Bringing Down the Perpetrator: Plaintiff’s Checklist For Undue Influence and Financial Elder Abuse Cases

University of California Continuing Education of the Bar
Estate Planning & California Probate Reporter
Volume 23 Number 4 February 2002

NOËL M. LAWRENCE

Introduction

Those who practice in the area of estates and trusts confront widely divergent legal challenges. One aspect the practice is typified by the charming white-haired client carefully planning for the benefit of loved ones. Another aspect is a shadowy one, typified by the sinister quasi-criminal who would prey on that elderly, frail, vulnerable client.

“Undue influence” and “financial elder abuse” are terms of art that describe conduct as old as humankind: overreaching, exploitation, and misappropriation—conduct motivated by the basest of instincts. Although it might be expected that undue influence and elder abuse always plague society, our legal system attempts to provide both criminal and “civil” remedies for punishing wrongdoers and preventing them from profiting from their actions.

In the context of noncriminal litigation, the plaintiff’s objective is to build a case against the defendant, with the twin goals of forcing settlement on favorable terms or taking the case through trial to a successful resolution.

With those goals in view, this article sets forth a checklist of useful tools by which the practitioner can

(i) Obtain information as efficiently and as economically as possible;

(ii) Block the defendant’s planned avenues of “escape” from the consequences of his
wrongdoing, usually by rendering himself judgment-proof; and

(iii) Exert a maximum amount of pressure on the defendant, including presenting him with a “downside.”

A downside in this context means a result more unfavorable than merely returning misappropriated assets or receiving the hoped for inheritance—an adverse money judgment that includes attorney fees and punitive damages, for example, or criminal conviction resulting in fines or incarceration. All three sorts of methods are used simultaneously throughout the litigation. The ultimate goal, of course, is to persuade the defendant that capitulation, or at least settlement on terms favorable to the plaintiff, is the best option. Particularly useful are those methods that disproportionately shift the burden of the litigation, both evidentiary and financial, to the defendant.

Information Gathering

Investigation of the facts is usually the most important part of counsel’s job in an undue influence or elder abuse case. This is especially so if the defendant not only has procured an estate plan that inappropriately benefits him, but has also wrongfully obtained the victim’s assets during lifetime. See Barringer & Lawrence, The Effect of Elder Abuse Lawon the Conduct of Estate & Trust Litigation, Cal Trust & Est Q (Winter 1996).

Typically, discovery will not be narrowly focused on the circumstances surrounding the preparation of a set of estate planning documents, but will require extensive investigation
of other possible premortem and postmortem mischief.

The Pre-Complaint Phase

Before commencement of the litigation, the would-be plaintiff may have the right to
information or an accounting from the future defendant or from a third party. The defendant might be a fiduciary who has a statutorily imposed duty to provide information to the plaintiff. Or, a third party fiduciary may have information regarding the victim that supports the plaintiff’s belief that undue influence and over-reaching has occurred. Pre-litigation discovery, in the form of information or accounting requests, may provide facts that will later enable the plaintiff to file a more specific petition or complaint and to conduct better-focused formal discovery.

To Obtain an Account

From a Conservator

Probate Code §2620 requires a conservator to account to the court at the end of the first year of the conservatorship and every two years thereafter. Notice of the hearing on the account must be given in accordance with Prob C §§2621, 1460. If the plaintiff is not one of those persons otherwise entitled to notice under Prob C §2621, he can file a Request for Special Notice as an “interested person” (Prob C §48) under Prob C §2700.

A wide variety of persons may file written objections to a conservator’s account, including “the spouse or domestic partner of the conservatee” or “any relative or
friend” of the conservatee. Prob C §2622. Subsequent objections to the account and demands for explanations often yield additional information. See Prob C §2616 under which a citation may be issued compelling witnesses to “appear and be examined” regarding wrongful taking, concealment, or disposition of the assets of the conservatee.

See also Prob C §2622.5, which provides for an award of attorney fees and costs for bad faith objections or bad faith opposition to objections to an accounting. Note also that orders approving a conservator’s earlier accounts can be set aside in whole or part if the order was obtained by fraud, conspiracy, or misrepresentation as to any material fact. Prob C §2103(b).

From the Personal Representative of an Estate

Unless formally waived, a final account is always required upon conclusion of estate administration, and interim accounts are required under several circumstances. Prob C §§10950-10954. If the personal representative is an innocent third party witness or repository of information, the plaintiff may rely on Prob C §10950(a), which provides that on its own motion, or on petition by an interested person, the court may order an account at any time. Probate Code §10950(b) makes an account order mandatory upon an interested person’s petition after one year from the date of the last account or, if none, after one year from issuance of letters. If, however, the personal representative is the defendant/wrongdoer, the plaintiff may be in a position to rely on Prob C §10952, which provides for an account within 60 days after the personal representative is removed from office or his authority is otherwise terminated.

Alternatively, the plaintiff might invoke Prob C §10953 when the personal representative has absconded. In addition to the account, an interested person can request that the personal representative produce for inspection or audit the documents that support the account. Prob C §10901.

