In Re: Estate Of: Jacqueline Gladstone

FIFTH DIVISION
DILLARD, P. J.,
REESE and BETHEL, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
March 14, 2017
In the Court of Appeals of Georgia
A16A1682. IN RE ESTATE OF JACQUELINE GLADSTONE.
A16A1683. IN RE ESTATE OF JACQUELINE GLADSTONE.
REESE, Judge.
The probate court appointed Emanuel Gladstone as conservator for his wife
(the “ward”), who suffered from dementia. The probate court later removed Gladstone
from office, finding that he had breached his fiduciary duties, and entered a $317,000
judgment against him and Ohio Casualty Insurance Company (the “surety”). In these
companion appeals, Gladstone and the surety challenge the judgment. For the reasons
set forth, infra, we affirm.
In October 2014, Gladstone filed a petition for the appointment of a
conservator for the ward in light of a proposed inheritance that she was to receive.
The probate court appointed an attorney for the ward and later appointed Gladstone
as conservator, setting a bond at $430,000. After the surety posted the bond, the court
issued letters of conservatorship on February 3, 2015.
Gladstone filed an inventory and asset management plan in April 2015, which
included a budget listing the ward’s monthly income as $809 and her monthly
expenses as $10,513. The ward’s attorney objected, requesting documentation of
various items, including some of the monthly expenses and the status of the
inheritance. After a hearing in June 2015, the court directed Gladstone to provide
additional information to the ward’s attorney, deferring approval of the asset
management plan.
At a hearing two months later, in August 2015, the ward’s attorney reported
that the attorney remained unable to consent to the asset management plan because
Gladstone had still not provided her with the requested documentation. In the
resulting order, the court noted that the expenditures being made by Gladstone were
unapproved because, due to Gladstone’s delays, the asset management plan still had
not been approved. The court noted that Gladstone’s interim report was due by
September 3, 2015, and ordered the ward’s attorney to file a response to the interim
report, when filed.
2
Gladstone filed the interim report, listing receipts and expenditures between
February 3 and July 15, 2015. In response, the ward’s attorney raised additional
concerns and concluded that the county conservator should be appointed to evaluate
the ward’s financial needs and review the unapproved expenditures that Gladstone
had reported. Another hearing was set for October 21, 2015, and Gladstone again
failed to produce the requested information. The probate court suspended Gladstone
and appointed a temporary substitute conservator to evaluate the ward’s financial
needs and review the unapproved expenses.
The temporary substitute conservator reported, inter alia, that, around October
21, 2015, Gladstone had removed approximately $80,000 from the ward’s account via
checks written to himself. In December 2015, the probate court suspended Gladstone
and ordered him to appear and submit to a final settlement of his accounts under
OCGA § 29-5-81.
After a hearing at which Gladstone, his attorney, counsel for the surety, and
counsel for the ward appeared, the probate court issued an order removing Gladstone
from office and entering judgment against Gladstone and the surety for $167,000 for
breach of fiduciary duty and for $150,000 in sanctions labeled as “punitive
3
damages.”1 The court also directed Gladstone’s attorney to return $10,000 in attorney
fees to the substitute conservator, reducing the total judgment against Gladstone and
the surety, as neither Gladstone nor his attorney had presented evidence to support
the payment of such fees. The court retroactively approved expenses of $8,678 per
month for the nine months that Gladstone had been in office (totaling $78,102) plus
certain one-time expenses. The court found the shortfall in funds that had been
delivered to the successor conservator to be between $167,576.20 and $189,228.31;
thus, the court entered judgment against Gladstone and the surety in the amount of
$167,000 on the settlement of accounts and as damages for his breach of fiduciary
duty.
The court also awarded punitive damages in the amount of $150,000 based on
Gladstone’s “failure to disclose his conflict of interest [i.e., his claims against the
estate], his diversion of Conservatorship assets, [and] the looting of the
Conservatorship account by the Suspended Conservator’s attorney and the
Conservator on the eve of his suspension.” The court awarded a total judgment of
$317,000. These appeals followed.
1
See Division 4, infra.
4
Because the trial court sits as the trier of fact when settling a
conservator’s accounts, its findings based upon conflicting evidence are
analogous to a jury verdict and should not be disturbed by a reviewing
court if there is any evidence to support them. When the evidence is
uncontroverted and no question of witness credibility is presented,
however, the trial court’s application of the law to undisputed facts is
subject to de novo appellate review.2
With these guiding principles in mind, we turn now to the appellants’ specific claims
of error.
