August 27, 2015

Step-Child Inheritance

If a person passes away without a will, the legal term for this is "intestacy." 

If the decedent's estate was not disposed of by a trust or beneficiary designation(s) such as a pay-on-death account, his or her estate will be distributed to their heirs, i.e. their next of kin. This might include a parent, child, uncle, aunt, cousin, etc. For example, assume Bob was a widower who only had 1 child during his marriage. Bob passes away intestate. His sole heir would be his child. If Bob had 2 children, the 2 children would split the distribution of Bob's estate as heirs.  

Probate Code § 6402 lists the order of priority for a decedent's heirs. It goes from those closely related to the decedent to those less closely related to the decedent. The California legislature presumed that a decedent would prefer to leave their estate to a close relative rather than a remote relative.

A question that occasionally arises is whether a step-child is entitled to inherit from an intestate step-parent. The answer, much like most legal questions, results in the familiar refrain "it depends."

The applicable law is Probate Code § 6454. It states as follows:

For the purpose of determining intestate succession by a person or the person’s issue from or through a foster parent or stepparent, the relationship of parent and child exists between that person and the person’s foster parent or stepparent if both of the following requirements are satisfied:

(b) It is established by clear and convincing evidence that the foster parent or stepparent would have adopted the person but for a legal barrier.

Thus both elements, (a) and (b) of the foregoing statute, need to be satisfied to claim an intestate inheritance as a step-child from a step-parent. If both elements cannot be satisfied the step-child is basically a nobody for purposes of intestate succession and receives nothing.

If a step-child cannot show a colorable claim under Probate Code § 6454, there is an alternate route available. A step-child can assert a claim of equitable adoption. "In order to take as an equitably adopted child from the alleged adoptive parent's intestate estate, the claimant must prove the decedent's intent to adopt by clear and convincing evidence." Estate of Ford (2004) 32 C4th 160, 173.   

August 12, 2015

Equitable Estoppel

The law does not look favorably upon trickery. This is exemplified by Evidence Code § 623, which states that "whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it." This legal doctrine is known as equitable estoppel.

To prove equitable estoppel, a party needs to show that (1) the party to be estopped must know the facts; (2) the estopped party must intend that his conduct shall be acted upon, or must act in a way that causes the other party to believe that was his intent; (3) the party asserting estoppel must be unaware of the true facts; and (4) he must detrimentally rely on the other party's conduct. Estate of Bonanno (2008) 165 Cal.App.4th 7, 22. 

This doctrine was recently raised in an unpublished appellate opinion.

Janene Curtis discovered as an adult that she was the daughter of famous actor Troy Donahue, whose real name was Merle Johnson. Previously, at birth, she had been adopted.

When Mr. Donahue passed away, Ms. Curtis was told by a close friend of Mr. Donahue that the drug Vioxx might have caused Mr. Donahue's death. Ms. Curtis then hired a New York law firm to participate in the class action lawsuit against Merck & Co., the pharmaceutical giant that makes Vioxx. Ms. Curtis was later advised to open a probate in California. Since Ms. Curtis lived in Arizona and probate needed to be filed in California, she asked Eve O'Neill, Mr. Donahue's sister, to open probate in California on her behalf.

Ms. Curtis then negotiated a settlement in the Vioxx case and the estate of Mr. Donahue reaped $190,000. Later it was discovered by Ms. O'Neill's attorney that Ms. Curtis had been adopted at birth. An adoption severs normally severs the parent-child relationship whereby inheritance rights are cut off. Probate Code § 6451. The attorney then filed a petition to have Ms. O'Neill be declared the sole heir of Mr. Donahue's estate and to approve the Vioxx settlement. Naturally Ms. Curtis objected to the petition.

Ultimately, after two appeals, it was determined that Ms. O'Neill was equitably estopped from challenging Ms. Curtis' claim to the assets of the Donahue estate, i.e. the Vioxx settlement.

