Joan Dundas, et al. v. American Equity Investment Life Insurance Company, et al.

MOTION FOR SUMMARY JUDGMENT, OR ALTERNATIVELY, SUMMARY ADJUDICATION

 

MOVING PARTY: Defendant American Equity Investment Life Insurance Company and Defendant Joshua Manzano

RESPONDING PARTY(S): Plaintiffs Joan Dundas and Sidney Dundas

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS

Plaintiffs Joan and Sidney Dundas (“Plaintiffs”) bring the instant suit alleging one cause of action for elder abuse against defendants Joshua Manzano (“Manzano”) and American Equity Investment Life Insurance Company (“American Equity”). Plaintiffs allege Defendant Manzano, as an agent of Defendant American Equity, contacted Plaintiff Joan Dundas unsolicited in August of 2017, to sell her a 40-year annuity.  (Compl. ¶¶ 17, 29-32.)  Plaintiff was 73 years old when she purchased the annuity from Manzano that ate up most of her savings, and the annuity would not mature for 10 more years.  (Id. ¶ 32.)  Plaintiffs further allege Defendant Manzano misstated Joan Dundas’s net worth, assets, and financial objectives on the annuity’s suitability acknowledgment form, which Defendant American Equity reviewed and approved.  (Id. ¶ 35.) Plaintiffs allege that Defendant American Equity knew or should have known of the fraud and missed numerous red flags when it ratified and adopted the conduct of Defendant Manzano. (Id. ¶¶ 55-62.)

Defendant American Equity now moves for summary judgment or, in the alternative, summary adjudication. Defendant Manzano joined in the motion.  Plaintiff opposed.  

TENTATIVE RULING:

Defendants’ Motion for Summary Judgment is DENIED.

Defendants’ Alternative Motion for Summary Adjudication of Punitive and Treble Damages is DENIED.

Defendants’ Motion for Summary Adjudication of double damages under Probate Code section 859 is GRANTED.

Moving party to give notice.

DISCUSSION:

Motion for Summary Judgment, or Alternatively, Summary Adjudication

I. Evidentiary Objections

Pursuant to CCP § 437c(q), this court rules only on objections material to the disposition of this motion, as follows:

Defendant Manzano’s objections to the Declaration of Sidney Dundas 1-4 are OVERRULED.

Defendant Manzano’s objections to the Declaration of Maurice Lieberman 1-30 are OVERRULED.

Defendant American Equity’s objections to the Declaration of Ben Perlmutter 1 and 2 are OVERRULED. 

Defendant American Equity’s objections to the Declaration of Sidney Dundas 4, 5, 6, 7, 8, 9, 10, 11 are OVERRULED.

Defendant American Equity’s objections to the Declaration of Maurice Lieberman 12-29 are OVERRULED.

II. Legal Standard

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843. In analyzing motions for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.  Thus, summary judgment is granted when, after the Court’s consideration of the evidence set forth in the papers and all reasonable inferences accordingly, no triable issues of fact exist and the moving party is entitled to judgment as a matter of law.  Code Civ. Proc. § 437c(c); Villa v. McFarren (1995) 35 Cal.App.4th 733, 741. 

As to each claim as framed by the Complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520. Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” Dore v. Arnold Worldwide, Inc.¿(2006) 39 Cal.4th 384, 389. A defendant has met its burden of showing that a cause of action has no merit if it demonstrates the absence of any single essential element of plaintiff’s case or a complete defense to plaintiff’s action.  Code Civ. Proc. § 437c(o)(2); Bacon v. Southern Cal. Edison Co. (1997) 53 Cal.App.4th 854, 858.  Once the defendant moving party has met the burden, the burden shifts to the plaintiff to show via specific facts that a triable issue of material facts exists as to a cause of action or a defense thereto.  § 437c(o)(2). 

III. Analysis

In analyzing motions for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.)

1. Allegations in Complaint

Plaintiffs allege “[i]n August 2017, Plaintiff Joan Dundas,” then 73 years old, “received either a cold call or door knock from Defendant Manzano.” (Compl. ¶¶ 29, 32.) Defendant Manzano then proceeded to sell Plaintiff Joan Dundas “a 40-year annuity complete with 10 years of onerous surrender charge penalties that locked up all her life savings.”  (Id. ¶ 32.) The annuity included a $270,000 premium, and “rolled-in” her 401-K. (Id. ¶¶ 49, 51.) The annuity would not mature until Plaintiff Joan Dundas was 83 years old. (Id.) The money invested into this contrived annuity was the community property of both Plaintiff Joan Dundas and Plaintiff Sidney Dundas. (Id. ¶ 32.)

