SHIFTING THE BURDEN OF PROOF TO THE ABUSER IN ELDER FINANCIAL ABUSE LITIGATION

I. INTRODUCTION.

            Evidence of elder financial abuse is often missing or unavailable at the time of trial. Testimony of the elder is frequently problematic because of physical and cognitive problems or because the elder has died; documents are many times lost or destroyed. Such problems of proof cause the placement of the burden of proof to assume even greater importance in elder financial abuse litigation than in other civil cases. In elder financial abuse litigation, the party with the burden of proof is often the loser. Thus, the ability of a plaintiff to shift the burden of proof to the defendant may be the difference between winning and losing. This article examines one method of shifting this burden to the abuser.

II. A BRIEF STATUTORY HISTORY OF ELDER FINANCIAL ABUSE.

            In 1982, a growing awareness that elderly and disabled adults were suffering from neglect and abuse resulted in the enactment of the Abuse of the Elderly and Other Dependent Adults Act. (Stats.1982, c.1184, § 3, codified as W & I Code §§ 15600 et seq.) The act sought to promote the protection of such persons by gathering data on the prevalence of incidents of suspected abuse through mandatory reporting to government social services agencies. The act included a statutory statement of purpose, which recognized simply that elderly and dependent adults “constitute a significant and identifiable segment of the population and that they are more subject to risks of abuse, neglect and abandonment.” (W & I Code § 15600.) The act only covered physical and psychological abuse and neglect and did not address the economic exploitation of elders.

            In 1985, the act was first amended. (Stats.1985, c.1120, § 7.) The statement of purpose was revised to reflect that “[m]ental and verbal limitations often leave [elders] vulnerable and incapable of asking for help and protection.” (W & I § 15600(c).) In a section defining terms, the amendment also coined the term “fiduciary abuse,” which was limited to adults with physical or mental limitations and was defined as the taking of property by “any person who has the care or custody of, or who stands in a position of trust” to the victim. Fiduciary abuse occurred when such a person “takes, secretes, or appropriates [the dependent adult’s] money or property.” (W & I Code § 15610(f).) Incidents of fiduciary abuse were then included in those required to be reported. (W & I Code § 15630.)

            In 1986, the definition of fiduciary abuse was expanded by including all elders in the class of potential victims. (Stats.1986, c.769.)

            In 1991, the Legislature substantially revised the act and renamed it the Elder And Dependent Adult Civil Protection Act (EADACPA). (Stats.1991, c.774, § 1.) The amendment added a new Article 8.5 providing for civil remedies, which authorized the recovery of attorney’s fees where a plaintiff proved – by clear and convincing evidence – the existence of physical abuse, neglect, or fiduciary abuse. (W & I Code § 15657.) The statutory purpose was again revised to recognize that elderly and dependent adults are a “disadvantaged class,” that few civil cases on their behalf are prosecuted (W & I Code § 15600(h)), and that civil remedies were necessary to “enable interested persons to engage attorneys to take up the cause of abused” persons (W & I Code § 15600(j)).

            In 1998, the term “fiduciary abuse” was changed to “financial abuse” and its definition was expanded from “any person who has the care or custody of, or who stands in a position of trust [to the elder]” to any “person, including, but not limited to, one who has the care or custody of, or who stands in a position of trust to [the elder].” (Stats.1998, c.946, § 5, codified as W & I Code § 15610.30.)

            In 2000, the definition of financial abuse was revised by applying it simply to any “person or entity” and by deleting the phrase “care or custody, or who stands in a position of trust.” It also added the phrase “or both” after “to a wrongful use, or with the intent to defraud.” (Stats.2000, c.442, § 5.)

            In 2004, the remedy for financial abuse was separated from that for physical abuse or neglect by adding section 15657.5, which lowered the standard of proof from clear and convincing evidence to a preponderance of the evidence and eliminated the requirement of proving recklessness, oppression, fraud, or malice. (Stats.2004, c.886.)

III. VULNERABILITY OFTEN RESULTS IN THE INAPPROPRIATE REPOSING OF TRUST IN OTHERS AND CREATES THE OPPORTUNITY FOR EXPLOITATION.

            The development of the law of elder financial abuse and the expansion of its reach to any person, not just to fiduciaries, reflected the growing awareness that significant numbers of elders suffer from mental and verbal limitations which often leave them vulnerable to abuse and incapable of effectively protecting themselves. (W & I Code § 15600(c).) Vulnerability often leads to the inappropriate reposing of trust in others and may result in the empowering of those who would seize or create opportunities to exploit elders through the application of undue influence. Whether abusers are family members, caretakers, or commercial sellers, they all exploit this diminished ability of many elders to protect themselves and their property from those who would take advantage of them. Thus, while EADACPA has expanded the reach of financial abuse from those in formal positions of trust (fiduciaries) to any person or entity, the essence of the exploitation remains the violation of the trust or confidence which the elder has placed, often inappropriately, in the abuser.

