Stafford v. Crane

• Decision Date: 03 September 2004
• Docket Number: No. 03-3067.,03-3067.
• Citation: 382 F.3d 1175
• Parties: L.J. STAFFORD, a/k/a Jay Stafford, Plaintiff-Appellee, v. Carol Jane CRANE, Trustee of the L.J. Stafford Irrevocable Trust, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

382 F.3d 1175

L.J. STAFFORD, a/k/a Jay Stafford, Plaintiff-Appellee, v. Carol Jane CRANE, Trustee of the L.J. Stafford Irrevocable Trust, Defendant-Appellant.

No. 03-3067.

United States Court of Appeals, Tenth Circuit.

September 3, 2004.

Appeal from the United States District Court for the District of Kansas, Kathryn H. Vratil, J.

COPYRIGHT MATERIAL OMITTED

W. Greg Wright, Hill, Beam-Ward, Kruse & Wilson, LLC, Overland Park, KS, for Plaintiff-Appellee.

Leonard L. Wagner and Anne W. Schiavone, Husch & Eppenberger, LLC, Kansas City, MO, for Defendant-Appellant.

Before KELLY, McKAY, and HENRY, Circuit Judges.

HENRY, Circuit Judge.

In September 1999, Plaintiff L.J. Stafford executed a durable power-of-attorney, naming his two sisters his lawful attorneys-in-fact. In April 2000, the sisters used the power-of-attorney to commit Mr. Stafford to a lock-down Alzheimer's unit and to create an irrevocable trust for Mr. Stafford. Defendant Carol Jane Crane, Mr. Stafford's niece, assumed the role of trustee. In September 2000, Mr. Stafford filed a habeas corpus petition, seeking release from the Alzheimer's unit. He was judged mentally competent and released to the care of a nursing home, due to his physical condition.

Mr. Stafford then filed this diversity action against Ms. Crane in the federal district court for the District of Kansas, seeking a declaratory judgment that the trust was void ab initio and seeking the return of all property received by the trust. Before trial, the parties filed a joint motion and stipulation, which was accepted by the district court, declaring the trust null and void as of May 9, 2002. After a bench trial, the district court found for Mr. Stafford, holding that (1) the trust was void ab initio because the durable power-of-attorney did not expressly authorize the attorneys-in-fact to create the trust for Mr. Stafford, and therefore (2) all disbursements which had been made by Ms. Crane as trustee were misappropriations, except to the extent that Mr. Stafford conceded that he himself would have paid the bills for which the disbursements were made. The court ordered Ms. Crane to pay back the challenged disbursements, with interest.

In this appeal, Ms. Crane contends that (A) the parties' pre-trial stipulation that the trust was null and void as of May 9, 2002, barred Mr. Stafford's claim at trial that the trust was void ab initio, and (B) Mr. Stafford's attorneys-in-fact had the authority to create the irrevocable trust on his behalf. For substantially the same reasons as the district court, we AFFIRM.

I. BACKGROUND

Mr. Stafford, aged 92 at the time of trial, is a long-time resident of Keyes, Oklahoma. On September 17, 1999, Mr. Stafford executed a durable power-of-attorney, appointing two of his sisters, Billie Jo Stafford and Juanita Jankowski his lawful attorneys-in-fact. See Aplt's App. vol. I, at 30. The power-of-attorney authorized Ms. Stafford and Ms. Jankowski to manage Mr. Stafford's property but did not expressly grant authority to the attorneys-in-fact with respect to the creation, amendment, or revocation of trusts.

Subsequently, on April 6, 2000, Mr. Stafford executed a durable medical power-of-attorney, appointing Billie Jo Stafford as his agent for health care decisions. See id. at 33. The following day, Billie Jo Stafford used the durable medical power-of-attorney to involuntarily admit Mr. Stafford to the Morton County Geriatric Hospital and Psychiatric Center in Elkhart, Kansas. On April 20, 2000, she transferred him to a locked-down Alzheimer's unit at the Southeast Colorado Hospital and Long Term Care Center in Springfield, Colorado. That same day, she executed a document titled "L.J. Stafford Irrevocable Trust" ("Trust").

The Trust purported to be an agreement between Mr. Stafford as settlor and his niece, Barbara Ann Hinds, as trustee. It provided that

(a) During the lifetime of the Settlor, the Trustee shall pay or apply so much of the income from the trust estate as well as any amount from the principal of the trust which the Trustee, under his sole discretion, deems necessary for the care, comfort, health and welfare (including living, residential, medical and health, legal and general welfare) of Settlor....

(b) Within a reasonable time after the death of Settlor, Trustee shall distribute the trust corpus and any accumulated income to the estate of the Settlor outright in fee simple absolute.

Id. at 35-36. The Trust included Mr. Stafford's real estate in Cimarron County, Oklahoma, and Baca County, Colorado, which had an approximate value of $3,000,000, and certificates of deposit at banks in Kansas and Oklahoma, totaling nearly $1,000,000.

