In re EState of Kraus

• Decision Date: 27 April 2010
• Docket Number: No. B213484.,B213484.
• Citation: 184 Cal.App.4th 103,108 Cal.Rptr.3d 760
• Court: California Court of Appeals Court of Appeals
• Parties: ESTATE OF Janice Helena KRAUS, Deceased. The Regents of the University of California, et al., Petitioners and Respondents, v. David Kraus, Objector and Appellant.

184 Cal.App.4th 103

108 Cal.Rptr.3d 760

ESTATE OF Janice Helena KRAUS, Deceased.The Regents of the University of California, et al., Petitioners and Respondents,

v.David Kraus, Objector and Appellant.

No. B213484.

Court of Appeal, Second District, Division 5, California.

April 27, 2010.

Julia C. McBride for Objector and Appellant.

Hicks, Mims, Kaplan & Burns and Stephen L. Kaplan, Los Angeles, for Petitioners and Respondents.

TURNER, P.J.

I. INTRODUCTION

This appeal arises out of a Probate Code sections 850 and 859 petition by two residuary trust beneficiaries—the Regents of the University of California and the Make-A-Wish Foundation of Greater Los Angeles—for restitution of funds. Objector, David Kraus, appeals from a December 19, 2008 judgment and orders after a court trial.¹ The probate court ordered David to return $197,402 to a court appointed representative of the Estate of Janice Helene Kraus and to pay statutory double damages of $394,804. ( Prob.Code, §§ 850 et seq., 859.) (All further statutory references are to the Probate Code unless otherwise noted.) We affirm the judgment.

II. BACKGROUND

A. Pleadings

The two beneficiaries filed an August 29, 2007 petition for transfer and return of property. The two beneficiaries alleged as follows. Janice had executed a will on December 9, 2003. On December 9, 2003, the JaniceHelene Kraus Trust (the trust) was created. The trust was amended on May 12, 2005. On October 22, 2006, David's sister, Janice Helene Kraus, was dying of cancer. Janice was unmarried, did not have any children and she was in hospice care. On October 22, 2006, David had Janice execute a durable power of attorney in his favor. At the time, Janice was semi-comatose. On the morning of October 23, 2006, David closed several of Janice's bank accounts and appropriated the funds for himself. The money in those accounts belonged to the trust. Janice died on October 24, 2006 at 7:50 a.m.

The two trust beneficiaries sought to recover the misappropriated funds. The two beneficiaries also sought restitutionfrom California National Bank for turning over the funds to David. The present appeal does not involve any claims against California National Bank. In his March 4, 2008 response to the petition, David denied he was guilty of any wrongdoing.

B. Evidence

A court trial commenced on July 28, 2008. At issue were moneys in Janice's accounts; funds withdrawn by David under a void power of attorney on October 23, 2006. Janice died the next day on October 24, 2006. The bank accounts in question, and the amounts David withdrew, were as follows: four California National Bank certificates of deposit naming Janice and David's mother, Irene, as beneficiary in the amounts of $18,432.24, $28,929.43, $44,061.56, and $51,252.80; $9,385.07 from Janice and Irene's Wells Fargo Bank joint checking account; and $14,767.93 from Janice's Washington Mutual Bank checking account.

Janice's attorney, Jack A. Thompson, testified as follows. Janice signed her will on December 9, 2003. Janice's will provided the funds in her bank accounts pour over into her trust. The beneficiary of Janice's will was the trust. Janice executed the trust instrument on December 9, 2003. The trust was amended on May 12, 2005. The beneficiaries were each to receive 50 percent of the trust residue. Mr. Thompson became the trustee of the trust upon Janice's death on October 24, 2006. Janice had disinherited David for two reasons. First, he had a bad temper and she was afraid of him. Second, he had refused to return $160,000 that Irene had given him to hold for her benefit. Mr. Thompson had prepared Irene's estate plan as well as Janice's. The money in the accounts at issue belonged to Janice and not to Irene.

On November 9, 2006, after Janice's October 24, 2006 death, Mr. Thompson began marshalling the trust assets. On November 9, 2006, Mr. Thompson learned that David had gained access to Janice's banks accounts through apurported power of attorney. Bank records substantiating the withdrawals were received in evidence. As a result, on November 13, 2006, Mr. Thompson, as the successor trustee, wrote David and stated in part: "On November 9 and 10, 2006, I appeared at the following banks: Washington Mutual, Citibank and California Bank. I learned, much to my chagrin and astonishment, that you had terminated all checking, money markets, CDs and IRA accounts---one day prior to Jan's death. [¶] My fiduciary duty as Trustee is to explain why funds belonging to Jan were withdrawn from the aforementioned financial institutions one day prior to her death." On December 15, 2006, David responded to Mr. Thompson's November 13, 2006 letter. David asserted the moneys in most of the accounts were intended to be used for Irene's care. As to funds in the California National Bank, David acknowledged they were inadvertently "pulled by error." On August 8, 2007, Mr. Thompson, in his capacity of successor trustee of the trust, assigned all "choses in action and claims" against David to the beneficiaries.

