A.Y. McDonald Industries, Inc. v. Michael B. McDonald, 20-0766

Background

Michael McDonald, a former A.Y. McDonald Industries executive, was found to have misappropriated company funds; he signed a 2012 restitution agreement and promissory note to repay $2,538,500 and confessed judgment after defaulting.
Michael had limited remaining assets: beneficial interests in two spendthrift trusts. In 2014 the parties executed an Amendment: Michael granted a limited power of attorney (LPOA) authorizing an attorney‑in‑fact to accept trust distributions and forward them to A.Y. in exchange for A.Y. ceasing collection activity.
Trust payments began in 2014; in Sept. 2016 Michael received a $6,218.44 trust payment directly (the attorney‑in‑fact had inadvertently sent him the check) and did not forward it to A.Y.; he later acknowledged the receipt.
Michael filed Chapter 7 in 2017 and revoked the LPOA; bankruptcy proceedings held the underlying debt nondischargeable but declined to enforce the LPOA as irrevocable because of spendthrift concerns and jurisdictional issues for injunction/declaratory relief.
A.Y. sued in Iowa district court seeking breach‑of‑contract relief, enforcement of the LPOA as irrevocable, and a permanent injunction to compel future trust distributions; the district court found Michael breached, declared the LPOA irrevocable, granted a permanent injunction, and awarded A.Y. attorney fees.
On appeal the Iowa Court of Appeals affirmed that Michael breached and affirmed the attorney‑fee award, but reversed the enforcement of the LPOA and the permanent injunction because enforcing an irrevocable assignment of spendthrift trust distributions violated the spendthrift statute and injunctive relief was not required.

Issues

Issue	Plaintiff's Argument (A.Y.)	Defendant's Argument (Michael)	Held
Did Michael breach the restitution agreement/Amendment by keeping the Sept. 2016 trust payment?	A.Y.: Michael agreed to forward distributions and breached when he kept the payment and later refused to authorize further transfers.	Michael: He was entitled to revoke the LPOA and retained distributions; A.Y. improperly collected some payments.	Held: Michael breached; his signed acknowledgement confirmed breach.
Is the LPOA irrevocable and enforceable so A.Y. can compel future trust payments?	A.Y.: LPOA was given for valuable consideration and thus irrevocable; it functions like security for future distributions.	Michael: Iowa law allows revocation of a power of attorney; spendthrift protections bar compelling assignment of future trust distributions.	Held: Reversed — court cannot enforce an irrevocable LPOA to bind spendthrift trust distributions; statute prohibits assignment/encumbrance pre‑distribution.
Did A.Y. interfere with Michael’s expectancy or otherwise violate the Amendment by accepting DB&T payments?	A.Y.: Those were courtesy credits applied to debt, not a breach.	Michael: Accepting bank payments released consideration and breached the Amendment.	Held: A.Y. did not breach by accepting the payments; Michael did not timely object and the credits were not a material breach.
Is a permanent injunction appropriate to compel compliance and prevent revocation of the LPOA?	A.Y.: Injunction necessary to avoid irreparable harm and preserve collection mechanism.	Michael: Injunctive relief cannot override spendthrift protections and other legal remedies suffice.	Held: Reversed — injunction improper; A.Y. has adequate legal remedies (collection after distribution) and cannot force binding of future spendthrift distributions.
Are attorney fees recoverable under the Amendment?	A.Y.: Amendment waived past fees but authorizes fees if Michael defaults after the Amendment.	Michael: Fees should not be awarded to A.Y.; he did not seek fees below.	Held: Affirmed — contract authorized reasonable attorney fees upon Michael’s default; award upheld.

Key Cases Cited

In re Est. of Bucklin, 51 N.W.2d 412 (Iowa 1952) (recognizing validity and effect of spendthrift trusts)
MacGregor v. Gardner, 14 Iowa 326 (Iowa 1862) (agency coupled with an interest may be irrevocable when given as part of a contract)
Taylor v. Burns, 203 U.S. 120 (U.S. 1906) (defining “interest” for powers coupled with an interest)
In re Est. of Crabtree, 550 N.W.2d 168 (Iowa 1996) (power of attorney construed strictly; grants only specified powers)
Royal Indem. Co. v. Factory Mut. Ins. Co., 786 N.W.2d 839 (Iowa 2010) (breach‑of‑contract proof and required elements)
Van Sloun v. Agans Bros., Inc., 778 N.W.2d 174 (Iowa 2010) (contractual attorney‑fee provisions enforceable when properly authorized)