Posts Tagged ‘exploitation’

Guardianship / Conservatorship Petition Backfires on Son Who Exploited Mother

MAY 2, 2016 VOLUME 23 NUMBER 17

When a litigant asks the court for particular relief, lawyers call the request a “prayer.” It isn’t always as spiritual or respectful as that sounds, but it does give us a chance to offer good generalized legal — and life — advice: be careful what you pray for.

Consider the family of Martha Young (not her real name). She had two children, son Donald and daughter Joanne. When Martha was in her early 90s, her ability to manage her own affairs had slipped somewhat, and Donald decided he needed to get legal authority to handle her affairs. He filed a petition for guardianship (of the person) and conservatorship (of the estate) in the Maricopa County (Phoenix) courts.

Donald immediately thought better of his prayer for relief, and dismissed the case before his mother or his sister had answered it. Still, Martha and her attorney filed a response — but rather than simply objecting to the guardianship and conservatorship, she alleged that Donald had stolen money from her, and had put the money he took into an account in his name alone. She alleged that she was a vulnerable adult under Arizona law, and asked that Donald be ordered to return her money.

The probate court ordered Donald to return the funds in question, and he appealed. The Arizona Court of Appeals reversed, finding that there was no jurisdiction in the probate court once Donald dismissed his initial petition. That looked like it might be the end of things.

Then Charles Schwab, where the account in question was held, filed a separate action with the court. The investment company said it knew about the allegations of theft and exploitation, and it didn’t want to turn the money over to the wrong person. Charles Schwab asked the court to tell it who should receive the balance of the account Donald had set up.

That got the issues back before the court. Donald insisted that his mother had given her half of a large parcel of land she had owned, and that when the land was sold (yielding $818,955.61), his mother had moved half of the net proceeds into an account in his name. With “her” half of the sale proceeds, she bought a home (leaving a small balance which, Donald insisted, she had voluntarily added to “his” half of the sale proceeds). After a number of transactions, the $150,000 of remaining funds found their way into the Charles Schwab account.

Meanwhile, it turned out that the bank where Donald had opened his account had filed a report with Adult Protective Services, expressing concern about the way Martha’s finances were being handled and her ability to protect herself. That report had led to an investigation but (apparently) no action to stop the use of funds or recover any of the money for Martha.

Here’s one of Donald’s problems: when he filed the guardianship and conservatorship petition against his mother, he listed the bank account as one of her assets. But the court ultimately ruled that, since the conservatorship matter had never been litigated, Donald could not be held to the position he took in the initial filing. Similarly, Martha’s claim could not be dismissed on statute of limitations grounds, since she had made a good-faith effort to recover her funds when she filed the petition in the guardianship and conservatorship action — even though it was ultimately dismissed by the Court of Appeals.

After a two-day trial, the judge ruled that Martha was a vulnerable adult (and had been for almost a decade), that Donald had acted as her de facto conservator throughout the banking and real estate transactions, and that the Charles Schwab account really belonged to Martha. The judge ordered Schwab to turn the money over to Martha’s estate (by the time of the court ruling she had died), and also imposed a judgment against Donald for attorney’s fees — another $92,000.

Donald appealed, arguing that Martha’s claims should have been dismissed because they were filed years after she knew or should have known to file her lawsuit. He also argued that he should not have to pay attorney’s fees to his mother’s estate, and that he had not been shown to have exploited his mother financially.

The Court of Appeals noted that the evidence had shown that Donald lived with his mother for years, that he had seriously reduced the value of her home property (five dumpsters of his trash was removed after her death and his eviction from the property), that Martha had weighed just 62 pounds when her daughter had her removed from Donald’s care, and that he had managed her affairs for at least five years before the litigation began. Donald had to admit that his mother had been unable to manage her own affairs for at least five years before his initial court filing — that was what he had alleged in that first petition seeking control of her affairs.

After review of all the evidence considered by the trial court, the Court of Appeals upheld the lower court’s rulings. The judgment against Donald — for return of all the funds in the Charles Schwab account plus over $100,000 in attorney’s fees and interest on those awards. The court also ordered Donald to pay attorney’s fees for the appeal, in an amount to be determined after his mother’s estate’s attorneys file fee affidavits with the court. Yamamoto v. Kercsmar & Feltus, April 19, 2016.

Exploitation of a Vulnerable Adult, or Not? You Judge

NOVEMBER 16, 2015 VOLUME 22 NUMBER 42

This week we’re going to ask you to be the judge. We’re going to tell you a story, then give you a moment to decide what you think should be the outcome of a lawsuit. Once you’ve decided, we’ll tell you what actually happened in the courts. Ready?

Diego Ramirez (not his real name) was 80 years old when his wife died. Shortly thereafter he moved in with his daughter and son-in-law.

Diego was a Spanish immigrant, and spoke no English. He was having trouble handling his finances, and his daughter and son-in-law helped him. They also provided care for him — first in their home, and later in the nursing home where he moved when he was unable to stay at home any longer.

The care they provided for Diego was complete — they made doctor’s appointments (Diego had a heart condition as well as his increasing confusion), transported him to medical appointments, administered his medications, took him on social and recreational outings, and even took care of his dog. Diego’s daughter actually quit her job to take care of her father (though she was able to return to work part-time and, eventually, full-time).

Shortly after Diego arrived in their home, his daughter and son-in-law arranged to sell his house. His daughter located an attorney, made an appointment and took Diego to visit the attorney. The attorney helped complete the sale of the home, and prepared a power of attorney document for Diego to sign. The power of attorney gave his daughter and son-in-law authority to manage his finances, and to conclude the sale of his home.

