United States Court of Appeals

For the Eighth Circuit

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No. 16-3949

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Charleen Corrado, Individually and as the Executrix of the Estate of John M

Corrado; Federal City Region, Inc.

lllllllllllllllllllll Plaintiffs - Appellants

v.

Life Investors Insurance Company of America; Seth Miller; Patrick Melchert;

Kevin Crist; Frank Neeland, Jr.; Mark Thiel; Andrew Martin

lllllllllllllllllllll Defendants - Appellees

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Appeal from United States District Court 

for the Northern District of Iowa - Cedar Rapids

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 Submitted: October 18, 2017

 Filed: January 2, 2018 

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Before WOLLMAN, BEAM, and SHEPHERD, Circuit Judges.

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SHEPHERD, Circuit Judge.

In this most recent installment of the litigious history of the Life Investors

Owners Participation Trust, CharleenCorrado and FederalCity Region, Inc. (“FCR”)

brought suit against a number of defendants associated with the Trust, alleging
breaches of fiduciary duties and conversion. The district court granted summary 1

judgment to the defendants, and Corrado and FCR appeal. We affirm.

I. Background

As recounted in our previous opinion, John Corrado and FCR became

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associated with Life Investors Insurance Company of America (“Life Investors”) in

1977. Corrado sold Life Investors’s insurance policies on a commission basis, and, 3

as a result, Corrado and FCR were able to maintain accounts in a pension plan

established by Life Investors—the Life Investors Owners Participation Trust (the

“Trust”).

In 2008, John Corrado and FCR filed a lawsuit in the District of Maryland 4

against Life Investors, the Life Investors Owners Participation Trust and Plan, and

its trustees—John Cleavenger, Kevin Crist, Mike Kirby, Frank Kneeland, William

Kuennen, R. Joe Smith, and Mark Thiel. In that suit, Corrado and FCR alleged six

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counts: the first three alleged that the Trustees breached their fiduciary duties; Count

IV alleged that Life Investors knowingly participated in the breaches alleged in

The Honorable Edward J. McManus, United States District Judge for the

1

Northern District of Iowa, now deceased.

FCR was created by John Corrado to market Life Investors’s policies, and it 2

is a participant beneficiary of the Trust.

Their original association was actually with Bankers Union Life Assurance 3

Company—Life Investors’s predecessor—but we refer solely to Life Investors

because that party was acting at all times relevant to this case.

Shortly after he filed that lawsuit, John Corrado died. His widow, Charleen 4

Corrado, was substituted as a party due to her role as personal representative for his

estate.

We refer to these individual defendants as the “Trustees.” 5

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Counts I through III; Count V alleged that the Trustees failed to provide appropriate

documentation to participants; and Count VI alleged that the Trustees unjustifiably

refused to allow Corrado to withdraw the money in his account. The Maryland court

granted summary judgment to the defendants, and Corrado did not appeal that ruling. 

Life Investors advanced money to the Trustees to pay for the legal expenses related

to the defense of this action.

During the pendency ofthe Maryland suit, Life Investors filed a lawsuit against

Corrado and FCR in the District of Iowa, alleging that Corrado had breached a

settlement agreement between the parties. After the district court granted summary

judgment to Life Investors in that case, this court reversed and remanded based on the

district court’s misapplication of Iowa law. See Life Inv’rs Ins. Co. of Am. v. Fed.

City Region, Inc., 687 F.3d 1117 (8th Cir. 2012). After remand, the district court

again entered summary judgment in favor of Life Investors, and we affirmed. See

Life Inv’rs Ins. Co. of Am. v. Corrado, 804 F.3d 908 (8th Cir. 2015). The final

outcome of the Iowa litigation was a $1.3 million judgment in favor of Life Investors

against both Corrado and FCR, which FCR satisfied by assigning sufficient funds

from its Trust account to Life Investors.

