Fredrick Mahan v. Charles W. Chan Insurance Agency, Inc.

In this appeal we consider whether two plaintiffs, 86-year-old Frederick Mahan

(Fred) and his 79-year-old wife Martha Mahan (Martha)1

have stated a viable claim under

the Elder Abuse and Dependent Adult Civil Protection Act (the Elder Abuse Act or the

Act)

2

against Charles W. Chan (Chan), the Charles W. Chan Insurance Agency, Inc. (the

Chan Agency), Omar Kaddoura (Kaddoura), Cung Thai (Thai), and the American

Brokerage Network (ABN) (collectively the Respondents), all of whom provided life

insurance advisory services to them.

The facts, as alleged, begin in the mid-1990s when, long before any of the

Respondents were involved, the Mahans purchased two life insurance policies, naming

their children as beneficiaries. Together, these two policies provided death benefits of



1

For the sake of convenience, we refer to the plaintiffs individually by their first

names. We mean no disrespect to them.

2 Welfare and Institutions Code section 15600 et seq. Unless otherwise

specifically designated, all statutory references are to the Welfare and Institutions Code.

2

approximately $1,000,000, at an annual premium cost of $14,000. As part of the

Mahans’ estate plan, the policies were held by a revocable living trust (the Children’s

Trust or the Trust), of which their daughter, Maureen Grainger, was trustee. The Mahans

made enough money available to the Trust, in advance, so that it would be selfsustaining,

with no need for additional cash infusions from them for ongoing premium

costs.

More than two decades later, in 2013, when the events triggering this action

began, Fred, then at the end of his career as a lawyer, was suffering from confusion and

cognitive decline; Martha, who had turned overall control of the couple’s affairs over to

Fred under a power of attorney, was in an even more precarious state of health, having

been diagnosed in 2012 with Alzheimer’s disease. Seizing on this situation, the

Respondents allegedly carried out an elaborate scheme that involved arranging the

surrender of one of the life insurance policies and the replacement of the other with a

policy providing more limited coverage, at massively increased cost. The premiums for

the new coverage, spread over the term it was to be in force, amounted to some $800,000,

forcing the Mahans to feed cash into the Trust to sustain it and, in effect, consuming most

of their intended $1,000,000 gift in transaction costs, including $100,000 in commissions

to the Respondents.

The Mahans and Maureen (acting for the Trust) sued. Separate demurrers to the

first amended complaint (FAC) were filed by Chan, the Chan Agency and Kaddoura

(collectively the Chan Defendants) and by Thai and ABN (the Thai Defendants). The

focal point of both demurrers was the Mahans’ first cause of action, pleaded under the

Elder Abuse Act. The thrust of the Respondents’ attack was that the Children’s Trust

owns and has always owned the life insurance policies at issue here, and that all of the

commissions paid to the Respondents were paid by or on behalf of the Trust. Whatever

money the Mahans paid into the Trust to sustain it, the Respondents argued, was paid

voluntarily for the benefit of their children, after the alleged scheme was over. According

to the Respondents, the only proper plaintiff is the Children’s Trust, which does not have

3

an Elder Abuse Act claim “because [it] is not 65 years old.”

Embracing this line of argument, the trial court sustained both demurrers, ruling

that the Mahans had not alleged any “depriv[ation]” of “property” owned by them within

the meaning of section 15610.30. The court also sustained the demurrers as to the

Mahans’ remaining causes of action, the second (for negligence), third (for breach of

fiduciary duty), fourth (for fraud) and fifth (for violation of Business and Professions

Code section 17200), applying in substance the same reasoning—the FAC failed to allege

that the Mahans rather than the Children’s Trust, suffered harm. Since neither of the

demurrers attacked the Trust’s right to pursue the second, third, fourth and fifth causes of

action, the court’s ruling left those claims intact, with the Trust remaining as the sole

plaintiff in the action. The court invited the Mahans to amend to allege harm to

themselves directly, but they elected to stand on the allegations of the FAC, as originally

stated. Judgment was then entered dismissing the Mahans’ claims with prejudice, and

this appeal followed.

We now reverse and remand.

I. BACKGROUND

We review a trial court’s ruling on demurrer de novo (California Apartment Assn.

v. City of Fremont (2002) 97 Cal.App.4th 693, 699), giving “the complaint a reasonable

interpretation, reading it as a whole and viewing its parts in context. [Citations.] We

deem to be true all material facts properly pled. [Citation.] We must also accept as true

those facts that may be implied or inferred from those expressly alleged.’ ” (Balikov v.

Southern Cal. Gas Co. (2001) 94 Cal.App.4th 816, 819; see Tameny v. Atlantic Richfield

Co. (1980) 27 Cal.3d 167, 170.) The primary issue here is whether the Mahans have

stated legally cognizable harm to themselves. Accepting the allegations in the FAC to be

true, as we must at this stage—whether those allegations can be proved is another

matter—we conclude that they have done so.

The 49-page FAC, to be sure, is not particularly reader-friendly. It begins with

some 35 pages of dense background narrative, set forth in 87 numbered paragraphs,

4

bereft of subheadings or clear organizing principles. These undifferentiated background

allegations are then incorporated, wholesale, into each cause of action. Because of the

FAC’s meandering style, the trial court observed it is difficult to discern the materiality

of its many allegations, and as a result, if the Mahans chose to amend, the court ordered

them to file something more focused and concise. We sympathize with that reaction,

having waded through the document ourselves, but in the end we believe the Mahans’

core allegations are set forth in reasonably coherent fashion.

3

Beyond the capsule

summary provided above, we set forth the relevant highlights, as follows.

A. Background: The Children’s Trust

In the mid-1990s the Mahans “paid an estate planning attorney to create an estate

plan” in which the Children’s Trust was a critical component. The Trust “was created to

hold the insurance policies in the approximate amount of $1 million for the children’s

future benefit, until after both of the Mahans had passed away. In implementing their

estate plan, the Mahans . . . made the . . . Children’s Trust sustainable, i.e. they made

enough cash available within the . . . Trust to pay the annual premiums for many years to

come. This gave the Mahans peace of mind knowing that there would be $1 million for



3 A complaint, with certain exceptions, need only contain a “statement of the facts

constituting the cause of action, in ordinary and concise language” (Code Civ. Proc.,

§ 425.10, subd. (a)(1)) and will be upheld “ ‘so long as [it] gives notice of the issues

sufficient to enable preparation of a defense.’ ” (Doe v. City of Los Angeles (2007) 42

Cal.4th 531, 549–550.) “[T]o withstand a demurrer, a complaint must allege ultimate

facts, not evidentiary facts or conclusions of law.” (Logan v. Southern California Rapid

Transit District (1982) 136 Cal.App.3d 116, 126.) However, “ ‘[t]he fact that a party has

alleged more than is required to justify his right does not obligate him to prove more than

is essential, and the unnecessary allegations will be treated as surplusage unless the

opposing party would be prejudiced.’ ” (Berman v. Bromberg (1997) 56 Cal.App.4th

936, 945.) At some point, of course, there is a remedy for undue prolixity: a demurrer

for uncertainty. (Code Civ. Proc., § 430.10, subd. (f).) But “demurrers for uncertainty

are disfavored, and are granted only if the pleading is so incomprehensible that a

defendant cannot reasonably respond.” (Lickiss v. Financial Industry Regulatory

Authority (2012) 208 Cal.App.4th 1125, 1135.) That was not a ground for the demurrers

here.