The daughter and son-in-law used some of the proceeds from that sale to improve their own home, adding rooms for Diego and doing some other work that needed to be done. They did not add Diego to the title on their home; when they later sold the home, the took the proceeds and bought a new home in their own names.

Diego had a private pension and Social Security. His daughter and son-in-law deposited the monthly checks in their own account and used the proceeds — along with their own income and savings — to take care of the entire household, including themselves and Diego. In other words, they did not keep separate accounts for Diego, and could not show exactly how his income had been spent after the fact. They handled Diego’s savings in the same way, using his funds to keep the entire household operating.

According to the daughter and son-in-law, Diego knew how his funds were being used. They said that he had agreed with them that they could use his funds so long as he lived with them and they were providing the care he needed.

After this relationship continued for ten years, Diego died. One of his sons successfully sought appointment as personal representative of his estate, and sued the daughter and son-in-law for return of the funds they had allegedly exploited from Diego while he was a vulnerable adult. The daughter and son-in-law responded that the reasonable value of their services on his behalf exceeded what they had received, and that if anything his estate owed them money.

The probate court held a one-day hearing on the allegations of exploitation of a vulnerable adult. From the recitation of facts we’ve provided (taken from the later Court of Appeals decision, by the way), can you tell how the court ruled? Did Diego’s daughter and son-in-law take funds from him improperly? Were they entitled to additional fees for the ten years of care they provided?

Think about it a minute before you move on. What would you decide?

The probate judge decided that Diego was a vulnerable adult, that his daughter and son-in-law acted as if they had been his conservator (though they were never appointed by any court), and that they had commingled his assets and income with their own. They enriched themselves with his assets, and they were unable to provide any meaningful accounting of the funds they had used. They were found liable for a breach of their fiduciary duty and a violation of the Arizona statutes on exploitation of a vulnerable adult, and they were ordered to repay his estate $15,527.26 — plus an additional $35,000 in attorney’s fees incurred by the estate.

The Arizona Court of Appeals upheld that ruling, agreeing with the probate judge that Diego was a vulnerable adult, that the daughter and son-in-law improperly commingled assets, and that they had violated the exploitation statutes. Of some interest to the appellate court was the provision of the Arizona law that anyone in the daughter and son-in-law’s position must use the vulnerable adult’s assets solely for the benefit of the vulnerable adult.

The existence of the power of attorney did not improve the daughter and son-in-law’s position. Nor did the agreement that Diego could live with them and that they would provide care. Neither of those authorized the daughter and son-in-law to commingle assets or take Diego’s funds for their own benefit. Rodriguez v. Graca, November 3, 2015.

Let us assume for a moment that Diego in fact wanted to turn over most of his assets and income in return for a home and the care required to allow him to live there as long as possible. What could he (or his daughter and son-in-law) have done in order to make that arrangement possible?

First, a clear (and, preferably, written) understanding should have been reached. It probably would have been helpful to discuss that arrangement with Diego’s other children, so they could talk with Diego about it at the time. It also would have been important for the daughter and son-in-law to maintain clear records, showing how much of Diego’s money was needed to care for him, and how they spent the funds. That could have included time records as well as financial details.

A final word of advice: do not enter into these kinds of arrangements lightly. It is very difficult to establish the reasonableness of the agreement years later, with the vulnerable adult no longer available to explain what they had in mind at the time. Recognize that the senior’s needs — and ability to supervise or negotiate — will probably change over time, and perhaps over a short period of time.

Oh, and how did you do as the judge?

Financial Exploitation Case Leads to Judgment, Disinheritance

MARCH 2, 2015 VOLUME 22 NUMBER 9

We hear variations on this same story once every week or so. Dad (it might be Mom, or Aunt Bridget, or a long-time family friend) seemed to be adrift after his wife (her husband, her long-time companion) died. Then he met this woman who moved in with him (or moved her to his town), cut off family contact, got a power of attorney signed and proceeded to transfer assets.

Too often there’s not much we can do about the story. The money may be all gone (the people who take advantage of seniors in this fashion are often drug users, gamblers or marginal characters themselves). The family member might actually want to live with the person everyone sees as an exploiter. Sometimes it’s hard to even locate the victim.

Once in every few cases, though, it may be possible to protect the elderly victim, improve their situation and even secure a judgment against the exploiter. That’s what happened in a case that finally (after a decade of litigation) seems to have gotten resolved by the Arizona Court of Appeals.

Bridget Greene (not her real name) was 99 when she first came to the attention of Tucson lawyer (and professional fiduciary) Denice Shepherd (her real name) in 2005. Based on a report from Adult Protective Services, Denice filed a guardianship and conservatorship proceeding to extract Bridget from her “deplorable” living situation, and to begin the process of recovering some or all of her assets.

As the story developed, it became apparent that Bridget had befriended one Andrew Brice almost two decades earlier, after her husband’s death. She and her husband had no children; her closest relatives were nieces and nephews. Just two years before the guardianship/conservatorship proceeding, Bridget had moved back to Arizona after a short stint living near her nieces in Virginia. She had then signed a power of attorney naming Andrew as her agent, and transferred her home into Andrew’s name. She had also signed a new, handwritten will leaving everything to Andrew.

Denice promptly initiated an action against Andrew, seeking return of the money he had moved from Bridget’s account to his own. She recovered over $60,000 from three bank accounts, and then initiated a complaint against Andrew claiming that he had exploited a vulnerable adult.

Under Arizona law at the time (it has since been softened), a person found to have exploited a vulnerable adult would automatically be liable for three times the amount taken, plus being disinherited from receiving anything from the victim’s estate. Denice secured a judgment against Andrew for $247,531.23 (three times the amount he had taken); the handwritten will and power of attorney were also invalidated. The judgment was reduced by $65,155.99 that Denice had collected from Andrew by that time.

