in-the-matter-of-the-estate-of-angel-ibarra-jr-bruce-p-bickel-as ( 2015 )

IN THE COURT OF APPEALS OF IOWA
No. 13-0867
Filed December 9, 2015
IN THE MATTER OF THE ESTATE OF
ANGEL IBARRA JR., Deceased
BRUCE P. BICKEL, as Administrator of the
Estate of Angel Ibarra Jr., Deceased, BRUCE
P. BICKEL, as Administrator Individually, DARIO
ZAFFARANO, as Attorney for Administrator
and MIA IBARRA and MARIAH IBARRA,
Intervenors-Appellants/Cross-Appellees,
vs.
ANGEL RAY IBARRA a/k/a ANGEL IBARRA III
and IMT INSURANCE COMPANY,
Respondents-Appellees/Cross-Appellants.
________________________________________________________________
Appeal from the Iowa District Court for Story County, James C. Ellefson,
Judge.
The administrator of the estate, his attorney, and two minor heirs appeal
the district court order concerning the disposition of estate assets. AFFIRMED
AS MODIFIED ON APPEAL; AFFIRMED ON CROSS-APPEAL.
Dario Zaffarano of White, Zaffarano & Skog, L.L.P., Ames, for appellants
Estate of Angel Ibarra Jr. and Bruce Bickel.
Mark J. Olberding of Olberding Law Office, Nevada, attorney and guardian
ad litem for appellants Mia Ibarra and Maria Ibarra.
2
F. Richard Lyford of Dickinson, Mackaman, Tyler & Hagen, P.C., Des
Moines, for appellee IMT Insurance Company.
John G. Martens of Martens Law Office, Ames, for appellee Angel Ibarra.
Heard by Doyle, P.J., Bower, J., and Miller, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2015).
3
BOWER, Judge.
The administrator of the estate, his attorney (the estate), and two minor
heirs appeal the district court order finding the summary procedure in Iowa Code
section 633.186(2) (2013) should have been followed by the administrator of the
estate and his attorney; the breach of fiduciary duty by the original administrator
of the estate does not justify an award of additional extraordinary fees; the 401(k)
account funds were properly excluded from the estate for the purposes
calculating fees; the “release and waiver” signed by Divina Ibarra acted as a
disclaimer, but only to her half interest in the life insurance proceeds. On cross-
appeal, IMT Insurance claims its liability to the estate cannot exceed the total
amount the original administrator took from the estate. We affirm the district
court’s order on these issues, except we modify the order to include the 401(k)
account funds in the estate for the purpose of calculating fees.
I. BACKGROUND FACTS AND PROCEEDINGS
We incorporate the district court’s statement of the factual background:
Angel Ibarra Jr., was killed in an automobile collision on May
17, 2006. He was divorced and left two adult children: Angel Ray
Ibarra and Divina Ibarra. The Protective Life Insurance Company
issued a check payable to the estate of Angel Ibarra Jr., in the
amount of $32,500.80 on account of Mr. Ibarra’s death. When
Angel Ray Ibarra attempted to negotiate that check at U.S. Bank in
Ames, he learned that an estate would need to be opened. An
employee of the bank suggested that Dario Zaffarano would help
him to open his father’s estate.
Angel Ray Ibarra was appointed administrator of his father’s
estate on September 18, 2006. IMT Insurance Company posted a
$50,000 court officer’s bond on September 25, 2006. Mr. Zaffarano
was designated as the attorney for the estate. Although the notice
to creditors was dated September 26, 2006, the publication of that
notice did not occur until over a year later, on October 30, 2007,
and November 6, 2007. The affidavit of publication was filed on
4
February 11, 2008. No explanation is offered for the 13-month
delay in publication.
The check from Protective Life Insurance Company was
deposited in the U.S. Bank in Ames on September 27, 2006, to an
account opened for the estate of Angel Ibarra Jr. At some point,
Angel Ray Ibarra learned that his sister, Divina Ibarra, was the
beneficiary of a life insurance policy on their father in the amount of
$50,000. Angel Ray Ibarra then concluded, completely without
justification, that he should receive the proceeds of the Protective
Life Insurance policy. Mr. Zaffarano thought that he was being
diligent in holding the checks to the estate account in his office. He
apparently did not realize that Mr. Ibarra could access the account
by other means.
