Asaro v. Augustine

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ANGELO ASARO, Plaintiff and Appellant, v. MICHAEL AUGUSTINE, Defendant and Respondent;

JAMIN HORN et al., Interveners and Appellants; LORNA DROPE, Intervener and Respondent.

H049867

California Court of Appeals, Sixth District

September 8, 2023

NOT TO BE PUBLISHED

Santa Clara County Super. Ct. No. 20CV372731

Danner, J.

This appeal arises from an order disqualifying Brightwork Law PC and its attorneys, Jamin Horn and Briar Horn (collectively Brightwork), from representing brothers Angelo Asaro (Angelo) and Anthony Asaro (Anthony) as plaintiffs in a civil action involving the estate of their father, Jerry.^[1] Under the most recent trust amendment executed by Jerry before his death, Angelo is a disinherited heir. Anthony, who suffers from cognitive impairment, is a beneficiary through a special needs trust that Jerry established for his benefit. The primary beneficiary of the trust property is defendant and respondent Michael Augustine (Augustine), a longtime friend and business partner of Jerry's, whom Jerry also appointed as successor trustee of the trust.^[2]

At Brightwork's request, due to concerns that Anthony was vulnerable to influence by Augustine and others, the trial court appointed a guardian ad litem for Anthony in the trust litigation. The guardian ad litem, respondent Lorna Drope (Drope), immediately raised concerns about Brightwork's representation and, ultimately, moved to disqualify Brightwork based on its simultaneous representation of Anthony and Angelo. The trial court found that Brightwork's dual representation of Angelo and Anthony under the circumstances of the case created a direct and potential conflict of interest warranting disqualification.

On appeal, Brightwork and Angelo (together appellants)^[3] assert that the trial court erred because Angelo's and Anthony's litigation interests are aligned. They contend each brother would benefit from invalidating the most recent trust amendment and reverting to an earlier amendment of the trust. Drope maintains that appellants' argument is based on a misunderstanding of Anthony's status, rights, and remedies under the current trust amendment. Drope argues that because Anthony, through the special needs trust, is a beneficiary of the trust plaintiffs' counsel breached their duty of loyalty by not pursuing claims that might benefit Anthony and were properly disqualified for representing clients with conflicting interests.

For the reasons explained below, we affirm the order.

I. FACTS AND PROCEDURAL BACKGROUND

A. Factual Background

In September 1990, Jerry established the Jerry Family Trust (Trust). In September 2005, Jerry executed a First Amendment and Restatement of the Trust (First Amendment). Jerry also established the Anthony J. Asaro Special Needs Trust for Anthony (hereafter, special needs trust or SNT).

Jerry established the special needs trust after Anthony was rendered disabled from injuries he suffered in a beating inflicted during a robbery. The injuries left Anthony with memory deficits and impaired higher-order thinking. The SNT provides that Anthony "suffers from a disability which substantially impairs his ability to provide for his own care and custody and constitutes a substantial handicap." It directs the trustee and successor trustees to hold and dispose of the SNT "for the sole benefit of" Anthony. It defines the purpose and disposition of the trust as a way to facilitate Anthony's "financial eligibility for means-tested public benefits," such as supplemental security income (SSI) and Medicaid, and to supplement those aspects of Anthony's care not covered by public benefits.

The First Amendment named Jerry's two sons, Angelo and Anthony, as beneficiaries to the trust estate upon Jerry's death. It named Jerry's brother, Samuel J. Asaro (Sam), and a friend, Gary Canonica, as successor cotrustees.

Jerry executed further amendments and restatements to the Trust in May 2010 (Second Amendment) and January 2015 (Third Amendment). These amendments generally divided the trust property evenly between Angelo and to Anthony via the SNT.^[4]For example, the Second Amendment provided that real property located at 788 and 794 N. Daniel Way (hereafter, the Daniel Way duplex) be evenly distributed between Angelo and Anthony and provided for monthly distributions of $1,000 each to Angelo and Anthony, with annual cost of living adjustments. The Third Amendment similarly provided for monthly distributions of $1,000 each to Angelo and Anthony. It further stated that any outstanding balance Angelo owed Jerry under a $500,000 promissory note secured by a deed of trust on the Daniel Way duplex would be forgiven and that Jerry's one-half interest in the duplex be divided equally between Angelo and Anthony. The Third Amendment additionally gifted real property located at 1727 Pope Court to Jerry's friend and business partner, Augustine.

