Opinion
C082547
02-05-2020
Conservatorship of the Estate of BETTY HOLLY ZACHARY YOUNG, as Conservator, etc., Plaintiff and Respondent, v. CARA KEOUGH, Defendant and Appellant.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 34201400156129PRCEFRC)
After a conservatorship was established for Betty Holly, appellant Cara Keough's elderly mother, the conservator filed a petition in probate court to recover money and property Keough had allegedly taken from her mother. Keough consulted an attorney who, after reviewing the documents Keough received and consulting the court's online probate calendar notes that indicated a potential issue regarding service of the notice of hearing, advised her not to attend the hearing alone (he was unavailable at the time) because it appeared she had not been properly served and the hearing would likely be continued for proper service to be effectuated. Based on this advice, Keough did not attend the hearing. In her absence the court imposed substantial monetary damages against her as well as ordered her to return certain real property to Holly. The court later denied Keough's motion for relief from the judgment under Code of Civil Procedure section 473.
Undesignated statutory references are to the Code of Civil Procedure.
On appeal, Keough contends the court erred in denying her section 473 motion. She argues she was entitled to both discretionary and mandatory relief based on her attorney's mistaken or faulty advice not to attend the hearing.
We conclude the trial court abused its discretion in denying Keough discretionary relief under section 473. We therefore reverse and remand for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
In January 2014, Holly filed a petition for appointment of a professional fiduciary to act as conservator over her estate. The petition alleged Holly had been the victim of repeated financial abuse committed by a family member--Keough, her only child. To mitigate any future actions of undue influence, fraud or theft, Holly asked the court to appoint a private fiduciary to handle her financial affairs. Keough was served by mail with notice of the petition for appointment of the conservator.
At the conservatorship hearing in March 2014, Zachary Young (the conservator) was appointed conservator of Holly's estate. Seven months later, in October 2014, the conservator filed a petition to recover from Keough property she allegedly wrongfully took from Holly, including real property located at 4429 South Park Drive in Sacramento (the property) and $481,614.62 in assets. The petition alleged causes of action for breach of fiduciary duty, fraud, financial abuse of an elder adult, double damages and for attorney fees, constructive trust, and accounting.
According to the petition allegations, in March 1997 Holly executed a durable power of attorney for financial matters listing Keough as her agent; she also executed the Betty J. Holly Revocable Trust dated March 10, 1997 (Holly's Trust). In July 2002, Keough began assisting Holly in managing her finances and took control of all of Holly's assets including bank accounts and other financial accounts. Keough also handled all of Holly's income, including pension and rental income. From 2002 to 2007, Keough allegedly obtained the proceeds from a life insurance policy meant for Holly, loan proceeds on real property owned by Holly, and the sale of real property owned by Holly's Trust; the whereabouts of the proceeds of those transactions were unknown.
In July 2008, Holly revoked Keough's durable power of attorney and also removed her as cotrustee of Holly's Trust. Five months later, in December 2008, Keough allegedly coerced or unduly influenced Holly into transferring the property to the Cara E. Keough Revocable Trust. The petition further alleged that in June 2009, Keough coerced or unduly influenced Holly into executing a new trust (the June 26, 2009 Betty J. Holly Trust) that revoked Holly's Trust and any amendments thereto and named Keough as the successor trustee. Keough also allegedly wrongfully withdrew money from a joint account held with Holly.
Keough resides at the property.
After the conservator was appointed in March 2014, but before he filed the petition to recover Holly's assets in October 2014, Keough allegedly transferred the property in May 2014 to Daniel Sakuma as Trustee of the Cara E. Keough Inter Vivos Trust.
A hearing on the conservator's petition was set for December 18, 2014. Keough did not appear at the hearing, and the court entered an order adverse to her. Judgment was entered on the petition on April 21, 2015, directing Keough to return $481,614.62 to the conservatorship estate, surcharging her that amount, invalidating the December 2008 deed of the property to the Cara E. Keough Revocable Trust, and determining the property belonged to Holly's estate.
The conservator mailed a notice of entry of judgment to Keough on May 19, 2015. A month later, Keough filed a motion for relief from the default judgment under section 473--the denial of which is at issue here.
Keough's motion sought relief based on section 473, subdivision (b), for inadvertence, surprise, mistake, and/or excusable neglect, section 473.5 for inadequate personal service, and section 473.5 because the summons did not result in actual notice. Keough's supporting declaration stated that on or about October 23, 2014, she found lying on the ground inside a chain link fence surrounding the property (where she resided) a pile of documents consisting of an unfiled, unsigned, and unissued summons, a copy of the petition, and an alternative dispute resolution package. She read the petition and understood she was being accused of stealing from her mother.
