In re Estate of Kurrelmeyer

In re Estate of Kurrelmeyer  (2004-347); 179 Vt. 359; 895 A.2d 207

2006 VT 19

[Filed 03-Mar-2006]



       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2006 VT 19

                                No. 2004-347


 In re Estate of Louis H. Kurrelmeyer     Supreme Court

                                          On Appeal from
                                          Chittenden Superior Court

                                          September Term, 2005


       Matthew I. Katz, J.

  Karl W. Neuse of Neuse, Smith & Venman, P.C., Middlebury, for
  Plaintiffs-Appellees Ellen L. Kurrelmeyer and Ellen L. Kurrelmeyer,
  Executrix of the Estate of Nancy Kurrelmeyer.

  James W. Runcie of Ouimette & Runcie, Vergennes, for Plaintiff-Appellee
  Louis H. Kurrelmeyer, Jr.

  Thomas F. Heilmann and Wendy L. Fuller of Heilmann, Ekman & Associates,
  Inc., Burlington, for Defendant-Appellant Martina Kurrelmeyer.


  PRESENT:      Reiber, C.J., Dooley, Johnson and Skoglund, JJ., and
                Burgess, D.J., Specially Assigned

        
       ¶ 1.     BURGESS, D.J., Specially Assigned.   Martina Kurrelmeyer
  appeals an order of the Chittenden Superior Court declaring void, as a
  matter of law, the revocable intervivos trust she created under her
  husband's durable power of attorney prior to his death.  Mr. Kurrelmeyer's
  surviving children claimed the power of attorney did not grant authority to
  create a trust and that transfer of Mr. Kurrelmeyer's property to the trust
  constituted unauthorized self-dealing and a breach of Martina Kurrelmeyer's
  fiduciary duty as her husband's agent.  We reverse the superior court's
  determination that the trust is void as a matter of law, and remand for
  further proceedings to determine whether Martina Kurrelmeyer's actions
  breached her fiduciary duty of loyalty as her husband's agent.

       ¶ 2.     The undisputed facts are summarized as follows.  In 1996,
  Louis Kurrelmeyer executed two durable general powers of attorney to
  appoint his wife, Martina Kurrelmeyer, and his daughter, Nancy Kurrelmeyer,
  as attorneys-in-fact.  Louis Kurrelmeyer was competent at the time he
  executed the powers of attorney.  In December of 2000, Martina, pursuant to
  her powers under the durable power of attorney, executed a document
  establishing the "Louis H. Kurrelmeyer Living Trust," with herself and
  Nancy as co-trustees.  Days after she created the trust, Martina
  transferred certain real estate owned by her husband, the "Clearwater"
  property, to herself and Nancy as co-trustees of the trust.  At the time of
  the creation of the living trust and the transfer of the Clearwater
  property, Louis Kurrelmeyer was no longer competent.  Mr. Kurrelmeyer died
  testate a year later, and Martina was appointed executrix of his estate.  
   
       ¶ 3.     Louis Kurrelmeyer's last will and testament, executed in
  1980, contained a specific provision for the Clearwater property.  Under
  the will, Martina would take a life estate in the property, with
  responsibility for taxes and upkeep, and upon her death the property would
  pass to Mr. Kurrelmeyer's surviving children as joint tenants with rights
  of survivorship.  In contrast, the terms of the trust provide Martina
  additional rights with regard to the property.  Under the terms of the
  trust, Martina may occupy the home as long as she wishes and the trust is
  permitted to pay the expenses on the property should she fail to do so. 
  The trustees would be required, however, on Martina's unilateral request,
  to sell the home, with the sale proceeds to be used either to purchase
  another home for Martina or, alternatively, to be added to the trust
  principal.  Additionally, the trust provides that all income from the trust
  property would be paid to Martina, as well as so much of the principal as
  the trustees deem necessary and proper for her support.  Upon Martina's
  death, the trust principal would be distributed to Louis's children, if
  they survived him, with any deceased child's share to be distributed to
  that child's descendants or held in trust until such descendants reached
  the age of twenty-five.  The trust requires that there be at least one
  other trustee serving so long as Martina is serving as a co-trustee, and
  the co-trustees must act by mutual agreement.  

