Linda Cooper v. Lynnette S. Jordan, Trustee of the Dorothy L. Demean Revocable Trust ( 2015 )

IN THE COURT OF APPEALS OF IOWA
No. 14-0157
Filed April 22, 2015
LINDA COOPER,
Plaintiff-Appellant,
vs.
LYNNETTE S. JORDAN, Trustee of
the Dorothy L. DeMean Revocable
Trust,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Jones County, Robert Sosalla,
Judge.
Beneficiary of trust appeals adverse judgment in action against trustee.
AFFIRMED IN PART AND REVERSED IN PART.
Robert S. Hatala of Simmons, Perrine, Moyer & Bergman, P.L.C., Cedar
Rapids, for appellant.
Robert N. Downer and Dennis J. Mitchell of Meardon, Sueppel & Downer,
P.L.C., Iowa City, for appellee.
Heard by Vogel, P.J., McDonald, J., and Scott, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2015).
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MCDONALD, J.
Linda Cooper sued her sibling Lynnette (Sue) Jordan, successor trustee of
their mother’s trust, asserting claims for negligence and breach of trust. Linda
alleged Sue failed to keep in good and habitable condition two houses on the
farmstead Linda received from the trust. Linda also alleged Sue engaged in self-
dealing by using trust funds to enhance the value of the property Sue received
from the trust. Following a bench trial, the district court entered judgment in favor
of Sue and dismissed Linda’s petition. The district court denied Linda’s request
for costs and expenses but granted Sue’s request for the same. Linda timely
filed this appeal.
I.
At the time of her death on August 26, 2009, Dorothy DeMean was trustee
of the Dorothy L. DeMean Revocable Trust. Dorothy’s daughter Sue was
designated as the successor trustee. The trust instrument provided the trust
property was to be distributed in equal one-quarter shares per stirpes to
Dorothy’s four surviving children—Sue, Gene, Linda, and Leann. The trust
corpus included four separate farms in Jones and Linn Counties, which the family
referred to as the Home Farm, the Wyoming Farm, the Martelle Farm, and the
Castle Grove Farm. The siblings agreed each was to receive one of the family
farms with the understanding that equalization payments were to be made
between and among them to reconcile the difference in value among the farms.
The four farms were transferred out of the trust to the four beneficiaries as
tenants in common on February 18, 2011, eighteen months after Dorothy’s
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death. The exact cause or causes and the person or persons responsible for the
delay between the time of Dorothy’s death and the time of transfer are disputed,
but the delay generally arose out of conflict between Linda and the rest of the
family with respect to the farm properties and the terms and conditions under
which her son could farm one or more of the properties. Regardless of the exact
nature of the dispute, on April 8, 2011, following a family agreement to partition
the farms, the farms were deeded to the four siblings individually. Linda was
deeded the Home Farm.
The Home Farm comprised one main house, where Dorothy lived until her
death, and a smaller house. Linda’s family entered the main house on the Home
Farm on April 9. They claimed the house was in a state of disrepair. Linda
testified there was moisture and water in the basement. She testified the
basement ceiling tiles had fallen down. She testified there was mold in the
house. She testified raccoons had come into the house through the roof or a
vent cover on the roof. Although no raccoons were found in the home, there
were raccoon feces in the home. The water to the home had been shut off
during the preceding winter. When Linda turned the water on, she discovered
some of the water lines were broken. Linda claimed the smaller home on the
Home Farm was in a similar state of disrepair. Linda then filed this suit for
damages against the trustee.
II.
Actions for a breach of trust by a trustee are brought in a court of equity;
review is de novo. See Iowa Code § 633A.4501 (2011); Iowa R. App. P. 6.907;
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In re Trust No. T-1 of Trimble, 826 N.W.2d 474, 482 (Iowa 2013). We give
weight to the district court’s factual findings, especially concerning the credibility
of witnesses, but are not bound by them. See Trimble, 826 N.W.2d at 482.
III.