The deposits to the account were the insurance proceeds of
$32,500.80, and four earned interest deposits totaling $2.32, for
total deposits of $32,503.12.
There was one legitimate withdrawal from the account.
Check No. 501, in the amount of $350, paid the IMT bond premium.
That check was honored by the bank on October 11, 2006.
Mr. Ibarra began making improper internet transfers to his
own account on October 4, 2006, with a transfer of $2000. From
October 4, 2006, through January 8, 2007, Mr. Ibarra made 14
internet transfers in the total amount of $25,793.
Mr. Ibarra made two customer withdrawals on December 6,
2006, and January 22, 2007, in a total amount of $4800. He made
his first ATM withdrawal on December 11, 2006. From December
11, 2006, through January 26, 2007, Mr. Ibarra made nine ATM
withdrawals in the total amount of $1580. His misappropriations
totaled $32,173.00. Although the record contains several
references to a total embezzlement amount of $32,500.80,
including several places where Mr. Ibarra himself uses that number,
the correct amount is $32,173.00. This is the amount the
successor administrator uses in his statement of facts (brief filed
March 15, Statement of Facts, second paragraph), and that is the
amount this Court will use.
His January 26, 2007, ATM transaction in the amount of
$140 was Mr. Ibarra’s final withdrawal. That ATM transaction
overdrew the estate checking account by $19.88. Four days later
the bank began assessing daily overdraft fees that eventually
totaled $304. On March 13, 2007, the bank charged a force-closed
account fee of $30, bringing the account to a total negative balance
of $353.88. That was comprised of $334 in bank fees and the
original $19.88 overdraft caused by the January 26 ATM
transaction. Also on March 13, the bank charged off the total
overdrawn amount of $353.88 and closed the account with an
ending balance of zero.
5
Mr. Ibarra also failed to file the Report and Inventory in this
estate. On June 1, 2007, Mr. Zaffarano filed an Application for
Hearing to Show Cause Why Administrator Should Not Be
Removed. That application was based entirely on Mr. Ibarra's
failure to attend to the Report and Inventory and his failure to
communicate with Mr. Zaffarano about the estate, because Mr.
Zaffarano did not yet know about the thefts. Mr. Ibarra failed to
appear at the hearing on Mr. Zaffarano’s application. The court
entered an order noting that Mr. Ibarra did not appear, but did not
immediately remove Mr. Ibarra. Mr. Zaffarano signed the Report
and Inventory and filed it on November 1, 2007. Again, this is
roughly contemporaneous with the publication of the notice to
creditors that was dated 13 months earlier.
Mr. Zaffarano was not initially aware of the checking account
activity because the bank statements went to Mr. Ibarra’s home. In
early June of 2007, Mr. Zaffarano wrote to the U.S. Bank to obtain
copies of the bank statements. He first learned of Mr. Ibarra’s
misappropriations when he received those statements. Mr.
Zaffarano reported Mr. Ibarra’s conduct to IMT Insurance
Company. Mr. Zaffarano was aware by no later than October 23,
2007, that Divina Ibarra was willing to give up her share of her
father’s estate in order to minimize the estate’s claim against her
brother.
The inventory signed by Mr. Zaffarano showed a gross
estate for Federal Estate Tax purposes of $87,910 and a total value
for Iowa probate purposes of $37,910. The difference was the face
value of the life insurance policy that named Divina Ibarra as the
beneficiary.
On February 7, 2008, Mr. Zaffarano filed an Application to
Remove Current Administrator and To Appoint Successor
Administrator. That application repeated the June 1 allegations of
lack of communication and failure to file the inventory. The
February application also alleged, for the first time in a filing with
the court, the history of improper transfers from the estate bank
account. Mr. Zaffarano proposed that Attorney Bruce P. Bickel be
appointed as the successor administrator. The application
proposed a bond for Mr. Bickel of $11,000.
