In re William E Preston

Filing 2

PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW Regarding Capacity of William E Preston on the Date of the Filing of the Bankruptcy Petition (dg)

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RELATED-DDJ
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FILED & ENTERED

2/5/2014

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FEB 04 2014

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CLERK U.S. BANKRUPTCY COURT
Central District of California
BY milano
DEPUTY CLERK

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UNITED STATES BANKRUPTCY COURT

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CENTRAL DISTRICT OF CALIFORNIA

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LOS ANGELES DIVISION

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SACV14-00163 VAP
In re:

Case No.: 8:05-bk-50128-TA

WILLIAM E PRESTON,

Adversary No.: 8:11-ap-01231-TA
Chapter: 7

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R. TODD NEILSON

PROPOSED FINDINGS OF FACT AND
Debtor(s), CONCLUSIONS OF LAW REGARDING
CAPACITY OF WILLIAM E PRESTON ON
THE DATE OF THE FILING OF THE
BANKRUPTCY PETITION
Plaintiff(s), Hearing Judge: Hon. Gregg W. Zive

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Trial:
v.
Date: October 8, 2013
October 9, 2013
November 19, 2013
Time: 9:00 a.m.
Ctrm: 1445

JOYCE MOORE, THE PRESTON MUSIC
GROUP, INC., THE WILLIAM PRESTON
TRUST, FREDERICK WILHELMS III
Defendant(s).

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R. Todd Neilson (“Neilson”), the Chapter 7 Trustee for the bankruptcy estate of
William E Preston (“Debtor”) filed a complaint for declaratory and injunctive relief against

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1 defendants The William Preston Trust (the “Trust”), Frederick Wilhelms, III in his capacity
2 as trustee of The William Preston Trust, Joyce Moore (“Moore”) and The Preston Music
3 Group, Inc. on May 20, 2011. Answers were filed by the Trust on October 28, 2011, and
4 by Moore on January 31, 2013. The Preston Music Group filed its answer on February 4,
5 2013. The complaint seeks a judgment declaring that Debtor was not incapacitated at the
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time of the filing of the bankruptcy petition, that the Trust remained revocable and that the
assets currently held by Neilson and any other assets of Debtor are assets of the
bankruptcy estate. Pursuant to order entered January 30, 2013, Phase One of the trial in
this adversary proceeding was limited to Neilson’s first claim for relief – whether Debtor
was “incapacitated” so as to render the William Preston Trust irrevocable. Trial in this
adversary was assigned to the Hon. Gregg W. Zive by order entered February 19, 2013
and the trial was held on October 8 and 9 and November 19, 2013. The matter was taken
under submission and these proposed findings of fact and conclusions of law have been
prepared for submission to the District Court for entry of a final judgment pursuant to 28

14 U.S.C. § 157(c)(1) in compliance with the orders entered October 12, 2011 finding that
15 the Court has “related to” jurisdiction over these non-core issues.
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I.

PLEADINGS

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In preparation for trial, the Court reviewed the following pleadings:

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Notice of Filing of Documents Pursuant to Court Scheduling Order filed September

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9, 2013 [Docket No. 196];

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Plaintiff’s Identification of Witnesses to Testify at Trial filed September 9, 2013

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[Docket No. 194];

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Plaintiff’s Trial Brief filed September 9, 2013 [Docket No. 193];

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Trial Brief filed by the Trust on September 9, 2013 [Docket No. 197];

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Trustee’s Complaint for: (1) Declaratory Relief against Defendants; (2) Injunctive

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Relief filed May 20, 2011 [Docket No. 1];
Answer to Trustee’s Complaint for (1) Declaratory Relief (2) Injunctive Relief filed
by the Trust on October 28, 2011 [Docket No. 30];

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Defendant Preston Music Group, Inc. Answer to Adversary Complaint filed

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February 4, 2013 [Docket No. 142];

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Defendant Joyce Moore Answer to Adversary Complaint filed January 31, 2013

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[Docket No. 136];

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Joint Pre-Trial Order for Phase One entered June 21, 2013 [Docket No. 176];

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Scheduling Order Re: Pre-Trial Conference entered June 21, 2013 [Docket No.
177];
Statement of Decision Construing Dismissal Motion as One for Amendment Under
FRBP 1009, Granting Motion as to William E. Preston Trust and Denying Motion to
Dismiss as to Individual Debtor, William E. Preston entered October 31, 2010
[8:05-bk-50128-TA, Docket No. 438];
[Amended] Order Denying Motion of Defendants Joyce Moore and Preston Music
Group, Inc. to Dismiss Plaintiff’s Complaint entered October 12, 2011 [Docket No.
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Order Denying Motion of Defendant The William Preston Trust by and Through its

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Trustee, Frederick Wilhelms, III to Dismiss Adversary Proceeding Pursuant to Fed.

