November 22, 2017

Colorado Court of Appeals: Trial Court Within Discretion to Impose Surcharge in Protective Proceeding

The Colorado Court of Appeals issued its opinion in Becker v. Wells Fargo Bank, N.A. on Thursday, August 24, 2017.

Aaron Becker was the conservator on an account set up for his daughter after she was the beneficiary of settlement funds from a personal injury claim. The trial court’s order to set up the restricted account specified that “no funds could be withdrawn from the account except by ‘separate certified order of this court.'” However, due to a “coding error,” Wells Fargo failed to set up the account as a restricted account. The account balance was $56,642.46 as reported in August 2013. Wells Fargo allowed Becker to make unauthorized withdrawals until the balance was negative, then closed the account.

The trial court issued an order to show cause in August 2016 to both Wells Fargo and Becker regarding the withdrawn funds. At the show cause hearing, Becker testified that he used the funds for his personal expenses, as well as to pay rent, groceries, utilities, sports activities expenses, and other expenses for the beneficiary. The court ordered Becker to file an accounting of how the funds were used from August 2013 until the account was closed. He agreed to do so, but never filed the accounting.

The court ordered Becker and Wells Fargo to restore to the account the last amount reported and found them jointly and severally liable for breach of fiduciary duty. The court ordered Wells Fargo to restore $56,642.46 to a new restricted account. 

Wells Fargo appealed, arguing the court should have apportioned liability per C.R.S. § 13-21-111.5. Wells Fargo also requested a hearing to determine the amount of the funds used to benefit the protected person so as not to afford her a double recovery. The trial court denied Wells Fargo’s motion.

On appeal, the court of appeals disagreed with Wells Fargo that C.R.S. § 13-21-111.5 applied, ruling instead that the court properly determined that it was a surcharge action under C.R.S. §§ 15-10-501 to -504. The court noted that the trial court had authority to impose a surcharge on Wells Fargo for failing to correct its error. The court of appeals agreed with Wells Fargo, however, that requiring the bank to restore the full amount of the settlement funds could potentially result in an impermissible double recovery to the protected person, and remanded for a determination of how the conservatorship funds were spent.

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