       ¶ 4.     During the probate administration of Louis Kurrelmeyer's
  estate, his son, Louis Kurrelmeyer Jr., objected to the exclusion of the
  Clearwater property from the inventory completed by Martina Kurrelmeyer. 
  Claiming that Martina exceeded her authority in creating the trust, Louis
  Jr. asked the probate court to set aside the trust and include the
  Clearwater property in the probate estate to be distributed in accordance
  with Mr. Kurrelmeyer's will.(FN1)  The probate court upheld the trust, and
  the children appealed to the superior court.  
   
       ¶ 5.     Martina Kurrelmeyer moved for summary judgment, arguing the
  creation of the trust and transfer of the Clearwater property to the trust
  were authorized under the broad authority granted to her by the durable
  power of attorney.  The children moved for a judgment in their favor,
  arguing that the power of attorney did not authorize creation of a
  revocable trust, that the transfer of the Clearwater property to the trust
  was a breach of Martina's fiduciary duty because it constituted
  self-dealing, and that the transfer violated the gift-giving proscription
  of the power of attorney.  

       ¶ 6.     The superior court reversed the probate court's order. 
  Granting summary judgment for the children, the superior court concluded
  that the power of attorney did not authorize Martina to create a trust. 
  The court found the power of attorney ambiguous on the trust issue, and
  narrowly construed the language to authorize only maintenance of, and
  additions to, trusts already existing when the power of attorney came into
  being.  The superior court also opined that, because the appointment of
  Martina as attorney-in-fact did not authorize her to make a will on behalf
  of the principal, she was without authority to convey his property in trust
  in a manner that would "alter" his existing will.  Martina appealed,
  complaining that the superior court erred in applying a strict construction
  analysis rather than recognizing Mr. Kurrelmeyer's intention to make
  Martina his attorney-in-fact for general purposes, including trust
  creation, as is evident, she argues, from the plain language of the power
  of attorney.  

       ¶ 7.     On appeal from a grant of summary judgment, we apply
  the same standard as the trial court.  Wesco, Inc. v. Sorrell, 2004 VT 102,
  ¶ 9, 177 Vt. 287, 865 A.2d 350.  Summary judgment is appropriate where the
  undisputed facts demonstrate either party is entitled to judgment as a
  matter of law. V.R.C.P. 56(c)(3).  Where the parties agree there are no
  contested issues of fact, the question of whether either party is entitled
  to judgment as a matter of law is reviewed de novo.  Bacon v. Lascelles,
  165 Vt. 214, 218, 678 A.2d 902, 905 (1996).  Our review of questions of law
  is nondeferential and plenary.  Wesco, Inc., 2004 VT 102, ¶ 9.  I.
   
