IN THE COURT OF APPEALS OF IOWA
No. 18-0625 Filed July 24, 2019
IN RE THE MARRIAGE OF MARIBEL MATHERLY AND CARL W. MATHERLY
Upon the Petition of MICHAEL STEVEN MATHERLY for the ESTATE OF MARIBEL MATHERLY, Petitioner-Appellant/Cross-Appellee,
And Concerning CARL W. MATHERLY, Respondent-Appellee/Cross-Appellant,
and
MARY ELIZABETH SLEZAK, Intervenor/Cross-Appellee. ___________________________
MICHAEL STEVEN MATHERLY, As Trustee on behalf of the MARIBEL MATHERLY TRUST, as amended, Plaintiff-Appellant/Cross-Appellee,
vs.
CARL W. MATHERLY, Defendant-Appellee/Cross-Appellant. ________________________________________________________________
Appeal from the Iowa District Court for Polk County, Michael D. Huppert,
Judge.
Former spouses appeal and cross-appeal the property division in their
dissolution-of-marriage decree. Trustee of the wife’s trust appeals the dismissal
of a breach-of-fiduciary-duty claim against the husband. AFFIRMED. 2
William W. Graham and Wesley T. Graham of Graham, Ervanian &
Cacciatore, L.L.P., Des Moines, for appellant/cross-appellee.
Shaun Thompson of Newman Thompson & Gray PC, Forest City, for
appellee/cross-appellant.
Joseph G. Gamble and Tara J. Higgins of Duncan, Green, Brown &
Langeness, P.C., Des Moines, for intervenor Mary Elizabeth Slezak.
Heard by Tabor, P.J., and Mullins and Bower, JJ. 3
MULLINS, Judge.
Maribel Matherly, and subsequently her estate, appeal, and Carl Matherly
cross-appeals, the property division in their dissolution-of-marriage decree.
Maribel contends that an equitable distribution of the marital estate required her to
receive the entirety of the marital property due to Carl’s negative contributions to
the marriage. Carl challenges the court’s finding that assets in an investment
account under Maribel’s name are a resulting trust in the name of their daughter,
Mary Elizabeth (MaryBeth), who intervened in the underlying trial. Carl contends
the assets are marital property to be divided equitably between himself and
Maribel. Michael Steven Matherly (Steven), as trustee of the Maribel Matherly
Trust, appeals the district court’s dismissal of his claims against Carl.
I. Background Facts and Proceedings
Carl and Maribel were married in September 1946. The marriage produced
three children, now adults: Sheryl, MaryBeth, and Steven. From the 1950s through
the pendency of the dissolution proceedings they lived in the same home in
Johnston. During the course of the marriage, Carl provided the majority of the
marital income while Maribel was primarily responsible for managing the home and
raising the children. In the late 1950s, Carl established Park Investment Company
(Park Investment), which provided financing for companies that were unable to
obtain financing through traditional bank loans. Park Investment was successful
for many years and provided Carl and Maribel with substantial income.
In the late 1950s or early 1960s, Carl provided financing to a company in
Forest City, Iowa. That business relationship continued for many years and Carl
eventually worked for that company, serving as vice president and on the board of 4
directors. Carl’s business activities required him to be away from the home for the
majority of the workweek, typically returning home on Friday or Saturday where he
remained for the weekend. Carl’s work often required him to be in Forest City.
In the mid-to-late 1970s, Carl began an extra-marital relationship with a
woman named Doris, who lived and owned a shop in Forest City. When Carl
travelled to Forest City for business, he stayed with Doris. At some point, Maribel
became aware of an extra-marital relationship, but she was unsure of who the
other party was at the time. When Maribel confronted Carl, he promised to end
the relationship. Unbeknownst to Maribel, Carl continued to live with Doris when
he travelled for business. Carl told Maribel and their children that he was working
in Illinois, Missouri, or Nebraska when he was actually with Doris in Forest City.
During the course of their marriage, Carl and Maribel gave each of their
children numerous gifts, including cash and stocks. In 1977, Carl helped MaryBeth
establish the Mary Elizabeth Matherly Trust (MEM Trust) with the proceeds of the
gifts from her parents. Carl was named as trustee. The terms of the trust required
Carl to pay MaryBeth the trust’s net income and any amount Carl, in his discretion,
deemed necessary for MaryBeth’s maintenance, health, and comfort until
MaryBeth turned fifty. Once MaryBeth turned fifty, MaryBeth was to receive the
remaining principal and the trust would terminate. Under the trust, Carl was not
required to provide an accounting of the trust to MaryBeth unless requested. He
did provide MaryBeth information about the trust’s earned interest each year so
MaryBeth could include that information in her tax returns. MaryBeth claimed she
did not receive a copy of the trust instrument. 5
In 1981, Carl received a salary of approximately $125,000 from the Forest
City company. Due to a business dispute, Carl left the company that year but did
not inform Maribel. He continued to tell her that he was working and traveling for
the Forest City company; but in reality, Carl did not obtain other paid employment
and his source of income consisted of proceeds from his investments and a farm
that he purchased in the 1970s (Fremont Farm).