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R. Civ. Pro 12(b)(1) & (2) BK Rule 7012(B) entered October 12, 2011 [Docket No.

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28];

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Declaration of Scott Lee Re: Minute Order of the Honorable Virginia A. Phillips,

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U.S. District Judge, Denying Motion to Withdraw Reference (Doc. No. 1), Denying

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Motion to Consolidate (Doc. No. 6) as Moot, and Vacating January 9, 2011 [sic]

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Hearing (in Chambers) Entered on December 8, 2011 filed December 9, 2011

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[Docket No. 35];

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Order Denying Joyce Moore’s Motion to Certify Appeal of Interlocutory Order

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Denying Motion to Dismiss Adversary Complaint Pursuant to Stern v. Marshall to

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the United States Court of Appeals for the Ninth Circuit entered December 12,
2011 [Docket No. 36];
Order Denying: (A) Trustee’s Motion for Summary Judgment on the First Cause of
Action (on the Capacity of William Everett Preston Prior to and as of the Filing of

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the Bankruptcy Petition and the Revocability of the William Preston Trust); (B)

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Defendants’ Motion for Summary Judgment on Plaintiff’s First Caused [sic] of

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Action; and (C) Defendants Joyce Moore and Preston Music Group, Inc. [sic]

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Motion for Summary Judgment on Plaintiff’s Second Cause of Action entered

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January 4, 2013 [Docket No. 120] and pleadings related thereto;

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Order Setting Trial Date in Adv. No 8:11-01231-TA, Establishing Deadline for
Filing of Withdrawal of Reference Motions and Assigning Related Adversary
Proceedings to Judge Philip H. Brandt for Further Scheduling and Trials entered
January 11, 2013 [Docket No. 125];
Order Reassigning Adversary Proceeding to Judge Gregg W. Zive entered
February 19, 2013 [Docket No. 149];
Scheduling Order entered March 5, 2013 [Docket No. 154];
Order Determining Choice of Law entered June 14, 2013 [Docket No. 173];
Notice/Request to Withdraw Pretrial Motion for Entry of Judgment for Defendant in

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Adversary Proceeding filed July 12, 2013 [Docket No. 183];

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Order Denying Motion for Stay Pending Decision by United States Supreme Court

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entered July 24, 2013 [Docket No. 187];

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Order Granting Request to Set Trial Order entered September 16, 2013 [Docket

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No. 208];

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Order Granting Motion in Limine to Exclude Declarations or Affidavits of Valerie

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Ervin, Joyce Moore, Ollie Ervin, David Spero, Otto D’Angelo, Dr. Robert Waldman,

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Dr. Lee Ann Kelley, and Dr. Vincent Cariatti as Hearsay entered October 1, 2013

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[Docket No. 221] and pleadings related thereto;

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Order Granting Motion in Limine to Exclude Testimony of Joyce Moore and Robert

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P. Waldman, M.D. as Hearsay entered October 1, 2013 [Docket No. 222] and

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pleadings related thereto;
Order Granting Plaintiff’s Motion in Limine to Exclude Expert Opinions of
Defendants’ Expert Witnesses entered October 1, 2013 [Docket No. 223] and
pleadings related thereto;

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Testimony Declaration of Lee Ann Kelley MD filed October 8, 2013 [Docket No.

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227];

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Testimony Declaration of Joyce Moore filed October 8, 2013 [Docket No. 228];

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Testimony Declaration of Otto D’Agnolo filed October 9, 2013 [Docket No. 229];

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Testimony Declaration of Roger Friedman filed October 9, 2013 [Docket No. 230];
and

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Testimony Declaration of Ollie Ruben Ervin filed October 9, 2013 [Docket No.

