Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
San Francisco City and County Super. Ct. No. PES-94-285606)
SIMONS, Acting P.J.
Petitioner Dennis Giacopetti, administrator of the estate of Michael W. Smith, deceased, appeals an order denying his petition for an order precluding distribution of a percentage of the assets of the estate of William G. Dempsey, deceased, to respondent Brandenberger & Davis (B&D). Giacopetti raises numerous claims of error. We conclude the assignment to B&D executed by Michael W. Smith provided B&D with fees that were “grossly unreasonable” under Probate Code section 11604, subdivision (c)(1), and reverse.
BACKGROUND
William G. Dempsey died intestate on December 15, 2003. On January 12, 2004, a petition for letters of administration of Dempsey’s estate was filed by Suzann Johnson. The petition named numerous cousins of Dempsey and included his family tree. Included on the family tree were Dempsey’s sister, Mary Smith, believed to be deceased, and Dempsey’s nephew, Michael W. Smith, whose whereabouts had been unknown for over five years. The petition stated that Johnson was making diligent efforts to determine whether Mary and/or Michael were alive or deceased, and, if alive, where they were located.
Solely for efficiency, we refer to Mary Smith and Michael W. Smith by their first names.
Also on January 12, 2004, Johnson retained National Information Services, Inc. (NIS), to locate Michael and Mary, and paid NIS $375. On January 13, NIS learned that Mary died in 2001. On January 14, NIS learned that Michael was incarcerated in the North Las Vegas Jail. On January, 15 the jail confirmed that information and NIS left Michael messages and a letter at the jail. On January 17, Michael contacted NIS who provided him with the name of the attorney representing Dempsey’s estate. On January 18, NIS left Johnson a message regarding Michael’s current status and whereabouts. On January 22, Michael contacted NIS investigator Joe Enloe concerning his anticipated release from custody on January 30. On January 30, Michael contacted Enloe to arrange for a personal interview to finalize the report, case facts and future contact methods.
B&D is an international probate research firm, licensed as a private investigator, and engaged in the business of identifying and locating missing and unknown heirs. B&D probate investigator, Jay Lindner, learned of Johnson’s petition for letters of administration of Dempsey’s estate shortly after it was filed, and identified Michael as Dempsey’s nephew and sole intestate heir, and Michael’s whereabouts at the North Las Vegas Jail. While Lindner was attempting to locate Michael, he was aware that there were cousins of Michael who were potentially claiming heirship to the Dempsey estate.
After discovering Michael’s whereabouts, Lindner contacted B&D’s Southern California field representative, Alex Salazar, and asked him to visit Michael in jail. Salazar was not a licensed private investigator. On the morning of January 15, 2004, Salazar was told by a deputy that he would need an appointment, which was scheduled for 2:00 p.m. that day.
At 2:00 p.m., Salazar met with Michael alone at the jail after introducing himself and showing Michael his identification, and explained that Michael might be an omitted heir to a probate matter. Salazar then explained that B&D locates missing heirs to estates and “in order for [B&D] to bring his name forward to the estate,” asked if Michael would be willing to execute an assignment agreement. Salazar showed and read to Michael the one page assignment agreement. After Salazar told Michael that the assignment involved Dempsey’s estate, Michael identified Dempsey as his uncle. The assignment agreement provides in part: “In consideration of your having located me and having brought to my attention certain assets in which I may have an interest, derived from the [one line of blank space for insertion of text] and in consideration of your further time, effort, expertise, and expense in investigation and your endeavor to gather genealogical evidence in support of my claim, I hereby assign to you a one-third (33 1/3%) interest in such assets to which I may be found entitled.” Although Salazar told Michael he did not need to sign the agreement immediately and thought he had at least a few months to do so, Michael signed the agreement. When Michael asked about the value of the estate, Salazar told him to contact the B&D office as soon as he was released from custody. Salazar testified that his conversation with Michael was “very cordial” and Salazar did not threaten him in any way.
Lindner’s declaration suggests that Salazar did not disclose Dempsey as the person whose estate assets were at issue. The declaration states that Michael never asked Salazar whose estate was at issue, only the amount of his potential inheritance, and that Salazar told Michael “there was an estate in which [Michael’s] whereabouts were unknown.”
Although the assignment agreement Michael executed did not bear Dempsey’s name, Salazar and Lindner testified it was B&D’s normal practice to fill in the name of the estate on the assignment agreement form after it was signed by the prospective heir. After the meeting with Michael, Salazar sent the executed assignment agreement to the B&D office. At trial, B&D’s case manager, Paul Hefti, testified that on January 23, 2004, he dated and executed the assignment agreement as “accepted” and added to it “ESTATE AND ASSETS OF WILLIAM G. DEMPSEY, DECEASED” as the subject assets of the assignment agreement.
