BRIAN D. MILLER, Executor of The Estate of Edward J. Humburg, Plaintiff-Appellant, vs. DUANE EISENTRAGER and SUSAN K. EISENTRAGER, Defendants-Appellees.
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IN THE COURT OF APPEALS OF IOWA
No. 9-819 / 09-0596
Filed December 30, 2009
BRIAN D. MILLER, Executor of The
Estate of Edward J. Humburg,
Plaintiff-Appellant,
vs.
DUANE EISENTRAGER and
SUSAN K. EISENTRAGER,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Franklin County, Colleen D.
Weiland, Judge.
Executor appeals the district court’s dismissal of his petition alleging
undue influence stemming from a confidential relationship, breach of fiduciary
duty, and asserting a constructive trust. AFFIRMED IN PART, REVERSED IN
PART, AND REMANDED WITH DIRECTIONS.
Joseph LaPointe, Mason City, for appellant.
Dani Eisentrager, Eagle Grove, for appellees.
Heard by Vogel, P.J., and Doyle and Mansfield, JJ.
2
VOGEL, P.J.
The executor of the Edward J. Humburg estate, Brian D. Miller, appeals
the district court’s dismissal of the petition alleging constructive fraud due to a
confidential relationship, breach of fiduciary duty, and constructive trust. 1 The
executor asserts the district court erred in (1) finding Susan Eisentrager
sustained her burden of proof to rebut the presumption of undue influence; (2)
failing to find Susan breached her fiduciary duty by abusing her authority as
attorney-in-fact, and (3) failing to find a confidential relationship existed between
Susan and Beulah Humburg, and between Susan’s husband, Duane Eisentrager,
and Edward Humburg. We agree with the district court a confidential relationship
existed between Susan and Edward.
However, we do not find substantial
evidence that Susan rebutted the presumption of undue influence. We also find
she abused her authority as attorney-in-fact and remand with instructions.
However, we do not find a confidential relationship existed between Susan and
Beulah, or Duane and Edward, and affirm as to those issues.
I. Background Facts and Proceedings
Edward and Beulah Humburg had two children, Roger and Susan. Roger
predeceased the couple, survived by his son, Anthony. During their marriage,
both Edward and Beulah were involved in managing their finances, but Beulah
handled most of the check-writing. As her parents got older, Susan increasingly
helped them with errands, and began paying bills and writing checks for them in
May 2001. In July 2001, Beulah transferred $40,000 to Susan and her husband,
1
We note noncompliance with the rules of appellate procedure, requiring the name of
each witness whose testimony is included in the appendix to appear at the top of each
page where the witness’s testimony appears. See Iowa R. App. P. 6.905(7)(c).
3
Duane, for Susan to pay Edward and Beulah’s expenses. Beulah passed away
in September 2001. Following Beulah’s death, Susan gave additional support to
Edward by regularly bringing him to her house, often to spend the night, and
providing for his day-to-day needs. She paid nearly every bill for Edward, writing
checks on his checking accounts. On September 18, 2001, Edward executed a
power of attorney, naming Susan as his attorney-in-fact.
In January 2002, Edward moved in with the Eisentrager family. Edward
utilized home health care services, but depended on Susan for his daily needs
and transportation. During the summer of 2002, Edward deeded his homestead
to Susan and Duane, retaining a life estate.
physically, he remained mentally alert.
Although Edward was failing
Edward passed away May 15, 2004.
Following his death, Susan and Duane sold Edward’s home for $59,010.73 and
deposited the proceeds into their own account.
On September 18, 2001, the same day he signed the power of attorney,
Edward executed his last will. The will provided for an equal distribution between
Susan and Anthony of Edward’s residuary estate. Anthony had what the district
court called a “pleasant relationship” with Edward, and visited Edward
approximately once a month.
Anthony, then age sixteen, received no notice
when Edward’s estate was being administered by the original executor, Susan.
Eventually Anthony’s mother, Sara, inquired as to the status of the estate, and
learned the estate had been fully administered and closed, but Anthony had
4
received nothing from the estate.2 A petition to reopen the estate was granted
and the current litigation was brought by the newly appointed executor, Miller.
After a trial, the district court dismissed the executor’s petition. The executor
appeals.
II. Standard of Review
Actions to set aside or contest wills are triable in probate as law actions.