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231].1

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The Court has considered and taken judicial notice of the entire docket in this
adversary proceeding and in the bankruptcy case (8:05-bk-50128-TA). See Fed. Rules of
Evid. 201.
II. Findings of Fact

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1. Debtor filed a voluntary chapter 11 petition on October 21, 2005. Neilson was

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appointed Chapter 11 Trustee on January 20, 2006. [2:05-bk-50015-VK, Docket

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No. 17] The case was converted to chapter 7 on July 17, 2006. [8:05-bk-50128-

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TA, Docket No. 6] Neilson continued as the Chapter 7 Trustee.

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2. Five of the signatures on Debtor’s bankruptcy petition were found to be authentic

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signatures, probably made on or about October 10, 2005. [8:05-bk-50128-TA,

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Docket No. 438, p. 7, lines 20-23]

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This declaration was not considered because Mr. Ervin did not appear at trial. At the

21 conclusion of testimony on October 9, 2013 and after discussions regarding the efforts
made to secure Mr. Ervin’s appearance, the Court granted the Trust a continuance to

22 November 19, 2013. [Oct. 9, 2013 Transcript, p. 209-224] The Court stated at that time
that Mr. Ervin’s declaration would not be accepted if he did not appear. [Id. at p. 217,

23 lines 22-23] At the beginning of trial on November 19, 2013, the Court was informed that
Mr. Ervin had been subpoenaed and had failed to appear. [Nov. 19, 2013 Transcript, p.

24 4-5] The Court issued an order to show cause against Mr. Ervin instructing him to appear
in the afternoon on November 19, 2013. [Id. at p. 8, lines 11-16] During the afternoon

25 hearing on November 19, 2013, the Trust’s counsel informed the Court that her private

investigator had not been truthful on his proof of service. [Id. at p. 11, lines 4-6] Pursuant

26 to order entered June 21, 2013, all direct testimony in this trial was to be by declaration
and witnesses whose declarations were offered were to be present for cross-

27 examination. [Scheduling Order Re: Pre-Trial Conference, Docket No. 177]
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3. Debtor authorized the filing of his bankruptcy case. [8:05-bk-50128-TA, Docket No.
438, p. 10, lines 16-19]
4. Debtor fell into a coma on November 21, 2005 and remained in that state until his
death on June 6, 2006. [Oct. 8, 2013 Transcript, p. 42, lines 4-11]
5. Debtor ceased being the trustee of the trust when he resigned in favor of Mr.
Wilhelms in late September or October 2004. [Oct. 9 Transcript, p. 144, lines 2-5]
Moore and Valerie Ervin were named co-successor trustees but later resigned. [Id.
at p. 145, lines 1-8] Moore resigned in favor of Teri Wilhelms and Ms. Ervin
resigned in favor of Heather Sauber. [Id. at lines 9-16] When Mr. Wilhelms passed
away, Ms. Wilhelms and Ms. Sauber became the trustees. [Id. at p. 146, lines 514]
6. Moore was Debtor’s personal manager intermittently from 2001 through his death.
[Oct. 8, 2013, p. 214-215, lines 13-25, 1-13] She describes herself as “often his
schlepp and driver” and his “family.” [Oct. 9, 2013 Transcript, p. 161, lines 20-23]

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Debtor did not have a business manager in the fall of 2005. [Id. at p. 163, lines 17-

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19]

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7. As of October 2004, Moore held a medical power of attorney for Debtor. [Oct. 8,

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2013 Transcript, p. 212, lines 13-20] Moore was very aware of Debtor’s medical

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condition during the time she held the medical power of attorney. [Id.]

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8. Moore coordinated Debtor’s care with Dr. Lee Ann Kelley, M.D. [Plaintiff’s Exh. 67,

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p. 96; Oct. 8, 2013 Transcript, p. 102, lines 11-20] They discussed his dialysis and

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made alterations to his medications. [Id.] Moore and Dr. Kelley spoke on the

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telephone frequently about Debtor’s care. [Id.]

