Royals v. LuRoyals v. Lu
Meng Jing Lu appeals from a pretrial right to attach order (RTAO) issued against her and in favor of Lisa Royals under
The primary question raised by the appeal, presented as a matter of first impression, is whether the prospect of punitive recovery on a financial elder abuse claim—in the form of exemplary damages or statutory penalties—may be secured by the extraordinary remedy of pretrial attachment. In the published portion of this opinion, we answer that question no.
A financial elder abuse claimant may obtain an attachment for potential compensatory damages and an award of attorney fees and costs associated with those damages, but only if the request for it complies with all applicable provisions of the statutory scheme governing pretrial attachments (the Attachment Law) (
No attachment was warranted here, for any of the relief requested, because Royals failed to support her prayer for compensatory damages with competent evidence. (
I. BACKGROUND
After Adams passed away October 14, 2019, Royals became the successor trustee and sole beneficiary of the Adams Trust (the Adams Trust or the Trust), a living trust established in the early 1990‘s by Adams and his former
A. Petition, Demurrer, and Motion To Strike
Once Royals became trustee of the Adams Trust following her father‘s death, she filed a verified petition against Lu for return of trust assets, for breach of spousal fiduciary duty, and for financial elder abuse.2 According to
the petition, Adams had no need for cash late in his life, but nonetheless suddenly encumbered his home in Orinda with a second mortgage, sold a vacation property in Sea Ranch, and deposited the proceeds into accounts controlled by Lu. Royals alleged that, contrary to Adams‘s testamentary intent, the proceeds from the Orinda second mortgage and from the Sea Ranch sale are actually assets of the Adams Trust. Adams diverted these funds from the Trust, Royals alleged, while acting under the undue influence of Lu and in a state of cognitive decline. In essence, Royals‘s theory is that her father intended to leave all assets of his estate to her and nothing to his wife, Lu, but that Lu thwarted his plan by misappropriating his assets before his death.
Royal‘s petition alleged on information and belief that the total amount of the misappropriated funds was “at least $1,095,000.” In addition to recovery of that amount, her third cause of action for financial elder abuse sought punitive damages, trebled under
general prayer for relief on all causes of action she included a demand under
B. Application for a Writ of Attachment
On the same day Royals filed her petition, she applied for a pretrial writ of attachment in the amount of $3,440,000. Her attachment application, filed on Judicial Council form AT-105, checked a box indicating that “the facts showing [she] is entitled to a judgment on the claim up on [sic] which the attachment is based are set forth with particularity in the [¶] . . . verified complaint.” Other than that, there was no evidentiary support for the requested attachment. Nor was there any explanation detailing why she sought an attachment in the amount of $3,440,000, how she calculated that amount, or what the amount was based upon.
Lu made a detailed evidentiary showing in opposition to the RTAO. She submitted seven declarations, including her own. These declarations, collectively, describe Adams‘s courtship of Lu, which began in 2011, several years before their marriage; Lu‘s decision to move from Las Vegas to Orinda to cohabitate with Adams; his proposal of marriage and her decision to accept the proposal in 2015; and the observations of people who knew the couple about the genuineness of Adams‘s affection for Lu and the transformation in his demonstrated level of contentment after he met her late in his life.
Lu attached to her declaration 32 documentary exhibits, including extensive, detailed correspondence between Royals and Adams discussing his testamentary intent. Also included in this opposition evidence are statements from Adams‘s doctor, dentist, a real estate broker and others who dealt with him in the year before he died, all of whom attest to his full cognitive acuity
Some of the evidence Lu presented in opposition to Royals‘s attachment application suggests that, because Adams made gifts to Lu during his lifetime, the Adams Trust does not encompass all of the assets Royals now claims are assets of the Trust. It also suggests that Adams was, in fact, in need of cash to put aside in accounts outside the Adams Trust for Lu‘s benefit; that he told Royals she could expect to inherit the Orinda home subject to any encumbrances put on it; and that he felt Royals and her husband were sufficiently well off that they might wish to consider a second home other than the home in Sea Ranch. In its totality, this evidence suggests, contrary to Royals‘s allegations, that Adams did not intend to leave all of his assets solely to Royals, and that instead he wished to leave enough to Lu so that she could support herself after his death.
