Court Opinion

ID: 4249470
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:18:51.811713+00
Date Added: 2024-06-11T07:48:11.692990
License: Public Domain

IN THE SUPREME COURT OF IOWA
                                        No. 11–0935

                                   Filed June 21, 2013

IN THE MATTER OF THE ESTATE OF LOIS L. HORD, Deceased.
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IN THE MATTER OF THE CARL R. HORD TRUST

ANNE T. WALSH, KATHRYN TRABERT, GARY R. SHUCK, DONALD C.
SHUCK, WILLIS E. SHUCK, and JOHN DALY,

        Appellants,

vs.

LARRY WAUGH, Executor of the LOIS HORD ESTATE and Trustee of the
CARL R. HORD TRUST,

        Appellee.

        On review from the Iowa Court of Appeals.

        Appeal from the Iowa District Court for Monona County, James D.

Scott, Judge.

        The remainder beneficiaries of a will seek further review of a court

of appeals decision invalidating their interests. DECISION OF COURT

OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED.

        Christine B. Long and Amy R. Teas of Bradshaw, Fowler, Proctor &

Fairgrave, P.C., Des Moines, for appellants.

        Patrick L. Sealey, Joel D. Vos, and Allyson C. Dirksen of Heidman

Law Firm, L.L.P., Sioux City, for appellee.
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APPEL, Justice.

      In this case, we must consider whether remainder beneficiaries

may enforce the terms of a spendthrift trust against the trustee when the

remainder beneficiaries previously purported to convey what was at the

time a future interest in real estate held by the trust. For the reasons

expressed below, we hold that the applicable statute of limitations bars

the remainder beneficiaries from enforcing the terms of the spendthrift

clause of the decedent’s will. As a result, we vacate the decision of the

court of appeals and affirm the judgment of the district court.
      I. Background Facts and Prior Proceedings.

      Carl and Lois Hord were husband and wife.        They did not have

children.   The couple owned approximately 210 acres of farmland in

Monona County as tenants in common. Carl died testate on June 18,

1992. His will was admitted to probate in the Monona County District

Court on June 30.

      Article VI of Carl’s will created the Carl R. Hord Trust and directed

that the residue of his estate, which consisted only of his undivided one-

half interest in the farmland, be placed in it. Article VI named Lois and

Larry Waugh, a longtime family friend and tenant on the farm, to serve

as trustees. Article VI also named Lois as a life beneficiary of the trust

and directed that, upon her death, the farmland would pass in equal

shares to the couple’s niece and five nephews.

      Article VI also contained a spendthrift clause.     Specifically, the

spendthrift clause stated:

      No interest, under this Article, shall be transferable,
      assignable, or become subject to any encumbrances by any
      beneficiary, nor shall such interest be subject to the claims
      of any creditors of any beneficiary prior to the actual
      distribution by the Trustees to the beneficiary.
                                            3

        On May 20, 1993, the attorney for the Carl R. Hord Trust sent a

letter to five of the six remainder beneficiaries of the trust. The letter

informed them that the present value of their individual interests was

$12,471.16 and that Lois, though not required to by law, had paid the

$1247.12 inheritance tax owed by each of them. The letter also indicated

the attorney’s belief that Lois had spoken to each of the remainder

beneficiaries about the possibility each might relinquish his or her

interest in the farmland to Lois. Finally, the letter indicated Lois would

not expect reimbursement for the amount of the inheritance tax if they
transferred their interests to her.

        Without consulting attorneys or reviewing Carl’s will, five of the six

remainder beneficiaries, Mary Ann Trabert, Gary Shuck, Donald Shuck,

Willis Shuck, and John Daly, executed quitclaim deeds to Lois in

September and October, which she promptly recorded. Waugh had no

knowledge of Lois’s correspondence with the five remainder beneficiaries

or that they transferred their interests to Lois.     The only duty Waugh

performed as trustee was to petition for relief from filing intermediate

reports. He did not read the terms of the trust until 2009, when Lois

died.

        Lois’s will bequeathed her entire interest in the farmland to

Waugh, including the remainder interests acquired from her niece and

nephews.1 Her will also appointed Waugh to serve as the executor of her

estate.   At the time, the value of Lois’s interest in the farmland was

$789,000.        The niece and nephews received little from Lois’s estate.

