BILL ANALYSIS                                                                                                                                                                                                    






                             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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