Conventional wisdom is that a safe deposit box is a safe place to store valuable belongings.  And that’s true, as long as the owner keeps track of the contents of the safe deposit box.

Yet, I have handled a case in which a bank denied, in writing, the existence of a safe deposit box in the decedent’s name.  A few months later, when presented with the key to the safe deposit box, the bank “found” the box and we recovered thousands of dollars in U.S. government bonds.

The plaintiff in Gabriel v. Wells Fargo Bank (Aug. 30, 2010) 2010 DJDAR 14579 did not fare as well.  In Gabriel v. Wells Fargo Bank, the decedent held a safe deposit box.  The widow learned of the safe deposit box 16 years after her husband’s death.  In the box was a non-negotiable certificate of deposit in the face amount of $976,691.60, payable to the widow.

But because the widow could not prove a negative (specifically, because she could not prove that Wells Fargo Bank had not already paid out on the certificate of deposit), she lost at the trial court and on appeal.

That’s a bitter pill, and a strange decision.  Here are the facts and the holding.
“On June 22, 1988, Hideo purchased a certificate of deposit from Wells Fargo in the amount of $976,691.60, payable to his wife Kuniko.  Interest from the certificate was to be placed in a savings account held in Kuniko’s name.  Hideo apparently placed a receipt from the bank for the certificate of deposit account in a safe deposit box at the bank which was also in Kuniko’s name.”

Sounds like great facts.  “Hideo died in November 1991 . . . In April 2002, Wells Fargo opened the safe deposit box because the rental fee had not been paid and the box was presumed abandoned.  It found the certificate of deposit and in June 2006 sent it to the California Controller’s Office as unclaimed property.”

Still going strong.  “In August 2007, Kuniko received a letter from the controller’s office informing her that it was holding the contents of a safe deposit box from Wells Fargo. The controller sent her the contents of the box, which included the receipt for the certificate of deposit. This was the first time that she learned of the existence of the certificate of deposit or of the savings account . . . Kuniko sued Wells Fargo, claiming that it failed to pay her the money in the accounts.”

What more do you need?  A lot, according to the court.  “The court granted summary judgment in favor of the bank, finding that despite the absence of definitive records, Wells Fargo had presented sufficient evidence of its normal business practices to establish that no funds remained in either account.”

Are you wondering what went wrong?  You should be.   Here’s how Wells Fargo got away scot-free.  “Wells Fargo has no records indicating that any funds from the CD account or the savings account were ever transferred to the State Controller’s Office as unclaimed property.  If any unclaimed funds remained in either of these accounts, those funds would have been escheated to the State Controller’s Office and Wells Fargo would have records of that fact.”

OK, so the bank did not pay out the funds to the state as unclaimed property.  What happened to the million dollars, which was payable to the widow?  “Wells Fargo [determined] that neither account was open, and that no records existed which would show when those accounts had been closed or how much money had been in the account when they were open.”

Watch the train wreck unfold before your eyes.   “Wells Fargo’s evidence establishes that the absence of specific Wells Fargo records infers that the certificate of deposit was withdrawn.   Since there is no evidence that plaintiff Yamamoto’s late husband did not withdraw the funds, and no evidence that the terms of the certificate of deposit account did not permit him to withdraw the funds, plaintiff Yamamoto is unable to meet her burden of producing evidence on an essential element of her claim.”

Really?  The widow loses?  Said the court, “At trial Kuniko would have the burden of proving nonpayment.”  Well. The widow said she never received the money.  Isn’t that enough?

No way, said the court.  “Wells Fargo submitted the declaration of the operations manager of the bank’s unclaimed property department who is responsible for monitoring dormant accounts and reporting escheated property to the State Controller’s Office.  Her declaration states that ‘it is Wells Fargo’s policy and practice to maintain account records for seven years after the account has been closed.’”

