Opinion
NOT FOR PUBLICATION
MEMORANDUM DECISION
Christopher B. Latham, Judge
Ishmael and Frances Berg had three children: Larry, Lory, and Nels. During their lifetimes, they owned 200 acres of land in Ramona, California. Over the course of several decades, Larry, Lory, and Nels purchased some of that land. Now that both Ishmael and Frances have passed away, Lory -as trustee of Frances's trust - seeks to undo Nels's acquisition of 80 acres.
Because the parties - and many of the witnesses - have the same surname, the court refers to them by their first names. It intends no disrespect by this.
After an evidentiary hearing, the court finds: (1) Nels and Frances had a contractual agreement for the purchase of those 80 acres; (2) Nels did not procure a 2008 purchase and sale agreement through undue influence; and (3) Nels fully performed under the agreement.
I. Procedural Posture and Trial Issues
A. Procedural Posture
On November 16, 2009, Nels Louis and Rachael Ann Berg filed a voluntary Chapter 7 petition. [Case No. 09-17553-CL7, ECF No. 1.] Richard Kipperman was appointed as the Chapter 7 Trustee. [Id., ECF No. 4.] Nels and Rachael received their 11 U.S.C. § 727 discharge on February 13, 2012. [Id., ECF No. 124.] On November 26, 2012, Nels and Rachael sued Lory, as trustee of the Frances H. Berg Trust, in the San Diego Superior Court (Case No. 37-2012-00086097). The first amended complaint, dated March 25, 2012, lists two causes of action for quiet title and declaratory relief [Ex. DD-1.]
On June 25, 2013, Mr. Kipperman filed the above-captioned adversary proceeding, naming as defendants: Lory K. Berg, as successor trustee of the Frances H. Berg Trust, dated August 29, 1990; Nels Berg; and Rachael Berg (ECF No. 1). Nels and Rachael answered on July 25, 2013 (ECF No. 5). Lory answered on August 7, 2013 (ECF No. 6) and then counter- and cross-claimed on November 7, 2013 (ECF No. 8). She listed Mr. Kipperman, Nels, and Rachael as counter- and cross-defendants. On August 29, 2014, Mr. Kipperman moved for summary judgment (ECF No. 49). Lory opposed (ECF No. 55), Nels and Rachael joined the motion (ECF No. 60), and Mr. Kipperman replied (ECF No. 69). Nels and Rachael also moved for partial summary judgment on the cross-complaint (ECF No. 51). Lory opposed (ECF No. 63), and Nels and Rachael replied (ECF No. 77). On October 22, 2014, the court heard oral argument on the motions, and then continued them to hold an evidentiary hearing to resolve factual disputes (ECF No. 91).
B. Jurisdiction and Venue
The court has jurisdiction to hear and determine this matter under 28 U.S.C. §§ 157(b)(2)(A), (K) and 1334(b). Venue is proper in the Southern District of California under 28 U.S.C. § 1409(a).
C. Bifurcation of Issues for Trial Under Rule 7042
The court identified two issues for trial: "1) whether Nels Berg obtained his mother's assent to the written purchase and sale agreement through undue influence; and 2) whether Nels Berg fully performed under that agreement" (ECF No. 92). Both issues presuppose a contract exists, so the court must necessarily decide that, as well. At the final pretrial status conference on February 28, 2015, the parties discussed damages and the issue of rescission (ECF No. 131). The court accorded the parties an opportunity to brief the matter post-trial.
The court held an evidentiary hearing over three days (ECF Nos. 136, 137, and 138). It received documentary evidence, and lay and expert witnesses testified. Thereafter, the parties submitted post-trial briefs (see ECF Nos. 153, 154, and 155), and the court took the matter under submission.
D. Burden of Proof
The party asserting that a contract exists bears the burden of proof. But, as undue influence is a defense to contract formation, Lory carries the burden on it - the court considers evidentiary presumptions below. The burden of proving performance also falls on Lory, as she essentially asserts that Nels breached the contract.
II. Factual Background and Findings
This matter involves Ishmael and Frances Berg, their family, and their land in Ramona, San Diego County, California. Ishmael and Frances were married.
A. Ishmael and Frances Berg's Land in Ramona
In 1960, Ishmael and Frances acquired 200 acres of land in Ramona. [Ex. ZZ-1.] This dispute concerns 120 of those acres. The parties have divided the land into three 40-acre parcels: Parcels A, B, and C. Parcel A, APN 246-050-06-00, is located at 23756 Ladrido Lane, Ramona, CA. And it has at least four buildings: the 1908 Historic Ranch House (the "Ranch House"); a barn that Nels converted to a house (the "Bamhouse"); a bunkhouse (the "Bunkhouse"); and a blockhouse built sometime in the 1930s. Parcels B and C are actually part of a larger, undivided 80-acre parcel, APN 246-060-32-00. Parcel B is the "lower" 40 acres; it is contiguous with Parcel A. Parcel C is the "upper" 40 acres.
B. The Berg Family
Central to this dispute are Frances and her children: Larry, Lory, and Nels. In 1977, Larry purchased 40 acres in Ramona from his parents by an oral agreement. Larry paid either $20,000 or $25,000, in $200 monthly installments; he also turned his income tax returns over to them. Ishmael and Frances immediately conveyed title to Larry. In 1989, Nels talked with Frances and Ishmael about purchasing part of their Ramona property. They negotiated for some time. Also in 1989, Nels began dating Sheri Haley.
Ishmael died in 1990. On August 29, 1990, Frances created the "Frances H. Berg Trust." [Ex. 20.] She named Larry, Lory, and Nels as the remainder beneficiaries. And she designated Lory, Nels, and Larry as successor trustees, in that order. She also listed her Long Beach residence, her property in Ramona, and all her personal property.
Sometime in 1990 or 1991, Nels moved to Parcel A. And in 1991, he converted a barn on the property into a house - the Bamhouse - and moved in. At this time, Larry and his first wife lived in the Ranch House. In June 1992, Nels and Ms. Haley broke up. During her relationship with Nels, Ms. Haley became friends with Frances. She maintained this friendship even after the breakup. She visited and called Frances several times a year. Some point later, Nels and Rachael met. Rachael had four children, and they moved onto Parcel A in 1993.
In 1993, Nels and Frances agreed orally that he would buy Parcel A for $40,000, at $200 per month. He started paying in August 1993. And in June 1994, Rachael and Nels wed.
C. Lory's and Larene's Purchases of 40 Acres
In the 1990s, Lory and her husband purchased 40 acres from Frances for $20,000, paid at $200 per month. This was an oral agreement. Frances immediately conveyed title to Lory. Lory and her husband eventually divorced. And they sold the property to Larene Berg - Larry's daughter - and her husband, Gary Westerfeld. Mr. Westerfeld first met Frances at Thanksgiving in 1999. Larene later also purchased Parcel C from Frances for $20,000, payable at $200 per month. This, too, was an oral agreement. She started making payments in 1998 or 1999, and did not stop until April 2012. Larene never received title.
At some point, Larry divorced his first wife. During that process, he employed Helene Armand, a paralegal. And Frances paid for some of Ms. Armand's work, so the two met. In 2001, Larry reconnected with an old friend, Cindy. And they eventually married. Cindy met Frances in November 2001, and they became fast friends. In February 2002, Cindy moved to the Ranch House, and she and Larry lived there for about a year. They then moved to a house on Larry's property.
D. Nels's Purchase of Parcel B
In 2004, Nels and Frances discussed his purchasing Parcel B. But, as with Parcel A, it took several years for the two to finish the deal. On November 9, 2004, Nels wrote Frances a letter about it (the "2004 Letter"). In 2006, Nels and Frances orally agreed that Nels would buy Parcel B for $25,000, at $200 per month. And on April 26, 2006, he sent her a $400 check - $200 for Parcel A and $200 for Parcel B. [Ex. D-2, Check No. 1050.] This was the first of many $400 payments.