Irene, Janice's and David's mother, died on March 10, 2007 prior to the court trial. At 91 years of age, Irene received Medicare and social security benefits. Also, Irene was the beneficiary of Janice's $20,000 life insurance policy. Further, Irene was a beneficiary of Janice's pension plan. In Mr. Thompson's opinion, Irene's future care was adequately funded under her estate plan.

Irene had also disinherited David in the event he survived Janice. In her will, Irene demanded that David and his wifereturn $160,000. Irene's June 2, 2005 will included the following provision: "I have given during my lifetime certain sums of money to DAVID S. KRAUS and my daughter-in-law JOAN L. KRAUS to be held as custodians for my benefit. These sums, as of the date of this Will, are in the approximate amount of $160,000.00. I hereby order that such funds, including any increases thereon, be made a part of the residue of my estate and be distributed as per Paragraph Fifth of this, my Will." David never returned the $160,000 referenced in Irene's will to her. Irene made no such demand on Janice. On November 11, 2006, Irene executed her trust declaration which gave David any assets held under that instrument.

David testified. David admitted using a "General Power Of Attorney," executed on October 22, 2006, to take the funds in Janice's accounts. David prepared the power of attorney on October 22, 2006. David saw no reason to contact Mr. Thompson, the successor trustee, about preparing a power of attorney. Nor could David remember speaking with Janice's physicians as to whether she had the capacity to sign the power of attorney. On October 22, 2006, Janice was semi-conscious and undergoing hospice care when an "X"was placed on the signature line of the power of attorney. Joe Damco, her boyfriend, held Janice's hand when the "X" was placed on the signature line of the power of attorney. Janice died on October 24, 2006, at 7:50 a.m., 36 hours after the "X" was placed on the signature line of the power of attorney. At the time of her death, Janice's doctors assumed the cancer had spread to her brain. David prepared the power of attorney to reclaim money in Janice's accounts he thought belonged to Irene. Also, David wanted to secure jewelry that Janice wanted placed in her coffin.

David went to the bank to secure the jewelry the day before Janice died. Also, David, using the power of attorney, closed the bank accounts at issue on October 23, 2006, the day before Janice's death. The funds secured under the power of attorney were placed in accounts in the name of David and his wife. No funds taken by David on October 23, 2006, under the power of attorney were ever placed in Irene's accounts. Funds from one of the accounts were used to purchase a certificate of deposit in the names of David and his wife. Moreover, David named his daughter as the beneficiary of the new accounts. One institution, Citibank, refused to honor the power of attorney as to one of two accounts.

David first disclosed the existence of the power of attorney to Mr. Thompson on December 15, 2006. In a December 15, 2006 letter, David claimed that if he had not taken the money, none would be left for Irene's care and would be given away. David intended to use the power of attorney to pay Janice's healthcare and funeral expenses as well as to provide care for Irene. No money taken by David was used for Janice's healthcare expenses. A bank official testified that Irene was the beneficiary of certain accounts held by Janice. After counsel for one of the beneficiaries demanded the funds be repaid, David threatened to expose their greed to the media. David further also wrote: "I am prepared to expose this entire ugly matter in open court. If you think you can bully me into anything, you are truly mistaken. I know the law very well, and you have no standing in the eyes of the court. [¶] Once you bring this ridiculous matter in front of the judge, you will forever be prejudiced in front of her before you begin any new trial. It's a small circle of players in Probate in Los Angeles, and judges have a long memory for anyone that engagesin this fraudulent activity. You will long be remembered in her court."

C. The Probate Court's Ruling And Judgment

The probate court found the power of attorney drafted by David on October 22, 2006, was void and David wrongfully and in bad faith convertedproperty belonging to the trust. The probate court made no final determination as to the beneficiaries' right to the funds. The probate court entered judgment as follows: "Judgment is entered for petitioners Make-A-Wish Foundation of Greater Los Angeles and The Regents of the University of California against respondent David Kraus as follows: [¶] AMOUNT OF JUDGMENT [¶] 1. Pursuant to Probate Code Sections 850 et seq., respondent David Kraus is ordered to deliver $197,402 to a court appointed personal representative of the Estate of Janice Helene Kraus. [¶] 2. ...