From the Trustee of a Trust

Subject to certain exceptions, Prob C §16062 sets forth the general duty to account “at least annually, at the termination of the trust, and upon a change of trustee to each beneficiary to whom income or principal is required or authorized in the trustee’s
discretion to be currently distributed.” Of particular importance in the financial elder abuse arena are the provisions of Prob C §§15800, 16064(b). During the time the trust is revocable and the person holding the power to revoke is competent, the trustee does not have a statutory duty to report information to, or account to, beneficiaries other than the holder of the power to revoke (i.e., the settlor).

Although the code is not specific on this point, it seems apparent that if and when the settlor becomes incompetent, that duty is owed to the other beneficiaries of the trust as provided in Prob C §§16061 and 16062. See, however, Johnson v Kotyck (1999) 76 CA4th 83, 90 CR2d 99, reported in 21 Est Plan R 88 (Dec. 1999), in which the court concluded that during the period an incompetent settlor has a conservator of the estate, the duty is owed to the conservator.

Obviously, an incompetent person is more likely to be the target of financial elder abuse than is a competent person, so the rules regarding the duty to account forth in Prob C §15800 take on added importance. Note too, that Prob § l6062(e) contains a useful safeguard against financial elder abuse insofar as it provides “[a]ny limitation or waiver in a trust instrument of the obligation to account . . . shall be void as to any sole trustee who is a disqualified person as defined in Section 21350.5.” Probate Code §§21350-21356 impose restrictions on transfers to drafters of donative instruments, care custodians of dependent adults, and others. Those code sections, powerful weapons to combat undue influence and financial elder abuse, are discussed below.

Probate Code §17200(b )(7) provides that a trust beneficiary may petition the Probate Court to compel an accounting if “(A) the trustee has failed to submit a requested … account within 60 days after written request of the beneficiary and (B) no … account has been made within six months preceding the request.”

Note that the wording of Prob C §17200(b )(7) has the effect of shortening the period between accounts. While Prob C §16062 provides that a trustee must account at least annually, Prob C §17200(b )(7) apparently permits the beneficiary to compel an account every eight months-the six-month waiting period plus the two month trustee performance period.

If delay in obtaining the account would result in further loss to the trust, the beneficiary should be able to rely on Prob C §I7200Cb)(12) to ask the court to take any and all actions necessary to compel “redress a breach of the trust by any available remedy.”

“[A]n agent under a power of attorney shoulders the lightest burden when it comes to
the duty to account.”

From an Agent Under a Power of Attorney

Compared with the fiduciaries mentioned above, an agent under a power of attorney shoulders the lightest burden when it comes to the duty to account. Ironically, such an
agent is probably the most likely of the fiduciaries to commit a breach of trust, often out of ignorance. See Barringer & Lawrence, The Perils of Powers of Attorney for Property Management, 16 CEB Est Plan R 85 (Feb.1995). The agent under a power of attorney must keep records, but has no duty to account except under certain circumstances and to certain persons set forth in Prob C §4236.

If the principal is unable to request an accounting due to incompetency, but is not yet under a conservatorship, either a conservatorship has to be put in place so the conservator can make the request under Prob C (b)(3), or a court order for such an account under
§4236(b)(5) must be sought. Persons with stand to seek such a court order are listed in Prob C §4540.

It is a broad list that includes, among others, the principal, spouse, relative, conservator, personal representative, successor in interest, and “[a]ny other interested person or friend of the principal.” If the power holder is engaged in criminal conduct, Prob C §2952 can be used to protect the victim’s assets pending the appointment of a conservator or issuance of a court order that the power holder render an accounting.

Requests for Special Notice and Other Methods of Obtaining Information

From a Conservator

A spouse, domestic partner, relative or creditor of the conservatee, as wll as “any other interested person,” may file a Request for Special Notice with the court. That request will entitle that person to receive notice of petitions, inventories and appraisals,accountings, and proceedings for the final termination of the conservatorship. Prob C §2700.

From the Personal Representative of an Estate

Any person “interested in the estate” (which is broadly described) may file a Request for Special Notice directed to the personal representative of an estate. Prob C §1250. The interested person can obtain, among other things, inventories and appraisals of property, accounts, and reports of status of administration.

From the Trustee of a Trust

A Request for Special Notice directed to a trustee of a trust is far narrower, both in terms of who may make such a request and the sort of information the trustee must produce. If proceedings involving a trust are pending (and subject to the limitations set for in Prob C §15802), a trust beneficiary can request notice of the filing of a petition under . Prob C §17200. Prob C §17204.

Often there will be no pending trust proceeding, but, subject to certain limitations set forth in Prob C §16064, the Probate Code offers trust beneficiaries greater opportunity to obtain information from the fiduciary than it does beneficiaries of an estate, Upon reasonable request by a beneficiary, the trustee shall provide the beneficiary with a report of information about the assets, liabilities, receipts and disbursements of the trust, the acts of the trustee, and the particulars relating to the administration of the trust relevant to the beneficiary’s interest, including the terms of the trust. Prob C §16061

Other Sources of Information

Title Companies

Customer service at most large title companies will provide title information on an informal basis and at no charge. The plaintiff may want to know the manner in which disputed property is titled and the nature of the encumbrances on an item of real property.
Or, if there was a period during which suspect transactions took place, plaintiff s counsel might request every document in the chain of title during that period. Usually a title company will comply with this sort of request within a few hours or a day, and will fax the documents to counsel.