The California Court of Appeal upheld the trial court's decision that "(1) Ms. O'Neill either actually knew of the legal impediments to Curtis inheriting or that she was culpably negligent for failing to learn those facts; (2) Ms. O'Neill intended Ms. Curtis to act upon O'Neill's assertions that she would prosecute the Vioxx litigation on behalf of Ms. Curtis and then give her all the proceeds; (3) Ms. Curtis was unaware that O'Neill would renege; and (4) Ms. Curtis relied to her detriment on Ms. O'Neill's conduct.

July 31, 2015

Estate of Duke - Will Reformation

The law in California used to be that in the case of an unambiguous clause in a will, extrinsic evidence could not be introduced to reform it. Stated in non-legalese, the term or terms of a will could not be altered through documentation outside the four corners of the will if the term or terms were clear. This past week, however, the California Supreme Court unanimously held that extrinsic evidence could be used in such a case.

Estate of Duke (2015) ___ C4th ___

The facts of the case were straight-forward:

"Irving Duke prepared a holographic will providing that, upon his death, his wife would inherit his estate and that if he and his wife died at the same time, specific charities would inherit his estate. The handwritten will, however, contained no provision addressing the disposition of his estate if, as occurred here, he lived longer than his wife. The specified charities contend that at the time the testator wrote his will, he specifically intended to provide in his will that the charities would inherit his estate in the event his wife was not alive when he died. The courts below excluded extrinsic evidence of the testator's intent, finding that the will was unambiguous and failed to provide for the circumstance in which his wife predeceased him. Therefore, finding that Duke died intestate, the court entered judgment in favor of the heirs at law, Seymour and Robert Radin."

Prior case law, i.e. Estate of Page (1967) 254 Cal.App.2d 702, 719, held that a will could not be reformed, through the use of extrinsic evidence, if the will's language was unambiguous.  

However, in the Estate of Duke, this prior case law was overturned. The Duke Court held that "an unambiguous will may be reformed to conform to the testator's intent if clear and convincing evidence establishes that the will contains a mistake in the testator's expression of intent at the time the will was drafted, and also establishes the testator's actual specific intent at the time the will was drafted."

Given the amount of money at stake, over $5M, it is not hard to see why this case ended up in the California Supreme Court. Litigation is expensive and appeals are even more expensive. Hence, there typically is a large amount of money at stake when a probate case reaches the California Supreme Court.

July 17, 2015

Trustee Succession

There are 3 roles in a trust, (1) settlor, (2) trustee and (3) beneficiary. For purposes of this post, the focus will be on the trustee.

The trustee is the legal owner of trust property. Trust assets will be titled in the trustee's name. For example, if a property is owned by a trust, the deed should list the trustee's name and the name of the trust on it. As legal owner, the trustee has the authority to seek legal redress on behalf of trust property for any injuries. The availability of legal redress does not automatically end when the original trustee passes away. 

When a successor trustee replaces the original trustee, the successor trustee is said to "stand in the shoes" of the original trustee. Eddy v. Fields (2004) 121 Cal.App.4th 1543, 1548. This permits the successor trustee to seek recovery for damages caused to trust property that occurred while the original trustee was still alive. These facts generally entail the case of George v. Gandolfo Excavating Inc., Alameda County Superior Court case # 12628707.

Original trustee owned real property in a rural area of Livermore, CA. In 2009, neighbors of original trustee allegedly cleared an improper fence line. In 2010, original trustee passed away and successor trustee assumed the office of trustee. In 2012, successor trustee sued neighbors in Alameda County Superior Court for (1) trespass; (2) destruction of real property; (3) destruction of trees (Civ. Code, § 3346; Code Civ. Proc., § 733); (4) discomfort and annoyance as a result of trespass; (5) negligence and negligence per se; (6) indemnification; and (7) conversion. Yep, go big or go home.

Defendants moved to have the case dismissed because successor trustee lacked "standing" to sue. They argued that the real party in interest was original trustee, the person who owned the property in 2009 when the alleged torts took place. Since successor trustee did not assume that role in 2010, the alleged damage had already happened. No harm no foul you could say. The trial court agreed with this argument and dismissed the case.

Successor trustee then appealed his case to the First District Court of Appeal of California. 

The Court of Appeal reversed the lower court's ruling, finding that a successor trustee "succeed[s] to all the rights, duties, and responsibilities of his predecessors."  Moeller v. Superior Court (1997) 16 Cal.4th 1124, 1131. So if original trustee had a right to seek legal redress for alleged injuries to the property, successor trustee does as well.

