Court Opinion

ID: 4374338
Source: CourtListenerOpinion
Date Created: 2019-03-06 17:04:26.782324+00
Date Added: 2024-06-11T14:21:33.664521
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                   No. 18-0069
                               Filed March 6, 2019

LYNDA CICH, EXECUTOR OF ESTATE OF JUNE McLEISH, LYNDA CICH,
HEIDILYN LEAVITT, and HEATHERLYN LAMBERT,
      Plaintiffs-Appellees,

vs.

MARK McLEISH,
     Defendant-Appellant.
________________________________________________________________

      Appeal from the Iowa District Court for Bremer County, Colleen D. Weiland,

Judge.

      Mark McLeish appeals the probate of June McLeish’s will. AFFIRMED AND

REMANDED.

      Christopher F. O’Donohoe of Elwood, O’Donohoe, Braun & White, LLP,

New Hampton, for appellant.

      James J. Burns of Miller, Pearson, Gloe, Burns, Beatty & Parrish, PLC,

Decorah, for appellees.

      Heard by Vogel, C.J., Vaitheswaran, J., and Gamble, S.J.*

      *Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2019).
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VAITHESWARAN, Judge.

          June McLeish executed a will under which one of her sons, Mark, would

receive land known as the Hawkeye farm and her three daughters would receive

land known as the Maynard farm. June transferred the Hawkeye farm to Mark

during her lifetime.

          June’s health deteriorated, and she eventually entered a nursing home.

She gave Mark power of attorney over her affairs, including power “[t]o transfer,

assign, convey, and deliver any real or personal property.” The document she

executed stated Mark would “be liable for willful misconduct or breach of good faith

in the performance of any of the” document’s provisions.

          Mark sold the Maynard farm for $862,500 and deposited the net proceeds

of $782,917.90 into an investment account he opened at a firm where his daughter-

in-law worked. Shortly thereafter, Mark presented June with a “transfer on death

beneficiary designation form.” June designated Mark the “100%” beneficiary of the

account.

          The sisters learned of the sale at their mother’s funeral. One of the sisters,

Lynda Cich, who served as executor of June’s estate, sued Mark in her capacity

as executor and in her individual capacity.1 Her two sisters, Heidilyn Leavitt and

Heatherlyn Lambert, also were named plaintiffs in the lawsuit. The sisters alleged

(1) Mark breached his fiduciary duty “by selling the [Maynard farm] for substantially

less than its fair market value” of $1,061,000; (2) Mark used his confidential

1
    Mark served as executor of the estate until his resignation.
                                            3

relationship with June “to wrongfully benefit himself to the exclusion of others”; and

(3) Mark intentionally interfered with receipt of their inheritance.

       Following trial, the district court entered judgment of $1,029,344 in favor of

the executor, “for distribution to the three plaintiffs, individually, pursuant to the last

will and testament of June McLeish.”

       On appeal, Mark challenges the district court’s determinations that (1) he

had a confidential relationship with June, (2) he breached a fiduciary duty under

the terms of the power of attorney, (3) he intentionally interfered with the sisters’

inheritance, and (4) the sisters were entitled to damages under the doctrine of

ademption.

I.     Confidential Relationship

       A confidential relationship exists “whenever a continuous trust is reposed

by one person in the skill and integrity of another.” Mendenhall v. Judy, 671

N.W.2d 452, 455 (Iowa 2003). “A transfer to a grantee standing in a confidential

or a fiduciary relationship to the grantor is presumptively fraudulent.” Id. at 454.

To rebut the presumption, the fund recipient must “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, 605 (Iowa 2003).

       The district court found a confidential relationship based on the following

evidence: (1) “Mark had been in a fiduciary relationship with June since 2008 by

virtue of the power-of-attorney” and (2) “the evidence established that, from at least

2008, June relied on Mark for assistance and advice.” We review the fact findings

de novo. Id. at 603.
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       By virtue of his power of attorney, Mark had a fiduciary relationship with

June for four years preceding her death. See Mendenhall, 671 N.W.2d at 455 (“A

fiduciary relationship includes a relationship in which one is under a duty to act for

the benefit of the other as to matters within the scope of the relationship.”); Trumm

v. Iowa [Nat.] Heritage Found., No. 15-0813, 2016 WL 3272295, at *10 (Iowa Ct.

App. June 15, 2016) (“As Robert’s attorneys-in-fact under the durable [power of

attorney], Joe and Betty were in a fiduciary and confidential relationship with

Robert.” (citing Mendenhall, 671 N.W.2d at 460)); In re Estate of Frye, No. 13-

1170, 2014 WL 3511827, at *8 (Iowa Ct. App. July 16, 2014) (“One acting under a

power of attorney is a fiduciary required to act in the principal’s best interests.”

(citing In re Estate of Crabtree, 550 N.W.2d 168, 171 (Iowa 1996))). That fact

alone created a confidential relationship, rendering his sale of the Maynard farm

presumptively fraudulent.

