In re Trust of Failla, A-15-687, A-15-688

Background

Virginia L. Failla suffered a disabling stroke in November 2008; in March 2009 she executed a durable power of attorney naming her daughter Roxann Haley as attorney in fact. Virginia lived with Roxann from May 2009 until her death in February 2012.
Roxann, acting as attorney in fact, withdrew and paid out large sums from Virginia’s funds (totaling ~ $416,000 over ~33 months), including $6,000/month charged to Virginia for "room and board" while Virginia lived in a small room in the Haleys’ home; checks were signed "Roxann Haley, POA."
A special administrator (Sally Hytrek) was appointed in 2013 to investigate expenditures and filed surcharge actions alleging self-dealing and misuse of Virginia’s funds; Roxann’s siblings intervened.
The county court found Virginia was a vulnerable adult, that Roxann breached her fiduciary duty, and entered judgment against Roxann for $196,473.65 (room and board), $578.80 (foreclosure interest), $40,838.31 (special administrator fees), and $58,465.66 (intervenors’ attorney fees), total $296,356.42.
On appeal, the court affirmed the breach finding and the judgments for room-and-board and foreclosure interest, reversed the award of intervenors’ attorney fees (no statutory authority), and remanded the special administrator fee award for modification so it is charged to the estate rather than directly against Roxann.

Issues

Issue	Plaintiff's Argument (Hytrek/estate/intervenors)	Defendant's Argument (Haley)	Held
Did Roxann breach fiduciary duty as attorney in fact by charging/withdrawing payments for her mother’s care?	Roxann used her POA to make excessive, inappropriate transfers (self-dealing); surcharge appropriate.	Roxann had an express (oral/written) agreement to be paid for care; charges were reasonable and in Virginia’s best interests.	Court affirmed breach: $196,473.65 for excessive room-and-board and $578.80 foreclosure interest.
Did a written/oral agreement between Virginia and Roxann authorize the payments and rebut gratuitous-services presumption?	Agreement supports reasonableness and consent.	Agreement (Lease/Care) existed and rebuts presumption of gratuitous services.	Existence of an agreement did not preclude finding terms were excessive/self-dealing; court’s silence about the agreement did not undermine surcharge.
Were the payments in Virginia’s best interests (allowing incidental benefit to agent)?	Payments were for beneficial in-home care and less than nursing-home cost; not self-dealing.	Same as plaintiff’s; Roxann emphasized Virginia’s preference and some professional input.	Court found evidence supported that $6,000/month (and overall transfers) were excessive and not in Virginia’s best interests.
May the court assess intervenors’ attorney fees and special administrator’s fees directly against Roxann?	Fees were necessary and recoverable given Roxann’s breach and the proceedings.	No statutory basis to charge intervenors’ or special administrator’s fees directly to Roxann.	Intervenors’ attorney fee award reversed and vacated (Neb. UPOAA inapplicable to acts before Jan 1, 2013). Special administrator’s fee amount affirmed but remanded to be charged to the estate per statutory scheme (vacate direct judgment against Roxann).

Key Cases Cited

Crosby v. Luehrs, 266 Neb. 827 (discusses agent duties under power of attorney)
Archibald v. Reifenrath, 274 Neb. 894 (prohibition on self-dealing by agent; duty of loyalty and constructive fraud presumption)
Litherland v. Jurgens, 291 Neb. 775 (prima facie case of fraud when attorney in fact gifts principal’s assets; fiduciary bears burden to prove fairness)
In re Estate of Haddix, 211 Neb. 814 (presumption that family caregiving is gratuitous; burden to rebut)
In re Estate of Chalupa, 134 Neb. 918 (memorandum/evidence can rebut gratuitous-services presumption)
In re Estate of Baker, 144 Neb. 797 (similar on rebutting gratuitous-services presumption)
Cisneros v. Graham, 294 Neb. 83 (best-interest vs. sole-interest test for incidental agent benefit)
In re Estate of Snover, 4 Neb. App. 533 (no statutory authority for attorney fees in certain surcharge contexts)
In re Estate of Chrisp, 276 Neb. 966 (trial court discretion in awarding attorney fees when authorized)
In re Estate of Jakopovic, 261 Neb. 248 (appellate standard reviewing probate records)
Huntington v. Pedersen, 294 Neb. 294 (statutory interpretation principles)
In re Estate of Watkins, 243 Neb. 583 (appellate review in probate matters)