BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
AB 381 (Chau)
As Amended May 24, 2013
Hearing Date: June 4, 2013
Fiscal: No
Urgency: No
TMW
SUBJECT
Estates and Trusts: Undue Influence and Elder Abuse
DESCRIPTION
This bill would provide that a person may be liable for
attorney's fees and costs if he or she, in bad faith, through
undue influence, or through the commission of elder abuse, has
wrongfully taken, concealed, or disposed of property that
belongs to a conservatee, minor, elder, dependent adult, trust,
or decedent's estate. This bill would also provide that a
person may be liable for attorney's fees and costs if he or she,
in bad faith, has wrongfully, taken, concealed, or disposed of
property that belongs to a principal under a power of attorney.
This bill would provide that a person who, by the use of undue
influence in bad faith or through the commission of elder or
dependent adult financial abuse, has taken, concealed, or
disposed of property that belongs to a principal under a power
of attorney is liable for twice the value of the property, and
may be liable for attorney's fees and costs.
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
(more)
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wrongfully taken real or personal property from a conservatee,
minor, estate of a decedent, or trust.
In 2011, the Legislature enacted AB 354 (Silva, Ch. 55, Stats.
2011), which extended the double damage award to actions against
a person who 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.
This bill, sponsored by the Conference of California Bar
Associations, would authorize the court, in its discretion, to
award attorney's fees and costs to the party seeking to recover
the property.
This bill would also extend the double damage remedy and
attorney's fees and costs award to actions involving property
that belongs to a principal under a power of attorney that
another person has taken, concealed, or disposed of by the use
of undue influence in bad faith or through the commission of
elder or dependent adult financial abuse.
CHANGES TO EXISTING LAW
1. Existing law , the Elder Abuse and Dependent Adult Civil
Protection Act (EADACPA), generally provides civil protections
and remedies for victims of elder and dependent adult abuse
and neglect. (Welf. & Inst. Code Sec. 15600 et seq.)
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.)
Existing law requires a court to award to the plaintiff
reasonable attorney's fees and costs, compensatory damages,
and all remedies otherwise provided by law, where it is proven
by a preponderance of the evidence that a defendant is liable
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for financial abuse under EADACPA. (Welf. & Inst. Code Sec.
15657.5(a).)
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, 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,
the person shall be liable for twice the value of the property
recovered. 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.)
This bill would provide that the person who has taken
property, in bad faith, through undue influence, or through
the commission of elder or dependent adult financial abuse,
may, in the court's discretion, also be liable for reasonable
attorney's fees and costs.
This bill would also make technical and conforming revisions
to the above provision.
2. Existing law provides that a principal can grant to an
attorney-in-fact the authority to act on the principal's
behalf regarding the principal's real or personal property.
(Prob. Code Sec. 4123.)
Existing law assigns various duties that the attorney-in-fact
has to the principal. (Prob. Code Sec. 4230 et seq.)
Existing law provides that if the attorney-in-fact breaches a
duty to the principal, the attorney-in-fact is chargeable with
any of the following, as appropriate under the circumstances:
any loss or depreciation in value of the principal's
property resulting from the breach of duty, with interest;
any profit made by the attorney-in-fact through the
breach of duty, with interest; or
any profit that would have accrued to the principal if
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the loss of profit is the result of the breach of duty.
(Prob. Code Sec. 4231(a).)
Existing law provides that if the attorney-in-fact has acted
reasonably and in good faith under the circumstances as known
to the attorney-in-fact, the court, in its discretion, may
excuse the attorney-in-fact in whole or in part from liability
if it would be equitable to do so. (Prob. Code Sec. 4231(b).)
Existing law provides that if a court finds that a person has
in bad faith wrongfully taken, concealed, or disposed of
property belonging to a principal under a power of attorney,
the person shall be liable for twice the value of the property
recovered by an action to recover the property or for
surcharge, in addition to any other remedies available in law.