Bridget lived another five years after being removed from her filthy home and the “care” she had been receiving. After she died in 2010, Andrew tried to reassert the handwritten will naming him as beneficiary. He also challenged Denice’s appointment as guardian and conservator, and the award of damages and attorneys fees.

The probate judge ultimately found that Andrew had been disinherited by his exploitation, that he had no basis for seeking Denice’s removal as guardian and conservator, that Bridget’s prior will (which had left nothing to Andrew) was valid, and that the judgment against him was proper. When Andrew appealed, the Court of Appeals agreed on every point.

It is worth noting, as the Court of Appeals does, that much of probate court’s ruling against Andrew is based on his failure to proceed properly in the underlying lawsuit. He answered the complaint with a general denial, but without specific allegations that would support his argument. His response to a motion for entry of judgment against him did not challenge the factual allegations, which were thus assumed to be correct. He filed numerous pleadings and motions, but apparently without good legal advice.

The final resolution of Bridget’s guardianship/conservatorship/probate case, though, was clear. Bridget was a vulnerable adult, impaired by her diminishing mental capacities. Andrew was her caretaker (he claimed that they held themselves out as a married couple, but he acknowledged that they were never actually married), and owed her a duty not to commingle their assets or take advantage of her. He breached that duty by transferring her assets into his own name. He might have also neglected her, though the probate court never had to reach that question.

Arizona law at the time provided for automatic disinheritance of someone who exploits a vulnerable adult (it has since been changed to permit, but not require, the court to order disinheritance). It also provided for damages automatically set at three times the amount actually exploited (it has since been changed to allow the court to enter judgment of up to two times the amount of damages). The Court of Appeals upheld the orders entered by the probate court under the “vulnerable adults” statute. In Re Garner, Deceased, February 25, 2015.

Even though Arizona’s law has been relaxed somewhat, it remains stronger than the similar provisions in many other states. Although it is often hard to recover damages for abuse, neglect or exploitation of vulnerable seniors, sometimes the legal tools actually work fairly well. Similar stories might be told in other states, though we don’t hold ourselves out as experts on other states’ laws or practices. But if you know someone who has been taken advantage of in similar circumstances, we strongly suggest that you get good legal advice to consider whether there might be some recourse to recover lost assets and, much more importantly, protect vulnerable seniors and improve their lives.

Exploitation of Vulnerable Senior Leads to Disinheritance

JANUARY 27, 2014 VOLUME 21 NUMBER 4

Arizona has a relatively strong statute dealing with exploitation of vulnerable adults. An exploiter can be charged criminally, and might receive a longer sentence or larger fine because of the victim’s vulnerability. But the strongest part of the Arizona law is probably the provision that lets the victim — or the victim’s heirs — pursue a civil judgment against the exploiter.

That was what Hazel Kaplan (not her real name) did. Her uncle Paul was a widower, living alone in Lake Havasu City, Arizona. Paul’s estate plan included a trust naming Hazel as successor trustee, and leaving his estate to her and two other nieces. Hazel regularly visited with uncle Paul, and helped him to pay his bills. When Paul’s wife had died, it was Hazel who had been there to help make funeral arrangements and help Paul with the transition.

Then, in 2001, Karen moved in as a caretaker. Paul, an immigrant, had located her through the immigrant community in the eastern U.S., and she moved to Arizona to live with him, oversee his medications, drive him to appointments, feed and bathe him — even monitor his care, change his catheter and clean up after he suffered a heart attack in 2006. Karen was his only caretaker (other than one nurse who visited after his heart attack) from her arrival in 2001 until Paul’s death in 2008.

Paul’s accountant prepared four amendments to Paul’s trust between 2006 and 2008. Over the course of those amendments, Hazel’s share of the estate and her appointment as successor trustee were both removed — caretaker Karen and her son were named as trustees and Karen as the beneficiary of Paul’s entire estate.

Three months before his death, Paul visited his bank in the company of Karen and her son. He withdrew $200,000 and opened two accounts with the proceeds. One account was in Karen’s name with her son as co-owner; the other account named Paul himself and Karen’s son as co-owners. Two months later Karen closed out the account her name was on, and used the proceeds to buy a house in Delaware, where she had lived before moving in with Paul. The house had been a bank foreclosure, and Karen’s daughter was the real estate agent in the transaction. She did not put Paul’s name — or his trust’s — on the title. She sold the property immediately after Paul’s death for a significant gain, and kept the proceeds.

After Paul’s death, niece Hazel started a probate proceeding and a lawsuit against Karen and her son. She alleged that both had violated Arizona’s vulnerable adult statute, and asked for the return of everything either of them had received from Paul or his estate.

After a two-day trial, the probate judge ruled that Karen and her son had, indeed, exploited a vulnerable adult. He ruled that the trust amendments were invalid, and that Karen and her son forfeited any right to inherit any portion of Paul’s estate or trust as a result of their exploitation.

The Arizona Court of Appeals considered the evidence and arguments, and upheld the probate judge’s ruling. One key question: was Paul a vulnerable adult?

Several witnesses (including the accountant who prepared trust changes, the bankers who handled the transfer of money from Paul’s name to his exploiters’ names, and Karen and her son) all testified that he was mentally alert. His doctor testified that he was very passive and suggestible, and niece Hazel testified that Paul was very susceptible to others — particularly to women. The appellate court noted that the probate judge had been in a better position to judge the believability of each witness, but noted that the accountant and the bankers had a vested interest in testifying that Paul had been able to give them direction. Besides, said the appellate judges, mental impairment is not required for an adult to be “vulnerable” under Arizona law — physical disabilities and resultant reliance on caretakers can make the patient vulnerable to manipulation.