       Mark attempted to rebut the presumption by testifying June “made her own

decisions” and “[y]ou couldn’t tell her any other way.” He characterized the sale of

the Maynard farm as “a financial decision” based on depletion of June’s funds to

pay for nursing home care. He noted that June expressed a desire to sell the farm

to the tenants farming the land and was satisfied with the value.

       Mark’s testimony did not establish that he acted in complete good faith.

Jackson, 676 N.W.2d at 605. There was no evidence Mark conferred with his

sisters about the need to sell the farm to pay for June’s continued nursing home

care. And, as the district court found, there was no evidence “to demonstrate

June’s bills, assets or financial status” at the time of sale or evidence “from

caregivers or experts as to June’s competency or cognitive abilities” at the time of
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sale. Finally, as the district court also found, the transfer-on-death beneficiary form

was “even more suspicious.” Mark could not “recall” whether he or June contacted

the investment firm to make the change, but he admitted to retrieving the

paperwork from the firm and bringing it to June for her signature. One of the sisters

testified the signature did not appear to be June’s. Mark furnished no expert

testimony to controvert this testimony.        In short, the record lacked clear,

satisfactory, and convincing evidence of good faith on Mark’s part.

       Mark’s testimony also was insufficient to establish June acted freely,

intelligently, and voluntarily in connection with the Maynard farm sale and the

subsequent appropriation of sale proceeds. Id. Mark’s two aunts testified June

lacked the mental capacity to manage her own affairs. Based on weekly visits to

the nursing home, one stated June “did not know who her living relatives were”

and she was “[p]retty far gone by” the time of the farm sale. The other described

June as “incompetent” and “delusional” and plagued by “[l]oss of memory.” She

testified June was completely reliant on Mark, because she “had no money, and

she had no checkbook.”

       Mark’s three sisters did not see their mother as often as his aunts did, in

part because of geographical distance. But when they visited, they uniformly found

her to be disoriented. One testified to receiving a call from Mark explaining that

June was on dementia medication. Another stated June was unable to recognize

her and was “very confused” around the time of the Maynard farm sale. The third

sister similarly testified June stopped recognizing her despite “virtually daily

[telephone] contact.” In her words, June was “[one] hundred percent” dependent

on Mark. Again, the record lacked clear, satisfactory, and convincing evidence to
                                           6

establish June freely made decisions about the Maynard farm sale and disposition

of the proceeds.

       We conclude the district court acted equitably in finding a confidential

relationship between Mark and June resulting in a presumption of a fraudulent

transfer and in concluding Mark failed to rebut the presumption.

II.    Breach of Fiduciary Duties as Power of Attorney

       Mark contends the district court should not have found he breached his

fiduciary duties under the terms of the power of attorney. Our discussion above

resolves this issue. We conclude the district court acted equitably in finding a

breach of fiduciary duty. Cf. Trumm, 2016 WL 3272295, at *11 (holding nephew,

under power of attorney, did not act in good faith in executing real estate contract

for uncle, due to uncle’s “mental incapacity, the disadvantageous terms of the

sales contract . . . , [his] awareness of the terms of [his uncle’s] will, and the fact

that the price on the contract was below market value”).

III.   Intentional Interference with Inheritance

       The Iowa Supreme Court has recognized “an independent cause of action

for the wrongful interference with a bequest.” Frohwein v. Haesemeyer, 264

N.W.2d 792, 795 (Iowa 1978).            “[I]n an intentional interference case, the

wrongdoer’s unlawful intent to prevent another from receiving an inheritance is the

key issue.” Huffey v. Lea, 491 N.W.2d 518, 521 (Iowa 1992); see also In re Estate

of Boman, No. 16-0110, 2017 WL 512493, at *10 (Iowa Ct. App. Feb. 8, 2017)

(setting forth elements of the tort).

