[00:00:00] Speaker 02: Uh, the matter's submitted. [00:00:02] Speaker 02: Thank you. [00:00:02] Speaker 02: Thank you. [00:00:06] Speaker 02: Go ahead, Madam Clark. [00:00:08] Speaker 00: Next, we have the NRA Eurostegui case. [00:00:12] Speaker 00: The appellant has waved argument and agreed to submit on the paperwork. [00:00:19] Speaker 00: Uh, Michael Berger appearing for appellee. [00:00:23] Speaker 02: Okay, Mr. Berger, you've got the floor. [00:00:26] Speaker 01: Thank you, Your Honors. [00:00:28] Speaker 01: So, [00:00:29] Speaker 01: There are four points that were raised by the appellant, and I wanted to address all four of the points. [00:00:35] Speaker 01: But first, just a little background, and you're probably familiar with it. [00:00:39] Speaker 01: This appellant, Ms. [00:00:41] Speaker 01: Yura Stegway, is a bad actor. [00:00:43] Speaker 01: She was already found to be guilty of financial abuse of an elder. [00:00:48] Speaker 01: She was already found to have acted willfully and fraudulently, punitive damages were awarded against her, and she's written through multiple appeals. [00:00:58] Speaker 01: In every case, they found that she acted with fraud. [00:01:02] Speaker 01: In every case, they found that there was, before she became the trustee of the trust by fraud, she was the holder of a power of attorney. [00:01:11] Speaker 01: and this power of attorney creates the fiduciary relationship. [00:01:15] Speaker 02: And so you got- Did she, well, let me back up one step, or step forward one step. [00:01:21] Speaker 02: Did she commit fraud after she became trustee of the trust? [00:01:25] Speaker 02: Did anybody adjudicate that? [00:01:27] Speaker 01: Both, both before and after. [00:01:29] Speaker 01: Sure, she transferred property to herself. [00:01:32] Speaker 01: There was like more than a hundred page statement of decision. [00:01:37] Speaker 01: So there was fraud. [00:01:38] Speaker 03: But there's nothing in the statement of decision. [00:01:40] Speaker 03: Nothing in the statement of decision found that she committed fraud on Mr. Forrest Dowling through the use of the power of attorney. [00:01:57] Speaker 03: He wasn't a fiduciary under the power of attorney and committed fraud in that context. [00:02:02] Speaker 03: before he died, after he died, she became the trustee of the trust and the sole beneficiary of the trust. [00:02:09] Speaker 03: And until your clients set it aside, she was authorized to do whatever the trust authorized her to do. [00:02:16] Speaker 03: Now, later they determined she didn't account appropriately, but there's been no finding by the state court that was in the notice of decision, the statement of decision that you relied upon. [00:02:27] Speaker 03: that stated that she violated a fiduciary duty after she became the trustee. [00:02:34] Speaker 01: So your honor, you're correct. [00:02:36] Speaker 01: I mean, there were multiple findings of fraud and financial abuse of an elder. [00:02:42] Speaker 01: And there were findings that there was the power of attorney, but there wasn't a finding that because of this power of attorney, then you committed more fraud and breach your fiduciary duty more. [00:02:53] Speaker 01: So they're really two separate things. [00:02:56] Speaker 01: Let me go back and dispose of the easy points. [00:02:59] Speaker 03: Well, let me try to direct you to the statute. [00:03:03] Speaker 03: which is 522Q and the other statute, which is 523A4, they both utilize the same basic idea that you have to commit some fraud, deceit, manipulation or defalcation or fraud in a fiduciary capacity. [00:03:20] Speaker 03: And what you're suggesting is if she's under the 522Q statute, if she's a fiduciary by virtue of the fact that she was [00:03:29] Speaker 03: there was a power of attorney that existed, that if she then committed fraud, that automatically results in her loss of the homestead exemption. [00:03:38] Speaker 03: Whereas under 523A4, we know you have to do it while you're in the fiduciary capacity. [00:03:45] Speaker 03: Are you saying there's a distinction between those two statutes? [00:03:49] Speaker 01: I'm not, Your