitalizations and diagnoses, including schizoaffective disorder, bipolar type, and antisocial personality disorder. He was hospitalized temporarily under Welfare and Institutions Code section 5150 following an incident of bizarre behavior. The public guardian’s expert testified that Jesse was schizophrenic, suffered from auditory hallucinations, and suffered from various substance abuse disorders. Jesse denied that he was suicidal, acknowledged his mental health problems, and felt that he could control them with medication. His friend Michael Elmer testified that Jesse had lived with him in the past, could live with him in the future, and that he would control Jesse’s medications and prevent any substance abuse in the home. The court nevertheless found that Jesse was gravely disabled because his underlying mental condition interfered with his ability to provide for his food, shelter and clothing, and because Elmer’s work commitments would make him unavailable if Jesse needed help.

The Court of Appeal reversed. “Gravely disabled” is a condition in which a person, as a result of a mental health disorder, is unable to provide for his basic personal needs for food, clothing or shelter. But a person is not gravely disabled if he can survive without involuntary detention with the help of responsible family, friends, or others who are willing or able to help meet his needs. Though Jesse did suffer from a mental health disorder, Elmer’s testimony demonstrated that Jesse could survive safely in the community without involuntary detention. If the fact that Elmer was at work during some of each day automatically negated the third party assistance factor, then offers of third party assistance would rarely, if ever, be sufficient to avoid a finding of grave disability. That would defeat the purpose of the LPS Act, which is to use the involuntary commitment power only in those cases where gravely disabled persons are unable to provide for their basic needs either alone or with the help of others.

http://www.courts.ca.gov/opinions/documents/A145749.PDF

Butler v. LeBoeuf

Filed June 20, 2016, Second District, Div. Six
Cite as B259534

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

LeBouef was an estate planning attorney who was the principal beneficiary and the nominated trustee under a testamentary trust executed by Patton, a vulnerable elder. The trial court invalidated the gift to LeBouef under Probate Code section 21380, which provides that a gift to the drafter of a donative instrument is presumptively the product of fraud or undue influence. Despite LeBouef’s denial, the trial court determined he was the drafter, and that he faked a burglary in which the original estate plan was stolen to prevent forensic examination of the original documents. In reaching its conclusion, the court admitted evidence of estate plans LeBouef prepared for other vulnerable elders, Irene Grant and Audrey Cook, under which he or his life partner were the primary beneficiaries.

The Court of Appeal affirmed. Evidence Code section 1101(b) allows admission of evidence of prior acts if they are relevant to prove some fact, such as motive, intent, opportunity, knowledge, or plan. The circumstances surrounding preparation of the Grant and Cook wills were similar in many ways to the circumstances here, including the fact that those wills were prepared on the same forms as the Patton will, and contained the same misspellings and grammatical errors. Evidence of the preparation of the Grant and Cook wills supported the existence of knowledge, opportunity and plan. Thus, substantial evidence supported the court’s conclusion that the same person, LeBouef, prepared all of the wills. LeBouef was not entitled to trustees’ fees, or attorneys’ fees to defend the heirs’ action, because the trust was void. He was also ordered to pay the heirs’ attorneys’ fees because, under section 21380, a beneficiary who is unsuccessful in rebutting the presumption of fraud or undue influence must pay the prevailing party’s attorneys’ fees.

http://www.courts.ca.gov/opinions/documents/B259534.PDF

Conservatorship of Bower

Certified for Publication May 16, 2016, Fourth District, Div. Three
Cite as G050468

By Julie R. Woods 
HARTOG | BAER | HAND
hbh.law

Lynn Bower paid for the support and maintenance of her conservatee husband, David.  The probate court ordered her to pay professional and legal fees directly to David’s conservators and creditors, reasoning that attorneys’ fees and conservator’s fees are part of the conservatee’s support and maintenance.  Lynn paid the professional fees indirectly, by satisfying liens placed on community assets after they were sold, thus failing to comply with the literal terms of the order.  As a result of Lynn’s noncompliance with the order, the probate court ordered the Bowers’ community estate divided under Probate Code section 3089, with David’s conservator receiving David’s share.

