Opinion
No. 1 CA-CV 14-0118
05-28-2015
In the Matter of the Guardianship of and Conservatorship of MELVIN SNYDER, An Adult. ENTRUST FIDUCIARY SERVICES, INC., as Temporary Conservator, by and through its principal, Lisa M. Price, Appellant, v. LARRY SNYDER, as Personal Representative, Appellee.
COUNSEL DeConcini McDonald Yetwin & Lacy, P.C. Barron & Associates, P.C., Of Counsel, Phoenix By John H. Barron III, Alexia J. Peterson Counsel for Appellant Hunt & Gale, Yuma By Jeanne Vatterott-Gale, Gerald Hunt Counsel for Appellee
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Yuma County
No. S1400-GC-2011-00097
The Honorable John N. Nelson, Judge
REVERSED AND REMANDED
COUNSEL DeConcini McDonald Yetwin & Lacy, P.C.
Barron & Associates, P.C., Of Counsel, Phoenix
By John H. Barron III, Alexia J. Peterson
Counsel for Appellant
Hunt & Gale, Yuma
By Jeanne Vatterott-Gale, Gerald Hunt
Counsel for Appellee
MEMORANDUM DECISION
Judge Peter B. Swann delivered the decision of the court, in which Presiding Judge Kent E. Cattani and Judge Lawrence F. Winthrop joined. SWANN, Judge:
¶1 Deciding cross-motions for summary judgment, the superior court held that a conservator was liable to a decedent's estate for having failed to prevent an allegedly exploitative caregiver from receiving property upon the decedent's death. We reverse and remand. Contrary to the contentions of the estate's personal representative, the conservator's failure to comply strictly with certain administrative obligations had no effect on the distribution of the estate. Further, as a matter of law, the conservator's duty was to preserve the protected person's estate and provide for his welfare not unilaterally to second-guess the validity of his plans for the estate's distribution upon his death.
FACTS AND PROCEDURAL HISTORY
¶2 In late 2009, Melvin Snyder, an elderly man, engaged Alvina Mosely to serve as his full-time caregiver. In 2010, Snyder transferred his vehicle's title to Mosely, and he designated Mosely as joint owner of bank accounts for which his only children, Larry and Steve, were named as payable-on-death beneficiaries. Further, he took several actions designed to provide benefits to Mosely upon his death: he signed forms to add Mosely as a beneficiary on annuity accounts, and he recorded beneficiary deeds to convey his residence to Mosely. Later, he executed a general power of attorney granting Mosely full authority over his assets and liabilities.
¶3 In June 2011, a branch manager of Snyder's bank notified Steve that Mosely had attempted to use the power of attorney to change the beneficiary designation on the payable-on-death accounts from Snyder's sons to herself. The manager also reported unusual expenditures from Snyder's checking account, as well as transfers from that account to an account held by Mosely. Steve promptly contacted Entrust Fiduciary Services, Inc., a licensed fiduciary, expressing concerns based on the bank manager's report and Mosely's reported receipt of assets.
¶4 Entrust investigated the matter and, on June 23, filed a petition in the superior court requesting to be appointed as Snyder's temporary conservator on an emergency basis, and to be appointed as his permanent conservator after notice and a hearing. In the same petition, Dawn R. Walters, represented by the same counsel, asked to be appointed as Snyder's temporary and permanent guardian. Entrust and Walters attached a document whereby Steve waived his priority of appointment and nominated them to serve as conservator and guardian. Entrust and Walters alleged that their counsel had telephoned Larry several times to discuss the matter but received no return call, and further alleged that according to Steve, Larry wished to avoid involvement.
¶5 The court immediately appointed Entrust as Snyder's temporary conservator, entered orders describing Entrust's duties, and issued temporary letters of appointment. The court also appointed Walters as Snyder's temporary guardian. Walters terminated Mosely's employment and, in July, filed a report under A.R.S. § 46-454 opining that Mosely had seriously neglected and endangered Snyder's health and safety. Around the same time, a court-appointed investigator filed a report recommending that Snyder be deemed an incapacitated adult and that he be appointed a guardian and a conservator. After considering the investigator's report and various medical reports, the court concluded that Snyder required a permanent guardian because he was an incapacitated person under A.R.S. § 14-5101(1), and required a permanent conservator because he suffered from mental impairment and had property that would be wasted or dissipated if proper management were not provided.