IV. CONFIDENTIAL RELATIONSHIPS ARE FOUNDED UPON THE REPOSING OF CONFIDENCE BY ONE PERSON IN THE INTEGRITY OF ANOTHER.

            A confidential relationship arises where one person comes to rely on the services of another and thereby establishes a relationship designed not to satisfy the needs of both parties, but primarily those of the entrusting party. In such relationships, one party becomes dependent upon the other and reposes confidence in the other’s fidelity. Confidential relationships arise in a variety of settings and may be founded on a moral, social, domestic, or merely a personal relationship. (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271.) The nature of the confidential relationship was described by United States Supreme Court Justice William J. Brennan, Jr. in the following terms:

“A confidential relation is not confined to any specific association of the parties. ‘Its essentials are a reposed confidence and the dominant and controlling position of the beneficiary of the transaction.’ . . . It exists when the circumstances make it certain that the parties do not deal on equal terms, but on the one side there is an overmastering influence, or, on the other, weakness, dependence or trust, justifiably reposed.” (In re Stroming’s Will (1951) 12 N.J. Super 217, 224, cited by Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271 at footnote 4.)

            Confidential relationships which are formally recognized are called fiduciary relationships. (Stevens v. Marco (1956) 147 Cal.App.2d 357, 374.) Thus, all fiduciary relationships are confidential, but only formally recognized confidential relationships are called fiduciary relationships. (See Frankel, Fiduciary Law (1983) 71 Cal.L.Rev. 795, cited by Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271.) Common examples of fiduciary relationships, both consensual and non-consensual, are between agents and principals, trustees and beneficiaries, executors and heirs, guardians and wards, conservators and conservatees, attorneys and clients, physicians and patients, and clergy and parishioners. Nevertheless, the essence of both confidential and fiduciary relationships is that the parties do not deal on equal terms; rather, the person in whom trust and confidence is reposed and who accepts that trust and confidence is in a superior position to exert unique influence over the dependent party. (Barbara A. v. John G. (1983) 145 Cal.App.3d 369, 382.)

            The close connection between confidential and fiduciary relationships has resulted in the terms often being used synonymously and has led to some confusion. (Herbert v. Lankershim (1937) 9 Cal.2d 409, 483; Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 270.) As one court observed:

“The statement in some of the cases that fiduciary and confidential relationships are synonymous obscures some significant differences. As our Supreme Court has stated, ‘[a] confidential relation may exist although there is no fiduciary relation . . . .’ [Citations.] Unlike confidential relations, fiduciary relations arise out of certain canonical relationships that are legally defined and regulated. Thus, to take just one of many possible examples, the Legislature has declared that the ‘relationship of . . . conservator and conservatee is a fiduciary relationship that is governed by the law of trusts . . . .’ (Prob. Code, § 2101); the law of trusts, a great deal of which is statutory, defines the nature of the fiduciary duties arising out of that particular fiduciary relationship with considerable precision. [Citation.] Because confidential relations do not fall into well-defined categories of law and depend heavily on the circumstances, they are more difficult to identify than fiduciary relations.” (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271.)

Thus, a fiduciary relationship arises in those contexts that the law has formally recognized as fiduciary; by contrast, confidential relationships arise wherever its specific characteristics are present.

“[T]he existence of a confidential relationship is a question of fact. There thus does not appear to be any requirement that it be objectively reasonable for the plaintiff (or the one who asserts the existence of the confidential relationship) to have reposed trust and confidence in the other: the question is only whether the plaintiff actually reposed such trust and confidence in the other, and whether the other ‘accepted the relationship.’ For this reason it is not possible to articulate rules about when confidential relationships may be said to arise: they may not arise where one might think they would (as between family members and relatives), and they may arise where one might think they would not (as between an adult and someone she had met only once or twice.)”  (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 272, at footnote 6.)

            Notwithstanding the vagueness of the range of relationships that can potentially be characterized as confidential, its essential elements have been expressed in the following terms:

“1) The vulnerability of one party to the other which 2) results in the empowerment of the stronger party by the weaker which 3) empowerment has been solicited or accepted by the stronger party and 4) prevents the weaker party from effectively protecting itself.” (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 272.)

            The vulnerability that is a necessary predicate of a confidential relationship often arises from advanced age, youth, lack of education, weakness of mind, grief, sickness, or some other incapacity. (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 272.) Advanced age in particular, coupled with a weakened mental and physical condition, often renders an elder easily manipulated and incapable of fully comprehending the implications of a transaction which is being urged upon the elder. (Stenger v. Anderson (1967) 66 Cal.2d 970, 979; O’Neil v. Spillane (1975) 45 Cal.App.3d 147, 153; Kent v. First Trust & Savings Bank (1951) 101 Cal.App.2d 361, 370.) And it is precisely this vulnerability which the Legislature recognized in enacting EADACPA and which lies at the core of elder abuse. (W & I Code § 15600(c).) That is, the vulnerability of the elder due to age and age-related disabilities leads to the inappropriate reposing of confidence in the abuser, which in turn, empowers the abuser to wrongfully solicit or otherwise accept the elder’s property. Thus, elder financial abuse almost always arises out of a relationship which may be characterized as confidential.

