In the Matter of the Guardianship and Conservatorship of Marvin M. Jorgensen ( 2021 )

IN THE SUPREME COURT OF IOWA
No. 18–1235
Submitted April 15, 2021—Filed May 21, 2021
IN THE MATTER OF THE GUARDIANSHIP AND CONSERVATORSHIP
OF MARVIN M. JORGENSEN,
ROXANN WHEATLEY, RICK WHEATLEY, and DALLAS WHEATLEY,
Appellants.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Audubon County,
Kathleen A. Kilnoski, Judge.
Two of the ward’s children and the court visitor request further
review of a court of appeals decision affirming in part and reversing in part
the district court’s order modifying farm leases entered into by the ward’s
conservator. DECISION OF THE COURT OF APPEALS AFFIRMED;
DISTRICT COURT JUDGMENT AFFIRMED IN PART AND REVERSED
IN PART.
McDermott, J., delivered the opinion of the court, in which all
justices joined. Waterman, J., filed a special concurrence.
Eldon L. McAfee (argued), Julia L. Vyskocil, and Daniel P. Kresowik
of Brick Gentry, P.C., West Des Moines, for appellants.
Deborah L. Petersen of Petersen Law PLLC, Council Bluffs, for
appellee Michael Jorgensen.
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Alexander E. Wonio and David L. Brown of Hansen, McClintock &
Riley, Des Moines, for appellee Mark Jorgensen.
Leo P. Martin (argued) of Peters Law Firm, P.C., Council Bluffs, court
visitor and former guardian ad litem for Marvin M. Jorgensen.
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McDERMOTT, Justice.
Marvin Jorgensen suffered a stroke in 2016 that left him unable to
manage his nearly 18,000 acres of Iowa farmland. Before his stroke,
Marvin had leased almost half his farmland to his children and several
grandchildren in “handshake” agreements that Marvin never put in
writing. One set of family members generally didn’t know the rental rates
that Marvin provided to another. After the stroke, Marvin’s court-
appointed conservator entered into new written leases with family
members that were intended to continue with Marvin’s practice of rent
discounts from market rates. The conservator included—at the
unanimous recommendation of all three of Marvin’s children, each of
whom had handshake leases with Marvin—a $40-per-acre discount with
a lease term lasting until 2030.
But about six months after signing the written leases, in the midst
of clashes among family members that continued to surface involving
Marvin’s farmland, the conservator filed a motion seeking direction on
whether the farm leases it entered into on Marvin’s behalf were
appropriate. Marvin’s two sons came forward claiming to have
misrepresented facts surrounding Marvin’s prior rent discount practices
that the conservator relied on when it entered into the written family
leases. The district court concluded the leases were inconsistent with
Marvin’s past practices and reformed the leases to provide a $25-per-acre
discount. On appeal, the court of appeals reversed the district court’s
ruling as to the reformation of the conservator’s farm leases with Marvin’s
daughter.
On further review, Marvin’s sons and guardian ad litem ask us find
the district court in this situation had the power to reform the family leases
that the conservator entered into on Marvin’s behalf or, alternatively, to
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find the discounted rental rate in the family leases constituted an
unauthorized “gift” that separately supports the district court’s
reformation of the leases.
I.
Because this is an equitable proceeding, we recite the facts as we
find them in our de novo review. Iowa Code § 633.33 (2017); Smith v.
Harrison, 325 N.W.2d 92, 93 (Iowa 1982). Marvin had three children:
Michael Jorgensen, Mark Jorgensen, and Roxann Wheatley. After
Marvin’s stroke, disagreements flared among the children concerning the
handling of his ongoing affairs. The three children, along with Marvin’s
guardian ad litem (attorney James Mailander), Marvin’s conservator
(Security National Bank), one of Marvin’s grandsons, and their respective
attorneys, all participated in mediation to resolve their disputes. The
mediation produced a settlement memorialized in the “Jorgensen Family
Settlement Agreement.” The first paragraph of the family settlement
agreement states: “The Parties desire to reconcile their differences,
preserve Marvin’s testamentary intent[,] and facilitate their future mutual
cooperation.” Security National Bank agreed to serve as Marvin’s
conservator “provided that Mark, Roxann, and Michael agree to form a
Family Council to provide it with assistance and guidance regarding the
management of Marvin’s estate.”