(Prob. Code Sec. 4231.5(c).)
This bill would additionally authorize an award of double
damages when a person has taken, concealed, or disposed of
property that belongs to a principal under a power of attorney
by the use of undue influence in bad faith or through the
commission of elder or dependent adult financial abuse.
This bill would also provide that a person who, in bad faith,
through undue influence, or through the commission of elder or
dependent adult financial abuse, has taken, concealed, or
disposed of property that belongs to a principal under a power
of attorney, the person may, in the court's discretion also be
liable for reasonable attorney's fees and costs.
COMMENT
1. Stated need for the bill
The author writes:
Financial abuse of vulnerable California citizens,
particularly elders and dependent adults, has increased in
recent years, and will almost certainly continue to do so as
the financially strong Baby Boom generation continues to age.
In 2011, the Legislature took one of several steps (AB 354,
Chapter 55) to protect the elderly by specifying that Probate
Code [Section] 859, which assesses double damages against
persons who misappropriate the property of conservatees,
wards, decedent's estates, and other vulnerable persons, also
protected victims of elder financial abuse and bad faith undue
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influence. However, the 2011 legislation didn't make a
similar change in the power of attorney law (Probate Code
[Section] 4231.5), which also provides for double damages when
an attorney-in-fact is found to have misappropriated the
property of his principal. AB 381 corrects this oversight,
ensuring that elders, dependent adults and victims of bad
faith undue influence are also protected from bad faith
misappropriation by attorneys-in-fact.
In addition, there are many instances where the attorney's
fees incurred seeking redress greatly exceed the remedy of
double the value of the property misappropriated, and the
rightful property owners have to decide whether they can
afford the cost of seeking justice. The rightful property
owners should not have to bear the burden of deciding whether
they should attempt to recover property that is rightfully
theirs because the attorney fees and costs might exceed the
value of the property, and persons acting wrongfully and/or in
bad faith should not benefit from their behavior because it is
too costly for the wronged party to seek redress. AB 381
solves this problem by adding attorney's fees and costs to the
award in successful cases to recover property that has been
misappropriated.
2. Awarding double damages in cases of undue influence
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 property belonging to a principal
under a power of attorney. (Prob. Code Sec. 4231.5(c).) The
award is calculated at twice the value of the property
recovered. This bill would further provide that when a person
has taken, concealed, or disposed of property that belongs to a
principal under a power of attorney by the use of undue
influence in bad faith, the person is liable for twice the value
of the property recovered.
In support of this bill, sponsor Conference of California Bar
Associations (CCBA) points to AB 354 (Silva, Ch. 55, Stats.
2011), which extended the existing double damage awards
available when a person in bad faith wrongfully took the
property of a conservatee, ward, or decedent's estate to the
misappropriation of property through the use of undue influence
or elder and dependent adult financial abuse. CCBA argues that
AB 354 did not make a similar change to provide undue influence
and elder and dependent adult financial abuse protections when
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the elder or dependent adult's property is misappropriated using
a power of attorney.
AB 354 was enacted to provide clarity as to 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. 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) [nonpub. 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 "[t]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
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punitive in nature. (See Estate of Young (2008) 160 Cal.App.4th
62, 88.)
In 2011, AB 354 settled the issue and extended an award of
double damages to cases where a person has wrongfully acquired
possession of property through the use of undue influence in bad
faith. Similarly, the question raised by this bill is whether
it is appropriate to award double damages for undue influence
when the wrongful taking was appropriated through the use of a
power of attorney. 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 the
confidence of a 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.) Building
on the most recent protections enacted under AB 354 for double
damages, this bill would authorize an award 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 property through the use of a power of attorney.
This award is in keeping with the Legislature's history of
providing 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 property that belongs to a principal under a
power of attorney through the commission of elder or dependent
adult financial abuse, the person is liable for twice the value
of the property recovered. 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
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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
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 property through the use of a power of
attorney. This award is in keeping with the Legislature's
history of providing punitive damages in these cases.