The assignment agreement identifying the Dempsey assets was marked as an exhibit at trial, but never admitted into evidence.
On January 26, 2004, Hefti sent Michael a letter formally acknowledging receipt of Michael’s assignment agreement and including a copy of the attorney authorization and a copy of the assignment agreement including the “ESTATE AND ASSETS OF WILLIAM G. DEMPSEY, DECEASED” and “accepted” by Hefti. The attorney authorization stated it regarded “Estate and Assets of WILLIAM G. DEMPSEY, Deceased.” The letter stated that B&D believed Dempsey’s estate to be valued at about $355,000 and that at B&D’s expense it had retained Attorney Daniel Conrad to represent B&D pursuant to the “partial assignment” received from Michael. The letter urged Michael to sign and return the attorney authorization so that Conrad could begin taking the legal steps necessary. Michael neither signed and returned the attorney authorization nor contacted Hefti. On March 25, B&D filed a notice of filing of Michael’s assignment agreement.
The assignment agreement attached to the notice includes the description of the assets as being those of Dempsey’s estate and bears the “acceptance” by Hefti.
On March 24, 2004, Michael died. Giacopetti was appointed executor of Michael’s estate.
On August 24, 2007, Giacopetti filed the instant petition for an order precluding distribution of Dempsey’s estate to B&D. B&D filed an objection to the petition.
At trial Hefti testified that B&D always works on a contingent fee basis. Lindner and Hefti both stated that 33-1/3 percent is the standard percentage in California of an assignment by an heir in a missing heir probate case. In response to questioning by the court, Lindner stated that B&D’s business is “kind of risky,” “time is very important,” and “you can do a lot of work for nothing.”
On January 28, 2008, the court issued its order denying the petition and finding that the assignment agreement executed by Michael is valid and enforceable. The court concluded that B&D is entitled to a 33-1/3 percent distribution of Michael’s interest in the Dempsey estate. Giacopetti filed a timely appeal from the order.
DISCUSSION
I. The Consideration Is Not Inadequate
Giacopetti contends the assignment was not supported by adequate consideration and therefore the trial court erred in validating it. He argues that Michael was not a missing heir because he was quickly located in the regular administration of the Dempsey estate, and because NIS, the heir hunter employed by Johnson, located Michael prior to the purported assignment to B&D.
Probate Code section 11604 “permits the probate court, in its discretion, to invalidate the assignment of an estate interest or to determine that consideration for the assignment is unreasonable. [Citations.] Section 11604 and its predecessor statutes were enacted, in part, to provide judicial supervision of assignments given to heir hunters. [Citation.]” (Estate of Wright (2001) 90 Cal.App.4th 228, 234 (Wright).) Section 11604 provides, in relevant part: “(c) The court may refuse to order distribution, or may order distribution on any terms that the court deems just and equitable, if the court finds . . . [¶] (1) The fees, charges, or consideration paid or agreed to be paid by a beneficiary are grossly unreasonable.” The heir hunter has the burden of establishing the adequacy of consideration for the assignment in a section 11604 proceeding. (Wright, at p. 239.)
All undesignated section references are to the Probate Code.
Estate of Butler (1947) 29 Cal.2d 644, 646, 650, relied upon by Giacopetti, is distinguishable. In that case, the respondent heir hunter solicited and obtained assignments from some of the appellants, relatives of the decedent, about a week before the hearing on the petition for letters of administration. The respondent obtained similar assignments from other relatives/appellants two weeks after the hearing. In the absence of any evidence to the contrary, it was presumed that the public administrator, in exercising his official duties regarding the decedent’s estate, would have notified the appellants on the basis of the information readily available to him as to their whereabouts. The court thus referred to the appellants as “ ‘known’ heirs.” (Id. at p. 651.)
Here, Johnson’s petition for letters of administration expressly advised the probate court that Michael’s whereabouts were unknown and that Johnson was making efforts to determine whether Mary and Michael were alive or deceased and, if alive, where they were located. Thus, unlike Butler, evidence supported B&D’s involvement in seeking to locate Dempsey’s heirs. (See Wright, supra, 90 Cal.App.4th at pp. 238-239 [rejecting assertion that consideration unreasonable where petition for letters of administration advised court that heir’s whereabouts were unknown to her siblings].)