V. THE EXPLOITATION OF A CONFIDENTIAL RELATIONSHIP IS ACCOMPLISHED THROUGH THE APPLICATION OF UNDUE INFLUENCE.

            While a confidential relationship is founded upon the vulnerability of a servient party resulting in the empowerment of a dominant party, the exploitation of that confidence is founded upon overreaching by the dominant party through the application of undue influence. Civil Code § 1575 defines undue influence as follows.

“Undue influence consists:

1. In the use, by one in whom a confidence is reposed by another, or who

    holds a real or apparent authority over him, of such confidence or

    authority for the purpose of obtaining an unfair advantage over him;

2. In taking an unfair advantage of another’s weakness of mind; or,

3. In taking a grossly oppressive and unfair advantage of another’s

    necessities or distress.”

            Undue influence is a shorthand legal phrase used to describe persuasion which exceeds accepted standards and approaches the boundaries of coercion. (Odorizzi v. Bloomfield School District (1966) 246 Cal.App.2d 123, 130.) The hallmark of such persuasion is the application of pressure on a mental, moral, or emotional weakness; thus, undue influence is sometimes referred to as “overpersuasion.” (Kelly v. McCarthy (1936) 6 Cal.2d 347, 364.) Actual misrepresentations of law or fact are not essential to undue influence. (Odorizzi v. Bloomfield School District (1966) 246 Cal.App.2d 123, 130.) As observed by one court:

“In essence undue influence involves the use of excessive pressure to persuade one vulnerable to such pressure, pressure applied by a dominant subject to a servient object. In combination, the elements of undue susceptibility in the servient person and excessive pressure by the dominating person make the latter's influence undue, for it results in the apparent will of the servient person being in fact the will of the dominant person.” (Odorizzi v. Bloomfield School District (1966) 246 Cal.App.2d 123, 131.)

            While undue influence need not occur in the context of a confidential relationship, it often does because an inability to effectively protect oneself is a predicate to both a confidential relationship and undue influence. (Wells Fargo Bank v. Brady (1953) 116 Cal.App.2d 381, 398.) Thus, undue influence arises out of the susceptibility of the servient person to overpersuasion by the dominant party. This susceptibility may range from total incapacity (Civil Code § 38), to an unsound mind (Civil Code § 39), to a mere lack of full vigor due to age, physical condition, emotional anguish, or a combination of such factors. (Odorizzi v. Bloomfield School District (1966) 246 Cal.App.2d 123, 131.)

VI. CONFIDENTIAL RELATIONSHIPS IMPOSE THE SAME DUTIES ON THE DOMINANT PARTY AS A FIDUCIARY RELATIONSHIP.

            A primary consequence of the fiduciary relationship is that the fiduciary is duty bound to the utmost good faith in his dealings with the principal, not only in form but in substance. (Webb v. Saunders (1947) 79 Cal.App.2d 863, 869.) This standard requires a high degree of honesty (Whittaker v. Otto (1961) 188 Cal.App.2d 619, 624), loyalty (Hickson v. Gray (1949) 91 Cal.App.2d 684, 686), integrity, and the most faithful service (Kinert v. Wright (1947) 81 Cal.App.2d 919, 925). As one court observed:

“[The act of the agent is] so fraught with responsibility and grave concern for the principal that it proceeds out of the highest considerations of confidence, which, as demanded by principles of equity, are preserved to the utmost in transactions involving the exercise of that authority.” (Young v. Young Holdings Corp. (1938) 27 Cal.App.2d 129, 148.)

Similarly, confidential relationships impose the same duty to act in the best interests of the servient party. (Herbert v. Lankershim (1937) 9 Cal.2d 409.) A description of this duty, adopted by the Supreme Court, provides:

“The law defines a confidential relation as any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter's knowledge or consent. A fiduciary relation in law is ordinarily synonymous with a confidential relation. It is also founded upon the trust or confidence reposed by one person in the integrity and fidelity of another, and likewise precludes the idea of profit or advantage resulting from the dealings of the parties and the person in whom the confidence is reposed.” (Herbert v. Lankershim (1937) 9 Cal.2d 409, 483.)

VII. A CONFIDENTIAL RELATIONSHIP RAISES THE PRESUMPTION OF UNDUE INFLUENCE AND SHIFTS THE BURDEN OF PROOF TO THE DEFENDANT.