This check's memo line states "Rent." But Nels testified he did not write "rent." Indeed, the court notes that the "rent" handwriting differs from the front of the check, but appears very similar to the handwriting that endorsed the check.
In 2007, Frances asked Ms. Armand to draft a revision to her trust (the "2007 Amendment"). And on April 14, 2007, Frances executed it in Nels and Rachael's house. [Ex. 20.] In it, she provides Parcel A to Nels and Parcel C to Larene. Thereafter, Nels continued sending payments.
E. The 2007 Wildfires
In October 2007, wildfires swept through San Diego County. And the fires encroached onto Parcels A and B. Instead of evacuating, Nels defended the property, to some success. Larene lost items in the fire. Larry and Cindy lost their house, but they rebuilt. Nels and Rachael also rebuilt. In addition, after the fires, Nels and Russell Landman, a friend of his and Frances's next-door neighbor in Long Beach, operated a temporary business helping landowners clear their land.
On November 27, 2007, Rachael wrote Frances a letter (the "2007 Letter"). [Ex. Q-1.] And Nels continued making payments.
On March 8, 2008, Frances executed the "First Amendment to The Frances H. Berg Trust" (the "2008 Amendment"). [Ex. II-2.] She removed Larry as a remainder beneficiary and provided for specific property distributions upon her death. Ms. Armand drafted and notarized the 2008 Amendment. She also prepared a codicil to Frances's will.
F. The November 2008 Agreement
Nels continued paying into 2008. Then, he and Frances discussed reducing their agreements to writing. Simultaneously, they modified the payment terms. Nels agreed to pay a lump sum and in July began sending her $500 per month.
On June 3, 2008, he wrote her a $10,000 check. [Ex. XXX-1, Check No. 1660.]
A few months later, in November 2008, they reduced this modified agreement to writing (the "2008 Agreement"). Ms. Armand drafted it. The 2008 Agreement is titled: "Agreement: Expectancy in Estate, Absolute." [Ex. 1-2.] It identifies two parcels of property: Parcel A and the land conprising Parcels B and C. It acknowledges that Frances and Nels "previously entered into a binding oral contract wherein [Frances] sold to [Nels]. .. two (2) parcels of real property." The terms are: for Parcel A, $40,000 in $400 monthly payments; for Parcel B, $25,000, a $10,000 lump sum, and then $100 monthly. If the properties were not paid in full when Frances died, Frances "further agree[d] to forgive all indebtedness owed to [Frances] regarding the aforementioned real properties . .. ."
On November 29, 2008, Nels retrieved the document from Ms. Armand's office and drove to Frances's house in Long Beach. They signed the 2008 Agreement before a notary, Charles Roath. He signed an acknowledgment page, but failed to affix his notary seal to it. They then returned to her home. There, they spoke with Mr. Landman, who moved next door in 2006 and saw Frances every day. But he had known her for his entire life and thought of her as a second mother. He was married to Blanca Landman, who knew Frances for about 25 years. Nels continued to send monthly payments.
G. Nels and Rachael's Bankruptcy and Frances's Subsequent Actions
On November 16, 2009, Nels and Rachael submitted their voluntary Chapter 7 case. On their schedules, they omitted Parcels A and B and any corresponding debt or contract.
On June 18, 2010, Frances visited Brian Chou, an estate-planning attorney, to revise her trust. On September 8, 2010, she executed her restated trust (the "2010 Restated Trust"). [Ex. B-1.] In Article 2.2, she directs the trustee to distribute the "Ranch House Forty, " Parcel A, to Nels. Article 2.4 clarifies that all gifts to Nels "shall be held, administered and distributed as provided in Article 6." Article 6, in turn, creates a lifetime benefit trust for Nels. Article 6.3 appoints Lory as the first trustee, with Nels as the second. Article 6.7 expresses Frances's intent that Nels "have the right to reside" on Parcel A, "provided he continues to pay fair market value rent . . . and the costs of maintaining" it. Article 6.9 grants Nels a limited power of appointment. On that same day, Frances also executed the "Last Will of Frances H. Berg." [Ex. 15] In it, she gifts all remaining property to her trust. Mr. Chou witnessed her signatures.
Nels continued to send payments. In 2011, Frances began acting differently. She was forgetful, uncharacteristically repeated herself, and confused Nels and Larry. In February 2011, Rachael posted on Facebook about Frances, [Ex. S-1.] The post upset Frances. On March 22, 2011, Rachael apologized to Frances in a letter (the "2011 Letter"). [Ex. T-1.]
On August 9, 2011, Frances met with Mr. Chou to again amend her trust. [Ex. 27.] She disinherited two of Nels's children. [Ex. D.] In October 2011, Cindy and Larry took Frances to Evan Drexl, another attorney, to draw up a rental agreement. And Frances and Cindy visited him twice to discuss evicting Nels and recovering possession of the properties. Mr. Drexl investigated the Chapter 7 proceeding and prepared a draft lease and a few letters. At one of the meetings, Frances showed Mr. Drexl the 2008 Agreement and explained that she did not sign it.
Mr. Drexl advised Frances to refuse Nels's checks if they did not say "rent" on them. So she refused a $300 check dated September 21, 2011 and a $500 check dated October 18, 2011. [Exs. U-2, GGG-1, Check No. 2191 and Exs. V-2, DDD-1, unnumbered check.] On December 4, 2011, Mr. Drexl mailed Nels a letter and lease. [Exs. C-l and PP-1.] He disclaimed the 2008 Agreement and suggested that Nels sign the rental agreement. But Nels refused. [See Ex. FFF-1.] On December 13, 2011, Mr. Drexl mailed a letter to Frances and Cindy updating them about the status of Nels and Rachael's bankruptcy case. He also advised Frances that she could keep Nels's checks, but suggested that she write "accept as rent" on them. Accordingly, Frances deposited Nels's November 23, 2011 check for $500. [Ex. XXX-1 and W-2, Check No. 1001.] The memo line contains "accepted as rent" on it. On January 3, 2012, one of Nels's payments bounced. [Ex HHH-1.] Frances told Nels, and he immediately went and gave her $500 and the $27 fee.
On January 30, 2012, Frances amended her trust yet again. [Ex. E-1.] She conditioned distribution of Parcel A to Nels on his being alive - if he predeceased Frances, the property was to be distributed to Larry and Lory. She altered the order of trustee appointments for Nels's lifetime benefit trust to Lory, Larry, and Larene. And she revised Article 6.9 to extinguish Nels's power of appointment upon his death.
In February 2012, the Bergs held two parties for Frances's 89th birthday - one in Long Beach and one at Larry's house in Ramona. During the Ramona party, Frances and Lory walked over to the Ranch House. Nels and his daughter were there. Frances confronted Nels about not paying rent and taking over the property. She poked him in the chest. He turned around and walked off. Despite this interaction, Nels continued to make his $500 payments.
At trial, Lory's counsel questioned Lory about Frances's 86th birthday, which would have been in February 2009. But the court interprets and understands the question as referring to Frances's 89th birthday. First, neither counsel nor Lory were confident about the particular year. Second, no evidence indicates that a rental agreement was ever discussed, much less drafted, before 2010. And third, the documentary evidence attached to Dr. Raffle's expert opinion - Lory and Larry's declarations - relate a similar confrontation at an 89th birthday. [SS-1.] The court notes that Larry's declaration suggests the "poking" incident occurred on a separate date, when Lory was not present.
The memo line on his $500 check dated March 9, 2012 reads "rent payment to Mom, " but Nels testified that he did not write it. [Exs. YYY-I and X-2, Check No. 1203].
At some point in 2012, Frances had a stroke. And on September 3, 2012, she died at age 89. Lory, as trustee, administered Frances's personal belongings. Frances had checks, check stubs, notes, pay advices, and other items dating back to the 1950s. Lory shredded some items, kept others, and disposed of yet others. At some point, the parties gathered for a will-trust reading at Mr. Chou's office.
