In Keading v. Keading, the California Appeals Court, First District, addressed three consolidated appeals involving elder financial abuse, and, in the published portion of the opinion, held that substantial evidence supported the trial court’s finding of elder financial abuse, and that Probate Code section 859 authorizes an award of double damages for the commission of elder financial abuse without a separate finding of bad faith.
The Facts of Keading v. Keading
Lucille and Lewis Keading died in 2015 and 2016, respectively. Decades before their deaths, they created a family trust for the benefit of their two children, Kenton and Hilja. Kenton and Hilja were to split the trust assets equally after their parents’ deaths. The main trust asset was the family residence in El Sobrante (the “Property”).
In 2011, Lucille and Lewis amended the trust to give Hilja a specific gift (an investment account) and made Kenton the residual beneficiary of the remainder of the trust. In February 2015, when the parents again amended the trust, they essentially restated the terms of the 2011 amendment that left Kenton all trust assets but for the investment account left to Hilja. At the same time, Lewis granted a power of attorney to Kenton.
In June 2015, Lucille was diagnosed with a brain tumor. Lucille died on September 10, 2015. After Lucille died, Lewis’s health began to deteriorate. He required semi-weekly kidney dialysis treatment and ongoing in-home care. Hilja moved into Lewis’ home and cared for him, and Kenton also spent considerable time with Lewis.
In late September 2015, Lewis executed a durable power of attorney designating Hilja his attorney-in-fact. Around the same time, he contacted his estate planning attorney about undoing the earlier amendment and amending the trust to equalize the assets distributed to his children after his death. The estate planning attorney “saw no indication Lewis lacked capacity or was under influence,” and he perceived that Lewis “understood, was very sharp” and “knew exactly what he was doing.”
While Hilja was away in early December 2015, Kenton discovered an email she sent to an attorney friend stating she was looking for a lawyer to pursue Kenton for claimed elder abuse.
According to Kenton, upon reading the email, Lewis stated, “ ‘I have misjudged your sister’ ” and “ ‘I have made a big mistake,’ ” and he wished to change the disposition of his estate. On December 12, 2015, while Hilja was still away, Kenton took Lewis to a UPS store, where Lewis executed a new power of attorney designating Kenton as attorney-in-fact. When Hilja returned days later, she and her father discussed the email Kenton had discovered. According to Hilja, Lewis told her “ ‘it didn’t change anything.’ ”
The Typed Declaration
Lewis executed a typed declaration on December 19, 2015, stating he was not the victim of elder abuse. In the declaration, Lewis asserted,
My son, Kenton Keading, has not committed any acts of abuse, either physical or mental to myself . . . . On the contrary, Kenton has always been actively supporting and caring of myself and his mother.
The document set forth the statutory definition of “elder abuse” under the Penal Code, after which Lewis continued:
It is my firm belief that my son, Kenton Keading, never willfully or otherwise, committed any acts or omissions that constitute ‘elder abuse’ as defined above.
At trial, Kenton explained that Lewis signed the document after Kenton shared his fear that Hilja would fabricate criminal elder abuse charges against him that could send him back to jail. He said the general content of the letter was Lewis’s idea, but Kenton had included the statutory reference.
Around Christmas, Lewis made the decision to discontinue dialysis. On December 30, 2015, acting under the recently conferred power of attorney, Kenton executed a grant deed transferring the Property out of the trust and to himself and Lewis in joint tenancy with right of survivorship. He did not show Hilja the deed before Lewis’s death.
The Stock Transfer
On January 1, 2016, Lewis transferred to Kenton nearly 99,678 shares of stock in Freedom Motors, which had been purchased years earlier for $1 per share. Lewis’s signature on the transfer document is barely legible. Warner, the family friend helping with Lewis’s care, was present when Lewis executed the transfer. At trial, she testified that Lewis was very sick, could not raise his head, and barely had strength to physically sign. Kenton admitted he did not show Hilja the stock transfer before Lewis died.
On January 2, 2106, Kenton removed Hilja as successor trustee of the trust, using his power of attorney.
Lewis died on January 4, 2016. Kenton recorded the deed to the Property four days later.
The Trial Court Action
Hilja filed an action to suspend and remove Kenton as trustee of the family trust, appoint a successor trustee, and confirm trust ownership of the Property. Hilja also sought to set aside the December 30, 2015 grant deed, recover any assets Kenton attempted to transfer from the trust to himself, and hold Kenton liable for damages resulting from elder abuse, fraud, conversion, and intentional interference with an expected inheritance. That same day, the trial court suspended Kenton as trustee. It appointed Elizabeth Soloway, a professional fiduciary, as the trustee.
Months later and by stipulation of the parties, the trial court resolved the discrete issue of whether the December 30, 2015 grant deed transferring the Property from the trust to Kenton and Lewis as joint tenants was valid. The court found the transfer invalid, set aside the grant deed, and vested title to the Property with the trustee as an asset of the trust.
After a four-day bench trial, the trial court issued a statement of decision in which it concluded Kenton was liable for elder abuse. The court determined that the power of attorney, the grant deed transferring the Property out of the trust, and the stock transfer—all done in the month before Lewis died—all resulted from elder abuse. The trial court’s amended judgment, entered on September 19, 2017 ordered Kenton to pay damages in the amount of $1,548,830, and return of the stock and the Property.