The newly-created family council that the three siblings formed
would provide “guidance and assistance” to the conservator in discharging
the conservator’s duties. The conservator agreed to give “due deference,
which will not be unreasonably withheld, as to matters and issues on
which the family council unanimously consents, in writing and signed by
all parties,” so long as the action didn’t contravene Marvin’s intent or the
conservator’s fiduciary duties. The family settlement agreement stated
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that determinations of Marvin’s intent would take into consideration his
“past course of dealing with his children and their family members.”
The family settlement agreement included an attached “Family
Recommendation to Conservator” signed by all three family council
members. In the recommendation, the siblings unanimously
recommended to the conservator that (1) “[a]ll current farm leases will
remain in effect”; (2) “[a]ll farm leases shall be extended to the year 2030”;
and (3) “[r]ents will be calculated at the Iowa State University cash rent for
medium quality ground, effective March 1, 2018 less $40 per acre as per
past course of dealing.”
Marvin’s guardian ad litem filed an application seeking the district
court’s approval of the family settlement agreement with the attached
family council recommendation. No one filed an objection or requested a
hearing on the application. The district court entered an order approving
the family settlement agreement on January 31, 2017.
In May, the conservator filed an application seeking the court’s
authorization and direction to enter into leases and other agreements to
manage Marvin’s farmland. Marvin’s guardian ad litem (a new one,
attorney Clint Hight, who replaced Mailander in April) filed an answer to
the conservator’s motion stating that it would be in Marvin’s best interests
“to authorize the Conservator to perform the acts requested in the said
applications as long as the Conservator gives appropriate consideration to
the family settlement agreement filed herein on January 31, 2017 and
exercises such authority in accordance with their fiduciary duty to the
ward.” The district court granted the application and ordered the
conservator to enter into the leases.
The conservator did as ordered. By September, the conservator had
signed farm leases on Marvin’s behalf with all family-member tenants. The
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leases included, as set out in the recommendation attached to the family
settlement agreement and urged by Marvin’s guardian ad litem, a $40-per-
acre discount from the Iowa State University cash rental rate and a lease
term that ran to 2030.
By late fall, new disputes started flaring among the siblings. The
issues included, for instance, whether the new leases permitted Michael
free access to Roxann’s farmland for winter cornstalk grazing for his cattle
herd, a practice Michael claimed their father had always allowed, and
whether land previously set aside in a crop reserve program should have
been included in a lease with Michael or with Roxann’s son Dallas
Wheatley. So in February 2018, about six months after the family leases
had been signed, the conservator filed an application asking the district
court to review issues surrounding the farm leases. The conservator made
reference to having not been informed of Marvin’s past practices in
permitting the winter foraging on other tenants’ properties, and to
criticism that the conservator hadn’t properly looked out for Marvin’s best
interest when it entered into leases with the $40-per-acre discounts and
lengthy lease terms. The conservator asked the district court to determine
whether it had complied with its fiduciary duties to Marvin when it gave
deference to the family council’s recommendation on the leases and
requested that the court either adjust the family members’ leases or
confirm the propriety of the existing leases.
In the course of the siblings’ new dispute, Michael and Mark
indicated that the $40-per-acre rent discounts were in fact inconsistent
with Marvin’s prior practice—contradicting the family council
recommendation they’d each signed more than a year earlier. When
questioned at a hearing about what had caused him to change his position
on this issue, Michael testified that he’d recently learned that before his
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stroke, Marvin had spoken with a farm management company about
managing his farm properties and, based on that discussion, the farm
management company presented Marvin with a proposal that would have
provided a $25-per-acre discount to family members. Michael thus seems
to have disputed not the fact that Marvin provided his family members
rent discounts but merely the amount of the discounts. Mark claimed his
father provided his children no discounts on rent. Roxann, for her part,
maintained that the discounts in the new leases were consistent with
Marvin’s past practice (if anything, not as extensive) and that no legal basis
existed to modify the leases.
