A conservatee's debts — incurred before creation of the conservatorship — must be paid from his estate. (Prob. Code, § 2430, subd. (a)(1).)
Mark Boothby and Frank Parker met in 1990. They decided to start "flipping" homes: Parker would contribute funds to purchase and remodel homes and Boothby would contribute "sweat equity" by doing the necessary work. They agreed to split sale profits equally after reimbursing Parker for his outlays.
In 2002, Boothby found undeveloped land in Lancaster (the Property), which the two men purchased for $495,000. During escrow, they received an offer for the Property that would yield them each a profit of $250,000. They declined the offer and formed a corporation called Fresh Start Developments (Fresh Start) to take title. They planned to build condominiums. Before escrow closed, Parker informed Boothby that he wanted title to be in his name alone. Boothby quitclaimed his right to ownership of the Property.
The men agreed that Parker would fund preparations for developing the Property and Boothby would facilitate the process. They reaffirmed their agreement to share profits equally after reimbursing Parker. Boothby relocated to Lancaster to oversee the project, meeting with architects and engineers and learning the requirements for developing land. Parker paid Boothby's expenses, including rent, telephone, a truck, and a $2,000 weekly advance.
The partners considered selling the Property in 2003, when Parker was ill, and Boothby found a local developer who offered to purchase it for $3 million. Parker and Boothby decided not to sell the Property. Instead, they
To document this proposal, Boothby contacted Attorney Olga Karasik, who met with Boothby and Parker in January 2004. She understood that they were partners who agreed to share profits from the development project. She advised them about the risks of individual ownership, and suggested holding title through a California limited liability company. Boothby signed a retainer agreement identifying himself, Parker and Fresh Start as Karasik's clients. Karasik next met with Boothby, Parker and the developer from Lancaster to discuss the proposed development agreement.
In February 2004, Parker's friends and family convinced Parker to sever his relationship with Boothby. They believed that Boothby was taking advantage of Parker. Parker angrily demanded the keys to the truck he had acquired for Boothby's use, and would not answer Boothby's questions or confirm their partnership. He ceased paying rent on Boothby's apartment. They stopped communicating.
Karasik redrafted the development agreement to exclude Fresh Start, listing only Parker and the Lancaster developer as the contracting parties. She created a joint venture in which Parker received 75 percent of the profits and the developer received 25 percent. In March 2004, Karasik terminated her representation of Boothby, claiming a conflict of interest between Parker and Boothby. Afterward, Boothby learned of the joint venture agreement between Parker and the developer.
On February 8, 2005, Boothby sued Parker for breach of contract, breach of fiduciary duty, fraud, defamation, and emotional distress. Boothby asserted claims against Karasik and her law firm for malpractice and breach of fiduciary duty. Parker cross-complained for elder abuse, fraud and misrepresentation, alleging that he suffered from diminished mental capacity due to dementia, alcoholism and diabetes.
By special verdict, a jury found that Parker breached his fiduciary duty to Boothby, and acted with malice, fraud, oppression, or despicable conduct. The jury found against Karasik and her law firm for malpractice and breach of fiduciary duty. In a judgment entered May 4, 2007, Boothby was awarded $725,000 in economic damages against Parker and the law firm defendants, jointly and severally, and $350,000 in punitive damages against Parker and the Parker Family Trust.
The defendants appealed. This court affirmed the punitive damages award, but reduced economic damages from $725,000 to $325,000. Subsequently,
While Boothby's lawsuit was pending, and before judgment was entered, a temporary conservatorship was established for Parker in October 2005; this became permanent in February 2006. Boothby petitioned the probate court to direct Parker's conservator to pay the judgment. Parker resisted the petition.
The probate court ruled that (1) Parker's debt to Boothby predates the conservatorship "because the debt was incurred at the time the tort occurred" and (2) all debts and expenses incurred before the conservatorship "must be paid by the Conservator regardless of whether that payment would impair the ability to provide the necessaries of life to the Conservatee." The court ordered the conservator to pay Boothby $350,000 in punitive damages and $137,958 in interest on the award.
Parker's conservators acknowledge the mandatory statutory language applying to debts incurred before creation of the conservatorship, versus the "necessaries of life" discretion afforded to debts incurred during the conservatorship. They posit that the debt in this case was incurred "during the conservatorship" — and is therefore discretionary — because the judgment Boothby obtained against Parker was entered after the conservatorship was established. In the conservators' view, because Boothby became a judgment creditor after the jury rendered its verdict, "the `debt' Boothby seeks to satisfy clearly post-dates the Conservatorship."
Our conclusion that the Legislature intended for conservatees to be liable for tortious acts is fortified by Civil Code section 41, which states that persons of unsound mind are liable for exemplary damages if they are capable of knowing that the act was wrongful "at the time of the act." This statute underscores that responsibility for punitive damages arises on the date the wrongful act was committed, not when a jury verdict or judgment is rendered. In this instance, Parker tried — and failed — to prove at trial that he suffered from diminished mental capacity due to dementia, alcoholism and diabetes. Thus, the jury believed that Parker knew his act was wrongful "at
The conservators maintain that Boothby cannot recover because the jury verdict "makes no mention of when either breach of contract or the tort [(breach of fiduciary duty)] occurred." It is evident — indeed it is res judicata, in light of the prior appeal — that the tort occurred and Boothby's claim accrued in 2004, when Parker and Attorney Karasik secretly excluded Boothby from the agreement to develop the Property, to prevent him from profiting from the sale of the condominiums that were to be built. Boothby sued in February 2005, before the conservatorship was created.
The conservators argue that even if the debt for punitive damages was incurred before the conservatorship was created, section 2430 "should not be interpreted so harshly as to mandate payment when to do so would deprive the Conservatee of the `necessities of life.'"
A review of statutory history indicates that the Legislature once agreed with the conservators' line of reasoning. The Probate Code formerly applied the "necessaries of life" exception to debts incurred either before or after creation of the conservatorship. (Former § 1858; see Stevenson v. Superior Court (1970) 9 Cal.App.3d 904, 906-907 [88 Cal.Rptr. 462] [stating that former § 1858 excepts the necessaries of life from the payment of debts incurred before creation of the conservatorship].)
The judgment is affirmed.
Chavez, J., and Ferns, J.,