Opinion
B161972.
7-31-2003
SARAH H. KERLEY, Plaintiff and Respondent, v. GUS DEFALCO, ET AL., Defendants and Appellants.
Daniel Kaminsky for Defendants and Appellants. Seaver & Gill, LLP, and R. Carlton Seaver for Plaintiff and Respondent.
Gus Defalco and Marilyn Moreira ("Defalco," "Moreira," and together, "appellants") appeal from an order of the probate court that denied their petition for an order instructing a conservator of a person and an estate to accept an offer made by the appellants to settle a suit that the conservator filed against them. Appellants contend the court ruled that it lacked authority to invade the discretion a conservator has in deciding whether to settle a case, and in so ruling the court misunderstood its authority to act. Appellants further contend the court should have granted their request for instructions.
Our review of the record reveals no such misunderstanding by the trial court of its authority to grant appellants petition for instructions. The record shows the trial court understood it had discretion in the matter and chose to exercise that discretion by denying the petition. Moreover, appellants have not demonstrated the trial court abused its discretion when it denied the petition. Therefore, the trial courts order will be affirmed.
BACKGROUND OF THE CASE
1. The Conservatorship
Sarah Kerley is the conservator of the person and estate of Rose Ross ("conservator" and "conservatee," respectively). Appellant Gus Defalco is the nephew of the conservatee, and appellant Marilyn Moreira is the former wife of nephew Gus Defalco. A temporary conservatorship was established on June 28, 2000, and permanent letters of conservatorship were issued on September 25, 2000.
2. The Conservators Complaint
The conservator filed a petition and complaint ("complaint") in the conservatorship case in which she asked the court to make specific orders affecting certain real property in West Covina, California ("the property"). The conservator sought to quiet title to the property and have certain grant deeds cancelled; she also sought injunctive relief and damages. The gist of the complaint is that certain recorded documents obscure the conservatees true ownership of the property. Appellant Defalco is presented in the complaint as the purported owner of the property who obtained such purported ownership by improper means. Appellant Moreira is presented as a purported beneficiary of a deed of trust against the property which was intended to secure a promissory note executed by Defalco in exchange for a loan to him from Moreira. It was Moreiras decision to foreclose on this deed of trust that prompted the conservator to file her complaint.
The conservator specifically alleged the following in her complaint. The conservatee purchased the property from the appellants in 1981 for value, receiving a grant deed that was recorded on May 21, 1981. There exists a grant deed, dated November 27, 1984, (the "first deed"), by which the conservatee purportedly transferred the property to appellant Defalco, as well as an acknowledgement by the conservatee, dated December 1, 1989, by which she acknowledged she executed the grant deed, and such deed was recorded on May 3, 2000. The conservatees signature on this grant deed is a forgery, and no consideration was paid for the transfer of the property purportedly effected by this deed.
On May 19, 1997, the conservatee executed a durable power of attorney appointing appellant Defalco as her attorney-in-fact. On May 11, 2000, she executed and acknowledged a revocation of such power of attorney; and, on May 15, 2000, a copy of such revocation was served on Defalco by mail, at two separate addresses.
On August 7, 2000, another deed (the "second deed") was executed by Defalco, purportedly acting as the conservatees attorney-in-fact and, by this deed, the property was conveyed to Defalco. No consideration was given for the transfer, and Defalcos execution of such deed followed the conservatees revocation of the power of attorney, and followed the issuance of the letters appointing the conservator as the conservatees temporary conservator. Moreover, even absent the revocation of the power of attorney, the second deed was executed at a time when the probate court had declared the conservatee was not competent to make such transfers, and Defalcos execution of such a deed thus constituted a breach of his fiduciary duty, and rendered the second deed voidable.
On May 1, 2000, during the proceedings for appointment of a conservator for the conservatee, Defalco executed a short form deed of trust by which he used the property to purportedly secure a promissory note obligation to appellant Moreira in the amount of $ 250,000. The deed of trust was recorded on May 3, 2000. Thereafter, appellant Moreira declared a default on the obligation purportedly secured by the deed of trust and began foreclosure proceedings. The successor trustee under the deed of trust, Meridian Trust Deed Service ("Meridian"), gave notice that it intended to hold a trustee sale on March 13, 2002. When the conservator attempted to bring the alleged promissory note obligation current by sending checks to Meridian, Meridian returned the checks to the conservator, saying it could not accept the checks because the conservator does not have a vested interest.
Meridian was also named as a defendant in the complaint.
