Opinion
No. 3-607 / 02-1075
Filed March 10, 2004
Appeal from the Iowa District Court for Jones County, William L. Thomas, Judge.
A trust beneficiary appeals from the district court ruling that dismissed her petition to declare her the high bidder on certain trust property offered for sale at a private auction or, alternatively, rescind the results of the auction. AFFIRMED.
Lawrence Marcucci and John Conger of Marcucci Conger, P.L.C., West Des Moines, and James Goodman of O'Connor Thomas, P.C., Dubuque, for appellant.
Mark Roberts of Simmons, Perrine, Albright Ellwood, P.L.C., Cedar Rapids, for appellee Firstar.
Ronald Wendt of Nazette, Marner, Wendt, Knoll Usher, L.L.P., Cedar Rapids, for appellees Smiths.
Merna Folkers, Mt. Prospect, Illinois, appellee pro se.
Lela Kratz, Charleston, South Carolina, appellee pro se.
Leona Krompart, Chicago, Illinois, appellee pro se.
Russell Meeks, Fairfax, appellee pro se.
Rita Mullet, Gulf Breeze, Florida, appellee pro se.
Considered by Sackett, C.J., and Miller and Hecht, JJ.
Nancy Folkers, a beneficiary of the H.W.G. Folkers Revocable Trust and the Byrdena Folkers Revocable Trust, appeals from a district court ruling that dismissed her petition, wherein she had requested the court to declare her the high bidder on certain trust real estate offered for sale at a private family auction or, alternatively, rescind the results the auction. We affirm the district court.
The petition further sought a temporary injunction against any conveyance of the property sold at the auction. The injunction, which was denied by the district court, is not at issue on appeal.
I. Background Facts and Proceedings.
This matter involves the combined trusts of decedents H.W.G. and Byrdena Folkers. The beneficiaries of the trusts are the couple's five daughters — Nancy Folkers, Laneva Meeks, Merna Folkers, Leona Kompart, and Treva Smith — as well as Treva's daughters, Elena and Ardelle. Firstar Bank, N.A. (Firstar) is the trustee. Two farms, the "Home Place" and the "Morley Place," comprised the bulk of the trusts' assets.
Just prior to the filing of the petition in this matter, Laneva Meeks died. Her interest passed to her children Rory Meeks, Nola Marz, Lela Kratz and Rita Mullet.
Treva disclaimed her interest in her mother's trust, which then passed to her daughters. Treva maintained her interest in her father's trust.
Under the terms of the trusts Nancy, Merna, Leona and Treva were allowed to request a distribution of their respective shares of the trusts' assets. In December 1999 Nancy sought to have her share of the assets distributed to her in the form of the Home Place. However, Nancy's distributive share was approximately $30,000 less than the farm's 1996 appraised value of $365,881, and over $120,000 less than its 2000 appraised value of $456,000. Faced with disagreements among the beneficiaries, Firstar determined the most equitable solution would be to hold a private family auction, where the Home Place and the Morley Place would be offered for sale.
Although it was not required to do so, Firstar obtained district court approval for the auction. The court ordered that, unless all beneficiaries approved the sale of the Home Place to Nancy and the Morley Place to Leona and Treva or Leona, Treva and Treva's daughters, then Firstar was
The trusts confer upon Firstar the power
[t]o sell at public or private sale, contract to sell, convey, exchange, transfer, and otherwise deal with the trust property and any reinvestments thereof from time to time for such price and upon such terms as the trustee sees fit. . . .
granted authority to sell the Home Place at a family auction and, if necessary to satisfy future requests for distributions, . . . granted authority to sell the Morely Place at a family auction. . . .
When the necessary consents were not forthcoming, Firstar set the auction for September 2000. The beneficiaries were sent a letter disclosing the date, time, place and terms of the auction, including the fact the Morley Place would be auctioned first. Nancy did not object to the order of sale or any other term or procedure.
Both Nancy and her attorney, Robert Downer, attended the auction. Attendees were provided an agenda that listed the starting bids for each property at their 2000 appraised values: $450,000 for the Morley Place, and $456,000 for the Home Place. Auctioneer Russell Curtis first solicited bids on the Morley Place. He accepted the first and only bid on the property, $450,500, which was made by Attorney Larry Kline on behalf of Treva and Leona.