Life Investors then sent an email to the Trustees informing them of its desire

to be reimbursed for the costs advanced in defense of the Maryland lawsuit. This

result, Life Investors explained, was authorized by Trust § 11.9, which states as

follows:

The Trustees shall have a lien upon the Trust Assets for any costs and

attorneys’ fees, in the event of any suit or proceeding regarding the Trust

to which the Trustees, or any of them, may be parties or a party. If any

Participant or beneficiary bringslegal action against the Trustees, or any

of them, the result of which shall be adverse to the party bringing the

suit, or if any disputes arise with respect to the person or persons to

whom delivery or payment of any property shall be made by the

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Trustees, the cost to the Trustees of defending the suit shall be charged,

to the extent possible, directly to the account of the Participant whose

interest is in issue, and only the excess, if any, shall be included in the

expenses of the Trust.

The Trustees unanimously voted to enforce § 11.9, and they deducted

$431,925.49—the cost of the defense in the Maryland litigation—from the Trust

accounts of Corrado and FCR. In turn, the Trustees paid this money to Life Investors

as reimbursement of money advanced in defending the Trustees in the Maryland

action.

In July of 2014, Corrado and FCR brought the instant lawsuit in the District of

Iowa against the Trustees and Life Investors, alleging that the Trustees’ actions in

deducting the funds from Corrado’s and FCR’s Trust accounts constituted breaches

of fiduciary duties and conversion. After discovery, both parties moved for summary

judgment, and the district court granted summary judgment to the defendants.

Corrado and FCR now appeal this ruling.

II. Analysis

The appellants raise two primary issues. First, whether the district court

correctly concluded that Trust § 11.9 authorized the Trusteesto deductfunds fromthe

appellants’ Trust accounts to reimburse Life Investors for the money it advanced to

pay for the defense in the Maryland litigation. And second, whether the district court

erroneously concluded that the Trustees did not breach their fiduciary duties when

they (1) transferred the appellants’ funds to Life Investors, (2) allegedly deprived the

appellants of a vested interest in Trust assets, or (3) failed to provide notice prior to

transferring the funds. In addition, the appellants contend that the district court

overlooked a dispute of material fact as to the reasonableness of the attorney’s fees

deducted from their Trust accounts, and they argue that Life Investors committed the

tort of conversion. Exercising de novo review, see Gilkerson v. Neb. Colocation

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Ctrs., LLC, 859 F.3d 1115, 1118 (8th Cir. 2017), we address each argument in turn

and affirm the grant of summary judgment to the appellees.

A.

The appellants attack the applicability of Trust § 11.9 by arguing that the

Maryland lawsuit was not a suit against the Trustees and that the Trustees were not

charged for the defense in that case. The appellants further argue that a different

section of the Trust precludes the use of Trust funds to pay for the defense because

defense costs were advanced by Life Investors. We disagree.

“On acceptance of a trust, the trustee shall administer the trust according to the

terms of the trust and according to thistrust code, except to the extent the terms of the

trust provide otherwise.” Iowa Code § 633A.4201(1). Indeed, “[t]he terms of a trust

shall always control and take precedence over any section of this trust code to the

contrary.” Id. § 633A.1105. In Iowa, “interpretation of a trust is guided by the intent

of the testator.” In re Steinberg Family Living Tr., 894 N.W.2d 463, 468 (Iowa

2017). And Iowa courts “determine intent based on the language of the trust itself,

utilizing the ordinary and usual meaning of the words included.” Id.

The plain language of Trust § 11.9 describes two situations in which the Trust

permits the Trustees to charge the account of a participant or beneficiary: (1) when

“any Participant or beneficiary brings legal action against the Trustees, or any of

them, the result of which shall be adverse to the party bringing the suit,” and (2) “if

any dispute shall arise with respect to the person or persons to whom delivery or

payment of any property shall be made by the Trustees.”

