Trusts and Estates

Hudson v. Foster

Cite as B300017
Filed September 7, 2021, Second District, Div. Five

By Michelle Barnett Batista
Aaron, Riechert, Carpol & Riffle, APC
www.arcr.com

Headnote:  Conservatorship Accountings – Extrinsic Fraud –Duty of Diligence

Summary:  A conservatee has no duty to investigate representations of fact in a conservator’s account, unless the conservatee becomes aware of facts from which a reasonably prudent person would suspect wrongdoing.

In 2007, Hudson was severely injured in a car accident. A voluntary conservatorship was established for Hudson after a personal injury lawsuit filed on his behalf resulted in a multi-million-dollar settlement.  The probate court appointed Foster, a film producer and Hudson’s friend, as conservator of the estate.  Foster later filed his first and final accounting and petition for discharge, which the probate court approved.  Years later, Hudson discovered that Foster failed to disclose in the accounting that checks shown as paid to third parties were in fact paid to Foster or his production companies.  Hudson filed a motion to set aside the order approving the accounting on the grounds of fraud and misrepresentation of material fact.  The probate court denied the motion, ruling that Hudson had not shown that he was unaware of the defects in the accounting at the time of its approval or that he acted with reasonable diligence in seeking to vacate the order based on information that he should have known. Hudson appealed.

The appellate court reversed.  Although an order denying a motion to vacate an order on equitable grounds is generally not appealable, where, as here, appellant through no fault of his own was not provided an opportunity to appeal the original order, the later order is appealable.  Here, Foster’s misrepresentations deprived Hudson of a full and fair opportunity to object to the accounting prior to entry of the order, or to appeal it.  A conservator is required to disclose material information to the conservatee, and misrepresentations of material fact by a conservator constitute extrinsic fraud.  Hudson was entitled to rely on the disclosures made by his conservator and Hudson’s access to information did not trigger a duty to review records to verify the truth of the conservator’s representations in the accounting.  The Court of Appeal disagreed with prior authority to the extent it suggests that a conservatee who is not aware of facts suggesting wrongdoing must show the misrepresentations of material fact in a fiduciary’s account could not reasonably have been discovered prior to the entry of judgment.

https://www.courts.ca.gov/opinions/documents/B300017.PDF

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