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When The Property of a Decedent Has Been Wrongfully Sold or Transferred – Right to Petition for Judicial Relief

When someone has died and their property has been wrongfully transferred to another, what can be done? 

The answer is that the following persons may file a petition requesting that the probate court make an order regarding the conveyance or transfer of property claimed to belong to the decedent or other person:

(1) a guardian, conservator, or any claimant, in the following cases:

            (a) where the conservatee is bound by a contract in writing to convey real property or to transfer personal property, executed by the conservatee while competent or executed by the conservatee’s predecessor in interest, and the contract is one that can be specifically enforced. [Prob. Code, § 850 subd. (a)(1)(A)]

            (b) where the minor has succeeded to the interest of a person bound by a contract in writing to convey property or to transfer personal property, and the contract is one that can be specifically enforced. [Prob. Code, §850, subd. (a)(1)(B)]

            (c) where the guardian or conservator or the minor or conservatee is in possession of, or holds title to, real or personal property, and the property or some interest therein is claimed to belong to another. [Prob. Code, §850, subd. (a)(1)(C)]

            (d) where the minor or conservatee has a claim to real or personal property title to or possession of which is held by another. [Prob. Code, §850, subd. (a)(1)(D)]

(2) the personal representative or any interested person in any of the following cases [see Prob. Code, § 48 (defining “interested person”); see also Estate of Sayles, 130 Cal. App. 3d 275, 181 Cal. Rptr. 543 (4th Dist. 1982) (petition properly denied where claimant’s interest was merely that of beneficiary of deed of trust used to secure note and did not fall within scope of former Prob. Code § 9860, subd. (a)); In re Estate of Kraus, 184 Cal. App. 4th 103, 108 Cal. Rptr. 3d 760 (2d Dist. 2010) (interested party may bring California Probate Code Section 850 claim even though Court has not yet determined the beneficiaries who would ultimately be entitled to the funds)]:

            (a) where the decedent while living is bound by a contract in writing to convey real property or to transfer personal property and dies before making the conveyance or transfer and the decedent, if living, could have been compelled to make the conveyance or transfer. [Prob. Code, §850, subd. (a)(2)(A)]

            (b) where the decedent while living binds himself or herself or his or her personal representative by a contract in writing to convey real property or to transfer personal property upon or after his or her death and the contract is one which can be specifically enforced. [Prob. Code, § 850, subd. (a)(2)(B)]

            (c) where the decedent died in possession of, or holding title to, real or personal property, and the property or some interest therein is claimed to belong to another. [Prob. Code, § 850, subd. (a)(2)(C)]

            (d) Where the decedent died having a claim to real or personal property, title to or possession of which is held by another. [Prob. Code, § 850, subd. (a)(2)(D)]

(3) the trustee or any interested person in any of the following cases:

            (a) where the trustee is in possession of, or holds title to, real or personal property, and the property, or some interest, is claimed to belong to another. [Prob. Code, § 850, subd. (a)(3)(A)]

            (b) where the trustee has a claim to real or personal property, title to or possession of which is held by another. [Prob. Code, § 850, subd. (a)(3)(B)]

            (c) where the property of the trust is claimed to be subject to a creditor of the settlor of the trust. [Prob. Code, § 850, subd. (a)(3)(C)]

If a proceeding has been brought under Prob. Code §§ 850 et seq. by a conservator on behalf of a conservatee, or by a guardian on behalf of a minor, and the conservatee or minor dies during the pendency of the proceeding, the personal representative of the conservatee or minor’s estate or other successor in interest may proceed with the matter and the existing proceeding will not be dismissed on account of the death of the conservatee or minor. [Prob. Code, § 858]

In applying these principles, the Fourth District Court of Appeal allowed a creditor to use Prob. Code, §850 to pursue the transferee of property owned by the decedent at the time the debt was incurred but which was subsequently transferred prior to decedent’s death. [In re Estate of Myers, 139 Cal. App. 4th 434, 42 Cal. Rptr. 3d 753 (4th Dist. 2006)] In Myers, the decedent declared bankruptcy but was denied a discharge of the debt owed to the creditor. She then sold her residence to her daughter’s live-in boyfriend but continued to reside in it. When the creditor’s claim in decedent’s estate did not completely satisfy the debt, the creditor filed an action under Prob. Code, §850 against the boyfriend, seeking an order requiring that the profits from the resale of the house be included in the estate based upon an allegation of a fraudulent conveyance by decedent. Under these facts, the statute of limitations was three years for fraudulent conveyance and the creditor had standing to pursue its claim under section 850.

Another interesting aspect of California Probate Code Section 850(c) is considering its application amongst the prevalence of titling assets in the name of another for financing purposes.  It is not uncommon in modern society for mortgage lenders and automobile dealers to encourage persons to place assets solely in the name of another for purposes of obtaining lender approval for financing.  While these acts were once considered loan fraud and extremely frowned upon, the modern world seems to have disinterestedly turned its head at such practices.  A cursory questioning of law enforcement has repeatedly been answered with the conclusion that such acts are not “criminal” and rather “civil” in nature.  While that is not true in a legal sense, it almost feels that greater society considers this type of behavior to be “common place.”

Notwithstanding the fact that it begs the question, “why should lenders even care about the identity of the beneficial owner, if they are not going to enforce their acceleration rights?”, the scenario creates an interesting situation as to whether the heirs of a deceased person who beneficially owned property not in their name at death will prevail and receive ownership of that property through a Section 850(c) claim.

California Civil Code Section 2223 and 2224 provides that a constructive trust is created where a defendant takes property by fraud, accident, mistake, undue influence, the violation of a trust or other wrongful act. A substantial number of constructive trust cases arise out of a fact pattern where one party is on “title” for the benefit of another (non-credit worthy) party.  In this case, it is claimed by the beneficial owner that they can prove themselves to be the “real owner” as understood between the two persons and evidenced by payment history and other evidence.

So, what happens to that property if the “non-titled owner” were to die?  Could the heirs of this beneficial owner bring a claim to that property against the “titled owner” under California Probate Code Section 850(c)? California Probate Code Section 850(c) could provide fertile ground for such heirs to attempt to recover property, both real and personal in nature. Regardless of whether 850(c) claims will be useful in recovering such property, interested persons should be advised that bringing claims under this Section of the Probate Code will be wrought with evidentiary objections and other impediments to having the action heard.

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