Coffey v. Rothschild

Opinion

The beneficiary of a life insurance policy petitioned the probate department of the Sonoma County Superior Court to reopen the final account of a former estate conservator and to surcharge that conservator for the loss of policy benefits resulting from a breach of duty in allowing the policy to lapse. The former conservator, John David Rothschild, appeals from a judgment of the probate court setting aside his final accounting and discharge and surcharging him in the sum of $13,500 and accumulated interest, payable to the policy beneficiary, the respondent, John E; Coffey. We affirm the judgment.

The facts are as follows. On October 1,1962, John J. Coffey (Jack Coffey) was issued a guaranteed renewable group term life insurance policy (number 9852) by Cal Western Life Insurance Company. The policy had a death benefit of $13,500 payable to John E. Coffey, Jack Coffey’s son. Semiannual premium payments were due on April 1 and October 1 of each year. If payment was not received on or before the due daté, the policy would lapse. However, the lapse could be automatically cured and the policy reinstated if payment was received within 60 days of the premium’s due date.

In 1977, Jack Coffey suffered a stroke. The following year his estate was placed in conservatorship. Respondent was appointed conservator of his father’s estate and served in this capacity until relieved of the responsibility by appellant John David Rothschild who became the successor conservator. The record reflects that a stipulation in open court on February 19, 1981, brought about an agreement that respondent would resign the conservatorship and that appellant would be appointed in his place. Respondent’s final accounting reveals he concluded his conservatorship activity on March 16, 1981. Appellant’s first and final accounting reveals he commenced his activities as conservator on March 17, 1981. Appéllant filed his first and final accounting on October 20, 1981, which covered the period from March 17 to September 29, 1981. However, he continued to pay important obligations and debts of the conservatee’s estate until his discharge as conservator in early December, 1981.

In November 1982 respondent was informed by his attorney that several life insurance policies had lapsed before Coffey’s death. Among them was the Cal Western policy number 9852 which had lapsed on October 1, 1981 due to failure to pay the requested premium of $196.87. The 60-day reinstatement period had passed on November 30, 1981 without the premium having been paid. The policy lapse was not mentioned in Rothschild’s October 20th final accounting nor was the matter otherwise brought to the court’s attention at the time of the hearing to settle the account. The policy was not listed as an asset on Rothschild’s inventory, nor had it been listed on the respondent’s inventories. Respondent, upon learning of the lapsed policy, petitioned the court to reopen Rothschild’s final accounting as conservator and to surcharge him for the lost insurance proceeds.

At the hearing on the petition, Dorothy Gleason, manager of the policyholder service department of the insurance agency which administered the group plan, testified that the last premium payment for policy number 9852 was made on April 20, 1981, covering the premium due on April 1, 1981. Appellant’s final accounting shows that he had made the payment. Mrs. Gleason testified that since 1978 notices had been sent to a post office box established for the conservatorship. She testified that Cal-Western, in addition to sending out the premium due notice, mails three additional notices advising of a lapsed policy where a premium payment had not been received and that a member of her staff spoke with Rothschild’s office by telephone, on November 24, 1981, regarding the lapsed policy. Respondent John E. Coffey testified that he had given Rothschild the only key to the conservatorship’s post office box when the latter took over the conservatorship.

Rothschild’s testimony acknowledged that he had made the April premium payment but stated that he was unaware that a further premium payment was due in October. He admitted making no effort to determine the terms of the policy and testified that respondent had never given him a copy of the policy. He denied having received the premium due notice or any of the subsequent reminder notices and testified that his secretary had not informed him of a conservation call from the agent’s office.

The parties stipulated that at the time the policy lapsed Jack Coffey was in such ill health he was no longer insurable.

Statutory authority provides that the right of a conservator to terminate a life insurance policy may be exercised only after authorization or direction by court order. (§ 2459, subds. (b)(1), (c).) Further, with respect to any transaction where court authorization was required, but not obtained, the transaction is subject to review by the court upon the next succeeding accounting of the conservator occurring after the transaction. (§ 2625.) Here, the life insurance policy constituted a part of the estate subject to appellant’s conservatorship. The clear statutory obligations imposed upon appellant, required that the matter of its termination be brought to the probate court’s attention. It was not. The order of the probate court settling appellant’s account, like an order settling the account of a trustee, executor or administrator, is conclusive as to all matters passed upon but is not binding as to those matters not passed upon. (Lazzarone v. Bank of America (1986) 181 Cal.App.3d 581 , 591-592 [ 226 Cal.Rptr. 855 ]; see also Estate of de Laveaga (1958) 50 Cal.2d 480 , 487 [ 326 P.2d 129 ].)

Appellant argues that the absence of an accounting disbursement entry showing payment of the October premium constitutes a “negative sort of disclosure of nonpayment,” since respondent was aware of the policy’s existence and had himself made premium payments. Thus, he argues, we should treat the nonpayment as a disclosed fact, rendering inapplicable the misrepresentation by omission exception to the res judicata provision of section 2103, subdivision (a). We reject appellant’s position. To do otherwise would require acceptance of a convoluted reasoning process that converts nondisclosure into disclosure and excuses the performance of statutory duties required in the management and control of the conservatee’s estate.

Appellant next contends that the superior court, while sitting in probate, is without the jurisdiction or authority to surcharge the conservator for a loss suffered not by the estate, but by the beneficiary of an insurance policy which was a part of the estate.