Keough met with attorney Ernest Chen in November 2014 and showed him the papers she had received; she told him about the manner in which she discovered the papers. Chen advised her that the papers were improperly served and the summons was incomplete because it had not been issued by the court clerk. Although he advised her to try to work things out with her mother, he did not tell her of the need to file a written response to the petition.
Keough met with Chen again on December 9, 2014, nine days before the scheduled hearing. During that meeting, Chen accessed the probate calendar notes from the trial court's Website and said the notes indicated there was a problem with the notice of hearing because a proof of service was not attached. According to Keough, Chen advised her the court had essentially determined in advance of the hearing that service of the papers on her was defective because there was no notice of hearing.
Chen could not attend the December 18 hearing because he was scheduled to be in trial on another matter. He cautioned her that if she attended the hearing, and represented herself incorrectly, the court could deem her presence as an appearance and a waiver of any defective notice. If she did not attend, Chen advised her the court would likely continue the hearing and that she could answer once she received notice of the continued hearing date. Based on Chen's advice, Keough did not attend the hearing.
Sometime later, when Keough did not receive notice of a continued hearing date, she consulted with Chen again and discovered the court had entered an adverse order granting the petition at the hearing. Judgment was entered by the court on April 21, 2015, and the conservator served Keough with a notice of entry of judgment by mail on May 19, 2015.
After receiving the notice of entry of judgment and consulting with Chen, she retained attorney Jeff Klink to represent her. A month after being served with the notice of entry of judgment, Keough moved for relief from the judgment, claiming she was unsophisticated in legal matters and had relied on Chen's advice. Although Keough submitted a declaration supporting her relief motion as well as a proposed verified response and objection to the petition, she did not include an attorney affidavit of fault from Chen.
The conservator objected to Keough's relief motion, and submitted a declaration from Ross Kangas, the process server. According to Kangas, on October 21, 2014 at approximately 3:40 p.m., he was sitting in his truck near the property, which was fenced and locked. He saw a white female enter a car and drive toward his location near the gate. When she arrived at the locked gate, she got out of her car. He approached her, identified himself, and explained he had a summons and complaint for her. As she retreated to her car, Kangas told her she could not avoid service, and he dropped the summons, notice of hearing, and the petition over the fence. He then observed the woman return to her house. Kangas subsequently confirmed her description with the conservator's counsel.
The conservator's counsel also filed a declaration stating neither Keough nor Chen had ever contacted him about the petition before the hearing date. The first time he received any response from Keough was when he received the motion to set aside the judgment.
In September 2015, Keough filed an amended motion to set aside the judgment, citing several new statutory bases for relief in addition to those previously asserted. Regarding section 473, she argued Chen was not unreasonable in advising her the purported service of documents was insufficient or that she should not represent herself at the hearing given the insufficient service. After consulting the probate calendar notes that purportedly indicated an issue with the notice of hearing, it was also reasonable to believe the court recognized a defect in service that would necessitate continuing the hearing. Keough therefore characterized Chen's advice not to attend the hearing as an excusable mistake.
The amended motion was heard in December 2015. Chen was present at the hearing with Keough's new counsel. Without being sworn, Chen explained to the court about his first meeting with Keough, the documents she showed him, and said that he left a message for the conservator's counsel to determine whether the documents had been properly served or if any answer was due. He said he never received a return call. A few days before the hearing, Keough contacted him again to see if he could attend the hearing with her. Because he could not attend, he advised her that maybe she could go and ask for a continuance because he was unavailable at the time. According to Chen, Keough responded, "what's a continuance?" Based on this response, Chen thought Keough would not be able to properly represent herself at the hearing. He then told her he believed the matter would be continued to allow for proper service, and based on their discussions, Keough apparently did not appear at the hearing.
The court allowed the parties additional time to file supplemental declarations and points and authorities before ruling on the motion. Both parties submitted supplemental declarations.
Keough submitted a declaration from Chen largely reiterating what he had told the court at the previous hearing. Chen declared he met with Keough in November 2014 and reviewed papers she received at her home; the papers included an unsigned summons with no court endorsement, a stapled petition, and an alternative dispute resolution packet that were partly rolled up and dirty. He confirmed with Keough that those three documents were the only ones she found at her home.