The district court ordered the guardian ad litem to negotiate a
contract with one of the farm management companies that Marvin had
spoken with (but didn’t retain) to manage all Marvin’s farmland in place of
the conservator. The court then directed the to-be-retained farm
management company to rewrite all the family leases to include only a
$25-per-acre discount as opposed to the $40-per-acre discount in the
existing family leases. The district court also directed the farm
management company to reform the existing leases to prohibit subleasing
at a profit and to correct certain errors the court found in describing who
had leased two particular farms (the Chappel farm and the Snake farm) as
between Michael and Dallas. The district court’s order also dissolved the
family council that had been created in the family settlement agreement.
The district court’s ruling made no comment on the credibility of any
witnesses and made no finding of misrepresentation or fraud associated
with the conservator’s existing leases. Rather, it found the existing leases
“the product of too many errors” and deemed the $40-per-acre discount
“not prudent,” particularly considering the length of the leases.
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Both Roxann (with her husband Rick Wheatley and son Dallas) and
the conservator filed motions to amend or enlarge the district court’s order
under Iowa Rule of Civil Procedure 1.904(2). In response, the district court
clarified that it was terminating the family settlement agreement (in
conjunction with dissolving the family council), and made other relatively
minor changes to particular findings or conclusions, but left unchanged
the substance of the original ruling.
The Wheatleys appealed. The court of appeals affirmed in part and
reversed in part the district court’s ruling, holding principally that the
district court lacked authority to reform the Wheatleys’ leases with the
conservator. Michael, Mark, and Marvin’s guardian ad litem (a new one,
attorney Leo Martin, who replaced Hight shortly after the Wheatleys
appealed) sought further review, which we granted. While this case
remained pending on appeal, Marvin passed away at the age of 92.
Attorney Martin thus continues in this appeal as “court visitor” under Iowa
Code section 633.562 (2020) instead of guardian ad litem.
II.
The court visitor argues, as an initial matter, that the conservator
lacked “sufficient prior court approval” to enter into the family leases in
the first place, and thus the district court acted within its power to require
changes to leases that had never been authorized. Under Iowa law, a
conservator generally must give notice and receive specific prior
authorization from the court before the conservator may take certain
actions on the ward’s behalf. Id. § 633.647 (2017). The law specifically
requires prior authorization before a conservator may lease a ward’s real
property. Id. § 633.647(2).
But under these facts, we find the conservator had specific prior
authorization to enter into the family leases. Marvin’s guardian ad litem
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filed the family settlement agreement with its attached family council
recommendation. No one opposed or requested a hearing on the
application. The conservator thereafter sought an order “authorizing and
directing the Conservator to execute and enter into any and all
agreements, leases and instruments, and to perform all other acts
necessary or appropriate to manage the Ward’s farm land.” Again, no one
filed any objection or requested a hearing. To the contrary, the guardian
ad litem filed an answer to the conservator’s motion stating that it would
be in Marvin’s best interest to authorize the conservator to enter into the
leases “as long as the Conservator gives appropriate consideration to the
family settlement agreement filed herein on January 31, 2017 and
exercises such authority in accordance with their fiduciary duty to the
ward.” The district court granted the application and ordered the
conservator to enter into the farm leases. The conservator dutifully
complied. The process undertaken fulfilled the process required by law.
See Iowa Code §§ 633.388 (requiring a request to lease property to “set
forth the reasons for the application and describe the property involved”),
.389 (requiring notice to interested persons), .647 (requiring notice and
prior approval by the court). The conservator didn’t need to go back to the
district court for yet another authorization to enter into the family leases.
Michael, Mark, and the court visitor argue more forcefully that
Marvin’s handshake leases never actually included the $40-per-acre
discounts included in the conservator’s leases, and that the conservator
thus breached its fiduciary duty to Marvin because the conservator’s
request for authorization was founded on a misrepresentation. The
curious quirk here, of course, is that the misrepresentation the
conservator relied on was perpetrated by the same two siblings—Michael
and Mark—advancing this argument. Roxann contends that, certainly as
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to the conservator’s leases with the Wheatley family, the leases are
consistent with Marvin’s past practice and there has been no
misrepresentation that would warrant reforming them.