Iowa Code § 633.33 (2007).
This petition was both filed and tried at law,
therefore we review for corrections of error at law. Id. We are bound by the trial
court’s findings of fact provided they are supported by substantial evidence. In re
Estate of Crabtree, 550 N.W.2d 168, 170 (Iowa 1996).
III. Confidential Relationship
The district court found a confidential relationship began between Edward
and Susan, when Edward moved into the Eisentragers’ home in January 2002.3
The executor asserts Susan failed to rebut the presumption of undue influence in
her management of Edward’s finances. “The gist of the doctrine of confidential
relationship is the presence of a dominant influence under which the act is
presumed to have been done. The purpose of the doctrine is to defeat and
correct betrayals of trust and abuses of confidence.” In re Estate of Clark, 357
N.W.2d 34, 37 (Iowa Ct. App. 1984).
2
Although Edward’s probate file was not made part of the record, the executor asserts
the receipt and waiver form required before closing the estate was signed by Susan on
behalf of, but without the knowledge of, Anthony.
3
Nothing in this opinion should be read to diminish Susan’s devotion to her parents and
the quality of care she provided them as their health failed.
5
A. Burden of Proof to Rebut Undue Influence
Where a confidential relationship is found to exist, and inter vivos
conveyances are challenged, the burden of proof shifts to the benefited party to
prove by clear, satisfactory, and convincing evidence “that the grantee acted in
good faith throughout the transaction and the grantor acted freely, intelligently,
and voluntarily.” Jackson v. Schrader, 676 N.W.2d 599, 604 (Iowa 2003).
Since that [confidential] relationship existed between [Edward] and
[Susan], the burden was upon [Susan] to rebut the presumption of
overreaching on [her] part, and to affirmatively establish that in [her]
acquisition of property, in the transaction in controversy, [s]he took
no advantage of [Edward] by reason of their relationship, but that
he acted voluntarily with freedom, intelligence and a full knowledge
of all of the facts.
Id. (quoting Merritt v. Easterly, 226 Iowa 514, 530, 284 N.W. 397, 405 (1939)).
When a confidential relationship is shown, the person in whom the trust is
reposed is not merely required to go forward with the evidence; she has the
burden of persuasion to uphold the transfers. Jackson, 676 N.W.2d at 605. It is
a heavy burden. Id.
The executor asserts Susan failed to carry her burden of proof to show
she acted in good faith in the managing of Edward’s accounts and that Edward
was fully knowledgeable and gave his consent to Susan’s many transactions that
benefited her or her family.
The executor identifies approximately $112,993,
which Susan used to her advantage after becoming attorney-in-fact. Together
with the proceeds from the sale of Edward’s home, $59,010.73, Susan depleted
Edward’s assets to the point that his probate inventory listed only $4355 in total
gross assets. After the payment of funeral expenses and attorney fees, there
6
was no net estate remaining for distribution. After Anthony’s mother questioned
Susan as to the estate, Susan wrote Anthony a check for $7000.
In May 2001, Susan began writing the majority of checks for Edward.
With the power of attorney in place on September 18, 2001, Susan began paying
his bills and writing all of his checks. She paid for all of his medical bills, his
house payment, insurance, and took care of all of his life necessities. However,
she also wrote a substantial number of checks from his accounts that not only
covered Edward’s needs, such as groceries, but also paid for her and her
family’s daily expenses. At trial Susan was able to identify a few checks written
strictly for Edward’s benefit, and many checks she admitted were written strictly
for her or her family’s benefit. She was unable to discern the purpose for a host
of other checks and admitted she comingled her personal expenses with
Edward’s, and paid both from Edward’s accounts. The result was that between
her family and Edward, Susan could identify only a small number of checks
written strictly for the benefit of Edward.
The record includes plaintiffs’ exhibits twenty-nine, the Goldenaire
account; thirty, the United Bank and Trust account; and thirty-one, the IRMA
account, which are compilations of checks Susan wrote from Edward’s three
accounts to pay for her or her family’s expenses.
Such items include her
insurance, cell phone, satellite services, credit cards, utilities, numerous
magazines—including Country Woman, Taste of Home, Quick Cooking, Field
and Stream, Sports Illustrated (including the swimsuit edition for Susan’s son,
Mike), Lane Bryant women’s clothing, catalog purchases from Blair, Eddie Bauer,
7
Walter Drake, Harriet Carter, Carroll Wright Gifts, and a variety of local
purchases, including J.C. Penney, Sears, Target, and Pamida.
