Opinion
No. 4-011 / 03-0136
Filed February 27, 2004
Appeal from the Iowa District Court for Boone County, David R. Danilson, Judge.
The respondent appeals from the district court's order entering declaratory judgment in favor of the petitioners. REVERSED AND REMANDED WITH DIRECTIONS.
Stephen Howell and Nathan Levin of Newbrough, Johnston, Brewer, Maddux Howell, L.L.P., Ames, for appellant.
Michael Lewis of Lewis Law Firm, Huxley, for appellees.
Heard by Sackett, C.J., and Vaitheswaran and Eisenhauer, JJ.
Ronald Carlson, as Executor of the Estate of Dale V. Sheldahl, appeals from the district court's order entering declaratory judgment in favor of the Residuary Beneficiaries of the Estate of Dale V. Sheldahl. Carlson contends the district court erred in finding a compensation agreement existed between Sheldahl and Carlson, whereby Carlson was promised eighty acres of farm land in exchange for labor and services provided to Sheldahl. We reverse and remand with directions.
I. Background Facts and Proceedings.
Ronald Carlson first began working for Dale Sheldahl while still in high school in 1964 or 1965. When Carlson graduated from high school in 1967, he continued working for Sheldahl as well as other farmers in the area. In 1969 or 1970, Carlson twice applied for a job at John Deere, but was not offered a position. In 1972 or 1973, Carlson began working for Sheldahl full-time as a hired hand His salary for this position never exceeded $24,000.
In 1976, Sheldahl built a home for Carlson and his wife on his property, telling them the house would belong to them upon his death. Sheldahl paid all real estate taxes on the home and Carlson never paid rent. Sheldahl also informed Carlson in the late 1970s and again in the mid 1990s that "he'd get" the eighty-acre farm.
Sheldahl retired in 1983 or 1984. At that time, Sheldahl and Carlson entered into a crop sharing agreement whereby each party received one-half of the crops. As a tenant on Sheldahl's land, Carlson did "everything on the farm" except keep Sheldahl's books.
At some point after his retirement, Sheldahl moved to Arizona. Carlson stayed in contact with Sheldahl and enjoyed a friendly relationship with him. Carlson tried to purchase Sheldahl's farm on several occasions and obtained an appraisal of the land for that purpose. However, Sheldahl informed Carlson he did not need to "buy something [he was] already going to get." The land is valued at $309,000.00.
Sheldahl died on February 21, 2001. Pursuant to the provisions of his will, the eighty acre farm was devised to his mother-in-law for life, and upon her death the remainder interest was devised to Carlson. All the rest, residue, and remainder of the estate was bequeathed to the residual beneficiaries. Carlson was nominated as Executor of Sheldahl's estate.
In November 2001, Doug Sheldahl, a nephew of the deceased and one of the residual beneficiaries, was provided a copy of the estate's state Form 706 inheritance tax return. Doug believed an error had been made on the return by the omission of a deduction for the federal estate tax. Doug contacted Professor James Monroe of the Drake University law school and hired him to review both the state and federal tax returns. Doug believed the estate should have taken a deduction in the amount of the bequest to Carlson because he believed the bequest was compensation pursuant to an agreement for services rendered. Professor Monroe was employed to prepare amended state and federal returns to correct the errors and deduct the amount of Carlson's bequeath as compensation.
When the amended returns were provided to Carlson, he was initially in agreement with the changes. However, when the attorney representing the estate contacted Carlson regarding the amended returns, his position changed.
A meeting was held at the office of the residual beneficiaries' attorney. Carlson attended the meeting, as did Doug, Professor Monroe, and the estate's attorney. Professor Monroe and Doug recall Carlson stating there was understanding between Sheldahl and himself, and that he would have "taken a walk if there hadn't been an understanding that he got the farm." Carlson admitted he would have filed a claim in the estate if he had not been bequeathed the eighty-acre parcel and home. Professor Monroe understood Carlson's part of the agreement was to take care of the grounds, Sheldahl's personal matters, and to look after Sheldahl.