Case No. A16A1682
1. Gladstone argues that the probate court erred in failing to adopt his proposed
asset management plan, which he filed based on his knowledge of the ward’s needs
and as her designated health care agent.
OCGA § 29-5-30 (a) requires a conservator to file an inventory of the ward’s
property and an asset management plan within two months of appointment. The asset
management plan “must be based on the actual needs of the ward and take into
consideration the best interest of the ward.”3 “The plan and any proposed budget for
2
In re Hudson, 300 Ga. App. 340 (685 SE2d 323) (2009) (citation,
punctuation, and footnote omitted).
3
OCGA § 29-5-30 (c) (emphasis supplied).
5
the expenditure of funds in excess of the anticipated income from the property must
be approved by the court.”4
Here, the letters of conservatorship directed Gladstone not to spend the ward’s
funds without a court order for any purpose except as set forth in the court-approved
budget. The ward’s attorney requested documentation and explanation of some of the
budgeted items in the proposed asset management plan in order to determine whether
they were based on the ward’s actual needs and to determine the status of the ward’s
pending inheritance. Despite his attorney’s promises that he would provide this
documentation to the ward’s attorney, Gladstone failed to do so.
Gladstone complains that the probate court erred in placing more confidence
in the court-appointed attorney for the ward than in him, the ward’s husband.
Gladstone cites no supporting case law, but argues that there is a conflict between the
statutes “regarding a probate court’s obligation to approve a Plan submitted by a
Conservator who is also the Health Care Agent for a ward.”
4
Id.
6
Under the facts of this case, we see no conflict between OCGA § 31-32-7,5
which authorizes a health care agent to contract for health care services on behalf of
the declarant,6 and OCGA § 29-5-30 (c). OCGA § 31-32-7 does not give a health care
agent unfettered authority but requires him to use “due care” in acting for the benefit
of the declarant, to act in the declarant’s “best interest” when the declarant’s
intentions and desires are unclear,7 and to act only as “reasonably necessary” to
implement the powers granted to him.8 Similarly, OCGA § 29-5-30 (c) requires the
conservator to take into consideration the ward’s “best interest” and “actual needs”
in making an asset management plan.
5
Specifically, a health care agent shall act in accordance with the terms of the
advance directive for health care and, in so doing, may enter into agreements and
otherwise act as reasonably necessary to implement the powers granted to him.
OCGA § 31-32-7 (b), (d). The advance directive may allow the health care agent,
inter alia, “to contract for any health care facility or service in the name of and on
behalf of the declarant and to bind the declarant to pay for all such services, and the
health care agent shall not be personally liable for any services or care contracted for
or on behalf of the declarant.” OCGA § 31-32-7 (e) (3).
6
A “declarant” in this context is “a person who has executed an advance
directive for health care.” OCGA § 31-32-2 (3).
7
OCGA § 31-32-7 (b).
8
OCGA § 31-32-7 (d).
7
Based on the questions raised by the ward’s attorney, the probate court did not
err in ordering Gladstone to provide documentation of the expenses in the asset
management plan to demonstrate that the monthly expenses, which exceeded the
ward’s monthly income, were based on her actual needs.9 Because Gladstone failed
to document the expenses, the probate court did not err in refusing to approve the
asset management plan.
2. Gladstone contends that the probate court erred in finding that he breached
his fiduciary duty and in denying his claims relating to the care he personally
provided for the ward.
The probate court set a final hearing on a settlement of accounts, pursuant to
OCGA § 29-5-81 (a), and ordered Gladstone to bring with him “all books and
records, including, but not limited to, bank statements, cancelled checks, credit card
records, and debit card records, reflecting his collection and expenditure of funds
belonging to [the] [w]ard from January 21, 2015, to the date of the hearing.”
Although Gladstone complains about the probate court’s reliance on documents
not in evidence (such as bank statements and checks showing more than $80,000 in
withdrawals on the eve of his suspension), Gladstone’s attorney acknowledged at the
9
See OCGA § 29-5-30 (c).
