A recent decision from the California Court of Appeal shows a continued split of authority as to the meaning of California Probate Code section 859, which allows doubles damages for the wrongful taking of property under specified circumstances.
In Keading v. Keading (2021) ___ Cal.App.5th ___, the Court of Appeal ruled that a trial court can impose double damages, without a finding of bad faith, if the court finds that a person has taken, concealed or disposed of property by committing elder or dependent adult financial abuse. The Keading court disagreed with a recent decision of another Court of Appeal, leaving a conflict (akin to conflicting road signs) that may not be clarified until the Supreme Court or the Legislature wades into the fray.
Meet the Keadings
Lucille and Lewis Keading created a family trust for the ultimate benefit of their two children, Kenton and Hilja. While the trust instrument initially provided for equal allocation to Kenton and Hilja, Lucille and Lewis later reduced Hilja’s interest in the trust. The court found that Hilja became estranged from her parents because they were unable to accept her sexual orientation.
In 2015, after Lucille was diagnosed with a brain tumor, Hilja returned from Southern California to her parents’ home in Contra Costa County to help support them. Kenton also returned to Northern California and frequently visited his parents.
Following Lucille’s passing, Lewis’s health began to deteriorate. He needed kidney dialysis and in-home care. Both Hilja and Kenton assisted Lewis.
Lewis signed a durable power of attorney for finances in September 2015, naming Hilja as his attorney-in-fact (authorized agent). He also contacted his estate planning attorney and signed an “equalizing” trust amendment to make his two children equal trust beneficiaries.
Conflict flared between Hilja and Kenton in December 2015 after he discovered an email she had sent to an attorney friend saying that she was looking for a lawyer to pursue him for elder abuse.
Kenton took Lewis to a UPS store where Lewis executed before a notary a new power of attorney designating Kenton instead of Hilja as Lewis’ attorney-in-fact.
After Lewis decided to take himself off dialysis, Kenton used the power of attorney to execute a deed transferring the family residence to himself and Lewis with a right of survivorship. Two days later, Lewis signed a document transferring shares of stock to Kenton. After Lewis died, Kenton recorded the deed and rented out the house while he went abroad.
Courts Find Financial Elder Abuse
In the ensuing litigation in Contra Costa County Superior Court, the judge found Kenton liable for elder abuse by exerting “substantial undue influence over Lewis.” The court found that Lewis’ “last clear, lucid, considered disposition of the trust was to equalize the distribution between Hilja and Kenton,” and that the power of attorney, deed and stock transfer all resulted from elder abuse.
The Court of Appeal affirmed the trial court’s rulings, designating two parts of its opinion for publication, i.e., precedential authority.
First, the court found that “substantial evidence,” a deferential appellate standard of review, supported the trial court’s finding of financial elder abuse. The court observed that “[b]ecause 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.”
The evidence supported a finding of undue influence under the four factors set forth in Welfare and Institutions Code section 15610.70. Lewis was vulnerable and grieving in December 2015. Kenton was Lewis’ son and a care provider. Kenton took Lewis to a notary to execute a new power of attorney while his sister was away, and Kenton then executed a deed that favored himself, revealing nothing about these matters to Hilja. As to the inequity of the result, Kenton’s actions removed the main asset (the home) from the trust, resulting in a significant loss to Hilja.
Second, the Court of Appeal considered whether the double damages award by the trial court had to be premised on a finding of “bad faith” on the part of Kenton in addition to the finding of financial elder abuse. Here, the appellate court parsed the wording of the double damages provision, Probate Code section 859, and found it had three distinct clauses, the last of which did not include the “bad faith” element.
The Keading court noted a split of authority. The courts in Hill v. Superior Court (2016) 244 Cal.App.4th 1281 and Kerley v. Weber (2018) 27 Cal.App.5th 1187 found no separate finding of bad faith was required under section 859, while the court in Levin v. Winston-Levin (2019) 39 Cal.App.5th 1025 more recently concluded otherwise.
According to the Keading court, a “plain reading” of section 859 shows that bad faith is not required when a person “has taken, concealed or disposed of the property . . . through the commission of elder or dependent financial abuse, as defined in Section 15610.30 of the Welfare and Institutions Code.”
The Keading opinion leaves California law unsettled, and open for argument, as to whether “bad faith” is required to get double damages under Probate Code section 859. It also provides an illustration of what evidence is sufficient to support a finding of financial elder abuse.