BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Noreen Evans, Chair 2011-2012 Regular Session AB 354 (Silva) As Amended March 21, 2011 Hearing Date: June 7, 2011 Fiscal: No Urgency: No TW SUBJECT Estates and Trusts: Property: Wrongful Taking DESCRIPTION This bill would provide that when a person has taken, concealed, or disposed of the real or personal property of a conservatee, minor, estate of a decedent, or trust by the use of undue influence in bad faith or through the commission of elder or dependent adult financial abuse, the person is liable for twice the value of the property recovered in a conservatorship, guardianship, estate, or trust proceeding. BACKGROUND Since 1851, the Legislature has provided for an award of double damages with respect to recovered property. In 2002, the Legislature reorganized the various statutes authorizing a probate court to decide quiet title actions involving trusts, estates of decedents, minors, or conservatees. (SB 669 (Poochigian, Ch. 49, Stats. 2001).) As part of this reorganization, courts were given authority to award double damages of the value of property recovered from a person who has wrongfully taken real or personal property from a conservatee, minor, estate of a decedent, or trust. This bill, sponsored by the Conference of California Bar Associations, would extend the double damages award to instances when the wrongful taking of real or personal property was a result of undue influence in bad faith or through the commission of elder or dependent adult financial abuse. (more) AB 354 (Silva) Page 2 of ? CHANGES TO EXISTING LAW Existing law provides that a guardian, conservator, claimant, personal representative, or trustee can file a petition with the court to recover the real or personal property of a minor, conservatee, estate of a decedent, or trust held by another. (Prob. Code Sec. 850 et seq.) Existing law provides that, if the court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to the estate of a decedent, conservatee, minor, or trust, the person shall be liable for twice the value of the property recovered by an action under this part. This remedy is in addition to any other remedies available in law to a trustee, guardian or conservator, or personal representative or other successor in interest of a decedent. (Prob. Code Sec. 859.) Existing law defines "undue influence" as the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him, taking an unfair advantage of another's weakness of mind, or taking a grossly oppressive and unfair advantage of another's necessities or distress. (Civ. Code Sec. 1575.) Existing law defines "financial abuse" as the taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both or by undue influence. (Welf. & Inst. Code Sec. 15610.30.) This bill would provide that when a person has taken, concealed, or disposed of the real or personal property of a conservatee, minor, estate of a decedent, or trust by the use of undue influence in bad faith or through the commission of elder or dependent adult financial abuse, the person is liable for twice the value of the property recovered in a guardianship, conservatorship, estate, or trust proceeding. COMMENT 1. Stated need for the bill The author writes: Current law is unclear as to whether a person who uses elder AB 354 (Silva) Page 3 of ? abuse or intentional undue influence to steal from an elder or dependent adult is liable for the same double-damages that he or she would be liable for if the wrongful taking had been directly from the elder's estate or trust. Although there are no reported cases interpreting this provision, there has been at least one unpublished appellate opinion . . . that holds that the bad faith action of an individual, using undue influence on an elderly parent, is not sufficient to allow a trial court to award double damages. If the appellate court's view is embraced in other cases, it would threaten to undercut the broad protections the Legislature has consistently intended by enacting a series of statutes dating back to 1851 to put potential wrongdoers on notice of their exposure to double liability for bad faith taking of estate property in all trust, guardianship, and conservatorship cases. The Conference of California Bar Associations (CCBA), the sponsor of this bill, writes: AB 354 would eliminate the ambiguity in existing law by amending Probate Code ÝSection] 859 to specifically include willful undue influence and elder financial abuse as Ýthe] bases for imposing double damages liability on wrongdoers who prey upon the elderly and infirm. 2. Awarding double damages in cases of undue influence This bill would provide that when a person has taken, concealed, or disposed of real or personal property by the use of undue influence in bad faith, the person is liable for twice the value of the property recovered in a guardianship, conservatorship, estate, or trust proceeding. Existing law provides an award of double damages if the court finds that a person in bad faith wrongfully has taken, concealed, or disposed of real or personal property belonging to the estate of a decedent, conservatee, minor, or trust. (Prob. Code Sec. 859.) The award is calculated at twice the value of the property recovered. The author argues that existing law is unclear whether a person who uses undue influence to steal from an elder or dependent adult is liable for the same double damages for which he or she would be liable if the wrongful taking had been directly from the elder's estate or trust. The California Department of Consumer Affairs (CDCA), neutral on this bill, "finds no AB 354 (Silva) Page 4 of ? objection to this bill's clarification of the law." The author argues that, in an unpublished court decision, the court did not award double damages when the