A Private Investigator

Of course, the plaintiff can always employ a private investigator. Often private investigators have contacts that enable them to obtain information on an informal basis, contacts (for example, in law enforcement) that simply are not available to counsel. Because so many private investigators are former FBI agents, a private investigator can bring a different perspective and skills to the investigation.

The Post-Complaint Phase Form Interrogatories

After the answer to the complaint has been received, the plaintiff can immediately obtain all the facts, witnesses, and documents on which the defendant currently relies by serving Judicial Council Form Interrogatories, specifically JC Form FJ-120. CCP§2030. While many of the form interrogatories are admittedly ill-suited to estate, trust, or elder abuse litigation, two in particular are tremendously helpful in any context.

Form Interrogatory No. 15.1 requires the defendant to identify each denial of a material allegation and each affirmative defense in his pleadings. The interrogatory further requires the defendant, with respect to each such denial and each affirmative defense, to (1) provide all facts that support the denial or defense; (2) provide the names, addresses, and telephone numbers of all witnesses who have knowledge of those facts; (3) identify
all documents and tangible things that support those denials and defenses and (4) provide the name, address, and telephone number of the person who has each such item.

Form Interrogatory No. 17.0 contemplates that the plaintiff will serve a set of Form Requests for Admission along with the Form Interrogatories. CCP §2033.5;
JC Form FJ-l00. Form Interrogatory No. 17 requires the defendant to identify each such request for admission that was denied, and (for each request) to (1) provide all facts upon which the response is based; (2) identify all witnesses who have knowledge of those facts; (3) identify all documents and other tangible things that support those facts; and (4) provide the name, address, and telephone number of the person who has those items.

That is a very significant amount of information. It is (or should be) the totality of the defendant’s defense as of that point in time. As soon as the documents and other items referred to in those two interrogatories have been identified, the plaintiff can follow up promptly with an inspection demand seeking the production of all of the identified items that the defendant possesses or controls. CCP §2031.

Moreover, the plaintiff can update this body of information at least three times before trial by sending a “supplemental interrogatory” that requires the defendant to correct his answers to all previously served interrogatories to the extent the earlier answer is no longer correct or complete. CCP §2030(c)(8). Having sent the form interrogatory so early on in the case, counsel will want to have the answers updated at least once before
trial.

Specially Prepared Interrogatories

This is not to suggest that form interrogatories will discover the totality of the defense. Plaintiff will undoubtedly propound specially prepared interrogatories into other subject matter areas, seeking witnesses and tangible evidence that shed light on, among other things, the decedent’s medical and mental condition, on the quality and nature of the decedent’s relationship with the defendant and others, and on the circumstances surrounding the preparation and execution of all the disputed documents. CCP §2030(c)(1)-(3).

Other Discovery

The circumstances of each case will, of course, prescribe the subject matter areas of the plaintiff’s discovery. Where, however, undue influence and/or elder abuse deprived the elder of money or assets during lifetime, the clearest and most compelling evidence of those misappropriations will usually be the financial records.

A favorite cartoon from the New Yorker shows an accountant and his businessman client looking at a tax return together. The accountant points to the return and says to his client: “Look there … at line 23 …. See that figure? That figure there? That’s why you have to go to jail.” It may just be a number on a page, but when it is the wrong number, the consequences can be both cut
and dried and severe.

Obtaining Financial Records

The plaintiff must begin the investigation by determining what the decedent owned before becoming a victim of undue influence or elder abuse. Often the best source of that information will be the last federal and state income tax returns the victim filed before his
assets began to disappear. Those returns may not be available to the plaintiff without a fight if, for example, they are in the possession of a defendant who, acting as the executor of the decedent’s estate, attempts to raise a right-of-privacy claim. However, the plaintiff should usually prevail against such a claim on the ground that the need to protect elders outweighs the need to protect their privacy, particularly after the elder is deceased.

For a general discussion of the privilege against disclosure of tax returns, see King v Mobile Home Rent Review Bd (1989) 216 CA3d 1532, 265 CR 624. Tax records and similar documents can provide the information needed for securing additional records from third parties. See Obtaining Financial Records From Third Parties, below.

“Records of loan applications can also be exceptionally useful. ”

The plaintiff is well served by taking an exhaustive approach to the investigation of financial records. Although this runs contrary to a principal topic of this article—i.e., ways in which to obtain information as easily and economically as possible—without complete financial records the plaintiff cannot hope to accurately trace assets and reconstruct the transactions that constituted the financial elder abuse.

Obtaining Financial Records From Third Parties

Financial records can be obtained fairly easily because, in general, they will be obtained not from the defendant but from disinterested corporate third parties: banks, brokerage houses, title companies, accountancy firms and the like.

It is advisable to use a two-step method in obtaining financial records. The plaintiff should serve two subpoenas on each third party recipient, one requiring the production of the financial records and one requiring that a person knowledgeable regarding the records appear for deposition. CCP §§2020, 2025. The first form is JC Form 982(a)(l5.2) (Deposition Subpoena for Production of Business Records) (Rev. Jan. 1, 2000).

