Errold Moody

$286,000 Judgment Against

Errold F. Moody

for Breach of Fiduciary Responsibility
Alameda Superior Court Judge Calls His Behavior 'Despicable'

Errold F. Moody

Judgment - Breach of Fiduciary Responsiblity Summary of Case No RP 09478054:

Errold Moody

was the trustee of my mother's estate of approximately $2.4M. He lied to beneficiaries, took trust money for personal use, failed to keep receipts, caused the trust excessive accounting fees, overpaid himself and used trust money for legal fees to defend his breaches. The judge ruled that

Errold Moody

overpaid himself by $82,000. He has fled the state and is refusing to reimburse any money to the family.

Stay away from this guy.


Please read the Judgment by Superior Court Judge Steven Brick:

Judgement in .pdf format

IN THE SUPERIOR COURT OF ALAMEDA COUNTY

IN AND FOR THE STATE OF CALIFORNIA

In re Matter of Patricia L. Francis,

Deceased.

DAVID SHEVICK,

Petitioner,

ERROLD F. MOODY, JR.

and

MATTHEW J. GONSALVES,

Respondents.

CASE NO. RP 09478054

[SECOND AMENDED PROPOSED] JUDGMENT

INTRODUCTION

This case presented the question of whether respondent

Errold F. Moody

, Jr., breached his fiduciary duties as trustee of the Patricia L. Francis Trust during the period of his trusteeship. For the reasons that follow, the Court finds that he did and that he must make restitution to the trust in the amount of $191,955.03 and to Mr. Shevick in the amount of $95,899.41.

PROCEDURAL HISTORY

This case involved a trust established by the late Patricia L. Francis. It is undisputed that Ms. Francis died on December 18, 2007, that petitioner David Shevick is decedent's son and a beneficiary of her trust, and that respondent

Errold Moody

served as trustee from Ms. Francis' death until he was suspended by the Court (Hon. Sandra K. Bean) on April 13, 2011. Judge Bean ordered that an accounting be filed by May 13, 2011, and ordered that all trust files be delivered to the newly appointed temporary trustee, attorney Ruben Sundeen. On June 14, 2011, Judge Bean removed

Errold Moody

as trustee and appointed Mr. Sundeen as successor trustee.

Errold Moody

's second counsel, Matthew J. Gonsalves, substituted out of the case on October 14, 2011, and

Errold Moody

began to represent himself. Two earlier trial dates were scheduled and vacated, and on August 16, 2012, the trial dates were scheduled and vacated, and on August 16, 2012, the Court (Hon. Cecilia Castellanos) set this case for trial in Dept. 1 for December 14, 2012.

On October 22, 2012, the Court denied Gonsalves' for good faith settlement determination. On December 14, 2012, the Presiding Judge continued the trial to January 4, 2013, a date agreed upon by the parties, so that a revised application for good faith settlement determination could be heard by the (Hon. Cecilia Castellanos) on December 19, 2012. On that date the Court granted Gonsalves' motion for good faith settlement determination (to which all parties stipulated), leaving Shevick and

Errold Moody

as the remaining parties in this matter.

On January 4, 2013, this case was assigned to the Hon. Steven Brick, Dept. 17 of this court, by Presiding Judge Clay, as a three to four day probate hearing. Trial commenced on January 4, 2013, continued on January 7, 2013, and then recessed until January 14, 2013. The evidence was on January 17, 2013. Counsel offered their closing arguments on the afternoon of January 18, 2013.

The matter was then submitted for decision, subject to ruling on respondent's motion to disqualify the trial judge pursuant to C.C.P. section 170.3, which was submitted just before closing arguments. On February 28, 2013 the Honorable Kelly V. Simmon's Marin County Superior Court, denied respondent's motion to disqualify.

FINDINGS OF FACT ESTABLISHING LIABILITY AND DAMAGES

  1. The testimony at trial established that

    Errold Moody

    had been decedent's friend and paid financial consultant for some 20 years at the time of her death. Nonetheless, he claimed to have no knowledge of decedent's many
  2. When

    Errold Moody

    arrived at decedent's house shortly after her death and began his work as trustee he made no inventory of the furnishings of the house. He said he took pictures of each of the rooms, but subsequently lost the pictures. He began selling and giving away various items but did not set up any system for keeping track of income and expenses of the trust or what items had gone to whom. He lost any receipts he may have obtained for the sale of furnishings and furniture.
  3. Errold Moody

    was capable of using computers (indeed, he testified to having owned several computers which crashed during the period of his trusteeship), but did not turn on Ms. Francis' computer to see whether she had information which would have been helpful with his administration of the trust (she did, in a Quicken program that was easily accessible). Instead, he sold the computer at a garage sale.
  4. As trustee,

