Opinion
No. 4-661 / 03-1844
Filed December 22, 2004
Appeal from the Iowa District Court for Scott County, James E. Kelley, Judge.
Kathryn Sampson appeals the district court's ruling ordering her to relinquish a certificate of deposit to the Estate of Terry Lowns. REVERSED AND REMANDED.
R. Douglas Wells of Gomez, May, Cartee Schutte, Davenport, for appellant.
Michael McCarthy of McCarthy, Lammers, Hines, Davenport, for appellee.
Considered by Mahan, P.J., and Miller and Vaitheswaran, JJ.
Kathryn Sampson appeals a district court ruling ordering her to relinquish a certificate of deposit to the Estate of Terry Lowns. We reverse and remand.
I. Background Facts and Proceedings
Kathryn Sampson and Terry Lowns dated intermittently for several years. In September 2001 Lowns discovered he had terminal cancer. The same month, he executed a will naming Sampson executor and sole beneficiary. Sampson was also vested with power of attorney. Immediately following execution of the will, Lowns and Sampson went to Lowns's bank and changed ownership of his savings account from Lowns as sole owner to Lowns and Sampson as joint tenants with rights of survivorship. They did not make a similar change to a $65,000 certificate of deposit at the same bank.
As Lowns's condition deteriorated, his relationship with Sampson became strained. The couple parted ways. At the end of the year, Lowns returned to his attorney's office and executed a new will naming his niece executor and sole beneficiary of his estate.
Lowns and Sampson reconciled in early 2002. Sampson began to care for Lowns, cooking for him, accompanying him to medical appointments, and becoming involved in his medical decisions.
In the spring of that year, Lowns held what he termed a "pow-wow" at his home. The meeting was videotaped. At the meeting, an ill, but lucid, Lowns told the invitees that he wished to discuss "what I'd like to do with my things." He stated that he had some money "in a bank in Princeton" related to the death of his son. He thought the funds would accrue approximately $3,000 annually in interest and he expressed a desire to have the interest placed in a "memorial fund" to honor his son. He stated he would create a committee to administer the fund and to disburse money to outdoor youth programs. He acknowledged that lawyers would have to write something to set up the fund.
The day after the "pow-wow," Lowns and Sampson went to his lawyer. Lowns did not set up the memorial fund or the committee structure he had discussed the night before but instead appointed Sampson executor and sole beneficiary of his estate. He also re-conferred on her a general power of attorney over his affairs. The couple then went to his bank and amended the certificate of deposit to add Sampson as a joint tenant with right of survivorship. The name of Lowns's niece, which had previously been inserted, was removed.
By the end of the month, the relationship between Lowns and Sampson had again soured. Lowns executed a fourth and final will naming Duane Sprout and Sandra Schultz co-executors and beneficiaries. He did not change the ownership of his savings account and certificate of deposit. Two weeks later, Lowns died.
Sprout, as executor, petitioned for an order requiring Sampson to turn over the savings account and certificate of deposit to the estate. Following trial, the district court ruled in favor of Sampson on the savings account but ordered her to relinquish the certificate of deposit. In response to post-trial motions, the court expanded one of its findings but did not alter the disposition. Sampson appealed.
The court also ruled on a counterclaim filed by Sampson. That ruling is not at issue on appeal.
The sole issue on appeal is whether the district court should have ordered Sampson to turn over the certificate of deposit to the estate. We review this issue de novo. Davis v. Roberts, 563 N.W.2d 16, 19 (Iowa Ct.App. 1997).
II. Confidential Relationship
Our analysis turns on whether there was a confidential relationship between Sampson and Lowns. If a confidential relationship existed, a profitable transaction will be held presumptively fraudulent and voidable. In re Estate of Herm, 284 N.W.2d 191, 200 (Iowa 1979). The burden of persuasion then shifts to the person benefiting from the transaction to show by clear, satisfactory and convincing evidence that the transaction was valid. In re Estate of Samek, 213 N.W.2d 690, 692 (Iowa 1973); First Nat'l Bank v. Curran, 206 N.W.2d 317, 322 (Iowa 1973).