8
hearing that the withdrawals constituted Gladstone’s “compensation for taking care
of Mrs. Gladstone between the hours of 8:00 p.m. to 8:00 a.m. at the rate of $16 an
hour.” This judicial admission is conclusive and binding.10 Gladstone does not argue
that this compensation was approved by the probate court; instead, the letters of
conservatorship directed Gladstone to keep the ward’s funds separate from his own
and not to spend any of her funds without court approval.
Because there is some evidence to support the probate court’s findings of fact
that Gladstone withdrew more than $80,000 in payments to himself on the eve of his
suspension and that Gladstone failed to account for at least $167,000 in funds
belonging to the ward, we will not interfere with the court’s finding that Gladstone
breached his fiduciary duty and its award of damages in that amount.11
10
See Jabaley v. Jabaley, 208 Ga. App. 179 (1) (430 SE2d 119) (1993) (“[A]n
admission [in judicio] is conclusive; it is binding upon the party and estops the party
from denying the admission or introducing any evidence to controvert such
admission, even if the admission is not true.”) (citation and punctuation omitted).
11
See In re Estate of Zeigler, 295 Ga. App. 156, 158-159 (2) (a) (671 SE2d
218) (2008).
9
3. Gladstone complains that the probate court erred by conducting an inquiry
pursuant to OCGA § 29-5-7012 without giving him notice.
This argument is without merit as the probate court did not conduct such an
inquiry. As discussed in Division 2, supra, the probate court conducted a final hearing
on a settlement of accounts, pursuant to OCGA § 29-5-81 (a).
4. Gladstone argues that the probate court erred in awarding “punitive
damages”13 of $150,000 because punitive damages were not specifically pled in the
relief sought by the substitute temporary conservator.
Under OCGA § 29-9-14, “[t]he court on its own motion may order a hearing
on any matter related to a conservatorship or guardianship even if no objection is
filed.” Compliance with Chapter 9 is generally sufficient for proceedings that arise
under Title 29.14 Although Title 29 does not explicitly provide for “punitive”
12
Under OCGA § 29-5-70 (a), “the court may conduct a judicial inquiry into
whether the ward is being denied a right or privilege provided for by this chapter and
may issue appropriate orders.”
13
Although the probate court refers to this award as “punitive damages,” it is
more properly considered sanctions for the reasons set forth, infra.
14
See OCGA § 29-9-1.
10
damages,15 it does allow the court to impose “sanctions.” Under OCGA § 29-5-92 (a),
“whenever it appears to the court that good cause may exist to revoke or suspend the
letters of conservatorship or to impose sanctions, the court shall cite the conservator
to answer the charge.” “Upon investigation, the court may, in its discretion: . . .
[r]educe or deny compensation to the conservator or impose any other sanction or
sanctions as the court deems appropriate[.]”16
Here, the probate court issued a “citation” on December 9, 2015, with notice
to both Gladstone and the surety, advising Gladstone that his actions would be
examined, inter alia, in connection with OCGA § 29-5-92 and other statutes. The
court ordered him and the surety to appear at a hearing on January 15, 2016, and
show cause why the letters of conservatorship should not be revoked, why the court
should not find that Gladstone had breached his fiduciary duty, “and why damages
or other redress should not be ordered.” By way of this citation, the probate court thus
15
See OCGA § 29-5-93 (a) (“If a conservator commits a breach of fiduciary
duty or threatens to commit a breach of fiduciary duty, a ward or an interested person
on behalf of the ward shall have a cause of action as appropriate: (1) To recover
damages; (2) To compel performance of the conservator’s duties; (3) To enjoin the
commission of a breach of fiduciary duty; or (4) To compel the redress of a breach
of fiduciary duty by payment of money or otherwise.”).
16
OCGA § 29-5-92 (b) (4) (emphasis supplied).
11
put Gladstone and the surety on notice that it could award “sanctions” under OCGA
§ 29-5-92 (b) (4).
In its final order, the probate court concluded that Gladstone’s conduct
“constitute[d] aggravating circumstances sufficient for the imposition of punitive
damages to penalize, punish, and deter future similar conduct.” Although the court
did not specifically reference OCGA § 51-12-5.1, it employed the language of § 51-
12-5.1 (a)17 in imposing punitive damages. In support of its award, the court relied on
case law, which stands for the general proposition that “punitive damages are
available against defendants who breach a fiduciary duty”18 and which is not
necessarily tethered to OCGA § 51-12-5.1.
