A California court of appeals affirmed a jury award against the owner of a construction company who fraudulently induced a special needs trust trustee who was himself disabled to transfer title of the beneficiary’s family home to him, and that the conduct warranted punitive damages ten times the amount of compensatory damage award.  Haworth v. Ness Adams, Inc. (Cal. Ct. App., 2nd Dist., Div. 2, No. B260148, Feb. 1, 2017).

Kathleen McGinty was the beneficiary of a special needs trust, of which the principal asset was the home she lived in with her mother. Ms. McGinty’s autism made it difficult for her to form thoughts, communicate or socialize.  After the mother’s death in 2009, Ms. McGinty’s brother Tim McGinty,  successor trustee of the trust, moved in with her.  Mr. McGinty suffered from bipolar disorder, depression, and substance addiction, and was occasionally suicidal, psychotic, and delusional.

In April 2011, Noam Bouzaglou, acting as officer of Ness Adams, a construction company he owned, met with Mr. McGinty to discuss a garage repair.  Mr. McGinty signed a contract with Ness and a number of subsequent work orders totaling $502,020.  Ms. McGinty suffered mental and physical distress when Mr. Bouzaglou moved the brother and sister into an apartment and Mr. McGinty attempted suicide and was placed in a psychiatric facility.  Shortly after Mr. McGinty’s discharge, while he still was depressed and psychotic, Mr. Bouzaglou had him sign documents transferring ownership of the home to Mr. Bouzaglou.  Mr. McGinty died in October 2012.

Jeanne Haworth, as successor trustee, sought rescission of the transfer against Mr. Bouzaglou and other causes of action, including fraud against him and Ness.  The trial court found Ness and Mr. Bouzaglou liable for fraud, awarding $1.3 million against Ness and $803,280 against Mr. Bouzaglou in favor of the trust, and $17,000 against Mr. Bouzaglou in favor of Ms. McGinty.  For punitive damages, the jury awarded the trust $13.3 million against Ness and $8 million against Mr. Bouzaglou.  In a separate bench trial, the court rescinded and cancelled the property transfer.  Ness and Mr. Bouzaglou appealed.

The Court of Appeal of the State of California, Second Appellate District, Division Two, affirmed the judgment of fraud against Ness and dismissed Mr. Bouzaglou’s appeal for lack of standing.  The court found that the construction contract and Mr. Bouzaglou’s representations were highly probative of fraudulent conduct and properly admitted at trial.  The court also found there was substantial evidence to support the lower court’s application of the alter ego doctrine and its finding that Mr. Bouzaglou perpetrated the fraud through Ness.  Finally, the court found that the conduct of Ness and Bouzaglou was so highly culpable that the punitive damages award met the reasonableness standard set by the U.S. and California supreme courts.

For a full text of the opinion, click here: Haworth v. Ness Adams, Inc.

A blog post about the case by the California attorney who obtained the $23 million jury verdict can be found here: Law Offices of Joseph C. Girard Wins $23 Million Verdict in Elder Abuse Case & Fraud Against Contractor & Attorney Who Enforced Sale of Family Home

For additional information concerning elder abuse actions, visit: http://vanarellilaw.com/will-contests-probate-litigation-elder-abuse-actions-2/#viiieaa

(This blog post is adapted from an article on the ElderLaw Answers website. Mr. Vanarelli is a founding member of ElderLaw Answers.)