Conservatorship of Sharon L Robles

Case Number

22PR00144

Case Type

Hearing Date / Time

Wed, 02/14/2024 - 08:30

Nature of Proceedings

First and Final Accounting and Report

Tentative Ruling

Probate Notes:

Appearances are required. 

A “Declaration” addressing the probate notes was filed on February 1, 2024.  Supplements, not declarations, are the proper procedural vehicle to address issues/discrepancies identified in probate notes: 

Counsel may rectify the deficiencies by filing verified supplements and/or amendments, provided appropriate notices are given as required by statute or rule. Supplements and corrections processed within two (2) court days prior to the hearing will not be reflected in the posted notes, and such matters may be continued to another date to allow review. However, the Court, in its discretion, may consider such late-filed supplements/corrections. Parties submitting documents after the deadline must appear at the hearing.

(Local Rule 1721(c)(2)(2); CRC, Rule 7.3(5).)  Declarations may support the supplement, if necessary.

Based on a review of the case file, it is recommended the Court interpret the declaration on file as a supplement, and address the following discrepancies/issues that persist:

Supplement fails to resolve Discrepancy no. 1.  On August 7, 2023, conservator purchased 15 US Treasury Bonds that appear to total $811,016.90.  This total was determined by the Probate Attorney, because the new schedule G was not properly reported by including subtotals that are more easily verifiable. 

The pressing issue is that Petitioner not only reported 11 of these entries with negative values in Schedule A (receipts) to the accounting, but described the entire transaction as “the Conservator instigated the sale of various securities on July 31, 2023 in order to invest in higher earning bonds.” (Pet. at ¶3, ln. 18.)  That sole, vague description of what appears to be a much more complicated transaction, not only fails to identify one of two very rare scenarios where a negative number is appropriate in a receipts schedule, the description does not contain the same date as the entries on both schedules, further adding to the confusion.

Save two very rare scenarios identified in the Fiduciary Accounting Handbook, a negative value is a loss or a liability, and not a receipt of income or principle required by the Probate Code to be listed in the receipts schedule. (Prob. Code, §1061(a)(2), 1062(a).) 

The original probate note for this discrepancy stated that if the negative value is listed because the note was sold prematurely, that loss should be reported as a loss on sale in that appropriate schedule.  If money was borrowed to purchase the notes, the full value of the note should be reported in the receipts schedule, and the liability on the note should be reported in the liabilities schedule.  (See Fiduciary Accounting Handbook (Cont. Ed. of the Bar 2022) §6.7.) 

Petitioner has not provided further clarifying information on the circumstances of how the bond was obtained.  To the contrary, Petitioner cited to one of two sections of the Fiduciary Accounting Handbook discussing the two very rare circumstances when a negative number would be appropriate in the receipts schedule, arguing that section justifies a negative figure for any bond transaction.  It does not.

According to Section 1.7 of the Fiduciary Accounting Handbook, one of only two times a negative number is appropriate in a receipts schedule is when a bond is purchased from a third party already entitled to an interest payment, and that interest payment was also purchased from that third party.  That could be would happened in these transactions, because Petitioner identifies “purchase of accrued interest” in several line items, but the Court was not otherwise given that information in the body of the pleading, and the description of the transaction does not discuss whether the bond was purchased directly from the Treasury, or from a third party.

Thus, a supplement must be submitted in order to correct this deficiency, if the bonds were purchased from a third party.  If the bonds were purchased from the Treasury, there would be no reason to include the negative interest entries, thus an amended pleading would be required, since the correction requires changes to the accounting that are “materially different from the facts alleged or the relief requested in the supplemented pleading.”  (CRC, Rule 7.3(5).) 

Supplement fails to resolve Discrepancy no. 2.  As stated in the previous notes, the fundamental reason for this schedule is to track what happens to cash.  In practice, this means that transfers between conservatorship cash accounts need not be reported (Prob. Code, § 1063, subd. (b)), neither do any changes that trigger a gain or loss. (See Fiduciary Accounting Handbook (Cont. Ed. Of the Bar 2022) §11.11-13.) 