No tickee, no laundry.  Or, because the bank has no records, the widow loses.  “Wells Fargo’s evidence that no money remained in the accounts shifted to Kuniko the burden of presenting evidence sufficient to create a triable issue as to nonpayment, and her possession of the receipt and her testimony were insufficient to do so.  The trial court therefore properly granted summary judgment in favor of Wells Fargo.”

The moral of this story – make sure that your family knows how to find your valuable possessions.  Also, bankers have a powerful lobby, and the laws favor them to an unreasonable degree.

Gabriel v. Wells Fargo Bank (Aug. 30, 2010) 2010 DJDAR 14579

It’s remarkable how persons come out of the woodwork after a relative’s death, claiming that they should get a share of the decedent’s estate.  Especially when the decedent left money to someone not related by blood who helped care for the person in his or her declining years.  In this case, the wicked step-daughter.

The recent situation in Estate of Austin involved this all-too-familiar pattern.  The court set the facts as follows.  “Prior to Donald Austin’s death, Donald’s mother passed away and his brother, Wesley Austin became successor trustee of the mother’s trust.”

“In April or May 2007, Wesley and his wife, Janice, learned Donald would receive funds from the mother’s trust.  Wesley and Janice went to see Donald at the nursing home and asked what he wanted to do with the funds.”

This did not sit well with Donald.  “On their third visit in three weeks, Donald had decided he wanted Debra to have the money.  [Debra was the daughter of Donald’s ex-wife.]”

“Wesley and Janice called Debra and asked her to come to the nursing home. Wesley handed the first check to Donald, who signed it, handed it to Debra, and said, ‘Here, this is yours.’  Wesley received the second check from the life insurance company; he took it to Donald, who signed it over to Debra and told Wesley to take it to her. Wesley delivered it to Debra personally. The remaining four checks were written by Donald to Debra. The six checks were dated between April 5 and July 10, 2007, and totaled approximately $185,000.”

The testimony at trial indicated that, at the time the checks were given to Debra, Donald was 72 years old and a resident of a nursing home.  He had been placed in the nursing home because his health had declined and he was unable to care for himself after suffering a broken hip and undergoing triple bypass surgery.  The parties did not dispute that he was a “dependent adult” within the meaning of California law.

Donald’s daughter, Dawn, was outraged after his father’s death that she [Dawn] did not get the money.  So she did what any reasonable person would do.  She sued Debra.  The court would have none of it.

Dawn’s theory was that Debra was a “care custodian” under California law and therefore ineligible to take from Donald.  Specifically, “Dawn contends Debra was a ‘care custodian of a dependent adult. as that term is used in Probate Code section 21350, and is therefore a person disqualified from receiving a transfer of property from that dependent adult.”

The trial court found that Dawn did not meet her initial burden of proving Debra was a disqualified transferee under section 21350, subdivision (a). It concluded Dawn failed to prove Debra met the definition of a care custodian.  This finding was affirmed on appeal.

Explained the court, “The definition [of care custodian] is not limited to paid professional care givers; it includes a person who provides health services or social services to a dependent adult as a result of a preexisting personal friendship with the dependent adult.”

However, Debra did not fit the definition.  According to the court, “Donald made the gifts to Debra while he was residing in a nursing home.  There was no evidence Debra was providing any health or social services to him at that time. The evidence showed that Donald had been able to take care of himself, and Debra did not provide assistance to him, until he broke his hip in October 2006 and had triple bypass surgery three weeks later.”

Furthermore, “There was no evidence Debra was ever a paid live-in caregiver for Donald . . . Debra’s services were much more limited, consisting only of driving Donald to the doctor, preparing some of his meals, and unspecified helping out. ¶ Substantial evidence supports the trial court’s conclusion that Debra did not become Donald’s care custodian as a result of the limited services she performed for him while he was not in a nursing home.  Dawn failed to carry her burden of proving Debra was a disqualified transferee.”

It seems like the court reached a fair and reasonable decision.  Donald favored the person who was closer to him, and the court respected his wishes.