5

their children upon their passing.” For tax reasons, all assets held by the Trust had to be,

and are, indisputably owned by Maureen as the trustee and a beneficiary of the Trust.4

B. The Alleged Scheme

1. The Parties’ First Meetings (January-March 2013)

Sometime in January or February 2013, the Chan Defendants assisted Fred in

finding casualty and earthquake insurance for the Mahans’ home, and in doing so

“succeeded in winning Fred’s trust and confidence [by] convincing him of their insurance

expertise and that they had the Mahans’ best interests at heart.” After finishing this

project, the Chan Defendants, with the assistance of the Thai Defendants, “turned their

focus to the Mahans’ existing life insurance [policies], offering to review and, if

appropriate, fine tune the life insurance component of the Mahans’ estate plan.” Early in

their dealings with Fred, the Respondents “discovered” the Mahans’ respective cognitive

issues and proceeded to exploit the situation and betray their trust, driven by “an

avaricious pursuit of a six-figure life insurance commission.”5

The Respondents also learned that the Children’s Trust held two second-to-die

joint life policies which the Mahans “had purchased many years earlier and which had



4

See 26 C.F.R. § 20.2042-1(c) (proceeds from insurance on decedent’s life not

includable in decedent’s gross estate for federal tax purposes so long as decedent does not

have “incidents of ownership” of the policy at the time of his death).

5 Chan is the president and Kaddoura is an agent of the Chan Agency; Thai was a

general agent of Transamerica, and also served as the president and CEO of ABN. The

FAC is sometimes specific as to which of the Respondents carried out the activity alleged

on the part of all of them, but for the most part refers generally to conduct by “the

Defendants,” without always specifying what roles Chan, Kaddoura, Thai and their

respective entities played. It is a fair reading of the FAC, however, that the Chan

Defendants, primarily, if not exclusively, dealt directly with Fred acting in a retail agency

capacity, while the Thai Defendants worked in a brokerage capacity. While most of the

direct communications with Fred—and with Maureen, to the extent there were any with

her—particularly at the outset of the alleged scheme, were undertaken by the Chan

Defendants, the FAC alleges that “Thai and his company ABN were heavily involved

from the outset of Defendants’ predation” and were involved “at every step, from case

design to underwriting.”

6

accumulated substantial cash value.”

6

One policy, from Reassure America (the Reassure

America Policy), providing death benefits of $600,000, had a planned annual premium of

$6,000; the other was from Sun Life of Canada (the Sun Life Policy), providing a death

benefit of $540,000, with an annual planned premium of $8,000. Maureen, a beneficiary

of both policies, owned the Reassure America Policy; the Trust owned the Sun Life

Policy. The linchpin of the Respondents’ scheme was the false representation to Fred

that “he could use the cash value in the existing policies to get substantial additional

coverage while keeping the annual premium costs at $14,000.”

Once the Respondents convinced Fred of their ability to obtain more coverage

without any increase in premium cost, they embarked on a course of conduct in which

they manipulated the Trust by dealing almost exclusively with Fred, cutting Maureen out

of the loop, and relying on their ability to get Maureen to “sign off” on transactional steps

presented to her as having her father’s approval. The Respondents knew of “Maureen’s

reliance upon her father’s guidance” and exploited that trust and deference. They “went

out of their way to accelerate and pressure Maureen’s actions and limit her access to

information, often providing her with only signature pages or blank forms to sign, and

always having Fred Mahan sign first in order to signal his approval and

recommendation.”

2. The First Wave of Life Insurance Applications (March-June 2013)

In March 2013, the Respondents “prepar[ed] and submit[ted] applications for life

insurance on [both Mahans] to both Life Insurance Company of the Southwest . . . and

Lincoln Benefit Life Insurance Company.” Both applications were “either presented . . .

in a way which deprived the Mahans of a meaningful opportunity to review them, or . . .



6

“ ‘[S]econd-to-die’ insurance is a form of joint life insurance that pays a death

benefit only upon the demise of the second named insured to die. It is often used by a

married couple in estate planning and is also called dual life insurance or survivorship

insurance.” (Drelles v. Manufacturers Life Ins. Co. (Pa. Super. Ct. 2005) 881 A.2d 822,

827, fn. 2.)

7

simply [given to] . . . the Mahans [to] sign . . . before they were filled out.”

7

“Had Fred

been given a chance to review the Southwest and Lincoln Benefit applications before

they were submitted, he . . . would have discovered that, instead of ‘leveraging’ the cash

value in the Reassure America Policy and the Sun Life Policy, as Chan and Kaddoura and

represented, Defendants were actually planning on replacing both policies.”

In this first wave of applications, the Respondents went to great lengths to conceal

the ownership of the life insurance they were seeking, which allowed them to obscure the

fact they were planning a replacement of coverage, not simply the purchase of additional

coverage. In five applications submitted in May and July 2013, the Respondents

“concealed either one existing policy or the other,” listing the Mahans, not Maureen, as

the owners. All of the applications the Respondents submitted between March and May

2013 were eventually denied, with each of the insurers citing Martha’s cognitive disorder

and “abnormal lab[]” results for Fred as the reason for the denial.

In June 2013, having failed in their first series of attempts to arrange replacement

coverage for both existing policies, the Respondents took a different tack. By that point,

it was clear to them that Martha was uninsurable due to her Alzheimer’s disease

diagnosis, so they decided to apply for a new policy insuring only Fred. This change in

course would later turn out to have significant consequences. Among other things, it

created the prospect of a sharp escalation in cost, for in seeking single-life coverage the

“the premiums on a . . . policy insuring only Fred Mahan would be higher than the

premiums on a joint-life policy insuring both of the Mahans.” It also fundamentally

undermined any pretense that “additional” insurance could be obtained without additional

premium cost. The Respondents pressed ahead anyway. Motivated by their own selfinterest

and “determined to earn a six-figure commission,” the Respondents “proceeded



7

The applications contained several basic errors indicating that no one who

actually knew Fred or who had tried to obtain accurate information about him had been

consulted in the course of preparing them. For instance, the “applications sa[id] [Fred

Mahan's] birthplace [was] ‘Lebanon’ when in fact he was born in West Virginia”; they

also misspelled Frederick’s name as “Fredrick.”

8

to prepare and submit more life insurance applications.”

3. The Purchase of the Transamerica Policy (July-August 2013)

Because obtaining term insurance of any kind, given Fred’s age—then 82—was

going to be enormously expensive, the Respondents developed a strategy to leave the Sun

Life Policy in place, while arranging to have the Trust borrow against its cash surrender

value. By raising cash through a loan against the Sun Life Policy, the Trust could then

pay the high initial payment that would be required to place the insurance. For a

purchase of term life insurance structured in this way, the Respondents submitted two

applications in July 2013, one to Transamerica, and one to American General. At that

point, they still had not yet discussed anything about what they were doing with Maureen.

And as they had done with the prior, unsuccessful applications, the Respondents had Fred

sign blank or incomplete applications before Respondents themselves completed and

submitted them.

“When Defendants steered [the Mahans and the Trust] into funding the initial

premium on the Transamerica Policy by borrowing against the Sun Life Policy, they

failed to disclose . . . the fact that there would be an additional cost for the loan [because]

. . . an annual payment of the loan interest [would have to be made] or that unpaid interest

would be deducted from the cash value and reduce the death benefit. A loan against the

Sun Life Policy would [be] a short-term loan because it would reduce the net cash

surrender value to under $235,000.00 within a year. Defendants had the Sun Life Policy

Statement of Value and knew, but did not disclose, that borrowing funds from that policy

without additional funding would jeopardize the policy by putting it in danger of

lapsing.”

