Opinion
No. 2-501 / 01-1885
Filed September 11, 2002.
Appeal from the Iowa District Court for Linn County, David M. Remley, Judge.
An estate appeals the trial court's ruling that a check from the decedent to his wife was a gift, not a loan. REVERSED AND REMANDED.
Leonard Strand of Simmons, Perrine, Albright Ellwood, P.L.C., Cedar Rapids, for appellant.
David Elderkin and Christopher Bruns of Elderkin Pirnie, P.L.C., Cedar Rapids, for appellee.
Considered by Hayden, Habhab, and Brown, Senior Judges.
Senior Judges assigned by order pursuant to Iowa Code section 602.9206 (2001).
The trial court concluded the transfer of $21,156 from the decedent to his wife was a gift, not a loan. The estate appeals. We reverse.
I. Background and Procedure.
Plaintiff's decedent, Elmer Peterson, and defendant, Geraldine Peterson Stopher, were married in 1992. They entered into a prenuptial agreement before the marriage. This agreement is also in litigation, but not involved here. Elmer died testate in June 1997 at the age of eighty-four leaving no children. At that time, Geraldine was eighty-one. Geraldine did not take under the will.
In 1996, Geraldine's daughter, Barbara Davisson, and her husband were having difficulty paying their residence property taxes amounting to $21,156. On July 30, 1996, Barbara visited Geraldine, explained the problem, and Geraldine suggested the two of them go pay the taxes. According to Barbara, Elmer was some ten to twelve feet away during their conversation, but did not participate in it. Barbara also testified she knew her mother usually had between $20,000 and $30,000 in her checking account, and that she also had certificates of deposit and other investments. Barbara and Geraldine then went to the Linn County Treasurer's office and Geraldine wrote her personal check for the tax bill. According to Barbara, she and Geraldine spent most of the rest of the day together and Geraldine made no deposits to her account that day. Geraldine and Elmer maintained separate checking accounts, as well as a joint account. Geraldine competently managed her own financial affairs.
That same day, Elmer signed a typewritten check on his account, payable to Geraldine, in the amount of $21,156. This check was deposited the same day in Geraldine's checking account. It was not endorsed. On the memo part of the check was typed "Loan to be repaid." Barbara also testified it was Geraldine's custom to endorse checks she deposited and to make out her own deposit slip. Barbara thought the deposit slip for this check was not in her mother's handwriting. At that time, Elmer was still occasionally driving an automobile.
The check itself has never surfaced. A photostat copy was obtained from the bank. The parties stipulated this represents decedent's check.
Barbara related that at a later time Elmer asked her if Geraldine had paid the taxes, and commented that he wished he could have helped. Barbara said she was not aware of Elmer's check until after he died, nor was she aware of any loan from Elmer to Geraldine. Geraldine did not testify at the hearing, but in her deposition stated she had no memory of the transaction in any respect.
On July 24, 1996 Geraldine had a balance of $17,472.67 in her checking account. There were no deposits after that until Elmer's $21,156 check on July 30, 1996. Geraldine's checking account balance was then $33,628.67. After the check she wrote for Barbara's property tax that day, her balance was $12,472.67 on August 1, 1996.
After Elmer's estate was opened, Geraldine applied for a spousal allowance. The parties agreed to the amount of $22,000. The estate now claims the $21,156 check from Elmer to Geraldine was a loan which should be offset against her spousal allowance. Geraldine asserts it was a gift. The only direct evidence of the nature of the transaction was the notation "Loan to be repaid." There is no evidence of any other money transfers from Elmer to Geraldine, or Geraldine to Elmer, either as a loan or gift.
The trial court held that since there was no evidence Geraldine was aware of the notation on the check, the transaction was not a loan. The court then concluded there was a rebuttable presumption that the transaction between spouses was a gift, and the presumption should prevail.
II. Standard of Review.
The parties dispute whether this is a law or equity case. Although Iowa Code section 633.33 (2001) provides that all probate matters are to be tried in equity except will contests, involuntary guardian and conservator appointments, and actions to establish contested claims, Geraldine maintains this should be considered a law action because it is based on contract and seeks money damages. However, it remains this was a probate proceeding to establish an offset to a spousal allowance provided by Iowa Code section 633.374. More importantly, the trial court considered it as an equity case throughout, without objection. The court did not rule on objections and referred to it as an equity case in its ruling.
The manner in which the case was tried in district court determines our review. Henning v. Security Bank, 564 N.W.2d 398, 399 (Iowa 1997); Grinnell Mut. v. State Farm Mut., 558 N.W.2d 176, 179 (Iowa 1997). Since the case was tried in equity our review is de novo. Iowa R. App. P. 6.4. We give weight to the fact-findings of the trial court, particularly those involving credibility of witnesses, but we are not bound by them. Iowa R. App. P. 6.14(6)( g). Of course, we consider direct and circumstantial evidence to be equally probative. Iowa R. App. P. 6.14(6)( p).