Billie Jo Stafford executed the Trust in Kansas, and it stated that it shall be governed and construed under Kansas law. The Trust named Ms. Crane as successor trustee if Ms. Hinds ceased to serve as trustee. Almost immediately after she assumed the position of trustee, Ms. Hinds did cease to serve, and Ms. Crane took over. Ms. Crane acted as trustee until May 9, 2002, when the parties jointly stipulated that the Trust was null and void. While Ms. Crane was trustee, she made numerous disbursements from the Trust.

Mr. Stafford was in the Alzheimer's unit from April until September 2000. During this time Billie Jo Stafford, another sister, and a brother filed a petition in the Baca County, Colorado District Court, requesting the appointment of Ms. Crane as Mr. Stafford's guardian and conservator. Also during this time, Mr. Stafford filed a habeas corpus petition in the Baca County court against his family and the Southeast Colorado Hospital seeking his release from the locked-down Alzheimer's facility.

The Baca County court consolidated the guardianship petition and the habeas action and appointed an independent psychiatrist to evaluate Mr. Stafford. The psychiatrist found Mr. Stafford to be oriented, intelligent, capable of giving a good history, and not depressed or in need of sedating tranquilizers. On August 8, 2000, based on the psychiatrist's recommendation, the court ordered that Mr. Stafford's medications be gradually reduced and discontinued. On September 12, 2000, the court ordered that Mr. Stafford be released from the Alzheimer's unit and moved to either a nursing home or home health care, because even though he was competent, he had physical infirmities and could not properly care for himself. The court appointed Ms. Crane as temporary guardian, but allowed Mr. Stafford to nominate an acceptable replacement guardian.

On November 8, 2001, Mr. Stafford filed this suit against Ms. Crane in the federal district court for the District of Kansas. He sought a declaration that the Trust was void ab initio. Additionally, he sought the return of his nearly $4,000,000 in property from the Trust and reimbursement for funds appropriated by Ms. Crane.

Prior to trial, the parties filed an agreed order and stipulation, which "declare[d] the `L.J. Stafford Irrevocable Trust' dated April 20, 2000, null and void" and provided for all assets in the purported irrevocable Trust to be transferred to the new "L.J. Stafford Revocable Trust Agreement." Id. at 68-69 (Order Declaring Trust Void, filed May 9, 2002). The order also set forth the following findings of fact and conclusions of law:

[Mr. Stafford] has denounced the purported L.J. Stafford Irrevocable Trust since its execution ... [;][t]here remains an issue as to whether [Ms. Crane] has misappropriated any assets or income of the purported trust during the time period she has served as trustee ... [;][and][t]his Court retains jurisdiction... to determine [Mr. Stafford's] damages from misappropriations of the purported trust's assets by [Ms. Crane].

Id. at 69.

When the parties appeared for trial, Mr. Stafford's counsel advanced the argument that the Trust was null and void ab initio—i.e., that it was never a valid trust from its execution in April 2000—making all of the expenditures by Ms. Crane misappropriations. Ms. Crane objected, arguing that this claim was barred because Mr. Stafford's counsel signed the parties' joint stipulation, and the stipulation did not preserve Mr. Stafford's claim that the Trust was void ab initio. The district court disagreed, finding that the stipulated order did not address that claim and that the court had retained jurisdiction to determine the extent of Mr. Stafford's damages from the alleged misappropriation of trust assets.

The district court then concluded that the Trust was void ab initio because the durable power-of-attorney did not specifically authorize the attorneys-in-fact to create a trust on Mr. Stafford's behalf. Accordingly, the district court found that all of Ms. Crane's expenditures as trustee, excepting those that Mr. Stafford conceded he would have made himself, were misappropriations, and the court ordered Ms. Crane to repay them, with interest, to Mr. Stafford.

We hold that (A) the pre-trial stipulation did not settle the dispute over whether the Trust was void ab initio, so the district court did not err in addressing the claim, and (B) the purported Trust was void ab initio because Mr. Stafford's power-of-attorney did not explicitly grant his attorneys-in-fact the authority to create a trust on his behalf. Therefore, we affirm the district court's judgment.

II. DISCUSSION

A. Did the parties' pre-trial stipulation that the Trust was null and void as of May 9, 2002, bar Mr. Stafford's claim at trial that the Trust was void ab initio?

On appeal, Ms. Crane first argues that "the district court erred in determining the issue of the status of the L.J. Stafford Irrevocable Trust ... when the parties had by their agreement and through a stipulated order resolved the issue of the status of the Trust prior to trial." Aplt's Br. at 19. She contends that Mr. Stafford abandoned his argument that the Trust was invalid from its inception by stipulating that the Trust was null and void as of May 9, 2002, and by...