There is nothing in the record to show that Waugh, acting as trustee of

the Carl R. Hord Trust, conveyed the farmland to Lois’s estate upon her

death or to himself, as beneficiary under Lois’s will.

        1Waugh   paid inheritance tax of $117,639.
                                          4

      Following Lois’s death, the remainder beneficiaries obtained copies

of Carl’s will and, for the first time, learned of the spendthrift clause.

The remainder beneficiaries filed a petition for construction and

interpretation of the Carl R. Hord Trust on September 9, 2010. They also

intervened in the probate action regarding Lois Hord’s estate.               The

remainder beneficiaries argued the spendthrift clause rendered their

assignments and quitclaim deeds void, that they did not have interests to

convey at the time of the assignments and quitclaim deeds, and that

Waugh, acting as trustee, breached his fiduciary duties to them by
refusing to carry out the terms of the trust, by failing to administer the

trust solely in the interest of the beneficiaries, and by engaging in self-

dealing.

      On April 21, 2011, citing the Restatement (Second) of Trusts and

the Restatement (Third) of Trusts, the probate court concluded the

remainder beneficiaries’ assignments were revocable until the property

was distributed from the Carl R. Hord Trust to Lois’s estate. The probate

court then held that the remainder beneficiaries’ right to revoke their

assignments      terminated      at   Lois’s   death   because   equitable   title

immediately passed to Lois’s estate upon the termination of the life

estate. In addition, the probate court concluded the ten-year statute of

limitations contained in Iowa Code section 614.17A did not bar the

action because the remainder beneficiaries’ cause of action did not arise

until the termination of the life estate upon Lois’s death.

      On May 6, two of the remainder beneficiaries, Anne Walsh and

Kathryn Trabert, the descendants of Mary Ann Trabert,2 filed a motion to

enlarge findings of fact and conclusions of law or in the alternative

      2Mary   Ann Trabert died in 2004.
                                            5

motion for a new trial. The district court denied the motions on May 16.

The remainder beneficiaries appealed on June 13.

       We transferred the case to the court of appeals.                   The court of

appeals reversed the district court.              The court of appeals held the

spendthrift clause operated to prohibit any transfer or assignment by the

remainder beneficiaries of their rights to future payment from the trust

and, as a result, their transfers were invalid. The court of appeals also

rejected Waugh’s defenses based upon the ten-year statute of limitations

contained in Iowa Code section 614.17A. We granted further review.
       II. Scope of Review.

       Because this is not an action to set aside or contest a will, for the

involuntary appointment of a guardian or conservator, or for the

establishment of a contested claim, this probate matter, in which the

court is asked to construe the effect of a spendthrift clause to determine

whether it protects the assets of a trust from transfer or assignment by

the remainder beneficiaries, is an equitable proceeding. See Iowa Code

§ 633.33 (2011). Accordingly, we review this action de novo. Iowa R.

App. P. 6.907; In re Estate of Serovy, 711 N.W.2d 290, 293 (Iowa 2006).

We give weight to the factual findings of the district court, but we are not

bound to follow them.          In re Estate of Roethler, 801 N.W.2d 833, 837

(Iowa 2011).

       III. Timeliness of Appeal.

       Waugh3 challenges the timeliness of the remainder beneficiaries’

appeal. Waugh points out that the district court entered its findings of

fact, conclusions of law, and declaratory judgment on April 21, 2011. On

May 6, two of the remainder beneficiaries, Anne Walsh and Kathryn

       3Waugh   is the trustee of the Charles R. Hord Trust, the executor of Lois’s estate,
and the beneficiary under Lois’s will. In this appeal, Waugh has filed a consolidated
brief presenting argument in all three of his capacities.
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Talbot, filed their combined motion. The district court denied the motion

on May 16.

      The remainder beneficiaries filed their notice of appeal on June 13.