Chen called the conservator's counsel and spoke with a female secretary or receptionist because counsel was not available. Chen told the woman Keough was in his office for representation and he needed to clarify whether the summons had been issued by the clerk, and, if so, when an answer was due. He also claimed he conveyed to the woman that if counsel did not return his call, he would presume the documents had not been validly served and would advise Keough she had no obligation to do anything further.
According to Chen, about two weeks later Keough called him for an update and he told her he had never received a return call from the conservator's counsel. When Keough asked if he could represent her at the hearing, he told her he was not available unless another matter he was handling settled. Keough called him a day or two before the hearing and asked if Chen could attend the hearing with her. Because his other case had not settled, he was unavailable to attend and represent her at the hearing.
During that call, Chen accessed the court's probate calendar notes online that noted a problem with service of the notice of hearing; the calendar note stated, "Summons personally served on Cara Keough; Notice of hearing not attached to the proof of service." Keough asked whether she should attend the hearing alone, and he advised her she could attend and ask for a continuance. When she questioned what a continuance was, Chen became concerned that given her lack of sophistication, she might harm her interests if she appeared on her own. Based on his review of the documents Keough provided to him, the court's probate calendar notes, and the fact the conservator's counsel never returned his call, he believed Keough had not been properly served with process and advised her the matter would likely be continued for proper service. He did not believe the court would act at the hearing, and advised her to stay home.
To the extent Chen made a mistake in judgment by advising Keough not to attend the hearing, he believed his actions were prudent under the limited facts available at that time. And if the court found he made an inexcusable mistake, he requested that the court grant Keough mandatory relief.
In a supplemental declaration, Keough declared she never encountered a process server and no one ever tried to personally serve her or call out to her from a distance that they had documents for her. She admitted she arrived home around 3:35 p.m. on October 21, 2014 - the date Kangas declared he personally served her at 3:40 p.m. - but said she did not encounter anyone that day when she returned home. The next day, October 22, around 3:45 p.m. she left her house and started to get into her car. She saw a white man she did not recognize leaning on a fence at the front of her property; she thought he might be "casing" her house. The man did not say anything to her, and she returned to her house. The following day, or a couple days later, Keough claimed she found the papers lying on the ground inside the fence.
The conservator's counsel also submitted a declaration, claiming his office had checked its phone records and they were unable to locate any phone calls from Chen's office.
Following the parties' supplemental declarations, the court took the matter under submission and denied Keough both mandatory and discretionary relief from the judgment under section 473, subdivision (b). Keough appealed.
Keough does not challenge the real property aspect of the judgment because she claims she did not own the property when the court entered the judgment since she purportedly transferred the property to Daniel Sakuma as Trustee of the Cara E. Keough Inter Vivos Trust in May 2014 before the petition was filed in October 2014 or heard in December 2014. After Keough appealed, Sakuma filed a motion in the trial court to set aside the judgment as void, claiming that as the true owner of the disputed property he was never served with the petition or notified of the hearing. In light of Keough's pending appeal, the court stayed any ruling on Sakuma's motion. Sakuma appealed the stay order in case No. C084495; we dismissed Sakuma's appeal and express no opinion on the issues raised therein.
DISCUSSION
Section 473, subdivision (b), provides for discretionary or mandatory relief from particular court orders. (Luri v. Greenwald (2003) 107 Cal.App.4th 1119, 1124 ["Section 473, subdivision (b) provides for two distinct types of relief—commonly differentiated as 'discretionary' and 'mandatory'--from certain prior actions or proceedings in the trial court"].) Keough contends the trial court erroneously denied her both forms of relief. We agree she was entitled to discretionary relief and do not reach her mandatory relief challenge.
Section 473's discretionary provision permits the court to "relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect." (§ 473, subd. (b).) To qualify for such relief, " 'the moving party must act diligently in seeking relief [in no case exceeding six months after the judgment, dismissal, order or proceeding was taken] and must submit affidavits or testimony demonstrating a reasonable cause for the default.' " (Huh v. Wang (2007) 158 Cal.App.4th 1406, 1419 (Huh); § 473, subd. (b).) The court may exercise its discretion under the statute " 'only after the party seeking relief has shown that there is a proper ground for relief, and that the party has raised that ground in a procedurally proper manner, within any applicable time limits.' " (Huh at p. 1419.)