       ¶ 8.     We first address Martina's claim that the trial court erred
  in concluding as a matter of law that the power of attorney did not
  authorize her to create a trust on Louis Kurrelmeyer's behalf.  We disagree
  with the superior court's characterization of the power of attorney as
  ambiguous, and find that the express language of the power of attorney
  authorized the attorney-in-fact to create a trust.  The trial court invoked
  a doctrine of strict construction, relied upon in some jurisdictions, to
  seemingly resolve any arguable ambiguity against the attorney-in-fact
  claiming delegation.  See King v. Bankerd, 492 A.2d 608, 611-12 (Md. 1985)
  (observing that "one well settled rule is that powers of attorney are
  strictly construed as a general rule and [are] held to grant only those
  powers which are clearly delineated" (internal quotations omitted)
  (alteration in original)).  We are not persuaded that strict construction,
  rather than a construction to effect the principal's intent, is a preferred
  method of determining the scope of a power of attorney.  See Restatement
  (Second) of Agency § 34 cmt. h (1958) (noting that while it is often stated
  that formal instruments denoting an agent's authority should be strictly
  construed, "[t]here should be neither a 'strict' nor a 'liberal'
  interpretation, but a fair construction which carries out the intent as
  expressed").  Determining the principal's intent is acknowledged as the
  primary objective, even in strict construction jurisdictions:  "Although
  our predecessors recognized this rule [of strict construction] over a
  century ago . . . they were careful to note that the rule of strict
  construction 'cannot override the general and cardinal rule' that the court
  determine the intention of the parties."  King, 492 A.2d  at 611 (citation
  omitted).  Accordingly, we will not apply a rule of narrow construction to
  particular words and phrases used in the power of attorney, but will
  examine the express terms and the context of the instrument as a whole to
  give effect to the principal's intent. 
   
       ¶ 9.     This approach is consistent with our analysis in Schall v.
  Gilbert, 169 Vt. 627, 741 A.2d 286 (1999) (mem.), in which we examined
  whether the scope of a power of attorney was limited, or "special," as
  opposed to broad, or "general": 

       A power of attorney is a written authorization used to
       evidence an agent's authority to act on behalf of another
       person.  It is often characterized as general or special. 
       The more specific a power of attorney is concerning
       performance of individual acts, the more the agent is
       restricted from executing acts beyond the specific authority
       granted.  Further, the Restatement (Second) of Agency § 3
       cmt. a (1958) states:

         In determining whether an agent is a general agent or a
         special agent, the number of acts to be performed in
         accomplishing an authorized result, the number of people to
         be dealt with, and the length of time needed to accomplish
         the result are the important considerations. Continuity of
         service rather than the extent of discretion or
         responsibility is the hallmark of the general agent.

  Id. at 630, 741 A.2d  at 289 (citations omitted).     
  
       ¶ 10.     To determine whether the power of attorney authorized
  Martina to create a trust, we look to Mr. Kurrelmeyer's "written
  authorization," entitled "Durable General Power of Attorney." As its title
  suggests, this power of attorney is indeed "general" and quite broad.  The
  power of attorney was to survive, and be unaffected by, the principal's
  subsequent disability or incompetence.  It authorizes Martina, as
  attorney-in-fact, to act in the principal's name "in any way which I myself
  could do,  if I were personally present, with respect to the following
  matters to the extent that I am permitted by law to act through an agent." 
  Among the delineated powers, the first subsection authorizes the agent
  "[t]o add all of my assets deemed appropriate by my said attorney to any
  trust of which I am the Donor" by transferring in trust a variety of types
  of property, including stocks, bonds, bank accounts, real estate, and
  "other assets or property of any kind" owned by the principal.  The
  subsection immediately following provides:
   

       In ADDITION, I authorize my said attorney to: (i) EXECUTE AND
       DELIVER ANY ASSIGNMENTS, STOCK POWERS, DEEDS OR TRUST
       INSTRUMENTS; (ii) sign my name to any instrument pertaining
       to or required in connection with the transfer of my
       property; (iii) give full receipts and discharges; (iv)
       re-register the title to stock certificates, bonds, notes,
       bills and other securities; (v) change the name on bank,
       brokerage and commodity accounts; (vi) withdraw any or all
       funds standing in my name in any bank; (vii) endorse and
       deliver any checks, drafts, certificates of deposit, notes or
       other instruments for the payment of money payable or
       belonging to me; (viii) change life insurance beneficiaries .
       . . (ix) elect lump sum or optional settlements of life
       insurance . . . and annuity proceeds and proceeds from a
       qualified plan or an individual retirement account; (x)
       convey any real estate, interest in real estate, any
       mortgages and notes or any beneficial interest in real estate
       which I may own or have any interest in; and (xi) record
       deeds of conveyance in the appropriate land records.