In seeking to place this new coverage, the Respondents’ gamesmanship

concerning policy ownership continued. The Notice Regarding Replacement

accompanying the Transamerica application stated that Fred was “the ‘Contract Owner’

for the Sun Life Policy when, in fact, [the Respondents] knew the policy was owned by

the [Children’s Trust].” On both the Transamerica application and on the American

9

General application, the Respondents “pretend[ed] to replace the Sun Life Policy when in

fact they were going to replace the Reassure America Policy and borrow against the Sun

Life Policy.” There was also no indication in either application that Martha was one of

the insureds. Had the Respondents identified Martha as an insured or listed Reassure

America as the policy being replaced, “they would have jeopardized their scheme” by

triggering a deeper inquiry by the insurance companies into what was going on.

The Transamerica application, which is attached as an exhibit to the FAC, was

given to Fred in blank, with an “X” encircled next to several places on it where he was

expected to sign. “Only after Fred Mahan signed those forms did Defendants complete

and submit them to Transamerica.” Among the documents submitted with the

Transamerica application were forms entitled “Absolute Assignment to Effect Internal

Revenue Code Section 1035 Exchange and Rollover,” and a “Notice Regarding

Replacement [:] Replacing Your Life Insurance or Annuity[].” These forms were left

blank. In submitting the application, the Respondents, as life insurance experts, “knew

that replacing the joint-life Sun Life Policy (or the joint-life Reassure America Policy)

with the single-life Transamerica Policy did not qualify as an IRS Section 1035 Tax-Free

Exchange, thereby exposing the cash surrender value of the Reassure America [P]olicy to

income taxes.”8

“Notwithstanding their knowledge that they were purporting to

surrender a joint-life policy for a single-life policy, Defendants prepared, presented and

had Fred Mahan sign . . . a Transamerica illustration which still assumed a legally

impossible 1035 [E]xchange.”

Ultimately, the Transamerica application was successful, resulting in the issuance

of a new term life policy (the Transamerica Policy) in September 2013 covering Fred,



8

Federal taxation may be avoided on an exchange of insurance policies involving

the trade of one policy for another. (26 U.S.C. § 1035(a)(1).) No taxable gain is

recognized in such an exchange, but only if the trade is for a policy of like kind. (26

C.F.R. § 1.1035-1(a).)



10

providing death benefits of $1,174,100 for an initial payment of $251,303.639

and an

annual premium thereafter of $101,500, terminating on Fred’s 91st birthday. When the

Transamerica Policy issued, so focused were the Respondents on making sure that they

were paid the $100,000 commission they were due that they “failed to deliver” the policy

as issued and neglected to pass along crucial pricing information from Transamerica. In

issuing the coverage, it turned out, Transamerica indicated that, to defray the high initial

payment—which Respondents had already arranged to fund by the surrender of the

Reassure America Policy—Fred had the option of paying a lower upfront premium and

paying a higher interest rate. The availability of this option showed it was unnecessary to

surrender the Reassure America Policy, but neither Fred nor Maureen was advised of it.

Summing up the workings of this alleged scheme up to its culmination upon

issuance of the Transamerica Policy, the FAC alleges that the “Defendants completed the

sale of the Transamerica [P]olicy through a parade of . . . wrongful acts, errors and

omissions [,] . . . includ[ing], . . . forging signatures, failing to provide [the Mahans and

the Trust] . . . complete copies of the documents they had signed, concealing (or

otherwise negligently failing to disclose) the true . . . economics of the Transamerica

transaction, concealing (or otherwise negligently failing to disclose) the tax consequences

of surrendering the Reassure America Policy, concealing (or otherwise negligently failing

to disclose) material facts about the loan being taken against the Sun Life Policy, and

concealing (or otherwise negligently failing to disclose) the fact that they were

extinguishing insurance coverage on Martha Mahan and at a time of her life when she

had become uninsurable.”

4. The Consequences to the Mahans and to the Children’s Trust

The Respondents’ scheme had a series of negative financial consequences,



9

“The total initial payment for the Transamerica [P]olicy was $251,303.63,

comprised of the surrender value of the Reassure America Policy in the amount of

$140,668.63, the liquidation of Sun [L]ife stock (that had been received when Sun Life

demutualized) in the amount of $43,000, and [a] loan on the Sun Life Policy of

$67,635.00.” There appears to be no dispute that, at the time the Children’s Trust paid

these amounts to Transamerica, the funds were property of the Trust, not the Mahans.

11

impacting the Trust as well as the Mahans. First, the Trust was drained of cash because

(1) “the annual insurance premium [owed by the Children’s Trust] [increased] by more

than $100,000,” and over the life of the Transamerica Policy “left the trust obligated to

pay . . . over $1 million in additional premiums,” (2) the Trust owed the Respondents

over $100,000 in commissions, and (3) the Trust paid Transamerica $251,303.63 for the

initial payment. Second, one of the primary tax advantages of using joint life insurance

as the form of asset conveyed through the Trust to the children was destroyed. Because

“the Reassure America Policy was not surrendered through a 1035 [E]xchange (and could

not be, because it went from a joint-life to a single-life policy), there would be taxes

owed on the funds Maureen Grainger received [upon surrender]. Defendants knew about

those tax consequences but did not explain them to Maureen . . . or the Mahans.”

Third, to keep the Trust afloat, the Mahans were “forced . . . to sell assets so they

[could] put significantly more of their personal money into the [Children’s Trust] in order

to pay insurance premiums and interest to prevent the [Sun Life and Transamerica]

insurance [policies] from lapsing,” and now they must continue paying money into the

Trust to sustain it. Fourth, (1) the Reassure America Policy was extinguished (by its

surrender), (2) the accumulated cash value of the Sun Life Policy was wiped out (by its

encumbrance with debt), and (3) the whole life, last-to-die joint survivorship coverage

formerly provided by both the Reassure America Policy and the Sun Life Policy,

together, was replaced with far less valuable and more limited term life insurance on

Fred’s life alone. “After Fred Mahan turns 91, the Transamerica [P]olicy will terminate

and all premiums paid, including the initial payment of $251,303.63, will be forfeited.”

In contrast, for the coverage which they gave up, “the Mahans paid an annual premium of

only $6,000.00 for the $600,000.00 Reassure America Policy, a policy that would not

terminate as long as the premiums were kept current.”

It also turned out that “Fred Mahan never understood in 2013 that he would be

forced to deposit into the . . . [Children’s Trust] over $800,000.00 in premiums for the

Transamerica [P]olicy, a policy that would terminate when Fred turned 91. When

12

Maureen . . . and Fred . . . questioned Chan about the actual premium costs of the

Transamerica [P]olicy, in December of 2014, Chan’s initial response was that Fred could

just borrow against his real estate to pay the premiums . . . .” “When Fred . . . objected to

borrowing against [his and Martha’s] real estate, Chan’s response was to propose a

reduction in the Transamerica [P]olicy coverage.” To Fred and to Maureen, this

exchange with Chan brought into sharp focus the adverse financial consequences of what

had occurred, so they sued.

