TAYE v.DRUMGOOLE






Filed 1/14/11






CERTIFIED FOR PARTIAL PUBLICATION*

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

Conservatorship of the Estate of IDA MCQUEEN.
FESSHA TAYE, as Conservator, etc., Petitioner and Respondent, v. EARLINE DRUMGOOLE et al., Objectors and Appellants.	A126825 (Alameda County Super. Ct. No. HP05237122)

I.
INTRODUCTION
Conservator Fessha Taye brought this litigation on behalf of conservatee Ida McQueen, a mentally and physically disabled elder, against several of McQueen’s family members and the family’s legal representative.[1] Specifically, it was claimed that these individuals violated the terms of a trust set up for McQueen by her father when they sold the family residence, in which McQueen held a life estate, without her consent or knowledge and then misappropriated the entirety of the sales proceeds for their own use.
Following a jury trial, Taye, on McQueen’s behalf (respondent), obtained an award of $99,900 in damages against three of five defendants who proceeded to trial––Alameda County attorney Carol Veres Reed (the family attorney), trustee Ray Blackshire (McQueen’s uncle), and Earline Drumgoole (McQueen’s sister) (collectively referred to as appellants).[2] The jury found each appellant liable on various causes of action, including financial elder abuse, concealment, conversion, breach of fiduciary duty, and negligence. After the trial, the court awarded respondent $320,748.25 in attorney fees and conservatorship costs.
Appellants have filed this appeal claiming multiple instances of prejudicial error, including that the instructions given to the jury on the collateral source rule and the Rules of Professional Conduct were erroneous. Appellants also claim that the trial court unduly restricted appellant Reed’s testimony and barred admission of relevant evidence so that she was not allowed to provide a full explanation on the reasonableness of her actions as it related to the claim of financial elder abuse. Appellants further argue that respondent failed to state a cause of action for conversion, and that the trial court erred in submitting this theory to the jury. Lastly, it is claimed that the attorney fee award was excessive and should be reduced. We reject all of these contentions and affirm.
II.
Facts and Procedural History
McQueen is a senior citizen, whose date of birth is February 16, 1935. She suffers from mild mental retardation, progressive spastic quadriparesis, scoliosis, osteoporosis, arthritis and has a history of hypertension. She uses a wheelchair and is unable to read or write.
A testamentary trust was created for McQueen’s benefit by her now-deceased father, Earl Blacksher, under his 1989 will.[3] The will gave McQueen the right to live in the family home located at 10709 Estepa Drive in Oakland during her lifetime. The will also provided that the trustee, in his discretion, shall pay as much of the trust principal as he deems necessary for McQueen’s care, comfort and health expenses during her lifetime. Upon McQueen’s death, the will directs that the remaining trust assets shall vest in any of Blacksher’s six children who may be living, in equal shares. Blacksher named his two brothers, Lee and appellant Ray Blackshire, as co-trustees of the trust for McQueen.
Earl Blacksher died on or about March 1, 1990. On April 10, 1990, Lee and Ray Blackshire were appointed as co-administrators of Blacksher’s estate. At the time of Blacksher’s death, a mortgage with Beneficial Finance existed against the family home. Lee Blackshire, in his capacity as co-administrator of the estate of Earl Blacksher, and with court permission, loaned the estate sufficient funds to pay off the existing Beneficial Finance mortgage. This transaction reduced McQueen’s monthly expenses to an amount she could reasonably afford to pay from her Social Security Supplemental Income (SSI). McQueen’s sister, appellant Earline Drumgoole, administered McQueen’s financial affairs after the death of their father, including becoming McQueen’s representative payee for her SSI benefits.
An order for final distribution of the estate of Earl Blacksher was prepared by appellant Reed, an attorney whose father had drafted Earl Blacksher’s will. The order for final distribution was filed and recorded in Alameda County on September 20, 1994. The order formally created a trust, it designated the family residence as the trust res, and it directed the trustee to pay the net income of the trust to McQueen for her care, comfort and support during her natural life. Lee Blackshire subsequently died. On September 21, 1994, appellant Ray Blackshire was appointed sole administrator of the estate of Earl Blacksher.
By court order in 1994, appellant Reed was to receive $3,321.93 for her attorney fees for services rendered to the estate. Appellant Ray Blackshire was to receive $2,321.93 in executor’s fees. However, there was no money in the estate to pay these fees.