Linda contends the district court erred in concluding she had not proved
her claim regarding Sue’s alleged failure to maintain the Home Farm. “A trustee
shall administer the trust with the reasonable care, skill, and caution as a prudent
person would, by considering the purposes, terms, distribution requirements, and
other circumstances of the trust.” Iowa Code § 633A.4203. “A trustee shall take
reasonable steps under the circumstances to take control of and to safeguard the
trust property unless it is in the best interests of the trust to abandon or refuse
acceptance of the property.” Iowa Code § 633A.4209. It is ordinarily the duty of
the trustee who is entrusted with the control and management of a house or
other buildings to make such repairs as necessary to preserve it. See
Restatement (Second) of Trusts § 176, cmt. b, illus. 4. “A violation by a trustee
of a duty the trustee owes a beneficiary is a breach of trust.” Iowa Code
§ 633A.450(1). “Except as provided in Section 633A.421(3), to remedy a breach
of trust which has occurred or may occur, a beneficiary or co-trustee of the trust
may request the court to do any of the following . . . [c]ompel the trustee to
redress a breach of trust by payment of money or otherwise.” Iowa Code
§ 633A.4502(c). “A trustee is personally liable for obligations arising from
ownership or control of trust property, . . . and for torts committed in the course of
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administering a trust only if the trustee is personally at fault.” Iowa Code
§ 633A.4601(2).
The trust instrument here contains a limitation of liability. As a general
rule, a trustor “may expand, restrict, eliminate, or otherwise alter the duties”
prescribed in chapter 633A. See Iowa Code § 633A.4201(2). Specifically, a trust
instrument may relieve a trustee of liability for breach of trust except if “committed
intentionally, with gross negligence, in bad faith, or with reckless indifference to
the interest of the beneficiary, or for any profit derived by the trustee from the
breach.” Iowa Code § 633A.4505. The district court interpreted the trust
language to limit the trustee’s liability to conduct rising to the level of gross
negligence. Linda contends this was error. We conclude the construction of the
trust instrument is immaterial under the evidence adduced: Linda failed to prove
negligence, let alone gross negligence, and failed to prove the trustee’s conduct
caused damage to the Home Farm properties.
There is a dearth of evidence supporting the conclusion Sue’s conduct
was negligent or grossly negligent. Indeed, other than the mere fact of damage
to the Home Farm properties, which we discuss below, Linda has not identified
with any specificity the allegedly negligent conduct. Sue’s journal of activities as
trustee showed she was actively engaged in the maintenance of the trust
property, including the Home Farm. Sue was in the main house frequently
throughout her term as trustee. She went to the Home Farm almost daily
through 2010 to tend to different matters and once or twice per week in 2011
before the property ultimately was transferred out of the trust. She checked the
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humidifiers in the basement of the home. Sue invited the other trust beneficiaries
to help clean and maintain the house, to take personal property, and to express
any concerns regarding the administration of the trust. In the fall of 2009, after
Dorothy’s death, Linda, Sue, and Leann worked together to clean the main house
on the Home Farm. Linda stopped coming to the home and stopped assisting
with clean up around Thanksgiving 2009. However, Sue and Leann continued to
work in the house into the summer of 2010, sending approximately twenty-five
boxes of items to Goodwill and several pickup loads plus 180 bags of garbage to
the dump. Sue hired an auctioneer to dispose of salable items. Sue paid the
taxes and other bills related to the Home Farm. She used trust funds to repair
the driveway to the Home Farm. The attorney working with the trust noted Sue
was one of the best trustees he had ever worked with, rating her a 9.5 on a 1 to
10 scale. We thus conclude Linda failed to prove Sue’s actions as trustee were
negligent or grossly negligent.
We also conclude Linda failed to prove Sue’s conduct caused any
damage to the Home Farm properties. The Home Farm was transferred out of
the trust to the four beneficiaries as tenants in common on February 18, 2011.