The court appointed Mr. Bickel as successor personal
representative on that same date, February 7, 2008, and set his
bond at the requested amount of $11,000. In February and March
of 2008, the successor administrator and his attorney mailed and
published notices of the successor administrator’s appointment,
disallowed the claim of a credit card company, and obtained
approval of their fees for ordinary services and for reimbursement
of their expenses. On November 10, 2008, Mr. Lyford filed a
request for notice. Nothing of substance happened in the court file
6
for the next two and a half years. In fact, there was a nearly 39-
month gap between the successive actions of the administrator—
his application for fees on March 26, 2008, and his application for
fees on June 14, 2011. The fee claims show that there was activity
behind the scenes, but the three-year time limit for closing the
estate expired on November 6, 2010, without any request for an
extension. Iowa Code § 633.473.
On October 23, 2007, IMT, through Mr. Bednarz, offered to
resolve the issues relating to the bond and Mr. Ibarra’s defalcation
by paying the net amount that was owed after taking credit for the
amount that Angel Ray Ibarra would have received as his
inheritance after the expenses of the estate had been paid. Mr.
Zaffarano’s fees for extraordinary services as of October 23, 2007,
would have been $1425. IMT renewed its offer several times.
Mr. Bickel and Mr. Zaffarano did not resolve the theft issue
by use of the procedure provided for in Iowa Code section
633.186(2). This subsection provides for a summary enforcement
of the bond within the administration of the estate. Instead, the
successor administrator and his attorney chose to file suit pursuant
to Iowa Code section 633 186(3). That subsection applies if the
estate has already been distributed or if the procedure under
633.186(2) is inadequate. The Court is unable to find any basis for
concluding that the summary procedure under 633.186(2) was not
adequate.
The petition against Angel Ray Ibarra was filed on June 24,
2011, more than three years and four months after Mr. Bickel’s
appointment as a successor representative. Mr. Bickel and Mr.
Zaffarano explained that although drafting of the petition
commenced in 2009, its filing was postponed because they were
unable to locate Mr. Ibarra and wanted to be certain that they would
be able to serve him within the 90 days after filing that is permitted
by Iowa R. Civ. P. 1.302(5). Even after the delay in filing the
petition, it took 14 months from the time of the filing of the petition in
June 2011 until Mr. Ibarra was served on August 28, 2012.
In the petition, Bickel alleged: Angel breached his fiduciary duty by
diverting his father’s 401(k) assets to himself, by diverting the proceeds from his
father’s life insurance policy to himself, by diverting the balance of his father’s
savings account to himself, and by causing the estate to be assessed penalties
and interest due to the untimely payment of state and federal taxes. Bickel and
Zaffarano requested “delinquency service charges” due to the delay caused by
7
Angel’s breach, and also requested “additional extraordinary fees and costs” for
the proceedings to remove Angel as administrator and for the proceedings
necessary to obtain a judgment against Angel for the damages to the estate.
On July 5, IMT filed an answer and cross appeal against Angel. IMT
claimed since November 2008, it has been “prepared to participate in any effort
to resolve the matter pending in this estate.” Angel had filed an answer in which
he admitted to improperly removing assets from the estate account. He noted,
as the sole beneficiary of the 401(k) account, the funds were properly paid to
him. Concerning the improper removal of the life insurance funds, Angel
requested a judgment only for the amount necessary to pay income taxes, court
costs, and attorney and administrator fees relating to the estate. Angel and
Divina are the only beneficiaries of the life insurance policy and Divina waived
any amount she was due with a signed “release and waiver.”
The trial was held on March 15, 2013. Relevant to this appeal, the district
court found Divina’s waiver of her share of the insurance proceeds acted as a
disclaimer and therefore her children were entitled to her disclaimed share. The
court found the summary procedure in Iowa Code section 633.186(2) should
have been followed by the administrator and attorney for the estate. The court
decreased the administrator and attorney’s request of fees and expenses from
$39,454.49 to $7,583.81, finding the excess amount to be unreasonable and
unnecessary. Finally, the court held the estate “shall have judgment against IMT
Insurance Company for the same amount as the final judgment against Angel
Ray Ibarra. The liability to the estate of Angel Ray Ibarra will be primary, and the
8
liability to the estate of IMT Insurance Company will be secondary for purposes
of fixing the ultimate liability.”