After Earl Blacksher’s death in 1990, McQueen continued to live in the family home with assistance from caregivers. In early 2000, McQueen was placed in a skilled nursing facility due to medical complications. Despite McQueen’s desire to return to the family home once her physical condition stabilized, she was unable to do so due to severe habitability problems in the home as well as lack of wheelchair access. In May 2001, McQueen moved into Gerrylaide Manor, a community care facility in the Cherryland area of unincorporated Alameda County, with the assistance of the Regional Center of the East Bay (Regional Center).
On February 9, 2000, appellant Reed and her brother, attorney Richard K. Veres, visited McQueen in the skilled nursing facility in order to have her to sign a power of attorney, which they had prepared, appointing appellant Earline Drumgoole to act on McQueen’s behalf. No one at the skilled nursing facility or the Regional Center was notified in advance of their visit to McQueen, so McQueen had no one with her to help her understand the purpose of the document. McQueen signed the power of attorney by making a mark on the document. The power of attorney was witnessed by appellant Reed and Richard K. Veres and notarized by Richard K. Veres. Afterward, McQueen told a worker at the skilled nursing facility that some people visited her and had her sign something, but she did not know the people or what she had signed.[4]
On October 5, 2004, appellant Ray Blackshire, acting in his capacity as trustee, executed a document selling the family residence to a third party, Phillip Edwards, under a grant deed, which was then recorded on October 26, 2004. The sale price paid for the subject property was $240,000. The sale was completed without McQueen’s consent and without authorization from the probate court. The money from the sale was held in appellant Reed’s general attorney/client trust account. Appellant Reed eventually distributed the sale proceeds among family members including appellant Ray Blackshire, appellant Earline Drumgoole, Earl Blacksher, Jr., Burt Blacksher, Alonzo Blacksher (son of Arthur Blacksher) and the children of Earl Blacksher’s deceased daughter Geraldine Blacksher Kane. Appellants Reed and Ray Blackshire were paid their court-ordered probate fees that they were owed from years earlier. Appellant Drumgoole was repaid for money she spent to keep the family residence out of foreclosure.
In November 2004, the Regional Center first learned that McQueen’s home had been sold without her knowledge or consent, and that she had not received any proceeds from the sale of the house. On December 16, 2005, Fessha Taye was appointed limited conservator of the estate of Ida McQueen.
A lawsuit was eventually brought by the conservator naming, among other individuals, the five defendants who proceeded to trial: (1) McQueen’s sister Earline Drumgoole; (2) McQueen’s uncle Ray Blackshire, (3) attorney Carol Veres Reed, (4) Reed’s brother Richard K. Veres, and (5) McQueen’s nephew Alonzo Blacksher. The operative complaint alleged causes of action for financial elder abuse, fraud and concealment, conversion, breach of fiduciary duty and negligence. The principal allegation underlying this lawsuit was that defendants “prepared and fraudulently obtained a power of attorney from Ida McQueen, fraudulently and secretly executed documents to wrongfully transfer title and sell the Subject Property, and thereafter wrongfully converted the cash proceeds from such sale to themselves for their own use and to the exclusion of Trust Beneficiary, Ida McQueen.” It was alleged that these actions were in direct contravention of the terms of the trust that was set up for McQueen by her father, Earl Blacksher.
At trial, appellants were represented by appellant Reed’s husband, James E. Reed.[5] In a pretrial ruling, the court held as a matter of law that there was no ambiguity with regard to the intent of the testator, Earl Blacksher, that in creating a life estate in the family home for McQueen, he intended for her to hold this interest for the duration of her life and that interest “doesn’t extinguish just because it’s sold.” Consequently, even though McQueen could no longer reside in the family home, she was entitled to any income that might result from the sale of the house.[6]
At trial, appellants were allowed to argue that they had a good faith reasonable belief that McQueen’s life estate had ended, despite the fact that the trial court had made a legal ruling resolving that issue against appellants. Appellants also claimed that McQueen could never have benefitted from the sale of the family home and, in fact, she would have been harmed because if she had received any of the sale proceeds, her SSI and Medi-Cal benefits would have been reduced and possibly lost altogether.
The jury heard conflicting expert testimony on this hypothesis. Respondent’s expert witness, Kevin Urbatch, testified that with appropriate financial planning, such as the creation of a special needs trust for McQueen’s benefit, the testator’s intent could have been carried out and the proceeds from the sale of the family home could have been preserved for McQueen while her SSI and Medi-Cal benefits were protected. In rebuttal, appellants’ expert witness, Stephen Dale, testified that while there presently is a way to create a special needs trust under these circumstances, this option did not really exist in California during the relevant time frame.