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9. Ollie Ervin worked as a personal assistant to Debtor. He traveled with Debtor and
helped with tasks such as packing bags. [Oct. 9 Transcript, p. 21, lines 4-6]
10. Debtor’s sister, Rodena Preston, filed conservatorship actions in Arizona and
California in January 2006 and March 2006. [Id., p. 91-92, lines 24-25, 1-3] One of
the purposes of Debtor’s bankruptcy filing was to protect Debtor’s assets from
Debtor’s sister. [Id. at p. 92 lines 4-7] As detailed below, declarations of Dr. Lee

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Ann Kelley, M.D. were filed in the Arizona and California conservatorship actions.

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Those declarations are contrary to Dr. Kelley’s trial declaration and are predic ate

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to the finding that that her trial declaration and testimony are not persuasive.

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11. Debtor was under the psychiatric care of Dr. Kelley beginning in September 2004.

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[Trial Decl. of Lee Ann Kelley, M.D. ¶ 13] Debtor received treatment for anxiety,

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situational panic disorder and related claustrophobia relating to Debtor’s dialysis
treatment and inability to deal with sitting in an airplane. [Id. at ¶ 16] Debtor was
prescribed medication for his dialysis sessions, as well as for generalized
depression and difficulty sleeping. [Id. at ¶ 18; see also Oct. 8, 2013 Transcript, p.
156-157]
12. Debtor was addicted to crack cocaine. [Oct. 8, 2013 Transcript, p. 211, lines 1523; Oct. 9 Transcript, p. 22, lines 10-16, p. 177, lines 16-24, p. 178, lines 1-2; Trial
Decl. of Roger Friedman ¶¶ 23, 24] Debtor acknowledged this to Dr. Kelley in
September and October 2004. [Trial Decl. of Lee Ann Kelley, M.D., ¶ 20]
13. There were periods of time when Debtor was able to remain sober, but Debtor was

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using drugs beginning in February 2005. [Trial Decl. of Lee Ann Kelley, M.D. at ¶¶

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22, 23, 24]

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14. According to one account, Debtor was “stoned most of the time.” [Oct. 9, 2013
Transcript at p. 186, lines 7-13]
15. Debtor’s depression had increased in late February 2005 and he increased the

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dosage of medication before dialysis. [Trial Decl. of Lee Ann Kelley, M.D. at ¶¶ 29-

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30]

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16. Debtor was admitted to the Mayo Hospital on September 4, 2005 with an infection.
He had been using cocaine. [Id. at ¶ 33]
17. Moore knew that in September 2005, Debtor’s nephrologist threatened to stop
dialysis because of Debtor’s bingeing. [Oct. 8, 2013 Transcript, p. 227, lines 11-25]
Moore also knew that Debtor’s other doctors also pleaded with Debtor to stop his
drug use. [Oct. 8, 2013 Transcript, p. 228, lines 1-5]

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18. As of October 23, 2005, Moore knew that Debtor had a history of cocaine abuse.
[Oct. 9 Transcript at p. 237, lines 6-8]
19. Until October 23, 2005, Moore was not concerned that Debtor was dependent on
cocaine. [Oct. 8, 2013 Transcript, p. 223, lines 9-11]
20. Debtor was in the Bahamas, at the Atlantis, from October 15 to 17, 2005 to
celebrate Sam Moore’s birthday. [Trial Decl. of Roger Friedman ¶ 12] During that
time, there were suspicions that Debtor was trying to get drugs. [Oct. 9, 2013
Transcript at p. 176, lines 1-7]. On this trip, Debtor was coherent, cogent and
charming. [Trial Decl. of Roger Friedman ¶12]
21. Debtor traveled to Los Angeles with Moore, Sam Moore and Ollie Ervin on
October 18, 2005. [Oct. 9 Transcript, p. 147, lines 19-25]
22. Debtor was fine on the airplane and at rehearsal on October 18, 2005. [Id. at p.
148, lines 3-16]
23. Debtor had dialysis the morning of October 19, 2005. [Oct. 9 Transcript, p. 196,

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lines 16-18] At times Debtor was sleepy after dialysis. [Id. at p. 197, lines 8-11]

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24. Debtor attended a recording session on the morning of October 19, 2005. [Oct. 9

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Transcript, p. 195, lines 8-12] In video taken of the recording session, there was

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mutual satisfaction about the performance. [Plaintiff’s Exh. 235; Oct. 9, 2013

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Transcript, p. 208, lines 6-8] Debtor did not appear gruff and none of the

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performers with Debtor indicated any discomfort or unhappiness with his