The original note on this discrepancy informed the Petitioner how the schedule should appear in reporting these changes:

Date             Description           Cash            Carry Value

The original note also pointed out that any deviance from this reporting method fails to track what is actually happening to the cash held by the estate, and can obfuscate malfeasance at worst, or bathe the court in ignorance as to what is actually happening with cash, at best.

Yet in response to the amended schedule, Petitioner submitted a newly drafted schedule that only includes three of the above four headings, leaving out the most vital of those four headings to determine the starting point of the change in form; CASH.  This omission, after all that was presented to the Petitioner  to inform of the necessity of this structure, appears to be intransigence on the part of Petitioner, and must be corrected.

The original note even explained that the schedule, as presented, does not track what happened to the property listed within it, and gave the Petitioner an example of this issue in the very first entry:

4/10/2023  Transfer of proceeds from sale of automobile -162

First, General Accounting Principles (now known as Generally Accepted Accounting Principles) govern accountings filed for Superior Court approval, especially in Probate Court, unless specifically preempted by the Probate Code. That is why the term is actually cited at section 1061(d).  Thus, according to GAAP, negatives such as losses or purchases for cash are reflected with parens not a negative symbol. I.e. (162) not -162.  Petitioner’s ipse dixit appeal does nothing to change this issue, and the Court surely has authority to hold Petitioner to make the changes conform to the standard in the legal and accounting community.  (CCP, §128(a)(1-5).

Second, with the newly detailed explanation in the supplement, the transaction (as reported) objectively appears to show the fiduciary in this case reportedly paid someone $162 just to take this property off the conservator’s hands; when the other entries in the accounting pertaining to this entry plainly state the carry value of the item is $400, and was actually sold for $162.

While the supplement goes into great effort to explain the condition of the car, and why paying for it to be taken off the estate property was necessary, Petitioner misses the point that it is the way the transactions were reported that was problematic; not the fact that it was a negative asset. The Court should certainly understand the simple concept of an asset generating greater liability than value.

Further problematic is labeling each of these transactions a “Transfer of Proceeds”. This raises the questions of “to where?”; “to whom?”; etc.

Based on just the first two discrepancies, the accounting still must be amended.

Supplement partially resolves Discrepancy no. 3.  The supplement clarifies sufficiently the room and board expenditures, but accounting of the retirement benefits is still erroneous without further explanation. 

Petitioner listed three transactions in schedule A (receipts) showing Conservatee was paid $14,115.58, $8,640.70, and $14,303.12 from the CALPERS system for “unpaid pension benefits.”  Petitioner then included the following deductions from those pension benefits as follows:

9/21/2022 Deductions from retirement checks

• • $2,535.58
  • $2,549.86
  • $1,630.58

If the receipts listed in schedule A were the gross income paid to Conservatee, the deductions from the gross amount would be properly reported.  But if the amounts were the net pay to Conservatee, the deductions would not be proper.  The standard practice for uncashed checks or income arrears is to report the face value of the check as the receipt and to exclude deductions from the gross pay from the accounting.  Petitioner did not explain what happened here, and the discrepancy is large enough to note in an accounting review.

Thus, the amended accounting must address these discrepancies.

Account statements submitted six days before the hearing resolve Discrepancy no. 4. – However, the account statements will not be reviewed until the amended accounting is submitted. 

Account statements resolve Discrepancy no. 5. The missing residential care facility statements were submitted with the other account statements six days before the hearing.

Sanctions recommended. Ipse dixit statements made to explain filings that do not follow the simple procedures outlined in the Rules of Court and Local Rules, do not resolve probate notes.  Probate notes simply point out the confusion or questions raised by the discrepancy noted, several of which appear in this case to be the result of a lack of explanations in the pleading, and late-filed supporting documents that squarely laid in the Petitioner’s power to present.

It is recommended the Court note on the record the intransigence of the Petitioner and his attorney to correct simple errors that could have been done in an expeditious manner, without wasting valuable judicial resources having to give detailed explanations why they should occur.  If the corrections are not made by the next hearing, it is recommended the Court order sanctions.