Can a person who is both personal representative of a California probate estate and a beneficiary of that estate maintain in her individual capacity a claim for financial elder abuse (or any other claims) based on allegations that she was manipulated into taking actions as personal representative that damaged her interests as a beneficiary? On the facts of Ring v. Harmon, a December 15, 2021 opinion, yes.
The Facts of Ring v. Harmon
Vickie Atiyeh died in November 2015, survived by her mom, Awana Ring. Ring was about 80 when her daughter died. In her will, decedent left a house to Ring. Scott Robb and Zachary Robb are a son and adult grandson of Ring.
Ring alleged that the Robbs, together with Richard Harmon and TSG Financial Corp. (TSG) used decedent’s probate proceedings as a means to extract equity from the house to use for their own purposes. Ring alleged as follows:
Ring alleges that at the time the probate petition was filed, the house was worth approximately $400,000,and it secured liens of approximately $110,000. She alleges she was induced to enter into a $200,000 loan from respondents on behalf of the estate, on terms requiring interest only payments at a rate of 10.99 percent and totaling $109,900.20 over five years, followed by a balloon payment of $201,831.67, with additional penalties if there were to be a default. The proceeds of the loan were distributed as follows: (1) approximately $137,000 to pay off debt secured by the house; (2) approximately $18,000 to respondents in the form of various fees; (3) 1029.08 to a title company; (4) $1,260 to an escrow company (also a defendant and allegedly an alter ego of Harmon, though not party to this appeal) and; (5) $41,894.24 in net loan proceeds, deposited to a bank account of Atiyeh’s estate that had been opened by Scott Robb. Shortly after the loan proceeds were distributed, the Robbs withdrew the loan proceeds deposited in the estate’s bank account.
Ring’s second amended complaint asserted claims only in her individual capacity and included nine causes of action including predatory lending, breach of fiduciary duty, rescission or reformation, constructive fraud, and elder abuse (financial) under California law. The California trial court sustained Harmon and TSG’s demurrer to the complaint with leave to amend, finding that the claims alleged were properly asserted only in Ring’s capacity as personal representative. Ring did not file an amended complaint, and judgment was entered in Harmon and TSG’s favor.
Who Is Authorized To Maintain or Defend Actions On Behalf Of a California Probate Estate?
Generally, an executor or other personal representative is the person authorized to maintain or defend an action on behalf of a probate estate. (Smith v. Cimmet (2011) 199 Cal.App.4th 1381, 1391(Smith); see Prob.Code, § 9820; Code Civ. Proc., § 369, subd. (a).) There are limited circumstances where the beneficiary of the estate has standing to sue a third party to seek redress for an injury to the estate.
California Probate Code section 9654 provides that a beneficiary may bring suit to recover possession of or quiet title to property. Also, appellate courts have occasionally recognized “special circumstances ”where it is appropriate to allow the beneficiary to pursue an action because the personal representative cannot or will not act.(Bohn v. Smith(1967) 252 Cal.App.2d 678, 680-681 (Bohn).)
The California appellate court stated:
Here, however, there is no reason why Ring could not, in her capacity as personal administrator of Atiyeh’s estate, pursue most of the claims she has asserted against respondents, since only the estate is the borrower under the allegedly predatory loan. She does not seek to recover possession of or quiet title to property. There is no conflict of interest …as a special circumstance justifying the beneficiary bringing suit in place of the conflicted personal representative. Nor is there any other apparent reason why Ring could not or would not assert, in her capacity as personal representative of the estate, her various claims arising directly from injury to the estate by the loan transaction (and only indirectly related to injury to her interests as beneficiary).Indeed, in her briefing on appeal, Ring represents that she is pursuing her claims in her capacity as personal representative of the estate in another forum, namely, in the probate matter regarding Atiyeh’s estate. It follows that Ring does not have standing to bring such claims also in her individual capacity, and those causes of action were properly dismissed.
Standing To Bring a Claim For Financial Elder Abuse In California Does Not Belong to The Estate Representative
The California appellate court distinguished the claim of financial elder abuse brought by Ring from all of the other causes of action, stating:
No authority supports the notion that the personal representative of a probate estate, acting in that capacity, has standing to bring an elder abuse claim on behalf of a beneficiary of that estate. Rather, an elder can bring an elder abuse claim on his or her own behalf, as can someone acting as the elder’s representative (not the estate’s)…. The trial court was mistaken to suggest that Ring could bring a claim that she suffered financial elder abuse in her capacity as personal representative of the estate.
A beneficiary who is not also the personal representative of the California estate would have a remedy against that representative for damages caused by any financial elder abuse that caused harm to the beneficiaries of the estate and was a breach of fiduciary duty.
Here, Ring’s elder abuse claim was that respondents induced her, in her capacity as personal representative, to enter into a transaction that damaged not only the estate, but also her individual interests. In the California appellate court’s view, this is the sort of special circumstance that justifies allowing an heir to maintain a cause of action for financial elder abuse in her own name. The appellate court stated:
We hold that where an elder is both beneficiary and personal representative of a probate estate, the elder has standing to bring a claim of financial elder abuse in his or her individual capacity based on allegations that the defendants wrongfully deprived him or her of property by means of a transaction with the estate. We conclude, therefore, that Ring has standing to assert in her individual capacity her claim that respondents are liable for financial elder abuse accomplished by means of the loan transaction with Atiyeh’s estate.
When Does Financial Elder Abuse Occur Under California Law?
The Elder Abuse and Dependent Adult Civil Protection Act (the Act) (§ 15600 et seq.) was enacted to protect elders, defined as “any person residing in this state, 65 years of age or older” (id., § 15610.27), and dependent adults from abuse and neglect.
Financial abuse, which is what Ring alleges, occurs when an elder is wrongfully “deprived of any property right, including by means of an agreement, donative transfer, or testamentary bequest, regardless of whether the property is held directly or by a representative of an elder. . . .” (§ 15610.30, subd. (c).)
Here, the California appellate court concluded that Ring pled facts showing that she, in her individual capacity, has a “property right” cognizable under section 15610.30, and that she was deprived of that right by respondents. The “property right” was Ring’s interest in decedent’s house. The court stated:
It is not the house itself that is the “property” that must be held either by Ring or her representative for her to come within section 15610.30, subdivision (c). Rather, it is Ring’s interest in the house. As discussed above, that interest passed to her, in her individual capacity, upon Atiyeh’s death. Although Ring did not immediately receive all the sticks in the proverbial bundle of individual rights relating to the house, she nevertheless held some of them, and those rights “‘constitute property.’”… Further, Ring adequately pleaded that respondents have “deprived” her of her property in a manner that is cognizable under the Elder Abuse Act. As alleged, the house remains under the administration of Atiyeh’s estate, but burdened by substantially more debt than before respondents manipulated Ring into entering the loan transaction on behalf of the estate. On its face, that transaction reduced the value of Ring’s interest as a beneficiary; whatever the value of a beneficiary’s interest in a house that has been left to herby will but remains subject to administration in probate, the value of that interest is lessened if the house is newly burdened by an additional $200,000 in debt. That reduction in value alone is enough to support the conclusion that Ring, in her individual capacity, has been deprived of a cognizable property right.
The Court recognized the likelihood of the damages Ring alleges in her individual capacity under her financial elder abuse claim would overlap with the damages in the separate lawsuit on behalf of the California estate, but concluded that was an issue for another day.
Read about attorney’s fees in California financial elder abuse cases and find your California probate lawyer.