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performance. [Oct. 9 Transcript, p. 208, lines 10-11, 21-24] Debtor did not appear

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withdrawn, although based on descriptions perhaps he could be more outgoing at

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other times. Debtor did not appear “happy-go lucky” in the video. [Id. at p. 208-

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209, lines 24-25, 1-4]

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25. In the video of the October 19, 2005 recording session, Debtor communicated with
the other artists, played the organ, posed for photographs and got up to leave with
everyone else. [Plaintiff’s Exh. 235]

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26. On the evening of October 19, 2005, Debtor attended the Concert for Bangladesh

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DVD release party. Debtor was photographed and performed three songs at the

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event. [Oct. 9 Transcript, p. 196, lines 4-6]

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27. Both Moore and Valerie Ervin believe they saw Debtor’s drug dealer or his car at
Debtor’s hotel on October 19, 2005. [Oct. 9 Transcript at p. 66, lines 9-17; p. 237238, lines 24-25, 1]
28. Accounts of Debtor’s mood at the Concert for Bangladesh event on October 19
vary from “gruff and moody” [Id. at p. 149, lines 2-7] to normal and in good spirits.
[Id. at p. 15, lines 19-21; p. 18, lines 10-23]
29. Debtor shopped for a new coat at Macy’s with Valerie and Ollie Ervin on the way
to the Concert for Bangladesh event. [Id. at p. 14 lines 20-23]
30. Opinions on whether Debtor was high at the Concert for Bangladesh event on
October 19 also vary. Moore and Valerie Ervin did not believe Debtor was high.
Based on his impressions from a photograph, Roger Friedman did. [Oct. 8, 2013

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Transcript at p. 206-207, lines 24-25, 1-4; p. 237 lines 9-17; Oct. 9 Transcript at p.

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18-19, lines 24-25, 1-4; p. 160, lines 13-18; p. 186, lines 7-13]

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31. Debtor was to travel with Moore to Cleveland on October 20, 2005 for a Rock and

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Roll Hall of Fame event, but did not go because he did not feel well. Debtor

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returned to Arizona with Ollie Ervin instead. [Oct. 8 Transcript, p. 209, lines 8-13;

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Oct. 9 Transcript, p. 151-152, lines 11-25, 1-3; p. 153, lines 3-9; 20-25]

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32. Debtor had a dialysis appointment scheduled for October 21, 2005, but at Debtor’s

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request, Moore rescheduled the appointment for approximately 5:00 a.m. on

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October 22, 2005. [Oct. 8 Transcript, p. 209, lines 8-17; Oct. 9, Transcript, p. 154,

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lines 3-19]

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33. When Moore spoke with Debtor on October 21, 2005, he was abrupt and
demanding, which was unusual. [Oct. 9 Transcript, p. 154, lines 20-24] Debtor was
ecstatic when Moore was able to get him a dialysis appointment at 5:00 a.m. on
October 22, 2005. [Id. at p. 155, lines 19-25]

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34. Moore picked Debtor up at 4:30 a.m. on the morning of October 22, 2005 to take

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him to his 5:00 a.m. dialysis appointment. Debtor was more awake than usual, but

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Moore was not concerned. [Oct. 8 Transcript, p. 209, lines 14-17; Oct. 9

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Transcript, p. 156, lines 8-16]

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35. Moore returned to the dialysis center two hours later when she was informed that
Debtor had a seizure. [Oct. 8 Transcript, p. 209, lines 19-21; Oct. 9 Transcript, p.
158, lines1-10]
36. When Moore arrived at the dialysis center, Debtor was swollen and incoherent. He
was jumping and flailing around. [Oct. 9 Transcript, p. 158-159, lines 18-25, 1-4]
37. Moore asked that the paramedics be called and followed the ambulance to the
hospital. [Id. at p. 159, lines 12-17]
38. The morning of October 22, 2005 was the first time Moore suspected that Debtor
had been using crack cocaine. [Oct. 8 Transcript, p. 209, lines 19-25; Oct. 9
Transcript, p. 208-209, lines 25, 1-4]
39. Upon arrival at the hospital on October 22, 2005, Debtor was not capable of

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answering questions, so Moore and Ollie Ervin provided a history to the doctors.