The second form is JC Form 982(a)(l5.3) (Deposition Subpoena for Personal Appearance). The plaintiff can direct this subpoena to a financial institution to subpoena a witness from that institution even though the plaintiff does not know the identity of the would-be deponent. At the time the subpoena is prepared, the plaintiff may know only, for example, that he wishes to examine a knowledgeable witness regarding certain records and certain transactions. Those “matters upon which the witness is to be examined” must be set forth in the subpoena. The recipient institution is, by the terms of the subpoena, “ordered to designate one or more persons to testify on [the institution's] behalf as to [those] matters.”

It is recommended that in the first records-only subpoena the plaintiff specify a production date for the financial records that is at least two weeks before the date the knowledgeable witness deposition, to allow for delivery and to allow time to review the records and prepare for the deposition.

The law authorizes a “Deposition Subpoena for Personal Appearance and Production of Documents and Things” (JC Form 982(a)(15.4), which requires the witness to appear for his deposition and bring the documents and other tangible things specified in the subpoena. CCP §§2020, 2025. If the plaintiff uses this sort of a subpoena, however, plaintiff s counsel will not have a chance to see the documents before the witness brings them to the deposition. It is almost impossible to review those records thoroughly in such a setting.

Plaintiff’s counsel will be in the presence of the defendant, defendant’s counsel, and the court reporter, all of whom are waiting to get on with the deposition. There will be little opportunity to compare the records with other available information in order to trace assets and reconstruct transactions. In addition, plaintiff’s attorney will make a better impression an his opponent if he arrives at the deposition thoroughly familiar with the subpoenaed documents and ready to examine the witness regarding their contents.

Finally, it may be the case that, once the financial records been reviewed, plaintiff’s counsel can see that it is unnecessary to take the deposition of the knowledgeable corporate deponent. If that is so, it is a simple matter to inform the witness and all interested parties that the deposition is indefinitely postponed or canceled.

A cost-savings tip: Often a financial institution mistakenly believes that it is permitted to charge the subpoenaing party for records production in accordance with an in-house schedule of its own making, and will demand the payment of huge fees before it will produce the records. In fact, a custodian of records is entitled only to “reasonable costs” in producing the records. See Evid C §1563(b)(l), (6).

Obtaining Financial Records From Defendant

The defendant’s knowledge regarding the victim’s assets should also be explored. The defendant may feign ignorance and that too, can be helpful. If the investigation later uncovers assets that the defendant should have known about, especially if the defendant procured some or all of those assets from the victim during the victim’s lifetime, the defendant’s credibility will be greatly impaired.

In addition, the plaintiff should obtain a set of records as complete as possible, regarding the defendant’s assets. Plaintiff’s counsel will want to trace the assets that passed from the victim to the defendant. If the perpetrator managed to convert the victim’s accounts into accounts standing in the names of both the victim and the perpetrator, those may show up when the victim’s records are subpoenaed. It is helpful, however, to specify that the subpoena seeks all accounts in the name of the victim alone, in the name of the victim and the name of the perpetrator, and in the name of the victim and any other person.

Obtaining Information During Mediation

Public policy in favor of promoting settlement of litigation is reflected in Evid C §1119, which prohibits a litigant from offering into evidence information obtained in a mediation. However, that code section does not turn otherwise nonprivileged material into protected information merely on the grounds that it was uttered in a mediation or in a writing prepared in connection with a mediation. Evid C §1120. If the information is discoverable outside the mediation, it is still discoverable and admissible into evidence.

A mediation can be the best, most cost-effective method of investigating the case. The goal of such a proceeding is full and final resolution of the case. However, a mediation is still successful and cost-effective if the plaintiff comes away having learned more about the case than he could have by spending an equal number of hours conducting research or discovery. When compared with a deposition, which incurs the cost of a court reporter and perhaps a videographer, a mediation is almost always a more economical way to obtain great quantities of information.

“The plaintiff should not hesitate to schedule a mediation, even if the case has almost no chance of settling. ”

The plaintiff should not hesitate to schedule a mediation, even if the case has almost no chance of settling. A good mediator will help narrow and crystallize the issues, will bring into sharp relief the areas where the plaintiff and the defendant differ, and will identify the legal and factual reasons for those differences. Along the way, the plaintiff will be receiving valuable information.

Blocking the Defendant’s Means of ”Escape”

Not surprisingly, it is very common for an undue influence/elder abuse defendant to develop a “fall back” plan for avoiding the consequences of his wrongdoing. For example, he might scheme to sell or make gifts of assets to defeat any judgment the plaintiff might obtain. He might plan to encumber real property and thereby drain it of its equity. He might assume that he can avoid liability by simply declaring bankruptcy. He almost certainly will assume that sums paid to his lawyers are beyond the plaintiff’s reach.

As important as it is to develop the evidence necessary to prevail at trial, it is equally important to prevent the defendant from putting the stolen assets beyond the plaintiff’s reach during the course of the litigation and thus prevailing in a practical (if not legal) sense. Protection of assets pending litigation falls into two categories: protecting the assets of an elder who is currently the target of undue influence or financial elder abuse and protecting the assets of an elder who was victimized during lifetime but who has since died. Unfortunately, in many cases the wrongdoing is not discovered until the elder has died.