The result? Paul was a vulnerable adult, Karen and her son owed him a duty not to take advantage of him, and their acts exploited him — especially when they were involved in getting $200,000 transferred to them before Paul’s death. Oh, and Karen was ordered to pay Hazel’s legal fees for the appeal, too. Kousoulas v. Marinis, January 7, 2014.

Does Hazel’s lawsuit stand for the proposition that any caretaker who receives the estate of the person they cared for is necessarily an exploiter? No, but the relationship inherent in a caretaker/patient relationship is certainly subject to exploitation, and gifts to caretakers will always be suspect. The evidence that Karen kept Hazel from visiting her uncle, and that she and her son were involved in changing his estate plan (though they did not go into the room with the accountant when Paul signed trust changes) both weighed heavily against them.

If Paul had hired an attorney to handle his estate planning, rather than entrusting it to his accountant, would things have been different? Possibly — an attorney would likely have been more attuned to the importance of separating out the possibility of exploitation and (if it was clear that Paul genuinely wanted to leave his estate to his caretaker) documenting the evidence of Paul’s wishes. But the probate judge noted, and experienced lawyers usually realize, that it is difficult to assure that a client’s choices are not being changed by suggestions from caretakers — especially full-time, live-in caretakers, who have such a strong opportunity to develop a relationship based on dependency. That is, in fact, why there can be a presumption of undue influence when a change is made in favor of someone who has a fiduciary relationship with a vulnerable adult.

Reporting Abuse, Neglect or Exploitation of Vulnerable Adults

DECEMBER 23, 2013 VOLUME 20 NUMBER 48

As people live longer and the elderly population increases, so does the likelihood of abuse, neglect and exploitation of vulnerable adults. Lawyers, accountants, doctors, nurses, caretakers, bankers — indeed, any professional — faces a growing probability that at some point they will be confronted with the issue of whether to report suspected abuse, neglect or exploitation. For lawyers, especially, the ethical requirement that client confidences be maintained can complicate the problem.

There were over 1,600 allegations of abuse, neglect or exploitation of vulnerable adults reported in Pima County, Arizona (the Tucson area) last year. Surprisingly, fewer than 1% of these were reported by legal professionals. Arizona law imposes an affirmative duty on attorneys to report suspected exploitation of a vulnerable adult to the authorities. Arizona Revised Statutes § 46-454(b) requires any attorney who is responsible for preparing the tax records of a vulnerable adult, or responsible for any “action concerning the use or preservation of the vulnerable adult’s property and who, in the course of fulfilling that responsibility, discovers a reasonable basis to believe that exploitation of the adult’s property has occurred or that abuse or neglect of the adult has occurred shall immediately report or cause reports to be made …”

Keep in mind that an individual does not have to be “elderly” to be a vulnerable adult. Any adult who is unable to protect himself or herself from abuse, neglect or exploitation by others because of a physical or mental impairment is a vulnerable adult. The definition of vulnerable adult is broad and so are the types of abuse and exploitation that the statute is intended to cover. Financial exploitation of vulnerable adults occurs with alarming frequency and in many cases goes unreported because the victim may not be aware of the ways in which he or she is being exploited.

Reports of suspected abuse can be made to the City Police, County Sheriff or (statewide) Adult Protective Services. The Pima County Public Fiduciary also handles cases of suspected financial exploitation. Even if suspected abuse is later found to be unsubstantiated, there are no penalties for good faith reporting. Any attorney who makes a report in good faith is likely to have some civil and/or criminal immunity from liability. You can make a report anonymously, however, the law requires that the report be made immediately, otherwise you may be found guilty of a class 1 misdemeanor.

So, you may be reading this and thinking: “how can I uphold my duty of confidentiality to my client if I suspect that he or she may be a victim of abuse, neglect or exploitation?” How is it possible to balance this ethical duty when reporting of suspected abuse is mandatory? In Arizona, you will not breach your duty of confidentiality if you reveal only information to the extent you believe is necessary to comply with a law that requires the disclosure of such information.

Arizona’s version of the ethical rules governing lawyers provides specific guidance to attorneys in cases where an attorney believes that his or her client of diminished capacity is at “risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client’s own interest.” In these specific cases, an attorney may take “reasonably necessary protective action,” including consulting with individuals or entities who may be able to protect a client with diminished capacity.  In taking any protective action, among other considerations, an attorney may be guided by the client’s best interests or the wishes and values of the client.

Pima County (and Arizona) is home to a growing number of seniors and vulnerable adults. As we consider the ways our practices can build a healthy community, we must remember the duty of advocacy we owe our clients. If you suspect a case of abuse is occurring and feel unsure about your duty to report, then reach out to one of our colleagues who specialize in professional responsibility or call the Arizona State Bar Ethics Hotline.

What about lawyers practicing in other jurisdictions? State laws vary — many states have mandatory reporting requirements but quite a few of them either do not extend to, or specifically exempt, lawyers from coverage. The ethical rules permitting disclosure when the client is at risk, however, have been adopted in substantially similar form in almost every state.

What about other professionals? Arizona’s mandatory reporting law is very clear: doctors and other medical providers are covered as to reporting abuse, neglect and exploitation, and accountants and tax preparers are covered as to reporting exploitation. Other states vary, with some focusing on medical providers and others on social workers and government officials. If you work with seniors and/or adults with diminished capacity, you should check into your state laws regarding mandatory reporting of abuse, neglect and/or exploitation.

A Chilling Story of Fraud Targeting an Elderly Victim

JUNE 17, 2013 VOLUME 20 NUMBER 23
Last week a colleague told us a story that we think needs to be shared. Patricia Sitchler, a nationally-known San Antonio lawyer with the prominent Texas firm Schoenbaum, Curphy & Scanlan, P.C., described her client’s eye-opening experience with a fraudulent attempt to access her bank account. We asked Patty if we could share her client’s story. Patty wrote:

This is how I spent last Thursday. I thought it might be helpful information.