The complaint alleges that the deed of trust is voidable since the first and second deeds are voidable, and thus Defalco had no interest in the property, and therefore he could not create a lien on such property with the deed of trust, and moreover, no consideration was given for the deed of trust.
By her complaint, the conservator sought to (1) quiet title to the property in the conservatee, whom she alleges owns the property in fee simple, (2) have the appellants claims to an interest in the property adjudged meritless, and (3) have the first and second deeds cancelled. She also sought injunctive relief preventing Moreira and Meridian from ordering, arranging or holding a trustees sale of the property, and ordering Defalco and Moreira to convey to the conservatee all of their right, title and interest in the property, as well as a declaratory judgment determining that (1) the two grant deeds and the deed of trust are void, (2) the conservatee is the owner in fee simple of the property, (3) appellants have no interest in the property, and (4) appellants are liable for damages, attorneys fees and costs.
3. Appellants Answer, Objection, and Petition for an Order Requiring
the Conservator to Accept Appellants Offer to Settle the Issues Raised by the Complaint and Answer
Appellants answered the complaint, raised affirmative defenses, and filed opposition to the requested preliminary injunctive relief. Appellants also filed the instant petition seeking to have the probate court instruct the conservatee to accept appellants offer to settle the issues raised by the complaint and the answer.
In their petition for instructions, appellants asserted that when they transferred the property to the conservatee in 1981, it was not a purchase by her, but rather, the conservatee was to hold title only and would ultimately transfer title back to Defalco. Ever since he purchased the property (that is, prior to the 1981 transfer of title to the conservatee), Defalco has rented it to tenants in his name as the owner, collected the rents, paid the mortgage on it in full, paid for its maintenance and its taxes, and insured it in his own name. The 1984 unrecorded grant deed from the conservatee to Defalco transferred title back to him. The later (second) deed was executed as a result of a misunderstanding, is redundant to the first deed, and its validity is not relevant since the first deed and the agreements between appellants and the conservatee operate to decide the issues raised by the conservators complaint.
Appellants further asserted in their petition that according to the conservatees latest will (dated May 15, 1998), appellant Defalco would receive the subject property when the conservatee dies, and since the conservatee was 99 years old at that time, no longer of sound mind, and would not make another will, the only benefit to the conservatees estate if the conservator were to prevail on her complaint, would be ownership of the property during the remainder of the conservatees life, less expenses of ownership and cost of repaying to Defalco the money used to pay off the mortgage. The appellants further asserted that since the net rental income of the property is $ 400 per month, it would be cost effective for both the conservatee and the appellants to settle the case by having the appellants, without admitting the validity of the conservators claims, pay the $ 400 monthly rental to the conservatees estate for the remainder of her life. Appellants offered to sign a stipulated judgment for $ 50,000, and to make annual payments of $ 4,800.
The conservator asserted the conservatee was actually 95 years old.
Appellants asserted that the settlement offer was rejected by the conservators attorney without explanation. They further asserted that the conservators pursuit of her complaint would be of no benefit to the conservatees estate, would be an expense to the estate, and if a judgment were rendered in favor of the appellants on the complaint, the estate would be at risk for payment of its own and the appellants litigation costs, and at risk of a malicious prosecution suit by appellants. Appellants therefore asked the court to instruct the conservator to accept their offer of settlement.
The conservator filed an objection to the petition for instructions. She set out various matters which she argued show that Defalco always acknowledged that the conservatee owned the property. While she agreed that the settlement made sense from the appellants point of view, she argued that if the court determined that the deeds and the power of attorney were forgeries, then the conservatees estate would be entitled to double damages under the Probate Code and treble damages under the Civil Code, and possibly entitled to recover attorneys fees under the Welfare and Institutions Code. The conservator also argued that if the documents were found to be forgeries and such forgeries and related activities of Defalco were determined to be elder abuse, Defalco could be deemed a predeceased heir under the Probate Code and he would not inherit the subject property. Additionally, the conservator challenged appellants assertion that Defalco paid the expenses of the property and paid the mortgage. The appellants filed a reply to the conservators objection, raising factual and legal issues about the conservators arguments, and asserting that the proffered settlement best suited the needs of the conservatee.
On September 12, 2002, the trial court heard argument on appellants petition for an order instructing the conservator to accept their offer of settlement. The court denied the petition without prejudice.
On September 24, 2002, appellants filed their notice of appeal.