A party seeking discretionary relief based on her or his attorney's error must demonstrate that the error was excusable. (Huh, supra, 158 Cal.App.4th at p. 1419.) " 'Excusable neglect is that neglect which might have been the act of a reasonably prudent person under the same circumstances.' " (Ibid.)
"Where, as here, the trial court denies the motion for relief from default, the strong policy in favor of trial on the merits conflicts with the general rule of deference to the trial court's exercise of discretion. [Citation.] Unless inexcusable neglect is clear, the policy favoring trial on the merits prevails." (Elston v. City of Turlock (1985) 38 Cal.3d 227, 235, superseded by statute on other grounds (Elston).) "Doubts are resolved in favor of the application for relief from default." (Ibid.)
In denying Keough discretionary relief, the trial court found Chen's poor judgment in ascertaining whether Keough had been properly served was not excusable. The court reasoned Chen could have checked online to discover that a proof of service of the summons and complaint was filed on November 10, 2014, a month before the hearing date. While the register of actions does show a summons filed on November 10, 2014, nowhere does the docket reflect a proof of service was filed for that document. Thus, viewing the docket online did not show the summons had been personally served on Keough. And while the register of actions reflects a notice of hearing was filed on October 22, 2014, the register of actions contains no notation showing it was served on Keough.
As Keough points out, because this was a conservatorship case, Chen could not remotely access the summons or notice of hearing listed in the register of actions to see what had actually been filed, or if either document included a proof of service. In fact, by rule of court, the only documents Chen could access remotely were the court's probate calendar notes. (Cal. Rules of Ct., rule 2.503(c)(3).) The probate calendar notes that were filed 10 days before the hearing and that Chen reviewed, specifically stated, "Notice of Hearing not attached to the proof of service."
Notably, the proof of service, apparently on the back of the summons, is dated October 3, 2013--over a year before Kangas allegedly served Keough with the petition documents. Even if we assume the "2013" was a typographical error and should have been "2014," the proof of service is still dated before Kangas allegedly served Keough with these documents on October 21, 2014. --------
The conservator brought the petition under Probate Code section 850 that permits a conservator to file a petition for orders where the conservatee has a claim to real or personal property in the possession of another. (Prob. Code, § 850, subd. (a)(1)(D).) Under the applicable statutory provisions, at least 30 days prior to the day of the hearing on the petition, the petitioner is required to serve notice of the hearing and a copy of the petition in the manner provided for service in other civil actions. (Prob. Code, § 851.)
While section 415.10 allows for personal service of a summons and complaint, the register of actions here did not show Keough had been served with the notice of hearing and the probate calendar notes--the only document Chen could access remotely--appeared to confirm that she had not. Chen also asked Keough whether she had received a notice of hearing, and she claimed she had not; no such document was included among the documents Keough showed Chen.
Based on the information available to him, his mistake in concluding Keough had not been properly served and was not yet under any obligation to defend the action, was not unreasonable. This is especially so since Chen believed Keough was unsophisticated in legal matters and would likely be detrimental to herself if she appeared at the hearing unrepresented by counsel. Instead, it was the type of excusable mistake that warrants relief under section 473, especially given the strong policy of deciding cases on the merits rather than by default. (Elston v. City of Turlock, supra, 38 Cal.3d at p. 235.)
Likewise, given the unique facts presented here, insufficient evidence supports the trial court's finding Keough did not diligently file the motion for relief. (Huh, supra, 158 Cal.App.4th at p. 1420 ["Whether a party has acted diligently is a factual question for the trial court"].) Evidence shows Chen had advised Keough she would likely be served with a new hearing notice for the anticipated continued hearing date, and, once she received that new notice he could represent her at the continued hearing. She did not receive anything until the notice of entry of judgment, and promptly retained new counsel and moved for relief within a month of receiving the notice. Under those circumstances, we cannot say substantial evidence supports the court's lack of diligence finding.
Although in hindsight Chen's advice to Keough not to attend the hearing alone because she had not been properly served turned out to be incorrect, based on the information available to him at the time, any mistake in judgment was excusable. The trial court therefore abused its discretion in denying discretionary relief. Under these circumstances, the interests of substantial justice as well as the policy in favor of trial on the merits require Keough's default be excused.
DISPOSITION
The order denying Cara Keough discretionary relief under Code of Civil Procedure section 473 and the judgment in favor of the conservator, Zachary Young, are reversed, and the matter is remanded to the trial court for further proceedings. Cara Keough shall recover her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
/s/_________
HOCH, J. We concur: /s/_________
RAYE, P. J. /s/_________
RENNER, J.