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[Oct. 9 Transcript, p. 232, lines 12-16, p. 236, lines 2-6; Plaintiff’s Exh. 42, p. 109,

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117, 119]

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40. When Dr. Kelley saw Debtor on October 23, 2005, more than 30 hours after his

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admission to the hospital, Debtor was restless and had decreased eye contact.

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Debtor was depressed and had impaired judgment due to drug use. [Trial Decl. of

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Lee Ann Kelley ¶¶ 37, 39]

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41. Dr. Kelley’s discussions on October 23, 2005 were with Debtor, not Moore. [Oct. 8,

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2013 Transcript, p. 71, lines 14-18] During this visit, Dr. Kelley convinced Debtor to

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seek drug treatment. [Id., p. 71-72, lines 18-25, 1-10] If Debtor had lacked

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capacity, these conversations would have been with Moore, Debtor’s medical
power of attorney.
42. Dr. Kelley diagnosed Debtor as dependent on cocaine. [Trial Decl. of Lee Ann
Kelley ¶ 41]

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43. Debtor was ill on multiple levels and was sicker on October 23, 2005 than usual.
[Oct. 8, 2013 Transcript, p. 185, lines 16-21]
44. Debtor was able to provide his medical history to Dr. Kwan Lee during a visit on
November 4, 2005. [Plaintiff’s Exh. 42, p. 132]
45. The declaration of Dr. Kelley was filed in support of a Motion for Order Vacating
Appointment of Temporary Conservator and Opposition to Petition to Appoint
Permanent Conservator filed March 8, 2006 in Los Angeles Superior Court by
Samuel and Joyce Moore. [Trial Decl. of Lee Ann Kelley, M.D., Exh. 5; Plaintiff’s
Exh. 50, p. 40] In that declaration, Dr. Kelley stated:
…it is my opinion that Mr. Preston functioned
at a very high level as a person, and
professionally as a musician until his tragic
event in late November 2005…He was also
capable of understanding that his previous
behavior
had
resulted
in
adverse
consequences in his life and career. As this is
incompatible with any allegation that he might
be cognitively impaired to the degree of being
able to manage his own affairs, Mr. Preston
was clearly competent in managing his affairs
and making decisions… (emphasis added)

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[Id., p. 40-42, ¶ 6] The same declaration was filed in support of an Opposition to

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the Petition for Emergency Appointment of Temporary Guardian of an Adult in

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Arizona Superior Court in May, 2006. [Plaintiff’s Exhibit 66, p. 13, ¶ 6] Dr. Kelley’s

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two 2006 declarations are also consistent with her interaction with Debtor on

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October 23, 2005 and are indisputably inconsistent with her 2013 declaration.

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46. On April 18, 2006, Moore provided two versions of a declaration by Dr. Kelley,
signed on April 17, 2006, to the Trustee’s counsel by fax. In both versions of the
declaration, Dr. Kelley stated:
…it is my opinion that Debtor functioned at a
very high level as a person…until his tragic
medical event in late November of 2005. In
short, I believe the Debtor may have been
behaviorally impaired (i.e., he was unable to
focus and be attentive for an extended period
of time) but was not cognitively impaired (i.e.

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he was able to make rational decisions)
between September of 2005 through October
21, 2005 (emphasis added)

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[Plaintiff’s Exh. 49, p. 2, ¶ 5] This declaration was filed with the Bankruptcy Court

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as Docket Number 36 on April 20, 2006 in support of the Trustee’s request to

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waive the pre-petition credit counseling requirement. [Plaintiff’s Exh. 8, p. 1] Moore

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and Dr. Kelley worked together to provide this information because they wanted

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the bankruptcy case to continue.

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47. In her trial testimony declaration filed September 9, 2013, and in Exhibits 2 and 4

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to that declaration, dated August and July 2012, respectively, Dr. Kelley changed

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her testimony to state that Debtor was not competent at least from the evening of

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October 19, 2005. [Trial Decl. of Lee Ann Kelley, M.D., ¶ 53; Exh. 2, ¶ 26; Exh. 4,

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p. 67]
48. Dr. Kelley’s subsequent diagnosis that Debtor was mentally incompetent on

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October 19, 2005 due to crack cocaine use [Trial Decl. of Lee Ann Kelley ¶ 42]

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was allegedly based on her review of records in 2013 that she asserted she did

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not have when she signed her 2006 declarations in which she testified Debtor was

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competent [Oct. 8, 2013 Transcript, p. 141-142, lines 21-25, 1-16] and on Ollie

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Ervin’s declaration 2. [Oct. 8, 2013 Transcript, p. 169, lines7-20] However, as a

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treating physician, Dr. Kelley admitted she could have easily obtained those

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records in 2006 before she signed the two declarations. [Oct. 8, 2013 Transcript,

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p. 168, lines 5-24] The Court finds Dr. Kelley’s 2013 declaration not to be

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persuasive.