¶6 Larry objected to Entrust's request to serve as the permanent conservator, and asked that he be appointed instead. The court extended Entrust's temporary letters of appointment pending the determination of the appropriate party to serve as permanent conservator. On January 3, 2012, before this determination was made, Snyder died. Several weeks after Snyder's death, Entrust filed a report under A.R.S. § 46-454. The report described Snyder's medical history, identified Mosely's addition as a beneficiary on Snyder's annuity accounts in 2010, and detailed significant transfers, expenditures, and withdrawals from his bank accounts from December 2009 through May 2011.
The temporary letters had previously been extended once before, after counsel for Entrust and the temporary guardian requested a continuance of the hearing on permanent conservatorship and guardianship. The temporary letters were initially restricted, but were later unrestricted.
¶7 Larry was named personal representative of Snyder's estate ("the Estate"). Larry commenced an action against Mosely, alleging financial exploitation of a vulnerable adult under A.R.S. § 46-456, tortious interference with the right to inherit, unjust enrichment, false claim of real property, breach of fiduciary duty, fraud/constructive fraud, conversion, and quiet title. The complaint requested damages and a declaration that Mosely forfeit any benefits with respect to the Estate. The matter eventually settled.
¶8 Meanwhile, in May 2012, Entrust filed an inventory of Snyder's assets and a petition for approval of its first and final account, approval of professional fees, final discharge, and exoneration of bond. Larry, as personal representative, objected to the petition and requested that the court surcharge Entrust. Larry contended that Entrust had "breached its fiduciary duty by not properly marshaling and re-titling [Snyder]'s assets in such a manner to prevent Mosely from benefitting after [his] death[,] . . . requir[ing] the Estate of Melvin Snyder to expend money for attorneys' fees and court costs to seek the return of assets left to Mosely via various beneficiary designations [that would otherwise have been distributed equally between Larry and Steve]." Larry argued that Entrust had been well aware of Mosely's "self-serving actions" and the fact that she was "named as beneficiary on the house and other accounts," and therefore should have either "retitled" those assets in its name as conservator or otherwise sought court approval to remove Mosely as a beneficiary. Larry also took issue with the timing and content of Entrust's inventory and accounting. He did not, however, challenge Entrust's failure to pursue recovery of the assets that Mosely allegedly dissipated during Snyder's life.
¶9 Entrust filed a response and moved for summary judgment. Entrust argued that its only fiduciary duties were to Snyder, and showed that it had notified Snyder's financial institutions of its appointment and used his funds to pay for his in-home care. Entrust further argued that it had no authority to unwind pre-conservatorship planning by which Snyder had redistributed assets to certain beneficiaries' detriment, and in fact was obligated to protect his plans. Entrust finally argued that its conduct as temporary conservator did not cause the Estate to incur damages.
¶10 Larry filed a cross-motion for partial summary judgment on liability, requesting imposition of a surcharge and civil contempt sanctions. Larry argued that Entrust owed a derivative fiduciary duty to the beneficiaries of the Estate, and that Entrust breached the duty by protecting pre-conservatorship decisions which it knew were the product of Mosely's undue influence. Larry contended that Entrust should have revoked Mosely's designation as an annuity beneficiary by "retitling" the annuities, should have revoked the beneficiary deeds in favor of Mosely by recording the letters of conservatorship, and should have timely reported the circumstances that changed Larry and Steve's expected inheritance -- or, at the least, should have petitioned the court for instructions regarding its responsibilities.
¶11 After holding oral argument, the superior court denied Entrust's motion and granted Larry's motion in part, holding that Entrust was liable for a surcharge as a matter of law, with the amount of damages to be determined at trial. The court found that Entrust had failed to timely file the inventory, accounting, and report of financial exploitation, failed to record the letters of conservatorship, and failed to retitle the annuity accounts. The court concluded that Entrust "had a duty to protect the estate assets and the estate plan . . . includ[ing] not only the protected person but the beneficiaries of the estate plan," but "[t]he statues were not complied with and court orders were not followed," resulting in a "fail[ure] to prevent certain assets from being automatically delivered or transferred to [Mosely]." The court certified its ruling on liability as an appealable order.