A conservator owes a fiduciary duty to the ward. Iowa Code
§ 633.3(17); In re. Conservatorship of Rininger, 500 N.W.2d 47, 50 (Iowa
1993). We find no breach of fiduciary duty in the conservator’s conduct.
Again, all three of Marvin’s children entered into the family settlement
agreement with its attached recommendation stating that the proposed
$40-per-acre discount was consistent with Marvin’s past course of dealing.
The district court entered an order approving the family settlement
agreement as requested. Our jurisprudence establishes that family
settlement agreements are favored in law. Gustafson v. Fogleman, 551
N.W.2d 312, 314 (Iowa 1996). Courts have long promoted the voluntary
settlement of legal disputes, and courts likewise refrain from inordinately
scrutinizing the parties’ terms of settlement. Wright v. Scott, 410 N.W.2d
247, 249 (Iowa 1987). We’ve noted exceptions in prior cases, but those
exceptions aren’t implicated in this case. See In re Est. of Swanson, 239
Iowa 294, 302, 31 N.W.2d 385, 390 (1948).
Only after the district court authorization and the conservator’s
consummation of the family leases did Mark and Michael claim that the
discount was inconsistent with Marvin’s past practice. Roxann,
meanwhile, steadfastly maintained the veracity of the discount and its
alignment with Marvin’s past practice. The conservator in this situation
didn’t breach its fiduciary duty when it relied on information from all three
of the ward’s children, each of whom was uniquely—if not ideally—
positioned to provide information on the ward’s past leasing practices with
them. We’re presented with no grounds for the conservator to have
disbelieved the family members prior to entering into the leases. Marvin’s
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own guardian ad litem—tasked in this role with “advocat[ing] for the best
interests of the ward,” Est. of Leonard ex rel. Palmer v. Swift, 656 N.W.2d
132, 142 (Iowa 2003)—endorsed providing the $40-per-acre discounts and
2030 lease terms in response to the conservator’s motion seeking
authorization. Under the facts of this case, we cannot find the conservator
acted imprudently or disloyally to the ward by including the $40-per-acre
discounts, and we thus find no breach of the conservator’s fiduciary duty
on this ground.
Concerning the unusual length of the family lease terms (to 2030)
as indicating a breach of the conservator’s fiduciary duty, Marvin’s will
specified that his property wouldn’t be liquidated until 2030, at which time
it would be donated to a charity he’d selected. Marvin might reasonably
have selected the year 2030 so his children could continue farming his
land until they neared a typical retirement age. The conservator’s
inclusion of the 2030 lease term suggests consistency with, not
contradiction of, Marvin’s wishes, and we again find no breach of fiduciary
duty on this ground. See Iowa Code § 633.644 (authorizing orders in a
conservatorship that preserve a living ward’s testamentary intent
expressed in a prior will); see also id. §§ 633.641(2) (2020) (conservators
when investing or selecting property for distribution “shall consider any
estate plan or other donative, nominative, or appointive instrument of the
protected person”) .670 (conservators in managing estate assets must take
into account “the protected person’s preference, values, and prior
directions to the extent known to, reasonably ascertainable”).
Marvin’s interactions with the two farm management companies
that led to a proposal that included a $25-per-acre discount for family
members doesn’t dictate a different result. The lack of written leases,
coupled with the fact one set of family members didn’t know the rental
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rates that Marvin provided to others, leaves us without certainty of the
amount of discount Marvin actually provided to each of his family
members. The farm management company interactions suggest Marvin
did, in fact, provide discounts to family tenants, contrary to the thrust of
Mark’s testimony otherwise. And Marvin, we mustn’t forget, elected not to
accept the farm management company’s proposal with its $25-per-acre
discount. The farm management company interactions prove neither that
Marvin’s past practice involved discounts of $25 per acre nor that his
future wish involved discounts in that amount.
Michael, Mark, and the court visitor further argue we should find a
breach of fiduciary duty nonetheless because the conservator made
statements during the course of the proceedings below suggesting it
admitted it had breached its fiduciary duties by entering into the family
leases. But reading the record in full, we find the conservator more
accurately poses questions as opposed to concessions. The conservator’s
motion asked the court to determine whether the conservator breached its
duties by relying on what Michael and Mark later claimed were
misrepresentations, which was the initial step (and initial question) the
district court needed to address. We find no breach of fiduciary duty based
on this argument.