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49. In Moore’s declaration, which was dated and filed with the Bankruptcy Court as

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Docket Number 36 on April 18, 2006 in support of the Trustee’s request to waive

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the pre-petition credit counseling requirement, Moore stated that she believed

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“Debtor was absolutely at all times herein rational and able to evaluate his

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financial situation.” [Plaintiff’s Exh. 1, p. 4, ¶ 19; Plaintiff’s Exh. 83; Oct. 9, 2013

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This declaration is hearsay, was not admitted and was not subject to cross examination.

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Transcript, p. 129, lines 11-15] Moore acknowledges signing this declaration. [Oct.

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9, 2013 Transcript, p. 114 lines, 7-14] This declaration was faxed to the Trustee’s

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counsel by the Law Offices of Cara Blake on April 18, 2006. [Plaintiff’s Exh. 47]

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The Court finds Moore’s trial declaration and testimony seven years later not to be

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credible.

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50. There is no evidence of any threats on the part of the Trustee or his counsel in
connection with the preparation of the declaration supporting the waiver of prepetition credit counseling. Trustee’s counsel stated that the declarations needed to
be truthful and accurate, which is not threatening. [Plaintiff’s Exh. 60]
III. Conclusions of Law
1. The “Declaration of Trust Named The William Preston Trust” and the “Abstract of
The William Preston Trust” provide, at §5(c):
Incapacity:
If
the
settlor
becomes
incapacitated, no person including his or her
legal guardian, conservator, court appointed
conservator, or one holding his or her Durable
Power of Attorney shall have any power or
authority to revoke or amend this trust.
[Plaintiff’s Trial Brief, Exh. 14 p. 173; 192]
2. The Durable Power of Attorney of William Everett Preston provides:
Principal shall be deemed to be incapacitated if
at any time two (2) licensed physicians certify
in writing that Principal has become physically
and mentally incapacitated and is unable to
manage his/her affairs in his/her best interest,
whether or not a court of competent jurisdiction
has declared Principal incompetent, mentally ill
or in need of a conservator/guardian.
[Plaintiff’s Trial Brief, Exh. 14 p. 225]
3. California law is to be applied to determine whether Debtor was incapacitated, as
defined by the Trust’s governing documents, on the date the bankruptcy petition
was filed. [Order Determining Choice of Law, Docket No. 173]

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4. Cal. Probate Code § 810(a) provides that there is a “rebuttable presumption

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affecting the burden of proof that all persons have the capacity to make decisions

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and to be responsible for their acts or decisions.”

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5. The burden is on the contesting party to overcome the presumption of capacity.
Estate of Mann, 184 Cal.App.3d 593, 602, 229 Cal.Rptr. 225 (1986).
6. Cal. Probate Code § 810(b) provides that a “person who has a mental or physical
disorder may still be capable of contracting, conveying, marrying, making medical
decisions, executing wills or trusts, and performing other actions.”
7. Cal. Probate Code § 811 provides that a determination that a person lacks
capacity must be supported by evidence of a deficit in certain enumerated mental
functions, and evidence of a correlation between the deficit/deficits and the
decision or acts in question. Section 811(b) provides that a deficit in the
enumerated mental functions may only be considered if it, by itself or in
combination with one or more mental function deficits, “significantly impairs the

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person’s ability to understand and appreciate the consequences of his or her

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actions with regard to the type of act or decision in question.”