C. Respondents’ Demurrers and the Trial Court’s Ruling

The trial court sustained an initial round of demurrers to the original complaint,

granting leave to amend. Following that order, the Mahans filed the FAC, alleging that

(1) all of the Respondents, either directly or by assisting the principals, committed

financial abuse against elders, the Mahans, in violation of the Elder Abuse Act; (2) all of

the Respondents were negligent; (3) the Chan Defendants breached one or more fiduciary

duties, in violation of, at least, Insurance Code sections 785 and 10509.4; (4) the Chan

Defendants committed fraud; and (5) all of the Respondents engaged in unlawful, unfair,

and deceptive business practices under Business and Professions Code section 17200 et

seq.

The Chan Defendants’ demurrer challenged all five of the Mahans’ causes of

action, while the Thai Defendants’ demurrer challenged only the first, second and fifth

causes of action (the only claims on which they were named as defendants). The grounds

for the demurrers, neither of which attacked the Trust’s ability to pursue relief on the

second through fifth causes of action, substantially overlapped. Each focused in rifleshot

fashion on the Mahans’ Elder Abuse Act claim. The Mahans’ basic argument in

support of that claim was that the Respondents’ alleged scheme “deprived [them] of

property rights” under section 15610.30 by, in essence, “forc[ing]” them to conduct a

“donative transfer[]” to the Children’s Trust. Based on the Mahans’ concession that

neither of them legally owned the Transamerica life insurance policy, because neither

legally owned the Children’s Trust (the Trust was indisputably owned by Maureen), the

13

Respondents argued that “Fred Mahan may have been acting as Maureen’s adviser and

agent and the rest of it, but he wasn’t the one who lost anything. He was a conduit.”

The trial court agreed, ruling that the Mahans’ Elder Abuse Act claim fails to state

a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) “[T]he allegation that

Defendants’ predatory scheme ‘forced’ the Plaintiffs to put money into the Children’s

Trust . . . fails to allege elder financial abuse,” the court explained, “because the transfer

of funds by the Mahans to the Trust for their children’s benefit was a voluntary act that

occurred after Defendants’ alleged fraudulent scheme. The Mahans’ property (money)

went not to the Defendants, the alleged abusers, but to the Trust for the benefit of the

children. . . . Such allegations do not suffice to show that Defendants took, appropriated,

secreted, obtained or retained (or assisted in taking etc.) the Mahans’ money by way of a

donative transfer, as Plaintiffs assert.”

On the same reasoning, the court sustained the Respondents’ demurrers as to the

Mahans’ claims for negligence, breach of fiduciary duty, fraud, and violation of section

17200, adopting the Respondents’ argument that “those causes of action fail because

Plaintiffs have not alleged financial loss or harm.” The court did, however, once again

grant the Mahans leave to amend, noting there were some allegations in the FAC that

appeared to allege in the alternative that Fred was the true owner of the Transamerica

Policy, and that, if the Mahans could “allege truthfully that Fred was the actual policy

owner/direct obligor, however, they may be able to allege that they suffered financial

harm as a result of Defendants’ scheme.”

Ultimately, as masters of their own complaint, the Mahans declined to abandon

their primary theory—which accepted that the Children’s Trust is the owner of all of the

life insurance policies at the center of Respondents’ scheme—in favor of an alternate

theory that would have committed them to prove that Fred was the “real owner” of the

Transamerica Policy, an approach to pleading their claims which in many respects would

have been inconsistent with the documentary evidence attached to the FAC. They chose

instead to stand on the FAC, as pleaded. The court then entered judgment dismissing all

14

causes of action as to them, with prejudice, while leaving intact the second through fifth

causes of action to the extent the Trust may wish to assert them. A final, appealable

judgment having been entered as between the Mahans and the Respondents (see Nguyen

v. Calhoun (2003) 105 Cal.App.4th 428, 437), this appeal followed.

II. DISCUSSION

A. The Elder Abuse Act Cause of Action

In construing the Elder Abuse Act, we begin with its words. (Winn v. Pioneer

Medical Group, Inc. (2016) 63 Cal.4th 148, 155 (Winn).) We are guided by the ordinary

meaning of those words, “[their] relationship to the text of related provisions, terms used

elsewhere in the statute, and the overarching structure of the statutory scheme.

[Citations.] When the language of a statutory provision remains opaque after we consider

its text, the statute’s structure, and related statutory provisions, we may take account of

extrinsic sources—such as legislative history—to assist us in discerning the Legislature’s

purpose.” (Id. at pp. 155–156.)

1. Statutory Text

“Financial abuse” claims are authorized in the Elder Abuse Act by section

15657.5, which works hand-in-hand with a set of defined terms in sections 15610.30

and 15610.70. As provided in Section 15610.30, subdivision (a), “ ‘[f]inancial

abuse’ of an elder . . . occurs when a person or entity does any of the following: [¶]

(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an

elder or dependent adult for a wrongful use or with intent to defraud, or both. [¶]

(2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal

property of an elder or dependent adult for a wrongful use or with intent to defraud,

or both. [¶] (3) Takes, secretes, appropriates, obtains, or retains, or assists in taking,

secreting, appropriating, obtaining, or retaining, real or personal property of an elder

or dependent adult by undue influence,” as defined in section 15610.70.

Section 15610.30, subdivision (c) defines the phrase “[t]akes, secretes,

appropriates, obtains, or retains” as occurring “when an elder or dependent adult is

15

deprived of any property right, including by means of an agreement, donative transfer, or

testamentary bequest, regardless of whether the property is held directly or by a

representative of an elder or dependent adult.” Section 15610.30, subdivisions (a), (b)

and (c), together, define the requisite level of culpability broadly. The defendant will be

liable for “depriv[ation]” (§ 15610.30, subd. (c)) of an elder’s property that is taken “for a

wrongful use or with intent to defraud” (id., subd. (a)(1), (2)), or that is committed by

“undue influence” (id., subd. (a)(3)).

The terms “wrongful use” and “undue influence” are specifically defined as well.

“A person or entity shall be deemed to have taken, secreted, appropriated, obtained, or

retained property for a wrongful use if, among other things, the person or entity…knew

or should have known that this conduct is likely to be harmful to the elder or dependent

adult.” (§ 15610.30, subd. (b).) “ ‘Undue influence’ means excessive persuasion that

causes another person to act or refrain from acting by overcoming that person’s free will

and results in inequity.” (§ 15610.70.) The test for “undue influence” is governed by a

series of listed factors, including the “vulnerability of the victim” (§ 15610.70,

subd. (a)(1)), the “influencer’s apparent authority” (id., subd. (a)(2)), the “actions or

tactics used by the influencer” (id., subd. (a)(3)), and the “equity of the result” (id.,

subd. (a)(4)).

No one disputes that the Mahans were “elders” when the acts alleged in the FAC

took place, or that the alleged chicanery of the Respondents, either directly or in assisting

one another, potentially exposes them to liability under the statute—if the Mahans have

adequately alleged a “deprivat[ion]” of the “property of an elder” for a “wrongful use” or

by “undue influence.” Placing great emphasis of the words “the property of an elder,”

the Respondents contend the Mahans were not “deprived” of any such property, and,

even assuming there was a “depriv[ation]” of something, the Trust owned whatever was

allegedly taken here. Thus, it is claimed, the Respondents committed no statutory

violation because they “did not ‘take the property of an elder’ to get the commission they

allegedly were paid.”

