Hudson v. Foster - Case Brief

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Hudson v. Foster

Case Number: B300017

Court: Cal. Ct. App.

Date Filed: 2021-09-07

Case Brief – Hudson v. Foster

Court: COURT OF APPEAL OF THE STATE OF CALIFORNIA
Date: 2025-09-03
Case Number: B300017
Disposition: Reversed and remanded, with directions.

Holding

The court held that the probate court’s order denying the conservatee’s motion to vacate the final account is appealable because it rests on the court’s inherent equitable power to set aside an order obtained through extrinsic fraud; moreover, a conservatee is not required to demonstrate that the misrepresentations of material fact in the conservator’s account could not have been discovered before the order’s entry, and the trial court erred in imposing such a heightened investigative burden. Accordingly, the denial was reversed and the matter remanded for further proceedings consistent with the correct legal standards.

Narrative

Lead – A California appellate panel has carved out a narrow but significant exception to the general rule that orders denying motions to vacate on equitable grounds are not appealable. In Hudson v. Foster, the court ruled that when a conservator’s final account contains misrepresentations of material fact—constituting extrinsic fraud—the probate court’s refusal to set aside that account is reviewable, and the trial court’s misapplication of the “diligence” standard warranted reversal.

Procedural Odyssey

The dispute began after Nigel Hudson, a severely injured personal‑injury plaintiff, entered a voluntary conservatorship of his estate in 2012. His longtime friend, film producer Lucas Foster, was appointed general conservator. Foster advanced funds for Hudson’s medical care and other expenses, later seeking reimbursement from the settlement proceeds of a $13.86 million personal‑injury judgment.

In December 2013 Foster filed a first‑and‑final account, asserting that he had received $9.49 million in estate assets and disbursed $4.31 million, including 17 reimbursements to himself or his entities. The account listed over a thousand disbursements, among them payments to “Miracle Mile Surgical Center,” “LA Litigation Copy Service,” and “Dr. Sam Markzar, DDS.” Hudson and his guardian ad litem signed consents, and on March 28 2014 the probate court approved the account.

Months later, creditors—including Miracle Mile—claimed they had never received the payments listed. A cascade of revelations followed: 28 checks that the account recorded as payments to third parties were actually made payable to Foster or his companies; additional checks written after the account’s filing further depleted the estate. Hudson, unaware of these discrepancies, filed a motion on August 30 2018 to vacate the order approving the final account on the ground of fraud and misrepresentation of material fact, invoking Probate Code § 2103. The trial court denied the motion on June 18 2019, concluding Hudson had not shown lack of knowledge or reasonable diligence. Hudson timely appealed.

Core Issues

  1. Appealability – Whether the probate court’s order denying a motion to vacate an approved final account, grounded in the court’s equitable power to set aside an order obtained by extrinsic fraud, is a “final, appealable” order under Probate Code §§ 1300‑1304 and California law.

  2. Standard of Review – Whether the trial court abused its discretion in applying a heightened diligence requirement to the conservatee, effectively demanding that Hudson have discovered the fraud before the account’s approval.

  3. Nature of the Fraud – Whether the misrepresentations in Foster’s final account constitute extrinsic fraud sufficient to trigger the court’s inherent equitable authority to set aside the order.

Court’s Reasoning

Appealability – The appellate court reaffirmed that orders settling a fiduciary’s account are expressly appealable under Probate Code § 1300(b). While a denial of a motion to vacate is ordinarily non‑appealable, the court cited Kalenian v. Insen (2014) and Estate of Baker (1915) to carve out an exception: when the underlying judgment is final and appealable, a subsequent order refusing to vacate that judgment is itself appealable if the moving party never had a prior opportunity to appeal the judgment directly. Because the order approving Foster’s final account was appealable, the denial of Hudson’s motion to vacate—rooted in the court’s equitable power—was likewise appealable.

Standard of Review – The appellate panel applied the “abuse of discretion” standard, requiring that the trial court’s factual findings be supported by substantial evidence and that its legal conclusions be correct. The court emphasized that a conservatee is not a “detective” obligated to uncover every misstatement; rather, the fiduciary bears the affirmative duty to disclose material facts accurately. The trial court’s reliance on Knox v. Dean (2012), which imposes a “could not have been discovered” test, was deemed misplaced. The appellate court clarified that extrinsic fraud does not require the plaintiff to have been able to discover the fraud before the judgment; the fraud itself—concealment or misrepresentation that deprives a party of a fair adversary hearing—suffices to invoke equitable relief.

