The case of Jenkins v. Teegarden (2014) 230 Cal. App. 4th 1128 provides helpful clarification on what constitutes a “donative transfer” for purposes of former Cal. Prob. Code § 21350 et seq. and its current incarnation, Cal. Probate Code § 21380 et seq. Essentially, both the former and current versions of the statute provide that a testamentary “donative transfer” is, under certain specified conditions, presumptively invalid. In the words of the court, “For purposes of this case, the effect of Probate Code section 21380 et seq. is the same as the effect of Probate Code former section 21350 et seq.; a ‘donative transfer’ above a certain minimum value to an unrelated drafter of the transfer instrument is invalid—even if the transferee could disprove fraud, menace, duress, and undue influence—unless it has been either reviewed by an independent attorney or approved by a court.” Id. at 1137.
In Jenkins v. Teegarden, Plaintiff Marilou Jenkins (Jenkins) was the stepdaughter of Robert Perry (Perry), an elderly man. Jenkins lived with her mother and Perry in their home in Riverside until she was 21 or 22. The Perrys also owned a vacant lot next door to their home. In 2002, the Perrys transferred the vacant lot into a revocable living trust. Upon the deaths of both spouses, Jenkins would become the successor trustee and sole beneficiary.
In 2001, Perry hired Defendant Charlotte Teegarden (Teegarden) as a weekend caregiver for himself and his wife, Loyce. (The Perrys employed other caregivers during this time in addition to Teegarden.) Teegarden earned $7,000 to $15,000 per year for helping around the house, including shopping for groceries, cooking, cleaning, and bookkeeping. She also maintained a full-time job during the week. Teegarden owned a house in Sun City, where she continued to live during this time. In 2003, her house was foreclosed. Under an oral agreement, Teegarden deeded the house to the Perrys, and they paid off the mortgage, which was $205,000. The Perrys allowed Teegarden to keep living in the home, and they told her she could pay rent if she could, but she was not required to do so.
In December 2005, Perry’s wife died. Perry owned a vacant lot next to his home, and in early 2006, he and Teegarden agreed to build a house on the lot that would belong to Teegarden. His stated intent was to provide a nearby place for Teegarden to live while she continued to serve as his caregiver. Perry paid a contractor to build the house, whereas Teegarden contributed about $100,000 for flooring, the electrical system, a water main, fencing, and other additions. Perry eventually sold the Sun City house, and he and Teegarden agreed that the proceeds would be used to offset what he paid to build the house. By early 2007 the house was finished, and Teegarden moved in.
In August 2007, Teegarden bought a blank quitclaim form at Staples, filled in the blanks, and had Perry sign the document. However, Teegarden made several mistakes. The deed listed Perry as an individual, rather than as the trustee, and the description of the property was legally inadequate. Although the deed was recorded in August 2007, because of the errors in the deed, the title remained in the trust established by the Perrys in 2002. In 2011, at the age of 87, Perry was killed in a fire that destroyed his house.
In 2012, Jenkins filed a petition asserting, among other things, that the purported transfer of the property to Teegarden was void because it was a “donative transfer” under former Cal. Prob. Code § 21350. Under that statute, a testamentary “donative transfer” was void under certain conditions, including if the transferee was the same person who drew up the deed or was a caregiver of the grantor, as in this case. See former Cal. Prob. Code § 21350(a)(1), (6).
Teegarden countered that the statute did not apply. She argued that the deed was not a “donative transfer” because it was for adequate consideration—namely, $45,000 equity in her Sun City home that she deeded to Perry; her giving up of the option to repurchaser the Sun City home for $45,000 less than its worth; the approximately $100,000 that she contributed to the new house built on the vacant lot; her “friendship”; and her continued caregiving. The trial court sided with Teegarden, finding that because the transfer was for adequate consideration, it was not “donative” and therefore not void under former Cal. Prob. Code § 21350.
On appeal, the court reversed. The most salient issue was whether the consideration was sufficient to make the transfer not “donative” for purposes of the statute. After a lengthy exposition on the legislative history of the statute, the court concluded that “‘donative transfer,’ as used in Probate Code former section 21350, includes not only a transfer for zero consideration, but also a transfer for unfair or inadequate consideration.” Jenkins, 230 Cal. App. 4th at 1142. Specifically, the court decided that the standard that best fit the legislative intent of the statute was the test from existing law used to determine whether consideration is adequate to require specific performance. Under this standard, consideration, to be adequate, “need not amount to the full value of the property”; rather, the test is whether the seller received a price that is “fair and reasonable under the circumstances.” Id.
Applying this standard, the court found that the consideration received by Perry was not adequate. The court found that the $100,000 contributed by Teegarden towards the new home, while adequate consideration “to support a contract,” was still not adequate for purposes of determining whether the transfer was “donative,” since the $100,000 would merely go back into Teegarden’s pocket when she took ownership of the house. Id. at 1143. As for the option to repurchase the property that Teegarden gave up, the court held that this option was worth “zero” because “there was no evidence that, as of 2007, she could have raised $205,000 for the repurchase.” Id. And Teegarden’s continued care was already being remunerated at around $10,000 per year, so it could not serve as consideration for the property. The court went so far as to say that even if the $100,000 and $45,000 were taken into account, $145,000 “still was not adequate consideration for a $480,000 house.” Id. Therefore, as a matter of law, the quitclaim was a “donative transfer” under former Cal. Prob. Code § 21350 and was invalid.
This decision is pivotal as it appears to be the first published opinion to establish the proper test for whether a transfer is “donative” under the California Probate Code. It is important to remember that even though the opinion dealt with the now repealed Cal. Prob. Code § 21350 et seq., the court explicitly held that its reasoning also applies to the current version of the statute, Cal. Prob. Code § 21380 et seq. Jenkins, 230 Cal. App. 4th at 1131. The current statute is essentially the same as the old one, except that it provides that a donative transfer meeting any of the conditions “is presumed to be the product of fraud or undue influence.” Cal. Prob. Code § 21380(a).