It’s not uncommon for an elderly person to feel dependent on, and grateful to, the professional caretakers who meet their daily needs and provide companionship. But that close relationship creates the risk that a caretaker may unfairly exploit this dependency, leaving family members and others looking for ways to block this exploitation.
A Los Angeles family facing what they saw as exploitive action by a caretaker employed a legal tool unfamiliar to most laypersons, in a strategy uncommon enough to become the focus of a case recently decided by the California Court of Appeal (Newell v Rollins).
Arthur and Julia Mancini created a trust in 2002, naming their daughter Lucy Mancini Newell and two of her siblings as their beneficiaries following the parents’ death. Julia died in 2009, and a few years later Arthur amended the trust to name Lucy as successor trustee and sole beneficiary.
In July of 2020, when Arthur was 89 years old, Neneth Rollins, then 56, began working as Arthur’s caretaker. Six months later, in January of 2021, Arthur executed a second restatement of the trust, which was drafted by Edgardo Lopez, an attorney recommended by Rollins.
The restatement named Lopez as successor trustee, gave him nine percent of the trust’s gross assets as trustee compensation, and directed him to distribute 51 percent of the assets to Rollins, the caretaker, and 40 percent to Lucy, the daughter.
Three months later, Arthur amended the restated trust, increasing the compensation to Lopez to 15 percent of the trust’s assets, naming Rollins as the sole successor trustee if Lopez could not serve, and distributing 100 percent of the remaining trust assets to Rollins, leaving Newell with nothing.
By May of 2021, Arthur had stopped communicating with his daughter.
Arthur died in November of 2022. Lopez had died a month earlier, so Rollins became the successor trustee upon Arthur’s death.
It was only when Newell received a notice required by probate law that she learned about the restatements and amendments to her father’s trust.
She filed a challenge in probate court to these changes. She cited Probate Code section 21380, which provides that “a donative transfer to a care custodian of a transferor who is a dependent adult is presumptively the product of fraud or undue influence.”
Newell alleged that Rollins and Lopez obtained the changes to Arthur’s trust through fraud and undue influence, and that they had committed financial elder abuse. She asked the court to suspend and then remove Rollins as trustee, replacing her with Newell, and to order Rollins to account for all trust assets, post a $2 million bond, and pay damages, fees, and costs.
After learning that Rollins had used trust assets to purchase some real estate in Van Nuys, Newell asked the probate court to take control of that property on behalf of the trust.
Newell also recorded a notice of lis pendens on the Van Nuys property.
A lis pendens is a legal notice, filed with the county recorder, intended to inform the public that a lawsuit is pending regarding a parcel of real estate. A lis pendens creates a “cloud” on the title of the property by making any potential buyer or lender aware of the ongoing dispute, likely discouraging them from proceeding with any transactions while the ownership of the property is uncertain.
Rollins asked the court to expunge the lis pendens. She argued that a lis pendens must be based on a claim about real property, while Newell’s action was a challenge to the validity of the trust and a claim to have a beneficial interest in the trust. Thus, the caretaker said, Newell was not making a real property claim.
In any event, Rollins continued, the ownership of the Van Nuys property would not be affected by Newell’s challenge, since the title to the real estate belonged to the trust and would continue to be held by the trust even if Newell prevailed.
The probate court agreed with Rollins’ arguments and granted the caretaker’s motion to expunge the lis pendens. It also awarded her $5,500 in attorneys’ fees and costs.
After further proceedings, the probate court held additional hearings about the lis pendens. It again ruled that Newell’s petition did not contain a real property claim because, even if she succeeded in invalidating the disputed trust documents, “the ownership of the real property in question would continue to be held by the trustee.”
Newell appealed the probate court’s ruling, and the appellate court agreed with her position.
The appellate justices acknowledged that, as the lower court noted, ownership of the property would continue to be held by the family trust even if Newell succeeded in altering the trustees and beneficiaries of the trust.
“The issue, however, is whether Newell’s petition would, if meritorious, affect title to the Van Nuys property. And it would,” the justices concluded, because the trustee of a trust holds title to real property.
Unlike a corporation, a trust is not a legal entity, they pointed out; a trust is “‘a fiduciary relationship with respect to property.”’ When property is held in trust, “there is always a divided ownership of property,” generally with the trustee holding legal title and the beneficiary holding equitable title.
If the probate court found that Rollins was named trustee and beneficiary of Arthur’s trust as the result of fraud or undue influence, it could remove her as trustee and designate a new trustee. That appointment would change the name of the titleholder of the Van Nuys property, resulting in “a pretty big effect on the title,” the justices said.
For that reason, “the probate court erred in ruling Newell’s petition did not contain a real property claim,” the justices concluded. They ordered the lower court to leave the lis pendens in place and reverse its award of fees and costs to Rollins. They also awarded Newell her costs on appeal.
By Lynda I. Chung