            The “burden of producing evidence” is the obligation of a party to introduce evidence sufficient to avoid a ruling against him on the issue. (Evidence Code § 110.) Where that party introduces any evidence, the burden of producing evidence is satisfied and the judge may not grant nonsuit. (1 Witkin, Cal. Evidence (4th ed.2000) § 2, p. 156.) By contrast, the “burden of proof” is the obligation of a party to establish the requisite degree of belief in the mind of the trier of fact. (Evidence Code § 115.) Thus, in a civil case where a party with the burden of producing evidence offers evidence on the issue, and thereafter opposing evidence is introduced, the burden of proof requires the party to convince the trier of fact that its version of a fact is more likely than not the true version. (Beck Development Co. v. Southern Pacific Transportation Co. (1996) 44 Cal.App.4th 1160, 1205.)

            Both the burden of producing evidence and the burden of proof are, at least initially, on the party seeking the relief or asserting the defense. (Evidence Code §§ 500 and 550; Rancho Santa Fe Pharmacy, Inc. v. Seyfert (1990) 219 Cal.App.3d 875, 880.) Thus, in a claim for elder financial abuse, the plaintiff has the burden of both producing evidence and proving by a preponderance the occurrence of financial abuse as defined in W & I Code § 15610.30. (W & I Code § 15657.5(a).) Similarly, the plaintiff must produce evidence and prove each element in a cause of action for fraud. (Elkind v. Woodward (1957) 152 Cal.App.2d 170, 175.) During the course of a trial, the burden of producing evidence normally shifts from one party to another, depending on the nature and strength of the proof offered. (Scott v. Wood (1889) 81 Cal.398.) However, the burden of proof remains on a party unless a presumption is raised which causes it to shift. (Evidence Code § 606.) A presumption is an assumption of fact that the law imposes based upon the proof of another fact or group of facts (Evidence Code § 600), and serves the purpose of implementing some recognized public policy (Evidence Code § 605). The effect of a presumption is to impose the burden of proof upon the party against whom the presumption operates. (Evidence Code § 606.)

            In the context of a confidential relationship, where the dominant person gains an advantage over the servient person, a presumption arises that the transaction resulted from undue influence. (Odell v. Moss (1900) 130 Cal. 352, 357-358; Brison v. Brison (1888) 75 Cal. 525, 529. Brown v. Canadian Industrial Alcohol Co. (1930) 209 Cal. 596, 597.) This presumption shifts the burden of proof to the party who gained the advantage to show fairness and good faith in all aspects of the transaction. (Magee v. Brenneman (1922) 188 Cal. 562, 567; Stevens v. Marco (1956) 147 Cal.App.2d 357, 383; Campbell v. Genshlea (1919) 180 Cal. 213, 224.) In other words, the law will presume that the dominant person exercised his influence unduly to his own advantage, and the transaction will not be upheld unless he can disprove it. (Stevens v. Marcos (1956) 147 Cal.App.2d 357, 383.) The defendant may disprove the presumption by establishing that the servient person had independent advice, that he understood what he was doing, and that the transaction was the result of his own volition. (Ross v. Conway (1892) 92 Cal. 632, 636; Sparks v. Sparks (1950) 101 Cal.App.2d 129, 135; Stevens v. Marcos (1956) 147 Cal.App.2d 357, 383.)

            In the context of elder financial abuse, the shifting of the burden of proof to the abuser in commercial transactions such as insurance sales, reverse mortgages, or estate planning services is consistent with that which occurs in the context of donative transfers. Probate Code § 21350 provides that a gift is invalid where the instrument making the transfer is drafted by the recipient or a person related to the recipient. This prohibition however, may be overcome where the instrument has been reviewed by an independent attorney who counsels the transferor and examines whether the instrument is a result of fraud or undue influence. (Probate Code § 21351(b).) Thus, the same public policy supports the requirement that one who benefits from a transaction where the risk of abuse is high must shoulder the burden of proving that the transaction was free from undue influence.

VIII. CONCLUSION.

            Vulnerability, that is the inability to protect oneself, often leads to the inappropriate reposing of trust in others and empowers abusers to wrongfully deprive elders of their property. Sometimes the elder’s property is simply taken in the guise of a gift or testamentary transfer while other times property is taken in an unsuitable sale of goods or services. This vulnerability of the elder, in conjunction with its exploitation by the abuser, usually exhibits the characteristics of a confidential relationship. As such, the law imposes a duty of the utmost honesty and fidelity on the abuser. Where the abuser profits from the relationship, a presumption of undue influence is imposed that shifts the burden of proof from the plaintiff to the defendant. Since evidence of abuse is many times conflicting or unavailable, the party with the burden of proof often loses. Accordingly, shifting the burden of proof in elder financial abuse may be the difference between winning and losing.