On November 26, 2012, Nels and Rachael sued Lory in the San Diego Superior Court. And on June 25, 2013, Mr. Kipperman filed this adversary proceeding.
III. Frances and Nels Berg Had Contractual Agreements for Parcels A and B
The court determines that Frances and Nels contracted for the purchase and sale of Parcels A and B.
A. The Nature of Contracts
In California, a contract is "an agreement to do or not to do a certain thing." Cal. Civ. Code § 1549. An enforceable contract requires: (1) capable parties; (2) their consent; (3) a lawful object; and (4) sufficient consideration. Cal. Civ. Code § 1550. By raising undue influence, Lory disputes only consent.
A real property purchase agreement "does not have to be evidenced by a formal contract drawn with technical exactness in order to be binding." Patel v. Liebermensch, 45 Cal.4th 344, 349 (2008) (internal quotation marks omitted) (citing King v. Stanley, 32 Cal. 2d 584, 588 (1948)). Instead, it need merely identify the material terms: the seller; the buyer; the price; and the property. See id. at 349, 351&n.4.
In California, an installment land sale contract provides that the buyer makes periodic "installment" payments while the seller retains legal title until conditions are met. 1 Harry D. Miller, Miller & Starr's California Real Estate § 2:11 (3d ed.). See Tucker v. Lassen Savs. & Loan Ass'n, 12 Cal.3d 629, 637 (1974); Cal. Civ, Code § 2985 ("A real property sales contract is an agreement in which one party agrees to convey title to real property to another party upon the satisfaction of specified conditions set forth in the contract and that does not require conveyance of title within one year from the date of formation of the contract.").
The "doctrine of equitable conversion generally provides that when a valid executory land sales contract is entered into, the purchaser becomes the equitable owner of the land." Redevelopment Agency of City of Stockton v. BNSF Ry Co., 643 F.3d 668, 678-79 (9th Cir. 2011) (citing cases). The doctrine applies to installment land contracts. Tucker, 12 Cal.3d at 637-38 ("[O]ne holding property .. . who executes an installment land contract . . . thereby 'sell(s), convey(s), or alienate(s)' an interest in the property - to wit, his equitable interest in the property.") (citing 1 Miller & Starr, Current Law of Cal. Real Estate (1965) p. 262); Alhambra Redevelopment Agency v. Transamerica Fin. Servs., 212 Cal.App.3d 1370, 1375 (1989) ("[A] purchaser of real property under a land sales contract is considered an equitable owner of the property . . . ."); In re Hathaway Ranch P'ship, 127 B.R. 859, 863 (Bankr. CD. Cal. 1990) ("Under California law, a purchaser of real property under a land sales contract is considered an equitable owner of the property"). In this situation, the seller has limited rights and "only possesses legal title to the property." Alhambra, 212 Cal.App.3d at 1376. The "seller is considered to be nothing more than a trustee, holding the land in trust for the purchaser as security for the payment of the purchase price until a conveyance of the legal title to the [purchaser] is finally made." Id. (internal quotation marks omitted).
California's "statute of frauds provides that certain contracts 'are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged . . . .'" Sterling v. Taylor, 40 Cal.4th 757, 761 (2007) (quoting Cal. Civ. Code § 1624). It applies to real property sale agreements. Cal. Civ. Code § 1624(a)(3). See also Cal. Civ. Proc. Code § 1971. Failure to abide by the statute does not render the contract void. Simmons v. Birge Co., 52 F.Supp. 629, 631 (S.D. Cal. 1943) ("Failing to comply with the provisions of the statute [of frauds] does not render a contract, otherwise valid, void, but merely unenforceable"). Instead, complying with the writing requirement "serves only to prevent the contract from being unenforceable . . . ." Sterling, 40 Cal.4th at 766 (internal quotation marks omitted) (citing Casa Herrera, Inc. v. Beydoun, 32 Cal.4th 336, 345 (2004)). See O'Brien v. O'Brien, 197 Cal. 577, 586 (1925) ("The statute is said to relate to the remedy only and not to affect the validity of the oral contract."). The statute "does not require a written contract; a 'note or memorandum . . .' is adequate." Sterling, 40 Cal.4th at 765-66 (quoting Cal. Civ. Code § 1624). This writing is not the contract- it is evidence of it. Id. at 766. The statute is satisfied if the writing "identifies the subject of the parties agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty." Id. See First Nat. Mortgage Co. v. Fed. Realty Inv. Trust, 631 F.3d 1058, 1066 (9th Cir. 2011). Further, an "oral agreement may be taken out of the operation of the statute [of frauds] by a written memorandum executed subsequently, even though the agreement has already been performed by one party." Ayoob v. Ayoob, 74 Cal.App. 2d 236, 242-43 (1946). See Ito v. Brighton/Shaw, Inc., No. 06-CV-01135, 2008 WL 3378120, at *10 (E.D. Cal. Aug. 8, 2008).
B. Nels and Frances's Contracts
Initially, Nels and Frances had oral installment contracts for the purchase of Parcels A and B. Nels thus had equitable ownership of the Parcels in 1993 and 2006, respectively. In November 2008, they memorialized these contracts in writing, satisfying the statute of frauds.
Lory at first argued that Frances's signature was a forgery. But she conceded its legitimacy at trial. Tr. Transcript vol. 3, 272:3-6.
1. Parcel A
Nels purchased Parcel A from Frances in 1993 for $40,000, initially payable at $200 per month. He started sending payments in August 1993. On this schedule, he would have paid in full by April 2010. But in 2008, they agreed to increase payments to $400 per month; and Nels began making $400 payments in July 2008. At this point, Nels had paid Frances for 178 months - or $35,600. So he had $4,400 left to pay. Accordingly, the court determines that Nels paid off Parcel A in June 2009 -months before he and Rachael filed bankruptcy.
2. Parcel B
Nels purchased Parcel B from Frances in 2006 for $25,000, initially payable at $200 per month. On April 26, 2006, he wrote her a $400 check. The court finds that this represents $200 for Parcel A and $200 for Parcel B; payments on Parcel B thus began in April 2006. In 2008, Nels and Frances altered the terms. Nels agreed to make a $10,000 down payment for Parcel B, and he did so on June 3, 2008. Ex. XXX-1, Check No. 1660. And they agreed to decrease Parcel B's $200 monthly service to $100. Nels's first $100 payment was in July 2008. At this point, he had paid for 26 months - or $5,200, in addition to the $10,000 lump sum payment. He thus had $9,800 left to pay. On this schedule, Parcel B would be paid off in 88 months. But in June 2009, Nels paid off Parcel A, and had $8,700 remaining on Parcel B. He could have started remitting only $100 per month, but he instead kept sending $500. And Frances accepted it. The court concludes that the $500 was applied to the outstanding principal on Parcel B. Nels thus paid off Parcel B in January 2011.
Lory argues that this check could have been for back rent and contends it was not a lump sum payment for Parcel B. But the court finds this unconvincing. First, the check's memo line states "10k of 25k, upper 40 acres." This encapsulates the contract's material terms. Second, Rachael and Nels both testified that the payment was for Parcel B. And Lory presented no contrary evidence.
3. Nels Overpaid for Parcels A and B
Even though Nels had paid off Parcels A and B by January 2011, he continued sending Frances $500 monthly payments. This continued until Frances died - the last check is dated August 9, 2012. [Ex. YYY-1, Check No. 1206.] In total, Nels paid Frances $75,300, when he only needed to pay $65,000. So Nels overpaid by $10,300.
C. Nels Acted Like He Owned the Property
The court also finds that Nels acted as if he owned the property: he made extensive improvements; he partially saved it from a wildfire; and he repaired it after the fire. Nels and Rachael's letters to Frances do not prove otherwise. Further, even Frances recognized Nels's assertion of ownership.
