Wealth Law Blog : Oregon Asset Protection Lawyers & Attorneys : Samuels Yoelin Kantor Seymour & Spinrad Law Firm : OR Estate Planning, Fiduciary Litigation

From time to time we publish summaries of interesting trust and estate cases. Today’s post examines a recent Oregon Appeals Court decision in the rapidly expanding field of elder law. The case involves an elderly woman with impaired mental capacity and asks whether she may be a considered a third-party beneficiary (under contract law) of a residency agreement signed on her behalf. The case also touches on the issue of arbitration clauses in residency agreements at senior housing facilities. Arbitration clauses like the one at issue in this case have been the subject of a number of recent 9^th circuit cases.

Drury v. Assisted Living Concepts, 245 Or App 217 (2011)

Background: Dorothy Drury was suffering from dementia and her mental capacity was severely impaired at the time her son, Eddie, admitted her to the defendant’s assisted living facility. Eddie signed the facility’s admission paperwork and residency agreement. At that time he was not yet Dorothy’s guardian or conservator and did not then have a power of attorney for her.

The residency agreement included a clause requiring arbitration for all claims or disputes relating to the agreement or the services provided “to You by Us.” After about a year in the facility, Dorothy died as a result of injuries sustained in a fall. Her estate’s personal representative sued the facility for wrongful death resulting from negligent conduct. The defendants (unsuccessfully) moved to compel arbitration, arguing that the estate was bound to the arbitration clause in the residency agreement as a third-party beneficiary of the contract.

On appeal, the court held that Dorothy’s estate was not bound to the agreement and its arbitration clause. Under general contract law principles, a third-party beneficiary is presumed to assent to a contract when it accepts benefits or otherwise seeks to enforce rights under that contract. Dorothy was a “third-party donee beneficiary” of the residency agreement signed by her son. The critical issue for the court was Dorothy’s mental capacity - or lack thereof. Even though Dorothy accepted the contract’s benefits (the facility’s services and apartment), her lack of requisite mental capacity meant that her acceptance of benefits did not ratify the contract.

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Washington State Substitute House Bill 1103 - 2009-10, effective July 26, 2009, prevents an abuser from inheriting property or receiving any benefit from the estate of a vulnerable adult who was the victim of financial exploitation by the abuser.

This may be a trend other states are keen to follow.

Generally speaking, “no slayer or abuser shall in any way acquire any property or receive any benefit as the result of the death of the decedent.” That is, an abuser is treated the same as a slayer with respect to the distribution of the decedent’s estate, although the court has equitable discretion and may consider, among other things:

• Elements of decedent’s dispositive scheme;
• Decedent’s likely intent given the “totality of the circumstances”; and
• The degree of harm.

A criminal conviction conclusively determines an abuser, but civil conviction must be by clear, cogent, and convincing evidence.

In many sad cases, financial exploitation is obvious, and the punitive impact of this new law certainly should apply. However, how will this impact other cases where the facts are not so easy to resolve? If there is insufficient evidence for a criminal conviction, but the fact finder proceeds to a determination in civil court, could this new law unnecessarily punish those that failed to have the foresight to properly document every gift from the dearly departed? How many keep written documentation of a gift, particularly from a family member? And when that elderly person becomes more mentally and physically frail, at what point does the average person have the medical or other specialized training to determine whether there is exploitation? The often dysfunctional response to grief and inheritance can lead to unwarranted allegations of who loved the decedent more and who sucked the funds (and life) right out of dear ol’ mom or dad. It can turn ugly, quickly. Is it “financial exploitation” or is it “but Mom always paid for everything, because I’ve never stood on my own two feet in my life?”

The new Washington law provides an escape in that a defendant may avoid liability if the court finds by clear, cogent, and convincing evidence that the decedent knew of the financial exploitation and subsequently ratified it. Maybe that’s enough room for those unjustly charged to avoid liability. Maybe not.

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Two recent and sad stories involving financial abuse of the elderly have come to light locally. The first story is the tale of Evelyn Roth, an 83-year-old esophageal cancer patient who signed a power of attorney for her cousin and niece, who then liquidated her assets. The now-indicted relatives, Virginia Kuehn and Kathleen Jingling, told investigators the “doctors guaranteed us she would die by August.” (Another example of the problem with medical care in America? You can’t rely on the doctors’ guarantee? I think not.) As poor Roth stated, “The only thing is, I didn’t die in time.”

What is it about people that when they are given a little bit of power (through a legal document like a power of attorney, through a joint bank account set up just to “help” with paying bills, or through a fiduciary position like a trustee), and a little bit of money, that their brains short-circuit and they start spending it as if it were their own? It’s not their money! There is no entitlement! There is no “well, nobody is going to know, so I’ll just take a bit from here or there!” As Roth’s cousins are learning, it’s not only unethical, it’s also illegal.

Gayla Ross just learned from a jury verdict in Washington County, Oregon, that she may have time in prison to contemplate her bad acts in taking $1 million from her 87-year-old mother, Clara Philpot, to finance Ross’ luxury home - and Philpot has been diagnosed with Alzheimer’s disease since 2002. As the court-appointed guardian stated, ‘It took Gayla less [than] two months to squander a lifetime of work.”  

Now the mortgage company is also in the cross-hairs, as the guardian proceeds with a lawsuit on behalf of Philpot. 

Be alert. With the aging population and an economy that may well bring out the worst in some people, financial elder abuse is a serious concern. 

Seek protection:

• Get an attorney to prepare for estate planning, power of attorney, trust, or other legal needs well in advance of it ever becoming a problem;
• Hire a criminal or civil attorney to recover losses;
• Call the Oregon statewide hot line to report abuse: 1.800.232.3020;
• Report abuse at  Aging and Seniors and People With Disabilities.

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