DISCUSSION
¶12 We review the grant of summary judgment de novo. Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12, 69 P.3d 7, 11 (2003). Summary judgment is appropriate when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(a). A beneficiary is entitled to damages for a breach of trust if a fiduciary duty existed, the trustee failed to perform the duty, and the breach caused the beneficiary to suffer a loss. John E. Shaffer Enters. v. City of Yuma, 183 Ariz. 428, 432, 904 P.2d 1252, 1256 (App. 1995).
¶13 A conservator is a fiduciary, and is held to the standard of care required of trustees -- the conservator must exercise reasonable care, skill, and caution, and must use any special skills or expertise. A.R.S. §§ 14-5417, -10804, -10806. At oral argument on appeal, Larry contended that his allegation of breach of fiduciary duty is based only on the superior court's findings regarding Entrust's failures to comply with filing and recording obligations -- he expressly disavowed any claim of breach related to Entrust's failure to "file a lawsuit or . . . take[ ] greater protective action within the conservatorship."
¶14 As an initial matter, the court's conclusion that Entrust did not timely file the inventory was erroneous. Ariz. R. Prob. P. ("Rule") 30(A)(1) directs temporary and permanent conservators to file inventories within 90 days after issuance of the letters of appointment "[u]nless otherwise ordered by the court." Here, the court ordered Entrust to file the inventory "no later than 90 days after your letters of permanent conservator are issued." (Emphasis in original.) This order was never challenged, and the condition precedent to Entrust's obligation to file an inventory never occurred. Accordingly, the inventory that it filed after Snyder's death was not untimely. Moreover, Larry's claim that a post-death inventory deprived him of notice to bring a pre-death action against Mosely does not withstand scrutiny.
¶15 Further, though Entrust did not timely file the accounting under Rule 30(B)(4), and did not record the letters of conservatorship as required by A.R.S. § 14-5421, these failings did not have any demonstrated bearing on the distribution of Snyder's property under his estate plan. Contrary to Larry's contention, recordation of the letters would not have "transferred title [to Snyder's residence] to the conservator's name and thereby extinguished Mosely's [beneficiary-deed] interest [in the residence]." As an initial matter, it is the issuance of the letters of appointment that vests legal title in the conservator -- the recording merely serves to give notice of the event. See A.R.S. §§ 14-5420(A), -5421. Moreover, the transfer of title to a conservator does not alter the interests of a beneficiary-deed grantee. Larry emphasizes that under A.R.S. § 33-405(A), such grantee's interest is subject to conveyances and other encumbrances to which the owner was subject during his lifetime. But this means only that the grantee takes the same interest that the owner held at the time of his death, and that the interests of third parties are not extinguished by virtue of the death. It does not mean that the imposition of a conservatorship during the owner's lifetime abrogates the grantee's right to succeed to the owner's equitable interest.
¶16 Larry appears to argue that had Entrust strictly complied with its filing and recording obligations, Snyder's estate would have been "collect[ed] and deliver[ed]" to the court for the court to decide distribution. Larry provides no authority for this proposition, and we find none. The conservator's role is to manage the protected person's property so as to avoid waste and dissipation, and to use the property to provide for the protected person's support, education, care, and benefit. See A.R.S. §§ 14-5401(A)(2)(b), -5425(A). The only manner in which this obligation intersects with post-death distribution issues is set forth in A.R.S. § 14-5427, which provides that the conservator must "take into account any known estate plan of the protected person known to [the conservator]," including wills, revocable trusts, and instruments designed to effect payment or the transfer or benefits or interests upon the person's death.