As shown by various handwritten notes and emails exchanged between Adams and Royals, and a few from Adams to Lu, there appear to have been unresolved disagreements between father and daughter over two issues: (1) Adams‘s desire to leave money to Lu for Lu‘s support following his death,
a plan Royals apparently declined to assist him in carrying out; and (2) Royals‘s request that she be allowed to become co-trustee of the Adams Trust during Adams‘s lifetime, an entreaty Adams firmly rejected, with reminders to her that he wished to remain in full control of his assets until he died. If these communications are credited, this is a man who insisted upon his financial autonomy to the end, and in his late nineties showed an ability to engage in fairly sophisticated financial planning.5
In both tone and substance, it is striking how rational and cogent Adams‘s writings are, while also displaying a mixture of sanguine acceptance of his coming demise and a level of irritation that seems to stem from disagreements with Royals. Adams felt neglected by Royals, he explained to her, and
Ranch property only after trying, and failing, to enlist Royals‘s help in funding the accounts he wished to leave for Lu‘s benefit.6
Royals lodged objections to the declarations and documentary exhibits submitted by Lu in opposition to the RTAO, but the trial court made no ruling on the objections. At the time the RTAO issued, this evidentiary showing stood uncontested.
C. Cross-petition, Demurrer to Cross-petition, Ruling on That Demurrer, and Grant of the RTAO
Lu filed a response to Royals‘s verified petition, denying all material allegations, and a verified cross-petition of her own that repeated and added more detail to the evidentiary showing she made in opposition to the RTAO. Lu‘s cross-petition alleged, among other things, a claim for financial elder abuse against Royals.
According to the cross-petition, Royals, by fraud and deceit, manipulated Adams into signing the Trust amendment and will with the objective of defeating his true testamentary intent and depriving Lu of the financial provision he intended to make for her outside of the probate process following his death. Lu‘s basic theory, countering that of Royals, is that Royals is the one who exercised undue influence over Adams and committed financial elder abuse.
In response to Lu‘s cross-petition, Royals filed a demurrer, which the trial court sustained with prejudice on August 11, 2020. A few weeks later, on September 4, 2020, the court granted Royals‘s request for the RTAO. Without explanation and without any indication that it had considered the evidentiary submissions Lu made in opposition to the RTAO, the trial court granted an attachment in the exact amount requested—$3,440,000. By minute order
The RTAO was the second layer of security the court provisionally granted to preserve assets for recovery on Royals‘s claims. Shortly after Royals applied for an attachment, Bank of America sought and obtained an interpleader order permitting it to deposit with the court $250,558.14 from various Bank of America accounts maintained in Lu‘s name. We affirmed that order in an unpublished opinion. (Royals v. Lu (Dec. 20, 2021, A160265) [2021 WL 5998551, pp. *3–*6].) The RTAO gave Royals an additional $3,440,000 in security on top of the frozen interpleader funds.
Lu timely appealed from the order issuing the RTAO, as well as from orders sustaining Royals‘s demurrer to Lu‘s cross-petition, overruling Lu‘s demurrer, and denying Lu‘s motion to strike. The RTAO, which arises out of a claim cognizable in probate court under that department‘s concurrent jurisdiction over Elder Abuse Act claims (
II. DISCUSSION
A. Motion To Dismiss
In our opinion affirming the interpleader order, we had no occasion to assess the merits of the claims Royals alleges in her petition, but we left no doubt that, on the factual record presented—which is, in all material respects, the same record the court had before it when it granted the RTAO—we view this case as one in which the facts are sharply contested, with an outcome in favor of Royals hardly foreordained. (Royals v. Lu, supra, A160265 [2021 WL 5998551, pp. *2, fn. 3, * 4, fn. 7].)9
Royals
RTAO—and pointing out that “[t]he only remaining funds” attached through the RTAO after issuance of the interpleader order consist of a modest amount of money in a Wells Fargo bank account that is too small to warrant the expense of further litigation—Royals then moved in this court to dismiss Lu‘s appeal of the RTAO. We issued an order deferring a ruling on Royals‘s motion to dismiss until Lu‘s pending appeal was fully briefed, argued and taken under submission.
