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C.A. Faults Opinion on Investigation Duty of Conservatee
Opinion Says Final Accounting May Be Set Aside Where Facts Did Not Signal Misuse of Funds Prior to Approval
By a MetNews Staff Writer
The Court of Appeal for this district yesterday reversed an order denying a conservatee’s motion to set aside a final accounting in connection with the distribution of funds from a $13.9 million settlement of his personal injury action, remanding the case to the Los Angeles Superior Court for a decision not influenced by a 2012 decision from the Riverside-based appeals court.
Justice Carl H. Moor of Div. Five authored yesterday’s opinion which repudiates the conclusion reached by the Fourth District’s Div. Two that under Probate Code §2103, a final accounting cannot be set aside based on extrinsic fraud unless the conservatee shows why the accountings did not provide sufficient information upon which to investigate prior to approval.
Section 2103 provides:
“(a) When a judgment or order made pursuant to this division becomes final, it releases the guardian or conservator and the sureties from all claims of the ward or conservatee and of any persons affected thereby based upon any act or omission directly authorized, approved, or confirmed in the judgment or order….
“(b) This section does not apply where the judgment or order is obtained by fraud or conspiracy or by misrepresentation contained in the petition or account or in the judgment or order as to any material fact. For the purposes of this subdivision, misrepresentation includes, but is not limited to, the omission of a material fact.”
Moor’s Opinion
Moor declared:
“We disagree with Knox to the extent it suggests that a conservatee who is not aware of facts suggesting wrongdoing must show the misrepresentations of material fact in a fiduciary’s account could not reasonably have been discovered prior to the entry of judgment.”
To the contrary, he said, “a conservatee has no duty to investigate representations of fact in the conservator’s account, unless the conservatee becomes aware of facts from which a reasonably prudent person would suspect wrongdoing,” adding:
“Therefore, to set aside an order approving the conservator’s account on the ground of extrinsic fraud, a conservatee is not required to establish that the misrepresentations of material fact in the account could not have been discovered prior to entry of the order approving the account. The probate court’s ruling relied on legal authority that we find unpersuasive because it placed a higher burden to investigate on the conservatee. The matter must be reversed and remanded for the probate court to exercise its discretion based on an accurate understanding of the applicable law.”
Judge Applied Decision
The opinion reverses an order by Los Angeles Superior Court Judge Brenda Penny, who applied Knox. Her order came in a case in which Nigel Hudson, a physical trainer and ex-boxer, alleges fraud on the part of film producer Lucas Foster, the general conservator of his estate, in handling the $13,863,000 in proceeds from the settlement of a lawsuit arising from a Jan. 11, 2007 traffic accident.
Hudson’s vehicle was rear-ended by a truck, causing severe injuries. However, his mental capacity was not affected.
The final accounting was approved by the court on March 28, 2014. On Aug. 30, 2018, he moved for a vacating of the order approving the accounting after a creditor he thought had been paid pressed for satisfaction of the account.
It turned out the 28 checks went to Foster’s accounts, not those of persons he listed in the accounting as the payees, with the amounts of the payments totaling $558,169.47.
“In this case, Hudson’s claim that the conservator’s account contained misrepresentations of material fact which amounted to extrinsic fraud is both the basis of his case as well as his excuse for failing to object within the original proceeding,” Moor wrote.
The case is Hudson v. Foster, B300017.
West Los Angeles attorney Martin L. Horwitz and Joseph S. Klapach of the Sherman Oaks form of Klapach & Klapach represented Hudson. Ryan C. Squire and Adjoa M. Anim of the Pasadena firm of Garrett & Tully were appellate counsel for Foster.
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