The appellate court reversed.  In a conservatorship proceeding where the conservatee has community property interests, the probate court may divide the community property if the competent spouse refuses to comply with an order for the support and maintenance of a conservatee spouse.  However, orders for fees for attorneys and conservators in conservatorships are distinct from orders for the support and maintenance of a conservatee spouse.  Professionals cannot collect their fees under Probate Code section 3089. 

McClatchy v. Coblentz, Patch et al., LLP

Filed May 10, 2016, First District, Div. Five Cite as A114391

By Julie R. Woods 
HARTOG | BAER | HAND
hbh.law

Carlos McClatchy is the beneficiary of an irrevocable trust administered by William Coblentz, a now-deceased partner of respondent law firm. Carlos filed a petition for breach of trust seeking damages for William’s mismanagement of trust assets. Carlos class=”anchor” named William individually as a defendant, as well as Doe defendants 1 through 20. Carlos later amended his petition to add the law firm as a Doe defendant because William was a partner at the firm while acting as trustee. The trial court granted the firm’s motion to quash, holding that Carlos could not amend the petition to add the firm as a defendant because he knew the firm’s identity and facts giving rise to its liability when he filed the original petition.

The court of appeal affirmed, holding that Carlos was not ignorant of the facts establishing a cause of action against the law firm when he filed the original petition. Carlos knew or reasonably should have known to identify the law firm as a defendant in the original petition because William used the firm’s business address, offices, letterhead, and resources in carrying out his duties as trustee. Code of Civil Procedure section 474 allows a plaintiff who is ignorant of a defendant’s identity at the time of filing a complaint to designate the defendant by a fictitious class=”anchor” name. When the plaintiff subsequently discovers the defendant’s identity, the plaintiff may file an amended complaint relating back to the date of the complaint. Because Carlos was not ignorant of the law firm’s identity and the facts giving rise to his cause of action against the firm when he filed the petition, his amended petition substituting the firm for a Doe defendant did not relate back to the original filing. The trial court properly granted the motion to quash because the statute of limitations had expired when he added the firm as a defendant.

Babbitt v. Superior Court

Filed April 25, 2016, Second District, Div. Seven
Cite as B263917

By Julie R. Woods 
HARTOG | BAER | HAND
hbh.law

Mary Lynne and Leland Babbitt established a revocable trust.  Upon Leland’s death, the trust was divided into two subtrusts: the revocable survivor’s trust and the irrevocable decedent’s trust.  Leland’s daughter, Carol McCormack, petitioned to compel Mary Lynne to account for both subtrusts.  Mary Lynne opposed the petition as to the revocable survivor’s trust, but the probate court granted Carol’s petition to compel both accountings.  Mary Lynne filed a petition for a writ of mandamus and a request for a stay of the proceedings.

The appellate court issued a peremptory writ of mandate to vacate the probate court’s order.  While a trust is revocable, a trustee owes duties solely to the settlor, and a contingent beneficiary may not compel a trustee to account for a revocable trust as long as the settlor is not incapacitated, incompetent, or subject to undue influence.  Even though a beneficiary has standing to compel an accounting or information from a trustee when a trust or a portion of a trust becomes irrevocable, the probate court does not have the authority to order a trustee to account or provide information regarding a revocable trust while it is still revocable and the settlor is competent and not subject to undue influence.

Alhadi v. Commissioner of Internal Revenue

Filed April 21, 2016, U.S. Tax Court
Cite as T.C. Memo. 2016-74

By Catherine M. Swafford
Withers Bergman LLP
www.withersworldwide.com

Arthur Marsh was elderly and suffered from various medical problems, including dementia.  In early 2007, he hired Angelina Alhadi to work as his caregiver.  He paid her well beyond the scope of her services.  By the fall of 2008, Marsh had written Alhadi checks totaling nearly $800,000.  In October 2008, he wrote her five checks totaling $500,000.  Vanguard Group raised concerns about the five checks and declined to honor them.  Vanguard sent an elder abuse report to the California Department of Health and Human Services.  After the Department investigated, the Santa Clara Public Guardian petitioned to establish a temporary conservatorship, which the Probate Court granted in January 2009.  On behalf of Marsh’s trust, Santa Clara County filed Forms 1099 for Alhadi for the years 2007 and 2008.  Alhadi failed to report the income she received from Marsh.  The IRS asserted deficiencies and penalties on a total unreported income of more than $1 million.