Plaintiffs allege Defendant Manzano filled out the suitability acknowledgment of the annuity contract in his own handwriting, and with the following false statements: (1) Plaintiff Joan Dundas’s net worth was $1 million excluding her annuity and primary residence; (2) Plaintiff Joan Dundas’s total liquid assets were $589,000; (3) Plaintiff Joan Dundas’s total monthly expenses were only $4,900.” (Id. ¶¶ 35.) Plaintiffs allege that, in reality Joan Dundas’s “total net worth was her 401-K, which was approximately $270,000 and $250,000 in equity in her home. Plaintiff Joan Dundas’s total liquid assets were approximately $290,000 (her 401-K plus an additional $20,000 in savings and checking). Plaintiff Joan Dundas’s monthly expenses were approximately $6,800.” (Id. ¶ 37.) Later in the suitability acknowledgment, Defendant Manzano stated that Plaintiffs liquid assets were only $300,000.00. (Id. ¶ 40.) 

Plaintiffs allege Defendant proceeded to make “outrageous” financial objective rankings on the suitability acknowledgement that did not fit the realities of Plaintiffs’ life situation. (Id. ¶¶ 38, 39.) 

Under the terms of the annuity, Plaintiffs would incur a surrender charge if they attempted to withdraw funds beyond a set amount. (Id. ¶ 44.) Plaintiffs were not entitled to any payments during the first 10 years of the annuity contract. (Id. ¶ 45.) At the end of the 10-year maturity period, Plaintiff Joan Dundas would be 83 years old. (Id. ¶ 46.) By that point, Plaintiffs would receive only $3,297.88 per month under the annuity—their average monthly expenses were approximately $6,800. (Id.)

Plaintiffs allege Defendant American Equity “ratified and adopted the conduct of Defendant Manzano” during the compliance stage of the annuity sale by approving a suitability acknowledgement “contain[ing] such glaring fraud on its face.” (Id. ¶¶ 55, 56.) Plaintiffs allege American Equity “failed to adequately install safeguards in any reasonable manner to verify and audit the claims on the annuity applications.” (Id. ¶ 61.) 

Plaintiff Joan Dundas suffered a stroke in 2018. (Id. ¶ 53.) Plaintiffs allege “[b]ecause of the mounting expenses and lack of available funds with which to pay these expenses they could no longer afford to pay their mortgage and medical bills because all their money was tied up in the annuity.” (Id.) This forced Plainiffs to “sell their home and move into a small apartment.” (Id.)

2. Summary Judgment 

Defendants move for summary judgment of the Complaint, arguing Plaintiffs cannot provide evidence to support their single claim for elder abuse. “A defendant moving for summary judgment has the initial burden of showing, with respect to each cause of action set forth in the complaint, the cause of action is without merit. A defendant meets that burden by showing one or more elements of the cause of action cannot be established, or there is a complete defense thereto.” (Leyva v. Garcia (2018) 20 Cal. App. 5th 1095, 1101.)

First, Defendants contend that American Equity has not “taken” Plaintiffs’ property, because “Plaintiffs sent funds to American Equity in exchange for the Annuity Contracts.” (Men. 13: 1.) “At any point,” Defendants argue, “Plaintiffs have been able to, and still can, withdraw the annuities’ proceeds, subject to the terms of the Annuity Contracts.” (Id. 13: 2-3.) Moreover, Defendants contend that Plaintiffs continue to benefit from the annuity contracts and have not been denied funds from the contracts. Rather, Plaintiffs could and have withdrawn funds from the annuity. Defendants contend they have fulfilled all obligations under the contracts.

Second, Defendants contend that Plaintiffs “cannot establish that American Equity retained Plaintiffs’ funds for a wrongful purpose or with intent to defraud.” (Id. 3: 15-16.) Defendants assert they relied on information provided by Plaintiff Joan Dundas, who also verified the information in the applications and suitability forms. Relatedly, they assert that Mrs. Dundas entered into the contracts “knowingly and voluntarily” while working as a legal assistant at a law firm. 

Third, Defendants contend that Plaintiffs have not established that the information contained in the suitability forms was inaccurate. 

“Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following:

(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.

(2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.

(3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 15610.70.

(Cal. Welf. & Inst. Code 15610.30(a); see also Teselle v. McLoughlin (2009) 173 Cal. App. 4th 156, 174 [citing Welf. & Inst.Code, § 15610.30].)