The jury was given a separate verdict form for each defendant for each theory of liability. Before the case was submitted to the jury, the court entered nonsuit in favor of defendant Alonzo Blacksher. Appellant Ray Blackshire was found liable for conversion, breach of fiduciary duty, and concealment. Appellant Earline Drumgoole was found liable for negligence, conversion, breach of fiduciary duty, and concealment. Appellant Carol Veres Reed was found liable for financial elder abuse, breach of fiduciary duty as an attorney, and conversion. The jury exonerated Richard K. Veres for all causes of action alleged against him.
Appellants were ordered to pay McQueen $99,900 in compensatory damages. Appellant Reed was the only defendant who was found liable under the elder abuse statute, which contains an attorney fees and costs provision. (Welf. & Inst. Code, § 15657.5, subd. (a).) She was ordered to pay attorney fees and costs in the amount of $320,748.25. This appeal followed.
III.
Discussion
A. Were McQueen’s Disability Benefits Subject to the Collateral Source Rule‌
The jury was instructed that the government benefits received by McQueen based on her long-standing disabilities and financial need could not be considered in awarding damages.[7] This instruction was based on the court’s pretrial ruling that McQueen’s SSI payments were collateral source benefits that could not be used to offset any damages that the jury might award McQueen as a result of any alleged breach of fiduciary duty, financial elder abuse, conversion, or negligence.
Under the collateral source rule, “if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor. [Citation.]” (Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, 6, fn. omitted (Helfend).) The court ruled that “to allow the jury to consider the SSI payments in connection with damages would be in violation of the collateral source rule, would be prejudicial, confusing and misleading under Evidence Code section 352, and against public policy.”[8]
Appellants assert that the trial court erred when it restricted use of evidence of McQueen’s SSI payments pursuant to the collateral source rule. Appellants emphasize that the collateral source rule typically applies “in tort cases in which the plaintiff has been compensated by an independent collateral source––such as insurance, pension, continued wages, or disability payments––for which he had actually or constructively . . . paid or in cases in which the collateral source would be recompensed from the tort recovery through subrogation, refund of benefits, or some other arrangement.” (Helfend, supra, 2 Cal.3d at pp. 13-14.) “This rule embodies a judicially created policy, firmly embedded in California jurisprudence, encouraging prudent investment in insurance and ensuring that victims are made whole.” (Kardly v. State Farm Mut. Auto Ins. Co. (1989) 207 Cal.App.3d 479, 485.) Appellants argue that the collateral source rule “has never applied in California to benefits––public, gratuitous, or otherwise––that were already being paid to the injured party before the injury occurred.”
While we are not aware of any published case in California that has specifically addressed the situation where the plaintiff has received preexisting payments from the federal government, California courts have used the collateral source rule to exclude evidence of payments to the plaintiff from a gratuitous source. In Arambula v. Wells (1999) 72 Cal.App.4th 1006, the plaintiff was physically injured necessitating that he miss work from his family-owned business. (Id. at p. 1008.) Nevertheless, he continued to receive his weekly salary. (Ibid.) Defendant moved in limine to exclude all evidence and testimony regarding the plaintiff’s lost wages on grounds he was not receiving payment through insurance, pension or by using accrued sick time or vacation time, nor had he submitted evidence that he would have to reimburse the wages he continued to receive. (Id. at pp. 1008-1009.) The trial court granted the motion but the appellate court reversed. After reviewing the existing law in California and in other jurisdictions with regard to gratuitous sources, the appellate court found that the rationale for the collateral source rule “favors sheltering gratuitous gifts of money or services intended to benefit tort victims . . . .” (Id. at p. 1014.) When explaining the reasons for imposing the rule in this context, the Arambula court stated, “Just as the Supreme Court . . . ‘expresses a policy judgment in favor of encouraging citizens to purchase and maintain insurance for personal injuries and for other eventualities’ [citation], so too we adhere to the rule to promote policy concerns favoring private charitable assistance.” (Id. at p. 1012.)
The court in Smock v. State of California (2006) 138 Cal App.4th 883, another gratuitous wage case, concurred: “The cases that discuss application of the collateral source rule do not find a critical distinction between situations where the victim receives a gratuitous payment or benefit and those where the benefit or payment arises from some obligation. Under California law, it makes no difference. [Citations.]” (Id. at p. 887.)
