According to the California Department of Aging, more than 200,000 older and dependent adult abuse cases are reported each year. Many more cases certainly go unreported.

Lawyers and clients often have the misconception that the California financial elder abuse statute, Welf. & Inst. Code § 15610, et seq., applies only where there is some bad faith conduct committed by an alleged wrongdoer defendant. This is not the case. In 2008, the Legislature replaced the “bad faith” standard with a different requirement to establish whether the defendant “knew or should have known of the likely harm to the elder.” That is, there can be financial elder abuse when one acts or assists another in acting wrongfully irrespective of intent.

“Financial abuse” of an elder occurs when a person does any one 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.” Welf. & Inst. Code § 15610.30(a) (emphasis added).

“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, secrets, 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.” Welf. & Inst. Code § 15610.30(b) (emphasis added). “Wrongful use” can exist by virtue of someone acting when he or she “should have known better” (as the Beatles sing).

But wait -- there is more. “For purposes of this section, 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.” Welf. & Inst. Code § 15610.30(c) (emphasis added). This means that a plaintiff elder may claim that a contract should be rescinded for financial elder abuse, simply because the contract is one-sided or obtained under questionable circumstances. In other words, one must exercise caution in doing any kind of business with someone over the age of 65. If you strike a deal with an elder that is too good to be true, and you “should have known better,” then that contract could be deemed to be too good to be true and set aside.     

A recent California decision, Munoz v. PL Hotel Group, LLC (1/3/22) 73 Cal.App.5th 543, which was published and then de-published (so it cannot be cited as controlling authority) is illustrative. There, an 80-year-old real estate investor-buyer of a hotel in a leaseback transaction sued the seller, alleging that the seller had taken advantage of the buyer by surreptitiously inserting extremely adverse terms into the contract. The Court of Appeal reversed the trial court, which had dismissed the case at the pleading stage after it determined that that no fraud or incapacity had been properly alleged. The Court held that a plaintiff victim is not required to allege lack of capacity or that he was of an unsound mind to maintain a claim for financial elder abuse.

Similarly, our clients, a couple in their 70s who were sellers of real property, recently won a two week long jury trial which resulted in the setting aside an unfair contract that they had entered into under pressure. Herrera v. Full Circle, et al., Los Angeles Superior Court Case No. 19STCV39580. We were not required to prove bad faith, fraud, or incapacity—one of the clients was a lawyer and they both had been licensed real estate salespersons. The jury found financial elder abuse on account of facts showing that the buyer had taken advantage, and he knew or should have known better, and it awarded compensatory and punitive damages.