He then began working in Doris’s shop for free, primarily handling the shop’s
bookkeeping. At the time Carl and Doris met, Doris had debts of approximately
$250,000. Carl arranged with Doris’s creditors to forgive her debt after she paid a
small percentage. Throughout their relationship, Carl gifted Doris money, a car,
paid for home improvements, and managed Doris’s investment accounts. When
with Doris in Forest City, Carl withdrew money from the marital bank account for
cash.
In 1985, Carl deeded the Fremont Farm to Steven seeking to remove his
name from any property of value in order to keep it from the reach of his creditors.
During the marriage, Carl created other trusts in order to protect assets from
creditor liability relating to his business work. He contends that despite the deed,
the Fremont Farm was not intended to be Steven’s property. The deed was
recorded a few days later.
In July 1988, a document (Trust Document A) was signed by both Carl and
Maribel and notarized. The document purported to establish the Maribel Matherly
Trust (Maribel Trust). The trust declaration listed Steven as the trustee. A second
trust document (Trust Document B) was also created in July 1988 but listed Carl
as the trustee. Trust Document B included Carl and Maribel’s signatures and was 6
notarized. Maribel did not remember signing two separate documents and only
remembered typing up one document. The listed notary public on both documents
filed an affidavit, stating she believed she only notarized one version of the trust
document. She believed that her handwritten name, date, and signature on both
documents appeared to be too identical to come from separate documents. Carl
initially denied altering either document. During trial, however, he stipulated Trust
Document B was an alteration. Both Trust Documents A and B provided that
Maribel and Carl would each receive one-half of the income of the trust. Upon the
death of either spouse, the other would then receive the entire income of the trust.
After both of their deaths, the trust residue would then be distributed equally to
their children and the trust dissolved.
In 1990, a third document (Trust Document C) was prepared and signed by
both Carl and Maribel that also purported to establish the Maribel Trust. Trust
Document C was not notarized. Trust Document C named Maribel as trustee and
provided the entire trust income would be paid to her. Upon Maribel’s death, the
trust income would then be paid to Carl and, after his death, the residue would be
distributed equally to their children and the trust dissolved. Maribel signed the
document as the designated settlor and trustee while Carl signed and was
designated as the beneficiary.
In 1989, Steven deeded the Fremont Farm to the Maribel Trust. The deed
was recorded in 1993. In 1996, a deed was recorded. The deed identified that it
was a correction and supplementation of the 1985 deed from Carl to Steven. The
correction deed listed Carl and Maribel as the grantors and the Maribel Trust as 7
the grantee. At the same time, Carl filed an affidavit identifying himself as the
trustee of the Maribel Trust.
During the course of the marriage, Carl oversaw the farm’s operations.
After the establishment of the Maribel Trust, he continued overseeing the farm and,
in addition, conducted business for the farm in the role of trustee of the Maribel
Trust. Monies received by the Fremont Farm from grain sales were deposited into
Carl and Maribel’s joint bank account. Within a few days, those monies were then
transferred into one of Carl’s investment accounts. Both Carl and Maribel made
the grain-sale deposits into their joint bank account. Both also designated
themselves as trustee of the Maribel Trust when endorsing checks for deposit.
In 1993, Carl transferred the proceeds of the MEM Trust into an investment
account designated “Maribel Matherly, Special M.E.M. Account” (Maribel-MEM
account). Carl claimed he received a letter from MaryBeth’s husband that led him
to believe that MaryBeth’s marriage was in trouble and her husband would attempt
to take the trust’s assets. He also claimed MaryBeth requested the transfer of the
MEM Trust assets in order to protect them from her husband. A communication
regarding the transfer from the financial institution holding the MEM Trust stated
that an authorization signed by MaryBeth was required to transfer the funds to the
Maribel-MEM account. The communication includes a notation that the request
was completed in March 1993. After Carl transferred the assets into the
investment account, he continued to act as if the account was for MaryBeth’s
benefit. When MaryBeth asked about the state of the MEM Trust, Carl reported
that it was “doing great.” In the following years, MaryBeth continued to sign
authorizations relating to the MEM Trust. Carl paid the taxes for the trust. In 2003, 8
he filed a tax return noting that it was the final return for the trust with zero interest
earned and no taxes owed. In approximately 2003, Carl terminated the MEM
Trust.
Carl deposited funds into the Maribel-MEM account at least once. In
November 2005, the Maribel-MEM account had a value of $228,224. Carl
subsequently removed the MEM designation from the account, leaving it in only
Maribel’s name (Maribel Matherly account). He testified that he removed the MEM
designation for multiple reasons, including his belief that he had extended
MaryBeth the same amount of money outside of the trust and he had already given
her more money than her siblings. By December, the statement for the same
account number listed only Maribel’s name. In June 2006, the month MaryBeth
turned fifty, the value of the Maribel Matherly account was $207,389.