III. Discussion.
The parties agree the check from Elmer to Geraldine constituted either a gift or a loan. A gift requires the intent of the donor to make a gift, delivery, and acceptance by the recipient. In re Marriage of Liebich, 547 N.W.2d 844, 851 (Iowa Ct.App. 1996). A loan is contractual; the lender transfers money to the borrower, who agrees to return it at some future time. Mosebach v. Blythe, 282 N.W.2d 755, 760 (Iowa 1979). The intent of the parties, determined by testimony and all surrounding circumstances, is "of crucial importance in determining what relationship their conduct gave rise to." Id. at 760-61.
The trial court concluded the substantial deposit into Geraldine's checking account was not intended as a loan, because there was no evidence she saw the check. We take this to mean there was no meeting of the minds on the essential term of repayment, hence no loan contract. Significantly, the court implied that had Geraldine been aware of the notation on the check, the result would have been different. The court then relied on a presumption that an unexplained transfer of personal property between spouses would be regarded as a gift.
The court stated in its ruling "[i]f Geraldine had endorsed the check or if Geraldine personally deposited the check in her account, it would be evidence that she intended that the check for $21,156 from Elmer to her was a loan. There is no evidence that Geraldine actually saw the check from Elmer which was deposited in her account."
We disagree with the trial court's analysis in that our de novo review convinces us there was substantial circumstantial evidence Geraldine was aware of the nature of the transaction at the time it took place. It is practically inconceivable that Geraldine was unaware of Elmer's check on the day it was written and deposited. Her daughter confirmed Geraldine was quite competent to manage her own financial affairs. Geraldine frequently made deposits to her individual checking account and kept track of the substantial sums which were ordinarily on deposit there. It is clear Geraldine did not have sufficient funds to cover the $21,156 check written to the Linn County Treasurer on July 30. She did not transfer other funds into her account, but relied on the infusion of cash from Elmer. Elmer was obviously privy to what was going on that day. He (or someone for him) typed his check in the precise amount of Barbara's tax bill and it was deposited in Geraldine's account the same day, which clearly establishes he knew what was taking place. It strongly suggests he discussed his actions with Geraldine. Without that interaction, Geraldine could not have known she had no need for additional funds in order to author her substantial check to assist her daughter. It is not reasonable to then conclude Geraldine was aware of the deposit, but not of the nature of the transaction. Even Elmer's comment later to Barbara suggests he was loaning, not giving, the money to Geraldine. We conclude Geraldine was aware the check from Elmer to her was intended as a loan and that she accepted it with that understanding.
The form of the transaction does not determine if funds advanced are intended as a loan. Mosebach, 282 N.W.2d at 761. In In re Marriage of Vrban, 359 N.W.2d 420 (Iowa 1984) our supreme court held that placing the notation "loan" on checks from parents to their child and his wife was a "significant act" indicating those checks were loans, while others, without the notation, were gifts. Id. at 427. Similarly, we agree the notation "Loan to be repaid" distinguishes this transaction from a gift and establishes the parties intended a loan.
We may assume, without deciding, there is a presumption in Iowa that unexplained transfers of personal property between spouses will be considered gifts. See, e.g., Sinclair v. Allender, 238 Iowa 212, 225, 26 N.W.2d 320, 327-28 (1947) (purchase of real estate by husband and placed in wife's name is presumed gift, advancement, or conveyance for her benefit); In re Estate of Mahin, 161 Iowa 459, 466, 143 N.W. 420, 423 (1913) (presumption of gift or advancement where real estate placed in name of person to whom donor owed obligation of support); 41 C.J.S., Husband and Wife, § 105(a) at 400 (1991) ("Generally, where one spouse transfers, delivers, or conveys his or her separately owned property to the other spouse, the transaction gives rise to a presumption that the transfer was intended as a gift."). Nevertheless, we think any such presumption has been overcome in this case. See 41 C.J.S., Husband and Wifeat 401 (evidence of contrary intent will rebut presumption). The notation on Elmer's check is unequivocal in explaining the true nature of the transaction. It is not subject to the criticism that the bare word "loan" is ambiguous and does not indicate what the parties intended. See Matherly v. Hanson, 359 N.W.2d 450, 454 (Iowa 1984). Here, it is clear that, since it is "to be repaid," it cannot involve the repayment of a loan from Geraldine to Elmer. To hold the parties intended a gift in this situation would require us to effectively disregard the notation entirely.
We conclude the transfer of $21,156 from the decedent to Geraldine on July 30, 1996 was a loan from the decedent to Geraldine which should be repaid. The decision of the trial court is reversed and the case is remanded for an appropriate set-off order regarding the $22,000 spousal allowance.
The costs are taxed to the defendant-appellee.
REVERSED AND REMANDED.