In addition, the exhibits detail numerous checks written by Susan for cash
for herself. For example, after Edward sold some real estate on February 25,
2002, and the money, $63,442.47, was deposited in his Goldenaire account,
Susan turned around and wrote two checks from that account: $11,490.02 went
to pay off a note for Susan; and $51,952.45, Susan deposited into her own
account and later used to purchase a Jeep for herself for approximately $11,500;
the rest was used for home repairs. She claimed the entire amount was a “gift”
from Edward. However, the only evidence she was able to offer to support her
claim was by her own testimony that her father was aware of what she was
doing. As the executor asserts, such self-serving testimony only attempts to
justify Susan’s conduct, but is not sufficient to prove Edward “acted voluntarily
with freedom, intelligence and a full knowledge of all of the facts.”
Susan’s burden was to rebut the presumption of undue influence by clear,
satisfactory, and convincing evidence that she acted in good faith throughout her
transactions with Edward. Jackson, 676 N.W.2d at 604. The district court found
that “Ed had constant access to his account and asset information, and he and
Sue conducted his bill-paying together.” Our review of the record fails to show
that, apart from Susan’s assertions, Edward approved and was fully
knowledgeable of Susan’s transactions, which eventually depleted virtually all of
his assets to the detriment of his grandson, who was to share equally with Susan
in the net assets of Edward’s estate.
8
During Susan’s testimony, she was asked to explain her use of Edward’s
funds for her own benefit. She repeatedly answered “I don’t know,” and “my
father wanted me to have the money.” While she claims the $63,442.47 from the
February 2002 cash withdrawals was a gift from her father, there was nothing to
corroborate such a gift; the only evidence of Edward’s wishes was Susan’s own
testimony. Further, she failed to report this “gift” on her father’s probate inventory
as a transfer within three years of death. Iowa Code § 450.3(2). At the same
time that she was claiming the $63,442.47 to be a “gift,” she also took the
position that the money was “income” or payment for her services for caring for
her father. This “income” was not reported on her 2002 federal or state income
tax returns. She testified at trial that her tax preparer was in the process of
amending her 2002 tax returns to report the money as earned income. In the
next breath, she reversed her position and reasserted that the money was a gift.
We find that Susan’s own vague and vacillating testimony was insufficient
to rebut the presumption of undue influence. Considering the evidence of the
hundreds of checks written for her or her family’s benefit from Edward’s
accounts, and the fact that Edward named Anthony as an equal beneficiary
under his will, which was executed the same day as he made Susan his attorneyin-fact, we conclude Susan did not demonstrate by clear, satisfactory, and
9
convincing evidence that Edward was free from undue influence, or that she
acted in good faith throughout her transactions with Edward.4
IV. Breach of Duty Under Power of Attorney
The executor also asserts the checks written by Susan for her own benefit
were a breach of her fiduciary duties under the power of attorney.
“The
established rule is that a power of attorney must be strictly construed and the
instrument will be held to grant only those powers which are specified.”
Crabtree, 550 N.W.2d at 170.
Edward’s power of attorney form stated, “my
Attorney-in-Fact may not make gifts of my property to himself or herself.” We
agree Susan abused her authority as attorney-in-fact.
Therefore, all monies
shown on the checks set forth in exhibits twenty-nine, thirty, and thirty-one, must
be returned to Edward’s estate.
V. Constructive Trust: Homestead
The executor next challenges Susan’s retaining Edward’s home after his
death, then selling it and keeping the proceeds, rather than preserving this asset
for the benefit of the estate. In July 2002, Edward deeded his homestead to
Susan and Duane and retained a life estate for himself. A gift is made when the
donor has a present intention to make a gift and divests himself “of all control and
dominion over the subject of the gift.” Crabtree, 550 N.W.2d at 170. Michael
Cross, the attorney who drafted the deed, and was Susan’s attorney during the
4
The executor also challenged Edward’s mental ability the months preceding his death,
asserting he did not have the ability to act freely, intelligently and voluntarily. While a
doctor’s note from September 20, 2002, stated that Edward suffered from mild dementia,
there were no other indications his mental clarity was in issue. As the district court
found, “although physically limited, Ed remained independent, clear-minded and
opinionated.” Although Edward had the mental clarity to make decisions, insufficient
evidence remains to prove he was knowledgeable about the way Susan was depleting
his assets to the benefit of herself and her family.
