It is apparently the rare case where a fraudster not only admits to the fraud, but seeks to get court relief, based upon the timing of the fraud.
However, when the object is to protect a residence, anything goes.
In the recent case involving debtor Diane Ida Uriostegui, BAP No. CC-24-1174-GFS, Defendant/debtor was sued in California Superior Court, for financial elder abuse among other things, for causing her patron to disinherit his family, and bequeath to her hundreds of thousands of dollars. Prior to Ms Uriostegui’s intervention, the money should have been distributed into a trust previously established by the deceased trustor and his late wife.
The heirs of the creator the trust (the trustor) successfully sued Ms. Uriostegui for financial elder abuse, and apparently won a verdict in the neighborhood of $1MM. Defendant subsequently filed for bankruptcy, and claimed an exemption for her home of $687,000.
The obvious purpose of Uriostegui’s exemption claim was to protect the home from sale, because if the sum of the mortgages and homestead exemption are greater than the value of the home, the home will not be sold in bankruptcy.
The heirs sought to force the sale of the home, claiming that 11 USC 522 (q) limited defendant/debtor to a homestead of $189,000. The heirs claimed that Defendant should have been limited in her a homestead exemption, because she had committed the elder abuse in her fiduciary capacity (as a trustee of fraudulently the manipulated trust). 11 USC 522 (q).
In the ironic twist, defendant claimed that her fraud occurred before she had any interest in the trust, and therefore prior to any fiduciary relationship attaching. The California court had not specifically found that she committed fraud while Defendant was a fiduciary. In fact, federal law is clear that there can be no fiduciary relationship prior to the establishment of a trust, in which the alleged wrongdoer is a trustee.
Because there was no fiduciary relationship between the defendant/debtor and the deceased at the time of his death, defendant/debtor’s actions were not committed in the capacity of a fiduciary, and therefore her homestead was not limited by 11 USC 522 (q).
If all of this a little odd in context, it is; the court does not discuss whether the debt to the heirs is dischargeable. That was not her argument. Apparently, the Superior Court judgment would still be collectible, as a non-dischargeable debt based on fraud, pursuant to 11 USC Sec. 523 and 524. All the underlying case was deciding was whether Debtor’s admitted fraud limited her homestead exemption.
Thus, the heirs could record the judgment, and enforce it to the lawful extent against any non-exempt asset. They simply could not force the sale of the home at this time (and the case does not say it, but query if the home was purchased by Defendant with the pilfered funds).
There is likewise no discussion of any criminal prosecution of the Defendant. That should have been a possibility, given her admission of the fraud; the fact that she took advantage of an elderly person; and the fact that she apparently took a very large sum of money.
READING THIS POST DOES NOT CREATE AN ATTORNEY CLIENT RELATIONSHIP
THIS POST DOES NOT CONSTITUTE LEGAL ADVICE; PLEASE CONSULT AN ATTORNEY!!