¶17 The superior court erroneously relied on A.R.S. § 14-5427 to conclude that Entrust owed a duty to the estate-plan beneficiaries and was required to "determine and then re-title the assets" to "prevent [them] from being automatically delivered or transferred to [Mosely instead of Larry and Steve]." Section 14-5427 allows the conservator to avoid "the risk of inadvertent sales of specifically devised property and the difficult ademption problems such sales often create." Unif. Probate Code ("UPC") § 5-418 cmt. The statute nowhere authorizes the conservator to revise the protected person's estate plan to favor certain putative beneficiaries over others. Estate plans are not assets that may be used for the protected person's benefit they are merely instruments that designate how the person's property will be distributed upon his death. They are therefore of no concern to a conservator, except to the extent that the conservator should try to preserve the protected person's wishes and avoid ademption problems. See Ullman v. Garcia, 645 So. 2d 168, 170 (Fla. App. 1994) ("The last will and testament . . . is not an asset. Neither is it an instrument which the guardian could use in the recovery of an asset. It cannot in any way relate to any matter within his power and duties . . . . [T]he guardian has, or should have, no interest whatever either in establishing or disestablishing a will of his ward." (citation omitted)). Even if the conservator believes that certain estate planning was the product of undue influence, the conservator's obligation is to account for the known estate plan. A.R.S. § 14-5427. Under A.R.S. § 14-5420, the conservator lacks equitable title to the property, and therefore has no authority to unilaterally rewrite the plan. To hold that the conservator has a duty to alter an existing estate plan would be to place the conservator in conflict with the duties prescribed by § 14-5427.
Arizona's conservatorship statutes are largely based on the UPC. In interpreting the Arizona statutes, we may look to analogous sections of the UPC. See In re Estate of Wood, 147 Ariz. 366, 368, 710 P.2d 476, 478 (App. 1985).
¶18 To be sure, the conservator has the power to institute judicial proceedings under § 46-456 based on financial exploitation of a vulnerable adult by a person in a position of trust and confidence, and such proceedings may result in court orders that revise the estate plan. See A.R.S. § 14-5424(C)(24); § 46-456(C), (G). But exercise of this authority is not mandatory -- the conservator has discretion to determine whether an action should be brought. See A.R.S. §§ 14-5424(C)(24) (conservator "may" prosecute actions for the protection of estate assets), -456(G) (conservator "may" file action against defendant who financially exploited protected person). The conservator's decision must be informed by the purposes of the conservatorship. Indeed, if litigation could provide no financial benefit to the protected person, or if the potential financial benefit to the protected person reasonably would be outweighed by the cost and risk of litigation, the conservator should not bring the action. See In re Guardianship of Sleeth, 226 Ariz. 171, 176, ¶ 21, 244 P.3d 1169, 1174 (App. 2010) (holding that conservator "must avoid the pursuit of pyrrhic victories that accomplish little but to bankrupt the protected person"); see also A.R.S. § 14-1104 (effective from and after December 31, 2011). An action that seeks only to rewrite a coerced estate plan and that cannot financially benefit the protected person is not properly brought by the conservator.
¶19 The validity of Snyder's testamentary bequests to Mosely was beyond Entrust's purview as Snyder's conservator. And Larry conceded that Entrust's decision not to seek damages under § 46-456 for the inter vivos transfers was reasonable; accordingly, Entrust cannot be held liable for failing to seek judicial revision of the estate plans. Moreover, Larry initiated judicial proceedings against Mosely to undo estate plans that included Mosely as a beneficiary, and there is no evidence that any proceedings that the conservator could have initiated prior to Snyder's death would have led to a result different than that obtained by the personal representative.
For the first time on appeal, Larry asserts that Entrust should have "retrieved some of th[e] money [allegedly stolen by Mosely]" to use for Snyder's benefit during his life, and should have retitled the vehicle that Snyder gifted to Mosely. These arguments are untimely and have been waived. Odom v. Farmers Ins. Co. of Ariz., 216 Ariz. 530, 535, ¶ 18, 169 P.3d 120, 125 (App. 2007).
For the same reasons, the court erred when it concluded that Entrust was liable based on its failure to promptly investigate and file a report of financial exploitation under A.R.S. § 46-454(A).
--------
¶20 The superior court erred by granting summary judgment against Entrust. Any claim arising out of a breach of fiduciary duty related to the matters discussed above fails as a matter of law.
CONCLUSION
¶21 We reverse the superior court's order granting summary judgment against Entrust, and remand for further proceedings consistent with this decision.