  (emphasis supplied).  The text continues, authorizing the attorney-in-fact
  to examine and obtain copies of the principal's will.  The attorney is
  authorized to "make gifts to members of my family (other than himself or
  herself) whom my said attorney has reason to believe I would have wished to
  benefit, but my said attorney shall not give any more than $10,000.00 per
  year to any one donee."  Among other powers, the attorney-in-fact is also
  granted unrestricted access to, and an unrestricted right to remove, the
  contents from "any and all warehouses, safe deposit boxes, drawers, and
  vaults" owned in the principal's name alone and in common with others.  The
  attorney-in-fact is authorized to disclaim interests in property on behalf
  of the principal, to convey title to his motor vehicles, to "convey any and
  all real estate owned by [the principal] to any person or entity," and,
  finally, the attorney-in-fact is authorized 

       [t]o do and perform all and every act and thing whatsoever
       necessary to be done in the premises, as fully to all intents
       and purposes as I might or could do if personally present,
       with full power of substitution and revocation, hereby
       ratifying and confirming all that my said attorney may do
       pursuant to this power.  

        
       ¶ 11.     We conclude that the express terms of the power of attorney
  unambiguously grant the attorney-in-fact the authority to create a trust
  and to add assets to a trust to accomplish estate planning objectives.  The
  first subsection, empowering the attorney to add any and all assets to a
  trust of which he is the donor, does refer to a trust already in existence,
  but does not suggest lack of authority to create a new trust when
  considered together with the second subsection-granting the power "to
  execute and deliver . . . trust instruments" expressly in addition to
  adding assets to existing trusts.  The phrase "trust instrument" is
  commonly understood to refer to the document that brings the trust into
  existence.  See Black's Law Dictionary 437 (8th ed. 2004) (defining a
  "declaration of trust" in part as "the instrument that creates a trust,"
  also termed "trust instrument").  Just as a subsequent provision authorizes
  the attorney-in-fact to "execut[e] . . . deeds" and "easements," which we
  commonly read to include granting and conveying lands and creating rights
  of way, so too may the attorney-in-fact create a trust under the provision
  authorizing the attorney to "execute . . . trust instruments."  Where a
  power is broadly drawn to include the authority to transact all business on
  behalf of the principal and delineates a variety of general acts, each
  particular task within the grant of authority need not be spelled out in
  exacting detail.  Schall, 169 Vt. at 630, 741 A.2d  at 289 (holding that
  authority to withdraw certificates of deposit at a particular bank need not
  be expressly delineated where power of attorney entrusted agent to make
  real estate decisions, enter contracts, and draw funds against principal's
  account).  Given the express language granting the authority to execute
  trust instruments, particularly in the context of the breadth of the
  attorney's other express powers, including, ultimately, her authority to
  fully substitute herself for the principal to do all things "whatsoever
  necessary . . . to all intents and purposes" as the principal "might or
  could do if personally present," we find that the agent's authority under
  this power of attorney includes the authority to create a trust on the
  principal's behalf.

                                     II.

       ¶ 12.     Alternatively, the children argue that, even if the
  principal intended to authorize the attorney-in-fact to create a trust, the
  power to create a trust is personal to the settlor and non-delegable as a
  matter of law.  We agree that certain acts may require personal performance
  as a matter of public policy, statutory law, or under the terms of an
  agreement.  See Restatement (Second) of Agency § 17 cmt. b ("Duties or
  privileges created by statute may be imposed or conferred upon a person to
  be performed or exercised personally only. . . . The making of affidavits
  as to knowledge and the execution of wills are illustrations of acts
  commonly required by statute to be done personally."); see also 14 V.S.A. §
  3504(b) (prohibiting the use of a power of attorney to authorize the agent
  to perform certain acts, such as making health care decisions or executing,
  amending, or revoking a will for the principal).(FN2)  We do not agree,
  however, that delegation of authority to create a trust through a durable
  general power of attorney to serve the interests of the principal violates
  public policy as a matter of law, even when a trust's dispositive terms may
  serve a function similar to that of a will.  
   