Estate of Austin (Sept. 15, 2010) — Cal.Rptr.3d —-, 2010 WL 3565739

California provides a one-year statute of limitations for claims against a deceased person.  If a claim exists against a person as of the time of that person’s death, an action based on such claim must be filed within one year after death or forever be barred.

Caveat – This rule assumes that the claim existed on the date of death.  If, for example, the claim is based on a promissory note which does not come due and payable until a later date, then the one-year statute of limitations is not controlling.

The court in Estate of Ziegler did not like the facts with which it was presented.  Here is the opening from the recent opinion.

“The statute of limitations serves noble public policies.  It promotes justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.  Its operation in particular cases, however, can be sadly inequitable.”

“This is just such a case.  The equities in favor of claimant Richard H. LaQue could hardly be more compelling.  LaQue and his wife provided food, care, and companionship to their neighbor, Paul Ziegler, when Ziegler was sick and alone.”

“At first, they did so out of the goodness of their hearts.  Eventually, however, a grateful Ziegler insisted on entering into a written agreement – the validity of which is unquestioned – that in consideration of continued care, LaQue would receive Ziegler’s home upon Ziegler’s death.”

“On the other hand, the equities in favor of appellant W.C. Cox and Company (Cox) are slim to none.  Cox is a soulless corporation in the business of locating missing heirs.  It is acting as the attorney in fact for nine residents of Germany who claim to be Ziegler’s heirs.”

“After Ziegler died without a will, LaQue simply moved into Ziegler’s former home, unopposed. He did not see the need to file any claim in connection with Ziegler’s estate until about a year and three weeks after Ziegler’s death.”

“Alas for LaQue, Code of Civil Procedure section 366.3, subdivision (a) provides: ‘If a person has a claim that arises from a promise or agreement with a decedent to distribution from an estate or trust or under another instrument . . . an action to enforce the claim to distribution may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply.’”

The contract provided as follows:

“November 10, 2005

“2:15 p.m.

“I Paul Daniel Ziegler home owner of 820 E. G St in Colton, California 92324, am signing over my home and property to Richard H. LaQue Sr.”

“This written agreement between myself and Richard is for the exchange of my care and daily meals. This written note will be immediately active if and when I no longer can reside in my home due to death.”

Ruling for Mr. LaQue, “the trial court reasoned that the applicable statute of limitations would run from breach of the contract and that the contract had not been breached.”  This finding was reversed on appeal, because “LaQue’s claim here is indistinguishable from a claim on a contract to make a will.  The agreement was a promise to transfer property upon death. It could be performed only after death, by the decedent’s personal representative, by conveying property that otherwise belonged to the estate.”

Here’s where Mr. LaQue loses the case.  If there had been a will in his favor, such will would have controlled.  Instead, there was a contract providing for distribution at death, which contract was subject to the one-year statute of limitations.

Yet, there is a question is whether the document was a contract, or a will substitute.  If the written document could have been a construed as a will – a disposition of property not effective until death – then Mr. LaQue stood a chance.

But the court of appeal did not reach this issue, stating that, “Even though the agreement was worded in the present tense, it required some further action by the Administrator (representing Ziegler) to make the transfer happen.  The notion that the title was instantly transferred, although appealing, is a legal fiction; actually, the estate continued to hold the title.”  (Which suggests that the agreement might have been a will substitute.)

Estate of Ziegler (Aug. 31, 2010) — Cal.Rptr.3d —-, 2010 WL 3398883

Whether a person has sufficient mental capacity to make a will can be a difficult question.  Historically the law has set a low bar for capacity to make a will.

The recent decision in In re Estate of Manuel focused on a fight over attorney’s fees.  The dispute under the discovery laws involves a thorny question – When can attorney’s fees be recovered if a request for admission is denied, but the fact is then proven at trial?

