Abuse – Constructive Fraud

“Constructive fraud” is a legal theory that can play a vital role in proving financial abuse against a defendant.  Often, proving that the defendant acted intentionally can be difficult, particularly when the elder or senior victim has become incapacitated and the only other eyewitness to the wrongful act is the defendant.

Under a constructive fraud theory, the defendant’s actual “intent” is not a requirement.  The law allows other factors be taken into account – from the totality of the circumstances – to show that a fraudulent act was committed.

One such factor is the existence of a “confidential relationship”.  “Confidential” must be taken in context.  For example, a companionship caregiver who spends four hours a day helping a mentally (mildly) impaired elder with laundry, housekeeping, and grocery shopping, might not have a confidential relationship if other family members regularly visit and assist with finances, bill paying and other needed duties.

But if no family, friends, or other interested persons ever visit, and the caregiver assists with finances and bill paying, then a red flag will go up if significant assets are given away or the caregiver becomes a new major beneficiary of the elder’s estate.

This type of relationship is similar to a “fiduciary” relationship, where someone (like a caregiver) receives authority through a financial power of attorney.  With a broadly worded power of attorney, that “agent” now has the authority to handle every type of transaction that the elder could, including transferring title of real property, withdrawing money from bank accounts, or obtaining a new home loan.

When the special relationship is a fiduciary one, then the person (caregiver in the above-example) owes a moral, social and domestic duty not to take advantage of the senior’s weaker state of mind.

In constructive fraud cases, the focus is on determining whether the defendant had the ability, opportunity and motivation to take advantage of the elder’s weaker state of mind through manipulation, coercion, or undue influence.

In one case, a caregiver had only provided in-home support services for six weeks to a frail elder.  The caregiver made an appointment with a shady lawyer, had her husband drive the elder to the lawyer’s office, and the elder changed her trust to leave her entire estate to the caregiver’s husband.  Remember: Opportunity, ability and motivation.

In California, the duties imposed – when a judge or jury finds that a fiduciary relationship exists –  have been extended to every such case. The fiduciary relationship does not have to be a legal one.  It can be moral, domestic or merely personal (Foster v. Keating (1953) 120 CA2d 435).

The constructive fraud theory can play such a vital role in winning elder abuse cases because once a special (confidential or fiduciary) relationship has been shown, then the law imposes a presumption that the elder was the victim of undue influence.  This then shifts the burden of proof to the defendant to show otherwise.

Whenever a client’s facts suggest such a special relationship, then an analysis of constructive fraud must be applied.

If you or a loved one has suffered from such elder or senior abuse, then pick up the phone and give us a call.  We’re here to help.  The initial telephone consultation is always free.

Copyright.  2007 – 2018.  Law Office of George F. Dickerman.  All rights reserved.