“A person or entity shall be deemed to have taken, secreted, appropriated, obtained, or retained property for a wrongful use if, among other things, the person or entity takes, secretes, appropriates, obtains, or retains the property and the person or entity knew or should have known that this conduct is likely to be harmful to the elder or dependent adult.” (Id., subdiv. (b).) “[A] person or entity takes, secretes, appropriates, obtains, or retains real or personal property when an elder or dependent adult is deprived of any property right, including by means of an agreement, donative transfer, or testamentary bequest, regardless of whether the property is held directly or by a representative of an elder or dependent adult.” (Id., subdiv. (c).)

Defendants present evidence that on August 1, 2017, Mrs. Dundas signed and initialed the suitability acknowledgment form, dated August 1, 2017, that was submitted with her annuity application for Annuity Contract 1258602. (SSUMF 7.) On October 21, 2017, Mrs. Dundas signed (1) the annuity contract application, (2) the Choice 10 Indexed Annuity Disclosure, and (3) the Disclosure to Senior California Residents, all of which were submitted to American Equity for Annuity Contract 1258602. (SSUMF 6, 8, 9.) 

At the time Mrs. Dundas signed these documents, she was employed full-time at the law firm Mitchell Silberberg & Knupp as a legal assistant. She had been employed as a legal assistant at Mitchell Silberberg & Knupp for over 20 years. (SSUMF 3.) 

The Annuity Contract 1258602 was issued on or about January 3, 2018, effective December 18, 2017 in the amount of $271,962.61 with the premiums funded from Mrs. Dundas’s 401K. (SSUMF 10.) 

As an initial matter, it is undisputed that Mrs. Dundas signed the annuity contract and related documents. (See SSDMF 6-9.) There is no dispute as to the present value of the annuity. (SSDMF 29). 

In opposition, Plaintiffs provide evidence that in 2017, Mr. Dundas had about $5,000.00 in savings in an IRA, less than $25,000.00 in any savings/checking account and more than that in credit card debt. (SSAMF 71). Mrs. Dundas had about $290,000.00 in her pension plan and $3,000.00 in an IRA. (Id.) The Dundas owned approximately $200,000.00 in home equity and owed about $540,000.00 on the mortgage. (SSAMF 72.) The house was worth about $750,000.00. (Id.)

Plaintiffs dispute the financial representations made in the application and contend that it was Manzano who “made up” the idea that Plaintiffs had $589,000.00 or even $1,000,000.00 in liquid assets. (SSAMF 78.) Plaintiffs contend they had only told Manzano they had approximately $325,000.00 in liquid assets, which included Mrs. Dundas’ $290,000.00 pension plan and credit card debt. (Id.) Therefore, they argue the Suitability Acknowledgement Form’s representations—written by Manzano—were false. (SSAMF 79.) 

Plaintiffs also provide an expert declaration from Maurice Lieberman, who attests to 47 years of experience as a California licensed insurance agent, unit, branch, regional, and agency sales manager, Life Insurance Specialist, and trainer of life and health insurance agents and sales managers. (P’s Compendium of Evidence, Lieberman Decl., ¶ 2.) Lieberman attests that Defendant Manzano used “unsavory and illegal sales practices” or “bait and switch tactics” during the sale of the annuity. (Lieberman Decl. ¶ 5(A).) He goes on to explain that it would be unreasonable to sell Plaintiffs’ the subject annuity based on Plaintiffs’ financial and age situation. (Id.)   

Finally, in his Declaration, Plaintiff Sidney Dundas attests that once Joan became ill and could not work, the couple “did not have sufficient liquidity to pay [their] living expenses.” (Dundas Decl. ¶ 9.) Plaintiffs made limited withdrawals from the annuity that were not subject to penalties, but it was insufficient to meet their needs. (Id. ¶ 10.) Plaintiffs had to sell their home in mid-2019 as they “could not afford the mortgage payments.” (Id. ¶ 11.) He contends that “because the house was steadily appreciating at the time” of the sale, Plaintiffs “lost out on approximately $400,000 in appreciation based upon the current value of approximately $1,250,000 based upon comparable sales listed on Zillow.” (Id. ¶ 13.)

Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc.¿(2006) 39 Cal.4th 384, 389.) Doing so here, the court concludes Plaintiffs have established a triable issue of material fact as to each point raised by Defendants. 

Plaintiffs have established a triable issue regarding the obvious unsuitability of the annuity contract. This implicates the question, at minimum, of whether Defendants “should have known” their conduct was likely to harm Plaintiffs. Plaintiffs have likewise established a triable issue as to whether they faced financial harm by virtue of the annuity contract. 

