Davis v. Zlatos

• Decision Date: 06 December 2005
• Docket Number: No. 1 CA-CV 04-0413.,1 CA-CV 04-0413.
• Citation: 211 Ariz. 519,123 P.3d 1156
• Parties: C. Bingham DAVIS and Robin Muller Davis, Plaintiffs/Appellees Cross Appellants, v. Emil ZLATOS and Gertrude Zlatos, husband and wife; Myrna L. Cagney, Attorney-In-Fact for Gertrude Zlatos; Richard W. Morris and Jane Doe Morris, husband and wife, Defendants/Appellants Cross Appellees. Emil Zlatos and Gertrude Zlatos, husband and wife, Plaintiffs/Appellants Cross Appellees, v. Pete Tanguma Saenz, Sr. and Teresa D. Saenz, husband and wife; C. Bingham Davis and Robin Muller Davis, Defendants/Appellees Cross Appellants.
• Court: Arizona Court of Appeals

123 P.3d 1156

211 Ariz. 519

C. Bingham DAVIS and Robin Muller Davis, Plaintiffs/Appellees Cross Appellants, v. Emil ZLATOS and Gertrude Zlatos, husband and wife; Myrna L. Cagney, Attorney-In-Fact for Gertrude Zlatos; Richard W. Morris and Jane Doe Morris, husband and wife, Defendants/Appellants Cross Appellees.

Emil Zlatos and Gertrude Zlatos, husband and wife, Plaintiffs/Appellants Cross Appellees, v. Pete Tanguma Saenz, Sr. and Teresa D. Saenz, husband and wife; C. Bingham Davis and Robin Muller Davis, Defendants/Appellees Cross Appellants.

No. 1 CA-CV 04-0413.

Court of Appeals of Arizona, Division 1, Department E.

December 6, 2005.

COPYRIGHT MATERIAL OMITTED

The Cavanagh Law Firm, P.A. By Christopher Robbins, Phoenix, Attorneys for Zlatoses, Cagney and Morrises.

Mariscal, Weeks, McIntyre & Friedlander, P.A. By Timothy J. Thomason and Michael J. Plati, Phoenix, Attorneys for C. Bingham Davis and Robin Muller Davis.

OPINION

IRVINE, Judge.

¶ 1 Appellants seek to overturn the trial court's judgment that Pete Tanguma Saenz ("Saenz") did not violate Arizona's Adult Protective Services Act, Arizona Revised Statutes ("A.R.S.") sections 46-451 through 46-457 (2005)¹ (the "APSA"), in obtaining money and title to a parcel of property from Gertrude Zlatos and quieting title to the property in favor of Appellees, C. Bingham Davis and Robin Muller Davis ("the Davises"). Because we find that Mrs. Zlatos was a vulnerable adult under the APSA and that Saenz, as the Davises' predecessor in interest, did not act for her benefit to the same extent as a trustee, we reverse.²

FACTS AND PROCEDURAL HISTORY

¶ 2 Mr. and Mrs. Zlatos³ were born in 1908 and 1913, respectively, and were married in 1932. By 1980, the Zlatoses had relocated to Arizona. The couple's daughter, Myrna Cagney, resides in Houston, Texas.

¶ 3 During their marriage, Mr. Zlatos handled all of the couple's finances. On July 11, 1991, the Zlatoses created a living trust naming themselves as trustees and authorizing either, acting alone, to transfer real or personal property of the trust. The Zlatoses then transferred title of some real property they owned in Sun City (the "Property") to the trust.

¶ 4 In 1993 Mr. Zlatos's health began to deteriorate. At about this time, Saenz started performing cleaning services for the couple. Over the years, Saenz began performing additional tasks, such as errands, cooking, and transportation services, and by 1999 was employed full-time for the Zlatoses. Saenz also performed some tasks for Mr. Zlatos's sister. In December 1999, Mr. Zlatos was hospitalized and in January 2000 he was placed in a lockdown Alzheimer's wing of Grandview Health Center ("Grandview").

¶ 5 The Zlatoses' son-in-law, Dale Cagney, testified that he had discovered several years before Mr. Zlatos was hospitalized that the Zlatoses' tax returns had not been filed for several years. The Cagneys acted to bring the couple's taxes up to date, filing the taxes and paying the penalties, fines, and interest. After this, in approximately 1998, the Cagneys took over the Zlatoses' bills, cancelled many of their credit cards, had their mail forwarded to the Cagneys' home in Houston, and arranged for many of their utilities to be paid by direct withdrawal.

¶ 6 On a number of occasions in the late 1990s, Mr. Zlatos became lost and Saenz had to find him. During 1999 Mrs. Zlatos also fell several times. On one occasion Saenz was not at work but became concerned when the Zlatoses did not answer the telephone. When he stopped at the house he found Mrs. Zlatos had fallen in the bedroom four to five hours earlier and had not been able to get up.

¶ 7 In December 1999, following Mr. Zlatos's hospitalization, Dale Cagney told Saenz that Mrs. Zlatos needed two caretakers to provide companionship and care twelve hours a day. Saenz recruited the help of his daughter and the two provided Mrs. Zlatos with care for more than twelve hours a day, seven days a week. Saenz was paid $500 dollars a week and his daughter received comparable compensation. As part of his duties Saenz transported Mrs. Zlatos to Grandview every afternoon so she could have dinner with her husband. With regards to Mrs. Zlatos's daily expenses, the record shows that Saenz would routinely cash checks for her at the bank and purchase her necessities such as groceries, toiletries, medical equipment, and other medical supplies.