I spent most of last Thursday helping an elderly client who was scammed. Fortunately, “Doris” discovered the scam and we were able to avert disaster. Take a minute to see just how easy we have made it for the crooks.

The driver helped Doris put her packages in the car. Doris was still living independently, buying her own groceries and curtains and copy paper, writing her own checks, balancing her own checkbook. After putting the goods away in her apartment, it wouldn’t take long to balance the checkbook. She only wrote about 10 checks a month-the utility company, the phone bill, her rent and the few checks she wrote shopping at various stores close by. She was so lucky. She and her beloved deceased husband had planned well and she was comfortable knowing that although she wasn’t wealthy, she probably had enough to live out her life.

But in only a few minutes, Doris would find out just how vulnerable technology has made her. Balancing her checkbook she noticed that there were 13 cancelled checks, more than she realized she wrote. Looking more closely, Doris saw a new name: Josiah Klinger had signed three of her checks (fictitious name, of course). The bank must have made a mistake and applied his checks to her account. Then she looked even closer with the magnifying glass–the account number at the bottom of each check signed by Klinger was identical to her bank account even though his name and address were on the check. What was going on? As realization hit, Doris knew somehow her name had been eliminated from the check and John Klinger’s name was printed on her checks with her bank number, debiting her precious funds.

How could this be? Enter the world of technology. The bank fraud investigator assured Doris that because she reported the theft of over $1,500 so quickly, the bank could stop the fraudulent withdrawals and would replace the funds in her account. But, he pointed out, such fraud was as simple as buying $20 software for your computer and printing your own checks in your own name but inserting someone else’s account information in a magnetic strip at the bottom of the check. “But I have all of my checks,” Doris stressed. “No one has stolen my checks.” “They don’t have to,” the investigator told her. “All a crook needs is the bank identifier and account information at the bottom of your check-information that can be copied anytime you hand over your check to a stranger in payment for goods or services.”

Check out a compilation of ads from a business supply store and the internet: “Good check writing software should include several check design templates with options to customize the templates by changing font styles and colors and adding logos and graphics. Financial institutions require checks to include a magnetic ink character recognition (MICR) line, so software that includes a MICR font will save you money on check stock with pre-printed MICR lines. In addition, the MICR line must be printed with magnetic toner or your checks will be rejected. For example, MySoftware Checksoft Personal Pack costs just $19.99. Just a few of the features of this check printing software includes 900 personal checks, allows the user to print sequential check numbers, include the bank’s address and logo, and print the bank code line.”

So the next time you write a check and hand it over to a stranger, is your account safe? Do you balance your checkbook the same day you get your bank statement in the mail like Doris? Do you get photocopies of your checks with your bank statement? You may have just 30 days from the date of the bank statement to report theft in order to possibly recoup the funds.

Taken from FAQs on the Texas Banking website:

“What are my rights and responsibilities when a check has been forged on my account?”

Answer: Ultimately, the forging party is liable for items forged by them. However, banks do have a responsibility under Section 4.401 of the Business and Commerce Code to pay only authorized items from a customer’s account, and a forged check is not an authorized item. Most banks employ automated check processing techniques which do not verify the signature on each check to the signature on the deposit account. Under Section 4.406, the customer has a duty to discover and report unauthorized signatures or alterations with reasonable promptness. Typically, the depository contract will limit the discovery period to 30 days. Once reported, the bank generally must credit the item back to the account unless it can prove that the customer failed to comply with his or her discovery and reporting duties as imposed by the law. However, once a customer has notified a bank of a forgery incident, and has had at least 30 days to examine previous statements, he or she may not recover a loss on items previously forged by the same party and paid by the bank before it was notified. A customer can also be precluded from asserting against the bank if the customer was negligent in protecting his or her checks (Section 3.406).”

It could have been disastrous for Doris. Although only 6 checks showed up on her bank statement the check numbers that showed up on her statement indicated that at least 23 checks were written but only 6 had cleared when the bank statement was issued and she caught the fraud Technology can be so convenience but beware.

Postscript: Under Texas law the Bank must refund the money to Doris so long as she properly reports it to the bank. Based on my contact with Plano, Texas, attorney Keith E. Davis, however, the biggest vulnerability I see for people is use of a DEBIT card. Debit cards do not carry the protections of a credit card (limit on liability for theft if properly reported) or bank account. Once the scammer figures out how to access your debit card, your bank account can be in real jeopardy and you can only hope that your bank will be nice and help you try to recover.

Patty Sitchler
Patricia F. Sitchler, CELA
Schoenbaum, Curphy & Scanlan, P.C.
112 E. Pecan St., Suite 3000
San Antonio, Texas 78205

Thank you, Patty. Word to the wise.

Physical Limitations Can Lead to “Vulnerable Adult” Finding

MARCH 12, 2012 VOLUME 19 NUMBER 10
Georgia Griffin (not her real name) moved from Kansas to Arizona in 1997. She lived in her own townhome in Sun City West, a retirement community northwest of Phoenix, until 2001, when she moved in next door to her daughter Barbara, who lived in Scottsdale.

Georgia’s story was fairly typical: she had lived at home independently until, at age 90, her physical ailments made it difficult for her to get along without help. The move to be next to her daughter was occasioned by her daughter’s concern that she was at risk living alone. One particular concern: after Georgia fell in her home, she worried that if she were to fall again she might not be able to get up, even to summon help.