10
administration of Edward’s estate, testified that Edward transferred the
homestead to Susan and her husband, Duane, because they had done a great
deal for Edward, “and to avoid that home being taken by the state for Title XIX
reimbursement if he had to go to a nursing home.” Cross confirmed that he
discussed the transfer only with Edward. Susan was not present, nor did Cross
ever speak to her. At trial, Cross was asked,
Q: Did it appear that anyone was influencing him to make
this transfer? A: No, not Ed.
Q: Did he appear to be coached? A: No
Q: Describe Ed, specifically referencing the home transfer.
A: I think he would be someone who had his own mind and he
would make decisions based on his own mind. . . . I had no
indication of anything otherwise.
Q: So is there doubt in your mind that he made that transfer
willingly? A: None whatsoever.
After Edward’s death, Susan sold the property for $59,010.73. With the
money, she purchased a vehicle for $26,000 for her son, Mike, paid off a loan to
the bank for $8900 for Duane, gave $10,000 to Mike for his wedding, gave $7000
to Tony, and used the rest for home improvements. Susan reported the prior
transfer of real estate on Edward’s probate inventory in order to clear title to the
real estate. Because there is sufficient evidence, primarily from attorney Cross,
that Edward deeded this land of his own “freedom, intelligence and a full
knowledge of all of the facts,” we find Susan rebutted the presumption the
transfer was a product of undue influence and affirm the district court. Jackson,
676 N.W.2d at 604.
VI. Confidential Relationship—Duane, Beulah
The executor also asserts that Susan had a confidential relationship with
Beulah, as she gave Beulah a substantial amount of assistance, and Beulah in
11
turn gave Susan $40,000 for her to pay for Beulah’s and Edward’s expenses.
The executor asserts Susan should have returned all of the funds to Edward and
Beulah’s account after Beulah died in September 2001.
Susan testified that
Beulah informed her that the money was “not a gift and if they needed it would be
[Beulah and Edward’s] to use.” While there is evidence $10,000 was transferred
back to Edward and Beulah’s account, $30,000 remained unaccounted for. As
executor of Beulah’s estate, Susan failed to report this $30,000 as either a gift
within three years of her death or as an asset of Beulah’s estate. While we
question Susan’s handling of this money, we are not inclined to order the return
of these funds to Edward’s estate.5 We also agree with the district court that
there was insufficient evidence to find a confidential relationship existed between
Susan and Beulah. Likewise, we agree with the district court, no confidential
relationship existed between Duane and Edward. We agree with the district
court that the “evidence shows that Duane occasionally assisted Ed, that Ed and
Duane were friendly and that Ed resided in Duane’s home; it does not show that
Ed relied on and trusted Duane to the extent contemplated in a confidential
relationship.”
VII.
Conclusion.
We affirm the district court’s finding of no confidential relationship between
Susan and Beulah or between Duane and Edward. We affirm the finding of a
confidential relationship between Susan and Edward, but find the confidential
relationship began on September 18, 2001, when Edward executed the power of
attorney, naming Susan as his attorney-in-fact. We reverse the district court on
5
There is no claim stemming from Beulah’s estate for the return of the funds.
12
its conclusion Susan rebutted the presumption of undue influence, and also
conclude Susan breached her fiduciary duty by self-dealing, as Edward’s
attorney-in-fact. She failed to meet the heavy burden of showing the amounts
the estate asserts she removed from Edward’s accounts: $76,578.51 from the
Goldenaire account, $20,787.58 from the United Bank and Trust account, and
$15,627.47 from the IRMA account, were used for the sole benefit of Edward or
were not a product of undue influence.
Jackson, 676 N.W.2d at 605.
We
therefore remand to the district court for entry of judgment, against Susan for
$112,993.56 in favor of the executor, to restore those funds to Edward’s estate.6
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH
DIRECTIONS.
6
Anthony may retain the $7000 Susan gave to him, as Susan testified it came from the
proceeds of the sale of Edward’s house after he died. As the house was “gifted” to
Susan, the $7000 came from Susan’s assets and does not therefore go back to the
estate for purposes of this remand.
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