IN THE MATTER OF THE ESTATE OF FLORENCE M. NIELSEN, Deceased, CAROL SWANSON, Heir to the Estate of FLORENCE M. NIELSEN, Ap pellant.
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IN THE COURT OF APPEALS OF IOWA
No. 8-772 / 07-2163
Filed October 29, 2008
IN THE MATTER OF THE ESTATE OF
FLORENCE M. NIELSEN, Deceased,
CAROL SWANSON, Heir to the Estate
of FLORENCE M. NIELSEN,
Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Woodbury County, Michael Walsh,
Judge.
Carol Swanson appeals from the district court’s order denying her motion
to surcharge an estate executor, granting the executor and attorney extraordinary
fees, deducting the extraordinary fees from Swanson’s portion of the estate as a
sanction, awarding joint accounts to named individuals, and reimbursing
individuals for advances made to the estate. AFFIRMED.
Carol Swanson, Winter Park, Florida, pro se appellant.
Dean Meine, Sioux City, for appellee Betty March.
Kendra Olson, Sioux City, for appellee Estate of Florence M. Nielsen.
Considered by Sackett, C.J., and Miller and Potterfield, JJ.
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POTTERFIELD, J.
I. Background Facts and Proceedings
Decedent Florence Nielsen, the mother of Carol Swanson, Betty March,
and several other children, died testate on May 31, 2005. Her will named her
daughter Betty March as executor.
March retained attorney Dean Meine to
represent the estate. The estate’s main asset was a house, which the listing real
estate agent valued between $105,000 and $110,000 and listed for sale. On
November 15, 2005, one of the decedent’s grandchildren, Troy March, Betty
March’s son, made an offer to buy the house for $109,900. Another buyer who
was unrelated to the family, Don Smith, had previously offered $105,000. Troy
March’s offer was accepted. Shortly thereafter, on November 18, 2005, Smith
orally offered to buy the house for $109,000.
However, because the estate
already had accepted Troy March’s higher offer, it did not take any action on
Smith’s second offer.
Troy March was unable to obtain financing for his offering price of
$109,900 because the property appraised for only $107,000. All of the heirs
except Swanson agreed to sell the house to Troy March at the appraised value.
Swanson raised numerous objections to the sale to Troy March, delaying and
ultimately preventing him from buying the house. The house eventually sold in
February 2006 to a buyer unrelated to the family for $104,000.
In its order
approving the sale, the court ordered the proceeds be deposited in Meine’s trust
account.
On April 20, 2006, Meine obtained an ex parte order approving the
disbursal of ordinary fees to himself and Executor March. The order authorized
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the payment of $2391.98 each to Meine and March. On May 19, 2006, Swanson
filed a notice of appeal regarding the disbursal of attorney fees.
Supreme Court dismissed the appeal as untimely.
The Iowa
While the appeal was
pending, Swanson filed other motions and discovery requests related to the
award of attorney fees to Meine and March and to the proposed sale of the
house to Troy March.
On June 26, 2006, Swanson filed a motion to surcharge March the
difference between Smith’s second offer and the actual sale price, a loss of
$3167.16. On May 31, 2007, March filed an application for extraordinary fees,
reimbursement of funds advanced, and sanctions against Swanson.
March
claimed that Swanson caused the failure of the first sale, necessitating another
sale, which resulted in more expenses, and that other litigation and objections
raised by Swanson needlessly created more work and expense. March also
sought reimbursement for money which she and her sister, Sharon Smith, had
advanced to the estate to pay estate expenses. A portion of these advances
came from joint bank accounts in the names of the decedent, March, and Sharon
Smith.
At a July 13, 2007 hearing, Swanson argued that March had not acted
responsibly in depositing the proceeds from the sale of the home in a
noninterest-bearing account. March and Meine filed motions for extraordinary
fees resulting from two hearings that took place in the process of selling the
house.
The district court granted March and Meine’s motions for extraordinary
fees. The district court ordered that $6480.19 in extraordinary fees be withheld
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from Swanson’s portion of the estate as a sanction against her for creating
extraordinary work by filing unfounded motions.
The district court denied
Swanson’s June 26, 2006 motion to surcharge March. Finally, the district court
awarded reimbursement to Sharon Smith and March in the amount of advances
made to the estate.
Swanson now appeals, arguing the district court erred in: (1) denying the
motion to surcharge March; (2) awarding March and Meine extraordinary fees for
litigation; (3) sanctioning Swanson by requiring payment of extraordinary fees out
of her portion of the estate; (4) awarding ownership of the joint bank accounts to
Sharon Smith and March; and (5) reimbursing Sharon Smith and March for
advances to the estate.
II. Standard of Review
Our review of probate matters in equity is de novo. Iowa R. App. P. 6.4.