After Georgia’s initial move to Arizona, daughter Barbara helped her with her banking, filling out checks and making transfers and withdrawals. She was a joint tenant with her mother on some accounts; several were changed from joint tenancy to “payable on death” (POD) to Barbara at some point. Meanwhile, Georgia’s other daughter Elizabeth was less involved — though she also lived nearby.

Shortly before Georgia’s move to be next door to Barbara, Barbara had purchased six condominium units in the complex where she lived. In fact, Georgia’s move was into one of those units. Elizabeth would later argue that the money for those purchases came from their mother’s accounts.

After Georgia’s death in 2003, Elizabeth initiated a probate proceeding and was appointed as personal representative of Georgia’s estate. She then filed an action against Barbara, alleging that Barbara had taken advantage of Georgia while she was a “vulnerable adult” — an important term under Arizona’s law protecting seniors and those with disabilities.

After a five-day trial, she convinced the judge that Georgia was vulnerable, that Barbara had held a position of trust with their mother, and that she violated that trust by using Georgia’s money to purchase her condominium units. The judge entered a judgment for $179,518.51 against Barbara, and imposed a constructive trust on five of the condominium units (ordering that they could be sold to satisfy the judgment). The judge also ruled that Barbara had forfeited any right to inherit from her mother’s estate; the judge did not impose treble damages against Barbara, which was an option available at the time (the Arizona legislature has since reduced the maximum penalty to double the amount of the basic judgment, though that would not have made any difference in this case).

The Arizona Court of Appeals upheld the judgment. The key question raised by Barbara on appeal: how could the trial court have found Georgia was “vulnerable” when the evidence indicated she was fully competent? Can vulnerability be based solely on evidence of physical limitations?

The short answer: yes. The appellate judges ruled that vulnerability for purposes of Arizona’s exploitation statute can be predicated solely on physical impairments if, as a result of the impairments, the victim is unable to protect herself from the exploiter. Mental impairment is not necessarily required. In this case, according to the court, Georgia’s “diminished vision and hearing could also have made her more susceptible to exploitation, as they could make her less aware of her surroundings and the circumstances of any transactions in which she became involved, thereby making her less able to protect herself if targeted for exploitation.”

That is not to say that every transaction Georgia might enter into would be suspect. “A vulnerable adult may still have the capacity to transfer property,” according to the judges. In fact, Georgia had transferred her original townhome to Elizabeth and the family home in Kansas to Barbara; those transfers did not necessarily amount to exploitation.

There is a second interesting holding in the appellate decision, though it is perhaps less far-reaching in its scope. After the trial was over, and while one of Barbara’s sons was packing up his belongings to move out of the condominium he lived in (and which would now be sold), he said he discovered old letters written by Georgia. Those letters related how Georgia was helping Barbara and her husband purchase several condominiums so that they would have income when they retired. Barbara moved to reopen the trial to introduce those letters, but the trial judge refused.

That refusal was not error, according to the Court of Appeals. There was insufficient evidence that the letters could have been found by diligent search before the trial. More importantly, the letters would not likely have changed the outcome. Why not? Because Barbara’s (and her husband’s) defense throughout the trial had been not that Georgia permitted the use of her money but that none of her money was involved in purchasing the condominiums. The letters would therefore have run counter to their core argument. In re Estate of Gorsik, April 12, 2012.

There are several footnotes worth mentioning in discussion of the appeal in Georgia’s case. First, the decision is a “Memorandum Decision.” That means that, though the appellate court laid out its reasoning and legal arguments, the decision is not “published” and therefore can not (at least not usually) be cited as precedent in other, similar cases. It is in the nature of lawyers and judges to make and keep records, so one irony about unpublished (memorandum) decisions is that they are published,  can be read by anyone who wants to take the time to look for them, and are often cited as at least some evidence of the inclinations of appellate courts.

Another small irony: even as Georgia’s case was working its way through the courts, the Arizona legislature has been busy weakening the protections afforded to victims of abuse, neglect and exploitation. First, as noted above, was the reduction of “treble damages” awards to “double damages.” That, as it turned out, had no direct effect on Georgia’s case, since the trial judge decided that extra damages should not be awarded — but it does make such cases less attractive to lawyers with experience in exploitation cases, and it reduces the likelihood that any given case will be initiated in the future. Since then, the legislature has continued to push at the margins of abuse, neglect and exploitation cases; there is a bill pending even now that would eliminate the availability of an award of attorneys fees to the successful party in cases involving vulnerable adults.

Why would the legislature want to eliminate protections for vulnerable adult victims? Probably because some abuse, neglect and exploitation cases are filed against nursing homes, long-term care homes and medical providers, and they tend to have legislators’ attention. Vulnerable adults, by contrast, have a very poor lobbying record.

Benefits Eligibility Irrelevant in Lawsuit Over Trust Terms

FEBRUARY 6, 2011 VOLUME 18 NUMBER 5
What can a parent do to ensure continuing care for his or her adult child with a disability? That was the dilemma facing Californian Earl Blacksher in the late 1980s. His daughter Ida McQueen lived with him in the family home in Oakland. She was developmentally disabled, and she received Supplemental Security Income (SSI) payments; she had no other resources and Mr. Blacksher’s own assets were largely limited to the home.

Mr. Blacksher signed a will. He directed that Ms. McQueen be allowed to live in the house for the rest of her life, and that the rest of his small estate be placed in trust to help her pay for the care and services that would be required to let her stay at home. He left his two brothers in charge of the estate and the testamentary trust he created.

After the brothers restructured the mortgage on the house, Ms. McQueen could live there on her SSI payments — just barely. When she became ill a decade later she moved temporarily to a nursing facility. With no resources to help pay for in-home care, and with escalating needs, she could not return to the home.