The estate appeals and IMT cross-appeals the court’s ruling.
II. STANDARD OF REVIEW
Our review in equity cases is de novo. Iowa Code § 633.33; Iowa R. App.
P. 6.907; Matter of Estate of Wulf, 526 N.W.2d 154, 156 (Iowa 1994). In equity
cases, we are not bound by the district court’s factual findings, but we give them
weight, especially when considering the credibility of witnesses. Iowa R. App. P.
6.904(3)(g). The allowance of attorney fees in estate actions is left to the
considerable discretion of the trial court subject to appellate review. In re Estate
of Petersen, 570 N.W.2d 463, 465 (Iowa Ct. App. 1997); see also Wulf, 526
N.W.2d at 156 (reviewing a district court’s application of section 633.199 and
noting that “[w]e accord the trial court considerable discretion in taxing executor
attorney fees to estates”).
III. DISCUSSION
A. Iowa Code Section 633.186(2)
The estate claims it properly sought to obtain a judgment against Angel
before turning to the summary enforcement procedure in Iowa Code section
633.186(2). The meaning of section 633.186(2) is contested on appeal,
therefore we will engage in statutory interpretation to ascertain the legislature’s
intent. In doing so, we apply the well settled principles of statutory interpretation:
The purpose of statutory interpretation is to determine the
legislature’s intent. We give words their ordinary and common
meaning by considering the context within which they are used,
absent a statutory definition or an established meaning in the law.
9
We also consider the legislative history of a statute, including prior
enactments, when ascertaining legislative intent. When we
interpret a statute, we assess the statute in its entirety, not just
isolated words or phrases. We may not extend, enlarge, or
otherwise change the meaning of a statute under the guise of
construction.
Schaefer v. Putnam, 841 N.W.2d 68, 75 (Iowa 2013) (internal citations omitted).
Section 633.186(2) provides:
Subject to the provisions of subsection 3 hereof, the court
may, upon the breach of the obligation of the bond of a fiduciary,
after notice to the obligors on the bond and to such other persons
as the court directs, summarily determine the damages as a part of
the proceeding for the administration of the estate, and by
appropriate process enforce the collection thereof from those liable
on the bond. Such determination and enforcement may be made
by the court upon its own motion or upon application of a successor
fiduciary, or of any other interested person. The court may hear the
application at the time of settling the accounts of the defaulting
fiduciary or at such other time as the court may direct. Damages
shall be assessed on behalf of all interested persons and may be
paid over to the successor or other nondefaulting fiduciary and
distributed as other assets held by the fiduciary in the fiduciary’s
official capacity.
The district court found the estate should have used section 633.186(2) to
timely close the estate. The court noted:
The statute seems to contemplate proceeding against the
surety alone. It requires notice to the “obligors on the bond of a
fiduciary” specifically, and to “such other persons as the court
directs.” Iowa Code § 633.186(2). If the legislature intended to
require participation of the fiduciary, the statute would specifically
require notice to the fiduciary as well. . . .
If the administrator had proceeded against IMT under
section 633.186(2), the least favorable result likely, a judgment
against IMT for one-half of the amount stolen, would have collected
enough for the estate to have paid the taxes, interest and penalties,
the ordinary fees of the administrator and his attorney,
extraordinary fees and expenses less than those eventually allowed
for the attorney on October 3, 2011, an extraordinary fee for the
administrator in a reasonable but probably similar, smaller amount,
10
and the court costs, and left funds for distribution to Divina Ibarra
quite probably in a larger amount than will now be available.
The administrator seeks to justify the delay by contending
that the administrator had to go to trial to avoid the possibility that
Angel Ray Ibarra would disclaim his interest and his heirs would
somehow claim to have been shorted. If that theory is accurate, no
estate and no issue in any estate could ever be settled because
there would always be the possibility of a disclaimer hanging over
the personal representative’s head.
A proposal to close this estate on the basis of what could be
obtained under the bond could, and should, have been presented
to the court for a hearing on notice by no later than the end of 2009.