16

Although we are skeptical of such a stingy reading of the statutory text, the

position the Respondents take does have some surface appeal. There is no dispute that,

long before Respondents came on the scene, the Mahans arranged to place ownership of

the life insurance policies at issue in either Maureen or the Children’s Trust, apparently

for tax purposes; that they ceded all control of the Trust and its assets to Maureen as the

trustee; and that, as trustee, Maureen was obligated to pay whatever premiums were

owing on the life insurance policies. Since Respondents’ position that the Elder Abuse

Act does not apply on these facts rests on a reasonably plausible reading of the statutory

text, we pause briefly to review the genesis of sections 15610.30, 15675.5, and 15610.70,

so that we may consider these provisions within the overall structure of the Act and take

legislative history and purpose into account in applying them.

2. Statutory History and Purpose

The Legislature recognizes that elders are a class of persons who are

particularly vulnerable to abuse and that “this state has a responsibility to protect”

them. (§ 15600, subd. (a); see Bookout v. Nielsen (2007) 155 Cal.App.4th 1131,

1139–1140.) Enacted in 1982 with that broad purpose in mind, the Elder Abuse Act

now protects elders by providing heightened remedies that encourage private

enforcement of laws against abuse and neglect. (Winn, supra, 63 Cal.4th at p. 155;

Intrieri v. Superior Court (2004) 117 Cal.App.4th 72, 82.) To this end, civil actions

may be brought under the Act for “physical abuse” (§§ 15610.63, 15657), “neglect”

(§§ 15610.57, 15657), or “financial abuse” (§§ 15610.30, 15657.5).

When the Elder Abuse Act was enacted, its primary focus was on data collection

and encouraging the reporting of claims as a way of facilitating criminal enforcement.

(ARA Living Centers-Pacific, Inc. v. Superior Court (1993) 18 Cal.App.4th 1556, 1559–

1560.) In 1991, “the focus shifted to private, civil enforcement of laws against elder

abuse and neglect.” (Delaney v. Baker (1999) 20 Cal.4th 23, 33; see § 15657.3.) A key

objective of the 1991 amendments was to remedy the fact that “few civil cases [were

being] brought in connection with [elder abuse] due to problems of proof, court delays,

17

and the lack of incentives to prosecute these suits.” (§ 15600, subd. (h); see Cal. Elder

Law Litigation: An Advocate’s Guide (Cont.Ed.Bar 1st ed. May 2016) § 6.2, p. 6-4.)

The template for private enforcement in cases involving physical abuse or neglect

was set by the addition of section 15657 to the Act in 1991.

10 Section 15657 has been

amended several times since then, but the core of it remains the same today. It sets forth

a scheme of heightened remedies—punitive damages (§ 15657, subd. (c)), attorney’s fees

and costs (id., subd. (a)), and exemption from certain limitations on recoverable damages

in survivorship actions (id., subd. (b))—designed to provide incentives for “interested

persons to engage attorneys to take up the cause of abused elderly persons . . . .”

(§ 15600, subd. (j).) These remedies are available only where the plaintiff proves by

clear and convincing evidence that “the defendant has been guilty of recklessness,

oppression, fraud, or malice in the commission of this abuse.” (§ 15657.)11

“Financial abuse” began to garner concentrated legislative attention in the late

1990s. From the mid-1980s, “fiduciary abuse” had been among the types of elder abuse

covered by the Act,12 but beginning in 1997 the Legislature took a series of steps to

strengthen the remedies available for financial injury inflicted on elders by those who



10 Statutes 1991, chapter 774, section 3, adding article 8.5, “Civil Actions for

Abuse of Elderly or Dependent Adults,” to the Act.

11 “The courts are divided over whether this section and related provisions create

independent cause of actions or merely enhance the remedies available under pre-existing

causes of action. (See Perlin v. Fountain View Management, Inc. (2008) 163

Cal.App.4th 657, 664–666 . . . [discussing division of authority concerning §15657,

which addresses physical abuse of an elder]; Balisok, Elder Abuse Litigation, [(The

Rutter Group 2008)] ¶ 8:9, p. 8-5 (rev. #1, 2009) [‘Whether “financial abuse” amounts to

a new cause of action or whether it is remedial is an important question.’].)” (Das v.

Bank of America, N.A. (2010) 186 Cal.App.4th 727, 743–744.) We need not address this

question, since no party has raised it and in any event we conclude the Mahans have

adequately alleged various causes of action which, if proved, would constitute predicate

torts. (See post, Section II.B.)

12 See Statutes 1985, chapter 1120, sections 6 and 7, repealing and reenacting

section 15610, with fiduciary abuse added in subdivision (f).

18

misuse positions of trust and confidence.

13 The first step the Legislature took, in 1998,

was to substitute the phrase “financial abuse” for the narrower phrase “fiduciary abuse”

throughout the Act.14

Then, in 2004, it created a new class of claims for “financial

abuse,” enacting a private enforcement provision—section 15657.515—tailored to these

claims in particular. Section 15657.5 sets forth a scheme of heightened remedies closely

paralleling those available under section 15657, but with some key differences,

principally that attorney’s fee and cost awards are available for “financial abuse” claims

proved by the preponderance of the evidence, while clear and convincing evidence

remains the standard applicable to fee and cost recovery for claims of “physical abuse” or

“neglect.”16

In 2007, the Legislature, acting on reports that the intent to encourage private

claims by “providing for enhanced remedies . . . ‘has largely been unrealized . . . ,’ ”

17



13 After some years of experience with the Elder Abuse Act, it appears to have

been clear to the Legislature that the problem it originally sought to address in the Act

goes far beyond cases where the health and safety an elder is at risk, i.e. “physical abuse”

or “neglect.” (See Stats. 1998, ch. 946, § 1 [legislative finding that, based on statistics

shown by mandatory elder abuse reporting laws enacted in 1982, 32 percent of reported

cases of elder abuse involve “fiduciary abuse”].)

14 Statutes 1998, chapter 946, section 5, amending section 15610.30.

15 Statutes 2004, chapter 886, section 4.

16 Compare section 15657 (heightened remedies available “[w]here it is proven by

clear and convincing evidence that a defendant is liable for physical abuse . . . or neglect

. . . and that the defendant has been guilty of recklessness, oppression, fraud, or malice in

the commission of this abuse”) with section 15657.5 (under subdivision (a) “[w]here it is

proven by a preponderance of the evidence that a defendant is liable for financial abuse

. . . the court shall award to the plaintiff reasonable attorney’s fees and costs”; and under

subdivision (b), all other heightened remedies are available where it is “proven by clear

and convincing evidence that the defendant has been guilty of recklessness, oppression,

fraud, or malice in the commission of the [financial] abuse”).

17 Assembly Committee on Judiciary, Analysis of Senate Bill No. 611 (2007–2008

Reg. Sess.) as amended May 31, 2007, page 2.

19

made available the remedy of prejudgment attachment as a way to facilitate quick

recovery of losses in “financial abuse” cases. (§ 15657.01; Stats. 2007, ch. 45, § 1.) In

2008 the Legislature acted again, broadening the defined term “financial abuse” and

making procedural changes designed to facilitate the bringing of “financial abuse”

claims. In an extensive set of amendments, the Legislature, among other things,

(1) redefined what it means to take property for a “wrongful use,” replacing the prior

requirement that “bad faith” be shown with a standard based on the whether the

defendant “knew or should have known” of “likely” harm to the elder (§ 15610.30,

subd. (b));

18 (2) redefined the phrase “takes, secretes, appropriates, obtains, or retains” so

that any “depriv[ation]” of property was subject to liability, including “by means of

agreement, donative transfer, or testamentary bequest, and regardless of whether the

property is held directly” by the elder or on his behalf by a third-party (§ 15610.30, subd.