Protecting Assets of a Vulnerable Elder Who Is Not Conserved

Probate Code §2952 provides for the immediate protection of the elder’s property through intervention of the public guardian in certain circumstances. This code section comes into play if the elder’s assets are not otherwise protected by a conservatorship of the estate. Under Prob C §2952(a), a peace officer may issue a declaration concerning an elder if (1) there is probable cause to believe the elder is substantially unable to manage his or her financial resources or resist fraud or undue influence, (2) there is a significant danger that the elder will lose all or portion of his or her property as a result of fraud or incapacity, (3) there is probable cause to believe a crime is being committed against the elder,
(4) the crime is connected to the elder’s inability to manage financial resources or resist fraud or undue influence as a result of mental deficits, and (5) the peace officer has consulted with an individual qualified to perform a mental status examination. The statutory form for such a declaration is set forth in Prob C §2954. Upon receiving the declaration, the public guardian is authorized, but not required, to take immediate possession or control of the elder’s property. Prob C §2952(c).

An incompetent elder who has been targeted for elder abuse should, of course, be placed under a conservatorship without delay. Good cause for an ex parte temporary appointment of conservator is shown when a third party has control of the proposed conservatee’ s assets and notice is likely to result in loss to the estate. Prob C §2250(c). See California Conservatorships and Guardianships §16.2 (Cal CEB 1990).

Protecting Assets of an Elder Under a Conservatorship of the Estate

If an elder under a conservatorship becomes a financialabuse victim, the perpetrator almost certainly will be the elder’s own conservator, because it is the conservator who has control of the assets. Probate Code §2620.2(c) sets forth the court’s powers to protect the
conservatee’s assets, including removing the conservator from office, suspending his or her powers, appointing a temporary conservator, appointing legal counsel and investigating the conservator, if the conservator failed to file an account as required by Prob C §2620 after written notice directing the conservator to file the account within 60 days under Prob C §2620.2(a).

Probate Code §2620.2(d) provides that the court can also take any other action in response to a failure to file a proper account. Ironically, because Prob C §2620 apparently gives the conservator at least 45 days to file the accounting, the method for putting a stop to criminal conduct is not as swift as that set forth in Prob C §2952 for persons not under a conservatorship. Presumably though, if there is evidence of criminal conduct, the
probate court would use the power to suspend a conservator under Prob C §2654 to provide the same sorts of protections that Prob C §2952 does. See Removing Defendant as Fiduciary, below.

Protecting Assets After an Elder’s Death
Real Property

If real property is in dispute, plaintiff’s counsel should file and record a Notice of Pending Action (a “lis pendens”) on the real property immediately upon filing the complaint. Recordation of a lis pendens is allowed when the plaintiff has a real property claim. CCP
§405.1. A real property claim is one that, if sustained, would, among other things, affect title to or the right to possession of specific real property. CCP §405.4. Recording a lis pendens preserves the plaintiff’s interest in the property pending the final determination of the action. The requirements for filing and recording a lis pendens are set forth in CCP §§405-405.24.

To avoid the risk of slandering title, plaintiff’s counsel must ensure that the complaint disputes a right in real property. For instance, the complaint might attack a deed transferring real property from the victim to the perpetrator, or might challenge the validity of a trust amendment providing for distribution of the real property to the perpetrator.

Filing and recording a lis pendens in the chain of title of the subject real property puts the world on constructive notice of the dispute. The lis pendens should effectively prevent a sale or any encumbrance of the property pending the outcome of the litigation. Any purchaser or encumbrancer is deemed to have constructive notice of the pendency of the noticed action, and the rights and interest of the claimant, as ultimately determined, relate back to the date the lis pendens was recorded. CCP §405.24.

Bank Acccounts, Brokerage Accounts and Other Assets

Three Day Non-Judicial Freeze of Bank and Savings Accounts

Protecting assets that are not real property is considerably more difficult, and involves going to court. In order to protect such assets pending litigation, a temporary restraining order and a preliminary injunction must be sought. A temporary restraining order protects assets until a hearing can be held on the application for the preliminary injunction.

Injunctive relief always takes time to accomplish, even ex parte. In emergency situations, when the plaintiff suspects that the perpetrator may move and hide assets, there are useful statutory provisions in the Financial Code that, in effect, allow for a short-term asset freeze until judicial intervention can be obtained. For funds or other personal property on deposit at banks or savings associations, if the perpetrator is a fiduciary (e.g. a trustee named under a wrongfully procured trust or a holder of a power of attorney), the first thing to do is to give notice of adverse claim to each institution under Fin Code §952(a) (banks) and §661(a) (savings associations).

Those statutes provide that an adverse claimant may deliver to the bank or savings association, at the office at which the deposit or account is carried, his or her affidavit (or declaration under penalty of perjury) stating (1) that of his or her own knowledge the person to whose credit the deposit stands is a fiduciary for the adverse claimant; (2) that the adverse claimant has reason to believe the fiduciary is about to misappropriate the deposit or account or the property; and (3) the facts on which that claim of fiduciary relationship and that belief are founded. If such a notice of an adverse claim is made, the bank or savings association must freeze the account for a period of not more than three court days (including the date of delivery) from the date that the bank or association received the claimant’s declaration.