¶ 8 In early 2000, Mrs. Zlatos began writing a series of large checks to Saenz. On February 3, 2000, Mrs. Zlatos wrote Saenz a check for $6,000. According to Saenz,⁴ he was having difficulty with his car and Mrs. Zlatos loaned him the money to buy another car because she was concerned about him arriving to work on time. Five days later Mrs. Zlatos wrote a check to Saenz for $900 that Saenz later believed was a loan for his son's college tuition. On April 6, 2000, Mrs. Zlatos wrote Saenz another check for $6,000, as a loan, to buy a car for his wife, who was left all day without a car while he was with Mrs. Zlatos. On May 23, 2000, Mrs. Zlatos wrote Saenz a check for $1,500, with the notation "loan" written on the check. On June 5, 2000, Mrs. Zlatos wrote Saenz a check for $5,500, as a loan, which helped pay for Saenz's mother-in-law's funeral expenses. On June 16, 2000, a check was issued to Saenz for $3,500 as a loan to help pay medical bills for Saenz's wife. Thus, from February to June 2000, payments labeled "loans" totaling $23,400 were made to Saenz. Saenz did not sign a promissory note for the loans and the loans did not have interest due. At trial, Saenz testified that sometime in February or March, 2000, Mrs. Zlatos told him: "You don't need to pay me back. I just want to make sure that you're here." Even after this conversation, Mrs. Zlatos continued to write "loan" on the bottom of the checks.

¶ 9 In February 2000, Mrs. Zlatos told Saenz that she wanted to transfer the Property to him as a birthday gift. Mrs. Zlatos contacted Fidelity National Title Insurance Company ("Fidelity") and opened an escrow account on February 24, 2000. Fidelity's escrow agent Alicia Varela handled the transaction and prepared the appropriate transfer documents. On or about March 13, 2000, Varela and Saenz traveled to Mrs. Zlatos's home. Varela explained the documents and Mrs. Zlatos signed a warranty deed, on behalf of herself and Mr. Zlatos, conveying the Property to Saenz. Varela, along with Saenz, then traveled to Grandview and had Mr. Zlatos sign a specific power of attorney authorizing Mrs. Zlatos to sign for him. On March 14, 2000, Saenz recorded the Warranty Deed taking title to the Property.

¶ 10 In June 2000, the Cagneys discovered that Mrs. Zlatos had made the loans to Saenz, and later learned of the transfer of the Property. In June 2000, Mrs. Zlatos was examined by Dr. Amardeep Majhail who testified at trial that he had found that she was very frail and elderly, and had some breathing trouble. In July 2000, Mrs. Zlatos was placed in Grandview with her husband and Saenz's employment was terminated by Mr. Cagney. In November 2000, Mrs. Zlatos was diagnosed with mild to moderate Alzheimer's dementia. Dr. Majhail testified that she "probably" had dementia in March 2000 because once a patient is diagnosed she may have had it for at least a couple of months or a year.

¶ 11 On or about November 28, 2000, the Zlatoses, through Mrs. Cagney, demanded that Saenz return the money and Property. Saenz refused. In January 2001, the Cagneys contacted the Maricopa County Sheriff's Department. A deputy questioned Saenz regarding alleged elder abuse but no charges were ever brought against Saenz. During this interview Mr. Saenz indicated to the deputy that the checks "were for a loan. And he was going to pay those back. And there was some type of arrangement that they were going to be paid back."

¶ 12 On January 10, 2001, the Zlatoses, through Mrs. Cagney, recorded a Notice of Claim of Interest with the Maricopa County Recorder giving notice that the Warranty Deed to Saenz, dated March 10, 2000, and recorded on March 14, 2000, was not properly obtained and such deed was void.

¶ 13 On January 7, 2002, the Zlatoses and Cagney filed a complaint against Saenz. The complaint alleged that Saenz breached his fiduciary duties to the Zlatoses by knowingly depriving an incapacitated or vulnerable adult of his or her assets or property in violation of the APSA and requested that title to the land be quieted to the Zlatoses. On March 4, 2002, Saenz sold the Property to the Davises for $20,000. On September 5, 2002, the Zlatoses, through Mrs. Cagney, recorded a Notice of Lis Pendens.

¶ 14 On December 2, 2002, the Davises filed a separate lawsuit claiming that they were the true owners of the Property and requesting that the trial court clear title to the Property. The Zlatoses then filed an amended complaint adding the Davises as defendants, alleging that the Davises had constructive notice of Mrs. Zlatos's interest in the Property and requesting that the trial court quiet title to the Zlatoses. The trial court subsequently consolidated the two actions.

¶ 15 A two-day non-jury trial was held after which the trial court issued a minute entry adopting the parties' joint pretrial statement of facts and setting forth findings of fact. Specific findings included: Saenz was in a position of trust and confidence with Mr. and Mrs. Zlatos at all relevant times; at all times Mr. Zlatos was incapacitated; none of the loans had been fully repaid, but all were eventually forgiven by Mrs. Zlatos; Mrs. Zlatos did not require assisted living until July 2000; and Mrs. Zlatos had frequent opportunities to raise concerns with others if she believed that Saenz was acting inappropriately, but did not do so. The trial court concluded that the Zlatoses had not met their burden to establish (1) that Mrs. Zlatos was an incapacitated or vulnerable adult under the statute during the time that the transactions at issue took place, (...