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Keywords

attorneytrialfiduciarytrustfiduciary duty
defendantattorneytrialpleamotionsummary judgmentfiduciarytrustmotion to dismiss

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BMO Harris Bank N.A. v. Towers, 2015 IL App (1st) 133351, 43 N.E.3d 1131, 398 Ill.Dec. 221

Facts

BMO Harris Bank, as trustee of two trusts created by Martin Cornelius, Sr. and Mary Cornelius, filed a petition seeking court instructions regarding the validity of Martin Jr.'s exercise of his testamentary powers of appointment. Martin Jr. had appointed assets from these trusts to his own revocable living trust, which led to a counterpetition from his children asserting the validity of his actions. The trial court found that Martin Jr. had improperly exercised his powers, leading to the distribution of trust funds per stirpes to his children.

During his lifetime, Martin Jr. created a revocable living trust (the Martin Jr. trust). Martin Jr. died a resident of North Carolina in 2006 and was survived by his spouse and four children, Harry, Martin III, Camilla, and Dagmar.

Issue

Did Martin Cornelius, Jr. improperly exercise his powers of appointment, and did the bank breach its fiduciary duty by filing a petition for instructions?

The Towers defendants contend Martin Jr. properly exercised his powers of appointment over his parents' two trusts using his revocable living trust as a conduit; the trial court erred in granting the Bank's motion to dismiss the Towers defendants' counterpetition; and the trial court erred by summarily granting Dagmar's petition for attorney fees.

Rule

A power of appointment is ineffective if exercised in favor of a non-permissible appointee, and a trustee may seek court instructions when there are conflicting claims to trust funds.

A power of appointment is not an absolute right of property, nor is it an estate, for it has none of the elements of an estate.

Analysis

The court determined that Martin Jr.'s exercise of his powers of appointment was void because he appointed assets to himself, which was not allowed under the terms of the trusts. The bank acted within its fiduciary duties by seeking court guidance on the validity of Martin Jr.'s actions, as it had a responsibility to ensure proper administration of the trusts.

After reviewing the record, we conclude that the trial court properly granted partial summary judgment in favor of Dagmar because Martin Jr. improperly exercised his powers of appointment over the assets of the Mary and Martin Sr. trusts.

Conclusion

The Appellate Court affirmed the trial court's ruling that Martin Jr. improperly exercised his powers of appointment and that the bank did not breach its fiduciary duty. The court also upheld the award of attorney fees to Dagmar Cornelius.

Accordingly, we affirm the trial court's order that granted the Bank's motion for judgment on the pleadings and dismissed the Towers defendants' counterpetition.

Who won?

BMO Harris Bank prevailed in the case because the court found that it acted within its fiduciary duties and that Martin Jr.'s actions were invalid.

The Bank, as trustee, acted within its fiduciary duties by filing a petition seeking instruction from the court regarding the proper distribution of the trusts.

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