In re the Interest of Black
422 P.3d 592
Colo. Ct. App.2018Background
- Joanne Black, who has chronic schizophrenia, was the beneficiary of POD accounts and a Roth IRA (≈ $3M) designated by their mother; mother’s will devised two-thirds of her estate to Joanne’s special needs trust (SNT) and one-third to a trust for Bernard Black and his children (Issue Trust).
- Bernard Black sought and obtained appointment as Joanne’s conservator in Denver; the appointment authorized him to disclaim Joanne’s interests in the POD accounts and to place assets into a Supplemental Needs Trust for Joanne.
- After appointment, Bernard disclaimed most POD assets; two-thirds were routed to the SNT and one-third to the Issue Trust (≈ $1M). He also moved the $300,000 Roth IRA into accounts in his children’s names.
- Allegations arose that Bernard failed to disclose his conflict of interest and diverted assets for his and his children’s benefit; the guardian ad litem filed a motion alleging breach of fiduciary duty and civil theft and sought disgorgement/treble damages.
- After a four-day evidentiary hearing, the probate court found Bernard breached his fiduciary duty, engaged in deceptive conduct amounting to civil theft, surcharged him for the converted funds (~$1.5M) and trebled damages under the civil theft statute; the Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether probate court had jurisdiction over breach/surcharge and civil theft claims | Court has jurisdiction to police fiduciaries and impose surcharge; civil theft remedy available in probate context | Bernard argued Rule 60(b) was required to challenge disclaimer and that notice was insufficient | Court: probate court had jurisdiction under probate statutes; actual notice and participation cured any form defects; Rule 60 inapplicable because motion attacked fiduciary conduct, not final judgment |
| Whether section 15-14-423 immunizes Bernard for the conflicted disclaimer | GAL/Joanne: Bernard failed to disclose conflict and could not invoke safe harbor | Bernard: he disclosed the transaction and obtained court authorization under §15-14-423 | Court: §15-14-423 requires disclosure of the conflict and court authorization plus proof the transaction is fair; Bernard failed to disclose the conflict or show fairness, so no safe harbor |
| Whether Bernard breached fiduciary duty by redirecting assets (duty of loyalty/self-dealing) | Joanne: redirecting one-third and taking the Roth IRA breached undivided loyalty and harmed Joanne | Bernard: actions were disclosed/approved; he believed transaction protected assets and benefited Joanne | Court: duty of loyalty prohibits conflicted self-dealing absent full disclosure and fairness; evidence showed nondisclosure, deceptive filings, and the transaction harmed Joanne — breach affirmed |
| Whether civil theft was proven and timely | GAL/Joanne: Bernard’s misrepresentations to the probate court and concealment amount to theft by deception; claim timely | Bernard: court lacked jurisdiction, claim time-barred, insufficient evidence of deception/reliance | Court: probate court had jurisdiction; claim accrued when misconduct became discoverable (Sept 2014) and was timely; evidence supported misrepresentations, concealment, reliance by the court — civil theft affirmed |
Key Cases Cited
- Itin v. Ungar, 17 P.3d 129 (Colo. 2000) (civil theft requires proof of elements of criminal theft)
- People v. Roberts, 179 P.3d 129 (Colo. App. 2007) (theft by deception requires misrepresentations that cause a victim to part with value and reliance on those misrepresentations)
- Wright v. Wright, 514 P.2d 73 (Colo. 1973) (trustee breaches duty by diverting funds intended for beneficiaries)
- United States v. Dunkel, 927 F.2d 955 (7th Cir. 1991) (courts are not obliged to search the record for overlooked arguments or 'truffles' in submissions)