Opinion
No. 6-007 / 04-1835
Filed March 1, 2006
Appeal from the Iowa District Court for Van Buren County, Michael R. Mullins, Judge.
Kenneth Turner appeals from a district court ruling closing a trust and enforcing a settlement agreement. AFFIRMED.
James Nepple and Michelle L. Heller of Nepple Law, PLC, Muscatine, for appellant.
Steven J. Westercamp of Westercamp Law Firm, Farmington, for appellee.
Heard by Huitink, P.J., and Vaitheswaran and Eisenhauer, JJ.
I. Background Facts and Proceedings
Gene Turner died testate in 2000, survived by his wife Mary Christine Turner, his son Kenneth Turner, and his two grandchildren Douglas and Stacy Turner (the children of Gene's deceased son Duane). From the outset of the probate proceedings, there were disagreements between Kenneth, Douglas, and Mary Christine, resulting in numerous lawsuits.
In the summer of 2001 Douglas and Kenneth were named co-trustees of the residuary trust created under Gene's last will and testament. In September 2001 a hearing was held with regard to an application to marshal the assets of the estate and for an interim accounting.
In December 2001 Gene's estate was closed, and assets were transferred to the trust. The assets transferred included farm machinery, Gene's interest in certain livestock, and an undivided one-half interest in several hundred acres of farmland which included at least two farmhouses.
In January 2003, following continued disagreements between Kenneth and the other family members, Kenneth and Douglas were removed as trustees. In April 2003 Iowa State Bank Trust Company of Fairfield and Earl Wallace Dick were named co-trustees.
On January 7, 2004, at a hearing before the district court, Kenneth, Mary Christine, Douglas, and Stacy Turner entered into a family settlement agreement to terminate the trust. During the hearing, Kenneth's counsel explained to the court the parties had agreed to release each other "for any acts which have happened up to this point, dismiss claims against each other." When counsel for Doug and Stacy sought to clarify that the beneficiaries were also agreeing to release the current co-trustees, Kenneth indicated he would not agree to such a release.
A calendar entry filed by the court following the hearing stated, "The current co-trustees are not expressly party to nor a part of any of the settlement agreements." The court filed an order approving settlement on January 16, 2004. The agreement provided that (1) the trust would be terminated and all trust expenses paid; (2) Mary Christine would receive all personal property and a life estate in the real estate owned by the trust; (3) Doug and Stacy would receive remainder interests in the real estate; (4) Kenneth would receive a cash payment from the other beneficiaries in an amount determined by subtracting the value of Mary Christine's life estate from the appraised value of the real estate; (5) Kenneth would dismiss one action pending in district court and two pending appeals; (6) the parties would release one another from liability for all claims as of the date of the agreement; and (7) Kenneth would be permanently enjoined from having contact with Mary Christine, Douglas, and Stacy, and vice versa.
On February 19, 2004 Kenneth filed an application to enforce settlement. At the hearing on the application, held March 26, 2004, Mary Christine's counsel explained the problem as follows:
[I]t's my understanding Ken Turner believes he has some claims against the trustees. And . . . the attorney for the trustees has indicated the trustees have claims against Ken Turner. And until either Ken Turner gives a release of claims against the trustees, or unless and until those are judicially decided, the trustees can't wind up the trust because they need to keep the money to pay attorney fees if in fact Ken Turner begins litigation against them.
Kenneth's counsel agreed with this assessment and explained to the court, "[I]t boils down to the trustees do not want to turn over the money [from the trust] to [Mary Christine] until they have a release [of liability] from Kenneth Turner. Kenneth does not want to provide a release to them." Counsel for Mary Christine requested the court order the trustees to file a final report and service of notice of the final report, which would "give a chance, if Ken Turner believes he has claims against the trustees, he would have to bring those or else the trustees could know that they will be discharged and able to wind up the affairs of the trust." Kenneth's counsel indicated "the court needs to order either he needs to bring a claim against the trustees or provide a release to the trustees." Kenneth's counsel told the court that Kenneth believed he had claims against the trustees, but that other counsel would be filing such claims on Kenneth's behalf.
At the end of the hearing, the court indicated it would issue an order of direction to the trustees to promptly prepare and file a final report, an application for approval of final report, and prescribe notice pursuant to statute to set that down which will then require . . . Mr. Kenneth Turner . . . to file any claims against trustees that you think you might have. And then if you do file claims, then of course the trustees can file counterclaims and then we'll get all of those matters set for hearing and trial.
The district court entered an order denying Kenneth's application to enforce settlement. The court ordered the trustees to prepare and file a final report "as preparation for termination of the trust as contemplated by the order approving settlement." The court further ordered the trustees to issue a probate notice pursuant to Iowa Code section 633.40(4) (2003).
On April 9, 2004, the trustees filed a final report and application for discharge. The final report included the following paragraph:
7. That all present and contingent beneficiaries should be required to execute appropriate releases in favor of the trustees and attorney for the trustee, releasing them from any and all liability associated with the execution of their duties related to this trust or the court should specifically order that the trustees and their attorney have fully administered the affairs of the trust to the best of their abilities, in accordance with law and all orders of the court, and they are fully discharged and released from any liability associated with duties performed during their appointment.
The trustees also issued a "Notice in Probate," directing the parties to file objections to the final report by May 6, 2004. The notice instructed that any party failing to file objections in writing by that date would be "forever barred from making any objections thereto."
Kenneth filed objections to the final report on May 5, 2004. He objected to paragraph seven of the report, arguing that releasing the trustees from liability "would break the agreement of the beneficiaries in the settlement" reached in January 2004. Kenneth further asserted he was still owed money for calves sold by the trustees. He claimed the amount owed was "pursuant to an agreement between the beneficiaries on an out-of-court agreement dictated into the record on September 28, 2001," and stated the amount owed would not necessarily "lower the amount of payment to Mary Christine Turner, but [would] come out of the own personal funds of the trustees for their malfeasance."