The Maryland suit triggered the first Trust provision, which permits the

Trustees to charge the legal fees to the account of a participant. The appellants are

participants who brought, and lost, a legal action against the Trustees. The

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appellants’ first contention—that the Maryland lawsuit was not against the

Trustees—is belied by that case’s operative complaint. In paragraphs 12 through 18

of that complaint—which identified who he was suing—John Corrado identified the

individual Trustees of the Trust, and, in paragraph 19, he collectively defined all of

those individual Trustees as the “Defendant Trustees.” As stated above, Corrado

pursued six theories of relief. Counts I through III alleged that the Defendant

Trustees breached their fiduciary duties in different ways; Count IV alleged that Life

Investors knowingly participated in and benefitted from those breaches; Count V

alleged that the Defendant Trustees failed to provide documentation to participants

in violation of ERISA; and Count VI alleged that theDefendant Trustees unjustifiably

refused Corrado’s withdrawal requests. Therefore, because five of the six counts

were asserted directly against the Trustees and the action was decided in their favor,

the express terms of Trust § 11.9 direct that “the cost to the Trustees of defending the

suit shall be charged, to the extent possible, directly to the account[s] of” the

appellants.

The appellants next assert that § 11.9 is inapplicable because, as a factual

matter, there was no cost to the Trusteesfor defending the Maryland suit because Life

Investors advanced the costs of the Trustees’ defense. As evidentiary support, the

appellants quote the appellees’ statement of fact “that no Trust assets were used to

pay attorney [sic] fees while [the Maryland Case] was ongoing,” Appellants’ Br. 28

(alteration in original) (internal quotation marks omitted), and the affidavit of Julie

Willingham, in which she stated that “no distribution has been made or requested

from Group Annuity Contract Y74552 to pay any costs or fees associated with this

Maryland lawsuit,” Appellants’ App. 35-36. These statements, while accurate, are 6

irrelevant to the present case. Indeed, had the Trustees used Trust funds to pay for

Willingham’s affadavit is dated June 24, 2010, and the Maryland litigation 6

was not terminated until that court granted summary judgment to the defendants on

March 11, 2011.

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the defense during the pendency of the lawsuit, they arguably would have violated

Trust § 11.9, which sets as a condition precedent to charging the participants’

accounts that the ultimate outcome of the litigation is “adverse to the party bringing

the suit.” Therefore, the litigation must be at an end prior to the Trustees using Trust

funds to pay the cost of their defense. 

Further, we find that the Trustees did indeed incur “cost” in the form of

attorney’s fees in defending the Maryland action unsuccessfully brought by Corrado

and FCR. That Life Investors advanced attorney’s fees incurred by the Trustees is of

no moment. The Trustees were entitled to a defense in the Maryland action, and

regardless of whether those fees were advanced by Life Investors or another party or

initially paid by the Trustees themselves, the Trustees may charge such sums to the

appellants’ accounts.

Relatedly, the appellants assert that Trust § 11.10 expressly precludes the

Trustees from paying attorney’s fees out of Trust assets when Life Investors initially

pays them. Section 11.10 reads as follows:

To the extent not paid by the Participating Companies, the Trusteesshall

have the power to pay from the Trust Assets all reasonable and

necessary expenses, taxes and charges, and fees for counsel incurred in

connection with the administration or operation of the Trust. The

Trustees hereunder shall serve without compensation for their services. 

The appellees counter by noting that the limitation in § 11.10—“[t]o the extent not

paid by the Participating Companies”—is not found in § 11.9, and § 11.9 is the only

section of the Trust that expressly concerns litigation against the Trustees. Under the

plain language of the Trust, § 11.9 is both the only section concerning litigation

against a trustee and the only section concerning litigation against a trustee instituted

by a beneficiary or participant. Moreover, given that the expense of defending the

Maryland suit arose because of the appellants’ actions, it follows that the appellants

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should bear that expense rather than the other beneficiaries. See George Gleason

Bogert, et al., The Law Of Trusts And Trustees § 802 (“If an act of one of the

beneficiaries gave rise to the necessity for the expenditure, or he will obtain the sole

or principal benefit from it, the trustee may reasonably place the burden of the

expense upon him.”).

Under Iowa law, the terms of the Trust are controlling. Iowa Code Ann.

