June 24, 2018

Colorado Court of Appeals: Guardian Who Diverted Assets for his Own Family Subject to Treble Damages

The Colorado Court of Appeals issued its opinion in People in Interest of Black on Thursday, January 25, 2018.

Probate—Disability—Conservator—Fiduciary Duty—Conflict of Interest—Jurisdiction—Civil Theft.

Black is the former conservator for his mentally-ill sister, Joanne. When he filed his petition to be appointed conservator, he did not tell the probate court that he sought the appointment to disclaim Joanne’s interest in payable-on-death (POD) assets so that they could be redistributed in accordance with his and his children’s expectations of his mother’s estate plan. Nor did he disclose this conflict of interest when he requested authorization to disclaim Joanne’s assets. Black later admitted this conflict. The probate court found that Black breached his fiduciary duties and committed civil theft by converting his sister’s assets for his own benefit. Specifically, the court concluded that Black failed to adequately disclose his intent to use a disclaimer to divest his sister of one-third of the (POD) assets, and therefore did not have the court’s authorization to redirect the assets. The court determined that his actions were undertaken in bad faith and satisfied the elements of civil theft. Based on its findings, the court surcharged Black in the amount of the converted funds and then trebled those damages under the civil theft statute.

On appeal, Black first argued that the probate court lacked jurisdiction to enter the hearing order because only a C.R.C.P. 60(b) motion, and not a motion to void the disclaimer, could undo the court’s order authorizing the disclaimer. However, the motion to void the disclaimer did not seek relief from a final order. Instead, the motion alleged that Black had breached his fiduciary duties to Joanne while acting as conservator, and it sought to unwind a transaction based on this breach. Thus, the probate court’s jurisdiction was based on the court’s authority to monitor fiduciaries over whom it has obtained jurisdiction. Accordingly, the court had jurisdiction to adjudicate the allegations and issues raised by the motion to void the disclaimer. Additionally, Black had sufficient notice of the proceedings.

Black next argued that he could not have breached his fiduciary duty to Joanne because his conversion of one-third of her POD assets was disclosed to and approved by the probate court in accordance with C.R.S. § 15-14-423. C.R.S. § 15-14-423 allows a fiduciary to engage in a conflicted transaction only when the fiduciary has disclosed the conflict of interest and demonstrated that the conflicted transaction is nonetheless reasonable and fair to the protected person. Black received authority to transfer the POD funds to a Supplemental Needs Trust (SNT) for Joanne’s benefit. Instead, he redistributed the POD funds two-thirds to the SNT and one-third to the Issue Trust, which benefited himself and his children. Because Black did not disclose the conflict of interest or demonstrate that this proposed redistribution was reasonable or fair, he did not have safe harbor under the statute. Thus, the probate court did not err in finding that Black breached his fiduciary duties.

Next, Black contended that the probate court erred in finding him liable for civil theft, arguing that the probate court lacked jurisdiction over the claim; the claim was time-barred; and that, in any event, the evidence was insufficient to establish civil theft. The civil theft claim is coterminous with the breach of fiduciary duty claim and thus directly related to Black’s duties as conservator. The probate court had jurisdiction over the civil theft claim, of which Black had notice. The record amply supports that the civil theft claim was timely asserted. As to the sufficiency of the evidence, Black did not dispute that he obtained control over Joanne’s assets with the intent to permanently deprive her of them; he disputed only the probate court’s finding of deception. The record supports the probate court’s finding that Black made misrepresentations or misleading statements or that he concealed material facts. When a conservator allegedly commits theft from a protected person by deception on the probate court, reliance is established if that court relied on the misrepresentation in authorizing the theft. Here, the court relied on Black’s misrepresentations in authorizing the disclaimer, and it would not have authorized the transaction had it known the true facts. The evidence was sufficient to support the finding that Black committed civil theft.

Black also contended that reversal is required because the probate court committed a series of errors that made the evidentiary hearing unfair. The court of appeals was unpersuaded by these arguments.

Lastly, Black contended that the court erred in concluding that he lacked authority to create a separate trust for Joanne’s workers’ compensation and Social Security disability benefits. The court discerned no error.

Joanne cross-appealed, contending that the court erred by failing to make explicit findings denying her request to void the disclaimer. The court did not abuse its discretion in imposing a surcharge rather than ordering that the disclaimer transaction be unwound.

The order was affirmed and the case was remanded for determination of reasonable appellate attorney fees.

Summary provided courtesy of Colorado Lawyer.

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.

Colorado Court of Appeals: Medical Evidence of Competency Not Required Under Conservatorship Statute

The Colorado Court of Appeals issued its opinion in In the Interest of Neher v. Neher on Thursday, July 30, 2015.

Special Conservator—Medical Expert—Stipulation—Witness Disclosure—Evidence.

After receiving several unsolicited e-mails asking for money, Galen Neher (father) sent almost $500,000 to anonymous offshore bank accounts. Suspecting fraud, Christopher Neher, his son, petitioned the court to appoint a special conservator over father’s financial affairs. Although there was no medical evidence to support the petition, the court appointed a conservator to oversee father’s financial affairs.

On appeal, father contended that the conservatorship statute requires medical evidence before a court can properly make a determination of whether an individual is impaired. Because the current statute does not include such a requirement and the prior statute was amended to remove language that might have suggested it, father’s argument was rejected.

Father also argued that the trial court committed reversible error by denying his motion to enforce an oral stipulation whereby father would retake control of his financial affairs but would be monitored by an accounting firm for a year. The parties later disagreed over the terms to be included in a written stipulation. Even assuming that the court should have found the oral stipulation enforceable, the court still proceeded consistent with that stipulation by holding a hearing on whether to make the conservatorship permanent. Therefore, the court did not err in denying father’s motion.

Father further contended that the trial court abused its discretion when it denied his motion for a new trial. The court did not deny father a fair trial when it stopped the proceedings and directed counsel into chambers for discussion without the parties present. Further, his son’s late disclosure of an expert witness did not require reversal because father’s counsel failed to request a continuance. Finally, his son presented clear and convincing evidence that father was unable to manage property and business affairs. The orders appointing a permanent conservator over father’s estate and denying his motion for a new trial were affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Status as VA Designated Payee Does Not Confer Priority for Appointment as Conservator

The Colorado Court of Appeals issued its opinion in In re Estate of Runyon on Wednesday, December 31, 2014.

Appointment of Uniform Veterans’ Guardianship Act Guardian—Appointment of Guardian by Incapacitated Person.

Gladys Runyon (mother) was the authorized payee for Sidney Runyon’s Department of Veterans Affairs (VA) benefits until August 2011, when Elizabeth Knight (sister) became the payee. In February 2012, the VA designated Colorado State Bank and Trust (Bank) as payee.

The Bank petitioned for appointment as Runyon’s guardian under the Uniform Veterans’ Guardianship Act (UVGA). It also petitioned to have Jeanette Goodwin appointed as Runyon’s guardian under the Colorado Probate Code. The Denver Probate Court concluded that the Bank’s petitions were filed in the wrong venue but appointed Goodwin as emergency guardian through August 2012.

Ten months after the expiration of the emergency guardianship, mother and sister sought appointment as co-guardians and conservators in Arapahoe County. Runyon advised the court-appointed visitor that he didn’t want mother and sister appointed. The court appointed counsel for Runyon.

The Bank then entered an appearance and sought appointment as conservator and UVGA guardian, and nominated Goodwin as guardian. At the hearing, Runyon’s attorney advised the court of Runyon’s preferences to appoint the Bank and Goodwin as conservator and guardian, and the court granted the appointments.

On appeal, mother and sister argued that the trial court erred because (1) their purported status as designated payees for Runyon’s VA and Social Security Administration (SSA) benefits entitled them to be appointed, and (2) the court should not have given effect to Runyon’s preferences. The Court of Appeals disagreed with the first point and remanded for further proceedings on the second.

The appointment of a guardian lies within the sound discretion of the probate court. A respondent’s nomination of a guardian creates a priority for that nominee, but only if the respondent had “sufficient capacity to express a preference” at the time of the nomination. The respondent may make an oral nomination at an appointment hearing. There is a similar scheme for appointment of conservators and UVGA guardians.

Here, mother and sister had no priority claim to be a guardian or conservator, and being appointed as designated payees of Runyon’s SSA and VA benefits did not confer any such priority claim on them. By nominating the Bank and Goodwin at the hearing, Runyon conferred on them a priority for appointment. However, the record did not reflect whether the trial court found that Runyon had sufficient capacity to express a preference at the time of the nomination. The Court remanded for such a determination, but noted that a finding that a respondent is an “incapacitated person” under the statute does not necessarily mean that the respondent lacks sufficient capacity to express a preference as to a guardian or conservator.

Summary and full case available here, courtesy of The Colorado Lawyer.

Probate JDF Forms Revised in Protective Proceedings Category

In April 2014, the Colorado State Judicial Branch issued several revised forms in the Probate category. The revised forms deal with protective proceedings. The forms are available here in PDF format, and may be downloaded in Word format from State Judicial’s website.

PROBATE

  • JDF 847 – “Instructions for Filing a Petition for Appointment of Co-Guardian/Conservator or Successor Guardian/Conservator” (Revised 4/14)
  • JDF 800 – “Acknowledgment of Responsibilities Conservator and/or Guardian” (Revised 4/14)
  • JDF 821 – “Affidavit of Acceptance of Appointment by Written Instrument as Guardian for Minor” (Revised 4/14)
  • JDF 878 – “Order Appointing Conservator for Adult” (Revised 4/14)
  • JDF 882 – “Conservator’s Financial Plan with Inventory and Motion for Approval” (Revised 3/14)
  • JDF 960 – “Petition for Final Settlement” (Revised 4/14)
  • JDF 964 – “Order for Final Settlement” (Revised 4/14)

Click here to access all of State Judicial’s JDF forms.

Colorado Court of Appeals: No Fiduciary Duty Owed by Party to Real Estate Transaction so Attorney Fee Award Inappropriate

The Colorado Court of Appeals issued its opinion in In the Interest of Delluomo v. Cedarblade on Thursday, April 10, 2014.

Revocable Living Trust—Trustee—Beneficiary—Breach of Fiduciary Duty—Undue Influence—Attorney Fees—Breach of Trust Exception.

Respondent Phillip Delluomo created a revocable living trust. He named himself trustee and Wells Fargo Bank as co-trustee. The beneficiaries of the trust were his niece, appellant Brenda Cedarblade, and his nephew, Timothy Corcoran. A few months after the creation of the trust, Delluomo transferred five parcels of real property from the trust to Cedarblade.

The court thereafter appointed Janice Eder as Delluomo’s conservator. Eder initiated an action on Delluomo’s behalf to quiet title, seeking to set aside the real property transactions involving Cedarblade on the basis of undue influence and breach of fiduciary duty. A jury found that Cedarblade had exerted undue influence on Delluomo with regard to the conveyances of property into joint tenancy. Thus, the court set aside the property transfers to Cedarblade and awarded attorney fees to plaintiffs.

Cedarblade argued on appeal that the court erred in awarding attorney fees to plaintiffs. Cedarblade was not a trustee or custodian of funds (or other trust assets). Although she breached her duty as an individual, she did not breach any duty owed based on a relationship to manage property.

Because the circumstances of this case did not fit within the breach of trust exception to the general rule that parties in a lawsuit must pay their own legal expenses, the Court of Appeals ruled that the district court erred when it denied Cedarblade’s motion for directed verdict and allowed the jury to award attorney fees to plaintiffs. The portion of the judgment awarding attorney fees was vacated.

Summary and full case available here.

Many Probate JDF Forms Amended by Colorado Supreme Court and State Judicial

The Colorado State Judicial Branch issued several new and revised JDF forms in the Probate category in June and July, after the Colorado Supreme Court issued Rule Change 2013(08) on June 19, 2013.

Most of the instruction forms were changed, as well as forms regarding guardianships for adults and minors, the Conservator’s Report, and the small estate affidavit. Click the links below to view and download the forms.

PROBATE FORMS

  • JDF 782 – Instructions to File Petition to Accept Adult Guardianship and/or Conservatorship in Colorado From Sending State (revised 7/13)
  • JDF 786 – Instructions to File a Petition to Transfer Adult Guardianship and/or Conservatorship from Colorado to Receiving State (revised 7/13)
  • JDF 820 – Instructions for Appointment of Guardian by Will or Other Signed Writing (revised 7/13)
  • JDF 823 – Instructions for Appointment of Guardian – Minor (revised 7/13)
  • JDF 840 – Instructions for Appointment of Guardian – Adult (revised 7/13)
  • JDF 860 – Instructions for Appointment of Conservator – Minor (revised 7/13)
  • JDF 875 – Instructions for Appointment of Conservator – Adult (revised 7/13)
  • JDF 887 – Instructions to File a Petition to Terminate Conservatorship (revised 7/13)
  • JDF 906 – Instructions for Probate With a Will (revised 7/13)
  • JDF 907 – Instructions for Probate Without a Will (revised 7/13)
  • JDF 957 – Instructions for Closing an Estate Formally (revised 7/13)
  • JDF 958 – Instructions for Closing a Small Estate Informally (revised 7/13)
  • JDF 959 – Instructions for Closing an Estate Informally (revised 7/13)
  • JDF 989 – Instructions to Re-Open an Estate (revised 7/13)
  • JDF 998 – Instructions for Completing Affidavit for Collection of Personal Property (revised 6/13)
  • JDF 827 – Order Appointing Guardian for Minor (revised 6/13)
  • JDF 828 – Order Appointing Temporary Guardian for Minor (revised 6/13)
  • JDF 829 – Order Appointing Emergency Guardian for Minor (revised 6/13)
  • JDF 830 – Letters of Guardianship – Minor (revised 6/13)
  • JDF 843 – Order Appointing Emergency Guardian for Adult (revised 6/13)
  • JDF 846 – Order Appointing Temporary Substitute Guardian – Adult (revised 6/13)
  • JDF 848 – Order Appointing Guardian for Adult (revised 6/13)
  • JDF 885 – Conservator’s Report (revised 6/13)
  • JDF 999 – Collection of Personal Property by Affidavit (revised 6/13)

For all of State Judicial’s JDF forms, click here.