Even without a breach of the conservator’s fiduciary duty, Michael,
Mark, and the court visitor argue that the brothers’ misrepresentations in
the family council’s recommendation (attached to the court-approved
family settlement agreement) misled the district court and caused the
court to authorize the family leases under false pretenses. The district
court, they argue, thus properly exercised its equitable powers to protect
the ward through reforming the leases under an inherent authority to
protect the ward.
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But the court generally protects a ward in a conservatorship not
through exercising some unrestrained equitable power of its own but
through exercising control over the conservator. See, e.g., Iowa Code
§§ 633.641 (2017) (prescribing the duties of a conservator), .668
(prescribing when a conservator may make gifts), .670 (prescribing the
reporting duties of a conservator). The Iowa Code makes most significant
actions by conservators subject to prior authorization from the court. Id.§ 633.647(1)–(8). The specific prior authorization requirement reveals
where the legislature sought to place the court’s oversight function: before
the conservator acts.
The logic of a pre-authorization focus needs little exposition, as we’ve
long held that once an action is completed, a conservator’s action binds a
ward in the same way any legally competent person may bind himself. See
Kowalke v. Evernham, 210 Iowa 1270, 1278, 232 N.W. 670, 674 (1930)
(“When duly authorized, a guardian, without becoming personally liable
himself, may bind the ward’s estate for an obligation.”); cf. In re Est. of
Harker, 113 Iowa 584, 588, 85 N.W. 786, 787 (1901). Requiring specific
prior authorization for conservator action appears throughout the Iowa
Code’s conservatorship provisions; after-the-fact judicial reformation of
preapproved conservator action appears nowhere in these provisions.
The court visitor also cites to section 633.10 as granting the district
court power to modify contracts a conservator enters into on a ward’s
behalf. But that statute grants the court no such power. Section 633.10
is a jurisdictional statute. See Iowa Code § 633.10 (titled “Jurisdiction”).
It states that “the district court sitting in probate shall have jurisdiction of
. . . [c]onservatorships and guardianships,” including “the administration,
settlement and closing of conservatorships.” Id. § 633.10(3). Yet the
district court’s jurisdiction over the administration of an estate does not,
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without more, permit the court to rewrite contracts that it previously
authorized the conservator to enter into and where the conservator
breached no fiduciary duty to the ward.
Parties seeking to set aside a written instrument affecting real estate
bear the burden to establish their right to relief by clear, satisfactory, and
convincing proof. Smith, 325 N.W.2d at 93. Reformation of written
instruments generally requires proof “of fraud, deceit, duress, or mutual
mistake.” Iowa R. App. P. 6.904(3)(k); see also Kufer v. Carson, 230 N.W.2d
500, 504 (Iowa 1975). In our de novo review, as to the Wheatleys’ actions
surrounding the leases, we find none of these defects. Marvin’s sons and
court visitor thus fail to meet their heightened burden of proof to reform
the Wheatleys’ leases under this argument.
Michael, Mark, and the court visitor raise a further argument: Even
if the leases were properly authorized, the conservator failed to seek and
receive authorization for what must be considered gifts to Marvin’s family
members by virtue of the discounts contained in the leases. As a result,
they argue, the conservator would have breached its fiduciary duty to
Marvin and the district court would have been empowered to rescind the
gifts.
Iowa Code § 633.668 provides that “[f]or good cause shown and
under order of court, a conservator may make gifts on behalf of the ward
out of the assets under a conservatorship to persons . . . to whom or to
which such gifts were regularly made prior to the commencement of the
conservatorship.” We’ve never previously addressed whether, when a
conservator enters into a lease, a discounted rental rate constitutes a “gift”
that brings it within the restrictions on the conservator’s powers to make
gifts. And “gift” isn’t defined in chapter 633.
