Alford v. Shelton (In re Estate of Shelton)

• Decision Date: 18 May 2017
• Docket Number: 121241 cons.,Docket Nos. 121199
• Citation: 89 N.E.3d 391,2017 IL 121199
• Parties: In re ESTATE OF Thomas F. Shelton (Ruth Ann ALFORD, Executor, Appellant v. Rodney I. SHELTON, Appellee).
• Court: Illinois Supreme Court

2017 IL 121199
89 N.E.3d 391

In re ESTATE OF Thomas F. Shelton (Ruth Ann ALFORD, Executor, Appellant
v.
Rodney I. SHELTON, Appellee).

Docket Nos. 121199
121241 cons.

Supreme Court of Illinois.

Opinion filed May 18, 2017.
Rehearing denied September 25, 2017

89 N.E.3d 394

Darrell K. Seigler, of Darrell K. Seigler, Ltd., of Ottawa, for appellant and cross-appellee.

Michael W. Fuller and George C. Hupp III, of Hupp, Lanuti, Irion & Burton, P.C., of Ottawa, for appellee and cross-appellant.

JUSTICE BURKE delivered the judgment of the court, with opinion.

¶ 1 The two consolidated appeals before this court concern the duties owed by an agent to a principal under a power of attorney for property. Ruth Ann Alford was named as executor of the estates of her parents, Thomas and Doris Shelton, following their deaths in 2012. In her capacity as executor, Ruth Ann filed two actions on behalf of the estates in the circuit court of Grundy County against her brother, Rodney Shelton. Both actions concerned quitclaim deeds signed by Thomas in 2011 which conveyed farmland to Rodney and his wife. At the time of these transactions, Rodney was designated as the successor agent under both Thomas's and Doris's powers of attorney. The estates alleged that Rodney breached his fiduciary and statutory duties as an agent by personally benefitting from the real estate transactions.

¶ 2 The circuit court dismissed both actions pursuant to sections 2-619(a)(9) and 2-615 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-615, 2-619(a)(9) (West 2010)), respectively. The cases were consolidated on appeal. The appellate court affirmed the dismissal of the action involving Thomas's estate and reversed the dismissal of the action involving Doris's estate. In re Estate of Shelton , 2016 IL App (3d) 140163, 406 Ill.Dec. 219, 60 N.E.3d 121. For the reasons that follow, we find that both actions were properly dismissed by the circuit court. We thus affirm in part and reverse in part the appellate court's judgment.

¶ 3 BACKGROUND

¶ 4 On January 18, 2005, Thomas and Doris each executed durable powers of attorney using the "Illinois Statutory Short Form Power of Attorney for Property." The documents were substantively identical, with the principals—Thomas and Doris—designating each other as their agent, also known as an "attorney-in-fact." Among other powers, they granted the agent the power to sell or otherwise dispose of real property during the principal's lifetime after the principal became disabled. Both principals designated their son, Rodney, as the successor agent and their daughter, Ruth Ann, as the successive successor agent. The documents include the following paragraph pertaining to successor agents:

"8. If any agent named by me shall die, become incompetent, resign or refuse to accept the office of agent, I name the following (each to act alone and successively, in the order named) as successor(s) to such agent:

my son Rodney I. Shelton

my daughter Ruth Ann Alford

For purposes of this paragraph 8, a person shall be considered to be incompetent if and while the person is a minor or an adjudicated incompetent or disabled person

89 N.E.3d 395

or the person is unable to give prompt and intelligent consideration to business matters, as certified by a licensed physician."

¶ 5 On December 1, 2011, Thomas executed two quitclaim deeds conveying 100% of the interest in two plots of farmland to Rodney and his wife, Regina Shelton. The first plot was owned solely by Thomas. The second plot was owned jointly by Thomas and Doris.¹ The quitclaim deed pertaining to the second plot was signed by Thomas, individually, and by Thomas as "attorney-in-fact" for Doris. As of the date of these transactions, Doris had not been adjudicated incompetent or disabled by a court. Nor had a licensed physician certified that Doris was unable to give prompt and intelligent consideration to business matters.

¶ 6 Thomas died on October 9, 2012. Doris died on December 20, 2012. Ruth Ann was named the executor of both estates.

¶ 7 I. Appeal No. 121241

¶ 8 On December 2, 2013, Ruth Ann filed an amended citation in the circuit court on behalf of Thomas's estate, pursuant to section 16-1 of the Probate Act of 1975 ( 755 ILCS 5/16-1 (West 2010) ), to discover information and/or recover the farmland conveyed to Rodney and his wife. The estate alleged that, at the time of the conveyances on December 1, 2011, Doris had been diagnosed with dementia and was incompetent. According to paragraph 8 of Thomas's power of attorney, the successor agent was to succeed to the status of agent "if and while" Doris, the designated agent, was incompetent. Accordingly, the estate alleged that Rodney, not Doris, was Thomas's agent on December 1, 2011.