According to Waugh, the notice of appeal was untimely. Waugh asserts

that the motion filed by the remainder beneficiaries amounted to nothing

more than a rehash of legal issues and that, as a result, it was not a

valid rule 1.904(2) motion and did not toll the time for appeal.       See

Explore Info. Servs. v. Ct. Info. Sys., 636 N.W.2d 50, 57 (Iowa 2001);

Bellach v. IMT Ins. Co., 573 N.W.2d 903, 905 (Iowa 1998); Beck v.
Fleener, 376 N.W.2d 594, 596 (Iowa 1985); see also Iowa R. Civ. P.

1.904(2). To the extent the motion requested a new trial under Iowa Rule

of Civil Procedure 1.1004, Waugh argues that while the prayer for relief

essentially tacked on a request for a new trial, the motion did not specify

any grounds for relief and, as a result, the tolling provisions of rule

6.101(1)(b) do not apply.     See Iowa R. App. P. 6.101(1)(b) (generally

requiring appeals in cases other than those involving the termination of

parental rights or children in need of assistance to be filed within thirty

days following the filing of the final order or judgment).

      The remainder beneficiaries respond by asserting that their rule

1.904(2) motion did not simply rehash legal issues. They point out that

the rule 1.904(2) motion asked the court to rule on the question of

whether there was a valid distinction to be made between remainder

beneficiaries who personally executed assignments and quitclaim deeds

and Anne Walsh and Kathryn Trabert, who were survivors of Mary Ann

Trabert and not involved in any transaction of any kind with Lois related

to the trust prior to her death.

      In the alternative, the remainder beneficiaries argue the motion

was a valid motion for a new trial.          According to the remainder
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beneficiaries, the motion for a new trial raised a number of issues,

including the claims related to Waugh’s breach of fiduciary duty and the

court’s failure to distinguish between the descendants of Mary Ann

Trabert and the other beneficiaries of the trust.

      Upon review of the record, we conclude that the remainder

beneficiaries filed a timely appeal. With respect to rule 1.904(2), we note

the trial court did not explicitly rule on the question of whether the

descendants of Mary Ann Trabert should be treated differently than the

other remainder beneficiaries.      We conclude that on this issue, the
motion did seek expanded findings and conclusions.           As a result, the

period for appeal was extended by the filing of the motion and this appeal

is timely.

      IV. Statute of Limitations.

      A. Introduction.      The dispositive issue in this case is whether

Iowa Code section 614.17A bars the remainder beneficiaries from

enforcing the terms of the trust. Section 614.17A prohibits actions “to

recover or establish an interest in or claim to real estate” if:

            a. The action is based upon a claim arising more than
      ten years earlier or existing for more than ten years.

            b. The action is against the holder of the record title to
      the real estate in possession.

            c. The holder of the record title to the real estate in
      possession and the holder’s immediate or remote grants are
      shown by the record to have held chain of title to the real
      estate for more than ten years.

Iowa Code § 614.17A(1). The statute further provides that if a claimant

files a statement describing the real estate, setting forth the nature and

extent of the claimed interest, and setting forth the facts giving rise to the

claim, the limitations period is extended for an additional ten years. Id.
                                      8

§ 614.17A(2).    Accordingly, the statute bars actions to recover or

establish interests in or claims to real estate in two situations: if the

claim arose more than ten years previously, see id. § 614.17A(1)(a), or if

a ten-year extension period expired without the claimant filing a

statement triggering an additional ten-year extension, id. § 614.17A(2).

        B. Positions of the Parties. The remainder beneficiaries do not

claim they took any action to extend the statute of limitations in this

case.    The key statute of limitations question is thus whether the

remainder beneficiaries’ claims arose or existed more than ten years
prior to the time they filed this action. See id. § 614.17A(1)(a).

        Waugh   asserts   that    because   the   remainder     beneficiaries’

assignments and quitclaim deeds were executed and delivered in 1993,

they were required under section 614.17A(1) to bring any action

challenging them by 2003. According to Waugh, the question of when

the statute of limitations begins to run is controlled by when the interest

was created, not when it became a current possessory interest.

        The remainder beneficiaries argue their claims arose upon Lois’s

death in 2009 because the conveyances and quitclaim deeds were void as

violations of the spendthrift clause in Carl’s will and because Waugh was

not obligated to distribute the farmland until Lois died. According to the

remainder beneficiaries, their cause of action arose only when Waugh

became obligated by the terms of the trust to distribute the farmland to

them. Under their reasoning, the statute would not bar the action.