Only a portion of the decision is published in the official reports.  However, in the unpublished portion of the opinion, the court offered a solid discussion of testamentary capacity, based on this issue:

“Brown denied that decedent possessed testamentary capacity at the time she executed the July 24, 2003 will.  We therefore must consider whether Brown possessed a reasonable basis, supported by the evidence, to believe decedent lacked testamentary capacity.”

The statute states that an “individual does not have sufficient mental capacity to be able to (A) understand the nature of the testamentary act, (B) understand and recollect the nature and situation of the individual’s property, or (C) remember and understand the individual’s relations to living descendants, spouse, and parents, and those whose interests are affected by the will.”   Probate Code section 6100.5(a)(1).

The court applied the rule of law to the facts of the case.  “Testamentary capacity must be determined at the time of execution of the will.  Incompetency on a given day may, however, be established by proof of incompetency at prior and subsequent times.”

Now comes a more difficult point.  “Where testamentary incompetence is caused by senile dementia at one point in time, there is a strong inference, if not a legal presumption, that the incompetence continues at other times, because the mental disorder is a continuous one which becomes progressively worse.”

Yet, “dementia” is a not a one-size-fits-all diagnosis – the labels is applied to a number of different symptoms.  The court continued.  “However, it has been held over and over in this state that old age, feebleness, forgetfulness, filthy personal habits, personal eccentricities, failure to recognize old friends or relatives, physical disability, absent mindedness and mental confusion do not furnish grounds for holding that a testator lacked testamentary capacity.”

For the estate planner, the question whether a person has sufficient mental capacity to make a will can be very difficult to answer.  “In this case, Brown possessed substantial evidence that decedent lacked testamentary capacity.”  But that was not the end of the matter.

“Indeed, while the trial court’s determination that decedent possessed testamentary capacity is supported by substantial evidence, had the trial court reached the opposite conclusion, it would have survived a substantial evidence challenge on appeal.”

“Brown relied on the following evidence at trial:  (a) decedent’s stroke in 1999; (b) the two Mini-Mental State Examinations in 1999, which showed substantial mental impairment; (c) an expert opinion that it is unlikely decedent’s condition would have improved after two similar evaluations in 1999; (d) the 1999 diagnosis of probable Alzheimer’s disease; (e) the testimony of relatives regarding decedent’s lack of improvement; (f) the expert opinion of Dr. Neshkes; (g) Wilson’s verified complaint in the Campbell action; and (h) decedent’s deposition testimony six months after the will was executed, in which she demonstrated a lack of testamentary capacity, by her failure to remember and understand her relations to Wilson and the Campbells.”

So who was correct?  It’s a factual matter for determination by the trial court.  “This constitutes more than sufficient evidence for Brown to have denied the request to admit that decedent possessed testamentary capacity.   The trial court’s implicit conclusion to the contrary was an abuse of discretion.  Therefore, Wilson should not have been awarded any attorney fees with respect to the issue of testamentary capacity.”

Alas, this useful analysis was deleted from the final published opinion.

In re Estate of Manuel (August 10, 2010) — Cal.Rptr.3d —-, 2010 WL 3133553

Here’s an awkward fact pattern  Grandfather establishes a testamentary trust, which trust was confirmed in 1971 court order.  The trust provides for distributions to the “grandchildren.”  A decade later, an individual (Mr. Quick) learns that he is a grandchild, and strikes up a friendship with his father, who is also a trustee of the trustee.

Another 20 years pass and Mr. Quick learns of the trust.  His father having passed away, he sues the successor trustee, claiming he was deprived of the benefits of the trust.  Despite the extremely long passage of time, the court allowed the case to go forward in the recent decision in In re Blowitz (June 14, 2010) 186 Cal.App.4th 371.

In its opinion, the court found that “Samuel D. Blowitz died testate in 1971. Pursuant to the terms of a testamentary trust, he left the remainder of the trust estate in equal shares to his grandchildren.”

