Massachusetts Appeals Court Affirms Ruling Restoring Nursing Home-Bound 83-Year Old Widow's Ownership Of Over $2.5 Million In Real Estate, Other Assets Pilfered By Sleazy Son, Daughter-In-Law; Fiduciary Relationship Among Parties Shifted Burden Onto Defendants To Prove Transactions Were Free From Fraud, Undue Influence

From a recent story in WealthManagement.com:

• The near epidemic of financial exploitation of the elderly and infirm came into sharp focus in the Massachusetts Appeals Court’s decision on Nov. 2, 2016 involving the guardianship of Alice Migell, a nursing home-bound 83-year-old widow. (Guardian v. Migell, 2016 Mass. App. Unpub. LEXIS 1056 (Nov. 2, 2016)) On behalf of Alice, a complaint in equity was filed against her son and daughter-in-law to recover over $2.5 million in assets after an investigation by the local protective services agency revealed that Alice was the victim of a scheme to strip her of everything.
  
  Alice’s son, Andrew, and his wife, Kai, failed to win reversal of judgments holding them guilty of criminal contempt of court and recovering real estate and money that they’d taken from her. A key aspect of the case was the fiduciary relationship that Andrew and Kai had created toward Alice. Andrew was a trustee and acted under a power of attorney for Alice. Both Andrew and Kai boasted about how they did everything for Alice because she couldn’t take care of herself. They tried to use that relationship as a justification for, if not entitlement to, keeping proceeds from selling property held in trust and receiving outright conveyances of other valuable real estate. As discussed below, this proved to be their undoing under the Massachusetts rule for burden shifting in transactions that benefit a fiduciary.
  
  Disturbing Basic Facts
  
  Alice’s husband Bruce died in 2006, while she was hospitalized. They’d been married for over 40 years and had amassed a sizeable estate. Alice is the primary beneficiary of Bruce’s estate. The Appeals Court agreed with the trial judge that Andrew “had a plan to obtain transfers of property Alice owned or reasonably expected to inherit.” Several valuable real estate properties were owned in a nominee realty trust with Bruce as sole beneficiary. Andrew was a trustee but obtained a transfer of beneficial interest from Bruce shortly before his death. Investment properties in New Hampshire and Florida had also been held in the nominee trust, but Andrew sold them and kept the money. Alice held title to a vacation home in her name. Two other properties that Alice owned when Bruce died were deeded over to Andrew shortly after Bruce’s death, which the guardian was able to recover outside of the lawsuit.
  
  Appeals Court Ruling
  
  The Appeals Court upheld the trial court’s decision to restore title to the real estate and order Andrew to turn over the sale proceeds. The court also agreed that the trial judge properly found Andrew’s wife, Kai, to be liable since she received some of the property or use of the sale proceeds. Indeed, Andrew had reconveyed one property to himself and Kai. As a result, transfers of title that rendered Alice essentially destitute were reversed, so that she’ll benefit from Bruce’s estate as he’d intended.
  
  Alice’s Standing
  
  Andrew and Kai’ argued on appeal that Alice had no standing because she didn’t own the properties at issue in the trial. The Appeals Court held otherwise, concluding that under Bruce’s estate plan, his widow was intended to be its primary beneficiary. The facts clearly established that Andrew worked continuously on his plan to deprive Alice of her expected inheritance, giving her standing to recover it. Accordingly, the equitable relief to restore these assets was proper. It should also be noted that courts of equity have extraordinary latitude to grant relief for protected persons, such as those under guardianship and conservatorship like Alice.
  
  Fiduciary Relationship Shifted Burden of Proof
  
  On appeal, just like they did at trial, Andrew and Kai argued that there was insufficient evidence against them for Alice to gain back the property and money. The Appeals Court, however, agreed with the trial judge’s determination that both Andrew and Kai stood in a relationship of trust and confidence toward Alice. Although they were defendants in this action, and so wouldn’t ordinarily bear the burden of proof, the finding of a fiduciary relationship shifted the burden of proof so that Andrew and Kai were required to prove that challenged transactions weren’t the burden of fraud or undue influence.
  
  Andrew and Kai didn’t appear at trial or offer any testimony concerning the challenged transactions so the record was barren of any evidence that could show these challenged transactions were proper. It was incumbent on the defendants, as a result of burden shifting, to demonstrate the circumstances of the transactions and their intended benefit to Bruce. As a matter of common sense, although the Appeals Court decision is silent on this point, one is left to wonder where such evidence could have been obtained.
  
  Criminal Contempt
  
  The judgment to recover the assets followed an earlier decision, also affirmed by the Appeals Court, sanctioning Andrew and Kai for more than $550,000 in expenses that Alice incurred to defend against the “plan” to divert to Andrew and Kai all that Alice had, and so render her destitute. That judgment included an injunction freezing Andrew and Kai’s assets until Alice has been made whole.
  
  Andrew filed for bankruptcy shortly after the Appeals Court upheld that judgment in 2014. During the bankruptcy case, which was ultimately dismissed, it became apparent that Andrew transferred ownership in a real estate investment property to Kai and their daughter and that both defendants put a homestead declaration on a second property. The obvious intent was to shield these valuable assets from being reached to satisfy the judgment.
  
  Both Andrew and Kai were found guilty of criminal contempt, with Andrew receiving a 45-day jail sentence and Kai receiving 250 hours of community service. They appealed, essentially arguing that what they did wasn’t so bad, didn’t harm Alice and wasn’t willful. If anything, the argument went, a finding of civil contempt was the most that should have entered against them.
  
  The Appeals Court rejected all of these arguments. Clearly, each transaction violated an injunction that forbade any transfer of assets, and the violations were willful because the defendants volitionally committed the acts on which the convictions were grounded. Indeed, both Andrew and Kai showed contempt for the court’s authority, such as by Andrew’s “flippant statements” about the transfer of the investment property to Kai and their daughter and the timing of the homestead declaration that occurred just days after their appeal failed.

For the story, see Estate Plan Protects Widow From Son's Breach of Fiduciary Duty (In Migell, a Massachusetts Appeals Court ordered that real estate and other assets be returned to elderly, infirm woman).

For the court ruling, see O'Regan v. Migell, No. 16-P-348 (Mass. App. Novenber 2, 2016).