        C. Discussion. Iowa Code section 614.17A is a marketable title

statute that applies to real estate claims maintained after July 1, 1992.

Its predecessor statute has been described as the pioneering marketable

title provision in the country.    Chi. & N.W. Ry. v. City of Osage, 176
N.W.2d 788, 793 (Iowa 1970); Tesdell v. Hanes, 248 Iowa 742, 747, 82
                                     9
N.W.2d 119, 122 (1957). Section 614.17A and its predecessors generally

bar actions based on claims arising or existing prior to a certain date if

the record title holder and his predecessors held a record chain of title

since the certain date and the claimant failed to preserve his claim by

filing a statement by another certain date. Iowa Code § 614.17A; Note,

The Mechanics of Iowa’s Marketable Title Legislation, 22 Drake L. Rev.

326, 326–30 (1973) [hereinafter The Mechanics of Iowa’s Marketable Title

Legislation] (explaining application of section 614.17).    The marketable

title statutes grew out of efforts around the turn of the century by the
legislature and this court to give “stability and effect to record titles.”

Lewis M. Simes & Clarence B. Taylor, The Improvement of Conveyancing

by Legislation 306–09 (1960) [hereinafter Simes].

      We addressed the issue of when a claim arose within the meaning

of Iowa Code section 614.17, which contains wording similar to Iowa

Code section 614.17A but applies to claims arising before 1980, in Lane

v. Travelers Insurance Co. of Hartford, 230 Iowa 973, 299 N.W. 553

(1941). In Lane, a testator who died in 1895 devised his farm to his son,

Patrick, for life, with the remainder to Patrick’s heirs. Id. at 974, 299

N.W. at 553.    Patrick mortgaged the farm to Travelers Life Insurance

Company in 1926.      Id. at 975, 299 N.W. at 554.      In 1938, Travelers

foreclosed the mortgage, received a sheriff’s deed, and claimed full title to

the property. Id. At the same time, Patrick, along with his two minor

children, born in 1917 and 1919, filed suit to void the deed. Id. at 975,

977, 299 N.W. at 554–55.

      We considered whether a predecessor to section 614.17 barred the

actions of the minors. Id. The statute barred any “ ‘action based upon

any claim arising or existing prior to January 1, 1920 . . . unless within

one year from and after July 4, 1931’ ” a statement describing the
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interest is filed. Id. at 976, 299 N.W. at 554 (quoting Iowa Code § 11024

(1939)).   Travelers argued the claims of Patrick’s children, who held a

contingent remainder interest from their grandfather’s will, arose when

they were born, which triggered the limitations period.      Patrick, citing

that he had yet to die, argued the claim of his sons to the land had yet to

arise or exist because their interests would not vest or become certain

until the termination of the life estate. Id. at 978, 299 N.W. at 555.

      We held the claims of the two minor contingent remainder

beneficiaries arose or existed prior to 1920 and no written statement
contemplated by the statute was ever filed on their behalf.       Thus, the

plain provisions of the statute barred the claims. Id. at 976, 978, 299

N.W. at 554–55. We noted a definitional distinction between a claim that

arises and a claim that accrues. Id. at 977, 299 N.W. at 555. We also

relied on precedent recognizing that contingent remainder beneficiaries

held protectable interests prior to the termination of the life estate and

recognizing that such interests could be conveyed. Id. at 978, 299 N.W.

at 555.    Finally, we noted the legislature may not have intended the

result in the case, but nonetheless viewed our holding as stemming from

the “plain and unambiguous” language of the statute. Id. In addition,

we observed “that there can be little doubt of the desirability of statutes

giving greater effect and stability to record titles.”   Id. at 978–99, 299

N.W. at 555.