A "confidential relationship" is "any relation existing between parties to a transaction wherein one of the parties is duty bound to act with the utmost good faith for the benefit of the other party." Herm, 284 N.W.2d at 199. A person who exercises power of attorney on behalf of another may be in a confidential relationship. Id. at 200; cf. Burns v. Nemo, 252 Iowa 306, 311, 105 N.W.2d 217, 220 (Iowa 1960) (noting fiduciary relationship such as that between attorney and client "can exist without the presence of a confidential relationship").
The district court found that Sampson was in a confidential relationship with Lowns at the time her name was added to the certificate of deposit, by virtue of the power of attorney executed earlier that day. This finding is supported by the record. Cf. In re Estate of Clark, 357 N.W.2d 34, 38 (Iowa Ct.App. 1984) (finding no confidential relationship where evidence showed only that decedent placed man's name on two savings account and told family members that he wanted man to pay his bills). The addition of Sampson's name to the certificate of deposit was, therefore, presumptively fraudulent and the burden shifted to Sampson to persuade the court otherwise.
We conclude Sampson met her burden. While Sampson was imbued with authority to act as Lowns' attorney-in-fact, she did not use this authority. Instead, both she and Lowns individually signed the papers changing ownership of the certificate of deposit.
This act was consistent with Lowns's testamentary intent expressed in the will in effect at the time. Although he had spoken of setting up a memorial fund in his son's name, he did not take steps to create this fund either the morning after the "pow wow" or at any time prior to his death despite multiple trips to see his attorney. He also did not set up a committee to administer his estate as he said he would.
The third will naming Sampson as sole beneficiary not only established Lowns's intent but also established that Sampson had little to gain by changing ownership of the certificate of deposit. She already was slated to receive the certificate in probate and she was aware of this fact prior to visiting the bank. See Hoelscher v. Sandage, 462 N.W.2d 289, 292 (Iowa Ct.App. 1990) (noting defendant "had no interest" in certain contested transfers, which were in actuality made for the benefit of the plaintiffs).
There is also scant evidence that Sampson dominated any of Lowns's financial transactions. See Herm, 284 N.W.2d at 200 (stating key is "dominating influence over the other by reason of the affection, trust, and confidence"); cf. Curran, 206 N.W.2d at 322 (stating confidential relationship cases "do not require a showing that the confidant actually stood over the other or in fact bent the will of the other to the confidant's wishes"). Witnesses testified and the videotape confirms that Lowns was of sound mind at the time of the transaction. The videotape also confirms that Lowns made his own financial decisions, garnering the assistance of professionals when needed. Cf. Kunz v. Kunz, 255 Iowa 1087, 1095, 125 N.W.2d 226, 231 (Iowa 1963) (finding no confidential relationship where the plaintiff had available and used independent advice of all her children, not just the defendant child). For example, his long-time accountant testified that Lowns "understood the financial system and was able to make most of his own decisions with the aid of an attorney." She stated Lowns also understood the nature and implications of a joint tenancy relationship and, specifically, the fact that joint tenancy assets would belong exclusively to the surviving individual or group. Finally, although Sampson accompanied Lowns to his lawyer's office and to the bank, there is no evidence that Lowns sought advice from her about his decision to change the will or change ownership of the certificate of deposit. Notably, Lowns later executed a fourth will divesting Sampson of his assets. Sampson assumed Lowns also removed her as joint tenant on the savings account and certificate of deposit and did not learn until after his death that he had not. This evidence establishes that Lowns, not Sampson, was at all times in control of his financial affairs.
One of the executors testified that, after Lowns's death, Sampson expressed surprise that she was still listed on the savings account and certificate of deposit.
We conclude Lowns freely and voluntarily made the decision to change ownership of the certificate of deposit, and did so in accordance with his testamentary intent at the time of the transaction. Conversely, Sampson met her burden of proving that she acted with "utmost good faith" in executing papers to change ownership of the certificate deposit. See Samek, 213 N.W.2d at 692 (stating survivor has burden to prove "account arrangement was voluntarily established"); Curran, 206 N.W.2d at 322 (stating survivor has "heavy" burden to show "entire good faith" and "voluntary" and "intelligent action" on the grantor's part).
We reverse the judgment of the district court and remand for entry of judgment in favor of Sampson.