References herein to statutes are to the Probate Code. Section 1300, subdivision (c), permits the taking of an appeal when a probate court makes, or refuses to make, an order that authorizes, instructs, or directs a conservator, or that approves or confirms the acts of a conservator.
CONTENTIONS ON APPEAL
Appellants assert that the trial court ruled it lacked authority to invade the discretion a conservator has in deciding whether to settle a case, and in so ruling, the court erred. Appellants further contend the court should have granted their request for instructions.
In their moving and reply trial court papers, appellants did not specify what statutory or case law they were relying on to support their petition for instructions. They only cited to subdivision (b) of section 2403 to indicate to whom notice of the petition should be given, and they cited a few statutes mentioned in the conservators opposition papers and argued such statutes do not apply here. Nor did appellants cite any supporting case or statutory authority at the hearing on their petition. We observe that under California Rules of Court, rules 312 and 313, points and authorities are required when a motion is filed, and failure to file points and authorities "may be construed by the court as an admission that the motion . . . is not meritorious and cause for its denial . . . ." We further observe that appellants petition for instructions is in the nature of a motion, and section 1000 makes the rules of practice that are applicable to civil actions, applicable to proceedings under the Probate Code. Thus, appellants failure to support their petition with a memorandum of points and authorities would be grounds in and of itself for denying the petition.
In their appellate brief, appellants have provided legal authorities which they contend support their appellate position. They assert that either section 2403 or section 2580 provide authority for the court to have addressed their petition for instructions on its merits.
Subdivision (a) of section 2403 provides that when petitioned by a conservator, conservatee, creditor "or other interested person, the court may authorize and instruct the . . . conservator . . . in the administration, management, investment, disposition, care, protection, operation, or preservation of the estate, or the incurring or payment of costs, fees, or expenses in connection therewith." (Italics added.)
Section 2580 states that a conservator or another interested person "may file a petition under this article for an order of the court authorizing or requiring the conservator to take a proposed action for any one or more of the following purposes: [P] (1) Benefiting the conservatee or the estate. [P] (2) Minimizing current or prospective taxes or expenses of administration of the conservatorship estate or of the estate upon the death of the conservatee. [P] (3) Providing gifts for any purposes, and to any charities, relatives (including the other spouse or domestic partner), friends, or other objects of bounty, as would be likely beneficiaries of gifts from the conservatee." (& sect; 2580, subd. (a).) Subdivision (b) of section 2580 provides that the action proposed by the petition may include, but is not limited to, 13 specific actions set out in that subdivision, including entering into a contract.
DISCUSSION
Section 2403, subdivision (a), (see fn. 4, ante), states that a trial court may instruct the conservator regarding the conservatorship estate when a petition is made to the court for such instruction. Use of the word "may" suggests that whether to instruct the conservator is a matter within the courts discretion. That conclusion is born out by consideration of another statute in the Probate Code.
The Law Revision Commission comment for the 1990 reenactment of section 2403 states that section 9611 is comparable to section 2403. (Cal. Law Revision Com. com., 52A Wests Ann. Prob. Code (2002 ed.) foll. § 2403, p. 421.) Section 9611, which relates to decedents estates, states in relevant part: "Upon petition of the personal representative, the court may authorize and instruct the personal representative . . . in the administration, management, investment, disposition, care, protection, operation, or preservation of the estate, or the incurring or payment of costs, fees or expenses in connection therewith."
Section 9611 has been held to provide the trial court with permissive, not mandatory, power to instruct (Estate of Denton (1971) 17 Cal. App. 3d 1070, 1074, 95 Cal. Rptr. 347 [analyzing sections 9611s predecessor-former section 588]), and the decision of such court on a petition for instructions will be upheld on appeal absent an abuse of discretion (id . at p. 1075). In Denton, the probate court was presented with a petition by an executor of an estate for instructions for authority to file a lawsuit. Regarding the exercise of discretion, the Denton court noted that if the evidence presented to the trial court had convinced the court that the proposed lawsuit lacked merit and was not suggested in good faith, the court would have been required to prohibit the executor from proceeding with the suit. (Id. at p. 1076.)
Section 2580, the other statute upon which appellants rely (see fn. 4, ante), is a codification of the doctrine of "substituted judgment." "Under . . . sections 2580 through 2586 a superior court may, upon the petition of any interested person and after consideration of all relevant circumstances, authorize or require a conservator to take actions of various kinds with respect to the conservatorship estate. In essence, the statute permits the court to substitute its judgment for that of a conservatee." (Conservatorship of Hart (1991) 228 Cal. App. 3d 1244, 1250, 279 Cal. Rptr. 249, italics added.) It is within a trial courts discretion to grant a section 2580 petition. (§ 2584.)