§ 633A.1105. Here, “utilizing the ordinary and usual meaning ofthe wordsincluded”

in the Trust, the current situation is expressly provided for. See In re Steinberg

Family Living Tr., 894 N.W.2d at 468. As such, we are bound by the language of the

Trust to conclude that the “Participant whose interest isin issue,” Trust § 11.9, should

bear the costs of the suit. See Hanrahan v. Kruidenier, 473 N.W.2d 184, 189 (Iowa

1991) (“We agree with the trial court that in equity the [legal] expenses should be

paid from the trust [because the] . . . payments were expressly authorized in the trust

agreement.”); Bogert, et al., supra, § 802 (“The settlor may make provisions as to the

source or sources from which the trustee should pay expenses and these will be

controlling.”).

B.

The appellants next argue that the Trustees breached fiduciary duties when they

(1) transferred the appellants’ funds to Life Investors thereby giving Life Investors

an interest in Trust assets, (2) deprived the appellants of a vested interest in Trust

assets, and (3) failed to provide advance notice prior to transferring the funds. 

The first two alleged breaches arise out of Trust § 14.3, which states:

Except as provided in Article VII, no provision of the Plan or Trust shall

either directly or indirectly operate to give the Participating Companies

any interest whatsoever in any funds or property held by the Trustees

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under the terms of this Trust, or to deprive any Participant or beneficiary

of his vested interest in the Trust as it is then constituted, nor shall any

such provision cause any part of the income or corpus of the Trust to be

used for, or diverted to, purposes other than for the exclusive benefit of

the Participants or their beneficiaries.

The success of this argument therefore turns on whether application of § 11.9 in this

case gives Life Investors an “interest” in Trust proceeds and whether the appellants’

interests were “vested” at the time of the transfer.

Section 11.9 does not operate to give Life Investors any interest in Trust assets

or proceeds. An “interest” is “[a] legal share in something; all or part of a legal or

equitable claim to or right in property.” Interest, Black’s Law Dictionary (10th ed.

2014). Under the plain language of Trust § 11.9, the Trustees are given the ability to

charge legal expenses directly to a party who brings an unsuccessful lawsuit against

the Trustees. That the Trustees then take money recovered under § 11.9 and

reimburse Life Investors does not change the result, and the appellants advance no

precedent requiring a different outcome. Trust § 11.9 creates the “interest” in favor

of the Trustees, and nothing in the Trust grants to Life Investors a legal right to, or

interest in, Trust assets. 

Next, the appellants were not deprived of their vested interests in Trust assets. 

The appellants assert that “when the value of the participant’s accounts becomes

100% vested to him, the participant’s interest in net Trust Assets becomes by law

fixed, settled, and absolute and not subject to being defeated or changed.”

Appellants’ Br. 38. In support of this claim, the appellants point to Trust § 4.2, which

states that the value of a participant’s contributionsto the Trust is 100% vested to the

participant. The appellees respond that the appellants’ interests were only 100%

vested with respect to net Trust assets—which are those assets remaining after

accounting for any liabilities of the participants. Once the appellants lost the

Maryland suit, a liability was created as § 11.9 operated to impose a lien on the

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appellants’ accounts in the amount of the attorney’s fees incurred by the Trustees in

defending the action.

The appellees’ interpretation is more true to the plain language of the Trust

because the appellants fail to appreciate the significance of the final clause of Trust

§ 4.2, which limits vesting “subject to the restrictions of Section 8.7.” Section 8.7,

in turn, provides that “no distribution shall be made to a Participant while there

remains any indebtedness . . . of the Participant to a Participating Company.” An

interest is vested only where “the right to its enjoyment, either present or future, is not

subject to the happening of a condition precedent.” Vested Interest, Black’s Law

Dictionary (10th ed. 2014); see also Edworthy v. Iowa Sav. & Loan Ass’n, 86 N.W.

