Former Lawyer in Elderly Bequest Case Files for Bankruptcy

Former probate attorney James D. Gunderson, stung in July by a court order to return $3.5 million he improperly inherited from the estate of a 98-year-old Leisure World man, filed for bankruptcy Friday.

Faced with the unprecedented judgment against him, Gunderson, whose activities as a lawyer inspired reforms in state probate law, sought protection from his creditors under Chapter 11 of the U.S. Bankruptcy Code. Chapter 11 gives people time to reorganize their finances in order to pay their debts.

His attorney, James L. Huffman of Santa Ana, said the judgment was a key factor in his client’s decision to file a bankruptcy petition. Huffman also said Gunderson is no longer working as a lawyer.

In January, Gunderson turned in his license to practice law in California after State Bar prosecutors said they were prepared to file conflict-of-interest charges that could have led to his disbarment. Gunderson said he resigned because of failing health.

In July, nearly seven months later, Orange County Superior Court Judge Byron K. McMillan ruled that Gunderson should repay the $3.5 million, plus $500,000 in interest, to heirs of Merrill A. Miller, who died in February, 1992, leaving an $18-million estate.

Two days after Miller’s death, Gunderson began paying himself a one-fifth share of the estate by selling Miller’s substantial holdings of Abbott Laboratories stock.

Attorneys for the heirs contended that Miller’s gift to Gunderson followed a disquieting pattern in which the probate lawyer received inheritances from the estates of several other clients.

The inheritances appeared to conflict with a longstanding California Supreme Court ruling that anything more than a “modest” gift to an attorney preparing a will raised questions of impropriety. The justices in that landmark case decided that a $20,000 bequest was excessive, and ordered that inheritance returned.

Gunderson, who once ran a thriving law practice from an office with a view of the Leisure World retirement community in Laguna Hills, has vigorously denied any wrongdoing. His attorneys appealed McMillan’s decision earlier this week.

During the civil trial, Gunderson testified that Miller was his best friend and fishing buddy. Miller, he said, wanted him to have the lion’s share of his estate.

Gunderson’s inheritances from the Miller estate, and from those of several of his other elderly clients, were detailed in a series of articles published by The Times in late 1992.

The articles prompted the state Legislature in 1993 to pass a new law, sponsored by Assemblymen Tom Umberg (D-Garden Grove) and Bill Morrow (R-Oceanside), that invalidated most bequests to attorneys who prepare wills and trusts naming themselves as beneficiaries.

Neither Miller’s heirs nor their attorneys could be reached for comment Friday.