In an apparent effort to buttress her motion to dismiss, Royals filed (1) a motion to augment the record on appeal, (2) a request for judicial notice of the discharge of the writ of attachment, and (3) a motion to take additional evidence on appeal under
We grant the request for judicial notice and the motion to augment the record as unopposed, but deny the motion to take additional evidence on appeal.
and, subject to certain exceptions . . . , terminates the lower court‘s jurisdiction.” (Eisenberg et al., Cal. Practice Guide: Civil Appeals & Writs, supra, ¶ 3:2, citing
Pointing to an automatic stay exception specific to attachment orders where the appellant fails to post an undertaking (
a bond, that the trial court retained jurisdiction to enforce the RTAO, and that as a result, the court necessarily retained jurisdiction to vacate the RTAO as well. This logic is flawed. There is a material difference between enforcement and vacatur. On its face,
Once our appellate jurisdiction was properly invoked by Lu‘s notice of appeal of the RTAO, we had—and still have—a duty to resolve the appeal, absent intervening mootness. And this appeal is not moot. Whatever benefit Lu obtained from the “release” of the RTAO was voluntarily offered by Royals and does not change the fact that, for sixteen months, an attachment order and writ of attachment were in place that deprived Lu of possession of substantial assets—claimed by her to be rightfully hers—without a trial in which Royals was put to her proof. Royals insists that only $30,229 was
B. The RTAO
1. Standard of Review
“On appeal from an attachment order, . . . [w]e apply the same evidentiary standard to an attachment hearing decided on affidavits and declarations as to a case tried on oral testimony.” (Goldstein v. Barak Construction (2008) 164 Cal.App.4th 845, 853, citation omitted.) Although there is no dispute about that basic point, the parties take opposite positions on the standard governing the court‘s exercise of discretion in granting the RTAO, with Royals urging review of substantial evidence and Lu urging de novo review.
To a degree, both parties are correct. A trial court necessarily makes a factual assessment when deciding to accept or reject the applicant‘s evidentiary showing in exercising its discretion, and that factual assessment is reviewed for substantial evidence. (Bank of America v. Salinas Nissan, Inc. (1989) 207 Cal.App.3d 260, 273.) But where an unsettled question of law requires that we interpret the meaning of a statute, we review the trial court‘s interpretation de novo. (People v. Kurtenbach (2012) 204 Cal.App.4th 1264, 1276.) Because the resolution of this appeal turns on open questions of
statutory interpretation, Lu has the better of the argument. Our review here will be de novo.
2. Applicable Statutes
This case requires us to address the interplay of the Elder Abuse Act and the Attachment Law. The Elder Abuse Act, a remedial scheme designed to protect a vulnerable class of citizens, is generally construed broadly in favor of plaintiffs seeking relief on behalf of elders (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 860–861 (Mahan)), while the Attachment Law, which authorizes “a harsh remedy [that] . . . causes the defendant to lose control of his property
a. The Attachment Law
” ’ “Attachment is an ancillary or provisional remedy to aid in the collection of a money demand by seizure of property in advance of trial and judgment.” ’ ” (Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1476, italics omitted.) Under the statutory scheme governing attachments in California (
73 Cal.App.4th 76, 79), and the “safeguards” embodied in the Attachment Law are designed to rectify due process defects identified in Randone. (Western Steel & Ship Repair, Inc. v. RMI, Inc. (1986) 176 Cal.App.3d 1108, 1115.)