4. Awarding attorney's fees and costs
This bill would provide that a person who, in bad faith, through
undue influence, or through the commission of elder or dependent
adult financial abuse, has wrongfully taken property of a
conservatee, minor, elder, dependent adult, trust, or decedent's
estate, or property that belongs to a principal under a power of
attorney, may, in the court's discretion, be liable for
attorney's fees and costs.
Supporters of this bill argue that although existing law
provides an award of double damages for recovered property,
"there are many cases where the costs of bringing suit to
recover the property exceed even twice the property's value,
meaning that the victims cannot afford to attempt to recover
what has been taken from them. To ensure that victims have the
ability to protect their interests, it is fair and right that
they recoup their attorney's fees and costs if they are
successful in their recovery efforts."
The question at issue is whether attorney's fees and costs
should be awarded to the prevailing petitioner in addition to
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the existing award of double damages. In Bickel v. Sunrise
Assisted Living (2012) 206 Cal.App.4th 1, the court analyzed
enhanced civil remedies provided by EADACPA, which authorizes an
award of punitive damages, in addition to attorney's fees. The
court noted that the Legislature has provided heightened
remedies, including attorney's fees and costs, in cases of elder
financial abuse in order to engage attorneys to take up the
cause of abused elderly persons and dependent adults. (Id. at
p. 6.) The court further noted that the remedies provided by
EADACPA regarding elder and dependent adult financial abuse,
"including the attorney fees and costs recovery provided
therein, was enacted to carry out an important public purpose:
that of protecting an especially vulnerable portion of our
population - elders and dependent adults - by creating civil
incentives for attorneys to represent victims of egregious abuse
and neglect." (Id.)
Like the attorney's fees and costs award provided under EADACPA,
the attorney's fees and costs award in this bill would further
the public purpose of protecting this vulnerable population from
the misappropriation of their property. In order to maintain
the intent of encouraging an advocate to bring an action to
recover the misappropriated property (petitioner), this bill was
recently amended from a two-way fee shifting provision (either
the prevailing petitioner or respondent could be awarded
attorney's fees and costs) to a one-way fee shifting provision,
where only the prevailing petitioner could receive an attorney's
fees and costs award. This one-way fee shifting provision is
arguably appropriate because it would allow the prevailing
petitioner, acting on behalf of the conservatee, elder, minor,
or dependent adult, to recoup amounts expended in pursuit of
protecting the property, but may limit an award of attorney's
fees and costs, through court discretion, against a person who
agreed to act as the attorney-in-fact for the elder or dependent
adult but is sued by a beneficiary of the elder or dependent
adult who disagreed with the legitimate actions of the
attorney-in-fact.
Support : California Advocates for Nursing Home Reform;
California Alliance for Retired Americans; California
Association for Health Services at Home; California Commission
on Aging; California Long-Term Care Ombudsman Association;
California Police Chiefs Association, Inc.; California Senior
Legislature; Consumer Attorneys of California; Contra Costa
County Advisory Council on Aging; County Welfare Directors
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Association of California; WISE & Health Aging Elder Abuse
Prevention Program; one individual
Opposition : None Known
HISTORY
Source : Conference of California Bar Associations
Related Pending Legislation : None Known
Prior Legislation :
AB 354 (Silva, Ch. 55, Stats. 2011) See Background; Comments 1
and 2.
SB 1038 (Harman, Ch. 48, Stats. 2010), among other things,
provided circumstances under which attorneys-in-fact will be
held accountable for breaches of duty.
AB 2611 (Simitian, Ch. 886, Stats. 2004) See Comment 3.
SB 679 (Mello, Ch. 774, Stats. 1991) See Comment 3.
Prior Vote :
Assembly Committee on Judiciary (Ayes 9, Noes 0)
Assembly Floor (Ayes 77, Noes 0)
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