      Thus, the focus in Lane was on the date the remainder

beneficiaries’ claimed interest came into existence and not on the date a

cause of action accrued on their interest. We applied the rule of Lane in

Lytle v. Guilliams, 241 Iowa 523, 529, 41 N.W.2d 668, 672 (1950), where

we held section 614.17 barred the claims of the heirs of two remainder

beneficiaries. In Lytle, a decedent died in 1910. Id. at 524, 528 N.W.2d
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at 669. The decedent’s will gave his wife a life estate in his farmland,

with remainder interests to his three children. Id. at 524–25, 41 N.W.2d

at 669–70. The life beneficiary and one of the remainder beneficiaries

gave a mortgage on the property in 1928. Id. at 525, 41 N.W.2d at 669.

The mortgage was foreclosed in 1939, and Guilliams purchased the farm

at a sheriff’s sale. Id. The life beneficiary died in 1947. Id.

      The heirs of two of the remainder beneficiaries filed an action in

1948 against the purchaser. Id. The purchaser asserted section 614.17

as a defense. Id. At the time, it provided that no action based upon a
claim existing prior to January 1, 1930, could be maintained against a

record title holder in possession unless the claimant had filed a

statement of his claim by July 4, 1944. Id. at 529, 41 N.W.2d at 671

(citing Iowa Code § 614.17 (1946)). Citing Lane, we noted the remainder

beneficiaries’ interests existed before 1930 and that they had not filed a

statement of their claim with the county recorder. Id. at 529, 41 N.W.2d

at 672.    Ultimately, we held section 614.17 did not bar the action

because the purchaser’s chain of title did not meet the statutory

requirement.    Id.   However, citing Lane, we noted the statute would

otherwise have been applicable because the remainder beneficiaries’

interests existed before 1930 and they had not filed a statement of their

claim with the county recorder. Id.

      Under Lane and Lytle, therefore, a claim under section 614.17

arises or exists on the date the instrument creating the interest was

recorded. Lytle, 241 Iowa at 529, 41 N.W.2d at 671; Lane, 230 Iowa at

978, 299 N.W. at 555; see also Simes at 315. Thus, for the purposes of

section 614.17, a claim involving a future interest arises or exists when

the interest appears of record, not when it vests, becomes possessory, or

becomes actionable.     Simes at 315.      Our decision as to when a claim
                                    12

arises under section 614.17 was criticized by at least one commentator,

but even that critic noted the decision represented “the maximum

sacrifice . . . to attain the simplified title and conveyancing procedure

envisioned by the [marketable title act].”     Paul M. Basye, Trends &

Progress—The Marketable Title Acts, 47 Iowa L. Rev. 261, 270.         Our

interpretation of section 614.17 has also been described as “interesting.”

Simes at 314.      At least two other jurisdictions, Florida and Alabama,

have indicated a statute of limitations will run before a future interest

becomes possessory because the holder of a future interest can bring
suit to remove a cloud on title. 4 John A. Borron, Jr., Simes & Smith:

The Law of Future Interests § 1964, at 247 & nn.7–8 (3d ed. 2005); see

also Lewis v. Belk, 122 So. 413, 414 (Ala. 1929); Mullan v. Bank of Pasco

Cnty., 133 So. 323, 329 (Fla. 1931).

      We think Lane and Lytle are controlling here. The real battle in

this case is not between the remainder beneficiaries and Waugh in his

role as trustee, but rather between the remainder beneficiaries and

Waugh in his role of executor of Lois’s estate.      Both the remainder

beneficiaries and the estate claim interests in the disputed real estate.

Lois’s estate claims entitlement to the disputed real estate through the

recorded quitclaim deeds received from the remainder beneficiaries

seventeen years ago, while the remainder beneficiaries claim that the

recorded quitclaim deeds are void and that Iowa Code section 614.17A is

not implicated. Yet, Lois Hord’s claimed interest in the real estate has

been spread on the real estate records for more than ten years without

dispute. Under the circumstances, we believe that Iowa Code chapter

614.17A clears title to the real estate in favor of the estate of Lois Hord

because more than ten years have elapsed from the recording of the

quitclaim deeds.
                                   13

      V. Conclusion.

      For the reasons expressed above, the claims of the remainder

beneficiaries are barred by the applicable statute of limitations.

Accordingly, we vacate the decision of the court of appeals and affirm the

judgment of the district court.

      DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT AFFIRMED.