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8. Pursuant to Cal. Probate Code § 812, a person lacks capacity to make a decision

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unless the person has the ability to communicate verbally, or by other means, the

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decision, and to understand and appreciate, to the extent relevant, all of the

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below:

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(a) The rights, duties, and responsibilities
created by, or affected by the decision.
(b) The probable consequences for the
decision maker and, where appropriate, the
persons affected by the decision.
(c) The significant risks, benefits, and
reasonable alternatives involved in the
decision.
9. Evidence of mental condition both before and after the execution of an instrument

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is relevant and admissible to the determine soundness of mind at the time of

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execution of a will. In the Matter of Harry C. Fisher, 202 Cal. 205, 208 (1927). In

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the absence of evidence that “intemperate use of alcoholic beverages” has

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destroyed testamentary capacity, there is no presumption that it has been

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destroyed, even if it is shown that there is a continuing habit. Id. at 209.

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10. The fact that Debtor was addicted to crack cocaine did not incapacitate him

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unless he had no intelligent comprehension of what he was doing. See In the
Matter of George A. Little, 46 Cal.App. 776, 789 (1920).
11. A testator’s intoxication, assuming it is established on the day of the execution of
the will, must have been such that it deprived him of judgment while executing it.
“It must affirmatively appear that the mind of the testator was totally destroyed, …
that he was incapable of comprehending the nature of his act, the extent of his
property and those who had a claim upon his bounty.” In the Matter of the Estate
of Frank Smethurst, 15 Cal.App.2d 322, 331-332 (1936).
12. The Trust has not met its burden under section 810. It has demonstrated that
Debtor was a drug addict. The Trust has not established that Debtor had a deficit

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in mental function that impaired his ability to understand the decision to file a

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bankruptcy petition, as required under section 811. On October 19, 2005, Debtor

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participated in a rehearsal session and attended a public event where he had

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conversations with multiple people. On October 20, 2005, Debtor was able to ask

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Moore to make the arrangements for him to travel back to Arizona, rather than to

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Cleveland. On October 21, 2005, the petition date, Debtor was lucid enough to

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call Moore and ask her to reschedule his dialysis appointment. Moore did not

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question these requests. It was not until October 22, 2005, the day after the

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petition was filed, that Debtor had a seizure during dialysis that resulted in his

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admission to the hospital. By October 23, 2005, Debtor was communicating with

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Dr. Kelley. By October 23, 2005 Debtor was signing releases of information and

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communicating with his physicians.
13. The petition documents had been prepared and signed days before the petition
was filed. There has already been a finding that Debtor intended to file his
bankruptcy petition. The Trust has not established that Debtor was not able to

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comprehend his actions during the time the petition documents were prepared. To

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the contrary, it appears Debtor was actively working and participating in social

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engagements up until the petition date.

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14. A party cannot create an issue of fact by providing a declaration that contradicts

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her prior testimony. Kennedy v. Allied Mutual Insurance Co., 952 F.2d 262, 266
(9th Cir. 1991); Radobenko v. Automated Equipment Corp., 520 F.2d 540, 544 (9th

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Cir. 1975) (sham issues should not subject a defendant to the burden of trial).

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15. Moore and Dr. Kelley both signed declarations in 2006 stating that Debtor was
“not cognitively impaired” and “rational.” Their story changed once the Trustee

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began to pursue Moore. Dr. Kelley could have had access to the Mayo medical

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records when she prepared her April 2006 declaration.
16. Dr. Kelley would not have discussed entering rehab with Debtor on October 23,

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2005 if he was incapacitated. She would have discussed it with Moore, Debtor’s

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medical power of attorney, who regularly attended Debtor’s doctor appointments

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and communicated with Debtor’s doctors. Dr. Kelley and Moore had a history of

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working together and communicating with each other with respect to Debtor’s

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medical care. By November 4, 2005, Debtor was able to provide his own medical

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history to doctors.

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17. Moore was very familiar with Debtor, his medical conditions and drug use. She

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had been his medical power of attorney since October 2004. Moore knew that

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Debtor’s doctors had encouraged him to stop his drug use. If Moore believed that

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Debtor was incapacitated, she would not have contested the conservatorship

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proceedings in California and Arizona because Debtor would have needed some

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form of protection.
18. The later assertions of Debtor’s incapacity by Moore and Dr. Kelley should be
disregarded in favor of their earlier declarations.
19. The Trust has failed to meet its burden and has failed to overcome the rebuttable
presumption of capacity. Debtor was not incapacitated on the petition date,
October 21, 2005.

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Date: February 4, 2014

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