Procedurally, the plaintiff must meet the burden of showing her claim has ” ‘probable validity,’ ” meaning it is “more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (
As a general matter, the statutory remedy of attachment is limited to an “action on a claim or claims for money, each of which is based upon a contract” (
(
b. The Elder Abuse Act
As we explained in Mahan, “civil actions may be brought under the Act for ’ “[p]hysical abuse” ’ ([
“The template for private enforcement in cases involving physical abuse or neglect was set by the addition of
from certain limitations on recoverable damages in survivorship actions (
In 2004, the Legislature “created a new class of claims for ‘financial abuse,’ enacting a private enforcement provision—[Welfare and Institutions Code]
“In 2007, the Legislature, acting on reports that the intent to encourage private claims by ‘providing for enhanced remedies . . . “has largely been unrealized . . . ,” ’ made available the remedy of prejudgment attachment as a way to facilitate quick recovery of losses in ‘financial abuse’ cases. ([
available to financial elder abuse actions claimants was to help claimants “preserve the elder or dependent adult‘s assets wrongfully held by defendant until judgment is rendered.” (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 611 (2007–2008 Reg. Sess.) as amended Mar. 26, 2007, p. 4; see Assem. Com. on Judiciary, Analysis of Senate Bill No. 611 (2007–2008 Reg. Sess.) as amended May 31, 2007, p. 4 [“The attachment procedure is a useful tool to prohibit the perpetrator from disposing of the elder or dependent adult‘s assets in his or her possession prior to final disposition of the case.“].)
3. Analysis
a. Uncertainty in the Basis for Attachment Amount
It is unclear what justified an attachment amount of more than three times the actual damages that Royals pleaded on information and belief. In her third cause of action for financial elder abuse, she pleads as follows: “The Court should award damages according to proof, but on information and belief at least $1,095,000, against Respondent for her financial elder abuse. [¶] . . . Respondent acted with oppression, fraud, or malice in committing financial elder abuse against Mr. Adams. The Court should award exemplary damages against Respondent according to proof, trebled pursuant to
The position Royals takes here on appeal in defense of the RTAO adds no greater clarity. She argues in her responding brief that the $3,440,000 attachment amount “included punitive damages[] and estimated attorney‘s fees and costs,” but she provides no itemization. And she appears to back away from any suggestion that the $3,440,000 includes statutory penalties. Lu “provides no evidence,” Royals argues in her responding brief, “that the attachment order included damages pursuant to
In response to our request for supplemental briefing asking the parties to address the basis of the attachment amount, Royals takes a different tack.
Departing from the allegations of her elder abuse claim as pleaded, she
Royals‘s elusiveness about the basis for requesting an attachment of $3,440,000 is troubling. Having pleaded compensatory damages on information and belief, she claimed a need for security in an amount that added a hefty seven-figure sum to her claimed actual damages and has never been clear about the basis for the additional increment. The trial court might have insisted upon an evidentiary and legal foundation providing more specifics, but in the end did not question the requested attachment amount and simply rubber-stamped it, apparently, as we were told at oral argument, based on representations of Royals‘s counsel at the hearing on the RTAO. For our part, we need not engage in guesswork or accept representations of counsel at this stage. To cover all the potential bases for the requested attachment amount, we will consider all forms of potential recovery Royals has relied upon—as pleaded, or in her appellate briefs—and address whether any of them, individually or together, can legally support the issuance of an attachment order in the amount of $3,440,000.
We conclude that some elements of Royals‘s claimed recovery can support an attachment on a financial elder abuse claim (compensatory damages, attorney fees and costs) and some cannot (punitive damages, statutory penalties under
b. Noncompliance with the Attachment Law
First, and most basically, an attachment application must be supported by an affidavit or an equivalent verified complaint “show[ing] affirmatively,” based on facts “set forth with particularity,” that “the affiant, if sworn as a witness, can testify competently to the facts stated . . . .” (
Second, an application for an attachment must include a statement of the “amount to be secured by the attachment.” (
Within the scheme of the Attachment Law,
Mindful that the Attachment Law was enacted in an effort to rectify due process problems in a predecessor statute (Western Steel & Ship Repair, Inc. v. RMI, Inc., supra, 176 Cal.App.3d at p. 1115; see Randone v. Appellate Department, supra, 5 Cal.3d at pp. 543-563), we read
Third, an attachment applicant must present a “statement showing that the attachment is sought to secure . . . recovery on a claim upon which an attachment may be issued” (
Fourth, and finally, “the amount to be secured by an attachment” must be based on “[t]he amount of the defendant‘s indebtedness claimed by the plaintiff.” (
To the extent Royals‘s attachment request was based on her demand for punitive damages, it did not comply with
In her supplemental brief, Royals argues that
What we see here, in the overall, is that the Legislature enacted a broad remedial scheme to protect elders, but in adding pretrial attachment to the package of available remedies to the scheme, made use of a statutory remedy that, within its own scheme, has long been interpreted narrowly. Our reading of these two schemes together—permitting the attachment of well-supported claims for compensatory relief along with associated requests for attorney fees and costs, while rejecting the attachability of claims for punitive damages and statutory penalties—strikes an appropriate balance.