The will was submitted to probate, and “An Order Settling First and Final Account and Report of Executor filed January 2, 1974, recounts that the trust provides: ‘Each grandchild living at the time of decedent’s death shall hold undivided equal interests in the trust estate.  When a grandchild attains age twenty-five (25), the Co-trustees shall distribute to such grandchild the entire principal of such grandchild’s interest in the trust.’”

That sentence triggered the litigation.  The Order did not name the grandchildren, but merely referred to “each grandchild living at the time of the decedent’s death.”

Now comes the fact that should have triggered a duty of inquiry.  “In 1989, Quick learned J. Michael Blowitz was his natural father. Mr. Quick thereafter met J. Michael Blowitz, attended a Clippers game with him and built a close relationship over the next few years.”

Quick’s father was a trustee of the trust.  If Quick wanted to sue someone, it should have been his father.  He did not do so, instead waiting years before suing the successor trustee.  In his complaint, “Quick alleged Pearson [the successor trustee] knew Quick was Samuel D. Blowitz’s grandchild and therefore a member of the class of remaindermen identified in the trust.”

The lawsuit further alleged that “Pearson willfully and unlawfully refused to give Quick notice he was a beneficiary of the trust and willfully failed to distribute Quick’s share of the trust remainder to Quick.”

By way of defense, Pearson contended Quick “played the proverbial Ostrich, stuck his head in the sand and refused to investigate.  Pearson repeatedly notes Quick  had an obvious source of information available to him, namely, his natural father with whom he had a good relationship and who was a co-trustee of the trust . . . Pearson asserts Quick had a duty to inquire and investigate when he became aware of facts which would put a reasonable person on notice.”

The court rejected this argument, holding that “Nothing in the second amended petition suggests Quick became aware of facts that would have put a reasonable person on notice of the existence of the trust earlier than 2007 when Quick was advised of the trust’s existence by Mickey J. Blowitz.”

The court concluded that “The second amended petition asserts Quick was unaware of the existence of the trust. It further alleges Pearson knew, at all relevant times, that Quick was a grandson of the testator and that Pearson failed to notify Quick of his interest in the trust and instructed the other trust beneficiaries not to inform Quick of the existence of the trust.  Accepting the allegations of the second amended petition as true, as we must on review of an order sustaining a demurrer, we conclude Quick adequately has stated a cause of action for breach of trust by a trustee.”

This seems like a wrong decision, morally if not legally.  More than 35 years elapsed before Mr. Quick filed his lawsuit.  His dispute was with his real father, not the successor trustee.  Under these facts, the court should not have permitted the litigation to proceed.

In re Blowitz (June 14, 2010) 186 Cal.App.4th 371

A recent case emphasizes that the probate court has broad powers to prevent the looting of a decedent’s estate, and can award penalty damages, as well.

In Estate of Kraus (April 27, 2010) 184 Cal.App.4th 103, the decedent’s brother used an invalid power of attorney to clean out her bank accounts in the hours before his sister’s death.  As stated in the decision, “On October 22, 2006, David’s sister, Janice Helene Kraus, was dying of cancer.  Janice was unmarried, did not have any children and she was in hospice care.”

Bad fact coming up.  “On October 22, 2006, David had Janice execute a durable power of attorney in his favor.  At the time, Janice was semi-comatose.  At trial, David “could [not] remember speaking with Janice’s physicians as to whether she had the capacity to sign the power of attorney.”

More bad facts for David.  “On October 22, 2006, Janice was semi-conscious and undergoing hospice care when an ‘X’ was placed on the signature line of the power of attorney.  Joe Damco, her boyfriend, held Janice’s hand when the ‘X’ was placed on the signature line of the power of attorney . . . At the time of her death, Janice’s doctors assumed the cancer had spread to her brain.”

“On the morning of October 23, 2006, David closed several of Janice’s bank accounts and appropriated the funds [totaling  $197,402] for himself.  The money in those accounts belonged to the trust.  Janice died on October 24, 2006 at 7:50 a.m.”