III. Motion to Surcharge Executor
A. Delay of Sale
Swanson argues that the district court should have surcharged March for
delaying the sale of the house.
Swanson asserts that March intentionally
delayed the sale of the house in order to allow one of her sons to buy the house
and another son to receive commission on the sale.1
The record does not
support this claim.
We find that March never acted to delay the sale of the house to the
detriment of the estate. The estate accepted Troy March’s offer because it was
1
March’s son could not receive commission on the sale until after he obtained his
realtor’s license on November 3, 2005.
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the best offer and was a fair price for the house. Troy March was unable to buy
the house because the appraisal did not support the price. Swanson was the
only heir who refused to sell the house at the appraised value. The terms of the
proposed sale to Troy March benefited the estate; Swanson’s refusal to allow
Troy March to purchase the property at a reasonable price did not benefit the
estate. The only evidence explaining Swanson’s objection to the first sale of the
property is her testimony that it was “personal.” Executor March should not be
responsible for the $3167.16 difference between the proposed sale to Troy
March and the actual sale at a lower price.
B. Failure to Place Proceeds in Interest-Bearing Account
Swanson also argues that March should be surcharged for the loss of
interest that resulted from her failure to put the proceeds from the sale of the
home into an interest-bearing account until the estate could be closed.
An
executor is a fiduciary and has a duty to act in the best interests of the
beneficiaries of the estate. See Vos v. Farm Bureau Life Ins. Co., 667 N.W.2d
36, 52 (Iowa 2003).
On March 31, 2006, the district court ordered that the “net proceeds [from
the sale of the home] shall be held in Dean Meine’s trust account pending further
order of this court.” The money remained in Meine’s trust account as ordered by
the court until November 2007. In their closing arguments, March and Meine
requested authority to invest the proceeds in an interest-bearing account. On
November 14, 2007, a court order authorized Meine and March to invest the
money in an appropriate interest-bearing account. On November 26, 2007, the
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money was used to purchase a certificate of deposit earning four percent
interest.
Swanson was aware of the court order requiring the proceeds to be
placed in Meine’s trust account. She had insisted that Meine keep the funds in
his trust account as part of her acquiescence to the sale.
March was not
breaching her fiduciary duty to the estate by not reinvesting the funds, but merely
following a court order.
Swanson never asked the court to authorize the
reinvestment of the funds in an interest-bearing account, nor did she ask March
to do so. Thus, we affirm the district court’s decision to overrule Swanson’s
motion to surcharge the executor.
IV. Extraordinary Fees to Meine and March
Swanson argues that the district court erred in awarding extraordinary
fees to Meine and March.
Attorneys and executors are allowed to recover
extraordinary fees for services in connection with real estate and litigated
matters. Iowa Code § 633.199 (2005). Meine and March incurred expenses in
connection with Swanson’s facially untimely appeal to the Iowa Supreme Court
as well as her discovery requests which followed.
Meine and March also
incurred expenses stemming from the second real estate sale, which the district
court found was a consequence of Swanson’s actions.2
Swanson asserts that March’s actions were not in the best interests of the
estate, but were motivated by personal interests. The executor has the burden of
proving that she acted in good faith and with just cause in engaging in
2
The district court did not award extraordinary fees related to the attempted sale of real
estate to Troy March.
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proceedings. Matter of Estate of Wulf, 526 N.W.2d 154, 156 (Iowa 1994). No
just cause exists where the interest is merely a personal matter. Id. An action
benefits the estate if it increases or preserves the size of the estate. Id.
March’s efforts to sell the house and defend against Swanson’s litigation
were for the benefit of the estate.
The evidence shows that March acted
reasonably in her attempts to sell the house. Though the potential buyer was
March’s son, nothing suggests that the sale was unfair to or would not have
benefited the estate. Swanson’s objections to the sale and the resulting litigation
did not benefit the estate and were primarily personal. However, the personal
nature of the dispute does not negate the fact that March had an obligation on
behalf of the estate to respond to Swanson’s objections. March was not acting
merely out of personal interest, but primarily out of her obligation to the estate.
Accordingly, we find that the district court’s award of extraordinary fees to March
was appropriate.
The district court also awarded extraordinary fees to Meine. Like March,
Meine has the burden of showing good faith and just cause for the litigation. In
re Brady’s Estate, 308 N.W.2d 68, 72, (Iowa 1981). A thorough review of the
record establishes that Meine’s efforts in defending against Swanson’s litigation
were in good faith. Swanson argues that her attempt to appeal was necessary
because Meine obtained an ex parte order allowing the disbursal of fees to
himself and to March in violation of an oral agreement that he had made with
Swanson during the phone conversation when she insisted that proceeds of the
sale be deposited in Meine’s trust account. We agree with the district court that,
as Meine understood the oral agreement with Swanson, the proceeds from the
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sale of the home were to be placed in a trust account and were not to be
distributed to the heirs until Swanson had the opportunity to raise her claims to
the court at a hearing. Meine did not believe that the agreement prohibited the
customary disbursal of ordinary fees before the hearing. We find the award of
extraordinary fees to Meine was appropriate.