Curtis then solicited bids on the Home Place. When attorney Kline made an opening bid of $456,000 on behalf of Treva and her daughters, Nancy became upset and briefly left the room. When she returned she raised the bid by $1. Bidding proceeded between the Smiths and Nancy, with attorney Kline raising the Smiths' bids in increments of $1,000, $2,000 and finally, $5,000, and Nancy responding each time by bidding $1 higher than the Smiths' prior bid.
Nancy's opening bid of $373,705 was rejected as it was below the minimum bid.
Nancy was clearly upset during the proceedings, and on several occasions left the room. Each time the bidding was halted until she returned. However, both Nancy and attorney Downer were in the room when attorney Kline submitted the ultimately successful bid of $475,001. As will be discussed in more detail later in this opinion, a series of events ensued which left Nancy of the opinion that she had submitted the highest and final bid on the Home Place. However, Curtis declared that when the bidding was closed the highest and final bid was that submitted by the Smiths, for $475,001.
The bidding proceeded as follows: the Smiths bid $456,000; Nancy bid $456,001; the Smiths bid $457,000; Nancy bid $457,001; the Smith's bid $458,000; Nancy bid $458,001; the Smiths bid $460,000; Nancy bid $460,001; the Smiths bid $465,000; Nancy bid $465,001; the Smiths bid $470,000; Nancy bid $470,001; the Smiths bid $475,001.
Nancy filed a petition that requested the district court to either declare her the high bidder on the Home Place and direct Firstar to convey the property to her or, alternatively, to rescind the results of the auction and order a new auction with more clearly defined rules. Following a bench trial the district court dismissed Nancy's petition. The court rejected Nancy's various claims about the impropriety or inequity of auction procedures, as well as her claim that she had been the high bidder on the Home Place. The court also denied Nancy's post-trial Iowa Rule of Civil Procedure 1.904(2) motion. Nancy appeals.
II. Scope of Review.
This court conducts a de novo review of equitable proceedings arising in probate. Iowa Code § 633.33 (1999); Iowa R. App. P. 6.4.
III. Discussion.
On appeal Nancy contends she was the high bidder on the Home Place as either 1) she submitted a high bid of $475,002 before bidding was closed, or 2) bidding was reopened following the Smiths' $475,001 bid, after which she submitted the final and highest bid of $475,003.50. Alternatively, Nancy contends the auction was invalid as 1) it is unclear whether she submitted her $475,002 bid prior to the close of bidding and 2) the auction was conducted in an inequitable manner. The validity of these claims hinge on various factual determinations. Here, the district court's fact findings were generally adverse to Nancy's claims. We not only give weight to those findings, Iowa R. App. P. 6.14(6)( g), but, based on the record before us, largely concur in them.
A. High Bid.
We first address, and reject, Nancy's contention that she submitted the high bid on the Home Place prior to the close of bidding. It is undisputed that sometime after attorney Kline submitted the $475,001 bid on behalf of the Smiths, Nancy offered a bid of $475,002, personally declared the bidding closed, and stormed out of the room. However, the vast majority of the evidence, including testimony from not only Curtis but Firstar representative David Kubicek, Nancy's nephew Rory Meeks, attorney Kline, and even attorney Downer, indicates that Nancy's bid of $475,002 occurred after Curtis had closed the bidding on the Home Place. In fact, Curtis specifically testified that after the Smiths' $475,001 bid, he asked if there were additional bids, looked specifically at Nancy, waited for approximately one minute, and, receiving no further bids, closed the bidding on the Home Place. Even Nancy did not specifically claim that her bid occurred before bidding was closed, only that she was upset and did not hear Curtis close the bidding. To the extent Nancy's claims are premised on the timing of her tender of a $475,002 bid, they are without merit.
Nor can we credit Nancy's claim that bidding was reopened, after which she submitted the high bid. Nancy relies on testimony from her expert witness, Arden Johnston, who opined that an auctioneer has the inherent authority to reopen an auction for additional bids, and that once additional bids have been accepted by the auctioneer, the bidding is in fact reopened. The district court found Johnston's testimony irrelevant, as the sale in this case occurred at a private, rather than public auction. Even if we were to disagree with the court, and conclude the principles outlined by Johnston were controlling, Nancy's claim cannot succeed. Johnston further testified that a bid has no meaning until it is accepted by the auctioneer, or a person the auctioneer has authorized to accept bids. While the record contains evidence that additional bids were tendered by Nancy and the Smiths, it does not show that any of the bids were accepted.
