Bringing Down the Hammer – California Appellate Court Upholds $1,000 Per Day Sanction For Failure To Timely File Accounting
August 10 2021
As trusts and estates litigation counsel, we often have matters where a fiduciary, either as a trustee, conservator, personal representative, or agent under a power of attorney, fails to provide financial information when properly requested, or to provide an accounting if one is required under law. The result is that the person seeking the accounting may be left with no alternative but to file a petition with the court for an order compelling the fiduciary to submit an accounting, most commonly by requesting that the accounting be filed within the court proceeding.
Frequently, the fiduciary will appear at the initial hearing on the petition and request additional time to submit the accounting. In my experience, courts have been generous with such requests, granting a 60- to 90-day continuance to allow the fiduciary to prepare the accounting. Usually, that is sufficient time – and should be – for a fiduciary to gather the information to prepare and submit an accounting within the additional time allowed by the court. At this point, the fiduciary usually has been on notice for some time, first with the initial request for an accounting, then there is the additional time between the filing of the petition and the court hearing, and then, the additional 60-90 days requested at the hearing. There should be a very good reason – maybe a flood? – for the court to grant a further extension of time.
Well, in the case of Conservatorship of Norma Farrant, published on August 2, 2021, in the Court of Appeal for the Second Appellate District, Division Six, the fiduciary’s claim of loss of records through a “flood” was not sufficient to cause the court to forego imposing a sanction of $121,000 for the fiduciary’s failure to file an accounting ordered by the court. In November 2017, Diana Farrant, daughter of the conservatee Norma Farrant, filed a petition with the court requesting that the conservatee’s son, Duane Farrant, file an accounting of his transactions as agent under a power of attorney granted by Norma Farrant to her son in 2008. Diana’s petition requested that Duane be ordered to account for the period September 2014 through January 2018. At the hearing, at which Duane appeared, the court ordered him to do a “formal account” and set a due date of March 30, 2018. In a minute order of July 10, 2018, the court noted that no accounting had been filed, and ordered Duane to appear in person or by video court call on October 16, 2018. Duane did not appear, but was represented by counsel which, one should take note, was not sufficient for the court because the minute order directed Duane’s appearance, not appearance by counsel on his behalf. The court imposed a new due date of December 14, 2018, and warned Duane’s counsel, “Now, make no mistake, Mr. Dickens, the hammer is coming down very hard if I don’t get a good accounting. There are no more excuses. There is no more delay . . . This is the last . . . continuance that he’s going to get to get this accounting filed . . .”
At the next hearing, January 29, 2019, the accounting still had not been prepared. Duane’s counsel explained that his client was working diligently to get the information, but they had to subpoena records from the banks because there “was a flood” and a lot of Duane’s records were damaged. Counsel for the conservator strenuously objected to any further continuances, to which the court replied that it had “heard about every excuse in the book as to why [the accounting] hasn’t’ been provided.” The court then imposed a sanction of $1,000 per day until the accounting was filed.
On May 31, 2019, Duane filed an accounting that was woefully inadequate, failing to report all of the rental income received by Norma, and excluding her pension income. Duane was granted additional time to December 20, 2019, file an amended accounting, which was further extended to January 30, 2020, at which time the court determined that Duane had failed to file an amended accounting.
In June 2020, the conservator filed an objection to the accounting Duane had initially filed. In addition to surcharging Duane $63,448.90, the court ordered Duane to pay sanctions to his mother in the amount of $121,000 for the 121-day period between January 29, 2019, and May 31, 2019, when Duane filed his accounting.
The Court of Appeal upheld the trial court’s imposition of sanctions of $121,000.00, rejecting Duane’s argument that the maximum amount which the court could impose was $1,500.00 under Code of Civil Procedure section 177.5. The court found that statute did not apply because it relates to sanctions payable to the court, and the sanctions ordered by the trial court were payable to Duane’s mother’s conservatorship estate.
The judge warned the fiduciary that the hammer would be coming down very hard if the fiduciary did not file the accounting. It did. Very hard.