California’s Elder Abuse Act
California’s Elder Abuse Act is found at Welfare & Institutions Code § 15500 et. seq. The purpose of the Elder Abuse Act is “essentially to protect a particularly vulnerable portion of the population from gross mistreatment in the form of abuse and custodial neglect.’ ” (Estate of Lowrie (2004) 118 Cal.App.4th 220, 226 (Lowrie).)
Although the California Elder Abuse Act was originally enacted to encourage the reporting of abuse of elders and dependent adults, the Legislature modified the statutory scheme to “provide incentives for private, civil enforcement through lawsuits against elder abuse and neglect.”
What Constitutes Substantial Evidence Of Elder Financial Abuse Under California’s Elder Abuse Act?
Pursuant to section 15610.30 of the Elder Abuse Act, financial abuse of an elder occurs when a person “[t]akes, secretes, appropriates, obtains, or retains . . . real or personal property of an elder or dependent adult by undue influence, as defined in Section 15610.70.” (§ 15610.30, subd. (a)(3).)
Section 15610.70 defines “undue influence” as “excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity.” (§ 15610.70, subd. (a).)
In determining whether a result was produced by undue influence, section 15610.70 directs courts to consider: (1) the victim’s vulnerability; (2) the influencer’s apparent authority; (3) the tactics used by the influencer; and (4) the inequity of the result. (§ 15610.70, subd. (a)(1)–(4); see also Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 867.) Because perpetrators of undue influence rarely leave any direct evidence of their actions, plaintiffs typically rely on circumstantial evidence and the reasonable inferences drawn from that evidence to prove their case. (In re Cheryl E. (1984) 161 Cal.App.3d 587, 601 [because direct evidence of undue influence is rarely obtainable, “[t]he court is often obliged to infer undue influence from the totality of the circumstances” (italics omitted)].)
Here, there was substantial evidence supporting the California trial court’s finding of elder financial abuse.
Taking, Obtaining, Or Retaining Both Real And Personal Property
Here, Kenton executed the grant deed to remove the Property as a trust asset to be shared with Hilja, essentially attempting to deed the Property to himself. Kenton also obtained stock certificates belonging to Lewis and exercised rights over Lewis’s car when he sold it.
Four Considerations Of Undue Influence
The victim’s vulnerability. Here, there was abundant evidence that Lewis was vulnerable around December 2015 when Kenton executed most of the improper transactions. In the last weeks of his life, Lewis was grieving the loss of Lucille and his health had deteriorated such that he needed round-the-clock care. He required kidney dialysis, which he ultimately decided to discontinue. As one of Lewis’s care providers, Kenton was well aware of his father’s many vulnerabilities in the last month of his life.
The influencer’s apparent authority. The influencer’s apparent authority may be demonstrated by the influencer’s “status as a fiduciary, family member, care provider, health care professional, legal professional, spiritual adviser, expert, or other qualification.” (§ 15610.70, subd. (a)(2).) This criterion was readily satisfied, since Kenton was Lewis’s only son and one of his care providers.
The influencer’s actions or tactics. In the week Hilja was away, Kenton rushed his father to a UPS Store to execute a new power of attorney designating him attorney-in-fact. As Lewis’s attorney-in-fact, Kenton then executed the grant deed that transferred the Property out of the trust. Kenton mentioned nothing about these matters to his sister.
The inequity of the result. Here, there was substantial evidence that the effects of Kenton’s activities on Hilja, a trust beneficiary, were significant. Kenton’s actions removed the main asset from the trust, resulting in a significant economic loss for Hilja as a trust beneficiary. As the trial court found, such result was counter to Lewis’s last clear, lucid, and considered disposition of the trust to equalize distribution between Hilja and Kenton.
Double Damages Under California Probate Code Section 859
Section 859 of the California Probate Code states:
If a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to a conservatee, a minor, an elder, a dependent adult, a trust, or the estate of a decedent, or has taken, concealed, or disposed of the property by the use of undue influence in bad faith or through the commission of elder or dependent adult financial abuse, as defined in Section 15610.30 of the Welfare and Institutions Code, the person shall be liable for twice the value of the property recovered by an action under this part. In addition, except as otherwise required by law, including Section 15657.5 of the Welfare and Institutions Code, the person may, in the court’s discretion, be liable for reasonable attorney’s fees and costs. The remedies provided in this section shall be in addition to any other remedies available in law to a person authorized to bring an action pursuant to this part.
We have previously written about a case involving double damages under section 859 here.
In this case, Kenton argued that the court erroneously construed California Probate Code section 859 by imposing double damages for his commission of elder financial abuse without a finding of bad faith.
The court stated:
The language of Probate Code section 859 is not ambiguous in specifying when a bad faith finding is necessary for double damages. The statutory language contains three different clauses describing the three different categories of conduct that can support double damages, each of which is separated by the conjunction “or.” The first two categories require a separate finding of bad faith but the third one—applying when a person “has taken, concealed, or disposed of the property . . . through the commission of elder or dependent adult financial abuse, as defined in Section 15610.30 of the Welfare and Institutions Code”—does not.
The judgment of the California probate court finding Kenton committed elder financial abuse was upheld.