Opinion ID: 1231420
Heading Depth: 2
Heading Rank: 2

Heading: Mismanagement.

Text: Hanson claims that Bankers Trust breached its fiduciary duty by failing to diversify the trust assets. Ordinarily, trustees in Iowa are held to the standard imposed by the Model Prudent Person Investment Act. Iowa Code §§ 633.123, 682.60 (1989). However, the settlor can vary the terms of trust management from those set out by statute. See Iowa Code § 633.699; In re Lawson's Will, 215 Iowa 752, 759, 244 N.W. 739, 742 (1932); 76 Am.Jur.2d, Trusts § 277 (1979); In re Jones' Will, 221 Minn. 524, 22 N.W.2d 633, 634 (1946). There were several such provisions in the Hanson trust. One such clause provided the trustees could invest and reinvest trust assets in any kind of property ... which the trustee shall deem proper ... without being restricted to investments as fixed by the laws of any jurisdiction. Another clause permitted the trustees: To continue trust assets invested in any property received or acquired by the Trustees without obligation to sell all or any part thereof because not of a type or quality or constituting a diversification considered proper or wise for trust investments.... A third relevant clause stated the Trustees are specifically authorized to sell as they deem advisable in their sole discretion Winnebago Industries stock. Hanson now contends that because one clause authorizes the trustees to retain Winnebago stock and another authorizes them to sell it, the instrument is ambiguous on this point and should therefore be resolved in his favor. We disagree. Both clauses are permissive; they merely expand the trustee's options. They are not inconsistent and create no ambiguity. It is conceded by Bankers Trust that the trust assets were never diversified. It urges, however, and the district court agreed, that the trustees' failure to diversify was not a breach of their duties under the circumstances. When Bankers Trust assumed its duties as trustee in 1978 there was concern about selling the Winnebago stock due to S.E.C. rule 144 and Hanson's familial ties to the corporation. By the time those concerns had been cleared up, the value of the Winnebago stock had begun to decline. Because of the depressed value of the stock, combined with the fact that much of the income realized by the sale would result in large capital gains due to the extremely low basis in the stock, the trustees decided to sell no more stock than was necessary to pay the debts being incurred by Hanson until the stock went back up. The stock did eventually go back up; unfortunately, by that time the trust assets were exhausted. In Matter of the Estate of Wiese, 257 N.W.2d 1 (Iowa 1977), the trustee was directed by the will to convert stocks and debentures into cash within a reasonable amount of time after the testator-settlor's death. Because of a depressed market the trustee delayed sale of the stock until it was finally forced to sell the stock at a price even lower than it had been originally. Applying the Model Prudent Person Investment Act, we held the trustee had not breached its duty. Under Wiese, the facts of the present case would suggest a similar result. The language in the trust instrument specifically authorizing the trustees to retain the Winnebago stock makes that conclusion unavoidable.