Although appellants contend the trial court (1) refused to rule on their petition for instructions because it believed it lacked authority to invade the discretion of the conservator regarding whether the conservator would accept appellants offer of settlement, and (2) should have decided their petition on its substantive merits, we find the record indicates the court did consider the substantive issues raised by the papers filed by the appellants and the conservator, and did exercise its discretion to deny the petition for instructions.
At the hearing on appellants petition for instructions, the court stated that whether to accept an offer of settlement is a matter within the conservators discretion, and declared that based on what it had seen at that point in time, it would not interfere with that exercise of discretion. The court said that while the Probate Code does provide that interested persons may file a petition asking the court to instruct a conservator in the administration of the conservatees estate, such petitions are for obtaining a "legal interpretation on things, [and the instant matter] doesnt take any legal interpretation. This is a factual analysis as to whether or not [the conservator] should or should not accept the settlement." The court said that conservators are appointed so that courts do not have to make these types of decisions, and "whether or not the court will approve afterwards or not, thats a different issue." The court declined to rule at that point whether the conservator was abusing her discretion by refusing the settlement offer.
Thus, the record shows that the trial court understood that (1) a decision whether to accept a settlement offer is generally one for the conservators discretion, and (2) petitions for instructions to a conservator are nevertheless permitted by the Probate Code. The record further shows that the trial court analyzed the papers presented to the court and determined they did not present sufficient cause for the court to step in at that point in time and direct the conservator to accept the appellants offer of settlement.
A similar determination was analyzed and accepted by the reviewing court in Estate of Denton, supra, 17 Cal. App. 3d at p. 1076. There, the executor of the estate of a decedent petitioned the probate court for instructions for authority to file a lawsuit to recover assets of the estate. The trial court in that case denied the petition. The trial courts order recited that documentary and oral evidence had been introduced, and then the order simply denied the petition without any explanation for why it was being denied. The reviewing court said that while such a "blunt" denial of the petition might be interpreted as a disapproval of the proposed lawsuit, the reviewing court would not so interpret that order. (Estate of Denton , supra, 17 Cal. App. 3d at p. 1076.) The Denton court stated: "In denying the petition for instructions, the probate court was neither approving nor disapproving the proposed lawsuit. It was exercising its discretion to reserve judgment until a later time. Had the evidence at the hearing convinced the court the proposed lawsuit was without merit and not suggested in good faith, its duty would have been to prohibit the executor from proceeding with it. No such prohibition appears in the order." (Ibid.) This is another way of saying that it would have been an abuse of the trial courts discretion to not prohibit the lawsuit if the court felt the suit was meritless, but absent evidence that would convince the trial court of such lack of merit, it was within the trial courts discretion to deny the petition for instructions and reserve judgment on the advisability of filing the proposed lawsuit. That is what the trial court did in the instant case. The court stated that based on what it had seen up to that point in time, it would leave the matter of accepting or denying the proposed settlement to the conservators discretion.
Given this state of the record, we cannot say the trial court abused its discretion when it declined to instruct the conservator to accept the appellants offer of settlement. It necessarily follows then that we must also reject appellants second appellate contention-that the petition for instructions should be granted. To order the trial court to grant the petition would be depriving the court of its discretionary powers. We cannot take away the courts discretion in this matter.
While it is true that a conservator has a duty to use ordinary care and diligence in managing the conservatees estate (§ 2401), the presence of that duty is simply one of the factors a trial court takes into consideration when it determines whether it must, as a matter of law, grant a petition for instructions, or whether it can reasonably deny the petition. Here, the trial court observed that the advisability of whether to accept the offer was a matter of factual analysis. Was there a forgery of a deed or an absence of a valid power of attorney? Was there a breach of fiduciary duty by Defalco? Can the conservator produce sufficient evidence to warrant voiding the grant deeds and the deed of trust, warrant the doubling or trebling of damages and awarding of attorneys fees and costs, and warrant executing a codicil to the conservatees will to prevent Defalco from inheriting from her? Clearly there was no abuse of discretion by the trial court when it declined to grant the petition for instructions.
DISPOSITION
The order denying appellants petition for instructions to the conservator is affirmed. Costs on appeal to the conservator.
We Concur: KLEIN, P.J., ALDRICH, J.