C. The Trial Court Erred in Sustaining Royals‘s Demurrer to Lu‘s Cross-petition
In December 2019, Lu filed a demurrer to Royals‘s petition arguing that, as pleaded, the first claim in the petition seeking return of trust assets fails to state a cause of action under
In February 2020, following the rulings on her demurrer and motion to strike, Lu filed a response to Royals‘s verified petition, denying all material allegations, and a verified cross-petition of her own that tracked the evidentiary showing she made in opposition to the RTAO. According to the cross-petition, Royals, by fraud and deceit, manipulated Adams into signing a will and an amendment to the Trust that were contrary to his true testamentary intent, and that deprived Lu of the financial provision he intended to make for her outside of the Trust. The sixth count in Lu‘s cross-petition alleged a claim for financial elder abuse against Royals. In response to Lu‘s cross-petition, Royals filed a demurrer, which the trial court sustained with prejudice as to all causes of action.
Lu timely appealed the RTAO, the order overruling her demurrer and motion to strike, as well as the order sustaining Royals‘s demurrer.
1. Standards of Review
“We review a trial court‘s ruling on demurrer de novo . . . , giving ’ “the complaint a reasonable interpretation, reading it as a whole and viewing its parts in context. . . . We deem to be true all material facts properly pled. . . . We must also accept as true those facts that may be implied or inferred from those expressly alleged.” ’ ” (Mahan, supra, 14 Cal.App.5th at p. 847, citations omitted.)
Typically, the denial of a motion to strike is reviewed for abuse of discretion. (Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 612.) When the motion seeks to strike allegations of punitive damages, however, the standard of review is de novo, because the “motion to strike, like a demurrer, challenges the legal sufficiency of the complaint‘s allegations, which are assumed to be true.” (Blakemore v. Superior Court (2005) 129 Cal.App.4th 36, 53.) ” ‘In passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.’ [Citation.]” (Kaiser Foundation Health Plan, Inc. v. Superior Court (2012) 203 Cal.App.4th 696, 704.)
2. The Order Sustaining Royals‘s Demurrer Was Erroneous
Because the arguments advanced by Lu in her appeal of the trial court‘s order sustaining with prejudice Royals‘s demurrer to the cross-petition are limited to Lu‘s fourth count seeking correction of Adams‘s death certificate and sixth count for financial elder abuse, our review on the merits will be limited to those claims.
The trial court sustained Royals‘s demurrer on three grounds—lack of standing, failure to state a claim upon which relief may be granted, and failure to serve summons and notice of the date of hearing on the petition. Its ruling sustaining the demurrer with respect to the fourth count was sound. Royals correctly argued that, before Lu filed her cross-petition, she did not make a correction request to the county registrar (
Nor is there any merit to Royals‘s argument that the sixth count in the cross-petition is legally deficient. Lu‘s cross-petition for financial elder abuse is essentially the mirror-image of Royals‘s petition alleging the same type of claim: Lu alleges “deprivation” of “property” of an elder (i.e., assets Adams sought to make to his wife via a “donative transfer” outside the Trust) by “undue influence.” (
We are unpersuaded. Lu correctly points out that, when the trustee of an elder‘s trust or the executor of an elder‘s estate is herself accused of financial elder abuse, the Elder Abuse Act expressly grants to a third party with an interest in the claim standing to pursue it instead of the conflicted fiduciary. (
By attacking the validity of the will and amended Trust, Royals argues, Lu is in effect trying to claim she is entitled to inherit through intestate succession, which according to Royals is a futile endeavor because even if those instruments are invalid, Royals was the sole beneficiary of the Trust prior to September 2016. The premise of this argument is incorrect. To prevail, Lu does not need to inherit by intestacy. Royals alleges that the disputed funds here were placed in some combination of accounts maintained solely in Lu‘s name and a joint account maintained in the names of Adams and Lu as husband and wife. To the extent Adams deposited funds directly into accounts solely controlled by Lu while he was still alive, at his death any such pre-death gifts were not assets of the Trust or part of his estate. And as for any funds that were deposited in or that passed through a joint account, a testator may deposit funds in a joint account with a right to survivorship, and at his or her death the funds in the account will pass directly to the survivor outside of probate. (