By obtaining approval of the proposed distribution after a hearing
on notice, the approval order would have been a final order, Iowa
Code § 633.36, and would have the same binding effect as an
order after trial. This estate could and should have been closed by
very early 2010 at the latest (and a year earlier than that would
probably have been a generous allowance of time) and IMT should
have been left to pursue Angel Ray Ibarra on its own time, at its
own expense, and with relatively little involvement of the estate and
no further expense to the estate.
Looking at the “ordinary and common meaning” of the words in section
633.186(2), there is no requirement a judgment must be obtained against the
principal (as the estate claims) before the “summary enforcement proceedings in
section 633.186(2) are available.” Even though section 633.186(2) lacks an
explicit requirement for a judgment, the estate points to In re Estate of Adams to
demonstrate that a judgment must first be obtained against the principal. 599
N.W.2d 707 (Iowa 1999).
In Estate of Adams, following the defalcation of the estate’s
executor/attorney (Jacobs), the successor executor filed an application for
damages against Jacobs and the surety pursuant to section 633.186(2). Id. at
708. Jacobs did not respond or resist the application. Id. The surety “agreed by
stipulation it would pay the estate the full amount of the bond plus interest in
11
exchange for a release and assignment of the claim against Jacobs.” Id. The
court adopted the stipulation and entered judgment against Jacobs. Id. On
appeal, Jacobs claimed he was denied procedural due process when judgment
was entered against him without allowing him the opportunity to be heard. Id.
He also claimed section 633.186(2) “only allows for summary determinations of
damages caused to the estate; therefore, the court was without power to
summarily determine whether he, as a bonded fiduciary, breached his
obligations.” Id. Jacobs thought the successor executor should have filed a
separate action against Jacobs. Id. In reversing the district court, our supreme
court reasoned:
Iowa Code section 633.186(2) clearly provides a summary
procedure for assessing liability against a surety, the assumption
being that the principal has been found liable. In the instant case,
the statute was used to summarily find the principal liable based on
the surety’s admission of liability. The statute is not written to be
applied in this manner and we find no legislative intent to do so.
Id. at 710–11.
In the present case, the district court noted:
Adams contains the following language: “Iowa Code section
633.186(2) clearly provides a summary procedure for assessing
liability against a surety, the assumption being that the principal has
been found liable.” (emphasis added). This italicized phrase does
seem to point toward a conclusion different than the one reached
here, and this Court is clearly bound to follow any statement of the
law made by the supreme court. The italicized phrase was not
necessary to the Adams decision. Restatement § 68[(2)]1 seems to
1
(2) When, in an action by the obligee against the secondary obligor to enforce the
secondary obligation, (i) a judgment is given in favor of the obligee and (ii) the secondary
obligor seeks recovery from the principal obligor pursuant to §§ 21–31, the principal
obligor is bound as to any determination of fact common to the two litigants if:
(a) the principal obligor was a party to the action against the secondary obligor;
or
12
suggest that suit may be maintained against the surety alone, as
does Ellyson v. Lord,[2] 99 N.W. 582, 588 (Iowa 1904).
We agree with the district court that our supreme court’s language in the
italicized quote above is dicta for the purposes of the Adams decision. However,
our supreme court’s sentiment on assuming the principal’s liability before
proceeding against a surety’s is not inapposite to the district court’s ruling and
this opinion. The assumption of liability can be defined by the bond agreement
between the principal and surety. See John W. Hinchey, Surety’s Performance
over Protest of Principal: Considerations and Risks, 22 Tort & Ins. L.J. 133, 134
(1986) (explaining the obligation of a surety to the obligee, “unless otherwise
provided by statute, the obligee may ignore the principal and call upon the surety
to perform the principal’s contract: ‘Although the surety’s obligation depends
upon a valid obligation of the principal, the surety may be sued immediately when
the principal becomes liable . . . on an obligation covered by the surety contract,
unless the surety contract or statute provides otherwise.’” (citation omitted)). The
court officer bond executed between IMT and Angel provides both parties are
“jointly and severally” bound for the payment of $50,000. The bond goes on to
state, “The Surety or Sureties on this bond shall be liable for all money or
(b) the principal obligor is charged with notice of the secondary obligation, and
the secondary obligor gave the principal obligor reasonable notice of the
obligee’s action against the secondary obligor and an opportunity to join in its
defense.