Defendants have provided no authority supporting their contention that they cannot be liable for financial elder abuse because they relied on the information supplied by Mrs. Dundas. This ignores the reality of working with elders, who “are more subject to risks of abuse” than the general population. (Welf. & Inst. Code 15600(b).) That Mrs. Dundas worked as a legal assistant during this time is not dispositive. A jury could find it was unreasonable for Defendants to rely on this information, especially given the purported obvious inconsistencies or “red flags” in the Suitability Acknowledgment form.

In reply, Defendants attack the credibility of Plaintiff Sidney Dundas’s “sham” declaration, which they argue “was drafted solely to avoid summary judgment” and “completely contradicts his deposition testimony.” (Reply 2: 6-7.) Under D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, a “party cannot create an issue of fact by a declaration which contradicts his prior [discovery responses.]” Benavidez v. San Jose Police Dept. (1999) 71 Cal.App.4th 853, 860.) 

The court has reviewed Sidney Dundas’s declaration (P’s Compendium of Evidence, p. 5-8, Dundas Decl.) and compared the statements made therein to the statements made (or not made) by Dundas at his deposition. (D’s Supp. Reply Evidence, Exh. SS.) Dundas’s testimony at his deposition reflects that he was mostly unsure or “could not recall” matters related to the meetings with Defendant Manzano. (Id.) He could not recall details of Dundas’s financial situation near the time they contracted for the annuity, and did not know whether the information contained in the Suitability Acknowledgement Form was accurate as of August 1, 2017. (Id. 98: 307.) He did not remember if he discussed the same with Ms. Dundas or Defendant Manzano (Id.)

Plaintiff Dundas’s declaration, on the other hand, provides hard numbers on Dundas’s financial situation in 2017. (Sidney Dundas Decl. ¶ 3.) He also purports to recall details of the meeting with Defendant Manzano. He attests that “Joan never told Mr. Manzano anything that was false about her employment status or our savings,” and “made it clear that [they] only had approximately $300,000 in liquid assets.” (Id. ¶ 6.) 

While the comparison suggests some inconsistencies between statements made by Dundas at deposition and in his declaration, the evidence is not wholly contradictory. Moreover, directly conflicting testimony given by the same witness before trial and during trial is normally weighed by the trier of fact.  The trial court should use caution in applying the D’Amico principle. “A Summary Judgment should not be based on tacit admissions or fragmentary and equivocal concessions, which are contradicted by other credible evidence.” (Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 482.) Therefore, Dundas’ declaration is not a “sham,” and this court considers it with Plaintiffs’ opposition evidence. It is ultimately up to the trier of fact to judge the purported “inconsistencies” in Dundas’s testimony.

Accordingly, Defendants’ Motion for Summary Judgment is DENIED.

3. Alternative Motion for Summary Adjudication

In the alternative, Defendants move to summarily adjudicate Plaintiff’s claims for damages. Plaintiffs seek punitive damages under Welfare and Institutions Code section 15657 (Compl. ¶ 73); double damages under Probate Code section 859 (id. ¶ 74); and treble damages under Civil Code 3345. (Id. ¶ 75.)

First, Defendants contend double damages are unavailable under Probate Code section 859 because “Plaintiffs have not brought a cause of action under Probate Code section 850, nor have they produced evidence that would entitle them to relief under section 850 if they had.” (Mtn. 23: 1-2.)  This Court agrees with this argument.

Probate Code section 859 provides:

If a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to a conservatee, a minor, an elder, a dependent adult, a trust, or the estate of a decedent, or has taken, concealed, or disposed of the property by the use of undue influence in bad faith or through the commission of elder or dependent adult financial abuse, as defined in Section 15610.30 of the Welfare and Institutions Code, the person shall be liable for twice the value of the property recovered by an action under this part. In addition, except as otherwise required by law, including Section 15657.5 of the Welfare and Institutions Code, the person may, in the court’s discretion, be liable for reasonable attorney’s fees and costs. The remedies provided in this section shall be in addition to any other remedies available in law to a person authorized to bring an action pursuant to this part.

Accordingly, Defendants’ Motion for Summary Adjudication of double damages under Probate Code section 859 is GRANTED.

Second, Defendants contend that neither punitive damages nor treble damages under Civil Code section 3345 are available because “American Equity issued the Annuity Contracts requested by Plaintiffs based on information provided by Plaintiffs.” (Mtn. 23: 19-20.)   However, as discussed in this ruling, this factor is not dispositive. Plaintiffs have established a triable issue of material fact as to Defendants’ liability for elder abuse. Therefore, Plaintiff’s claims for punitive and treble damages survive. 

Accordingly, Defendants’ Motion for Summary Adjudication of Punitive and Treble Damages is DENIED.

Moving party to give notice.

IT IS SO ORDERED.

Dated:   October 16, 2023 ___________________________________