Sue’s fiduciary duties with respect to that property thus terminated, and the four
siblings had joint responsibility for the maintenance of the farm properties after
that date. See Lovrien v. Fitzgerald, 66 N.W.2d 458, 462 (1954) (stating that
cotenants have reciprocal duty to protect the estate held in common). Linda thus
was required to prove the alleged damage to the properties occurred sometime
after Dorothy’s death and prior to February 18, 2011.
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At the time of Dorothy’s death, the main house on the Home Farm was not
in good condition. Dorothy and her former husband were frugal, and the main
house reflected their frugality. The original building was more than 100 years
old. Over time, the family made several additions to the property, including the
addition of repurposed old corn cribs to expand the space. The manner of
construction of the additions left portions of the home out of plumb. Because of
the way the home was built, some of the water lines were susceptible to freezing.
For years, water penetrated the home, causing mold to grow in the basement
and the main level of the house. Moisture in the basement caused tiles in the
drop ceiling to absorb water, sag, and fall. In 2008, standing water in the
basement soaked the carpet and caused damage to one wall. There was mold
in the family room on the main floor that was hidden from view by house plants
and discovered only after Dorothy’s passing. Close to the time the Home Farm
was transferred from the trust to the beneficiaries, there was no indication of any
property damage beyond what existed at the time of Dorothy’s death. Family
members who were in the main house in December 2010 and January 2011
testified the house was in about the same condition then as when Dorothy died in
August 2009, with the exception of some mess left by the auction company. The
family members did not see animal damage or water damage to the house at that
time.
At the time of Dorothy’s death, the second home was in poor condition.
The second home was a trailer with some additions. Dorothy had turned off
water to the house because the water line kept breaking. Dorothy’s son testified
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that the secondary house had no value at the time of Dorothy’s death. There
was no evidence to the contrary.
On de novo review, we conclude the evidence does not establish when
the alleged damage occurred. Neither of the properties was in good condition at
the time of Dorothy’s passing. Sue expended time and effort in maintaining the
properties while serving as trustee. The witnesses who were in the properties
close to the time the Home Farm was transferred to the siblings as tenants in
common observed no damage to the properties above and beyond the condition
they were in at the time of Dorothy’s death. It is likely the additional damage
occurred after the transfer of the property to the siblings as tenants in common.
Linda had access to the home after this time, but she took no action to enter the
property at the time of transfer or otherwise protect the condition of the home
prior to it being deeded to her.
It was Linda’s burden to prove Sue breached her fiduciary duty and that
any such breach caused damage. Linda has not identified the specific conduct
she contends constitutes a breach of duty. The evidence showed Sue acted with
reasonable care, skill, and caution to take control of and safeguard the trust
property. Linda also failed to establish when the property damage to the Home
Farm occurred and thus failed to establish any causal link between the alleged
breach of duty and the damage to the property. Accordingly, the district court did
not err in entering judgment in favor of Sue and adverse to Linda.
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IV.
The district court determined Sue was entitled to recover costs and
expenses incurred in defending against Linda’s suit. The district court awarded
attorneys’ fees in the amount of $38,606.00 and other costs and expenses in the
amount of $1397.02, for a total award of $40,003.02. Linda first contends the
district court should not have imposed the costs and expenses against her.
A district court, “as justice and equity may require,” has discretion to
award reasonable costs and expenses, including attorney fees, for litigation
expenses incurred in the administration of a trust. See Iowa Code § 633A.4507.
Our supreme court has interpreted the phrase “justice and equity” to encompass
two determinations: the initial determination of whether a party is entitled to
recover costs and expenses, and, if so, the secondary determination of the
amount of the costs and expenses. Trimble, 826 N.W.2d at 491. The Trimble
court adopted nonexclusive criteria in interpreting what justice and equity require.
See id. Those include
(a) reasonableness of the parties’ claims, contentions, or defenses;
(b) unnecessarily prolonging litigation; (c) relative ability to bear the
financial burden; (d) result obtained by the litigation and prevailing
party concepts; and (e) whether a party has acted in bad faith,
vexatiously, wantonly, or for oppressive reasons in the bringing or
conduct of the litigation.