We further note that in a listing of the collateral benefits that generally are not subtracted from the plaintiff’s recovery, the Restatement Second of Torts includes “[s]ocial legislation benefits,” such as “Social security benefits” and “welfare payments.” (Rest. 2d Torts, § 920A, com. c, p. 515.) The Restatement explains: “If the benefit was a gift to the plaintiff from a third party or established for him by law, he should not be deprived of the advantage that it confers. The law does not differentiate between the nature of the benefits, so long as they did not come from the defendant or a person acting for him.” (Id. at com. b, p. 514, italics added.)
Moreover, courts from outside this jurisdiction have used the collateral source rule to exclude evidence of payments to the plaintiff from a governmental agency. (See, e.g., Ray v. Department of Social Services (156 Mich.App. 55 1986) 401 N.W.2d 307 [lower court properly refused to offset the plaintiff’s gratuitous public welfare benefits against the judgment]; Roundhouse v. Owens-Illinois, Inc. (6th Cir. 1979) 604 F.2d 990 [receipt of federal funds in partial reimbursement of plaintiff’s loss did not bar recovery of the full amount of damages caused by defendant’s conduct]; Town of East Troy v. Soo Line R. Co. (7th Cir. 1980) 653 F.2d 1123, 1132 [collateral source rule prevented evidence of town’s receipt of federal development grant in assessing damages]; Bonnet, etc. v. Slaughter (La.Ct.App. 1982) 422 So.2d 499, 502 [plaintiff’s recovery not reduced by welfare payments received during period the plaintiff did not work]; Buckley Nursing Home v. Com’n. Against Discrim. (Mass.App. 1985) 478 N.E.2d 1292, 1299-1300 [court refused to offset welfare payments received by the plaintiff against the defendant’s liability for damages]; Gatlin v. Methodist Medical Center, Inc. (Miss. 2000) 772 So.2d 1023, 1032-1033 [imposed the collateral source rule on funeral payments made by a victims’ rights fund]; Wheatland Irrigation Dist. v. McGuire (Wyo. 1977) 562 P.2d 287, 302 [“the fact that benefits have been received from governmental sources does not preclude application of the [collateral source] rule”].)
Accordingly, we conclude that the rationale underlying the utilization of the collateral source rule in the aforementioned cases, where the plaintiff received funds from the government, applies to the present case. As expressed by the Fifth Circuit, “[t]he collateral source rule is a substantive rule of law that bars a tortfeasor from reducing the quantum of damages owed to a plaintiff by the amount of recovery the plaintiff receives from other sources of compensation that are independent of (or collateral to) the tortfeasor.” (Davis v. Odeco, Inc. (5th Cir. 1994) 18 F.3d 1237, 1243, fn. omitted.) McQueen’s SSI payments were entirely independent of (or collateral to) appellants, and therefore, were properly excluded from consideration by the collateral source doctrine.
B. Was Carol Veres Reed Properly Found Liable for Financial Elder Abuse and Breach of Fiduciary Duty‌
Using a multifaceted attack, appellant Reed[9] argues that the jury’s verdict finding her liable for financial elder abuse and breach of fiduciary duty must be reversed, because: (1) the jury held her to a different and higher standard than her codefendants––specifically, the standard of care of an attorney as opposed to a reasonable person, (2) the court’s preclusion of evidence on the standard of care of an attorney combined with the jury instructions on the Rules of Professional Conduct created prejudicial error, (3) the court erred in curtailing her testimony about the legal precedent she had relied upon to support her opinion that McQueen’s life estate had terminated, and (4) no reasonable trier of fact could have concluded that she owed McQueen a fiduciary duty as an attorney at the time the family residence was sold and the sales proceeds distributed; therefore, the trial court should never have submitted the issue to the jury.
Reed argues that the trial court committed error in not allowing expert testimony to offer guidance on an attorney’s standard of care because the jury found her liable for financial elder abuse because they held her “to a higher standard because she was an attorney.” Reed bases this conclusion on the fact that she was the only defendant found liable for financial elder abuse; thus, according to her brief, “it can be assumed that the jury held [her] to a higher standard because she was an attorney, and that on the basis of her being an attorney, she ‘knew or should have known’ that [McQueen] had a right to the property.”[10]
To the contrary, the jury was specifically instructed that to find a defendant liable for financial elder abuse “it would have been obvious to a reasonable person that Ida McQueen had the right to have the property transferred or made readily available to her.” (Italics added.) Reed’s apparent assumption that the jury ignored this directive and held her to a different standard than her codefendants, is nothing more than rank speculation belied by the actual language used in the jury instructions. There is nothing in the record suggesting that the jury misunderstood or misapplied the reasonable person standard as set out in the jury’s instructions.


To Be Continue As Part II………


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