Preliminary Injunction

Longer term protection against further misappropriation will generally require court orders. For example, the plaintiff may seek orders enjoining withdrawals from a brokerage account formerly belonging to the decedent and now standing in the name of the defendant. Such relief is usually initiated by applying for a temporary restraining order (TRO) and preliminary injunction. A TRO may be issued for a limited period of time pending consideration of an application for a preliminary injunction. See CCP §527.

In many cases, the plaintiff will be well into the discovery phase of the case before he is armed with enough evidence for a successful TRO application. The application is typically made by providing the court with a copy of a verified complaint, additional affidavits or declarations, and a memorandum of points and authorities.

A preliminary injunction may be granted when it appears by the verified complaint or affidavits that the commission or continuance of some act during the litigation would produce waste or great or irreparable injury to a party in the action. CCP §526(a)(2).

Normally, an injunction will not issue if only money is involved, because the legal remedy of damages is supposedly adequate. CCP §526(a)(4). However, in an action to recover specific funds, as distinct from a “naked claim for damages,” an injunction may issue to prevent dissipation of the funds. See Heckmann v. Ahmanson (1985) 168 CA3d 119, 136, 214 CR 177, In the undue influence/elder abuse arena, it is often possible to identify the needed specific fund. The preliminary injunction may also issue when the obligation arises from a trust. CCP §526(a)(7).

In deciding whether or not to grant a preliminary injunction, the court must consider the likelihood that the applicant will succeed on the merits at trial, the harm to the applicant in the injunction is denied, and the harm to the responding party if the injunction is issued.

When seeking to establish the likelihood of success on the merits, Prob C §21350 can be very helpful when it applies. In general, the statute shifts the burden of proof to the defendant in cases involving transfers to such persons as a fiduciary who transcribed the instrument or a care custodian of a dependent adult. This assumes the transferee is not related to the transferor by blood or marriage and is not a cohabitant with the transferor.

If the plaintiff is successful in obtaining a preliminary injunction, he will not only have preserved assets, hw ill have demonstrated to the defendant the first judge before whom the case was presented agreed that the plaintiff will probably prevail. That knowledge combined with the defendant’s deprivation of the subject funds with which to litigate, could promote resolution of the case on terms satisfactory to the plaintiff.

Removing Defendant as Fiduciary

If the defendant is a fiduciary, the plaintiff generally will seek court orders suspending the powers of the fiduciary or removing the fiduciary. In some cases, this may be an effective alternative to obtaining a preliminary injunction, in terms of preventing further misappropriation of the victim’s assets. In other cases, it may reduce problems that arise 13or attempts to claim evidentiary privileges that belong to the victim.

Provisions for the removal of fiduciaries include Prob C §§8500-8505, 9614 (removal or suspension of a personal representative of an estate); Prob C §§15642, 17200(b)(10) (suspension and removal of a trustee); Prob C §2654 (suspension of a conservator); and Prob C §4541(d) (revocation of authority of attorney-in-fact). In cases involving a decedent’s estate, the need for removal can usually be avoided by preventing the appointment of the defendant as the personal representative in the first place.

Removal is particularly important in cases involving estates and trusts, because the executor or trustee may be able to claim a fiduciary duty to defend the will or trust. If the defendant is removed, the new personal representative may still be able to defend the will or trust, or he may have a different view of the litigation. He may believe that expending the estate’s resources in defense of the will contest is not in the best interests of the estate. See e.g. Prob C §9611. Alternatively, an “interested person” (Prob C §48) may bring a petition for an order directing the fiduciary not to defend, if he believes defending a will contest will cause the estate to suffer “great or irreparable injury.” Prob C §9613.

The grounds for removal of a trustee are set forth in Prob C §15642(b). Note that a sole trustee may be subject to removal if he is a person described in Prob C §21350(a) (i.e., if he drafted the trust instrument), regardless of whether said sole trustee is the named recipient of a donative transfer under the instrument.

Attacking Source of Defendant’s Attorney Fees

The defendant’s attorney may be the greatest obstacle to settlement. Although no ethical attorney would condone the practice, some few of the profession may continue to litigate until the client’s ability to pay his fees is exhausted, without regard to the merits of a case.
The money to pay those fees probably comes from one or both of two sources: the perpetrator’s personal funds and the victim’s funds in the possession of the perpetrator. Either way, funds that might otherwise be available to the plaintiff to satisfy claims against the defendant are being depleted.

Charles Dickens, who as a young man worked at the Inns of Court, observed this practice and wrote about it in Bleak House regarding the fictional Chancery Court case of Jarndyce and Jarndyce:

“Mr. Kenge,” said Allan … Do I understand that the whole
estate is found to have been absorbed in costs?”

“Hem! I believe so,” returned Mr. Kenge ….

“And that thus the suit lapses and melts away?”
“Probably,” returned Mr. Kenge ….

“My dearest life,” whispered Allan, “this will break.
Richard’s heart!”

This observation raises the question of whether there are steps that can be taken to prevent the use of the victim’s funds for the payment of attorney fees, or at least raise enough doubt about a possibility of nonpayment that the defendant’s attorney will not assume there is no risk of nonpayment or of an order to reduce fees.