According to his trial testimony, “David prepared the power of attorney to reclaim money in Janice’s accounts he thought belonged to Irene.  Also, David wanted to secure jewelry that Janice wanted placed in her coffin.”

The trial court “found the power of attorney drafted by David on October 22, 2006, was void and David wrongfully and in bad faith converted property belonging to the trust.  According to the court, “The funds secured under the power of attorney were placed in accounts in the name of David and his wife.  No funds taken by David on October 23, 2006, under the power of attorney were ever placed in Irene’s accounts.”  The probate court made no final determination as to the beneficiaries’ right to the funds.

The decision was affirmed in its entirety on appeal.  Explained the court, “the probate court is a court of general jurisdiction (Probate Code § 800) with broad equitable powers.  The probate court has jurisdiction to determine whether property is part of the decedent’s estate or living trust.”

“The probate court has general subject matter jurisdiction over the decedent’s property and as such, it is empowered to resolve competing claims over the title to and distribution of the decedent’s property.  The probate court may apply general equitable principles in fashioning remedies and granting relief . . . The ultimate aim and purpose of administrative proceedings, including any special proceeding or contest to determine heirship, is to ascertain the persons entitled to share in the estate of the decedent and to decree distribution accordingly.”

Thus,“Probate Code section 850 et seq. provides a mechanism for court determination of rights in property claimed to belong to a decedent or another person. The statutory scheme’s ‘evident purpose’ is to carry out the decedent’s intent and to prevent looting of estates.”

Further, “Probate Code section 859 provides for recovery of twice the value of property taken in bad faith.  The section 859 penalty is imposed when an interested party establishes both that the property in question is recoverable under section 850 and that there was a bad faith taking of the property.”

On appeal, “David conceded that the power of attorney was invalid . . . David argued the probate court should have denied the petition because the beneficiaries did not prove they had any right to the funds.”

The court summarily rejected this argument.  “Section 850, by its clear and plain terms, does not require the probate court to find that the property in question belongs to the interested petitioning party.  Here, the trust beneficiaries sought an order requiring David to relinquish misappropriated property.  That it is unclear who is entitled to the property does not deny the beneficiaries of their interest in its rightful disposition – even if, ultimately, it does not go to the trust.”

“Under the language and purpose of the statutory scheme, and given the probate court’s broad powers, it was not required to allow the wrongdoer to retain the property misappropriated in bad faith until someone else proved a ‘better’ right to it.  Under the plain terms of the statutory scheme, the probate court was not required to determine who was entitled to the funds before it could take them away from a person who was not entitled to them.”

“What was clear, as the probate court found, was that David was not entitled to take the money out of Janice’s bank accounts and put it in his own name.  Given these circumstances, the probate court could reasonably, in the exercise of its statutory and equitable powers, place the funds, together with the statutory penalty imposed on David, in Janice’s estate for a future determination of their proper disposition.”

The court also affirmed the statutory penalty in the amount of $394,804.  “Here, the probate court found David in bad faith wrongfully took money that was recoverable under section 850.  At the time it was misappropriated, the money belonged to Janice.  Now that Janice is deceased, the money belongs to her estate, her trust, or, potentially, some party claiming against her estate.  But it is in David’s possession.  Because the probate court found David in bad faith wrongfully took Janice’s money, he could properly be found liable for twice the value of that property.”

Finally, the court held that David had the burden to prove his financial inability to pay the penalty.  “The ability to pay argument was not raised in the probate court.  Even if the issue were properly raised, we would conclude David’s financial condition under these circumstances was not a relevant consideration.  The Courts of Appeal have held evidence of a defendant’s financial status is not essential to the imposition of statutory penalties, and financial inability to pay is a matter to be raised in mitigation.  The trust beneficiaries had no obligation to present evidence of David’s financial condition or his ability to pay the mandatory statutory penalty.”

Estate of Kraus (April 27, 2010) 184 Cal.App.4th 103