Also in reliance on Butler, Giacopetti notes that NIS located Michael first and should have been given a reasonable time to locate Dempsey’s heirs, prior to B&D “pouncing upon [Michael,] the hapless heir.” Because the heirs were known in Butler, its discussion of the speed with which the heir hunters procured their assignments is inapposite. No evidence was presented that at the time B&D contacted Michael it was aware of NIS’s retention by Johnson or that NIS had located and contacted Michael. In any case, Linder’s declaration submitted in opposition to the instant petition provided a detailed two-page listing of the chronology of B&D’s investigation efforts. Based on the information provided by B&D, the court did not abuse its discretion in impliedly concluding that the assignment was supported by adequate consideration. (See Wright, supra, 90 Cal.App.4th at pp. 238-239.)
II. The Assignment Agreement Does Not Omit an Essential Term
Next, Giacopetti contends the assignment was invalid because the assignment agreement signed by Michael omitted an essential term—the identity of the asset purportedly assigned. In reliance on subdivision (a) of Civil Code section 1698, Giacopetti argues that B&D’s oral testimony that the asset to be assigned was the proceeds of the Dempsey estate is an ineffective modification of the assignment agreement.
Civil Code section 1698, subdivision (a) provides: “A contract in writing may be modified by a contract in writing.”
Giacopetti’s argument lacks merit since the terms of the assignment agreement were not required to be in writing. “[A]n oral assignment of a contract or chose in action is sufficient. [Citations.]” (Berg Metals Corp. v. Wilson (1959) 170 Cal.App.2d 559, 575-576; see also Civ. Code, § 1052 [“[a] transfer may be made without writing, in every case in which a writing is not expressly required by statute”].) Here, substantial evidence was presented that at his meeting with Michael, Salazar expressly read to Michael the entirety of the one-page assignment agreement and told Michael the assignment involved the assets of Dempsey’s estate. That the later written agreement memorializing those terms was not admitted into evidence does not invalidate the assignment agreement.
In his reply brief, Giacopetti asserts, with no citation to the record, that Salazar would not have identified the Dempsey estate to Michael prior to Michael signing the assignment agreement because “[t]o do so would go completely counter to the known methods of heir hunters.” He asserts that even in the absence of evidence of this fact, the trial court and this court should take such fact into consideration because “the Probate Court is well aware of the known methods of heir hunters.” We disagree and reject the assertion as lacking in evidentiary support. (Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184-185, fn. 1.)
III. No Fraud in the Inducement Is Shown
Giacopetti contends the assignment should be invalidated because it was procured by fraud in the inducement. In particular, he argues that Salazar falsely stated to Michael that B&D would “bring his name forward to the estate.” Giacopetti asserts that the truth is that the Dempsey’s estate knew Michael’s name, but what they did not know was whether he was alive; and, if so, what were his whereabouts.
Section 11604, subdivision (c)(2) permits the court to refuse distribution to an assignee if the court finds “[t]he transfer, agreement, request, or instructions were obtained by duress, fraud, or undue influence.” We review an order under section 11604, subdivision (c)(2) for substantial evidence. (Wright, supra, 90 Cal.App.4th at p. 238; Estate of Raphael (1951) 103 Cal.App.2d 792, 795.) In doing so “ ‘we must view the evidence in the most favorable light to support the probate court’s findings drawing every reasonable inference in their favor which the evidence will support,’ ” and we cannot substitute our judgment as to the weight and effect of the evidence. (Estate of Cook (1976) 64 Cal.App.3d 852, 863.)
Nothing in the challenged statement by Salazar contains any intentional misrepresentation of fact. Instead, a reasonable inference from the statement is that B&D would inform Dempsey’s estate that Michael had been located and was alive. We conclude the evidence is sufficient to support the court’s order.
IV. B&D Did Not Engage in Commercial Exploitation of the Legal Profession
Again, in reliance on Estate of Butler, supra, 29 Cal.2d 644, Giacopetti argues that the assignment should be invalidated because B&D, a nonlawyer, is engaged in the unlawful, commercial exploitation of the legal profession.
In Butler, the Supreme Court invalidated an heir hunter’s assignments because an unlicensed person obtained compensation agreements and related powers of attorney pursuant to which he undertook to furnish legal services for his principals and to pay out of his agreed compensation all expenses incident to the services he was authorized to provide by the power of attorney, including attorney fees and court costs. (Estate of Butler, supra, 29 Cal.2d at p. 652.) The court concluded this procedure amounted to “ ‘commercial exploitation’ of the legal profession and is contrary to public policy.” (Id. at p. 647.)
Again, Butler is distinguishable. Michael never executed a power of attorney in favor of B&D or Conrad. The assignment agreement executed by Michael specified “It is understood that the share assigned to you is to cover all costs and expenses you may incur in connection with efforts to establish my entitlement.” Neither this nor anything else in the assignment agreement authorized B&D to represent Michael or perform any tasks required of an attorney.