Honor. [00:03:49] Speaker 01: I mean, I'm looking at Q, and it talks about fraud, deceit, or manipulation at fiduciary capacity. [00:03:56] Speaker 01: And there's case law back and forth. [00:03:57] Speaker 01: I think the general Ninth Circuit view [00:04:00] Speaker 01: It's not like fraud or something in a fiduciary capacity. [00:04:05] Speaker 01: It's this fraud in a fiduciary capacity. [00:04:07] Speaker 01: So I would concede that you have to have that. [00:04:10] Speaker 01: Even before [00:04:11] Speaker 01: The power of attorney though, this was the person that was closest to the elder. [00:04:15] Speaker 03: If she wasn't in fiduciary capacity, just because she's a friend, and even if she's a confidant, has a relationship with him, this has to be a technical trust under the bankruptcy code. [00:04:26] Speaker 03: It can't be just a operational of if you violate this duty to this person, then suddenly the fiduciary duty arises. [00:04:36] Speaker 03: There was no technical relationship, true? [00:04:43] Speaker 01: I don't know what technical relationship means. [00:04:45] Speaker 03: It means that there's some kind of a document, a trust document, that there is some kind of a professional relationship, an attorney-client relationship. [00:04:53] Speaker 03: There is some power of attorney. [00:04:56] Speaker 03: We don't even know what the power of attorney said. [00:04:58] Speaker 03: It's not part of the record, is it? [00:05:00] Speaker 01: No, your honor. [00:05:01] Speaker 01: So she acted to become the trustee of this trust, and she became the trustee of the trust by fraud. [00:05:10] Speaker 01: So she got into this fiduciary capacity by fraud. [00:05:14] Speaker 01: And then her defense is, well, yes, I did these terrible things. [00:05:19] Speaker 01: Yes, it's financial abuse of an elder. [00:05:21] Speaker 01: Yes, there's punitive damages. [00:05:22] Speaker 01: but I did it before I managed to weasel my way into trust. [00:05:27] Speaker 03: You're using a statute to preclude her from her homestead exemption. [00:05:31] Speaker 03: That's what this is all about. [00:05:33] Speaker 03: It's not about whether she didn't, you know, she's not getting a discharge under 523.82. [00:05:38] Speaker 03: She's not getting a discharge under 523.86. [00:05:41] Speaker 03: She's not getting a discharge under 727. [00:05:43] Speaker 03: That's not an issue. [00:05:45] Speaker 03: She committed fraud. [00:05:47] Speaker 03: There's no doubt. [00:05:47] Speaker 03: She's not going to get away from the obligations. [00:05:50] Speaker 03: Whether she can have a homestead exemption turns on whether the fraud was while she was in a fiduciary capacity. [00:05:57] Speaker 03: And that's what I don't see the evidence of in this case. [00:06:01] Speaker 01: So if the court will allow, let me get rid of all our other arguments and I'll come back to that. [00:06:06] Speaker 01: I think maybe you've already disposed them in your own mind. [00:06:09] Speaker 01: One of our arguments is, Oh God, I didn't get a fair evidentiary hearing. [00:06:13] Speaker 01: And there were three different hearings and there was plenty of time to brief it. [00:06:18] Speaker 01: So I think that one's, you know, sort of out and forget about it. [00:06:22] Speaker 01: She says that the matter's not moot and we agree. [00:06:25] Speaker 01: So again, that one's gone. [00:06:26] Speaker 01: So we're really back to the court, the court's point. [00:06:32] Speaker 01: This to me is like kind of a really good example of a bad actor that this statute was made for. [00:06:38] Speaker 01: And I think that the thing that your honor is seizing on, which I guess is a point raised by the appellant, is some sort of technicality that she's using to try and get out of this bad conduct. [00:06:52] Speaker 01: The fraud continued while she's a trustee of the trust. [00:06:57] Speaker 01: Again, not accounting, not a playing with the court orders. [00:07:00] Speaker 01: All of this continued. [00:07:02] Speaker 01: She became a trustee by fraud, and I think her defense is, well, okay, but I wasn't a fiduciary then. [00:07:09] Speaker 01: But