    Errold Moody

    made a habit of paying expenses with cashiers' checks or cash. He did not keep the 'stubs' of the cashiers checks.
  5. Errold Moody

    also acknowledged that he took for himself a teak grandfather's clock from decedent's home without the knowledge or permission of the beneficiaries. He still has it. He also took some $5,000 of trust money and used it to go to Florida for his own personal reasons. He later returned the money to the trust.
  6. Based upon information he says decedent told him over the years before her death,

    Errold Moody

    distrusted petitioner and his sister at the time of decedent's death (and earlier) and thought them capable of taking trust property without permission. In fact

    Errold Moody

    knows of no such property that was taken. Petitioner asked for and received permission from

    Errold Moody

    to take some family photographs from decedent's home on the day of the funeral. His sister, Sarah, asked for and received permission to take two sets of silver from decedent's home.
  7. When, in December 2008, after a year of

    Errold Moody

    's managing the trust, petitioner first asked

    Errold Moody

    what assets remained and how much he had charged the estate,

    Errold Moody

    did not respond to that request for information.
  8. When, in March 2009, petitioner complained that his prior request had gone unanswered, and asked for a full accounting,

    Errold Moody

    insisted that petitioner make his request through a lawyer, citing the 'privacy' of the estate. Of course, the trust had no privacy interest vis a vis a beneficiary.
  9. When petitioner correctly pointed out that as a beneficiary he had a right to the information he was asking for,

    Errold Moody

    , nonetheless, insisted on petitioner hiring a lawyer. When petitioner did hire a lawyer,

    Errold Moody

    hired his own lawyer and began charging the legal fees he incurred to the trust.
  10. In fact, in the spring of 2009,

    Errold Moody

    had not organized the decedent's files and could not have provided a meaningful accounting. Correspondence from the fall of 2008 through the fall of 2009 between

    Errold Moody

    and the CPA firm charged with filing the trust's IRS form 706 showed that, contrary to

    Errold Moody

    's representations to the beneficiaries, he had not provided to the CPAs the documents they needed to complete and file form 706. Indeed, despite having obtained a one year extension of form 706 filing deadline.

    Errold Moody

    's delays in providing the required documents to the CPAs caused the trust to incur IRS penalties.
  11. The fees

    Errold Moody

    charged the trust for his own time were plainly excessive. In the accounting he claims that he paid himself $33,330.79 for probate of the Oregon condominium. A document produced by

    Errold Moody

    in discovery, '

    Errold MOODY

    RPD 003007, instead shows that his fee for the probate was $37,330.97, which included $7,036.40 for the probate of the Oregon condominium, plus $30,294.57 as 1% of the value of the gross estate that he reported in Oregon. Thus the amount of

    Errold Moody

    's fees, was misrepresented as $101,623.97 when with the correct Oregon number added, it was $105,624.17. Adding in the value of the Cadillac that

    Errold Moody

    also took for himself as a portion of his trustee's fees, $4,000.00, brings

    Errold Moody

    's total trustee's fees to $109,624.17.
  12. Ruben Sundeen, Esq., the successor trustee, is the founding partner of his law firm, specializes in trust and estates litigation, and has been involved in more than 200 cases involving fee disputes. He testified that a nonprofessional trustee such as

    Errold Moody

    would be allowed $40.00/hr. in Alameda County, not the $250.00/hr. that

    Errold Moody

    charged to the trust. Mr. Sundeen also testified that this amount would be capped at 1% of the value of the administered estate, or up to 1.5% if the estate was complex. Mr. Sundeen testified that the trust was not complex, involving two residential properties and approximately 25 investment and bank accounts.

    Errold Moody

    agreed with Mr. Sundeen's characterization, and testified that it was his own inept state of mind and disorganization that led to the difficulty in producing an accounting. The value of the estate administered by

    Errold Moody

    was $2,097,529.38. Thus the maximum 1% fee should have been $20,975.94. The Oregon Probate fee of $37, 330.97 was excessive. In trial

    Errold Moody

    refused to stipulate to the amount listed as compensation for the Oregon condominium probate, and instead testified that he spent about twenty hours on that matter. Using the rate commonly allowed for non-professional trustees in Alameda County, $40.00 an hour, that leaves

    Errold Moody

    with a fee of $800.00 for the Oregon probate. Although

    Errold Moody

    did not testify in detail as to the extent of his work to sell the house in Riverside, he did testify that he made several trips there, stayed at the home, and helped to prepare it for sale. The Court will allow $5,000.00 in fees for the sale of the Riverside residence. An appropriate fee for