V. B&D Is a Licensed Private Investigator
Giacopetti contends that the assignment must be invalidated because Salazar is not a licensed private investigator in violation of the Business and Professions Code. Because this issue is raised for the first time on appeal, it is waived. (See Brown v. Boren (1999) 74 Cal.App.4th 1303, 1316.) In any case, the assignment at issue runs to B&D, not Salazar. B&D is a licensed private investigator and Salazar was acting as an employee of B&D at the time he met with Michael. As such, B&D was legally responsible for Salazar’s conduct. (Bus. & Prof. Code, § 7531.)
VI. The Fee Charged Was Grossly Unreasonable
Finally, Giacopetti contends the fee charged by B&D is per se grossly unreasonable and, therefore, the assignment should be invalidated or the fee reduced. He notes that Lindner testified that he expended about 12 hours total on the Dempsey estate project and incurred no expenses. Giacopetti argues that excluding the 10 to 15 hours Salazar expended on the project, the fee charged for the 12 hours expended by Lindner was “$10,000 per hour,” “more than [12] times the $813.33 hourly rate” affirmed in Wright. He argues there is no evidence that Lindner took any risk, expended great effort or exhibited any unique or exceptional skill in locating Michael. He also notes that NIS located Michael within the same time frame for a retainer fee of $375. For all these reasons, he concludes there was no substantial evidence to support the court’s finding that the fee charged by B&D was valid and enforceable.
As we noted previously, section 11604, subdivision (c)(1), provides that the probate court “may refuse to order distribution, or may order distribution on any terms that the court deems just and equitable, if the court finds . . . . [¶] (1) The fees, charges, or consideration paid or agreed to be paid by a beneficiary are grossly unreasonable.” In assessing the reasonableness of consideration paid for an assignment of an interest in a probate estate the court may give much stricter scrutiny to the fairness of the consideration than would be the case under ordinary contract principles. (Estate of Boyd (1979) 98 Cal.App.3d 125, 131.)
In Wright, the appellant argued that a fee of 35 percent of the heir’s estate ($122,000) to the respondent heir hunter was disproportionate to the $5,000 payment the probate court had authorized to a different heir hunter. (Wright, supra, 90 Cal.App.4th at p. 238.) The appellate court concluded the fee was reasonable under the circumstances. It noted that the respondent heir hunter had spent approximately 150 hours searching databases and interviewing leads, and two days searching in Reno for the heir. There was also evidence that heir hunting is a competitive business and only two out of 100 searches resulted in remuneration. The appellate court concluded that the probate court did not abuse its discretion in finding the fee reasonable in view of the evidence that the heir’s whereabouts were unknown and the amount of effort expended by the respondent heir hunter. (Id. at p. 239.)
The hours worked by Salazar were devoted solely to having Michael execute the challenged assignment, after his location had already been determined by B&D. Excluding those hours from the calculation, B&D received almost $10,000 per hour for its efforts to find Michael. This is a grossly unreasonable fee, particularly in light of Giacopetti’s evidence that Johnson paid $375 to NIS to perform essentially the same task. Without more, B&D’s evidence that the 33-1/3 percent fee it charged is the standard in the heir hunter industry, and that charging a contingent fee often leads to no recovery for work performed, is insufficient to render the exorbitant fee charged reasonable.
Many cases applying section 11604 or its predecessor (former section 1020.1, repealed by Stats. 1988, ch. 1199, § 55.5, p. 3903) have modified the distribution of an estate’s assets rather than rescinding the agreement altogether, where the value of consideration for an assignment or agreement is unreasonable. (Estate of Bennett (2008) 163 Cal.App.4th 1303, 1312; see also, Burchell v. Strube (1955) 43 Cal.2d 828, 831 [reducing heir hunter’s fee from 40 to 10 percent of the estate]; Estate of Freeman (1965) 238 Cal.App.2d 486, 488 [distribution modified from 60-40 division in favor of claimants to 80-20 division in favor of the heir at law]; Estate of Peterson (1968) 259 Cal.App.2d 492, 495-496 [distribution modified from 90 percent division in favor of assignee charity to division of estate into one-third shares].) Thus, it is most appropriate that the matter be remanded to the probate court for its determination of an appropriate fee to be paid to B&D for its services in locating Michael.
DISPOSITION
The order is reversed and remanded for determination of an appropriate fee to B&D. Costs on appeal to Giacopetti.
We concur. NEEDHAM, J., DONDERO, J.
Judge of the Superior Court of the City and County of San Francisco, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.