       The district court concluded:
                                   7

        [T]he plaintiffs have proven that they expected to receive an
inheritance from June upon her death. Mark testified that he was
aware of June’s will’s provision regarding the Maynard farm, so the
court considers this element also met. And the plaintiffs have clearly
suffered damages as a result of their loss of inheritance.
        Two other elements require more discussion. For the plaintiffs
to succeed in this claim, the court must additionally find (a) that Mark
intentionally and improperly interfered with the plaintiffs’ expectance
and (b) a reasonable certainty that the plaintiffs would have received
an inheritance but for the interference.
        If the sale of the Maynard farm were the only act in question,
the court would not be able to find that the plaintiffs met their burden
on the “intentional and improper interference” element. The need for
funds provides an explanation for Mark’s acts as agent that is
reasonable, and there are not suspicious extenuating circumstances
as to the sale.
        But that element is not as easily discarded as to the
beneficiary designation. The court recognizes that the only direct
evidence as to Mark’s actions and intent (or lack of it) is Mark’s
testimony. But the circumstances make it impossible to take Mark’s
testimony at face value. “Direct and circumstantial evidence are
equally probative.” After having executed the Maynard farm sale
agreement, the sale closing and the opening of the [investment]
account as June’s agent, this court cannot believe that June then
decided on and was able to accomplish the beneficiary designation
without Mark even knowing. Even if the court accepts that June was
cognitively competent and that the signature on the designation is
indeed hers, it would have to believe that June made these
arrangements despite her significant hearing loss, which made
telephone communication difficult. It would have to accept that June
told Mark nothing of her plan and knew just where to sign on both
forms, even though she had relied on him for other recent financial
transactions. It would have to accept that Mark, even though he was
June’s financial fiduciary, did not even inquire as to what documents
he was transporting from and to [the investment firm]. The court
would have to ignore that whoever filled out the initial [investment]
account application was very clearly the same person who filled out
the beneficiary designation forms with Mark’s birthdate and social
security number—the most likely candidates being Mark or his
daughter-in-law. Finally, the court would have to accept that, for no
discernable reason, June decided to cut her daughters out of her will
after Mark had already received the farm that she had devised to
him. These are circumstances that the court cannot ignore or accept.
        In regard to the final element, the court concludes that the
plaintiffs have demonstrated a reasonable certainty that they would
have received an inheritance but for Mark’s interference. They would
have at least received the sale proceeds remaining in the
                                          8

       [investment] account, even if some of the funds had been expended
       for June’s care.
               The plaintiffs’ burden of proof on their claim of intentional
       interference is a preponderance of the evidence, and the court
       concludes that they have met that low burden.

(footnote and citation omitted). We could not have analyzed the claim any better.

On our de novo review, we fully concur in the district court’s findings and

conclusion that Mark interfered with the sisters’ inheritance.

IV.    Damages – Ademption

       “Ademption means ‘a taking away’ and generally refers to removing or

eliminating a specific bequest from a will or trust before the death of the testator.”

In re Steinberg Family Living Tr., 894 N.W.2d 463, 468 (Iowa 2017) (citing In re

Estate of Anton, 731 N.W.2d 19, 23 (Iowa 2007)). “[A]demption occurs where a

testator had knowledge of a transaction involving a specific devise, realizes the

effect of the transaction on his or her estate plan, and has an opportunity to revise

the will. Where these elements are not present, no ademption occurs.” Anton,

731 N.W.2d at 26.

       The sisters alleged no ademption occurred and they were entitled to

damages equivalent to the fair market value of the Maynard farm. The district court

agreed with the sisters on the sale of the Maynard farm. Specifically, the court

stated “failure of the devise is presumptively inconsistent with [June]’s intent, and

[u]nless the presumption is rebutted the specific devise does not fail.” The court

concluded Mark failed to “overcome that presumption as to the sale.” Based on

this conclusion, the court awarded the sisters damages equal to the fair market

value of the property, minus the amount of a mortgage loan that was satisfied.
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       On appeal, Mark contends the court inappropriately awarded damages

“based on the [Plaintiff’s] ademption claim which was denied by the court.” Mark’s

real challenge is not to the court’s discussion of ademption but to the amount of

damages awarded by the court. Specifically, he contends the court should have

deducted “capital gains tax which would have been paid by the decedent on her

federal and state income tax returns for calendar year 2011 and again for the cost

of probate administration.”

       Mark did not raise these damage items at trial, nor did he file a post-trial

motion asking the court to revisit these damage amounts. Accordingly, we could

conclude he failed to preserve error. See Semler v. Knowling, 325 N.W.2d 395,

399 (Iowa 1982) (“Since the damage issue was not preserved for appeal, we have

nothing to review in that regard.”). We bypass this error preservation concern and

proceed to the merits. See State v. Taylor, 596 N.W.2d 55, 56 (Iowa 1999).

       The district court ordered the subtraction “of any costs necessary for final

administration of the probate proceedings.” And, as the sisters note, “The trial

court specifically assigned the damage award to . . . June’s estate” and,

accordingly, “[a]ny taxes owed will therefore be charges against the damage award

in that matter.” In short, Mark received the relief he is now requesting.

V.     Appellate Attorney Fees

       The sisters request an award of appellate attorney fees. In Huffey, the court

stated, “We are strongly committed to the rule that attorney fees are proper

consequential damages when a person, through the tort of another, was required

to act in protection of his or her interest by bringing or defending an action against

a third party.” 491 N.W.2d at 522. In light of this statement, we remand to the
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district court for consideration of an award of appellate attorney fees. See In re

Herrera, 912 N.W.2d 454, 473 (Iowa 2018); De Stefano v. Apts. Downtown, Inc.,

879 N.W.2d 155, 191–92 (Iowa 2016).

      AFFIRMED AND REMANDED.