On May 28, 2002, the residual beneficiaries of the estate filed a petition for declaratory action, seeking declaratory judgment that a compensation agreement existed between Sheldahl and Carlson. Following trial, the district court concluded a valid compensation agreement existed between Sheldahl and Carlson, whereby Carlson was promised the farm in exchange for labor and services provided to Sheldahl during his lifetime. Carlson's motion to enlarge and amend the court's findings was denied.
II. Scope of Review.
We review law actions for corrections of errors of law. Land O'Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000). The district court's findings of fact are binding on us if supported by substantial evidence. EnviroGas, L.P. v. Cedar Rapids/Linn County Solid Waste Agency, 641 N.W.2d 776, 780-81 (Iowa 2002). Evidence is substantial for purposes of sustaining a finding of fact when a reasonable mind would accept it as adequate to reach a conclusion. Land O'Lakes, 610 N.W.2d at 522. The evidence is viewed in a light most favorable to the district court's judgment. Van Oort Constr. Co. v. Nuckoll's Concrete Serv., Inc., 599 N.W.2d 684, 689 (Iowa 1999).
III. Analysis.
On appeal, Carlson contends the district court erred in applying the wrong standard of proof, in finding the existence of an oral contract, in finding adequate consideration supported the contract, and in failing to acknowledge Sheldahl's intent.
The existence of an oral contract, as well as its terms, are ordinarily questions for the trier of fact. Gallagher, Langlas, Gallagher v. Burco, 587 N.W.2d 615, 617 (Iowa Ct.App. 1998). A party seeking to enforce any agreement has the burden of proving the terms of the contract. Advance Elevator Co. v. Four State Supply Co., 572 N.W.2d 186, 188 (Iowa Ct.App. 1997). Only a reasonable certainty an oral contract existed need be shown. Netteland v. Farm Bureau Life Ins. Co., 510 N.W.2d 162, 165 (Iowa Ct.App. 1993). In other words, the terms must be sufficiently definite to determine with certainty the duties and obligations of each party. Id.
Carlson first contends the district court erred in applying the wrong standard of proof. He claims the district court wrongly applied a preponderance-of-the-evidence standard when the plaintiffs were required to prove the existence of an oral contract by clear, satisfactory, and convincing evidence. It is true that proof of a claimed oral contract must be clear, satisfactory and convincing. Ehlinger v. Ehlinger, 253 Iowa 187, 192, 111 N.W.2d 656, 659 (1961). A mere preponderance of the evidence is not sufficient. Id.
In its ruling, the district court wrote:
To establish a contract, the Petitioners must prove by a preponderance of the evidence the following elements:
1. The parties were capable of contracting.
2. The existence of a contract.
3. The consideration.
4. The terms of the contract.
Later in the ruling it found, "[T]he weight of the evidence presented in this action supports the conclusion that a contract existed. . . ." Although the district court stated the petitioners' burden of proof was by a preponderance of the evidence, the residual beneficiaries argue the court's later citation to the unpublished case of Kidwell v. Davenport, No. 00-1255, April 24, 2002, shows it was well aware of the clear, satisfactory, and convincing standard and applied that standard in finding the existence of an oral contract. Because the court articulated the preponderance of the evidence standard, we must conclude that is the standard the court used. There is no proof to support the argument advanced by the residual beneficiaries.
Where, in a case tried by the court without a jury, the trial court errs as to the rule of law to be applied in considering the evidence in making its findings, the appellate court should vacate the findings made and remand the case with directions to reconsider the entire record and make new findings in the light of the applicable rule of law.
Oehlert v. Kramer, 205 N.W.2d 723, 727 (Iowa 1973) (citation omitted). Accordingly, we reverse and remand for reconsideration of the facts by the district court under the application of the proper clear, satisfactory and convincing evidence burden of proof. We do not retain jurisdiction.
REVERSED AND REMANDED WITH DIRECTIONS.
Vaitheswaran, J., concurs; Sackett, C.J., concurs in part and dissents in part.
I concur in part and dissent in part. I would reverse and dismiss.