17
OCGA § 51-12-5.1 (a) provides: “As used in this Code section, the term
‘punitive damages’ is synonymous with the terms ‘vindictive damages,’ ‘exemplary
damages,’ and other descriptions of additional damages awarded because of
aggravating circumstances in order to penalize, punish, or deter a defendant.”
18
Jonas v. Jonas, 280 Ga. App. 155, 163 (3) (d) (633 SE2d 544) (2006) (citing
Home Ins. Co. v. Wynn, 229 Ga. App. 220, 223 (2) (493 SE2d 622) (1997)).
12
In light of the probate court’s role as the finder of fact19 and the right-for-any-
reason doctrine,20 we conclude that the court properly awarded punitive damages in
this case. The citation put Gladstone and the surety on notice that Gladstone’s actions
would be examined in connection with OCGA § 29-5-92, and the record supports the
court’s conclusion that sanctions in the form of punitive damages were appropriate.
Compliance with the procedural requirements of OCGA § 51-12-5.1 (d)21 was not
necessary.22 We find no reversible error.
19
See Hudson, 300 Ga. App. at 340.
20
See Bagwell v. Trammel, 297 Ga. 873, 876 (1) (778 SE2d 173) (2015)
(affirming trial court’s denial of party’s specific performance claim, following a
bench trial, pursuant to the right-for-any-reason rule).
21
Section 51-12-5.1 (d) of Title 51, “Torts,” requires that the complaint include
a specific prayer for an award of punitive damages and that the court hold a bifurcated
trial to determine first the issue of liability for punitive damages before the trier of
fact hears evidence on the appropriate amount of damages.
22
See OCGA § 29-9-1 (“Compliance with the provisions of this chapter shall
be deemed to be sufficient for proceedings in the court arising under [Title 29.
Guardian and Ward] except as otherwise provided in Chapter 11 of Title 9 [Civil
Practice Act] and Chapter 9 of Title 15 [Probate Courts].”); see also In re Longino,
281 Ga. App. 599, 601 (1) (636 SE2d 683) (2006) (finding that written citation was
sufficient notice under predecessor to OCGA § 29-5-92 to enable guardian of a
ward’s property to answer the charge that there could be cause to revoke his letters
of guardianship).
13
5. Gladstone contends that the probate court erred in ordering his attorney to
reimburse the ward’s account the $10,000 in fees Gladstone had paid him from the
account because there was no testimony to prove the payment to counsel or cancelled
checks or bank statements in evidence.
As in Division 2, supra, Gladstone complains about the probate court’s reliance
on documents not in evidence. His attorney, however, acknowledged at the hearing
that two checks of $5,000 each were given to his firm from the conservatorship
account for legal services provided to Gladstone in his capacity as conservator. This
constitutes a judicial admission.23 Neither Gladstone nor his attorney provided
documentation or an explanation that these expenses were for the conservatorship.
The probate court thus did not clearly err in finding that Gladstone’s attorney was
liable to the ward for this amount.24
23
See Jabaley, 208 Ga. App. at 179 (1).
24
See OCGA § 29-5-63 (“If the court finds that the conservator is liable to the
ward, the court shall enter a judgment against the conservator and any surety in the
amount of such liability.”).
14
Case No. A16A1683
6. The surety argues that the probate court erred in imposing punitive damages
against it because the surety bond covered only actual damages. Based on the plain
language of the bond and applicable statutes, we disagree.
“The bond of a conservator shall be . . . [c]onditioned upon the faithful
discharge of the conservator’s duty[.]”25 “The conservator and any surety shall be held
and deemed joint and several obligors,”26 and “[i]n all cases where letters of
conservatorship are revoked, any surety on the bond shall be liable for all acts of the
conservator in relation to the trust up until the time of the settlement with the new
conservator or the ward.”27 While “the surety’s liability will not be extended by
implication or interpretation,”28 “[s]ureties . . . are jointly and severally liable with
their principal unless the contract provides otherwise.”29
25
OCGA § 29-5-41 (a) (3).
26
OCGA § 29-5-46.
27
OCGA § 29-5-49 (d).
28
OCGA § 10-7-3.
29
OCGA § 10-7-1.