The basis for this particular claim is an exchange between Kubicek and attorney Kline that occurred after Nancy offered her $475,002 bid and left the room. Kubicek, concerned that Nancy might try to rely on her bid to assert she had in fact been the high bidder on the Home Place, asked attorney Kline if the Smiths would be willing to bid $475,003. After expressing concern about the fact the auction had been closed, attorney Kline reluctantly tendered a bid of $475,003. Nancy then reentered the room and tendered a bid of $475,003.50. Curtis and Kubicek privately conferred, at which time Curtis informed Kubicek the bidding had been closed at $475,001. Curtis then announced the bidding had closed after the Smiths' $475,001 bid, and struck the $475,002, $475,003, and $475,003.50 bid "notations" from his handwritten auction record.
At best the foregoing demonstrates that Kubicek solicited an additional bid from the Smiths, and that the Smiths and Nancy tendered additional bids. In light of the remaining record, however, it does not demonstrate that these bids were accepted. Curtis testified that, after he closed the bidding, he did not accept any additional bid tendered by Nancy or the Smiths. Curtis explained that while he wrote down the three additional bids, he was simply making notations for his record, rather than recording an accepted bid. Nancy herself testified that "she did not recall" Curtis confirming the Smith's $475,003 bid. In addition, the evidence establishes that Kubicek was not the auctioneer, and was not authorized to accept bids, or even to solicit the bid from the Smiths. Nancy has failed to demonstrate that the bidding was reopened after it was closed by Curtis.
Finally, Nancy contends that even if her final bid was made after the close of bidding and was not accepted by the auctioneer, it was incumbent upon the district court to accept that bid as it offered the highest and best price for the Home Place. She relies on the case of Thornton v. Estate of Thornton, 531 N.W.2d 651 (Iowa Ct.App. 1995) to support this proposition. We find Nancy's arguments to be misplaced.
Thornton involved a judicial sale which became final only upon court confirmation. Thornton, 531 N.W.2d at 653. Here, Firstar conducted a private auction which became final upon the auctioneer's acceptance of the final and highest bid. Moreover, Nancy's last bid was only $2.50 higher than the bid accepted by the auctioneer. "`Ordinarily we do not approve the acceptance of a bid which has been increased by but a small, proportionate amount over a previous bid, which had been accepted by the referee, at either a public or private sale.'" Id. at 655 (quoting Criswell v. Criswell, 227 Iowa 212, 222, 288 N.W. 130, 135 (1939)). While strong equitable considerations may on occasion lead this court to make an exception to the general rule, see Thornton, 531 N.W.2d at 655, no such considerations appear in this case.
B. Validity of Auction.
Nancy claims, in the alternative, that the sale to the Smiths should be invalidated because of irregularities and inequities in the auction process. However, while Firstar held the auction pursuant to court order, the conduct of the auction was a matter within Firstar's discretion. See Iowa Code § 633.4401(3) (2001) (noting grant of power to trustee, whether by terms of the trust, the Code, or the court, does not govern exercise of the power). We will interfere only when that discretion has been abused, or exercised in violation of fiduciary principles. See id.; Iowa Code § 633.4214.
These particular sections of the Iowa Trust Code embody preexisting common-law principles in this area. See In re Tone's Estate, 240 Iowa 1315, 1321, 39 N.W.2d 401, 405 (1949).
Nancy first contends the auction was invalid as it was unclear whether her $475,002 bid occurred before, after or during the time when Curtis closed the bidding. This claim fails as a factual matter, because we have already determined Nancy's bid in fact occurred after bidding was closed. Moreover, even if Nancy's bid had occurred "while the hammer [was] falling in acceptance" of the Smiths' bid, at most Curtis had the discretion to, but was not required to, reopen the bidding. Iowa Code § 554.2328(2); but see Iowa Code §§ 554.2102 (stating that Article 2 of the Uniform Commercial Code "applies to transactions in goods"), .2105 (defining "goods," a definition which does not include real estate).
