Monday, October 27, 2014
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Transfer for Consideration May Still Be ‘Donative,’ C.A. Rules
Caregiver’s Contributions to Property Held Inadequate to Support Transfer by Deed She Prepared Herself
By KENNETH OFGANG, Staff Writer
The fact that the recipient of property gave consideration for the transfer does not mean that the transfer isn’t “donative” for purposes of laws designed to prevent lawyers and caregivers from obtaining their clients’ property by improper means, the Fourth District Court of Appeal has ruled.
Div. Two Thursday reinstated Merilou Jenkins’ suit on behalf of a trust created by her stepfather, Bob Perry. A Riverside Superior Court judge had dismissed the suit on the ground that the defendant, a former caregiver for Perry, had provided consideration for the transfer.
Perry was 87 years old when he died in a fire that destroyed his Riverside home in 2011. He had created a trust, with assistance from an attorney, in 2002, but in 2007, without consulting the attorney, he quitclaimed a house that he had built on vacant land next to his residence to Charlotte Teegarden.
According to testimony, Teegarden and Perry had known each other for about a decade prior to his death. She had helped him with bookkeeping, and with household work after his wife—who died in 2005—sustained a knee injury, but she also had a fulltime job and the Perrys had other caregivers.
Foreclosure Averted
When she and Bob Perry met, Teegarden was living in Sun City. Two years later, the Perrys agreed to save her home from foreclosure by purchasing it from her for the mortgage balance of $205,000—it was worth about $45,000 more than that—with the understanding that she would pay rent if she could, and that she would eventually buy it back for $205,000 if she was able to make mortgage payments again.
After his wife’s death, Perry agreed to build a house for Teegarden on his vacant lot. Perry paid the contractor, while Teegarden spent about $100,000 for flooring, electrical work, a water main, appliances, fencing, and other essentials. It was agreed that Perry would recoup a portion of his outlay by selling the Sun City house, and Teegarden moved into the new house in early 2007, several months before Perry transferred it to her using a quitclaim form she purchased at an office supply store and filled in herself.
The house was worth about $480,000 at the time, according to testimony.
Following Perry’s death, Jenkins petitioned the court to void the transfer of the house under former Probate Code §21350, to adjudicate title to the property as belonging to the trust, and for damages for elder abuse. Teegarden responded that she had acquired title for good consideration, which she testified included the money she put into the house, her equity in the Sun City house, and her continued care for Perry.
Section 21350, repealed and superseded by §21380 effective Jan. 1, 2011, provided that under specified circumstances, such as when the recipient drafted the instrument effecting transfer, a donative transfer was invalid absent review by an independent attorney or court approval during the transferor’s lifetime.
Trial Judge’s Ruling
Judge Thomas H. Cahraman found that the statute applied to transfers made prior to its repeal, but agreed with Teegarden that the transfer was not donative because she had supplied consideration.
But Justice Betty Richli, writing for the Court of Appeal, said that the giving of consideration, even if sufficient to establish a contract, does not necessarily mean that the transfer was not donative within the meaning of the statute.
In order to meet the Legislature’s intent in enacting the law, the justice said, there must not only be consideration, it must be sufficient to avoid the conclusion that the transfer was donative, in other words, a gift.
In this case, she said, the consideration was plainly inadequate and unfair.
The money Teegarden put into the house benefitted Teegarden, not Perry, the justice said. It “went right back into Teegarden’s pocket,” Richli noted.
“If such consideration sufficed to prevent a transfer from being donative, it would be too easy for a drafter (and particularly an attorney drafter) to subvert the statutory scheme simply by providing that proceeds of the transfer must be used to buy something that the attorney already wants,” she wrote.
Besides, the justice reasoned, even if Teegarden were credited with the $100,000, plus her $45,000 in equity in the Sun City house, and whatever value her post-2007 services to Perry may have had over and above what she was paid for them, it still would not add up to nowhere near the $480,000 that the house was worth.
The result would be the same under the current law, Richli noted.
Unpublished Portion
In an unpublished portion of the opinion, Richli noted that the property was sold while the case was on appeal, and that the trial judge had allowed Teegarden to keep $100,000 of the proceeds but ordered that the remainder be placed in a blocked account.
She also explained that “[o]n remand, the trial court will have discretion to consider Jenkins’s claim of an offset for reasonable rental value and Teegarden’s claim of $100,000 investment in the subject property,” and that the panel was expressing no view on how the trial court should rule on any such claims.
Jenkins cannot, however, revive her elder financial abuse claim, Richli said, because it was implicitly rejected by the trial judge.
The case is Jenkins v. Teegarden, 14 S.O.S. 4759.
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