The attorney who had handled the probate in the first place had never been paid, since there was not enough money to take care of her bill. Neither had the brothers been paid for their work in handling the estate. Nor had the real property taxes on the home been kept current. It appeared that there was no choice but to sell the house, pay bills, and distribute any proceeds. The attorney assisted the trustee in listing and selling the house.

After all the bills were caught up there was $90,000 left to distribute. The attorney, apparently reasoning that Ms. McQueen had effectively abandoned her life estate interest in the home by failing to pay taxes and keep payments current, decided that nothing needed to be retained in Mr. Blacksher’s trust, and she arranged distribution of the proceeds to the remaining family members.

Almost immediately a conservatorship was begun to investigate the transaction, and a lawsuit was filed against several family members and the attorney who had arranged the sale and distribution. The lawsuit argued that the net proceeds should have been retained in trust for the benefit of Ms. McQueen. In response, the defendants insisted that it was reasonable to treat Ms. McQueen’s right to use of the house (or proceeds from its sale) as terminated, and that in any event any money she would have received would have simply interrupted her eligibility to receive SSI payments and subsidized care from California’s Medicaid program.

At trial two attorneys testified about the possibility of treating Mr. Blacksher’s trust as a “special needs” trust, which might have allowed Ms. McQueen to have the benefit of the sale proceeds without losing her eligibility for SSI and Medicaid. One expert opined that the option should have been discussed; the other pointed out that Mr. Blacksher’s trust did not qualify as written, and that California law would not have permitted a revision. Ultimately, however, the language of Mr. Blacksher’s testamentary trust was irrelevant — the trial judge precluded testimony about SSI benefits, and the jury found that most of the defendants had participated in taking money from Ms. McQueen. They were ordered to return $99,900 to Ms. McQueen.

One defendant — the attorney — was singled out by the jury for additional penalties. She was the only one the jury found liable for elder abuse, a separate claim under California law (and, incidentally, under the law of Arizona and most, if not all, other states). That did not directly increase the jury’s award against her, but it did have a significant additional effect. California law permits an award of attorneys fees against a party found liable for elder abuse. The attorney was ordered to pay Ms. McQueen’s lawyer’s fees, which totaled another $320,748.25.

The California Court of Appeal considered several arguments but ultimately upheld the judgment, including the effectively quadrupled award against the attorney. Key to the appellate court’s ruling was a finding that it was irrelevant whether Ms. McQueen received SSI or Medicaid benefits, or whether she would have lost those benefits if the terms of her father’s trust had been carried out as written. The judges were also unimpressed by an argument that the attorney acted reasonably in deciding, albeit wrongly, that failure to pay taxes or upkeep on the house effectively ended Ms. McQueen’s interest in the trust. McQueen v. Drumgoole, January 14, 2011.

The litigation involving Mr. Blacksher’s testamentary trust proves what every parent of a child with disabilities already knows: it can be very difficult to come up with a plan that adequately protects your child after your death. Mr. Blacksher’s trust may have been inadequate to the task, but it may be that the basic inadequacy was in the plan itself — there does not seem to have been enough money available to let Ms. McQueen stay in the family home after his death.

What might Mr. Blacksher have done differently? It is hard to be certain on the sparse record in the Court of Appeal, but there are a number of planning questions we might have asked Mr. Blacksher if we had a chance to speak with him before he signed his will, including:

  1. Does the testamentary trust language in your will adequately protect your daughter’s interest in the family home if it has to be sold? It appears that Mr. Blacksher’s will may not have done so — the trust he established may not have been a “special needs” trust.
  2. Do you have a realistic plan about how your daughter’s care can be provided? It appears from the outcome that there were not sufficient assets available to provide in-home care, even if health problems had not intervened to send Ms. McQueen to a care facility.
  3. If a move from the home is inevitable after your death, have you given adequate consideration to alternatives now? Might it be best to look into transitioning your daughter into a suitable placement while you are still able to participate in the selection and oversight of the care home?
  4. How involved — both in terms of time and in financial and other support — will the rest of the family be in caring for your daughter? Most parents recognize the high personal cost of providing full-time care. Did Mr. Blacksher’s family members realize that they would need to provide some of that care after he was unavailable, or did they realize it but lack the resources to do what he had done for years?

For lawyers, the key messages from the McQueen v. Drumgoole case are probably:

  • The “collateral source” rule, which prevents jury consideration of other payments available to the plaintiff in most civil lawsuits, applies in a case like this to prevent discussion of the SSI and Medicaid benefits a plaintiff might be entitled to receive — even if a successful verdict might eliminate those benefits.
  • The attorneys fees generated in complex litigation might all be chargeable against an unsuccessful defendant, even if not all of the claims (and all of the defendants) are found liable for any attorneys fee award.

For family members, though, the takeaway message is simpler:

  • Failure to plan realistically for your child’s care may result in a failed care plan.

What is the Value of a Senior’s Life?

SEPTEMBER 6, 2010 VOLUME 17 NUMBER 28
The question addressed in a ruling last month by the Arizona Court of Appeals seems provocative. In a lawsuit based on the Arizona law prohibiting abuse, neglect or exploitation of vulnerable adults, does the very life of the abused senior have any intrinsic value? The Court’s answer: perhaps, but the lawsuit can not recover damages for the loss of that life.

Mary Winn died about a month after being admitted to Plaza Healthcare, a Scottsdale, Arizona, nursing home, in 1999. Four years later her husband George Winn filed a lawsuit against Plaza, alleging that it had violated Mrs. Winn’s rights under Arizona’s Adult Protective Services Act. Under the APSA, a vulnerable adult who has been abused, neglected or exploited may recover damages suffered as a result of that abuse, neglect or exploitation. Mr. Winn argued (on behalf of his wife’s estate) that he should be able to recover on behalf of his late wife, and that she would have been entitled to actual damages for the loss of her life, as well as punitive damages.