(c));

19 and (3) created a new basis for liability, adding “depriv[ation]” of property by

“undue influence” (§ 15610.30, subd. (a)(3)) as a ground for suit separate from

“depriv[ation]” “for wrongful use or with intent to defraud” (§ 15610.30, subd. (b)).

20



18 Statutes 2008, chapter 475, section 1; see Senate Committee on Judiciary,

Analysis of Senate Bill No. 1140 (2007–2008 Reg. Sess.) as amended March 10, 2008,

page 9 (“This definition of taking for a wrongful use would shift the proof required from

the defendant’s knowledge or presumed knowledge of the elder’s or dependent adult’s

right to the property taken, to the defendant’s knowledge or presumed knowledge of the

effect of the taking on the elder or dependent adult, to which a reasonable person standard

may be applied.”).

19 Statutes 2008, chapter 475, section 1.

20 (Stats. 2008, ch. 475, § 1; see Sen. Com. on Judiciary, Analysis of Sen. Bill No.

1140 (2007–2008 Reg. Sess.) as amended June 17, 2008, p. 4 [This bill “add[s] undue

influence as a third basis for financial abuse of an elder or dependent adult[,] [which

proponents of the bill contend] is necessary because elders are often exploited through

undue influence and under circumstances where the statutory elements necessary for

financial abuse . . . are lacking . . . .”].) When enacted, section 15610.30 borrowed a

definition of the term “undue influence” from Civil Code section 1575. By amendment

in 2013, the Legislature revised this definition, dropping the old Civil Code formulation

20

3. Application of the Act

With this quick sketch of the statutory history in mind, we turn to a specific

application of the Elder Abuse Act on the record here. Most of the questions raised by

this appeal are easily answered by resort to the statutory text, either plainly applied, or

when read in light of statutory context and history. But to the extent there is room for

reasonable debate, we resolve those questions in favor of the Mahans. (See California

Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 295 [a

remedial statute is to be “liberally construed on behalf of the class of persons it is

designed to protect”].) As further explained below, we view Respondents’ narrow

construction of the Elder Abuse Act as incompatible not only with its overall remedial

purpose, but also with the breadth of the “financial abuse” provisions of the Act as those

provisions have evolved by amendment in recent years.

a. “Depriv[ation]”

Since the Respondents are alleged to have arranged for a restructuring of insurance

policies the Mahans do not own, at an increased premium cost the Mahans are not

obligated to pay, the threshold question presented here is whether the FAC adequately

alleges that the Respondents took anything from the Mahans in a manner that is

cognizable under the Elder Abuse Act. We think it does.

The text of section 15610.30 is broad. It speaks not only of “taking” real or

personal property, but also “secreting, appropriating, obtaining, or retaining” such

property (§ 15610.30, subd. (a)(2); accord, id., subd. (a)(1)), and then, to capture the

sense of all of these terms, goes on to use the more expansive term “deprive.”

(§ 15610.30, subd. (c) [“a person or entity takes, secretes, appropriates, obtains, or retains

real or personal property when an elder or dependent adult is deprived of any property



of the term (which dated from 1872), restating it in a new defined term located within the

Elder Abuse Act itself—current section 15610.70—and updating the definitional

language in detail to capture the variety and characteristic features of “undue influence”

as it is often perpetrated on elders in today’s world. (Stats. 2013, ch. 668, § 3; see Sen.

Com. on Judiciary, Analysis of Assem. Bill No. 140 (2013–2014 Reg. Sess.) as amended

June 14, 2013, pp. 1–4.)

21

right”].) Some of the terms used in section 15610.30 are narrower than others; to

“secret,” for example, suggests hiding or concealment, and to “retain” or to “obtain”

suggests affirmatively acquiring possession of something. But we have no trouble

concluding that the broadest of these terms—the word “deprive”— in its ordinary

meaning covers what the Mahans have alleged. (See § 15610.30, subd. (c); Oxford

English Dict. Online (2017) [“Deprivation” means “[t]he action of depriving or fact of

being deprived; the taking away of anything enjoyed; dispossession, loss”] at

[as of June 2, 2017].) The trial court’s determination to the contrary

relies heavily on the fact that the Mahans gifted (or intend to gift) whatever money or

assets they transferred (or will transfer) to the Trust, but in our view this makes no

difference. The Act, as amended in 2008, expressly contemplates that liability may flow

from transfers made by “agreement, donative transfer, or testamentary bequest . . . .”

(§ 15610.30, subd. (c).)

b. “Property of an Elder”

Perhaps the most challenging aspect of this appeal, and the focus of most of the

Respondents’ attention, is the further question whether any losses claimed by the Mahans

may be considered “the property of an elder”? The Respondents insist that the FAC

alleges, at most, a “depriv[ation]” of property belonging to the Trust, not to the Mahans.

Naturally, the Mahans disagree, claiming they were deprived of their “right[s]” in three

pieces of “property”: (1) damage to their “estate plan,” (2) loss of the money they felt

compelled to transfer to the Children’s Trust to pay for the Transamerica term coverage,

and (3) loss of the money they felt compelled to transfer to the Children’s Trust to pay

the Respondents’ commissions. We agree with the Mahans.

First, we consider the Mahans’ theory that their “estate plan” was damaged.

Respondents argue that an “estate plan” cannot be a property right, and strictly speaking,

they are correct, but what they overlook is that the estate plan alleged here was simply the

vehicle by which the Mahans sought to convey assets by gift to their children. Those

assets took the form of second-to-die joint survivorship life insurance policies. As

22

alleged in the FAC, the two chosen policies had unique characteristics and value, in that:

(1) they accumulated cash surrender value over time and were permanent until the last of

the Mahans passed away (i.e., they were whole life policies on two lives and did not

expire on a date certain, as term insurance does), and (2) in combination, they were

dramatically cheaper than the restructured coverage put in place by the Respondents. By

alleging that the Respondents steered the Mahans into transactions that, in effect,

destroyed the value they intended to convey to their children when they chose these two

second-to-die joint survivorship life insurance policies as their preferred form of gift

asset, we think the FAC alleges a legally cognizable “depriv[ation]” of a “property right”

under the language of section 15610.30, subdivision (c), as amended in 2008. We agree

with the Mahans, therefore, that “[b]ecause Defendants’ misconduct made the donation

or voluntary transfer of” the Mahans’ chosen gift assets “in their estate plan much more

expensive and of lesser value, [their] right to dispose of their property has been

damaged.” (See Bounds v. Superior Court (2014) 229 Cal.App.4th 468, 480 [where

defendants manipulated 88-year-old plaintiff suffering from Alzheimer’s disease into

signing escrow instructions that impeded sale or encumbrance of real estate owned by

plaintiff’s trust, the “adverse financial impact of the escrow instructions [was] sufficient

to allege a ‘depriv[ation] of [a] property right . . . by means of agreement’ ” within the

meaning of section 15610.30, subd. (c), because the restrictions on alienability deprived

her and the trust “of one of the incidents of property ownership”].)