       ¶ 13.     The use of a revocable living trust serves a number of
  legitimate purposes.  Restatement (Third) of Trusts § 25 cmt. a (2003). 
  For example, revocable trusts are widely used in estate planning and asset
  management as a means to avoid the costs and delays associated with probate
  administration, as a means to provide property management for settlors late
  in life by establishing trustees and successor trustees to assume
  continuing responsibility, and as a means to maintain privacy and
  flexibility in the management of assets beyond the life of the settlor. 
  Id., see also id. ch. 6, introductory note ("[W]ith its flexibility and its
  highly developed, prototypical, default body of ready made fiduciary
  principles, the trust device is widely used in a broad variety of
  arrangements serving diverse purposes.").  Revocable trusts allow the
  settlor to retain the ability to use the assets for support during
  lifetime, provide for ongoing asset management, and preserve the estate for
  the settlor's intended beneficiaries.  

       ¶ 14.     The fact that the trust here was created by an agent does
  not affect its legitimacy.  See id. § 11(5) ("Under some circumstances, an
  agent under a durable power of attorney or the legal representative of a
  property owner who is under disability may create a trust on behalf of the
  property owner."); see also id. cmt. f (noting that despite restrictions
  against making a will for an incompetent person, it is proper for a
  principal to authorize an agent to create or modify a revocable inter vivos
  trust "to serve purposes that are financially advantageous to the estate,
  such as probate avoidance and managerial efficiency").   The children fail
  to demonstrate any sufficiently countervailing evil to compel this Court to
  declare such powers of attorney contrary to public policy and void as a
  matter of law. 
   
       ¶ 15.     We find unpersuasive and inapposite the cases cited by the
  children in support of their position that the power to create a trust is
  non-delegable.  The courts in those cases found that the powers of attorney
  did not expressly authorize the agent to create a trust, which, as we hold
  above in Section I, is not the case with this power of attorney.  See
  Stafford v. Crane, 241 F. Supp. 2d 1239, 1246-47 (D. Kan. 2002) (holding
  that trust was void where durable power of attorney did not specifically
  authorize attorney-in-fact to create a trust), aff'd, 382 F.3d 1175,
  1183-84 & n.2 (10th Cir. 2004) (observing that "[t]he general weight of
  authority suggests that the power to create, modify, or revoke a trust is
  personal and non-delegable to an attorney-in-fact unless expressly granted
  in the power-of-attorney" and noting several states' codification of that
  rule); Kotsch v. Kotsch, 608 So. 2d 879, 880 (Fla. Dist. Ct. App. 1992)
  (holding that power of attorney did not authorize creation of trust to
  dispose of principal's property); In re Jameison, 2000 MT 190, ¶ 21, 8 P.3d 83 ("The Power of Attorney does not specifically grant the authority to
  create a trust, reflect [the principal's] intent to create a trust, or even
  mention a trust.").   

       ¶ 16.     For the same reason that trusts can be beneficial to an
  estate, we are not persuaded on the current record that this trust is
  necessarily an invalid usurpation of the principal's last will and
  testament.  The trial court was concerned that, by conveying Clearwater to
  the trust, Martina did "indirectly what she [could] not do directly," that
  is, alter the will by depriving the children of their expected inheritance
  of Clearwater's appreciation.  When the principal expressly granted his
  attorney-in-fact the power to convey realty from his estate, he must have
  anticipated that the terms of his will might be so altered.  It is not
  clear, then, why conveyance of Clearwater to a trust would be a per se
  impermissible alteration of the will, when the power of attorney expressly
  authorized Martina to convey any real estate outright to others. 
  Therefore, these additional arguments do not persuade us that the trust
  must be rendered void as a matter of public policy.