July 3, 2015

Medicare and Medi-Cal eligibility

An annoyance of mine is when I see a non-attorney make a legal determination involving an ostensibly simple matter that is wrong and consequential. While reading through appellate opinions, I stumbled upon a case involving such a a scenario.

Wong v. Tam, Los Angeles County Superior Court, Case # BC541794.   

In this case, the plaintiff and defendant agreed to purchase a property for their elderly parents (presumably they were brother and sister). According to a declaration by the defendant:

"At a wedding reception in December 1999, plaintiff told the parties' parents and siblings that their parents would need to divest their assets in order to qualify for Medicare and Medicaid and suggested they and defendant buy a home in a new senior living community in Walnut, California. Defendant expressed interest in purchasing a home in that community because it would allow him and his wife to use the home when he retired or earlier in order to live closer to their children. He and his father also said they were open to purchasing the home provided it was not sold for the lifetimes of the parents' children and "hopefully" their grandchildren, which stemmed from the Chinese cultural tradition of passing family homes through generations. With that understanding, defendant, plaintiff, and their parents orally agreed that defendant and their parents would pursue buying a home."

This declaration is wildly inaccurate in terms of qualifying for benefits, i.e. the parts in bold

Medicare, the medical insurance program for the elderly, is an entitlement. If you earn enough credits, you are eligible to receive it. It makes no difference whether you are a billionaire or living a meager existence. If you pay for it, you get it. It is as simple as that.

Conversely, "Medi-Cal," the name California uses for the federal program known as "Medicaid," is a medical insurance program for the poor and disabled. Medi-Cal is not an entitlement. Essentially you have to be poor and/or disabled to qualify for it. Therefore, Medi-Cal is described as a needs-based public benefit.   

While the case did not turn on benefits eligibility, it does demonstrate the defendant's ignorance of the law on this topic. This can be particularly damaging because of the legal adage "ignorance of the law is no excuse." A person is stuck with their mistake, whether they knew the law or not. This can be a sobering reality for the legally uninformed.  

June 26, 2015

The Perils of Pro Bono

When an attorney is representing a client in court, certain items are sometime best left unspoken.

Katzenstein v. Chabad of Poway (2015), ___ Cal.App.4th ___

In this case, the decedent had originally named his trust as the beneficiary of two life insurance policies. The successor trustee was the plaintiff in this matter. Later on, the decedent allegedly provided the defendant with an "irrevocable pledge" of those same two life insurance policies. In exchange, the defendant would rename the senior center after him and operate it from the life insurance proceeds.
When the decedent passed away, a dispute ensued over who was the beneficiary of the life insurance policy, the plaintiff or defendant. Naturally each side believed they were the rightful beneficiary and litigation ensued.

What captured my attention from this case though is this portion of it, as recited in the appellate opinion:

"The court entertained oral argument, during which most of the exchange concerned the tentative striking of Chabad's Objection and Counterclaim. In part, the court described to Chabad's counsel (who stated that he was representing Chabad on a pro bono basis) some of the differences between the procedures in the Code of Civil Procedure and the Probate Code, explaining that claims in probate need to be presented properly." Italics added. 

In reading the opinion, the defendant's counsel seemed more accustomed to civil actions as opposed to probate actions. For example, counsel mistakenly believed that they could file a counterclaim to the plaintiff's petition when the proper procedure was to oppose the plaintiff's petition and file their own separate petition.

Arguably the defendant's counsel offered this admission in hopes that the court would offer him sympathy. Clearly this was not the case. Moreover, the fact that the appellate opinion decided to highlight this admission emphasizes this apparent mistake. Although the appellate opinion did not specifically give the attorney's name in mitigation.

Personally I doubt I would ever disclose such a fact in front of a judge. While performing pro bono work is laudable, disclosing such an arrangement during litigation seems imprudent. A pro bono attorney has to abide by the same rules and procedures as a compensated attorney. There are no special rules for pro bono attorneys when representing a client in court. 

Unfortunately the cruel adage holds true, no good deed goes unpunished.