¶ 9 The estate further alleged that, under Illinois law, any conveyance of property from a principal to an agent under a power of attorney is presumptively fraudulent. Based on the presumption of fraud inherent in the transactions, the estate requested that the deeds be set aside and the property returned to Thomas's estate.

¶ 10 Rodney filed a motion to dismiss the amended citation pursuant to sections 2-615 and 2-619(a)(9) of the Code ( 735 ILCS 5/2-615, 2-619(a)(9) (West 2010)). He argued that Doris was still Thomas's agent on December 1, 2011, since she was not "incompetent" as defined in the power of attorney. As of that date, Doris had not been adjudicated incompetent or certified incompetent by a licensed physician. Since a successor agent has no fiduciary duties to a principal, there is no presumed fraud arising from a transaction between the successor agent and the principal. Rodney thus asserted that the amended citation failed to plead a legally sufficient claim for setting aside the deeds.

¶ 11 In response, the estate filed a supplemental physician's report dated January 30, 2014, by Dr. Daniel Jurak, Doris's treating physician. The report stated that Doris experienced an onset of confusion in March 2011 and was diagnosed with dementia in October 2011. Dr. Jurak averred that on December 1, 2011, Doris was incompetent, unable to manage her personal affairs, and unable to give prompt and intelligent consideration to her business matters.

¶ 12 The trial court granted Rodney's motion to dismiss the amended citation under section 2-619 based on the language in the power of attorney. The appellate

89 N.E.3d 396

court affirmed the trial court's dismissal, with one justice dissenting. 2016 IL App (3d) 140163, 406 Ill.Dec. 219, 60 N.E.3d 121. The majority held that a certification of incompetence signed two years after the execution of the deeds could not retroactively establish Doris's incompetency. Id. ¶¶ 24-26. Therefore, there were no grounds to support the estate's claims. Id.

¶ 13 II. Appeal No. 121199

¶ 14 On March 24, 2014, Ruth Ann filed a complaint on behalf of Doris's estate alleging that Rodney breached his statutory duties to Doris under section 2-10.3(b) of the Illinois Power of Attorney Act. 755 ILCS 45/2-10.3(b) (West 2010). Section 2-10.3(b) provides:

"(b) An agent is not liable for the actions of another agent, including a predecessor agent, unless the agent participates in or conceals a breach of fiduciary duty committed by the other agent. An agent who has knowledge of a breach or imminent breach of fiduciary duty by another agent must notify the principal and, if the principal is incapacitated, take whatever actions may be reasonably appropriate in the circumstances to safeguard the principal's best interest."Id.

¶ 15 The estate alleged that Thomas breached his common-law fiduciary duty as Doris's agent by transferring all of her interest in the farm without reserving a life estate at a time when Doris was in need of income. The estate further alleged that Rodney, as Doris's successor agent, breached his statutory obligation under section 2-10.3(b) to notify Doris of Thomas's breach or to safeguard her interests in the transaction. The complaint alleged damages to the estate in the amount of the value of the property as well as the income from the property during the remainder of Doris's lifetime.

¶ 16 Rodney filed a motion for judgment on the pleadings or, in the alternative, a motion to dismiss the complaint, under section 2-615 of the Code ( 735 ILCS 5/2-615 (West 2010) ). He argued that section 2-10.3(b) of the Power of Attorney Act does not apply to him because he was only a successor agent and had not attained the status of agent at the time of the transactions. Thus, he had no statutory duties to Doris. The trial court agreed and dismissed the complaint with prejudice.

¶ 17 The appellate court, with one justice dissenting, reversed the trial court's judgment and remanded for further proceedings. 2016 IL App (3d) 140163, 406 Ill.Dec. 219, 60 N.E.3d 121. The majority held that the duties imposed by section 2-10.3(b) apply to an individual designated as a successor agent in a power of attorney. Therefore, the court held, the estate's complaint stated a legally cognizable claim against Rodney. Id. ¶¶ 36-40.

¶ 18 The appellate court thus held in Rodney's favor in the first case and in Doris's estate's favor in the second case. The parties filed petitions for leave to appeal in this court. We allowed both petitions ( Ill. S. Ct. R. 315 (eff. Jan. 1, 2015)) and consolidated the two appeals for our review.

¶ 19 ANALYSIS

¶ 20 I. Appeal No. 121241

¶ 21 At issue in this appeal is whether Rodney breached a common-law fiduciary duty to Thomas when he personally benefitted from the real estate conveyances on December 1, 2011. The trial court dismissed the amended citation filed by Thomas's estate pursuant to section 2-619(a)(9) of the Code ( 735 ILCS 5/2-619(a)(9) (West 2010)). In deciding a section 2-619 motion, a court accepts all well-pleaded facts and their inferences as true

89 N.E.3d 397

and construes all pleadings and supporting documents in favor of the non-moving party. Bjork v. O'Meara , 2013 IL 114044, ¶ 21, 369 Ill.Dec. 313, 986 N.E.2d 626. Under...