Lory testified that Frances wanted Nels "to cease taking over like he owned the place." And in late 2011, Lory took notes about Frances's questions for a visit with Mr. Drexl. Due to liability concerns, Frances apparently wanted Nels to stop "taking over the entire ranch." [Ex. M-l.]
1. Nels Improved Parcels A and B
Nels improved Parcels A and B extensively. For Parcel A, he testified that he: built a 20 by 15 foot steel gate; planted palm trees along the half mile long driveway; converted the barn and Bunkhouse into houses; added a porch onto the Ranch House and renovated the interior; added about 20 acres of plants; built four ponds - ranging in dimensions from 20 by 15 feet to 400 by 30 feet - on the property; and constructed a two-story "loft" with its own sleeping area. For Parcel B, he: planted almost a hundred species of bamboo; irrigated the bamboo; installed two new $5,000 gallon tanks into the well; built a block facade in front of a container, including a rock courtyard; and landscaped extensively. Shawn O'Brien - an inspector - corroborated much of Nels's testimony. Nels estimated the improvements' value at $500,000 or more.
2. Nels Protected Parcels A and B
Nels bravely protected Parcels A and B during the 2007 wildfires. Instead of evacuating, he defended the property - at his own peril. He suffered burns to his hand, arms, and face. He constructed a firebreak. When any of the houses caught fire, he put it out. He was able to save the four homes, but lost many of the trees, the hangar, his airplane, his "desert toys, " a trailer, and a boat. Nels testified that, if he did not own the property, he would not have protected it. Rachael also testified that Nels would not have risked his life to save the property if it did not belong to him. The court finds this testimony credible.
3. Nels Repaired Parcels A and B
And after the fire, Nels repaired the property - at his own cost. Frances never offered to repair Parcels A and B. He replaced the irrigation, fixed the road, cleared culverts, ran new electric wires, and restored the properties to livable condition.
4. Nels and Rachael's Letters Do Not Show Otherwise
Lory and her expert contend that Nels and Rachael's letters to Frances show that they believed they did not own Parcels A and B. The court disagrees, evaluates each letter, and attributes any contrary statements to confusion about equitable versus legal title.
In the 2004 Letter, Nels explains that he has offered to buy his 40 acres many times, but Frances refuses. He reiterates an offer to buy Parcels A and B for $80,000. And he expresses surprise at Frances's announcement that she was selling the land to a third party. Before Nels wrote this letter, Frances stated that she needed money and intended to cancel the sale of Parcel A to Nels. In her 2007 Letter, Rachael apologizes for taking Frances's inhaler from Long Beach to Ramona - she thought it was Nels's. She then explains that Frances, as legal owner of the property, needs to sign a farm-worker housing agreement before a notary. Because Frances had not yet transferred title, she was the legal owner; Nels and Rachael had equitable ownership. In her 2011 Letter, Rachael is again apologetic - this time for a Facebook post. She also expressed surprise at Frances's threat to sell the Ranch. Rachael testified that she intended to apologize and to ask Frances to be kinder to Rachael's family; she did not intend to imply that Frances could eject them from the property.
The court concludes that the letters do not prove a lack of ownership - or even that Nels and Rachael thought they did not own the Parcels. Instead, any contrary statements are attributable to confusion over equitable as opposed to legal title. Both Nels and Rachael understood that Frances held legal title.
D. Lory's Denial of the Contracts Is Unpersuasive
Throughout her testimony, Lory offered the following narrative for why Frances and Nels cannot have entered into a contract: Frances felt such animus toward Rachael that she would never have sold any "Berg land" to Nels, since he is married to Rachael. The court finds this explanation, and the logic on which it is based, to be unpersuasive. The trial testimony overwhelmingly indicated that Frances disliked Rachael. Yet the true reasons for it remain unclear. Lory asserts that Frances resented Rachael for moving into the Barnhouse - which Nels was supposedly converting into a house for Frances to use on her occasional visits from Long Beach. But the court finds it unreasonable to believe that Frances bore a lifelong grudge against Rachael because of the Barnhouse. And the court finds credible Nels's testimony that Frances did not ask him to convert the Barnhouse for her use. In any event, the timeline is inconsistent. Rachael and her children moved to Parcel A in 1993. But in June 1994, Frances participated in Nels and Rachael's wedding and, in Nels's words, "everything was great."
All that said, Frances and Rachael's relationship soured. No one provided a coherent, rational explanation why; instead, the witnesses were largely reticent and circumspect. All agree that Frances disapproved of Rachael. And Frances intended to keep the "Berg Ranch" in the family - and Rachael was not family. Frances apparently insisted on this fiction despite the fact that Rachael is married to her son and is the mother of her granddaughter, Cheyenne. In the end, this sad dynamic is not persuasive as an explanation of why, as Lory would have it, Frances never actually sold Parcels A and B to Nels.
Nels explained there was "a little trouble" one night. He also hypothesized that Frances disapproved of Rachael because his brother and sister did not like her. Cindy testified that Frances, in the last four years of her life, wanted nothing to do with Rachael. When asked why, Cindy said she could not give a definitive answer and explained that Frances "just did not like [Rachael]. That's all I can say."
Lory testified that Frances did not care for Rachael and did not consider Rachael's children "Bergs." Cindy explained that - unfortunately, in her opinion - Frances did not consider Rachael a Berg. Larry testified that Frances detested Rachael and did not want her to get any of the property. He explained: "She told me that [Nels] will never, ever have any of this property, and I won't state how she spoke of Rachael."
E. Conclusion
In conclusion, the court finds that Nels and Frances had oral installment contracts for the sale of Parcel A in 1993 and for Parcel B in 2006. Although Frances retained legal title, Nels received equitable ownership of the Parcels. And in November 2008, they reduced their agreements to writing, bringing them within the statute of frauds.
Lory concedes that Nels would have received equitable title if the 2008 Agreement is valid (ECF No. 154, pg. 14).
IV. There Was No Undue Influence
The court concludes that Nels did not unduly influence Frances.
A. Legal Standards
Undue influence is a defense to contract formation and the testamentary disposition of property. It is also part of California's statutory provisions protecting elders and dependent adults from abuse.
1. Contractual Undue Influence: California Civil Code § 1575
In California, undue influence is a defense and implicates consent to a contract. See Cal. Civ. CODE§§ 1575 and 1567. Undue influence exists:
1. In the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him;
2. In taking an unfair advantage of another's weakness of mind; or,
3. In taking a grossly oppressive and unfair advantage of another's necessities or distress.
Cal. Civ. Code § 1575. "There is no precise formula of factors that, when applied, will identify for the court whether undue influence has occurred." Olam v. Cong. Mortgage Co., 68 F.Supp.2d 1110, 1141 (N.D. Cal. 1999). To invoke the doctrine of undue influence a party must prove: "(1) that she had a lessened capacity to make a free contract and (2) that the other party applied its excessive strength to her to secure her agreement." Id. at 1141 (citing Odorizzi v. Bloomfield School Dist., 246 Cal.App. 2d 123, 54 (1966)). The combination of "undue susceptibility . . . and excessive pressure make the [dominating person's] influence undue." Id. (quoting Odorizzi, 246 Cal.App. 2d at 54).
Indicia of undue susceptibility include: lack of full vigor due to age; physical condition; physical exhaustion; and emotional anguish. Id. "The presence of any one or more of these factors may support - but does not necessitate - a finding of undue susceptibility." Id. But, as a "general rule, age, physical condition, and suffering of pain furnish no basis for setting aside a conveyance if the [party seeking rescission] exercised a free and untrammeled mind." Id.
Excessive pressure need "not involve misrepresentation or the threat of force." Id. at 1142. And the following factors suggest excessive persuasion: "(1) discussion of the transaction at an unusual or inappropriate time; (2) consummation of the transaction in an unusual place; (3) insistent demand that the business be finished at once; (4) extreme emphasis on the untoward consequences of delay; (5) use of multiple persuaders by the dominant side against a servient party; (6) absence of third-party advisors to the servient party; and (7) statements that there is no time to consult financial advisers or attorneys." Id. at 1142. See Spencer v. DHI Mortgage Co., 642 F.Supp.2d 1153, 1167-68 (E.D. Cal. 2009) (citing Myerchin v. Family Benefits, Inc., 162 Cal.App.4th 1526, 1540 (2008)).