The value embodied in the Reassure America Policy and the Sun Life Policy was

intrinsically personal to each of the Mahans. Subdivision (a) of section 10110 of the

Insurance Code provides, in relevant part, that “[e]very person has an insurable interest in

the life and health of: [¶] (a) [h]imself.” (See also Ins. Code, § 10110.1, subd. (b) [“An

individual has an unlimited insurable interest in his or her own life . . . and may lawfully

take out a policy of insurance on his or her own life”].) We believe a statutory “insurable

interest” is properly considered a “property right” within the meaning of section

23

15610.30.21 Granted, in 2013, the Mahans’ eligibility for life insurance as new applicants

was subject to many health-dependent variables for which the Respondents cannot be

held responsible, but that looks at insurability from the wrong point in time. Because the

Mahans enjoyed whole life coverage as of the inception of the two joint survivorship

policies at issue here (see Ins. Code, § 286 [“an interest in the life or health of a person

insured must exist when the insurance takes effect”]), they would never have had to

qualify as insurable again absent Respondents’ machinations. This is not a case in which

the Respondents arranged to swap one term policy for another, less valuable one. They

are alleged, instead, to have stripped the Mahans of the ability to deliver one of the key

features that anyone seeks in whole life coverage—a lifelong right to death benefits

payable to the beneficiary, so long as premiums are paid. Due to the ticking of the

actuarial clock and their declining health, these elders can never again qualify for life

insurance of the same value they secured in the mid-1990s. Once they suffered a

“depriv[ation],” the value of that asset cannot be restored any more than the clock can be

turned back.

Second, we examine the alleged “depriv[ation]” of the Mahans’ “property



21 (See Fields v. Michael (1949) 91 Cal.App.2d 443, 449 [“ ‘[T]he word

“property” may be properly used to signify any valuable right or interest protected by law

. . . [but] the meaning to be given to the word depends upon the sense in which it is used,

as gathered from the context and the nature of the things which it was intended to refer to

and include.’ ”]; see also Estate of Sigourney (2001) 93 Cal.App.4th 593, 603 [“The

concept of property in California is extremely broad.”]; Yuba River Power Co. v. Nevada

Irrigation Dist. (1929) 207 Cal. 521, 523.) Respondents emphasize throughout their

briefs, as they did in the trial court, that the Mahans did not own the two policies at issue

here. But transferring or assigning the ownership of an insurance policy, does not defeat

the insurability interest of the insured. (See Ins. Code, § 10110.1, subds. (a), (b) & (f); In

re Marriage of Bratton (1994) 28 Cal.App.4th 791, 794; see also Lincoln Nat’l Life Ins.

Co. v. Gordon R.A. Fishman Irrevocable Life Trust (C.D. Cal. 2009) 638 F.Supp.2d

1170, 1177–1179; Curtiss v. Aetna Life Ins. Co. (1891) 90 Cal. 245, 250, 252–253.) The

Mahans may have ceded to Maureen and to the Trust all rights to control and receive

payout on these policies, but the underlying insurable interests, bound to the Mahans as

individuals, were essential to giving the “bundle of rights” they transferred $1,000,000 in

value.

24

right[s]” in funds paid for the Transamerica term coverage. We split this question into

two parts, looking first at the initial payment to Transamerica, and then looking at the

money paid or to be paid for annual premiums. Because the initial payment was made

from funds generated directly from the Reassure America and Sun Life policies (see ante,

p. 10, fn. 9), we view this money as part of the value of that whole life coverage;

Respondents are alleged to have obstructed its transferability to the Mahans’ children. As

for premiums paid or payable on the Transamerica Policy over and above the $14,000

annual premium cost of the two joint survivorship policies they intended to pass to their

children, the Mahans have had to reach into their pockets and sell assets to provide more

cash to the Children’s Trust than they ever planned to do. By alleging that the Mahans

were “forced” to transfer more of their own money into the Children’s Trust than they

anticipated and sell some of their personal assets to do so—which the Respondents well

knew would happen—we are satisfied the FAC has sufficiently alleged Respondents

“deprived [the Mahans] of [their] property right[s]” (§ 15610.30, subd. (c)) in that

money. Stating things in blunt terms, the FAC alleges that, by manipulation and use of

the Children’s Trust as an instrument, the Respondents managed to separate the Mahans

from their money. That, in our view, constitutes a “depriv[ation]” of “property.”

Third, we consider whether, when Respondents were paid their commissions, they

“deprived” the Mahans of the “property of an elder.”22

Courts have found in a number of

settings that commissions paid by a third party to a defendant arising from an abusive

transaction are sufficient to constitute elder abuse. (See, e.g., Wood v. Jamison (2008)

167 Cal.App.4th 156, 164–165 [a finder’s fee paid from the lender sufficient]; Zimmer v.

Nawabi (E.D. Cal. 2008) 566 F.Supp.2d 1025, 1034 (Zimmer) [commission paid by



22 The Thai Defendants argue that, read closely, the FAC never actually alleges

that they received any commissions. The Chan Defendants, for their part, argue that any

commissions were paid by Transamerica as part of the Trust’s purchase of the

Transamerica Policy. We think it can be fairly inferred from the FAC that the

Respondents shared a $100,000 commission payment that was paid out by the Trust, or

on behalf of the Trust, following the issuance of the Transamerica Policy.

25

mortgage broker sufficient]; Negrete v. Allianz Life Ins. Co. of N. Am. (C.D. Cal. 2015)

927 F.Supp.2d 870, 890–893 (Negrete) [commissions from churning insurance policies

sufficient].) Here, whether the commission money flowed directly into the Respondents’

pockets, it seems to us, makes no difference. The Mahans have alleged that the

Respondents’ “scheme depleted all of the cash in [the] trust” and that, as a result, all

commission payments by the Trust are fairly traceable to them.

At bottom, the Respondents’ insistence that any compensation for their services

came from the Trust, and that the Mahans never paid a dime themselves, strikes us as an

argument going to the scope of the relief available, not to the question of whether a claim

for relief has been stated in the first instance. Certainly, the adverse financial

consequences flowing from the Respondents’ actions cannot be awarded twice in

damages, both to the Trust and to the Mahans, but any damages apportionment issues

must be dealt with as a matter of proof, not as a matter of pleading. On this record, we

cannot say what specific items of damages may be awardable to the Mahans, as

distinguished from the Trust. All we can say definitively is that (1) it can be fairly

inferred from the allegations of the FAC that the Mahans suffered at least some damages

unique to themselves,

23 and (2) the Respondents are entitled to object to any effort at

double recovery.

c. “Wrongful Use”

We look next to whether the FAC adequately alleges that any property of the

Mahans was taken “for a wrongful use” under subdivisions (a)(1) and (a)(2) of section

15610.30. To show a likelihood that the alleged scheme here would be “harmful” to



23

For example, the Mahans appear to have incurred attorney’s fees and other

expenses in setting up the Children’s Trust, and according to the allegations in the FAC,

that money has now been wasted, since the Mahans’ fundamental objective in trying to

convey a gift to their children through two last-to-die joint survivorship life insurance

policies has now been derailed. And it may be that they can show they would have

earned a return on the money they unexpectedly had to “feed” into the Trust to keep it

afloat, or that they have been prevented from doing things they could have done had they

retained this money (e.g. using it for Martha’s care).

26

them and thus raise a presumption of “wrongful use” within the meaning of these

subdivisions, the Mahans do not have to allege they might suffer “physical harm” or

“mental suffering” from it (see Bonfigli v. Strachan (2011) 192 Cal.App.4th 1302, 1316;

Negrete, supra, 927 F.Supp.2d at pp. 891–893), although the FAC does allege emotional

distress to Fred. In addition, given their prior dealings with Fred, the Respondents knew

enough about how the Mahans’ estate was structured to understand the critical role lastto-survive

joint survivor coverage played in their plans. The Respondents also knew

early in 2013 that each of the Mahans was suffering from mental incapacity, yet chose to

deal almost exclusively with them instead of Maureen. The Respondents further knew

that Maureen, who lived in Oregon, would follow her father’s advice in connection with

Trust business.

