Alford v. Shelton (In re Estate of Shelton)

60 N.E.3d 121

406 Ill.Dec. 219

In re ESTATE OF Thomas F. SHELTON, Deceased (Ruth Ann Alford, Executor, Petitioner–Appellant, v. Rodney I. Shelton, Respondent–Appellee).

Ruth Ann Alford, as executor of the Estate of Doris E. Shelton, Plaintiff–Appellant

v.Rodney I. Shelton, Defendant–Appellee.

Nos. 3–14–0163

3–14–0685.

Appellate Court of Illinois, Third District.

Aug. 1, 2016.

George C. Hupp, Jr. (argued), and Michael W. Fuller, both of Hupp, Lanuti, Irion & Burton, P.C., Ottawa, for appellant.

Darrel L. Seigler (argued), Ottawa, for appellee.

OPINION

Justice HOLDRIDGE delivered the judgment of the court, with opinion.

¶ 1 In these consolidated cases, Ruth Ann Alford, as the executor of the estates of her late parents, Thomas and Doris Shelton, sued her brother, Rodney Shelton, to recover real estate that she alleged Rodney had wrongly received from both estates and for damages resulting from Rodney's alleged violation of his legal duties as successor power of attorney for Doris. In case No. 3–14–0144, Ruth Ann, as executor of Thomas's estate, filed an amended estate citation seeking the return to Thomas's estate of a farm that Thomas had conveyed to Rodney in December 2011. Ruth Ann alleged that the conveyance was presumptively fraudulent because it occurred while Rodney was named as the successor power of attorney under Thomas's Illinois Statutory Short Form Power of Attorney for Property (POA), and while Doris, Thomas's primary power of attorney under the POA, was incompetent. Rodney moved to dismiss the complaint under sections 2–615 and 2–619 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2–615, 2–619 (West 2010)). The trial court granted Rodney's motion to dismiss under section 2–619 because it found that Ruth Ann had failed to establish that Doris was incompetent at the time of the conveyance and that Rodney owed Thomas a fiduciary duty at that time.

¶ 2 In case No. 3–14–0685, Ruth Ann, as executor of Doris's estate, sued Rodney for damages allegedly caused by Rodney's breach of a duty to Doris as a successor power of attorney. Ruth Ann alleged that, while Rodney was named as a successor power of attorney for Doris, and while Doris was incompetent to manage her own affairs, Rodney colluded with Thomas, Doris's primary power of attorney, to transfer Doris's interest in certain real estate to Rodney in violation of section 2–10.3(b) of the Illinois Power of Attorney Act (Act) ( 755 ILCS 45/2–10.3(b) (West 2010)). Rodney moved to dismiss the complaint under section 2–615 of the Code (735 ILCS 5/2–615 (West 2010) ). The trial court granted Rodney's motion and found as a matter of law that, at the time of the transaction at issue, Rodney had no duty to Doris. This appeal followed.

¶ 3 FACTS

¶ 4 On January 18, 2005, Thomas Shelton executed an Illinois Statutory Short Form Power of Attorney for Property (POA) appointing his wife, Doris Shelton, as his “attorney-in-fact” or “agent.” The POA form states that Doris has the power to act for Thomas and in his name in any way Thomas could act in person with respect to several enumerated powers, including: (1) the power to “pledge, sell, and otherwise dispose of any real or personal property without advance notice” to Thomas; (2) the power to make Estate transactions, gifts, and “all other property powers and transactions”; (3) the power to name or change beneficiaries or joint tenants; and (4) the power to exercise trust powers. It was a “durable” power of attorney in that it provided that Thomas's appointed agent “may exercise the powers given here throughout [Thomas's] lifetime, after [he] become[s] disabled” (unless Thomas or a court otherwise limited or terminated the agent's power, which did not occur).

¶ 5 In paragraph 8, Thomas's POA provided:

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

¶ 6 On the same day Thomas executed his POA, Doris executed a substantively identical durable POA for property appointing Thomas as her agent (or attorney-in-fact) and Rodney and Ruth Ann, successively, as successor agents.

¶ 7 Thomas and Doris owned a farm together as joint tenants. On December 1, 2011, Thomas executed quitclaim deeds conveying his and Doris's interest in the farm to Rodney and Rodney's wife. Thomas conveyed his own interest in the farm on his own behalf, and he conveyed Doris's interest in the farm as attorney-in-fact under Doris's power of attorney. On the same day, Thomas executed another quitclaim deed conveying to Rodney and Rodney's wife another farm that was titled in Thomas alone.