The court evaluates the "presence or absence of each of the above factors in light of all the circumstances." Olam, 68 F.Supp.2d at 1142. The central inquiry is whether "there is a 'supremacy of one mind over another by which that other is prevented from acting according to his own wish or judgment, and whereby the will of the person is over-borne and he is induced to do or forbear to do an act which he would not do, or would do, if left to act freely.'" Id. at 1141 (quoting Webb v. Saunders, 79 Cal.App. 2d 863, 871 (1947)).
2. Testamentary Undue Influence
"[i]n the context of a testamentary disposition of property by will or trust, " undue influence is '"pressure brought to bear directly on the testamentary act, sufficient to overcome the testator's free will, amounting in effect to coercion destroying the testator's free agency.'" Lintz v. Lintz, 222 Cal.App.4th 1346, 1354 (2014) (quoting Rice v. Clark, 28 Cal.4th 89, 96 (2002)). See Cal. Prob. CODE §6104; Hagen v. Hickenbottom, 41 Cal.App.4th 168, 181-82 (1995) ("Mere general influence, however strong and controlling, not brought to bear upon the testamentary act, is not enough . . ..").
The person asserting undue influence "ordinarily bears the burden of proving undue influence . . . ." Rice, 28 Cal.4th at 96 (citing Cal. Prob. Code § 8252). But a "presumption of undue influence, shifting the burden of proof, arises upon the challenger's showing that (1) the person alleged to have exerted undue influence had a confidential relationship with the testator; (2) the person actively participated in procuring the instrument's preparation or execution; and (3) the person would benefit unduly by the testamentary instrument." Id.
3. Undue Influence in the Elder Abuse and Dependent Adult Civil Protection Act
In the Elder Abuse and Dependent Adult Civil Protection Act (the "Elder Abuse Act"), undue influence means "excessive persuasion that causes another person to act or refrain from acting by overcoming that person's free will and results in inequity." Cal. Welf. & Inst. Code § 15610.70(a). The statute lists four factors for courts to consider. Id. at § 15610(a)(1)-(4).
First is the victim's vulnerability. And relevant evidence may include: "incapacity, illness, disability, injury, age, education, impaired cognitive function, emotional distress, isolation, or dependency, and whether the influencer knew or should have known of the alleged victim's vulnerability." Id. at § 15610.70(a)(1). The second factor is the influencer's apparent authority, including the person's "status as a fiduciary, family member, care provider, health care professional, legal professional, spiritual adviser, expert, or other qualification." Id. at § 15610.70(a)(2). Third, courts may consider the influencer's tactics. These include: controlling the victim's necessaries of life, interactions with others, access to information, or sleep; using affection, intimidation, or coercion; or "initiation of changes in personal or property rights, use of haste or secrecy in effecting those changes, effecting changes at inappropriate times and places, and claims of expertise in effecting changes." Id. at § 15610.70(a)(3). And fourth, the inequity of the result matters. Relevant is "the economic consequences to the victim, any divergence from the victim's prior intent or course of conduct or dealing, the relationship of the value conveyed to the value of any services or consideration received, or the appropriateness of the change in light of the length and nature of the relationship." Id. at § 15610.70(a)(4).
B. Nels Did Not Unduly Influence Frances to Sign the 2008 Agreement
The court finds that Nels did not unduly influence Frances to sign the 2008 Agreement. It concludes that the contractual definition of undue influence applies because Lory argues that Nels procured the 2008 Agreement through undue influence. The 2008 Agreement is a contract - not a will or trust. Frances had both a will and a trust, and each was amended many times; but Lory does not contest any of those amendments. Further, Lory does not allege elder abuse. Nevertheless, the court considers the other definitions and their factors as relevant. It concludes that Nels did not, under any definition, unduly influence Frances.
Because the court concludes that the Elder Abuse Act's first through third factors are absent, it need not consider whether the fourth is present. See CAL. WELF. & INST. CODE § 15610.70(b) ("Evidence of an inequitable result, without more, is not sufficient to prove undue influence.").
As a general matter, the court finds Nels and Rachael credible. They were present in the gallery throughout the trial. And the court was able to evaluate their credibility on the stand. The court finds Lory's testimony generally not credible. During cross-examination, her testimony deviated from her prior, sworn testimony; counsel impeached her on numerous occasions. For instance, she provided conflicting testimony about the price she paid for her land - initially, she said $40,000, but when confronted with the deed of trust, she corrected the amount to $20,000. The court further explores Lory's contradictory testimony about Frances's personal documents below. And the court does not find Lairy's testimony persuasive, based upon his own words.
Shortly before trial, Larry passed away - news which was kept from Nels for some time. The parties designated and read into the record portions of Larry's deposition transcript.
In addition, Mr. Kipperman and Lory hired expert witnesses to address undue influence. Dr. Blum, Mr. Kipperman's expert, concluded that Nels did not unduly influence Frances. And Dr. Raffle, Lory's expert, determined that Nels did unduly influence Frances. The court considers their reports below.
1. Confidential Relationship
Frances and Nels did not have a confidential relationship. Accordingly, no evidentiary presumption of testamentary undue influence arises, nor is the Elder Abuse Act's second factor present.
A "confidential relationship exists when trust and confidence are reposed by one person in the integrity and fidelity of another." Estate of Sanders, 40 Cal.3d 607, 615 (1985) (quoting Nicholson v. Rose, 106 Cal.App.3d 457, 462 (1980)). It "exists when one party gains the confidence of the other and purports to act or advise with the other's interests in mind; it may exist although there is no fiduciary relationship; it is particularly likely to exist when there is a family relationship or one of friendship." Id. (internal quotation marks omitted) (quoting Kidokax v. Balkus, 26 Cal.App.3d 744, 750 (1972)). The existence of a confidential relationship is a question of fact. See Richelle L. v. Roman Catholic Archbishop, 106 Cal.App.4th 257, 272 n.6 (2003), as modified (Mar. 17, 2003). See, e.g., Estate of Llewellyn, 83 Cal.App. 2d 534, 562 (1948) ("The evidence negatives any inference that such trust and confidence was reposed by decedent in the integrity and fidelity of his brother as would establish the existence of a confidential relationship between them."); Buchmayer v. Buchmayer, 68 Cal.App. 2d 462, 470-71 (1945) (finding that the facts showed no confidential relationship between a husband and wife and thus "were sufficient to negative the existence of a confidential relationship and furnished no basis for a presumption that undue influence had been exercised").
Here, Frances reposed no trust in Nels or his business acumen Likewise, he had no control over her. Indeed, she was dismissive - if not outright contemptuous - of him. Dr. Raffle opined that Frances believed Nels invested foolishly and failed to properly manage his monies. And Dr. Blum rightly concluded that Frances viewed Nels as an unreliable person for real estate, estate planning, or financial decisions. She thought he lied and was irresponsible. Although she cared for him, she did not trust him with financial matters.
Rachael and Nels both testified that he never handled any of Frances's financial affairs.
2. Undue Susceptibility
Frances was not unduly susceptible. On the contrary, she "exercised a free and untrammeled mind" when she signed the 2008 Agreement. Olam, 68 F.Supp.2d at 1141. Frances was capable when she signed the 2008 Agreement. The trial testimony established that she was capable before, in, and after November 2008. Indeed, the overwhelming weight of the evidence establishes that Frances was strong willed. Her general capability diminished, however, in 2011. She became forgetful. She would confuse Nels and Larry. She repeated herself. And she became belligerent. Frances's death certificate lists respiratory failure and Alzheimer's dementia as causes of death.