taking involved undue influence committed in bad faith on an elder. In that case, the court determined whether the son's undue influence exerted on his father in order to get his father to write checks payable to the son constituted a wrongful taking, concealing, or disposing of property belonging to the father's trust. (Estate of Wolf (Aug. 31, 2000, B126543) Ýnonpub. opn.] pg. 17.) The court held that because the father gave the money to the son, albeit through undue influence by the son, the evidence was insufficient to prove that the son in bad faith wrongfully took, concealed, or disposed of property in or belonging to the trust. (Id.) On the other hand, the court in Estate of Young (2008) 160 Cal.App.4th 62, 80, 84 found that transfers of real and personal property into trusts for which no beneficial purpose to the testator could be found demonstrated undue influence and/or fraud, which supported an award of double damages. It appears that part of the confusion regarding a court's discussion of undue influence centers around the evidence necessary to be proven in proceedings to recover property. Under Probate Code Section 850, the petitioner must prove that the property rightfully belonged to the minor, conservatee, decedent, or trust. To do so, the petitioner must provide proof that the transfers of the property were defective. Such proof may be shown through undue influence and fraud. Once title to the property has been established, the court may then consider awarding double damages against the wrongful taker of the property upon proof that the taking was wrongful and made in bad faith. In Estate of Kraus (2010) 184 Cal.App.4th 103, the court, in deciding whether to award double damages, reasoned that "Ýt]he statutory emphasis is not on to whom the property belongs, but whether the person in possession in bad faith wrongfully acquired it." (Id. at 117.) Proof of wrongfully taking, concealing, or disposing of property in bad faith requires a higher level of evidence. This is because double damages are punitive in nature. (See Estate of Young (2008) 160 Cal.App.4th 62, 88.) The question becomes whether it is appropriate to award double damages for undue influence. Undue influence arguably leads to the wrongful taking of property. In order to prove undue influence, existing law requires a showing that the person used AB 354 (Silva) Page 5 of ? the confidence of or real or apparent authority over the victim in order to obtain an unfair advantage over the victim, take an unfair advantage of the victim's weakness of mind, or take a grossly oppressive and unfair advantage of the victim's necessities or distress. (Civ. Code Sec. 1575.) This undue influence potentially results in the ability to wrongfully take property away from the victim, either by gaining direct power over the property of the victim as in the Young case, or by influencing the victim to transfer the property in a way the victim, if he or she had full mental and physical capacity, would not normally have done, as in the Wolf case. Over the years, the Legislature has enacted statutes to protect California citizens who have a diminished ability to protect themselves and their assets and to deter financial predators through the use of punitive damages. (See Comment 3.) This bill would authorize the use of punitive damages in the form of twice the value of the property recovered when the financial predator utilized undue influence in bad faith to obtain the real or personal property directly from the person or trust or by convincing the conservatee, minor, or decedent to transfer the property. This award is in keeping with the Legislature's history of financial protection for these cases. 3. Awarding double damages in cases of elder and dependent adult financial abuse This bill would provide that when a person has taken, concealed, or disposed of the property through the commission of elder or dependent adult financial abuse, the person is liable for twice the value of the property recovered in a guardianship, conservatorship, estate, or trust proceeding. In 1992, the Legislature enacted the Elder Abuse and Dependent Adult Civil Protection Act (EADACPA). (SB 679 (Mello, Ch. 774, Stats. 1991).) EADACPA was established in order to provide enhanced remedies to ensure adequate representation of victims in cases of elder or dependent adult physical and financial abuse and neglect. In 2005, the Legislature enacted AB 2611 (Simitian, Ch. 886, Stats. 2004), which separated out the provisions for elder and dependent adult financial abuse. Existing law defines "financial abuse" as the taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both, or by undue influence. (Welf. & Inst. Code Sec. 15610.30.) EADACPA provides an award of punitive damages AB 354 (Silva) Page 6 of ? for elder and dependent adult financial abuse. (Welf. & Inst. Code Sec. 15657.5.) As discussed in Comment 2, double damages are punitive in nature. (See Estate of Young (2008) 160 Cal.App.4th 62, 88.) This bill would authorize the use of punitive damages in the form of twice the value of the property recovered when the financial predator committed elder or dependent adult financial abuse to obtain the real or personal property directly from the person or trust or by convincing the conservatee, minor, or decedent to transfer the property. This award is in keeping with the Legislature's history of awarding punitive damages in these cases. Support : Trusts and Estates Section of the State Bar of California Opposition : None Known HISTORY Source : Conference of California Bar Associations Related Pending Legislation : None Known Prior Legislation : See Background and Comment 3. Prior Vote : Assembly Floor (Ayes 71, Noes 0) Assembly Committee on Judiciary (Ayes 10, Noes 0) **************