On September 7, 2004, Kenneth filed a supplement to objections to the final report, claiming "that the trustees have breached their fiduciary duty in this matter which has resulted in damages to Kenneth Turner." The co-trustees filed a resistance to the supplement to objections, arguing it was untimely and prejudicial.
At the hearing on the final report, the district court sustained the co-trustees' resistance to the supplement to objections and motion to strike the supplement. The court stated its reasons on the record:
I recall specifically explaining to the parties from the bench [at the March 26, 2004 hearing] that the idea behind a final report is that there would be a bar date set for filing objections, and failure to file objections within the bar date would waive all objections. That was then followed up by the written order by this court on April 2 of 2004 making a specific direction to the trustee to issue probate notice as in 633.40(4) of the probate Code. . . . As the court reads and interprets it, it means a bar date is set, objections are filed and then hearing is filed on the objections for the issues raised in the timely-filed objections. The supplement filed in September, some nearly four months after the expiration of the bar date and only a few weeks before the hearing, is untimely. It is stricken. . . . [T]he whole idea from the prior hearing, the order of this court was to affirmatively and precisely bring matters to head that needed to be brought to head. That's the reason I specifically directed that a final report be prepared. I ordered deadline for the filing of that and ordered that objections be filed pursuant to 633.40. Accordingly, the supplement filed September 7, 2004 is stricken.
In its written ruling closing the trust and enforcing settlement, the district court overruled Kenneth's objections to the trustees' final report. The court explained that Kenneth "should be barred from pursuing any claims against the trustees beyond those contained in the written objections that he filed" because "[t]he January 2004 preservation of his rights to object to conduct of the trustees was cut off at the expiration of the probate notice provided by the trustees to all of the parties in connection with the filing of the final report." The court noted that it had "explained clearly on the record that if Kenneth Turner intended to object to the conduct of the trustees, he must do so before the court would close the trust and enforce the settlement."
The court further concluded Kenneth failed to provide evidence as to how many calves he claimed the new co-trustees sold for which he should receive payment or how much money he thought he should be paid for the calves. The court approved the trustees' final report, ordered the payment of fees and expenses and ordered distribution of the trust assets in accordance with the January 16, 2004 order approving settlement. The court further ordered Kenneth "is not entitled to any payment from the trust other than as set forth in the January 16, 2004 order approving settlement" and barred Kenneth from "pursuing claims against the trustees for any acts or omissions known by him which could reasonably have been known by Kenneth Turner on or before May 6, 2004." The district court entered an order closing the trust and discharging the trustees on October 22, 2004.
Kenneth appeals, arguing (1) the district court's ruling barring him from pursuing all claims against the trustees was overbroad and violates the January 16, 2004 settlement agreement; (2) the district court erred in striking his supplement to objections to the trustees' final report; and (3) the district court erred in ruling he was not entitled to payment for calves born in 2001.
II. Standard of Review
Our review of this equitable proceeding is de novo. Iowa R. App. P. 6.4; In re Barkema Trust, 690 N.W.2d 50, 53 (Iowa 2004).
III. Discussion
Family settlement agreements are generally favored in law. Gustafson v. Fogleman, 551 N.W.2d 312, 314 (Iowa 1996). "Voluntary settlement of legal disputes should be encouraged with the terms not inordinately scrutinized." Id. Kenneth refused to agree to a term releasing the successor co-trustees from liability as part of the settlement agreement. The written order approving settlement is silent as to claims against the co-trustees. It neither releases the co-trustees from liability, nor does it set a specific deadline for claims to be brought against the co-trustees.
At the hearing on March 26, 2004, the parties explained the stalemate to the court: the settlement agreement could not be carried out until the trust was closed, and the trust could not be closed until any pending claims against the co-trustees had been brought and adjudicated. To remedy the stalemate, the district court balanced the need to bring closure and finality to the proceedings by closing the trust and fulfilling the terms of the settlement agreement with the need to permit beneficiaries to bring claims against the co-trustees. The court directed the trustees to provide notice pursuant to Iowa Code section 633.40(4), which allows for notice directing the parties that "unless the party does so file objections in writing [within the time required by the notice] that the party will be forever barred from making any objections thereto." The court made it abundantly clear to Kenneth and the other beneficiaries — on numerous occasions — that any claims against the trustees must be filed prior to the cutoff date provided in the notice.
"At some point, despite the trustee's fiduciary duty, the trustee's acts must be final and immune from attack." Martin D. Begleiter, In the Code We Trust — Some Trust Law for Iowa at Last, 49 Drake L. Rev. 165, 275 (2001). Iowa Code section 633.4504 requires a beneficiary to commence an action to pursue a claim within one year of receiving the report or account disclosing the claim unless the claim is "previously barred by adjudication, consent, or other limitation." Iowa Code § 633.4504(1). In this case, claims against the co-trustees were barred by "other limitation" — the deadline set in the notice pursuant to section 633.40(4). Given the facts and circumstances of this case, we conclude the district court appropriately balanced the needs of all parties involved and fashioned a remedy well within its broad equitable powers. In re Anne Hamilton Killian Trust, 519 N.W.2d 409, 412 (Iowa Ct.App. 1994).
As for Kenneth's claim for proceeds from calves sold by the trustees, we have carefully reviewed the record and agree with the district court's conclusion that Kenneth failed to present evidence as to the nature or amount of his claimed damages. Accordingly, we affirm the district court.