The Tax Court determined the money Alhadi received from Marsh was taxable income.  Applying California law, the Tax Court determined the money was not a gift because Alhadi exerted undue influence over Marsh.  There was no evidence Marsh loaned the money to Alhadi.  Additionally, the Tax Court determined Alhadi owed self-employment tax, and her 2007 and 2008 tax returns were fraudulent.

https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=10764

DP Pham, LLC v. Cheadle

Filed April 15, 2016, Fourth District, Div. Three
Cite as G050964

By Catherine M. Swafford
Withers Bergman, LLP
www.withersworldwide.com

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.

http://www.courts.ca.gov/opinions/archive/G050964.PDF

Carne v. Worthington

Filed April 13, 2016, Fourth District, Div. One
Cite as D067756
By Catherine M. Swafford, Withers Bergman LLP
www.withersworldwide.com

Decedent executed a revocable trust in 1985 (the “1985 Trust”), and real property located on Via Regla was transferred to the 1985 Trust. Decedent executed an irrevocable trust in 2009 (the “2009 Trust”) which stated, “I transfer to my Trustee the property listed in Schedule A, attached to this agreement.” The sole asset listed on Schedule A was the Via Regla property. Decedent’s daughter filed a petition to confirm the validity of the 2009 Trust and that the Via Regla property was an asset of the 2009 Trust. The trial court found the transfer of Via Regla to the 2009 Trust was not valid because decedent was required to transfer title to the Via Regla property by a deed, and because decedent did not personally own the property at the time of the transfer.

The appellate court reversed. The language quoted above in the 2009 Trust was sufficient to convey the property to the 2009 Trust, and decedent was not required to execute a deed. While decedent did not own the property individually at the time of the transfer, his signature on the 2009 Trust was sufficient to convey title from the 1985 Trust to the 2009 Trust because the 1985 Trust was a revocable inter vivos trust, he owned the property as sole trustee of the 1985 Trust, and he had the power to transfer real property owned by the 1985 Trust.

Ammerman, et al. v. Callender, et al.

Filed March 23, 2016, Fourth District, Div. Three
Cite as G049880
By Julie R. Woods, Weintraub Tobin Chediak Coleman Grodin Law Corporation
www.weintraub.com

Beneficiary Cathe Callender appealed orders concerning the interpretation and administration of a trust which included licensing agreements for use of the Marie Callender class=”anchor” name.  The beneficiaries disputed the division of the trust residue by the so-called changing fraction method, whereby the beneficiaries’ interests are revalued with each non-pro rata distribution payment, such as estate tax payments.  Cathe also disputed her responsibility to pay estate taxes on property specifically gifted to her, free of estate taxes.  The trial court ruled the trust residue should be divided based on the changing fraction method, based on its interpretation of the trust and the settlor’s intent, and on extrinsic evidence.  The court also ruled that Cathe was responsible for a portion of the estate taxes on the specific gift of real property.

The appellate court reversed and remanded, holding that the trial court erred in applying the changing fraction method to the trust residue, and charging estate tax to Cathe’s gift.  There was no language in the trust, no evidence of the settlor’s intent, and no basis in California law or equity to support the use of the changing fraction method.  Instead, the appellate court utilized the fixed fraction method, whereby non-pro rata charges to principal have no effect upon the fractional interests of the beneficiaries.  Further, based on the language of the trust, Cathe was not responsible to pay any estate taxes on her specific gift.

Conservatorship of Heather W.