    Errold Moody

    's work in this matter was $26,775.94. Subtracting this from the $109,624.17 that

    Errold Moody

    wrongfully took for his fees, he is ordered to reimburse $82,848.23 to the trust.
  13. In addition, he caused the trust to incur unnecessary fees of his attorney, the CPA firm which worked on the tax filings, the Mowat, Mackie CPA firm which created the final accounting, and a bookkeeper who sought to organize the trust records after

    Errold Moody

    had made a shambles of them. The amounts of these excessive and unnecessary charges are detailed below.
  14. The form 706 CPA, through deposition testimony read out in Court, stated that her firm's usual fee for preparing a form 706 accounting for this size of estate would be less than $15,000.00, and that because of

    Errold Moody

    's noncooperation and delays, the final cost of the trust accounting was $40,500.00.

    Errold Moody

    is ordered to reimburse the trust $25,500.00 for these excess fees.
  15. Additionally, Mr. Sundeen testified that the final accounting for the trust should have cost no more than $15,000.00. In testimony and evidence presented to the court,

    Errold Moody

    showed the same pattern of disorganization and failure to timely provide documents to the Mowat, Mackie accounting firm as he did with the CPA that completed the IRS form 706 accounting. In December of 2012, more than three years after Ms. Francis' passing,

    Errold Moody

    still was missing seventeen categories of account statements, including many bank statements. The accounting took more than six months, and the Mowat, Mackie firm charged $42,000.00 for the accounting. The excess amount of $27,000.00 will be added to the amount that

    Errold Moody

    is ordered to pay to the trust.
  16. Errold Moody

    hired a bookkeeper to organize the files, and he should have done that work himself. The total paid to the bookkeeper was $8,435.80. The total accounting and bookkeeping reimbursement to the trust for the two accounting firms and for the bookkeeper is $60,935.80
  17. When asked on adverse examination why he had done such a poor job of managing the trust's assets and documenting his work,

    Errold Moody

    explained that he had health problems which made him incapable of fulfilling his duties. In his words, he had a 'meltdown.' He again pointed to his health issues as a reason for not responding to petitioner's December 2008 request for information and for going to Florida using trust money, and for disobeying the probate court's order to turn over documents and complete the final accounting in 2010.

    Errold Moody

    volunteered that he had similar health problems in the late 1990s and had to struggle to reestablish his business as a financial consultant because he had pretty much destroyed it.
  18. When asked on adverse examination why he had insisted that petitioner make his requests for an accounting through a lawyer,

    Errold Moody

    acknowledged that he wanted to hire a lawyer to protect himself because of his negative perception of petitioner and his sister, not based on anything they had said or done after decedent's death, but based on things decedent supposedly confided in him over the years before her death.
  19. In sum,

    Errold Moody

    acknowledged multiple breaches of his duties as a fiduciary, by not properly administering the assets of the trust, not keeping records of the disposition of trust property, taking trust property for his own use, causing the trust to incur unnecessary and unreasonable professional expenses, overcharging the trust for his fees and not responding to the reasonable requests for information by petitioner, instead causing petitioner to incur the expenses of his own attorneys' fees to pursue his rights as a beneficiary.

    Errold Moody

    offered no legitimate excuse for his behavior, which can only be viewed as malicious and oppressive (which was proven by clear and convincing evidence) within the meaning of Civil Code section 3294.

CONCLUSIONS OF LAW

The duty of loyalty, requiring a trustee to administer the trust solely in the interest of the beneficiaries (§ 16002, subd. (a)), is the most fundamental duty of a trustee. (Bogert & Bogert, The Law of Trusts and Trustees (rev. 2d ed. 1993) § 543, p. 217 (Bogert); 2A Scott & Fratcher, The Law of Trusts (4th ed. 1987) § 170, p. 311.) Its purpose is to protect the best interests of the beneficiaries. The duty of loyalty requires a trustee to subordinate his or her interests to those of the beneficiaries in every regard. (Bogert, supra, § 543, pp. 217-219.).

Errold Moody

's failure to take an inventory, taking of trust property and cash, paying expenses with cash and cashier's checks, misrepresenting facts to beneficiaries, paying for his attorney from trust funds, forcing petitioner to hire an attorney to seek an accounting, failure to work competently with accountants, and other actions comprise multiple and severe breaches of what was

Errold Moody

's foremost duty.