Based on her interactions with Frances over more than 20 years, Ms, Haley judged Frances as mentally sharp. When Frances executed the March 2008 trust amendment, Ms. Armand screened her for mental capacity and determined nothing was amiss cognitively.
Lory, who spoke with Frances almost every Sunday, testified that in November 2008 there was nothing mentally wrong with Frances.
Larry testified that Frances had no mental incapacity in 2008 and handled her financial affairs perfectly. In fact, he explained that she drove a car up to the day she passed away and "was always sharp as a pin, " Lory testified that, in 2008, Frances was "sharp enough to live by herself, take care of her home, pay her bills, [and] put on her makeup every morning." In 2010, Mr. Chou (one of Frances's attorneys) met with Frances about four times. And he testified that she showed no signs of lessened mental capacity. He recalled, in particular, that although she was elderly, she had exceptional clarity of mind and purpose.
Nels described Frances as strong willed. Rachael explained that Frances was not easily manipulated - in fact, Frances intimidated her, Cindy said that Frances was "feisty, " strong willed, and had a mind of her own. Ms. Armand stated that Frances was willful, and not easily manipulated by people. Mr. Landman testified that Frances was very strong-willed in 2008. And Mrs. Landman said that in 2008 Frances was opinionated and said whatever she wanted.
Larry testified that he never suspected that Frances was suffering from Alzheimer's. But Mr. and Mrs. Landman, Frances's next-door neighbors, both testified that, in the last year of her life, Frances seemed forgetful and tended to repeat things - uncharacteristically, compared to her previous self. And Rachael testified that, in 2011, Frances acted differently. The strange behavior continued until her death. Dr. Blum noted that the first hint of Frances's cognitive problems was sometime in 2011; and Dr. Raffle acknowledged that Frances had a stroke, at some point, and that she likely lost cognitive capacity following that. The court finds the death certificate and the testimony of Mr, Landman, Mrs. Landman, and Rachael persuasive on this point.
Having concluded that Frances acted with a free and untrammeled mind, the court need not consider the individually delineated factors. But it does. Frances did not lack full vigor due to her age. Instead, as Lory and Larry testified, Frances lived independently and was vigorous. As such, no evidence suggests she was in poor physical condition or physically exhausted in 2008. Last, Frances did not have emotional anguish.
The experts disagree on age. Dr. Raffle explained that Frances, at 86 years old, was more intellectually fragile and vulnerable than a younger person; older people tire easily, making them more susceptible to confusion, distraction, or argument. Last, Dr. Raffle discussed how older people are not as mentally sharp as they previously were. Dr. Blum countered that some people's verbal reasoning improves with age. The court finds Dr. Raffle's explanation unhelpful because he offered a comparison to Frances's younger age - even if she were more vigorous in her youth, Frances could still have full vigor later. And the testimony indicated she was strong willed.
Dr. Blum suggested that Frances was conflicted about Nels. She cared for him, but did not trust him. The court finds that this does not rise to the level of emotional anguish.
The Elder Abuse Act's first factor (the victim's vulnerability) is also relevant here. The court has already considered Frances's capacity, age, cognitive functioning, and emotional distress. And it does not find any relevant evidence of illness, disability, injury, education, or isolation. Frances did rely on Nels's handiwork, but this did not amount to dependence on him.
Frances's general well being also negates the existence of a confidential relationship. See Richelle L., 106 Cal.App.4th at 273 ("The vulnerability that is the necessary predicate of a confidential relation, and which the law treats as 'absolutely essential', usually arises from advanced age, youth, lack of education, weakness of mind, grief, sickness, or some other incapacity.").
3. Undue Pressure
Nels did not exert undue pressure on Frances. The court considers the Odorizzi factors as well as the Elder Abuse Act's third factor.
Discussing the Transaction a t an Unusual or Inappropriate Time
There is no evidence that Nels discussed the transaction at an unusual or inappropriate time. Accordingly this factor is of neutral effect.
Consummation of the Transaction in an Unusual Place
Nels and Frances consummated the transaction in a usual place. Nels retrieved the 2008 Agreement from Ms. Armand's office in Ramona, drove to Frances's house in Long Beach, and then he and Frances went to a notary and signed it. The court finds nothing unusual about the arrangement. And it weighs against undue influence.
Insistent Demand that the Business Be Finished at Once and an Extreme Emphasis on the Untoward Consequences of Delay
Nels did not insistently demand that the agreement be finished at once or emphasize any consequences of delay. Indeed, he wrote her the $ 10, 000 check in June, and they did not sign the 2008 Agreement until November. Further, Dr. Raffle admitted there was no evidence that Frances was not allowed to read the document. This factor does not support undue influence.
The Dominant Side's Use of Multiple Persuaders Against a Servient Party
The court finds this is a non-factor. Admittedly, Rachael mentioned Parcels A and B in her letters to Frances and appealed to Frances's affection for Nels. But given Frances's low opinion of Rachael, discussed above, the court finds that Rachael's efforts do not implicate this factor.
Absence of Third-Party Advisors to the Servient Party and Statements that There Is No Time to Consult Financial Advisers or Attorneys
These factors are neutral. Although Frances did not consult third-party advisors about this particular document, she used advisors for other documents. And, as discussed above, Nels made no statements about a lack of time. Even Dr. Raffle admitted that Frances had the ability to contact a lawyer, if she wanted to.
Nels's "Tactics"
There is no evidence that Nels used nefarious tactics. He did not control Frances's necessaries, her interactions with others, or her access to information or sleep. He did not use affection, intimidation, or coercion. He did initiate a change in property rights, but not with haste, secrecy, at an inappropriate time or place, or by claiming expertise in the matter. Indeed, he relied upon Frances's recommendation to use Ms. Armand.
4. Frances Arranged for the November 2008 Agreement
The court finds that Frances arranged for the November 2008 agreement. Lory argues that Nels controlled the Agreement's drafting - and that this is highly relevant. The court disagrees.
Dr. Raffle - Lory's expert - considered this a minor factor. He assumed Nels prepared the 2008 Agreement, but explained that his ultimate opinion would not change even if Nels had not prepared the agreement.
Nels and Frances had different reasons for reducing the agreement to writing. Nels did not trust Lory, who was to be the trustee of the amended trust. And Rachael told Nels the agreement needed to be in writing. Frances, for her part, viewed this as a chance to renegotiate the terms. She was about 85 years old and was concerned that, on the present payment schedule, she would not enjoy the benefit of the payments before she passed away. Accordingly, the court finds that Nels did not substitute his own will for Frances's in drafting the Agreement.
Frances also directed how the document was to be prepared. Nels admitted that Ms. Armand drafted the agreement at his request. But he explained that Frances: asked him to use Ms. Armand; told her the contents; and paid for her to draft it. Ms. Armand testified that Nels provided the substance and directed her to draft the document. Further, Frances paid for the notary. That said, as noted earlier, the document lacks a notary seal. But the court finds Rachael's testimony about the seal persuasive. She explained that the notary was very ill and died shortly after the document was signed. Moreover, Frances kept the original agreement, while Nels received a photocopy.
The court thus finds that Frances arranged the creation and execution of the 2008 Agreement. She also understood its purpose.
5. Frances Believed She Sold the Property
Frances knew she had sold the property First, she understood that she entered a contract. In preparation for a visit with Mr. Drexl, Cindy took notes about what Frances wanted. [Ex. 1-1.] She wrote: "Returned check because Nels in breach of the contract when unable to make regular monthly payments . . . ." And Frances believed that she had sold the property. Mr. and Mrs. Landman, who lived next door to Frances in Long Beach, both testified that Frances knew she had sold the property to Nels. The court thus finds that Frances understood the nature of the 2008 Agreement and what she had done. But she later changed her mind.
6. Frances's Fear of Nels "Losing" the Property
Despite clear, uncontroverted evidence that she signed the 2008 Agreement, Frances disclaimed doing so on multiple occasions. The court considers this contradiction, and finds that Frances was worried about "losing" the property to Nels's creditors.