315, 316 (Iowa 1901) (“A vested right is an immediate fixed right of present or future

enjoyment.”). The appellants owed money to the Trustees. Under the plain language

of the Trust, the § 8.7 limitation makes the vesting of the appellants’ interests in their

account funds contingent on satisfying that debt. Cf. In re Lunt, 16 N.W.2d 25, 32

(Iowa 1944) (holding that beneficiary’s interest in trust assets was properly charged

in the amount of a foreclosed debt where the loan was made at the request of that

beneficiary).

Finally, the appellants argue that the Trustees breached a fiduciary duty by

failing to provide notice to the appellants prior to deducting the funds from their

accounts. As their sole Iowa authority for this assertion, the appellants claim that a

“beneficiary is entitled to adequate information regarding the trust, i.e., what the trust

is and how the trustee has dealt with it.” Schildberg v. Schildberg, 461 N.W.2d 186,

191 (Iowa 1990). But, as we read it, this case does not impose a duty on a trustee to

inform a beneficiary of the enforcement of provisions found in the trust document

itself. Cf. Maxa v. John Alden Life Ins. Co., 972 F.2d 980, 986 (8th Cir. 1992)

(“[T]his Court does not construe ERISA or the regulations under it to require that the

appellee had a duty individually to warn, upon their sixty-fifth birthdays, each and all

of the members of the plans which it insured that their benefits would be reduced

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according to the plan’s coordination of benefits provision unless they enrolled in

Medicare.”). Instead, Schildberg is concerned with whether a trustee should be

removed for failing to provide a yearly accounting of the trust. 461 N.W.2d at 190-

91. The appellants possessed a copy of the Trust document, and they instigated the

Maryland lawsuit against the Trustees with knowledge that theywould be responsible

for the Trustees’ legal fees if the matter was decided in favor of the Trustees. In the

absence of Iowa authority imposing the additional duty the appellants demand, we

believe the terms of the Trust itself provided sufficient notice.

C.

In their final arguments, the appellants contend that there is an issue of material

fact as to the reasonableness of the attorney’s fees and that Life Investors committed

the tort of conversion.

There is no material dispute as to the reasonableness of the attorney’s fees

because the appellants failed to challenge the fees below. The appellants argue that

they could not include this allegation in their complaint because they did not know

the value of the legal services until January of 2016. But this argument is completely

refuted by their amended complaint—filed on November 23, 2015—in which they

repeatedly assert that the money taken out of their accounts was to reimburse Life

Investors for the money it spent defending the Maryland lawsuit. Therefore, as a

factual matter, the appellants knew that the fees were at least $431,919.00 because

that is the amount that was charged to their accounts. The appellants—as the

plaintiffs in this action—had the burden of challenging the fees if they wished to

pursue that claim. See Fed. R. Civ. P. 8(a)(3) (“A pleading that states a claim for

relief must contain . . . a demand for the relief sought, which may include relief in the

alternative or different types ofrelief.”). While the appellants’ complaint vehemently

contests the means by which the Trustees acquired the money, nowhere do the

appellants claim that the amount was unreasonable.

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Finally, the appellants claim for conversion fails. “Conversion isthe wrongful

control or dominion over another’s property contrary to that person’s possessory right

to the property.” Blackford v. Prairie Meadows Racetrack & Casino, Inc., 778

N.W.2d 184, 188 (Iowa 2010) (internal quotation marks omitted). “The essential

elements of conversion are: 1) ownership by the plaintiff or other possessory right in

the plaintiff greater than that of the defendant; 2) exercise of dominion or control over

chattels by defendant inconsistent with, and in derogation of, plaintiff’s possessory

rights thereto; and 3) damage to plaintiff.” In re Estate of Bearbower, 426 N.W.2d

392, 394 n.1 (Iowa 1988). The appellants’ argument on this point depends entirely

on this court’s finding that their interests were indefeasibly vested at the time the

Trustees acquired the funds. As stated above, however, appellants’ interests were

subject to the terms of § 11.9, so they are unable to prove the first element of their

conversion claim.

III. Conclusion

For the reasons above, we affirm the district court.

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