                                    III.
   
       ¶ 17.     The question of whether Martina's actions breached her
  fiduciary duties remains.  Even though we conclude that Martina had
  authority from her principal to create a trust on his behalf, her authority
  to act under that power was not limitless.  A fiduciary duty of loyalty is
  implied in every agency as a matter of law.  See John A. Westlund, Inc. v.
  O'Bryan Const. Co., 123 Vt. 301, 308, 187 A.2d 507, 512 13 (1963) ("Every
  agency is subject to the legal limitation that it cannot be used for the
  benefit of the agent himself, or of any person other than the principal, in
  the absence of an agreement that it may be so used." (emphasis supplied)). 
  The attorney-in-fact was prohibited from making gifts to herself by the
  express language of the power of attorney and was also prohibited from
  using the agency for her own benefit or the benefit of others except as
  authorized. 

       ¶ 18.     The children complained below that Martina's conveyance of
  the Clearwater property to the trust provided no benefit to Louis
  Kurrelmeyer, served no apparent tax or estate planning purpose, and was
  prohibited by the gifting provision of the power of attorney as well as by
  Martina's fiduciary duty of loyalty to her principal.  Martina argued, in
  response, that the trust and conveyance were justified by generally
  recognized and prudent tax and estate planning objectives, that the
  conveyance of Clearwater to the trust could not, as a matter of law,
  constitute a gift prohibited by the power of attorney, and that the
  co-trustee approval requirement was a safeguard against any self-dealing.  

       ¶ 19.     Concluding, erroneously, that creating any new trust  was
  void as beyond the authority of the attorney-in-fact, the superior court
  did not reach the additional question of whether the trust and conveyance
  were valid, as claimed by Martina, or a breach of fiduciary duty as claimed
  by the children.   The court recognized general proscriptions against
  self-dealing by attorneys-in-fact and trustees, but did not address the
  parties' particular factual or legal claims on this topic.  Despite
  recitations in their cross-motions for summary judgment, the parties do not
  appear to agree upon facts material either to Martina's contention that the
  dispositive terms of the trust and the conveyance of the Clearwater
  property were justified as prudent estate planning or to the children's
  contentions that the terms of the trust and the transfer of property were
  unauthorized self-dealing.
   
       ¶ 20.     Therefore, we remand the case to the superior court for
  further proceedings to consider whether there was a breach a fiduciary duty
  on the part of Martina Kurrelmeyer, as agent, in light of all the relevant
  circumstances at the time the trust was executed.

       Reversed and remanded for further proceedings not inconsistent with
  this decision.

             FOR THE COURT:


       _______________________________________
       Brian L. Burgess, Specially Assigned
       District Court Judge

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                                  Footnotes

FN1.  At the time of his death, Louis Kurrelmeyer had three surviving
  children-Louis Jr., Nancy, and Ellen.  Nancy subsequently passed away, and
  Ellen became executrix of Nancy's estate. Additionally, the trust
  designates Ellen as Nancy's successor co-trustee.  Because of this role,
  Ellen took no position in the probate court on the validity of the trust,
  but sought clarification of the title to the Clearwater property and
  questioned how the conveyance of the property affected Martina's homestead
  interest.  For the sake of simplicity, and because counsel for Louis Jr.,
  Ellen, and Nancy's Estate have represented the children's interests as
  aligned in this appeal, as well as in the appeal to the superior court, we
  refer to appellees collectively as "the children."



FN2.  Vermont's Powers of Attorney Act, 14 V.S.A. §§ 3501-3516, was enacted
  subsequent to the execution of the relevant documents in this case.  2001,
  No. 135 (Adj. Sess.), § 2.  Our reference to the Act here is for
  illustrative purposes.  It is noteworthy, however, that the Legislature did
  not act to prohibit the use of powers of attorney to create trusts.