The undisputed testimony established that Frances intended for the Ramona land to stay in the "Berg family." But she was worried. As Cindy's notes, written in Frances's voice, relate: "I talked to a bankruptcy, real estate lawyer. You have debts you can't handle and it would be futile to put 40 acres in your name, as it would be taken away for passed [sic] debts owed." Frances believed Nels would lose the land. So she tried to protect it by asking Nels to sign a rental agreement and by creating a lifetime benefit trust. The court concludes, then, that Frances was afraid that Nels's bankruptcy would deprive the "Berg family" of Parcels A and B.
Lory said Frances would never sell land to Nels because she was concerned that it would be lost. Instead, Frances put the property in the trust, where it would be safe. Cindy related that, in the last four years of her life, Frances was disappointed in Nels and felt that he would lose any property she turned over to him. Mr. Westerfeld testified that Frances "was concerned that if the Ranch got into Nels's hands, that it could be lost due to past business practices." Rachael believed Frances was concerned about losing the property in bankruptcy. And Nels and Rachael both testified that Frances first became concerned after they filed bankruptcy.
Larry explained that Frances wanted Nels to sign the rental agreement because he would otherwise lose the property in his bankruptcy.
At her June 18, 2010 meeting with Mr, Chou, Frances expressed a concern about Nels's creditors acquiring the property. [Ex. 26.] Mr. Chou then drafted the 2010 Restated Trust and created Article 6, 9 -Nels's lifetime benefit trust - to protect assets from Nels's creditors. At the August 9, 2011 meeting with Mr. Chou, Frances again wanted to amend her trust to prevent Nels's creditors from accessing the property. [Ex. 27.] But Mr. Chou explained to her that the lifetime benefit trust prevented Nels's creditors from encumbering the property.
7. The Experts' Opinions
The court finds Dr. Blum's testimony and opinions are more reliable than Dr. Raffle's. Dr. Blum's methodology likewise was more reliable and precise, while Dr. Raffle's reasoning was circular.
Dr. Blum analyzed four categories of issues - which roughly correspond to the factors listed in the Elder Abuse Act. First, he considered Frances's vulnerabilities, and determined that, although Frances was elderly, she had no unique vulnerabilities or medical issues. Second, he evaluated the nature and quality of Nels and Frances's relationship to decide whether she was reliant upon him- and he concluded there was no reason to suspect she depended upon Nels for care. Third, Dr. Blum looked to Nels's actions, antics, and strategies. He noted that Frances did not sign the document at an unusual location, she was not threatened, and she could contact an attorney. Last, Dr. Blum considered the objective and subjective outcomes. There, Frances continued to have relationships with Nels, his wife, her other children, and her friends. Thus, Dr. Blum concluded that Nels did not unduly influence Frances.
Lory objected to this conclusion as untimely and not previously disclosed. And in her post-trial brief, she asks the court to exclude the opinion. She cites Wannall v. Honeywell Int'l, Inc., 292 F.R.D. 26, 37 (D.D.C. 2013), aff'd sub nom. Wannall v. Honeywell, Inc., 775 F.3d 425 (D.C. Cir. 2014) and Lindner v. Meadow Gold Dairies, Inc., 249 F.R.D. 625 (D. Haw. 2008). Admittedly, Dr. Raffle's precise phrasing at trial did not appear verbatim in his expert report. In it, he concluded that there was insufficient medical evidence to render a proper psychiatric analysis about whether Nels unduly influenced his mother. [Ex. 25.] In his deposition, however, he expanded his opinion: "It is my opinion that there's insufficient evidence to conclude that [the 2008 document] was the result of undue influence." Dr. Blum explained that his phrasing at trial was the application of the clinical or medical approach - he applied all of the undue influence models (Dr. Singer's; Heisler's; Dr. Bernatz's; Dr. Shulman's; etc.) and none yielded an undue influence finding. So he concluded that, clinically or medically, there was no evidence of undue influence - thus, it did not happen. The court determines that this is not a new opinion. Rather, it merely articulates what naturally and logically must be true given the already existing opinion. Because Wannall and Lindner address untimely expert reports and new opinions, they are inapposite and do not require a different result.
Dr. Raffle opined that Nels unduly influenced Frances to sign the 2008 Agreement. He reasoned that Frances believed she owned Parcels A and B before and after she signed the 2008 Agreement; thus, when she signed it she did not understand that she transferred ownership to Nels. But Dr. Raffle's ultimate opinion relies upon the logical fallacy of petitio principii. His reasoning is essentially circular: Nels must have lied to Frances about the 2008 Agreement because she did not understand what the Agreement did, and Frances did not understand what the Agreement did because Nels lied to her. In addition, to establish Frances's belief that she owned the property after she signed the 2008 Agreement, Dr. Raffle looked to the 2010 Restated Trust and 2012 amendment. The court finds this unpersuasive for two reasons. First, Frances's fear of Nels losing the property in bankruptcy predates these documents. Thus, she had an ulterior motive in asserting ownership. Second, Dr. Raffle acknowledged that Frances thought she owned the land because she had not yet transferred title, so she would naturally include them.
When questioned, Dr. Raffle confirmed that this was his logic. Tr. Transcript vol. 2, 111:9-19.
C. The Contracts' Terms Point to the Same Conclusion
The substance of the contract terms points to the same conclusion, as this was an ordinary transaction for Frances. The terms are generally consistent with her other family deals. Nels and Frances had an oral agreement; Frances had oral agreements with Larry, Lory, and Larene. Nels initially paid $200 per month, as did Larry, Lory, and Larene. Admittedly, Frances did not immediately transfer legal title to Nels, in contrast to her transactions with Larry and Lory. But it is consistent with her treatment of Larene, who - despite overpaying for Parcel C - has not yet received title either. Further, Frances demanded more from Nels. Larry, Lory, and Larene each paid $20,000 for their parcels, while Nels paid $40,000 and $25,000.
D. Conclusion
For the foregoing reasons, the court determines that Nels did not unduly influence Frances to sign the 2008 Agreement.
V. Nels Fully Performed
The court finds that Nels fully performed under the contracts - indeed, he over-performed.
A. Nels Fully Performed by Cash, with Checks, and In-Kind Services
Nels paid Frances with cash, by check or money order, and in-kind services. When he visited Frances in Long Beach, he paid cash. If he had not seen her for a month or more, he would send a check or money order. On other occasions, Nels provided construction services to Frances, a practice going back to the 1990s.
1. Frances's Ledger Books
Frances maintained ledger books and recorded transactions in them. She had two books for Nels. One, with a cow face on the front, listed his money payments. The other ledger, which was blue, recorded his in-kind services. Frances kept the ledgers in a kitchen cabinet in Long beach. She dutifully recorded all of Nels's payments in them.
For instance, when Larry borrowed money from Ishmael and Frances, he had a ledger. Frances also tracked Larene's payments for Parcel C in a ledger.
But these ledger books went missing. When Frances died, Lory took possession of all of Frances's personal belongings - including the ledger books. Rachael and Nels testified they last saw the "cow" ledger at the will-trust reading after Frances died; Nels saw it in Lory's satchel. Lory, on the other hand, testified that she had her own ledger book, not Frances's. On this point, the court finds the testimony of both Nels and Rachael persuasive. And in any event, the ledger book was never produced.
Lory admitted that she likely disposed of the ledger books - but her testimony on this topic varied. She first testified that she was by herself with Frances's belongings for six weeks. She admitted that she shredded documents, did not keep a list of destroyed items, and was alone when she shredded them. But she also testified that she disposed of the ledger books because they did not seem important, there was so much to keep, and there were many people going in and out of the house. She also testified that she kept copies of everything important, such as checks. But this is inconsistent with her deeming the ledger books as not important. Last, she testified in immediate succession that: she never destroyed any ledger books; she did not remember if she did; and she did not know what happened to them. The court notes that Lory's testimony on this matter is internally inconsistent and not credible. And it concludes that Lory disposed of the ledger books.
