In re Estate of Shelton
2016 IL App (3d) 140163
| Ill. App. Ct. | 2016Background
- Thomas and Doris Shelton executed reciprocal durable powers of attorney (POAs) naming each other as primary agents and Rodney and Ruth Ann as successor agents.
- On December 1, 2011, Thomas quitclaimed his farm and, acting as Doris’s attorney-in-fact, quitclaimed Doris’s joint interest in the farm to Rodney and his wife; Thomas also conveyed another farm owned solely by him to Rodney.
- Thomas’s POA made a successor agent effective only if the named agent "shall ... become incompetent," which the POA defined as incompetence "as certified by a licensed physician" (or by adjudication).
- Ruth Ann (executor) filed two suits: (1) Thomas’s estate sought to set aside Thomas’s conveyance to Rodney as presumptively fraudulent because Rodney was allegedly Thomas’s agent (successor POA) due to Doris’s incompetence; (2) Doris’s estate sued Rodney for damages under section 2-10.3(b) of the Illinois Power of Attorney Act for participating in or failing to prevent Thomas’s alleged breach of fiduciary duty.
- At trial the court dismissed (1) the estate citation under section 2-619, finding the physician’s certification offered post hoc could not retroactively establish Doris’s incompetence and thus Rodney never became Thomas’s agent; and (2) the statutory claim under section 2-615, finding Rodney never had duties to Doris. The appeals were consolidated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether naming a successor agent in a POA creates a fiduciary duty to the principal before the successor becomes acting agent | Ruth Ann: Successor designation plus evidence of Doris’s incompetence (physician’s report) made Rodney Thomas’s agent in Dec 2011, creating a fiduciary presumption that renders the conveyance presumptively fraudulent | Rodney: Successor never became agent absent antecedent physician certification or adjudication; retroactive certification is not permitted, so no fiduciary duty existed | Held: Naming a successor agent does not create a fiduciary duty until the successor actually becomes the acting agent; physician certification must precede the triggering event, so dismissal of the estate citation affirmed |
| Whether a post-event physician’s certification can retroactively establish predecessor agent incompetence for purposes of triggering successor-agent status under a POA | Ruth Ann: Dr. Jurak’s 2014 physician report establishes Doris was incompetent in Dec 2011 and thus Rodney succeeded then | Rodney: The POA requires contemporaneous certification/adjudication; a later report cannot retroactively trigger successor status | Held: Physician certification must occur before or at the time it is relied upon to displace the primary agent; retroactive certification not permitted under POA language; affirmed |
| Whether a successor agent can be liable under 755 ILCS 45/2-10.3(b) for participating in, concealing, or failing to act on knowledge of a predecessor agent’s breach, even if the successor never became acting agent | Ruth Ann: Section 2-10.3(b) imposes affirmative duties on successor agents to notify the principal or protect the incapacitated principal and makes successor liable for participation/concealment | Rodney: Section 2-10.3(b) applies only to acting agents ("agent" means attorney-in-fact), not to successor agents who never assumed authority | Held: Section 2-10.3(b) applies within the Successor Agents provision and can impose limited duties on successor agents who participate in or have knowledge of a breach; dismissal of Doris’s estate’s statutory claim was reversed and remanded |
| Whether the complaint stated legally sufficient facts under section 2-615 to proceed on Doris’s estate’s claim for breach under section 2-10.3(b) | Ruth Ann: Complaint alleges Thomas breached his fiduciary duty to incapacitated Doris and that Rodney participated in or failed to prevent that breach and had knowledge of the transaction | Rodney: Allegations fail because Rodney was never an agent and thus owed no duties; statute’s references to "agent" show it targets acting agents | Held: Complaint alleged sufficient facts that, if proven, would support liability under section 2-10.3(b); dismissal under 2-615 was error, so reversal and remand |
Key Cases Cited
- Clark v. Clark, 398 Ill. 592 (Illinois) (agent under power of attorney creates a fiduciary relationship and self-dealing by an agent is presumptively fraudulent)
- In re Estate of Elias, 408 Ill. App. 3d 301 (Ill. App. Ct.) (designation as agent under a POA gives rise to fiduciary duties as a matter of law)
- Estate of DeJarnette, 286 Ill. App. 3d 1082 (Ill. App. Ct.) (fiduciary relationship may arise by appointment under a POA)
- In re Estate of Rybolt, 258 Ill. App. 3d 886 (Ill. App. Ct.) (conveyances that benefit an agent are presumptively fraudulent)
- In re Estate of Romanowski, 329 Ill. App. 3d 769 (Ill. App. Ct.) (written POAs are to be strictly construed)
- Sierra Club v. Kenney, 88 Ill. 2d 110 (Ill.) (specific statutory provisions control over general provisions when in conflict)