Hornung v. Stockall

Robert McDowell’s will created a trust for the benefit of his descendants, their spouses, and charities. He gave his widow, Betty McDowell, a testamentary power to appoint the trust principal among those beneficiaries. If Betty did not effectively appoint all the trust property, Robert’s will directed distributing it in equal shares to daughters Jane Hornung (plaintiff) and Sandra Stockall (defendant). Betty’s will purported to appoint all the trust property to Betty’s own trust, which named only Stockall and several grandchildren as beneficiaries, excluding Hornung. After Betty died, the trustee began transferring the trust property to only Stockall and the grandchildren. Hornung sued, arguing that Betty’s appointment was ineffective because Betty’s trust was not among the limited beneficiaries Robert’s will specified. If Betty’s appointment failed, the property should be distributed under the terms of Robert’s will, to Stockall and Hornung equally. The trial court found Betty’s appointment invalid because it exceeded the scope of the power Robert granted and commingled Robert’s trust assets with Betty’s. Betty’s trust benefitted Betty, her estate, and her creditors, who were not among the allowable beneficiaries that Robert’s will specified, making Betty’s appointment invalid. The court concluded that the trustee had acted reasonably and not breached the trust by distributing assets as Betty directed but ordered the trustee to recover the assets and redistribute them in equal shares to both daughters pursuant to Robert’s will. Stockall appealed, arguing that either the doctrine of selective allocation or substantial compliance made Betty’s appointment valid.