Monday, March 30, 2026
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Court of Appeal:
Inability to Pay Is Irrelevant to Penalties for Theft From Trust
Opinion Rejects Assertion by Now-Disbarred Attorney That Imposing Obligation Would Violate Constitutional Principles Against Excessive Fines Given Previous Restitution Payments
By Kimber Cooley, associate editor
Div. Two of the Fourth District Court of Appeal has rejected the assertion by a now-disbarred attorney that a trial judge erred in failing to consider his ability to pay as a factor in mitigation before imposing a statutory penalty for the bad faith taking of property from a trust, declaring that while the award may be disciplinary in nature, it is not the equivalent of punitive damages for which evidence of a defendant’s financial condition is required.
At issue is the statutory penalty found at Probate Code §859, which provides:
“If a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to a conservatee, a minor, an elder, a dependent adult, a trust, or the estate of a decedent,…the person shall be liable for twice the value of the property recovered….”
Acting Presiding Justice Art W. McKinster authored the opinion, filed March 5 and certified for partial publication on Friday. He acknowledged that language in some jurisprudence seems to suggest that a defendant’s ability to pay may be raised in mitigation against the imposition of §859 penalties, but said:
“Probate Code section 859 imposes a strict and mandatory penalty structure….The probate court has no discretion regarding the calculation of the amount of the statutory penalty. Moreover, [§859] is silent on the issue of mitigating factors, including defendant’s financial inability to pay….Thus, [the section] does not authorize the probate court to weigh any mitigating factors, including defendant’s ability to pay, when imposing the mandatory penalty.”
The decision, joined in by Justices Douglas P. Miller and Carol D. Codrington, also rejects challenges to the award as violative of the Eighth Amendment and the California Constitution.
Electronic Transfers
Appealing the award against him was Edward J. Nowakoski, who served as trustee over the John A. Moramarco Restated Living Trust dated March 26, 2003, which he drafted, following Moramarco’s death in 2016. Nowakoski made multiple electronic transfers from a trust account between 2016 and 2018.
In 2019, Nowakoski resigned as trustee after a beneficiary petitioned the probate court to remove him and appoint a successor. At the time of his resignation, only $40.16 of the trust funds remained; the proceedings were stayed when the State Bar announced that it was looking into allegations against the attorney.
Following an investigation, the disciplinary body recommended disbarment in 2021, having concluded that he had “willfully and intentionally misappropriated $394,681.88 that the Trust’s beneficiaries were entitled to receive and thereby committed an act involving moral turpitude.” The California Supreme Court agreed with the recommendation.
He pled guilty to grand theft charges in November 2022 and paid restitution of $542,688 as part of his probationary sentence. The following February, the probate court lifted its stay, and the case proceeded to trial.
Pointing to declining health and the restitution payment, Nowakoski argued that the court should take his inability to pay into account in light of an assertion that, at 71 years of age, he had no income other than monthly Social Security payments of $2,871 and no assets other than a $1.5 million family home.
Unpersuaded, Riverside Superior Court Judge Michael Rushton imposed a civil penalty of $399,681.88 plus interest and awarded $61,702.54 in attorney fees to the petitioning beneficiary.
Nowakoski cited the 2010 decision by Div. Five of this district’s Court of Appeal in Estate of Kraus and its progeny, which hold that there is no authority for taking evidence of a defendant’s ability to pay into account before imposing a penalty under §859.
He pointed to one sentence from the Krause opinion, which says:
“The Courts of Appeal have held evidence of a defendant’s financial status is not essential to the imposition of statutory penalties, and financial inability to pay is a matter to be raised in mitigation.”
Rejecting his view, McKinster wrote:
“None of the cases cited in Estate of Kraus involves a section 859 statutory penalty. Rather, they stress that statutory damages are created and defined by the Legislature, and as such, the precise language of the statute governs their application.”
Addressing Nowakoski’s assertion that the penalty violates his rights concerning excessive fines, the jurist distinguished case law relied upon by the defendant that found that a statutory scheme allowing tenants to recover $100 per day for the unlawful interruption of utility services violates the Eighth Amendment.
He remarked:
“Unlike the statutory penalty in [that case], a section 859 penalty is not limitless in its effect. Rather, it provides a fixed multiple of actual damages—twice the value of the property—and only applies if the person wrongfully took property in bad faith. The higher requirement of bad faith restricts the statute’s reach. Moreover,…Nowakoski does not argue that section 859’s provision for double damages is inherently excessive and unreasonable. Rather, he asserts that imposition of double damages in his case is excessive because he lacks the financial means to pay.”
He continued:
“The purpose of imposing double damages is to discourage fiduciaries and others in positions of trust from abusing their power to the detriment of beneficiaries (via the wrongful taking of property in bad faith) by imposing an enhanced penalty (twice the property value). The penalty is set at twice the value of the property taken, regardless of the defendant’s ability to pay. Accordingly, the probate court did not abuse its discretion in not considering Nowakoski’s financial status as a mitigating factor.”
Declaring that “[w]e conclude the judgment should be amended to indicate that postjudgment interest does not accrue on the prejudgment interest,” he said “[a]s amended, we affirm.”
The case is Moramarco v. Nowakoski, E084620.
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