As just indicated, the plaintiff needs to seek the suspension or removal of the defendant if the defendant is still an acting fiduciary. That measure may at least protect remaining trust or estate assets, as may court orders preventing payment of fees without further court authorization. However, the remedy of removal may be relevant or ineffective in cases where the defendant did not hold a formal fiduciary position or where assets have long since ended up titled in the name of the defendant individually

When Perpetrator, as Fiduciary, Is Using Trust or Estate Assets To Pay Fees

Even if the defendant holds a fiduciary position and can assert a duty to defend a will or trust or an attack on an action, a fiduciary’s right to reimbursement of attorney fees is limited. A fiduciary may not obtain reimbursement of attorney’ fees and other litigation costs of a trust unless the trustee’s prosecution or defense of the litigation resulted in an objective benefit to the trust and the fees were incurred in subjective good faith. Conservatorship of Lefkowitr (1996) 50 CA4th 1310, 1315, 58 CR2d 299, reported in 18 CEB Est Plan R 89) (Dec. 1996).

In many cases, the plaintiff should be able to obtain a court order barring payment of attorney fee without court approval or enjoining the defendant’s attorney from making trust account distributions without approval. In the latter case, this presupposes that there is evidence that the fees received by the attorney can be, traced to the estate or the victim. However, even when this cannot be demonstrated initially, a written warning to defendant’s attorney may be sufficient to convince the attorney that there is a potential risk of being required to return estate or victim funds at some point in the future as a result of the imposition of a constructive trust on misappropriated funds.

Uniform Fraudulent Transfer Act May Apply to Transfer of Unearned Attorney Fees

In rare cases, a transfer of funds to an attorney may raise issues concerning the possible application of the Uniform Fraudulent Conveyances Act (CC §§3439-3439.12) if, at the time those transfers were made, theywere intended to hinder, delay, or defraud the plaintiff as a creditor of the defendant, in violation of CC §§3439.04(a). This might require a showing that the monies transferred exceeded the cost of contemplated legal
res. See Convincing Defendant That “Avenues of Escape” Will Be Ineffective, below.

Convincing Defendant That “Avenues of Escape” Will Be Ineffective

Uniform Fraudulent Transfer Act

The defendant may seek to defeat the plaintiff’s rights by rendering himself insolvent in the course of the litigation. The defendant might sell assets for less than money’s worth, or transfer assets as gifts or retitle them in the names of family members and others, or drain the equity out of real property by encumbering it. Rather than waiting until they happen, the plaintiff can seek to prevent such conveyances. The plaintiff can inform the
defendant that, if and to the extent that any such transfers would render the defendant unable to meet his obligations, such transfers would violate the Uniform Fraudulent Transfer Act (CC §§3439-3439.12) Under CC §3439.04(a), “[a] transfer made or
obligation incurred by a debtor is fraudulent as to a creditor … if the debtor made the transfer … [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor. If the defendant made any such transfers without receiving reasonably equivalent value at a time when the defendant believed or reasonably should have believed that he would incur debts beyond his ability to pay as they became due, those transfers would violate
CC §3439.04(b)(2).

In addition to the other remedies (CC §3439.07), punitive damages are, of course, available for fraud. CC §3294(a). Defendant’s commission of fraud must be established by clear and convincing evidence.

A transferee who is innocent, i.e., has no intent to defraud creditors, is not personally liable if as he returns the assets transferred, and the assets may not be recovered from a subsequent good faith transferee. CC §3439.08(b)-(c). The good faith transferee also has a lien on those assets to the extent of value given. CC §3439.08(d). However, a transferee who colludes with the transferor to intentionally defraud creditors can be held personally liable on a conspiracy theory. Taylor v S & M Lamp Co. (1961) 190 CA2d 700, 706, 12CR 323.

Bankruptcy Law

The defendant may believe he can defeat the plaintiff’s rights by declaring bankruptcy. As a consequence, the defendant may fail to treat the plaintiff’s claims seriously or may adopt unreasonable positions in settlement negotiations. Bankruptcy filings can indeed be a problem for a plaintiff, but the defendant may have less protection than he expects, and there may be situations in which the plaintiff can convince the defendant that such a strategy will not be successful.

Debts arising from “defalcation in a fiduciary capacity” are nondischargeable in Chapter 7 proceedings if the plaintiff (creditor) files a nondischargeability complaint in the bankruptcy court within 60 days after the first date set for the meeting of creditors. 11 USC §523(a)(4); Fed R Bankr P 4007(c). Such debts can be discharged in a Chapter 13 proceeding, but that assumes court approval of the debtor’s plan. A restitution order
made in a criminal proceeding is not dischargeable. 11 USC §1328(a)(3). Further, a bankruptcy proceeding usually will not defeat a constructive trust claim to specific
property that was not voluntarily transferred to the debtor by the claimant. See Reliance Ins. Co. v Brown (WD Mo 1984) 40 BR 214; Blachy v Butcher (6th Cir
2000) 221 F3d 896.

