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In re Estate of Kraus

April 27, 2010


APPEAL from a judgment of the Superior Court of Los Angeles County, Reva Goetz, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed. (Los Angeles County Super. Ct. BP106406).

The opinion of the court was delivered by: Turner, P. J.



This appeal arises out of a Probate Code sections 850 and 859 petition by two residuary trust beneficiaries-the Regents of the University of California and the Make-A-Wish Foundation of Greater Los Angeles-for restitution of funds. Objector, David Kraus, appeals from a December 19, 2008 judgment and orders after a court trial.*fn1 The probate court ordered David to return $197,402 to a court appointed representative of the Estate of Janice Helene Kraus and to pay statutory double damages of $394,804. (Prob. Code, §§ 850 et seq., 859.) All further statutory references are to the Probate Code unless otherwise noted.) We affirm the judgment.


A. Pleadings

The two beneficiaries filed an August 29, 2007 petition for transfer and return of property. The two beneficiaries alleged as follows. Janice had executed a will on December 9, 2003. On December 9, 2003, the Janice Helene Kraus Trust (the trust) was created. The trust was amended on May 12, 2005. On October 22, 2006, David's sister, Janice Helene Kraus, was dying of cancer. Janice was unmarried, did not have any children and she was in hospice care. On October 22, 2006, David had Janice execute a durable power of attorney in his favor. At the time, Janice was semi-comatose. On the morning of October 23, 2006, David closed several of Janice's bank accounts and appropriated the funds for himself. The money in those accounts belonged to the trust. Janice died on October 24, 2006 at 7:50 a.m.

The two trust beneficiaries sought to recover the misappropriated funds. The two beneficiaries also sought restitution from California National Bank for turning over the funds to David. The present appeal does not involve any claims against California National Bank. In his March 4, 2008 response to the petition, David denied he was guilty of any wrongdoing.

B. Evidence

A court trial commenced on July 28, 2008. At issue were moneys in Janice's accounts; funds withdrawn by David under a void power of attorney on October 23, 2006. Janice died the next day on October 24, 2006. The bank accounts in question, and the amounts David withdrew, were as follows: four California National Bank certificates of deposit naming Janice and David's mother, Irene, as beneficiary in the amounts of $18,432.24, $28,929.43, $44,061.56, and $51,252.80; $9,385.07 from Janice and Irene's Wells Fargo Bank joint checking account; and $14,767.93 from Janice's Washington Mutual Bank checking account.

Janice's attorney, Jack A. Thompson, testified as follows. Janice signed her will on December 9, 2003. Janice's will provided the funds in her bank accounts pour over into her trust. The beneficiary of Janice's will was the trust. Janice executed the trust instrument on December 9, 2003. The trust was amended on May 12, 2005. The beneficiaries were each to receive 50 percent of the trust residue. Mr. Thompson became the trustee of the trust upon Janice's death on October 24, 2006. Janice had disinherited David for two reasons. First, he had a bad temper and she was afraid of him. Second, he had refused to return $160,000 that Irene had given him to hold for her benefit. Mr. Thompson had prepared Irene's estate plan as well as Janice's. The money in the accounts at issue belonged to Janice and not to Irene.

On November 9, 2006, after Janice's October 24, 2006 death, Mr. Thompson began marshalling the trust assets. On November 9, 2006, Mr. Thompson learned that David had gained access to Janice's banks accounts through a purported power of attorney. Bank records substantiating the withdrawals were received in evidence. As a result, on November 13, 2006, Mr. Thompson, as the successor trustee, wrote David and stated in part: "On November 9 and 10, 2006, I appeared at the following banks: Washington Mutual, Citibank and California Bank. I learned, much to my chagrin and astonishment, that you had terminated all checking, money markets, CDs and IRA accounts - - - one day prior to Jan's death. [¶] My fiduciary duty as Trustee is to explain why funds belonging to Jan were withdrawn from the aforementioned financial institutions one day prior to her death." On December 15, 2006, David responded to Mr. Thompson's November 13, 2006 letter. David asserted the moneys in most of the accounts were intended to be used for Irene's care. As to funds in the California National Bank, David acknowledged they were inadvertently "pulled by error." On August 8, 2007, Mr. Thompson, in his capacity of successor trustee of the trust, assigned all "choses in action and claims" against David to the beneficiaries.

Irene, Janice's and David's mother, died on March 10, 2007 prior to the court trial. At 91 years of age, Irene received Medicare and social security benefits. Also, Irene was the beneficiary of Janice's $20,000 life insurance policy. Further, Irene was a beneficiary of Janice's pension plan. In Mr. Thompson's opinion, Irene's future care was adequately funded under her estate plan.

Irene had also disinherited David in the event he survived Janice. In her will, Irene demanded that David and his wife return $160,000. Irene's June 2, 2005 will included the following provision: "I have given during my lifetime certain sums of money to DAVID S. KRAUS and my daughter-in-law JOAN L. KRAUS to be held as custodians for my benefit. These sums, as of the date of this Will, are in the approximate amount of $160,000.00. I hereby order that such funds, including any increases thereon, be made a part of the residue of my estate and be distributed as per Paragraph Fifth of this, my Will." David never returned the $160,000 referenced in ...

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