In re Robert L. McDowell Revocable Trust.
Sandra K. Stockall, Trustee of the Betty Jane McDowell Revocable Trust and individually, Appellant, Jane O. Hornung, Appellee and Cross-Appellee, and Roger R. Stockall, Trustee of the Robert L. McDowell Revocable Trust, Appellee and Cross-Appellant.
Trusts. The interpretation of the words of a trust is a
question of law.
Trusts: Equity: Appeal and Error. Absent an equity question,
an appellate court reviews trust administration matters for
error appearing on the record; but where an equity question
is presented, appellate review of that issue is de novo on
Decedents' Estates. In Nebraska, powers of appointment
are construed according to the principles of the common law.
Decedents' Estates: Intent. In the construction of powers
of appointment, the cardinal principle is that the intention
of the donor is controlling.
___. The donee of a power of appointment must keep within its
terms, and where the donor prescribes the method of its
execution, that method must be strictly followed, so far at
least as may be necessary to give effect to the donor's
intent and design.
Decedents' Estates. Where there is a prohibition,
limitation, or restriction in a power of appointment, such
provision will control and the donee will not be permitted to
disregard the same.
A power of appointment is considered special or limited when
the donee's appointment is limited to a group which is
not unreasonably large and which does not include the donee.
Neb. 566] 8. Trusts: Intent. Rules of construction for
interpreting a trust are applied when the language of the
trust is not clear; but if the language clearly expresses the
settlor's intent, the rules do not apply.
Appeal and Error. Plain error is error plainly evident from
the record and of such a nature that to leave it uncorrected
would result in damage to the integrity, reputation, or
fairness of the judicial process.
Trusts: Words and Phrases. A breach of trust includes every
omission or commission which violates in any manner the
obligation of carrying out a trust according to its terms.
Trusts. Every violation by a trustee of a duty required of it
by law, whether willful and fraudulent, or done through
negligence, or arising through mere oversight or
forgetfulness, is a breach of trust.
According to Neb. Rev. Stat. § 30-3890 (Reissue 2016), a
violation by a trustee of a duty the trustee owes to a
beneficiary is a breach of trust.
from the County Court for Custer County: Tami K. Schendt,
Judge. Affirmed as modified.
M. Lingelbach, James Tews, and Minja Herian, of Koley Jessen,
PC, L.L.O., for appellant.
S. Koerwitz and Kent E. Endacott, of Endacott, Peetz &
Timmer, PC, L.L.O., and Heidi Hornung-Scherr, of Scudder Law
Firm, P.C., L.L.O., for appellee Jane O. Hornung.
Richard A. DeWitt and David J. Skalka, of Croker, Huck,
Kasher, DeWitt, Anderson & Gonderinger, L.L.C., for
appellee Roger R. Stockall.
Heavican, C.J., Wright, Cassel, Stacy, Kelch, and Funke, JJ.
a dispute between the adult children of Robert L. McDowell
and Betty Jane McDowell, both deceased. The issue presented
is whether Betty validly exercised a limited power of
appointment given to her by Robert's trust when she
appointed the assets in Robert's trust to her own
revocable trust. The [296 Neb. 567] county court found
Betty's appointment was ineffective and ordered that the
assets be recovered and distributed through Robert's
trust. We affirm as modified.
and Betty were the owners of McDowell Cattle Company, which
consists of farmland and pasture near Arnold. Nebraska.
Robert and Betty each owned 270 shares of the company.
2001, Robert and Betty drafted wills and revocable trusts
with nearly identical language. Robert's trust provided
in relevant part:
From and after my death all principal of the trust not
allocated to the said Trust shall be administered and
distributed as Trust "A" as follows:
(d) Upon the death of my wife in the event my wife shall
survive me, the then principal of Trust "A" shall
be distributed to or held in trust for the benefit of such
one or more of my issue, the spouses of any such issue, and
tax-exempt charitable organizations, in such shares and
proportions and subject to such powers, terms and conditions,
as my wife shall appoint by will and any principal of Trust
"A" not appointed effectively by my wife shall
continue to be administered as Trust "A" pursuant
to the following provisions of this instrument.
died before Betty. After his death, Betty executed a new
will. In this will, she provided:
I hereby exercise any power of appointment given to me under
the . . . Robert L. McDowell Revocable Trust . . . (including
Trust "A" . . .), and direct that all such property
over which I have a power of appointment, together with all
of my property, whether real or personal, is hereby devised
to the Trustee or Trustees of the [Betty Jane McDowell
Revocable Trust], to be administered by the Trustee as part
of the property of said . . . Trust, [296 Neb. 568] and to be
held or distributed according to the terms thereof....
and Betty had two children who survived them: Jane O. Hornung
and Sandra K. Stockall. Pursuant to the terms of Betty's
will, both Robert's 270 shares of McDowell Cattle
Company-from his "Trust 'A'" (Trust A)-and
Betty's 270 shares passed through Betty's trust to
Stockall. Hornung received nothing under the terms of
Betty's trust, but was a potential beneficiary under
at least some of Robert's assets from Trust A were
distributed through Betty's trust, Hornung filed suit in
the county court for Custer County requesting instructions
and a declaration of rights of the beneficiaries of
Robert's trust, pursuant to Neb. Rev. Stat. §
30-3812 (Reissue 2016). Hornung alleged that "[t]he
power of appointment exercised under Betty's Will is
invalid and ineffective as the Betty Jane McDowell Revocable
Trust is not a person or beneficiary to which the assets of
Trust A could be transferred." Hornung alleged that the
assets of Trust A should instead be distributed pursuant to
the terms of Robert's trust, which provided that any
residue was to be distributed in equal shares to Hornung and
Stockall. Hornung's petition "request[ed] that the
Court instruct the Trustee of [Robert's trust] to
recover, preserve, and distribute the principal of Trust A
accordingly and . . . issue a preliminary order estopping the
transfer of any assets of Trust A."
in her capacity as the trustee of Betty's trust and in
her individual capacity, counterclaimed in the county court
action. Her counterclaim also sought instructions and a
declaration of rights of the beneficiaries under Robert's
trust. Stockall denied that the power of appointment
exercised by Betty was invalid. Stockall's counterclaim
requested that the court enter an order (1) finding that
Betty's exercise of the power of appointment was valid
and enforceable, (2) approving the actions taken by the
trustee of Robert's trust in "distributing the
remaining principal of [Trust A] to the Trustee of [296 Neb.
569] Betty's Trust in accordance with Betty's
exercise of the power of appointment, " and (3)
requiring the trustee of Robert's Trust "to promptly
distribute the remainder of the principal of [Trust A] in
accordance with Betty's exercise of the power of
appointment ... to the Trustee of Betty's Trust . . .
." Our record reflects that notice of the action and the
counterclaim was provided to the trustees of both
Robert's trust and Betty's trust and to all potential
beneficiaries of either trust.
trial was held. Hornung, Stockall, and the trustee of
Robert's trust participated. The court determined
Betty's exercise of the power of appointment was
ineffective because it exceeded the scope of the limited
power granted in Robert's trust, in that it commingled
the Trust A assets with Betty's trust assets and thus
benefited Betty, her estate, and creditors of her estate so
that it was not limited to one of the three classes of
beneficiaries Robert designated. The court ordered the
trustee of Robert's trust to recover all assets of Trust
A and to distribute them in accordance with the terms of
appealed, and the trustee of Robert's trust (who is also
Stockall's husband) filed a cross-appeal. We granted
Stockall's petition to bypass the Nebraska ...