This declaratory judgment action involves an attempt by appellees, residuary beneficiaries of decedent's estate, to structure what is agreed to be a clear and unambiguous specific bequest of real estate in decedent's will as an estate obligation to convey real estate in accordance with an oral contract made by decedent and appellant. The underlying reasons for the appellees' position are to reduce their federal estate tax and to create an income tax obligation for the appellant rather than an Iowa estate tax obligation.
I have questions whether even if this case were affirmed the appellees would receive the favorable tax treatment they seek as it seems by the time this action was commenced appellant had already inherited the eighty acres under the terms of decedent's will.
The will in question was executed by the decedent in December of 1993, and at his death was determined to be his last will and testament. In the will decedent devised and bequeathed a life estate in the eighty-acre tract in question to his mother-in-law. He then provided simply, "The remainder interest in said eighty (80) acre farm I will, devise and bequeath unto Ronald M. Carlson." (Emphasis supplied). The will contains no further reference to that eighty-acre farm or to appellant Ronald M. Carlson.
The probate file would indicate the mother-in-law predeceased the decedent.
Decedent died on March 26, 2001. The will was admitted to probate and has never been contested. On May 28, 2002, over a year after the will was admitted to probate, appellant filed this declaratory judgment action seeking to establish that there was an oral contract between appellant and decedent whereby the eighty acres appellant had already inherited was to be given to him not as an inheritance, but in consideration of the alleged oral contract to perform services.
The matter came to trial and the district court heard the evidence and found that the evidence showed there was a valid compensation contract between appellant and decedent whereby appellant was to provide decedent services during decedent's lifetime in exchange for the eighty acres. The appellant raised a number of issues on appeal including that the district court (1) applied the wrong standard of proof, (2) failed to present sufficient evidence to support the finding of the alleged oral contract, (3) did not find sufficient evidence of consideration to support the contract, and (4) failed to acknowledge the intent of decedent in his will.
The majority has reversed and remanded. In doing so they have only addressed the first issue raised by appellant and have concluded the district court applied the wrong standard of proof in finding there was an oral contract and have remanded for the district court to apply the correct standard. I do not disagree with the majority that the district court utilized the wrong standard of proof in determining whether there was an oral contract. I do not, however, find it is necessary to address this issue. Rather the case should be reversed and dismissed on other of appellant's issues. For the reasons set forth below, I would reverse the district court and dismiss the declaratory action.
First I would dismiss, for, as appellant argues, there is not sufficient evidence to support a finding there was an oral contract. Even looking at the scant evidence introduced of an oral contract in the light most favorable to appellees, when this scant evidence is considered together with the clear bequest in decedent's will, or as appellant argues on appeal, decedent's written intent, the evidence does not support a finding by clear and convincing evidence that there was an oral contract. That said, I don't believe this issue need even be reached, as I believe the will controls.
There was no language in the will indicating the bequest was to fulfill a contract.
Following the district court's decision, appellant filed a motion asking the district court to enlarge and amend its findings and judgment in accordance with Iowa Rule of Civil Procedure 1.904(2). The appellant stated that, among other reasons, not only was there no evidence decedent had an agreement or contract, but also, "To the contrary, the evidence showed the decedent bequeathed said 80 acres to Ronald Carlson in his last Will and Testament." Appellant contends on appeal the clear and unambiguous provisions of the will clearly show the decedent's intent was to devise the eighty acres to appellant. With this I strongly agree.
Appellees do not dispute that the will is clear and unambiguous. It is well established that no extrinsic circumstances are allowed in determining the testator's intent when the terms of a will are plain and unambiguous. In re Estate of Kiel, 357 N.W.2d 628, 630 (Iowa 1984). Furthermore, Iowa Code section 633.270 (2001) provides, "No will shall be construed to be contractual or mutual unless in such will the testator shall expressly state the intent that such will shall be so construed." To change the admitted clear and unambiguous intent of a will through a declaratory judgment action filed over a year after the will was admitted to probate is without precedent in this state and is contrary to the case and statutory law cited above. I strongly believe the case should be dismissed at appellees' cost.