When the Respondents’ alleged scheme began, the Mahans had two existing

whole life policies that provided satisfactory coverage, yet by using a position of trust

and confidence the Respondents maneuvered them into an arrangement in which they

effectively replaced the existing coverage—surrendering one policy, borrowing against

the other and wiping out its accumulated cash surrender value—and arranged instead to

have Fred buy a new single-life, time-limited policy with significantly higher premiums.

To make matters worse, it turned out that, when all was said and done, based on a pricing

option Transamerica offered, it was unnecessary to surrender the Reassure America

Policy, yet the Respondents were so focused on getting their $100,000 commission that

they never bothered to mention the availability of this option to Fred or Maureen, having

already rushed the surrender into effect.

There is enough here to say the Respondents “knew or should have known” of the

“likely” harm their scheme would have on the Mahans. Chan’s alleged statement to Fred

and Maureen that the Mahans “could just borrow against [their] real estate” suggests an

awareness Fred would need to call upon other assets to bear the dramatically increased

cost burden the Respondents knew was coming. That alone is enough to justify an

inference of the requisite knowledge. The Mahans also argue, and we agree, that another

27

way to describe what the Respondents allegedly did—if true—is “churning,” a term often

used in the stock-trading context as “excessive trading done primarily to benefit the

broker by generating commissions in excess of those justified.”

24 (See Hobbs v. Bateman

Eichler, Hill Richards, Inc. (1985) 164 Cal.App.3d 174, 188.) This case is similar to one

from a federal district court (see Zimmer, supra, 566 F.Supp.2d at pp. 1033–1034), where

the court held the insurance agents liable for financial elder abuse for what essentially

amounted to a “churning.” Just as in Zimmer, accepting the allegations of the FAC as

true, the Respondents “wrongfully obtained [tens of thousands of dollars in commissions]

as a result of [their] false statements about the terms of [the Mahans’] refinance, which

[the Respondents] knew were less favorable to [the Mahans] than [their] previous

[insurance policies].” (Id. at p. 1034.)

d. “Undue Influence”

The last question we address in applying the Elder Abuse Act is whether the FAC

sufficiently alleges “depriv[ation]” committed by “undue influence” (§§ 15610.30,

subd. (a)(3), 15610.70), which is an alternative to “depriv[ation]” by “wrongful use or

intent to defraud” (§ 15610.30, subd. (a)(1), (2)), under the revised liability scheme

created by amendment in 2008. We think the FAC sufficiently alleges the Mahans’ felt

need to pay more into the Trust to keep it afloat was brought about by “undue influence”

as now defined in section 15610.70. The Respondents are alleged to have taken

advantage of two aged individuals, both in a state of cognitive decline (§ 15610.70,

subd. (a)(1)); and, by use of their professed expertise as insurance professionals (id.,

subd. (a)(2)), carried out an elaborate plan of replacing insurance on the victims lives by



24 “Many older policyholders have years-old whole-life policies that have

accumulated a sizable cash surrender value. An insurance agent encourages them to trade

in these policies and buy new ones that pay higher death benefits. This practice, known

as churning, earns the agent a large sales commission while substantially increasing the

policyholder’s premium cost. . . . [¶] Insurance agents’ selling annuities of dubious value

under the guise of estate planning is common.” (Lawrence A. Frolik, Insurance Fraud on

the Elderly (June 2001) TRIAL p. 2, at

[as of June 2, 2017].)

28

“actions or tactics” that included “haste or secrecy” (id., subd. (a)(3)(C)), ultimately

visiting serious inequity on them, which included adverse “economic consequences,”

“divergence from [their] prior intent,” and commissions paid that are out of proportion to

the value of the services rendered to them (id., subd. (a)(4)). Thus, the plain terms of

section 15610.70, subdivision (a), fit what is alleged here quite well. The Respondents

are free to argue in their defense that, factually, and as a matter of causation, the Mahans’

actions in paying more money into the Trust were volitional and somehow independent

of their alleged bad acts, but for now the FAC sets forth plenty to permit a finding to the

contrary.

B. Other Causes of Action

Finally, we address the trial court’s dismissal of the Mahans’ four remaining

causes of action (negligence, breach of fiduciary duty under Ins. Code, § 785 et seq.,25

fraud, and unlawful business practices under Bus. & Prof. Code, § 17200) based on its

conclusion that the Respondents had not deprived the Mahans of a property interest, and

thus the Respondents had not “injured” the Mahans. For the reasons explained above in

concluding the FAC adequately alleges “depriv[ation]” of “the property of an elder” for

purposes of the Elder Abuse Act, we conclude the court erroneously sustained the

Respondents’ demurrers as to these other causes of action. The analysis of injury is, in

substance, the same.

The Chan Defendants contend the Mahans “forfeited” these four claims for lack of

analysis and authority in their opening brief on appeal. We disagree. The trial court was



25 Insurance Code section 785, subdivision (a) provides in relevant part that

anyone “engaged in the transaction of insurance” with an elder owes that person “a duty

of honesty, good faith, and fair dealing.” The Mahans moved this court on February 10,

2017, to take judicial notice of a letter of opinion, dated August 7, 2015, expressing the

Department of Insurance’s view of whether there “[i]s a private right of action afforded

for the violation of Article 6.3 (California Insurance Code (CIC) § 785 et. [sic] seq.)?”

We deny that motion. The trial court did not address whether Insurance Code section

785, subdivision (a), creates a private cause of action, and we decline to address it for the

first time on appeal.

29

clear in stating it denied all of the Mahans’ five causes of action because they had “not

alleged financial loss or harm.” It is true that the Mahans focused their appellate briefs

on the alleged harm they suffered in the context of “financial abuse” under the Elder

Abuse Act. The trial court saw this line of argument as presenting a question common to

all five causes of action, and so do we. We see no reason the “depriv[ation]” of

“property” for “wrongful use” we have found sufficient for purposes of the Elder Abuse

Act may not also serve as sufficient injury to support the second through fifth causes of

action. 26



26 At a number of places in the briefs, the Respondents argue the Mahans lack

“standing” to sue. “Standing, for purposes of the Elder Abuse Act, must be analyzed in a

manner that induces interested persons to report elder abuse and to file lawsuits against

elder abuse and neglect,” and analysis of the issue “may be intertwined with other issues

in elder abuse cases.” (Estate of Lowrie (2004) 118 Cal.App.4th 220, 230.) Since we

conclude the Mahans have sufficiently alleged “deprivat[ion]” and “wrongful use” of

their “property” under the Elder Abuse Act, we necessarily decide they have “standing”

to sue under the Act. We so conclude with respect to the other causes of action as well.

(See Surrey v. TrueBeginnings (2008) 168 Cal.App.4th 414, 417 [under Code of Civ.

Proc., § 367, the “existence of standing . . . requires that the plaintiff be able to allege

injury, i.e., an invasion of his legally protected interests” that is “greater than the interest

of the public at large and . . . is concrete and actual rather than conjectural or

hypothetical”].)

We reverse and remand for further proceedings not inconsistent with this opinion.

The Mahans shall recover their costs on appeal.