Mahan v. Charles W. Chan Ins. Agency, A147236

Background

Frederick (86) and Martha Mahan (79) previously created a revocable trust (the Children’s Trust) to hold two second‑to‑die life insurance policies (≈$1,000,000 death benefit) for their children; daughter Maureen was trustee and beneficiary. The Trust initially had cash to cover premiums.
By 2013, Fred showed confusion and Martha had Alzheimer’s. Insurance agents (Chan, Chan Agency, Kaddoura, Thai, ABN) solicited the Mahans and proposed reworking the life‑insurance arrangement.
Respondents allegedly misrepresented that they would “leverage” existing cash value without extra cost, prepared and submitted applications (sometimes signed by Fred in blank), and ultimately obtained a single‑life Transamerica term policy on Fred with very high upfront and annual costs. To fund that placement, the Trust surrendered one policy, borrowed against the other, and paid a large initial premium; Respondents received large commissions (~$100,000).
As alleged, the transactions eliminated the joint last‑to‑die whole‑life coverage the Mahans intended to pass to their children, increased premium obligations (forcing the Mahans to put personal funds into the Trust and sell assets), and imposed tax and cash‑drain consequences.
Plaintiffs (Fred and Martha, and the Trust via Maureen) sued for financial elder abuse under the Elder Abuse Act, negligence, breach of fiduciary duty, fraud, and UCL violations. The trial court sustained demurrers to the Mahans’ claims, reasoning that the Trust (not the Mahans) owned the property and thus the Mahans alleged no deprivation of their property under the Act; judgment dismissed Mahans’ claims with prejudice.
The Court of Appeal reversed and remanded, holding the FAC adequately alleged a deprivation of the Mahans’ property rights and wrongful conduct cognizable under the Elder Abuse Act and sufficient injury for the other tort claims.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Mahans stated a claim under the Elder Abuse Act (financial abuse)	Mahans: Respondents’ scheme deprived them of property rights — loss of their chosen estate‑plan assets, forced transfers into the Trust, and commissions traceable to them — constituting deprivation by donative transfer/undue influence	Respondents: The Trust (and Maureen) owned the policies; any payments/commissions came from the Trust, so Respondents did not take “the property of an elder”	Held: Reversed. FAC alleges deprivation of elders’ property rights (estate‑plan value, extra premiums, commissions) and sufficiently pleads wrongful use/undue influence under the Act.
Whether voluntary transfers into the Trust after the scheme preclude Elder Abuse Act liability	Mahans: Transfers were compelled/effectively forced by Respondents’ manipulation; transfers count as donative transfers under §15610.30(c)	Respondents: Transfers to the Trust were voluntary and benefitted the children, not the Mahans; thus no deprivation of the Mahans’ property	Held: Transfers may still constitute deprivation under §15610.30(c); voluntariness goes to proof/remedy, not pleading defect.
Whether commissions and other fees paid to agents can constitute deprivation	Mahans: Commissions paid as a consequence of the scheme are traceable to the Mahans and constitute deprivation	Respondents: Commissions were paid by the Trust; Mahans never directly paid defendants	Held: Commissions may be part of the deprivation; prior authorities recognize commissions from abusive transactions can support elder‑abuse claims; allocation/double‑recovery is a merits issue.
Whether dismissal of negligence/fiduciary duty/fraud/UCL claims for lack of alleged injury was proper	Mahans: The same alleged deprivation that sustains the Elder Abuse Act claim also supplies injury for the other tort and statutory claims	Respondents: Mahans lack injury because the Trust (not they) was harmed	Held: Court erred in dismissing these claims as to the Mahans; the FAC sufficiently pleads injury for those causes of action.

Key Cases Cited

Winn v. Pioneer Medical Group, Inc., 63 Cal.4th 148 (2016) (statutory interpretation principles for the Elder Abuse Act)
Delaney v. Baker, 20 Cal.4th 23 (1999) (history and purpose of Elder Abuse Act and private enforcement)
Bounds v. Superior Court, 229 Cal.App.4th 468 (2014) (restrictive instruments imposed by manipulation can constitute deprivation under §15610.30)
Wood v. Jamison, 167 Cal.App.4th 156 (2008) (commissions/fees from abusive transactions can support financial‑abuse claims)
Bonfigli v. Strachan, 192 Cal.App.4th 1302 (2011) (financial harm under the Elder Abuse Act need not be physical; statutory interpretation guidance)
Tameny v. Atlantic Richfield Co., 27 Cal.3d 167 (1980) (pleading standards: accept well‑pleaded factual allegations on demurrer)
Hobbs v. Bateman Eichler, Hill Richards, Inc., 164 Cal.App.3d 174 (1985) (concept of churning and broker misconduct)