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Yet even if we were to determine the discounts in the leases
constituted “gifts” to the tenants, the family settlement agreement (which
included the family council’s recommendation of the discount), coupled
with the district court’s June 2018 order authorizing the conservator to
enter into farm leases, satisfies the legal requirements of Iowa Code section
633.668 as “regularly made prior to the commencement of the
conservatorship.” The district court disagreed not with the fact Marvin
had previously provided discounts to his family members but merely the
amount of the per-acre discount ($40 versus $25). We find the evidence
supports the $40-per-acre discount in the Wheatleys’ leases (as previously
advanced by the entire family council, the guardian ad litem, and the
conservator, and authorized by the court) and thus find the discounts were
regularly made prior to the conservator’s appointment as required by the
statute.
III.
We thus affirm the court of appeals’ ruling reversing the district
court’s order insofar as it modifies the rent rates, duration, and for-profit
subleasing rights in the Wheatleys’ leases. “[W]hen we grant further
review, we have discretion to let the court of appeals decision stand on
specific issues,” State v. Swift, 955 N.W.2d 876, 885 (Iowa 2021), and we
do so on the court of appeals’ determinations concerning the Chappel
Farm issue. We otherwise affirm the district court’s ruling in its other
determinations.
DECISION OF THE COURT OF APPEALS AFFIRMED; DISTRICT
COURT JUDGMENT AFFIRMED IN PART AND REVERSED IN PART.
All justices join this opinion. Waterman, J., files a special
concurrence.
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#18–1235, Guardianship & Conservatorship of Jorgensen
WATERMAN, Justice (concurring specially).
I join the court’s opinion but write separately to emphasize that
today’s fact-bound decision should not be interpreted as weakening the
statutory requirement for district court approval of gifts that a conservator
makes on behalf of a ward from the assets of the conservatorship.
The governing provision of the probate code provides,
For good cause shown and under order of court, a conservator
may make gifts on behalf of the ward out of the assets under
a conservatorship to persons or religious, educational,
scientific, charitable, or other nonprofit organizations to
whom or to which such gifts were regularly made prior to the
commencement of the conservatorship, or on a showing to the
court that such gifts would benefit the ward or the ward’s
estate from the standpoint of income, gift, estate or
inheritance taxes. The making of gifts out of the assets must
not foreseeably impair the ability to provide adequately for the
best interests of the ward.
Iowa Code § 633.668 (2017). The ward in this case, Marvin Jorgensen,
owned 18,000 acres of Iowa farmland. Before his stroke and resulting
conservatorship, he had a longstanding practice of renting land to his
children at discounted rates. That practice continued during the
conservatorship. In my view, these below-market leases constitute gifts.
See, e.g., Wineman v. CIR, 79 T.C.M. (CCH) 2189, 2000 WL 839962, at *10
(2000) (holding that “there is no dispute that the below-market rent is a
taxable gift”). Yet the discounted leases continued a practice “regularly
made prior to the commencement of the conservatorship” as required
under Iowa Code section 633.668. Given the size of Jorgensen’s estate,
the leases at issue would not “impair the ability to provide adequately for
the best interests of the ward”—another requirement for court approval of
a gift. Iowa Code § 633.668; see also In re Brice’s Guardianship, 233 Iowa
183, 184, 189–90, 8 N.W.2d 576, 577, 580 (1943) (cautioning that
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“payments to one holding no legal obligation against the [ward] should not
be authorized unless adequate provision has first been made for the ward”
while affirming monthly payments to ward’s nephew when “it is certain
that neither the ward nor his large estate will ever suffer because of these
comparatively small payments”).
The district court previously approved the Jorgensen Family
Settlement Agreement providing for such discounted leases. The district
court’s ruling under review in this appeal modified the leases on other
grounds, not because of any alleged failure to comply with the court
approval requirements of section 633.668. Given the present posture of
the case and our de novo review, I agree with our court’s determination
that in light of the family settlement agreement, the parties to this appeal
have failed to show the leases should be set aside or modified. However,
the ultimate recipient of the extensive land holdings and beneficiary under
Jorgensen’s estate, the Mayo Clinic, was not a party to the family
settlement agreement and was denied leave to intervene in this appeal
after the court of appeals decision restored the leases. The Mayo Clinic
has not yet had its day in court on its own challenge to the lease terms as
gifts lacking the requisite court approval. Whether the Mayo Clinic’s
challenge has merit is a question for another day in district court.