certainly once she became a trustee of the trust, we can agree that she was a fiduciary. [00:07:14] Speaker 01: And at that point, we can look at the conduct. [00:07:17] Speaker 01: Did she comply with court orders? [00:07:19] Speaker 01: No. [00:07:19] Speaker 01: Did she continue to act willfully, maliciously? [00:07:24] Speaker 02: Which court orders are you talking about now? [00:07:26] Speaker 01: So there was court orders in the probate court to provide an accounting, to talk about all the money she took. [00:07:31] Speaker 01: And she never provided the accounting. [00:07:32] Speaker 01: And to this day, she's never provided the accounting. [00:07:37] Speaker 01: Every time she's raised an appeal up until now, she's lost on the appeals and has basically done everything she can to kind of hold on to this home that she got by fraud. [00:07:48] Speaker 01: Now, I guess there's no question that the home is going to be sold. [00:07:51] Speaker 01: There's a motion pending. [00:07:52] Speaker 01: But the question is, does she get the full homestead exemption that an honest but unfortunate debtor would get? [00:07:59] Speaker 01: Do you send it back for some sort of evidentiary hearing, which is what she says she wants? [00:08:05] Speaker 01: Or do you simply overrule it and decide that she gets the full homestead exemption? [00:08:10] Speaker 01: If the issue is whether or not she continued to act wrongfully once she became a trustee of the trust, I think there's ample evidence of that. [00:08:19] Speaker 01: If there's other questions of the court, I'll answer them, but otherwise, I don't have anything further, Your Honors. [00:08:25] Speaker 03: Well, you said there's ample evidence of it, but what you relied upon in this case, as far as I could tell, was the statement of decision made by the probate court. [00:08:33] Speaker 03: That's all that you relied upon. [00:08:35] Speaker 03: That's all that you introduced into evidence was that decision. [00:08:39] Speaker 03: And that decision does not in any way, shape or form indicate what conduct she committed after she became the trustee of the trust after Forrest Dowling died that constitutes fraud. [00:08:54] Speaker 01: So we've also cited to the bankruptcy courts, you know, ruling as well. [00:08:59] Speaker 01: And in our brief at page 19, [00:09:02] Speaker 01: The court talks about how they've given her, you know, all the rights that she wanted, that there was lots of briefing. [00:09:10] Speaker 01: And I think earlier, the court says—the court does cite to this power of attorney. [00:09:20] Speaker 01: They say, Prescott ex-used documents that give Diane powers of attorney. [00:09:24] Speaker 01: make decisions regarding his health care instead of Greg, giving him complete charges of affairs, including authority to exclude all of his family members from the residence, the hospital room, the funeral. [00:09:39] Speaker 01: The bankruptcy court sees the power of attorney as important, and I guess that's [00:09:44] Speaker 01: The question, if there's an issue about what happened after during the trust, then that might be something that could be dealt into further. [00:09:53] Speaker 01: The bankruptcy court didn't seem to feel that was necessary. [00:09:56] Speaker 01: And I'm not dying to give Ms. [00:09:58] Speaker 01: Irestegui the evidentiary hearing that she is crying for. [00:10:03] Speaker 01: But I believe there is such evidence. [00:10:05] Speaker 01: I mean, again, I've mentioned a couple of times this theory to account. [00:10:08] Speaker 01: I think we could dig up more beyond that that would show that she was not acting in a fiduciary capacity once she became a trustee of the trust that she continued to act only in her own best interest. [00:10:26] Speaker 02: Any more questions? [00:10:28] Speaker 02: No. [00:10:28] Speaker 02: Okay. [00:10:29] Speaker 02: Thank you very much, Mr. Berger. [00:10:30] Speaker 02: The matter is submitted and you'll be getting our decision. [00:10:34] Speaker 02: Thank you. [00:10:34] Speaker 02: Thank you, gentlemen. [00:10:35] Speaker 01: Thank you, Your Honors. [00:10:36] Speaker 02: Thank you.