Nancy also complains the auction "violated the court's directive to offer the Home Place first and the Morley Place only if necessary." We, like the district court, do not interpret the order authorizing the auction to require that the Home Place be sold before the Morley Place, or to require any specific sequence or timing of sale. Rather, the order granted Firstar the conditional right to sell each farm at a family auction, but further conditioned the right to sell the Morley Place upon such sale being "necessary to satisfy future requests for distributions." This condition for sale was triggered by Leona's request for her distributive share. We perceive no irregularity in the fact the Morley Place was offered for sale before the Home Place. Moreover, we note that, although Nancy had ample notice of the order of sale and opportunity to object to the order prior to the close of bidding, she did not do so.
Nancy makes several additional allegations, including bad faith and bias on the part of Firstar, and Firstar's failure to ensure a fair auction. We find such claims to be unsupported by the record and wholly without merit. In fact, in attorney Downer's opinion the auction did not appear to be biased in favor of or against any particular person. Nancy had been provided an opportunity to respond to each of the Smiths' bids before Curtis closed the auction, and the procedures as outlined in the court's order approving the auction were followed. Nancy has not demonstrated that Firstar abused its discretion, or violated fiduciary principles, in the conduct of the auction.
IV. Conclusion.
Nancy has not established that she, rather than the Smiths, was the high bidder on the Home Place, or that equity requires the acceptance of the final bid she tendered. Nor has she shown that the auction was conducted in such an irregular or inequitable manner that it should be invalidated and its results rescinded. The district court properly dismissed Nancy's petition.
AFFIRMED.
Sackett, C.J., concurs in part and dissents in part.
I concur in part and dissent in part. Appellant asks that we declare her the highest bidder and order the trust to sell her a piece of farmland or that we order the auction set aside. I would set the auction aside for two reasons: (1) because the alleged sale was not conducted in a fair and equitable manner and (2) it was a judicial sale — consequently it was not final until approved by the district court. For these reasons I also would reject appellant's argument that we should order the farmland sold to her.
The sale was not conducted in a fair and equitable manner for a number of reasons. First, the order of sale did not conform to the order authorized by the district court. Although the trustee had the authority to sell the farms, he sought court approval subject to certain terms to do so. The application among other things requested first that the Trustee be granted authority to sell the Home Place "and if necessary to satisfy future requests for distributions, be granted authority to sell the Morley Place. . . ." The terms of the sale in the application were the terms of sale approved by the district court. In saying this, I recognize that a letter sent to the heirs was contrary to this and indicated the Morley place would be sold first. However, the terms of the sale that were approved by the court would prevail.
Second, the sale was not conducted in a manner so as to draw the highest bid. The acting auctioneer had two bidders on farmland valued at nearly a half million dollars. The majority has found that he waited but one minute after what the majority has found to be the final bid before closing the bidding. Arden Johnston, an auctioneer who is a member of the Iowa Auctioneers Association and the National Auctioneers Association and has auctioneer experience, testified that when selling high dollar items such as farmland, recesses would be taken to assure that bidders had adequate time to confer with spouses and others. I give Johnston's testimony substantial weight. The haste with which the alleged last bid was accepted is evidence the sale was not conducted in a way to get the best price for the land. This is particularly true where Nancy subsequently made a higher bid. And then the alleged highest bidder was asked for an additional bid. That request resulted in an additional three bids being made, the highest of which was Nancy's. The trustee recorded the three bids and then rejected them. This is an additional indication the trustee was not concerned about receiving the highest price for the land.
Furthermore, I believe the sale was a judicial sale, and as such was conducted subject to court approval. I recognize that the trustee had the right to sell real estate without court order. However, for whatever reason he elected to obtain court approval to sell. Consequently, I believe in doing so it became a judicial sale, as it was done under court order. Judicial sales have been described as sales ordered by the court and conducted by marshals, masters, commissioners, or sheriffs, or by court-appointed fiduciaries including executors. Thornton v. Estate of Thornton, 531 N.W.2d 651, 653 (Iowa Ct.App. 1995) (citing 47 Am. Jur.2d Judicial Sales § 1, at 488 (1995)). These sales are subject to confirmation by the court ordering the sale, and only become final upon being confirmed. Id. Judicial sales may be ordered in a variety of proceedings, including partition proceedings and proceedings for the sale of real property of a decedent. Id. That said, the entire matter of confirmation of judicial sales is left with the court, which may confirm or not in its discretion. Id. (citing 47 Am. Jur.2d Judicial Sales § 308, at 307 (1995)).
While I do not agree with the majority that the auction was closed when Nancy made the last and highest bid, I would concur with the majority in rejecting her claim we should order the land sold to her.