Persuading Defendant That Capitulation or Settlement Is Best Option

As a practical matter, a real perpetrator, meaning one who acts with scienter, typically does not settle his case because he should or because it is the right thing to do. Like a criminal defendant who for a variety of reasons including the magnitude of evidence against him decides to plea bargain, a perpetrator capitulates or settles when the plaintiff has succeeded in rendering that kind of resolution the best possible option. Obviously, this involves rendering the perpetrator acutely uncomfortable
in his position as defendant.

Litigation inherently puts pressure on the defendant. The means by which the plaintiff prosecutes his case, discovery, attorney fees, the freezing of assets through injunction, the recordation of one or more lis pendens, blocking the various “avenues of escape”–creates that pressure. What else might the plaintiff do to improve his position at the expense of the defendant?

Involving the Police and District Attorney

The case against the defendant may be sufficiently egregious to warrant the involvement of the authorities. Certainly, if the elder is still living and is a crime victim, steps should be taken to protect the victim’s assets with the assistance of the police under Prob C §2952. And, obviously, any crime should be reported to the police. When it is less certain that criminal activity has occurred, it is more difficult to determine whether, how,
and when to involve the police or the district attorney, and that discussion is beyond the scope of this article.

Remember, however, that while the plaintiff has every right to go to the police or the district attorney, no person has the right to threaten to do so. If such a threat were made by an attorney, that attorney would be in violation of Cal Rules of Prof Cond 5-100(A) (“A member shall not threaten to present criminal …. charges to obtain
an advantage in a civil dispute.”). Moreover, if any person (including plaintiff’s attorney) threatens to accuse the defendant of a crime, that action could be within the definition of the crime of extortion.

Penal Code §518 includes in that definition “the obtaining of property from another, with his consent … induced by the wrongful use of … fear. … ” Penal Code §519 defines such fear to include that caused by “accusing] the individual threatened . . . of any crime.” An agreement to conceal or “compound” a crime in exchange for money or property is also punishable under Pen C §153.

That having been said, the point is this: The defendant will be made acutely uncomfortable by the involvement of the authorities, even if the police and the D.A.’s investigator never take the matter past the investigation phase. Fortunately, a growing number of law enforcement agencies are taking an active interest in
elder abuse matters and some police departments and D.A. offices now have special units.

Awards of Fees and Costs and Punitive Damages Under the Law of Elder Abuse

If the plaintiff’s will contest, trust contest, or similar action is based solely on undue influence, ordinarily the defendant has nothing to lose but the case itself. The defendant has no “downside,” no personal liability. By contrast, if the facts support a claim for elder abuse, the defendant faces the possibility of a personal judgment against him. Such a judgment could include an award of punitive damages if fraud, malice, or oppression is proven, as well as an award of attorney fees and costs. CC §3294; Welf & I C §15657.

A cautionary note: Would-be elder abuse plaintiffs often make the mistake of assuming that the same sorts of persons who have standing to bring a will or trust contest have standing to bring an elder abuse action on behalf of a deceased elder. In fact, after the victim’s death, standing is limited to the personal representative of the deceased elder’s estate or, if none, the elder’s successors in interest. Welfare and Institutions Code §15657.3 provides:

(c) The death of the elder or dependent adult does not cause the court to lose jurisdiction of any claim for relief for abuse of an elder or dependent adult. (d) Upon petition, after the death of the elder or dependent adult, the right to maintain the action shall be transferred to the personal representative of the decedent, or if none, to the person or persons entitled to succeed to the decedent’s estate. [Emphasis added.]

Award of Attorney Fees and Costs Under Prob C §21350

When the statute applies, a plaintiff prosecuting a case of undue influence and/or elder abuse has no greater friend in the law than Prob C §21350. The statute limits donative transfers to specified transferees, including a person who is in a fiduciary relationship
the transferor and who transcribed the donative instrument or caused it to be transcribed, or the care custodian of a dependent adult (without regard to who drafted caused the donative instrument to be transcribed). The statute does not apply if the transferee is related to the transferor by blood or marriage or if he or she is a co-habitant with the transferor, or if an attorney executes a certificate of independent review, or a court approves the transaction in advance. And after the fact, all transferees except a drafter of the instrument are afforded the opportunity to prove, if they can, that the subject transfer was not the product of fraud, menace, duress, or undue influence. Prob C §21351.

When the defendant attempts to rely on the last exception and fails, the plaintiff is entitled to reasonable attorney fees and litigation costs. Prob C §21351(d). The possibility that the plaintiff will prevail is high, because the statute places burden of proof on the relevant issues on the transfere raises the burden to “clear and convincing evidence,” and prohibits the defendant from using his own testimony.

If the defendant actually drafted the instrument, the plaintiff’s advantage is even greater: The defendant is not given the opportunity to prove lack of fraud, menace, duress, or undue influence and the transfer is therefore void. Prob C §§21350(a)(l), 21350.5, 21351(e). (See also certain narrow exceptions set forth in Prob
§21351(f).)

NOËL M. LAWRENCE received her B.A. from the University of California (Berkeley) and her J.D. from the University of San Fran-
Co. Ms. Lawrence is Certified as a Specialist in Probate, Estate Planning & Trust Law. She specializes in estate and trust related
litigation and financial elder abuse, Ms. Lawrence practices in Oakland.

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