In August 2019, Jerry executed a fourth amendment and restatement to the Trust (Fourth Amendment). The Fourth Amendment expressly provided for no distribution to Angelo and Anthony from the trust estate and named Augustine as the sole beneficiary. It also amended the appointment of successor trustees, naming Sam and Augustine as successor cotrustees.

After learning that the notarization of the Fourth Amendment was defective, invalidating the revision, Jerry consulted with an attorney who drafted a fifth amendment and restatement to the Trust (Fifth Amendment). The Fifth Amendment is the trust document at issue in the litigation underlying this appeal.

On July 2, 2020, Jerry executed the Fifth Amendment. The Fifth Amendment expressly states that Jerry provided Angelo an income producing property during his lifetime and Angelo "is to receive nothing under this Trust." It names Augustine and Anthony's special needs trust as beneficiaries. It directs the trustee to pay Augustine, in installments (with the exception of funds that the trustee places into the SNT), the net profit and income from the trust estate and "so much of the principal . . . up to the whole of it, as either" the trustee determines Augustine needs for his health, comfort, and/or support, or that Augustine requests.

The Fifth Amendment provides for Anthony as follows: "The Trustee shall place funds from the profits or income of the Trust into the [special needs trust], dated September 28, 2005. The amount and frequency of the payments into the [SNT] are within the sole discretion of the Trustee. The trustee is directed to take reasonable steps to assure that the corpus of the [SNT] is not reached by any third-party creditors." Upon Anthony's death, it provides for the remaining proceeds of the trust assets to be distributed to Augustine and his heirs.

The Fifth Amendment also amends the succession provisions. It designates Augustine as the successor trustee, followed by Sam (if Augustine is "unqualified or is unable to serve"). It specifies that Jerry's desire is for Augustine to "feel free to consult with" Sam "in making important decisions on behalf of the Trust."

Jerry died on July 13, 2020, shortly after executing the Fifth Amendment. At the time of Jerry's death, the trust estate was estimated to be worth approximately $10 million.

The parties dispute the circumstances under which Jerry executed the Fourth and Fifth Amendments to the Trust. According to the complaint, Jerry's failing health in the years prior to his death, including a back surgery in 2019 that left him blind, made him an "easy target for financial elder abuse, undue influence, and fraud." Appellants assert that Augustine took advantage of Jerry's vulnerable state and "orchestrated the signing, notarization, and payment for the preparation of the fourth amendment" to the Trust in August 2019, only one month after the back surgery that left him blind. Appellants further assert (though not alleged in the complaint) that 11 days after execution of the Fifth Amendment, which "elevated Augustine" to sole successor trustee, made him the beneficiary of the trust, and placed funding Anthony's special needs trust in Augustine's" 'sole discretion'" as successor trustee, Augustine drove Jerry from his care home to Jerry's previous residence, where Jerry used a gun to kill himself.

Respondent Drope counters that before his death, Jerry told friends and acquaintances that he did not want Angelo to receive anything from his estate. Jerry and Angelo had an "estranged relationship . . . on and off for years" preceding Jerry's death, related to Angelo's illegal drug use, which led Jerry ultimately to inform Angelo that he was going to be disinherited. According to Jerry's brother Sam, Jerry and Augustine were friends for 20 or 30 years and "worked together on everything." Jerry asked Sam to make sure Anthony was taken care of, and because of Sam's age (80 years at the time), Sam and Jerry agreed that Augustine should be named trustee because he was "much younger and would be there to take care of [Anthony]." Drope asserts it was Jerry's wish before he died that Anthony would be taken care of for the rest of his life.

B. Procedural History

A few months after Jerry's death, Brightwork filed suit on behalf of Angelo and Anthony, challenging the validity of the 2019 and 2020 estate plan amendments (Fourth and Fifth Amendments) and asserting tort and statutory claims against Augustine. The complaint, which asserts causes of action for financial elder abuse, intentional interference with expected inheritance, fraud, unjust enrichment, constructive trust recovery of damages and attorney fees under Probate Code section 859, and equitable accounting, seeks among other remedies a declaration that the Fourth and Fifth Amendments are rescinded and void, and asks for compensatory,...