Errold Moody

violated several provisions of the California Probate Code, including the following, evidenced by the foregoing findings of fact:

P.C. § 16000 (duty to follow the terms of the trust and the law governing trusts);

P.C. § 16002 (duty to administer the trust solely for the benefit of the beneficiaries of the trust); P.C. § 16004 ( duty to avoid transactions with the trust that will benefit the trustee personally); P.C. § 16006 (duty to marshal trust assets and take reasonable steps to preserve them);

P.C. § 16009 ( duty to keep the assets of the trust separate from the trustee's assets);

P.C. § 16012 (duty to perform actions on behalf of the trust rather than having others act on behalf of the trust); and

P.C. § 16040 (duty to manage other professionals competently).

The court finds clear and convincing evidence that

Errold Moody

's mismanagement of the trust went beyond ordinary breaches of trust into the realm of intentional malice and oppression. Under Civil Code section 3294, malice means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

Errold Moody

's taking of trust property and funds and the teak grandfather clock, and failing to keep any records, and in trial not only failing to take responsibility but trying to blame Shevick and his sister were despicable and malicious.

Under Civil Code section 3294, oppression means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

Errold Moody

's conduct as described above was also oppressive in that it put Shevick and all other beneficiaries through years of delay, the stress and costs of litigation, and reduction in the value of their mother's estate and their inheritance, which were unjust hardships in conscious disregard of their rights.

Based upon

Errold Moody

's malicious and oppressive behavior, the court assesses punitive damages.

Errold Moody

testified that 'there is no money', and no evidence was offered that

Errold Moody

has any substantial assets or net worth. Based upon this lack of financial information, the Court assesses the minimum punitive damages award of $1.00. This amount does not diminish the seriousness of the Court's finding.

Errold Moody

is also ordered to turn over the grandfather clock to successor trustee Sundeen.

Probate Code Section 17211(b) provides that the trustee is liable for a petitioner's legal fees if the court determines that the trustee's opposition to a petition contesting the account was without reasonable cause and in bad faith. Petitioner did challenge

Errold Moody

's account, including the inept process by which he failed to account for trust property, failed to keep receipts, failed to track cash transactions, and caused excessive accounting fees to create the final, deficient accounting (which, for example, understated

Errold Moody

's fee by $8,000.00).

This Court concludes that

Errold Moody

did not have the capacity to function as a competent trustee at all times pertinent to this matter. He was asked several times to resign, did not, and continued to overcharge the trust over $75,000.00 for his inept work. He ran up excessive accounting fees through not gathering trust account data and records, and not cooperating in good faith with the accountants. Worse, he paid his attorneys from trust funds to defend his indefensible actions. These were all bad faith actions. At trial,

Errold Moody

and his attorney put forth no substantive or successful defense, and with the one-sided documentary evidence clearly and convincingly showing

Errold Moody

's many breaches of trust, and

Errold Moody

's own testimony, his opposition to Shevick's petition was without reasonable cause.

Errold Moody

must reimburse Shevick for all reasonable attorneys fees and costs in this case, reduced by the amount that Shevick previously received from the settlement with Gonsalves.

RESTITUTION

Respondent and his counsel did not address the amount of damages or restitution Shevick claimed in this matter, except that

Errold Moody

did stipulate to turn over the grandfather clock and the Cadillac. With the amounts of restitution to the trust essentially uncontested, the Court finds that judgment should be entered against

Errold Moody

and in favor of Shevick, and that the following amounts must be repaid by

Errold Moody

to the trust as restitution:

Excessive Accounting and Bookkeeping Fees: $65,485.80

Excessive Trustee's Fees: 82,848.23

IRS Penalty: 12,000.00

Improperly Incurred Attorneys' Fees: 20,720.00

Portion of Mr. Sundeen's Fees Improperly Caused

By

Errold Moody

's Obstructive Conduct During Litigation: 20,450.00

Punitive Damages: 1.00

Less Amount Paid to Trust by Gonsalves: (15,000.00)

Total Restitution to the trust: $191,955.03

The amount to be paid to Mr. Shevick for attorneys fees and costs is as follows:

Shevick's Attorneys Fees and Costs: 125,899.41

Less Amount paid to Shevick by Gonsalves: (30,000.00)

Total Restitution to Mr. Shevick: $95,899.41

In addition,

Errold Moody

must return the teak grandfather clock to successor trustee Ruben Sundeen. If

Errold Moody

does not make a restitution payment of at least $4,000 within 60 days of his receipt of service of the executed Judgment in this matter, he shall turn over the Cadillac, with signed deed for the transfer, to Ruben Sundeen, trustee.

Date: ________________

________________________________

HONORABLE STEVEN A. BRICK

Judge of the Superior Court

Approved as to form: