Herr v. Underwood

Filed 1/17/07  Herr v. Underwood CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b).  This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Siskiyou)

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Following a nonjury trial, the trial court determined defendants were liable for fraudulently obtaining ownership of a home held in trust for the support of their late father's wife.  We affirm the judgment.

FACTS

In 1998, Albert and Betty Johnson created a revocable trust, naming themselves as trustees, and placing their home at 632 W. Miner Street, Yreka, in the trust.  The home had been owned by Albert as his separate property. 

In 1999, the Johnsons took out a loan against the house in the amount of $15,500.  The note required monthly payments of $124.90 for 20 years. 

Albert Johnson died in June 2001.  Under the terms of the trust, Betty Johnson became the sole trustee as well as the primary income and principal beneficiary.  The trust granted to her a life estate in the home, as well as the right to use the income and principal of all trust assets for her support. 

The trust directed that upon Betty's death, whatever assets remained in the trust would be divided between Albert's surviving children from a prior marriage:  Nancy Nelson, Clinton Johnson, and defendant and appellant Yvonne Underwood. 

Three weeks after Albert died, Yvonne, Nancy and Clinton sent Betty a letter demanding an accounting of the trust. 

Betty could not afford the cost of Albert's funeral.  Yvonne and her husband, defendant and appellant Robert Underwood, paid for the funeral.  Afterward, Robert began sending letters to Betty asking her or the trust to reimburse him and Yvonne.  Ultimately, Robert sued Betty in small claims court, but the court denied his claim. 

Meanwhile, less than two months after Albert's death, Yvonne, Nancy and Clinton filed a petition in superior court to remove Betty as trustee.  Richard L. Young, Robert's attorney on this appeal, represented Yvonne, Nancy and Clinton on the petition.  However, Nancy testified she did not request Young to represent her in a petition to remove Betty as trustee, did not ever retain Young to represent her, never spoke with Young, and never had correspondence with Young.^[1] 

Betty's physical and emotional health deteriorated after Albert's death.  She stopped paying the mortgage in June 2002.  A friend telephoned Betty's son in Colorado, plaintiff and respondent John Herr, to suggest he move Betty to his home.  John agreed and moved Betty to Colorado in August 2002.  At that time, Betty hoped to return to Yreka when her health improved. 

In September 2002, the bank notified Betty her payments on the mortgage were past due in the amount of $749.40.  Betty informed the bank she could not afford to make the payment and asked the bank to contact Yvonne, Nancy and Clinton to see if they would accept responsibility for the loan.  If they would not, Betty suggested the bank begin foreclosure proceedings. 

The bank contacted Yvonne, told her the loan was in arrears, and stated it would begin foreclosure proceedings in two weeks.  Robert contacted the bank that same day, and in October 2002, he purchased the note.  The bank assigned the deed of trust to Robert in December 2002. 

Although not the owners of the house, on January 2, 2003, Robert and Yvonne rented the house to Angela Elliott beginning in February.  On that date, Elliott paid Robert and Yvonne $1,650 to cover first and last months rent at $650 per month and a $350 security deposit. 

On January 27, 2003, the superior court granted the petition to remove Betty as trustee and replace her with Nancy. 

Yvonne and Robert continued to collect rent from Elliott.  Between January and May 2003, they collected $3,600.  However, they gave conflicting testimony of what extent, if any, of the rent proceeds were applied to the monthly mortgage payment.  Robert conveyed an undisclosed amount of the proceeds to Nancy, but Nancy did not pay Robert any money on the loan or deposit any of this money into the trust account.^[2] 

In April or May, 2003, both Robert and Yvonne informed Nancy the mortgage, which Robert owned, was in default and in danger of being foreclosed.  They made this assertion even though Robert had not actually determined the amount the mortgage was in arrears and had not recorded and served a 90-day notice of default, a prerequisite to foreclosure.  They made this assertion even though they had received, and would continue to receive more than enough money in rent proceeds to bring the mortgage current before the property could be foreclosed.  Both suggested Nancy sign the property over to them in lieu of foreclosure. 

At that time, Nancy did not know who owned the mortgage.  She had not on her own ascertained, nor had Robert and Yvonne informed her, the fact they owned the mortgage, the amount of the default, or the amount of the monthly loan payment.  Nancy made little effort to understand and fulfill her duties as a trustee. 

Robert drafted a grant deed and forwarded it to Nancy.  Nancy signed the deed on May 7, 2003, and returned it to Robert.  By the deed, Nancy, as trustee, transferred all interest in the home to Robert.  The deed stated the grant was made â€