Any “interested person, as defined in Section 48 of the Probate Code” (
it was in Mahan based on the alleged financial elder abuse scheme in that case, is that Royals obstructed Adams‘s estate plan and “deprived” Lu “of property indirectly, using the Trust as an instrument of [her] scheme.” (Mahan, supra, 14 Cal.App.4th at p. 862.) To funnel recovery on such a claim back into the hands of the person who allegedly carried out the scheme would defeat the purpose of
No other aspect of the order sustaining Royals‘s demurrer to Lu‘s cross-petition having been challenged here on appeal, the order will be reversed in part with respect to the sixth count, and otherwise affirmed (on the merits with respect to the fourth count, and by default with respect to all other counts).
3. The Trial Court Properly Denied Lu‘s Demurrer to Royals‘s Petition
Following the filing of Royals‘s petition on October 24, 2019, Lu‘s time to demur was 30 days following proof of personal service on October 25, making the deadline November 25, 2019. (
Here on appeal, Lu fails to address the issue of untimeliness. She complains instead that Royals‘s demurrer to Lu‘s cross-petition was untimely as well, but that the court excused Royals‘s tardiness as a matter of discretion. Lu argues it is “unfathomable” that the court could have reasonably refused to excuse her tardiness while treating Royals with lenity. “What is sauce for the goose is sauce for the gander” is not a legal argument, and we reject the invitation to employ the concept here. The trial court‘s orders are presumed correct. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) Lu has not borne her burden to demonstrate error. Applying the presumption of correctness, we conclude the trial court was correct to overrule her demurrer.
4. The Trial Court Properly Denied Lu‘s Motion To Strike
Lu moved to strike aspects of Royals‘s petition on several grounds. First, she argued that
Third, Lu challenged the sufficiency of the allegations to Royals‘s petition to support a claim for statutory penalties under
The allegations of Royals‘s petition sufficiently aver that Lu knowingly took advantage of Adams‘s declining cognitive and physical health in persuading him to take out a home equity loan on one property and sell another and transfer the proceeds to Lu. While Lu contests these allegations, she does not explain how, assuming they are true, they fail to make out a claim for financial elder abuse or statutory penalties under
5. Lu‘s Claims of Judicial Bias Are Meritless
Lu has made multiple, unsuccessful claims of judicial bias, via writ petition and in the interpleader appeal. (Royals v. Lu, supra, A160265 [2021 WL 5998551, p. *6]; Lu v. Superior Court (July 10, 2020, A160425), petn. den.; Lu v. Superior Court (Aug. 4, 2020, A160605), petn. den., review den. Aug. 26, 2020, S263915; Lu v. Superior Court (Feb. 28, 2022, A164611), petn. den.) Lu‘s briefing on this point presents many of the same arguments we have already rejected. We will not reconsider them here.
Lu also raises complaints of judicial bias regarding orders that postdate the filing of this appeal and that are currently under review, but those orders are not properly before us. The one complaint that appears to be properly before us is alleged bias in connection with an order granting Royals‘s ex parte application to appoint a discovery referee. We conclude here, as we did in resolving Lu‘s prior complaints of judicial bias, that her claims have no merit.
III. DISPOSITION
We reverse the trial court‘s order of September 4, 2020, issuing a writ of attachment and right to attach order. We reverse the order of August 11, 2020, to the extent it sustains Royals‘s demurrer to the sixth count of Lu‘s
STREETER, Acting P. J.
WE CONCUR:
BROWN, J.
NADLER, J.*
* Judge of the Superior Court of California, County of Sonoma, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.