¶ 8 On December 2, 2013, Thomas's estate (by its executor, Ruth Ann), filed an amended citation under section 16–1 of the Probate Act of 1975 (Probate Act) (755 ILCS 5/16–1 (West 2012) ) against Rodney and his wife to recover the farm originally owned by Thomas. The citation alleged that, at the time Thomas conveyed the farm to Rodney, Rodney was Thomas's agent under Thomas' POA because: (1) Thomas's POA designated Rodney as successor POA; and (2) at the time of the conveyance, the predecessor POA (Doris) was incompetent. In support of the latter assertion, the estate alleged that: (a) “[f]rom March 2011 Doris * * * was observed to have confusion and lack of short term memorization [sic ]”; (b) “[m]edical treatment records through, and beyond, December 1, 2011 reflect Doris's * * * continued confusion and cognitive impairment”; (c) “[a]bnormal EEG of 9–15–2011 found ‘features that would be consistent with diffuse cerebral dysfunction ’ ”; (d) “[o]n or about October 4, 2011, Doris * * * was diagnosed with dementia ”; (e) “[r]ecords for Doris * * * thereafter reflect progressive decline in cognitive level, disorientation and hallucinations.” The complaint alleged that, based on “the progressive effects of [Doris's] diagnosed Dementia as set forth above,” Doris “was unable to manage her affairs due to said mental deficiency and was incompetent at the time of the execution of the foregoing deeds.” The complaint did not attach a physician's report certifying that Doris was unable to conduct her business affairs or otherwise incompetent.

¶ 9 The complaint further alleged that, due to Doris's incompetence at the time the deeds at issue were executed, “Rodney * * * had succeeded to and was the POA under the power of attorney which created a fiduciary relationship between Thomas * * * and Rodney.” Therefore, the complaint maintained, the conveyances from Thomas to Rodney were “presumptively fraudulent” and Rodney was required show by clear and convincing evidence that the “transaction was fair and equitable.” Absent such showing, the complaint asked that the deeds be set aside.

¶ 10 On December 11, 2013, Rodney filed motions to dismiss the estate's amended petition for citation under sections 2–615 and 2–619(a)(9) of the Code. The latter motion noted that Doris had not been adjudicated incompetent or declared incompetent by a physician's certification, as required by paragraph 8 of Thomas's POA. Therefore, Rodney argued, Rodney never assumed a fiduciary duty to Thomas under the POA. Moreover, Rodney contended that “[t]he power of attorney at issue and applicable principles of Illinois law do not permit a retroactive adjudication of incompetence or the creation of a fiduciary relationship nunc pro tunc. ” The estate filed a response to Rodney's motions to dismiss and Rodney filed a reply.

¶ 11 On January 30, 2014, the estate filed the “Physician's Report” of Dr. Daniel M. Jurak, Doris's former treating physician, as a supplemental exhibit to its response to Rodney's motions to dismiss. In his report, Dr. Jurak stated under oath that Doris had suffered from “[d]ementia, diagnosed on or before October 4, 2011, associated with Parkinson's Disease with a start of care date of October 13, 2011.” Dr. Jurak further stated that Doris had an “onset of confusion in March 2011” and had “exhibited continuing diminishment of mental and cognitive ability with progressive worsening through the date of her death in 2012.” Dr. Jurak opined that “[a]s of, and including, December 1, 2011, * * * Doris Shelton was incompetent, unable to manage her personal affairs, unable to give prompt and intelligent consideration [to] her personal affairs and unable to give prompt and intelligent consideration to business matters.” Dr. Jurak stated that he based these observations on: (1) “[his] own examinations(s), continuing care and observations(s), of Doris Shelton from 2008 through the date of her death”; and (2) “[r]eview and examination of treatment records kept in the ordinary course of business, created by persons with independent knowledge of their personal observations and assessments, made at or near their personal observations and assessments[,] * * * records of which [Dr. Jurak had] found to be accurate and reliable.”

¶ 12 The trial court held a hearing on Rodney's motions to dismiss on February 4, 2014. After reading the parties' briefs and hearing oral arguments, the trial court denied Rodney's motion to dismiss under Rule 2–615 but granted his motion to dismiss under rule 2–619(a)(9). The court reasoned that, at the time of the conveyance on December 1, 2011, no doctor had certified that Doris was unable to manage her financial affairs, and the doctor's certification that “would trigger that POA” occurred two years after the event. The court concluded that “I don't think you can retroactively a year or two years later submit a certification * * * that is specifically referred to in the POA and have...