Extrinsic Fraud Analysis – The court adopted the three‑part extrinsic‑fraud test articulated in Stevenot (1984): (1) a meritorious claim, (2) a satisfactory excuse for not presenting a defense earlier, and (3) diligent effort to set aside the judgment once the fraud was discovered. Hudson satisfied the first element by showing that the final account contained material misrepresentations—checks listed as payments to creditors were actually paid to Foster’s entities, and additional unauthorized checks were written after the account’s approval. The second element was met because Hudson remained unaware of the fraud until Miracle Mile’s enforcement motion forced disclosure of the check images. The third element was satisfied by Hudson’s prompt filing of the motion to vacate once he learned of the discrepancies.

The appellate panel underscored that the fiduciary’s duty of full disclosure is “affirmative” and that any failure to disclose material facts—whether intentional or negligent—constitutes fraud. The court rejected Foster’s contention that the misstatements were merely “unclear” or “poorly presented,” noting that the check images unequivocally contradicted the payee designations in the account, thereby satisfying the knowledge‑of‑falsity and intent‑to‑induce‑reliance prongs of fraud.

Disposition

Finding that the probate court misapplied the diligence standard and erred in deeming the denial unreviewable, the appellate court reversed the trial court’s order and remanded for further proceedings consistent with the correct legal framework. The remand instructions require the probate court to reassess Hudson’s motion to vacate using the proper extrinsic‑fraud analysis, without imposing an undue burden on the conservatee to have discovered the fraud prior to the account’s approval.

Impact and Unresolved Questions

Hudson v. Foster sharpens the line between intrinsic and extrinsic fraud in probate contexts, confirming that misrepresentations concealed by a fiduciary—regardless of the conservatee’s investigative efforts—trigger the court’s equitable power to set aside a final account. Practitioners should note the following practical takeaways:

  1. Broader Appealability – Parties can now appeal denials of motions to vacate when the underlying order is itself appealable, expanding appellate review in conservatorship disputes.

  2. Fiduciary Disclosure Duty – Conservators must ensure that every disbursement is accurately reflected, including the true payee, even when the transaction is framed as a “reimbursement.” Failure to do so invites extrinsic‑fraud claims and potential reversal.

  3. Conservatee’s Burden – The court repudiated the notion that a conservatee must have discovered fraud before the judgment; instead, the focus is on the fiduciary’s duty and the conservatee’s reasonable diligence after discovery.

Remaining ambiguities include the precise temporal scope of “reasonable diligence” once fraud is suspected. While the court emphasized Hudson’s prompt filing after learning of the discrepancies, it did not delineate a definitive timeline for future litigants. Additionally, the decision leaves open how lower courts should weigh partial disclosures—such as Foster’s claim that many payments were legitimate reimbursements—when mixed with outright misrepresentations.

Overall, Hudson v. Foster reinforces the protective mantle of California’s probate statutes over conservatees, reminding fiduciaries that equitable powers will be invoked when transparency is compromised. Attorneys handling conservatorship accounting should audit payee information meticulously and be prepared to defend against extrinsic‑fraud allegations that can overturn even a court‑approved final account.

Referenced Statutes and Doctrines

  • Probate Code §§ 1300‑1304 – Appealability of probate orders.
  • Probate Code § 2101 – Definition of fiduciary relationship.
  • Probate Code § 2103 – Protection of conservatee from fraud or misrepresentation in fiduciary accounting.
  • Extrinsic Fraud Doctrine – As articulated in Stevenot (1984) and Cartagena (1995).
  • Res Judicata (Claim and Issue Preclusion) – Discussed in Lazzarone v. Bank of America (1986).
  • Standard of Review for Discretionary Orders – Abuse of discretion standard (e.g., County of San Diego v. Gorham (2010)).
  • Key Cases Cited
    • Kalenian v. Insen (2014) 225 Cal.App.4th 569.
    • Estate of Baker (1915) 170 Cal. 578.
    • Knox v. Dean (2012) 205 Cal.App.4th 417.
    • Stevenot (1984) 154 Cal.App.3d 1051.
    • Cartagena (1995) 35 Cal.App.4th 1061.
    • Barriga v. 99 Cents Only Stores LLC (2020) 51 Cal.App.5th 299.
    • Lazar v. Superior Court (1996) 12 Cal.4th 631.

These authorities collectively shape the appellate court’s analysis of appealability, fiduciary duties, and the equitable power to set aside probate orders obtained through extrinsic fraud.