15
Here, the probate court found that punitive damages were appropriate based on
“[t]he actions and omissions of [Gladstone] including, but not limited to, the failure
to disclose his conflict of interest, his diversion of Conservatorship assets, the looting
of the Conservatorship account by the Suspended Conservator’s attorney and the
Conservator on the eve of his suspension.” This constituted aggravating
circumstances sufficient to impose punitive damages “to penalize, punish, and deter
future similar conduct.” The court thus concluded that “punitive damages should be
imposed against [Gladstone] and his surety.” Although the surety cites extensive case
law from other jurisdictions and argues that it did nothing to warrant punishment, we
have held that “[r]ecovery of punitive damages in the liability context does not
contravene public policy.”30
Although OCGA § 29-5-41 (c) requires that a conservator’s bond “be in a value
equal to the estimated value of the estate,” if it is secured by a licensed commercial
surety, it does not necessarily follow, as the surety argues, that recovery is limited to
30
Lunceford v. Peachtree Cas. Ins. Co., 230 Ga. App. 4, 8 (2) (495 SE2d 88)
(1997) (citation omitted; emphasis in original).
16
actual loss. Under Georgia law, we must turn to the language of the bond itself to see
what the surety agreed to indemnify.31
First, we note that the probate court ordered that “[l]etters of conservatorship
shall issue to such . . . conservator[] upon taking the required oath and upon the
conservator[] posting bond in the amount of [$430,000].” The bond provided that
Gladstone and the surety were:
held and firmly bound unto [the probate judge] and the successors in
said office, in the just and full sum of [$430,000], for the payment of
which, well and truly to be made, we bind ourselves, our heirs, executors
and administrators, jointly and severally. . . . Now should [Gladstone]
well and truly demean [himself] as such as aforesaid named, and
faithfully discharge all of the duties required by law, then the above
obligation to be satisfied and void, otherwise to remain in full force and
effect.
At the settlement-of-accounts hearing, the surety introduced into evidence both the
bond and the bond application. Because Gladstone failed to discharge all of his duties
31
See R. J. Griffin & Co. v. Continental Ins. Co., 230 Ga. App. 822, 823 (497
SE2d 586) (1998) (“[N]o construction of a surety’s bond is required or even
permissible when the language employed by the parties in the contract is plain,
unambiguous and capable of only one reasonable interpretation.”) (citation and
punctuation omitted).
17
faithfully, both he and the surety are jointly and severally liable up to the amount of
the bond.32
7. The surety contends that the requisite procedures for imposing punitive
damages were not followed.
(a) For the reasons stated in Division 4, supra, we reject the argument that there
was no notice of any claim for punitive damages.
(b) In addition, the surety argues that the probate court violated its due process
rights by failing to provide any pre-judgment notice that punitive damages could be
awarded. The probate court did provide notice, however, directing both Gladstone
and the surety to show cause why the court should not find that Gladstone had
breached his fiduciary duty, “and why damages or other redress should not be
ordered.” The court specifically stated in the notice that the conservator should
submit to a settlement of accounts and that the court would consider whether to
reduce or deny compensation and what other remedies were appropriate, examining
his actions in connection with, inter alia, OCGA § 29-5-92. The surety appeared at
32
See OCGA § 10-7-1; R. J. Griffin & Co., 230 Ga. App. at 824.
18
the hearing and presented evidence. Because the surety was afforded notice and a
hearing, its due process argument is without merit.33
(c) The surety also complains that the probate court disregarded the two-step
procedure required by OCGA § 51-12-5.1 (d), i.e., that the trial court first resolve
whether an award of punitive damages should be made and then set the amount to be
awarded. As we held in Division 4, supra, the probate court complied with OCGA §
29-5-92 (b) (4) in imposing sanctions, and compliance with OCGA § 51-12-5.1 was
not required.34 As the surety has cited no authority holding otherwise, we find no
error.
Judgment affirmed. Dillard, P. J., and Bethel, J., concur.
33
See Pennington v. Pennington, 291 Ga. 165, 167 (3) (728 SE2d 230) (2012)
(“A fundamental requirement of due process in any proceeding which is to be
accorded finality is notice that is reasonably calculated to inform interested parties
of an impending hearing and afford them an opportunity to present their objections.”)
(citation and punctuation omitted).
34
See OCGA § 29-9-1.
19