V. Sanctions Against Swanson
Swanson argues that the district court erred in awarding the extraordinary
fees as a sanction against her personally as opposed to imposing the award
against the entire estate. The district court found that it had the authority to
sanction Swanson under Iowa Rule of Civil Procedure 1.413(1), which allows the
imposition of sanctions on a litigant who undertakes litigation for an improper
purpose.
The Iowa Court of Appeals considered a similar issue in In re Estate of
Bruene, 350 N.W.2d 209, 219 (Iowa Ct. App. 1984), where the court declined to
deduct sanctions from the portions of specific heirs, but rather deducted attorney
fees from the entire estate. In Bruene, one party sought to deduct attorney fees
from nine parties’ shares in the estate, arguing that the parties had raised a
groundless malfeasance action in bad faith and the parties who raised the action
should pay for the expenses related to it. Bruene, 359 N.W.2d at 219. The
Bruene court ruled that “[a]lthough this is a close question, we decline to go that
far” and deducted the fees from the entire estate. Id.
A review of the record establishes that Swanson had been put on notice
that the extraordinary fees may be taken out of her share of the estate as a
sanction for filing frivolous motions.
In Meine’s June 12, 2006 resistance to
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Swanson’s motion to rescind the order granting fees to attorney and executor, he
requested that “Carol Swanson be sanctioned for filing this frivolous motion and
that the costs by the executor to defend it and attorney fees be deducted from
her share of the estate.” Meine further requested that “sanctions be imposed on
Carol Swanson for her conduct to date and that said sanctions be deducted from
any inheritance that may later be allowed to her.”
After being put on notice about the potential sanctions, Swanson filed a
motion to surcharge the executor, two requests to produce, a written request for
hearing times, a motion to compel, and an objection to the executor’s request for
extraordinary fees.
Swanson’s litigious behavior continued well after Meine
requested that she be sanctioned for the expenses related to responding to her
frivolous litigation. We find that the district court properly sanctioned Swanson
for creating extraordinary work for both Meine and March and affirm the district
court’s decision to deduct extraordinary fees from Swanson’s distribution of the
estate.
VI. Ownership of Joint Bank Accounts
Swanson argues that the district court erred in determining ownership of
three of decedent’s accounts transferred to Sharon Smith and March at the time
of death. Swanson asserts that, though Smith and March’s names are on the
signature card for the accounts, decedent did not wish for them to receive the
proceeds of the accounts, but only added their names so that they would have
access to her accounts to help her pay her bills. Swanson also asserts that the
district court reminded the estate attorney to offer several exhibits related to the
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accounts into evidence.
Swanson suggests that the district court’s behavior
constitutes a fundamental error that affected the final decision.
Swanson failed to offer any evidence that would suggest the signature
card was invalid.
She does not assert fraud, duress, or mistake that would
suggest that the clear language on the signature card was invalid.
In re
Roehlke’s Estate, 231 N.W.2d 26, 28 (Iowa 1975). Nor does Swanson point to
any specific conduct at trial that would suggest that the district court improperly
took on an adversarial role in the trial. We find that the district court correctly
found that the three financial accounts belong to March and Smith. Because
those joint accounts contained their funds, once their mother died, they were
entitled to reimbursement for money taken out of those accounts for the estate.
VII. Reimbursement of Smith and March for Advances to the Estate
Swanson argues that Smith and March’s payments on behalf of the estate
should be treated as gifts to the estate and, therefore, Smith and March should
not be reimbursed for these advances. Swanson has the burden of proving that
March and Smith intended their payments to be a gift. In re Kneebs’ Estate, 70
N.W.2d 539, 542 (Iowa 1955). Swanson has offered no evidence to prove that
March and Smith intended to make gifts to the estate. Smith and March’s efforts
to seek reimbursement suggest that they did not intend to gift the money to the
estate, but were making payments on behalf of the estate while waiting for the
estate’s main asset, the house, to be sold.
VIII. Conclusion
We find that the district court properly denied Swanson’s motion to
surcharge the executor for the delay in selling the house and failure to put the
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proceeds of the sale into an interest-bearing account. The district court’s award
of extraordinary fees to March and Meine was reasonable and the fees were
properly deducted from Swanson’s share of the estate. The district court was
correct in finding that the three financial accounts belonged to Smith and March
and in reimbursing them for their advances on behalf of the estate.
AFFIRMED.
Miller, J. and Potterfield, J. concur. Sackett, C.J., concurs specially.
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SACKETT, C.J. (concurring specially)
I concur specially. Because I believe the result is equitable, I, too, would
affirm.
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