Id. (quoting Atwood v. Atwood, 25 P.3d 936, 947 (Okla. Civ. App. 2001)). The
decision to award fees is discretionary, In re Estate of Frye, No. 13-1170, 2014
WL 3511827, at *14 (Iowa Ct. App. Jul. 16, 2014), and we review the district
court’s award for an abuse of discretion. See Trimble, 826 N.W.2d at 482.
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In determining whether costs and expenses should be awarded, the
district court analyzed each of the Trimble factors. With respect to the first
factor—the reasonableness of the parties’ positions—the district court noted the
failure of proof of negligence and causation. Concerning the second factor, the
district court concluded both sides proceeded with due diligence. Regarding the
third factor—ability to bear the financial burden—the district court concluded
Linda was able to bear the burden because she inherited a farm valued in 2009
at $1.3 million dollars, which had only appreciated in value since the time of
valuation. With respect to the final factor, the court noted the evidence showed
Linda felt wronged by her mother’s not naming Linda the trustee and that when a
conflict arose, it was of Linda’s making. Nonetheless, the district court concluded
Linda’s motivation in bringing suit was a “sincere feeling” that she was wronged.
After weighing all the factors, the court found it appropriate for Linda to pay Sue’s
attorney fees and costs. After reviewing the Trimble factors, we cannot conclude
the district court abused its discretion in determining costs and expenses should
have been assessed against Linda. See id. at 491.
Linda also challenges the amount of the costs and expenses awarded.
“An applicant for attorney fees has the burden to prove that the services were
reasonably necessary and that the charges were reasonable in amount.” City of
Riverdale v. Diercks, 806 N.W.2d 643, 659 (Iowa 2011). The district court should
consider several factors, including “the time necessarily spent, the nature and
extent of the service, the amount involved, the difficulty of handling and
importance of the issues, the responsibility assumed and results obtained, the
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standing and experience of the attorney in the profession, and the customary
charges for similar service.” Id. “The district court is considered an expert in
what constitutes a reasonable attorney fee, and we afford it wide discretion in
making its decision.” GreatAmerica Leasing Corp. v. Cool Comfort Air
Conditioning & Refrigeration, Inc., 691 N.W.2d 730, 733 (Iowa 2005).
We conclude the amount of the costs and expense award was within the
district court’s discretion with one exception. The district court taxed as costs
deposition expenses for depositions not used at trial. As a general rule,
deposition expenses are not taxable as costs unless the deposition testimony is
offered and admitted at trial. See Iowa Rule of Civil Procedure 1.716. Here, the
district court concluded the statutory provision allowing for reimbursement of
“costs and expenses” was broader than that provided for by rule 1.716. In similar
circumstances, the supreme court has “construed ‘all costs’ language in other
fee-shifting statutes to limit reimbursement for litigation expenses to those
allowed as taxable court costs.” City of Riverdale, 806 N.W.2d at 659-60 (citing
cases). We see no textual basis or other reason unique to section 633A.4507 to
deviate from the supreme court’s past practice. We also reject Sue’s argument
that costs should include the deposition expenses because the depositions were
useful in preparing for trial. See City of Ottumwa v. Taylor, 102 N.W.2d 376, 380
(1960) (rejecting argument that “all costs” in section 472.33 includes “all
expenses reasonably necessary in preparation and trial of the appeal”).
Accordingly we find the district court abused its discretion in ordering payment of
costs and expenses related to deposition expenses in the amount of $1109.40
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and reverse that portion of the award. See Carson v. Rothfolk, No. 12-1021,
2013 WL 4009790, at *7 (Iowa Ct. App. Aug. 7, 2013) (reversing district court
award of deposition costs where only de minimis use of deposition at trial).
V.
For the reasons set forth above, we affirm the judgment of the district
court in part, and we reverse in part.
AFFIRMED IN PART AND REVERSED IN PART.