Appellant readily concedes that the probate court has the power to surcharge an errant conservator for the benefit of the estate (e.g., Estate of Hilde (1952) 112 Cal.App.2d 189 [ 246 P.2d 79 ]), but asserts that no authority exists to render such an assessment in favor of a third party. We are unaware of any case which addresses this question. Therefore, we must examine the statutory scheme surrounding the probate court’s authority to surcharge a conservator.

Collateral to this contention is appellant’s assertion that the action below deprived him of his constitutional and statutory right to a jury trial. The court addressed this issue at length in Estate of Beach (1975) 15 Cal.3d 623 , 642-644 [ 125 Cal.Rptr. 570 , 542 P.2d 994 ].

In Beach, trust beneficiaries contested the executor’s accounting, alleging negligence in his handling of estate assets and demanded a jury trial of the factual issues raised by the contest. The probate court rejected the jury demand and, following court trial, found against the contestants. They appealed, urging inter alia, error in denying their request for a jury. The Supreme Court affirmed the judgment and addressing the jury trial contention declared unequivocally that “There is no right to a jury in probate proceedings unless that right is granted by statute. ” (Id. at p. 642.) In explaining why claims for mismanagement of a probate estate are inappropriate for jury resolution, the court noted: “Such claims, unlike ordinary claims for negligence or malpractice, are necessarily based on conduct that is subject to the independent control and supervision of the very court before which the claim must be asserted. As we said in Estate of Sanderson [1887] 74 Cal. 199 , 208 [ 15 P. 753 ]: ‘. . . the proceeding in probate for the settlement of an account is sui generis, bearing but a distant and incomplete analogy to the procedure for an accounting in equity. The executor or administrator derives his power to act as such from the will, or order of the court; but in his conduct of the affairs of the estate, he is subjected largely to the discretion and control of the court. The court is bound to protect the estate, and, as far as may be, the rights of all concerned. . . .’ [Citation.] In short, to subject the court’s determination of the propriety of an executor’s acts in the course of administering the estate to contradiction by a jury verdict would tend to dilute and undermine the court’s ongoing responsibility for detecting and correcting executorial mismanagement.” (Id. at p. 643.) The sound reasoning of the Beach and Sanderson courts is applicable to the case before us.

As the probate court had jurisdiction to hear the objections from which this claim for breach of duty arises, there is clearly no right to a jury trial.

There was clearly sufficient evidence to support a finding that Rothschild breached his duty in permitting the policy to lapse. Evidence was presented at trial that Rothschild knew the policy existed and had paid one premium on it; that Cal-Western Life Insurance Company mailed a premium due notice and several subsequent default notices to the conservatorship’s post office box; that the conservator regularly had the conservatee’s mail picked up at his post office box; that the insurance agency had made a conservation call to Rothschild’s office informing his secretary of the policy’s status; that Rothschild had made no effort to investigate the terms of the policy; that Rothschild had copies of John Coffey’s accounting which showed the previous timing of payments during 1978, 1979 and 1980. It was clearly reasonable for the probate court to conclude Rothschild had breached his duty to exercise ordinary care and diligence in the management of conservatorship assets.

Appellant contends that respondent was at least guilty of contributory fault leading to his own loss. He asserts that the trial court either failed to consider this issue or, having considered it, failed to decrease the judgment to reflect the uncontroverted evidence of substantial fault by the respondent. Appellant predicates the issue on two evidentiary matters: first, respondent’s failure, while serving as conservator, to list the policy in the conservatorship inventory on three occasions; and second, because the accounting, a copy of which had been served by mail upon respondent at his request, did not indicate payment of the October premium, respondent should have detected this omission and brought it to appellant’s attention or taken any other steps to avoid forfeiture of the policy.

Looking initially to the facts upon which appellant makes his claim of comparative fault, we find they are legally insufficient to support his position. Respondent’s earlier failure to inventory the policy is without relevance and causal nexus where, as here, appellant’s actual knowledge of the policy’s

The position we take in no way dilutes the duty of a beneficiary or other interested person from acting by objection on what they perceive to be a conservator’s dereliction based on transactional facts, fairly stated, in an interim or final accounting. (See Lazzarone v. Bank of America (1986) 181 Cal.App.3d 581 , 597 [ 226 Cal.Rptr. 855 ].)

V

As the issue was squarely raised in the court below, and here, we address the question of whether the doctrine of comparative fault is, in any event, an appropriate consideration in a conservatorship proceeding to reopen an accounting and surcharge the conservator for damage sustained by a beneficiary due to the conservator’s failure to exercise ordinary care and diligence. We conclude it is not.

The seminal case of Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [ 119 Cal.Rptr. 858 , 532 P.2d 1226 , 78 A.L.R.3d 393 ] established a comparative fault doctrine for California “. . . in all actions for negligence.” (Id. at p. 829.) The proceeding before us is not an “action for negligence.” It is a statutory proceeding within the exclusive jurisdiction of the probate department of the superior court. The statutory scheme expressly provides for surcharging the conservator in certain instances where, without prior authorization, approval or confirmation by the court, the conservator has undertaken a transaction, violated his duty of ordinary care and diligence and has caused a loss (§ 2625). Nothing in the statute authorizes or suggests a fault weighing process in the surcharging procedure. The conservator need

Having determined that the doctrine of comparative fault does not apply to this proceeding, we need not address appellant’s further contention that the lower court failed to make a specific finding on the issue.

The judgment is affirmed.

Kline, P. J., and Smith, J., concurred.

Appellant’s petition for review by the Supreme Court was denied January 28, 1987.