Not so, argued the nursing home. Mrs. Winn obviously could never have collected damages for her own death, and her estate’s recovery was limited to what she could have recovered. In fact, the estate’s possible recovery was less than her damages, since any claim for pain and suffering she experienced at the end of her life ended with her death. With no actual damages to recover, her estate could not seek punitive damages.

Mrs. Winn’s estate argued that her life had some “intrinsic” value, and that it should be recoverable. The estate conceded that she was elderly and ill when she arrived at Plaza Healthcare, and that she could not be expected to earn a salary given her age and condition. But, insisted the estate’s lawyers, a human life has some inherent value.

The trial court agreed with the nursing home, and limited the estate’s proof to just actual damages. After an informal arbitration proceeding (the estate conceded that the remaining damages were less than $50,000, and therefore subject to mandatory arbitration rules) a judgment against was entered in favor of Plaza Healthcare.

The Arizona Court of Appeals reviewed the trial court’s ruling and agreed. There is no cause of action under the vulnerable adults statute, ruled the appellate judges, for the “intrinsic or inherent value” of a deceased claimant’s life. Mrs. Winn’s estate — and her husband — recovers nothing from Plaza Healthcare. Estate of Winn v. Plaza Healthcare, Inc., August 10, 2010.

To be fair, the appellate court did not rule that there is no value to the life of an elderly, disabled and vulnerable senior. All the ruling says is that there is no right to recover under the Arizona Adult Protective Services Act for the loss of life itself.

Does that mean that Mr. Winn had no claim for his wife’s alleged mistreatment? Not necessarily — he might have been able to file his lawsuit on his own behalf if he had acted more quickly. By the time he filed it had been more than four years since his wife’s death — too late for any wrongful death action but not too late for a viable lawsuit under the Adult Protective Services Act, which had a much longer statute of limitations.

There is another interesting footnote to the Winn case. Last month’s decision from the Court of Appeals is not the first time Mrs. Winn and her estate have been before Arizona appellate judges. In fact, her case had been appealed twice before — once in 2006/2007, and again a year later. The first trip through the appellate system involved the trial judge’s dismissal — ultimately reversed by the Arizona Supreme Court — on the basis that a probate proceeding filed more than two years after the decedent’s death did not permit filing of a lawsuit in the estate’s name. A year later the Court of Appeals dismissed an attempted appeal from the trial judge’s initial refusal to allow any recovery for the inherent value of Mrs. Winn’s life. That appeal had to wait for final resolution of the entire lawsuit, which was accomplished before the current (and probably final) appeal.

Video by Exploiters Leads to Witness Tampering Conviction

DECEMBER 21 , 2009  VOLUME 16, NUMBER 65

Washington State resident Shirley Crawford, then age 80, had a difficult problem to deal with. She had fallen in 2001 and was hospitalized. Her only child, Anne, was severely mentally disabled and lived in Ms. Crawford’s home. Ms. Crawford needed someone to help her with management of her financial affairs and care of her daughter.

Ms. Crawford turned to a long-time friend and distant relative, Judith Thompson. With the help of a lawyer Ms. Crawford signed a power of attorney form giving Ms. Thompson wide-ranging powers over her finances.

Within three months Ms. Thompson was trying to use the power of attorney to make gifts to herself. The broker where most of Ms. Crawford’s money was held refused to honor the power of attorney for that purpose, saying it did not include gift-making authority.

In the following year Ms. Thompson and her husband secured a new power of attorney from Ms. Crawford — this one specifically allowing them to make gifts to themselves. They sold her house and used more than $300,000 of the proceeds to pay off their own debts and to buy a $200,000 boat for their Alaska fishing charter business.

It took almost three more years before the state Adult Protective Services office and, ultimately, the Washington courts to begin to undo what the Thompsons had done. While investigations and court proceedings were pending, the Thompsons apparently thought it would be helpful to their cause if they had Ms. Crawford on videotape approving of the gifts they had made.

The videotape showed Mr. Thompson telling Ms. Crawford that he had compiled a series of statements from things she had told the Thompsons. The list included such items as “I wanted [the Thompsons] to have my house.” Ms. Crawford was shown nodding and agreeing with the statements as Mr. Thompson read them.

The Thompsons’ videotape never got introduced in the guardianship matter. It did, however, get used in court — in a criminal trial in which Mr. and Ms. Thompson were accused of tampering with a witness. At that trial Ms. Thompson testified that she and her husband had transferred Ms. Crawford’s assets to their name to protect her from thieves, and that the “investment” in their fishing charter business was safer than the stock market.

A jury found the Thompsons guilty of witness tampering, and the Washington Court of Appeals upheld their conviction. The appellate court ruled that the Thompsons had reason to believe that Ms. Crawford would be called as a witness in her own guardianship proceeding, and that they were trying to induce her to give false testimony. State v. Thompson, November 23, 2009.

As often happens in exploitation cases, the Thompsons insisted vehemently that they were following Ms. Crawford’s wishes, and that they intended to take care of her developmentally disabled daughter. The facts did not bear out that assertion, however — over the course of their involvement, virtually all of Ms. Crawford’s money went to the Thompsons, and none of it went to the care of Ms. Crawford’s daughter.

The Thompsons were also charged with (and convicted of) theft. That much makes an all-too-common story of exploitation of a vulnerable elderly woman. It is even common for exploiters to try to enlist their victims in an attempt to whitewash the evidence of misbehavior. What makes the Thompsons’ case stand out is their successful prosecution for what that attempt was: tampering with a prospective witness in a contested court proceeding.

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