Restatement (Third) of Suretyship & Guaranty § 68 (1996)
2
In Ellyson, the court found the sureties were liable for interest on the penalty of the
bond from the time of the administrator’s breach, and the administrator had to account
for an amount exceeding the bond amount. Id. at 588. “In this state it has been held
that sureties on an additional bond of a guardian are liable for funds already
misappropriated, and not finally accounted for.” Id.
13
property that may come into the hands of the principal at any time during his
possession of said office, and shall be responsible for a default in the
performance of the Principal’s obligations and duties hereunder.” (emphasis
added).
Angel defaulted on the court officer bond when he absconded with the life
insurance funds at the end of January 2007. Angel’s default on his duties as
principal triggered IMT’s liability for the absconded funds. Angel’s liability can be
assumed and the successor administrator should have proceeded against IMT to
obtain a judgment or settlement (we believe there is a difference between
assumed liability and liability established through judicial action). Pursuant to the
holding in Adams, the judgment or settlement would solely be entered against
IMT. Adams, 599 N.W.2d at 710–11 (finding executor could not be found liable
through sureties admission of liability). IMT would receive a release and
assignment of the estate’s claim, and be left to pursue Angel for his default on
the court officer bond. IMT’s subsequent action against Angel would satisfy
Angel’s right to procedural due process on the issue of his liability.
In summary, given the clear and unambiguous language in Iowa Code
section 633.186(2), the joint and several liability established in the court officer
bond, and Angel’s clear default on his duties as administrator, the successor
administrator should have used section 633.186(2) to obtain a judgment or
settlement with IMT. We find there is no requirement that judgment must first be
entered against the principal before the surety can be held liable for the bond,
and we affirm the district court’s ruling.
14
B. Damages Due the Estate
The estate claims the “true measure of damages” should be based on the
full amount of embezzled estate assets and an amount based on the subtraction
of Angel’s portion of the estate. It also claims due to Angel’s actions, the
successor administrator and the estate’s attorney require “extraordinary fees,”
and the district court should not have reduced their extraordinary fee request.
Finally, it claims the district court wrongly excluded the value of the 401(k)
account passing to Angel from the gross estate in its calculation of administrator
and attorney fees.
1. Set-off
The estate claims the district court should not have reduced the judgment
against Angel for his defalcation as administrator, as there is no difference in the
fiduciary obligation or responsibility for an administrator who is also a beneficiary
from one who is not.
In granting Angel a “set-off” for his portion of the estate, the district court
reasoned:
The doctrine of set-off provides that the demands of mutually
indebted parties are to be set off against each other and that only
the balance will be recovered. In re Marriage of Ballstaedt, 606
N.W.2d 345 (Iowa 2000); Baltimore & Ohio Ry Co. v. Jameson, 13
W.Va. 833, 1878 W.L. 3143 (1878) (agent who embezzled from
employer entitled to offset for the commissions he earned from his
employer); Candler v. Von Martels, 11 Ohio Dec. Reprint 744, 1892
W.L. 364 (Super. Ct. of Cincinnati 1892) (set-off of administrator’s
fees that were disallowed for dereliction).
Because Mr. Ibarra is an heir with an entitlement to an
inheritance that is independent of his former position as
administrator, it is easier to conclude he is entitled to a set-off than
it would be if he was entitled to compensation as an employee or
fiduciary, as in Jameson or Candler. Mr. Ibarra is entitled to a
15
credit for the amount he would have inherited, that is, one-half of
the net estate.
We agree with the district court’s holding, but rely on principles of equity to
justify subtracting Angel’s share of the estate from the judgment against him. In
In Re Ferris’ Estate, the Iowa Supreme Court determined the distributive share of
an heir, who was also a debtor to the estate pursuant to a promissory note but
not a fiduciary to the estate, should be offset to satisfy his debt. 14 N.W.2d 889,
900 (Iowa 1944). The court characterized this act as:
[A] right in the nature of a right of retainer. It is an equitable right of
its own nature, and not at all dependent upon any statute. It is the
plain moral, as well as legal, duty of the debtor to pay his debt to
the estate. He has had the value from the estate. He ought in
morals and law to restore it. The doctrine of equitable retainer is
based upon the principle that he who seeks equity must do equity.