Filed March 2, 2016, Second District, Div. Six
Cite as 2B260975

Heather W. appeals an order reappointing the County Public Guardian as her conservator under the Lanterman-Petris-Short Act.  The trial court did not advise Heather W. of her right to a jury trial.  The trial court also did not obtain on-the-record Heather W.’s personal waiver of the right to a jury trial.  Based on the evidence presented at the bench trial, the trial court found Heather W. was gravely disabled.

The appellate court reversed because, in conservatorship proceedings pursuant to the LPS Act, the trial court must obtain a personal waiver of a jury trial from the proposed conservatee, or from the proposed conservatee’s attorney when the proposed conservatee lacks capacity to make a jury waiver.  Even though there was evidence that Heather W. was gravely disabled, it is not harmless error to deny due process for a jury trial in an LPS conservatorship.

Hill v. Staggers

Filed February 18, 2016, First District, Div. Two
Cite as A145893

Petitioners, co-executors, sought double damages under Probate Code section 859 for allegations that their stepfather wrongfully withheld property belonging to their mother’s estate. During the proceeding, the stepfather died and his son substituted in as the successor in interest. Summary adjudication was granted on the claim for double damages: the trial court held there can be no punitive damages in an action against a decedent’s personal representative or successor in interest.

The appellate court reversed and held that the rule barring claims for punitive damages against a decedent’s estate did not preclude an award of double damages against the estate. Double damages under section 859 are not punitive damages, which require findings of oppression, fraud or malice. Rather, the damages under section 859 are statutory and only require a finding of bad faith, and may be awarded in addition to punitive damages.

Monschke v. Timber Ridge Assisted Living, LLC

Filed January 29, 2016, First District, Div. One
Cite as A144289

Plaintiff signed a residency agreement containing an arbitration clause as her mother’s agent under a power of attorney. After her mother died, plaintiff sued the care facility for wrongful death and elder abuse in her capacity as personal representative. The trial court denied defendant’s petition to compel arbitration because plaintiff was not a party to the residency agreement.

The appellate court affirmed. As personal representative, plaintiff sued on behalf of decedent’s heirs, not the decedent. Although the arbitration clause in the agreement purported to bind “all parties” and “heirs, representatives, administrators, successors and assigns”, only a party to an arbitration agreement may be bound by it. Plaintiff signed the residency agreement under decedent’s power of attorney, not in plaintiff’s personal capacity: the only parties to the residency agreement were the decedent and the defendant.

Kelly v. Orr

Filed January 11, 2016, Fourth District, Div. One 
Cite as D067735

Within one year of the prior trustee’s resignation plaintiff successor trustee filed a professional negligence action against the prior trustee’s attorneys. The trial court sustained the attorneydefendants’ demurrer, holding the professional negligence action was time barred because plaintiff knew about the representation and the alleged professional negligence more than one year before he filed the action.

The appellate court reversed. The statute of limitations for professional negligence is tolled until the predecessor trustee’s attorney-client relationship is terminated. When a successor trustee replaces a predecessor, he steps into the predecessor’s shoes and succeeds to the predecessor’s tolling rights. Because the attorney-defendants represented the prior trustee until she resigned, and the successor trustee’s malpractice action was filed within the one-year statute of limitations, it was timely.

Gray v. Jewish Federation of Palm Springs and Desert Area

Filed January 6, 2016, Fourth District, Div. Two
Cite as E059761

The Jewish Federation of Palm Springs and Desert Area, as remainder beneficiary, objected to accountings provided by the trustee, who was also the income beneficiary. Federation argued the trustee breached her fiduciary duties by improperly allocating trust expenses to principal rather than income. The trial court agreed with Federation, finding that the expenses were chargeable as income and could be apportioned over the term of the lease.

On appeal, the trustee argued that expenses for leasehold improvements, preparing spaces for rent, broker commissions, and capital improvements are chargeable to principal. However, the appellate court affirmed the probate court’s ruling, finding that the items are allocable to income. If an expense is to be paid from income, but there is insufficient income to pay the expense and maintain the income beneficiary’s distribution, the trustee can pay for the expense from principal; however, the trustee must pay back the principal over time if there is no reserve.

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