2. Nels's Performance
With the most probative documentary evidence about performance unavailable, the court must reconstruct Nels's payment history. First, Nels testified that he paid in cash on many occasions.
Second, he sent Frances checks and money orders. At trial, he offered seven years' worth of checks. The existing documentary evidence demonstrates that Nels and Rachael sent Frances the following:
Nels kept copies of his pre-2007 payments. But he lost them in the 2007 wildfires, which burned his office. Larene also lost her payment records in the 2007 fires.
• August 12, 2004: $200 to Frances Berg - Money Order No. 57-22079594 [Ex. C-2];
• April 26, 2006: $400 to Frances Berg - Check No. 1050 [Ex. D-2];
• January 29, 2007: $400 to Frances Berg - Check No. 1245 [Ex. XXX-1 ];
• March 1, 2007: $400 to Frances Berg - Check No. 1270 [Ex. XXX-1];
• May 2007: $400 to Frances Berg - Check No. 1317 [Ex. XXX-1 ];
• June 20, 2007: $400 to Frances Berg - Check No. 1351 [Ex. XXX-1 ];
• August 20, 2007: $400 to Fran Berg-Check No. 1390 [Ex. XXX-1];
• October 15, 2007: $400 to Frances Berg - Check No. 1462 [Ex. XXX-1];
• December 17, 2007: $800 to Mom Berg - Check No. 1486 [Ex. XXX-1];
• March 10, 2008: $500 to Frances Berg - Check No. 1613 [Ex. XXX-1];
• April 11, 2008: $400 to Frances Berg - Check No. 1629 [Ex. XXX-1];
• June 1, 2008: $400 to Fran Berg - Check No. 1659 [Ex. XXX-1];
• June 3, 2008: $ 10, 000 to Frances Berg - Check No. 1660 [XXX-1.]
• May 19, 2008: $400 to Frances Berg - Check No. 1660 [Ex. XXX-1];
• July 25, 2008: $500 to Frances Berg - Check No. 1725 [Ex. XXX-1 ];
• October 3, 2008: $500 to Frances Berg - Check No. 1666 [Ex. XXX-1];
• December 10, 2008: $500 to Frances - Check No. 1676 [Ex. XXX-1 ];
• February 26, 2009: $500 to Frances Berg - Check No. 1679 [Ex. XXX-1];
• August 18, 2009: $250 to Frances Berg - Check No. 1691 [Ex. XXX-1];
• January 5, 2011: $200 to Frances Berg - Check No. 2125 [Ex. XXX-1];
• January 31, 2011: $500 to Frances Berg - Money Order No. 81-01510454 [Ex. T-2.];
• September 21, 2011: $300 to Fran Berg - Check No. 2191 [Ex. U-2, GGG-1];
• October 18, 2011: $500 to Fran Berg - Unnumbered check [Ex. V-2, DDD-1];
• November 23, 2011: $500 to Fran Berg - Check No. 1001 [Exs. XXX-1 and W-2];
• March 9, 2012: $500 to Fran Berg - Check No. 1203 [Ex. YYY-1];
• April 17, 2012: $500 to Fran Berg - Check No. 1221 [Ex. YYY-1, Y-2];
• May 15, 2012: $500 to Fran Berg - Check No. 1204 [Ex. YYY-1];
• July 10, 2012: $500 to Fran Berg -Check No. 1205 [Ex. YYY-1];and
• August 9, 2012: $500 to Fran Berg - Check No. 1206 [Ex. YYY-1 ].
In addition, on January 3, 2012, one of Nels's payments was rejected for insufficient funds. [Ex HHH-1.] When Frances called about it, Nels promptly gave her $500 and the $27 fee. And third, Nels provided in-kind services. He estimated their market value as between $80,000 and $100,000.But, because she was his mother, he charged Frances a different amount. And she recorded about ' $ 10, 000 worth of work in the ledger book.
Rachael testified that Nels installed a water heater in the 1990s and in 2008 or 2009; he did yearly yard cleaning; he installed a drip system, a skylight, and an air-conditioning system; he replaced Frances's bathtub and rebuilt the bathroom floor; remodeled the bathrooms; replaced the internal piping; demolished and replaced; a patio covering; enclosed a patio; helped with the trim and woodwork; and he fixed the roof, back gate, and other items.
The court finds Nels and Rachael's testimony about Nels's payment history credible and persuasive. Rachael testified that Nels never missed a payment (whether check, cash, or in-kind) between August of 1993 and August of 2012. Nels last checked the ledger books sometime in 2010 or 2011. And they showed no missed payments. The court credits this testimony and concludes that Nels fully performed on the contract. In fact, he over-performed.
B. Nels Overpaid by $10,300
The court finds that Nels over-performed by $10,300. Lory argues that Nels's overpayment shows that he's not credible and that he was paying rent. The court disagrees. Instead, it concludes that Nels wanted to be supportive of his mother. Moreover, Frances had been threatening to take the property away from him, and the court infers that Nels did not want to provoke her. And Nels admitted that he likely overpaid for the property, but explained that neither he nor Frances ever added the amount up. Further, Larene also overpaid, apparently without realizing it. She had paid for Parcel C in full sometime in 2006, but kept paying until 2012, when Frances told her that she had paid more than enough.
Even if Nels had not fully performed, Frances agreed to forgive any outstanding indebtedness upon her death. "It is hornbook law that a contract, to be enforceable, must be supported by consideration." Patriot Scientific Corp. v. Korodi, 504 F.Supp.2d 952, 960 (S.D. Cal. 2007). Further, '"[p]ast consideration cannot support a contract."' Id. (quoting Passante v. McWilliam, 53 Cal.App.4th 1240, 1247 (1997)). But the court concludes that there was consideration for this promise. In exchange for the debt cancellation, Nels agreed to provide an additional $ 10, 000 lump sum payment and increase his total monthly payments from $400 to $500.
C. Conclusion and Discrepancies in the Schedules
The court concludes that Nels fully performed on his agreement to purchase Parcels A and B. But this conflicts with Nels and Rachael's bankruptcy schedules. Parcels A and B are not listed as assets on Schedule A. Nor does the contract for Parcel B appear as an unsecured debt, a secured debt, or an executory contract. Mr. Kipperman only became aware of Nels and Rachael's interest in Parcels A and B during a mediation.
Nels and Rachael explained that a paralegal prepared most of the schedules. This does not excuse the omissions; but the errors are likely not their fault. Rachael testified that they provided the paralegal with information about all their assets, including the 2008 Agreement. They signed an original draft. But then the paralegal worked on the schedules for five weeks before filing them - without Rachael and Nels reviewing them. Rachael further pointed out that another of their properties was not listed, a condo on "Davis Cup." Nels and Rachael, however, have yet to file amended schedules, despite knowing about the inaccuracies. The court invites them to do so.
VI. Rescission
A party may rescind a contract if their consent was obtained through undue influence. Cal. Civ. Code § 1689(b). The party seeking rescission must promptly notify the other party and either restore or offer to restore everything of value. Cal. Civ. Code § 1691. See Vill. Northridge Homeowners Ass'n v. State Farm Fire & Cas. Co., 50 Cal.4th 913, 918 (2010); In re Hathaway Ranch P'ship, 127 B.R. 859, 863 (Bankr. CD. Cal. 1990). The rescinding party must restore the status quo ante.
Lory may not rescind the 2008 Agreement. The court concluded that Nels did not obtain the 2008 Agreement through undue influence and tendered full performance. Accordingly, there are no grounds for rescission. Further, Nels never received notice from Frances that she wanted to rescind the contract. Nor did she offer to return the $10,000 lump sum and monthly payments.
VII. Conclusion
In conclusion, the court finds that: (1) Nels and Frances had installment contracts for Parcels A and B; (2) Nels did not unduly influence Frances in procuring the 2008 Agreement; (3) and Nels fully performed under the contracts.
IT IS SO ORDERED.