....
The right, in our opinion, rests not so much upon any rule of
setoff or of retainer as upon the broad principles of equity. That the
principle is not based upon any technical rule or distinction, but
upon justice, equity, honesty and fair dealing . . .
Id. at 898–99 (citations omitted).
While Angel served as an administrator to the estate, he was also a
beneficiary of the estate. We agree with the district court’s decision to hold Angel
liable for the entire estate pursuant to his role as an administrator. See Iowa
Code § 633.157 (“Every fiduciary shall be liable for, and chargeable in the
fiduciary’s accounts with, all of the estate that comes into the fiduciary’s
possession at any time, including all the income therefrom . . . .”). However,
pursuant to his role as a beneficiary of the estate, we find “the broad principles of
equity” and “justice” allows the judgment against Angel to be offset by the share
he would have received as beneficiary. We agree with the district court’s
16
equitable decision to subtract the amount Angel would have received from the
estate from the judgement. We affirm the district court’s method of calculating
the judgment against Angel.
2. Extraordinary Fees
“When fees for extraordinary services are claimed, the burden is on the
claimant to show both the necessity and value of the services . . . rendered.”
Bass v. Bass, 196 N.W.2d 433, 435 (Iowa 1972). There is no established
definition for extraordinary services. In re Estate of Randeris, 523 N.W.2d 600,
606 n.1 (Iowa Ct. App. 1994). Generally, however, extraordinary services are
those which in character and amount are beyond those usually required. In re
Estate of Mabie, 401 N.W.2d 29, 31 (Iowa 1987). “In making an allowance for
extraordinary services, the critical issue concerns the reasonable value of the
services performed, as well as the compensation allowed for the ordinary
services.” Estate of Randeris, 523 N.W.2d at 606 n.1. “In the end, the goal is to
provide fair and reasonable compensation for all services performed.” Id. Iowa
Code section 633.199 provides a guideline for determining extraordinary
services:
Such further allowances as are just and reasonable may be made
by the court to personal representatives and their attorneys for
actual necessary and extraordinary expenses and services.
Necessary and extraordinary services shall be construed to include
but not be limited to services in connection with real estate, tax
issues, disputed matters, nonprobate assets, reopening the estate,
location of unknown and lost heirs and beneficiaries, and
management and disposition of unusual assets. Relevant factors
to be considered in determining the value of such services shall
include but not be limited to the following:
1. Time necessarily spent by the personal representatives
and their attorneys.
17
2. Nature of the matters or issues and the extent of the
services provided.
3. Complexity of the issues and the importance of the issues
to the estate.
4. Responsibilities assumed.
5. Resolution.
6. Experience and expertise of the personal representatives
and their attorneys.
At trial, the administrator and the attorney proposed $39,454.49 in total
fees and expenses. The court found this proposal unreasonable:
In short, Angel Ray Ibarra’s embezzlement did cause losses
to the estate and required extraordinary services on the part of both
the administrator and the attorney, but the approach taken by the
administrator and the attorney, if compensated as they propose,
would cause more loss than the theft. The administrator asserts in
his brief of March 15 that “The Administrator and Attorney
Zaffarano have been denied payment of the fees ordered by the
Court in March of 2008 solely because of the embezzlement of
Angel Ray.” The Court rejects that contention and wishes to do so
in the clearest terms possible. The delay in collecting reasonable
and necessary fees is due at least as much to the tactics of the
administrator and attorney as to the original embezzlement. They
did not use § 633.186(2), and they refused to engage in settlement
discussions. The administrator observes in his billing record that
there was no point to settlement because Mr. Ibarra “will probably
be unable to make payment on the judgment anyway.” This
analysis was backwards. That is a consideration in favor of wasting
no more time and money on pursuing an uncollectable judgment.
The administrator and the attorney refused to even provide Mr.
Ibarra’s counsel with a debt calculation or settlement demand. If
this had been their case, that is, if they had been the harmed
parties, they would have had every right to insist on going to court.
But when, as here, they were acting as fiduciaries, they had an
obligation to work for the best interest of the estate. Their
assessment of their fiduciary obligations as requiring them to go to
trial was mistaken.
The court ultimately set the total fees and expenses at $7,583.81, which
we also believe is a reasonable sum. Since we agree with the court the
administrator and attorney should have used section 633.186(2) to collect the
18
bond to mitigate losses to the estate, we affirm the district court’s calculation of
fees and expenses.
3. 401(k) Account
The estate claims the district court improperly excluded the 401(k) account
listing Angel as the sole beneficiary from the gross estate, and therefore should
not have reduced the previously ordered administrator and attorney fees.
The district court decided to exclude the 401(k) account (totaling $2087)
from the gross estate and reduce the previously approved fees by two percent.
For this proposition, the district court cited Iowa Code section 633.357(5), which
acts to exclude custodial independent retirement accounts (IRA) from a probate
estate. Our supreme court addressed this issue in In re Estate of Martin, and
held a 401(k) account should be included “in the gross assets to be considered in
the calculation of the maximum fees payable under sections 633.197 and
633.198.” 710 N.W.2d 536, 541 (Iowa 2006). We believe this is the correct
holding in the present case and reverse the district court’s exclusion of the 401(k)
account from the probate estate.
C. Disclaimer
Lastly, the estate claims it properly sought a declaratory judgment on
whether Divina’s release and waiver should be treated as a full disclaimer, and
not as a partial disclaimer. IMT claims the court should not have found Divina’s
“release and waiver” was a disclaimer, instead it should be construed as a
release of any claims she had against the funds or as a gift to Angel. Angel
19
agrees with IMT’s claim, but also claims, in the alternative, that if we find Divina’s
waiver was a disclaimer he is entitled to her share.
Iowa Code section 633E.5 sets the general requirements for a person’s
power to disclaim, “in whole or in part, any interest in or power over property . . .
whenever and however acquired.” Iowa Code § 633E.5(1).
To be effective, a disclaimer must be in a writing or other
record, declare the disclaimer, describe the interest or power
disclaimed, be signed by the person making the disclaimer, and be
delivered or filed in the manner provided in section 633E.12. In this
subsection, “record” means information that is inscribed on a
tangible medium or that is stored in an electronic or other medium
and is retrievable in perceivable form.
Id. § 633E.5(3).
The district court relied on section 633E.5(3) to evaluate the “release and
waiver” signed by Divina, and concluded it was an effective disclaimer of Divina’s
interest. The court also found the disclaimer acted as a partial disclaimer and
only applied to her interest in the life insurance funds taken by Angel. The
disclaimer did not apply to funds already in Divina’s possession.
We agree with the district court and find Divina’s “release and waiver” is a
partial disclaimer to the funds she would have received from her father’s life
insurance policy. The text3 of the “release and waiver” limits its applicability to
the life insurance funds since the other property she inherited from the estate
was already in her possession at the time the “release and waiver” was
3
Paragraph 10 of the release and waiver states: “I waive, relinquish and forego any
money I would otherwise have received from the $32,503.61 removed from my father’s
estate.” The last paragraph states: “I, Divina Ibarra, state that I have read the foregoing
‘Release and Waiver of Claim of Divina Ibarra to Assets of the Estate of Angel Ibarra Jr.’
and I understand that I am knowingly and willingly waiving my right to receive further
funds from the estate of my father, Angel Ibarra.”
20
executed. The “release and waiver” also directly states it was only meant to
apply to Divina’s receipt of the life insurance proceeds. Upon our de novo
review, we affirm the district court.
D. IMT Liability to the Estate (Cross-Appeal)
On cross-appeal, IMT claims its liability cannot exceed the total amount
Angel took from the estate, which is $32,501, the value of the life insurance
policy. We decline to fully reach this issue as we have found in IMT’s favor on
the other claims and therefore IMT’s liability could not exceed the value of the life
insurance policy.
IV. CONCLUSION
We affirm the district court order as to all the issues, except we modify the
order to include the 401(k) in the estate assets for the calculation of administrator
and attorney fees. Their fees should be increased by 2% or an additional
$41.74.
AFFIRMED AS MODIFIED ON APPEAL; AFFIRMED ON CROSS-
APPEAL.