During the course of the marriage, Carl admitted he often signed other
family member’s signatures on documents, claiming to do so for convenience
purposes since he was away from home for most of the week. This included
signing Maribel’s name on checks and on an investment document that allowed
transfers between accounts Maribel was associated with and an account for Doris.
He also admitted to signing Steven’s name under penalty of law as the designated
trustee of the Maribel Trust on a document sent to the Internal Revenue Service.
Eventually, Steven became suspicious of Carl and his activities and hired a
private investigator. Steven learned Carl was staying with Doris in Forest City
when he claimed to be elsewhere. Steven subsequently informed his sisters who
then informed Maribel. Maribel filed a petition for dissolution of marriage on
June 22, 2016. The next day, Steven filed suit against Carl, alleging Carl has 9
wrongfully held himself out to be and acted as the trustee of the Maribel Trust,
including executing documents and diverting income away from trust assets.
Steven further claimed that even if Carl was legally permitted to act on the trust’s
behalf, his actions of diverting trust income and assets constituted a breach of
fiduciary duty, a wrongful taking, and Carl had been unjustly enriched by his
actions. Steven assumed the duty of trustee of the Maribel Trust in June.
In July, Carl wrote a letter to MaryBeth and Sheryl asking for assistance
with some of the property at issue in this case. In the letter Carl stated:
[Steven] has shown [Maribel] as owning a Scottrade Account with $250,000 value. [T]hat’s only partially true. Yes, the account is in her name but with my conversation many times to you, MaryBeth, that money is yours and has been for many years “You can have it anytime you want,” I said. I hope I can get this error corrected. It’s total value is “yours” not [Maribel’s].
MaryBeth claimed she was unaware of the transfer of the trust’s assets to
the investment account until she received the letter. After receiving the letter, she
investigated the circumstances of the trust and found documents relating to the
trust, including the instrument that created the trust and Carl’s letter requesting the
asset transfer to the Maribel-MEM designation. In August, Carl filed answers to
both petitions, denying the allegations of wrongdoing and suggested Maribel’s
dissolution petition was the result of Steven’s undue influence, Maribel’s dementia,
or both.
By agreement of the parties, the court consolidated the dissolution and trust
actions for purposes of trial, as the resolution of each case was dependent upon
the determination of whether the Maribel Matherly account was marital property.
Later, the court granted MaryBeth’s motion to intervene based upon the parties’ 10
consent. MaryBeth asserted that the Maribel Matherly account listed by both
Maribel and Carl as a marital asset was the remnant of the MEM Trust.
At the time of trial, both Maribel and Carl were in their nineties. In January
2018, the court filed its rulings for both cases. It determined the Maribel Matherly
account was the successor to the MEM Trust and Carl’s transfer of the MEM Trust
assets into the Maribel-MEM account, which Carl subsequently renamed the
Maribel Matherly account, created a resulting trust in favor of MaryBeth. The court
found Carl’s claims about the MEM Trust and Maribel Matherly account lacked
credibility. Further, MaryBeth was not put on notice about the issues regarding the
ownership of the assets in the trust until Carl repudiated the trust’s existence in
2016. Carl’s statute-of-limitations defense thus failed and the court declared
MaryBeth the owner of the assets in the Maribel Matherly account, removing the
account from the court’s consideration of the marital property between Maribel and
Carl.
As for the Maribel Trust, the court determined Trust Document C was the
controlling instrument. As a result, the Maribel Trust owned all the interest in the
Fremont Farm. The court rejected Maribel’s contention that the farm’s placement
in the Maribel Trust created a gift and was thus her separate property not to be
included in the distribution of the marital estate. Despite the farm’s transfer into
the Maribel Trust, it remained a marital asset. The court ordered the Fremont Farm
be sold and the net proceeds divided equally between Carl and Maribel. Further,
the court ordered Maribel to continue to receive the entire income from the Maribel
Trust, the proceeds from the grain sales, as provided in Trust Document C. Carl 11
was not entitled to receive any of the trust income nor any of the farm revenue
from June 2016, when Steven assumed the trustee responsibility.
The court also rejected Maribel’s argument that the court’s division of the
martial estate should take into consideration Carl’s negative contributions. The
court did find Carl dissipated the estate through his transfer of marital assets to
Doris and an unaccounted decrease in his investment account from the time of the
court’s temporary orders in the dissolution matter and trial. Based upon these
findings, the court ordered the sale of the marital home and increased Maribel’s
share of the proceeds by $34,800.
With regard to Steven’s claims against Carl relating to the Maribel Trust,1
the court found that Maribel affirmed or consented to Carl’s decisions and conduct
when Carl acted as the trustee. Based upon these findings, the court determined
that Iowa Code section 633A.4506(1)(a) and (c) (2016) provided Carl immunity
from Steven’s claims. Accordingly, the court dismissed Steven’s action against
Maribel appeals,2 contending the trial court erred by failing to recognize
Carl’s negative contribution to the marital estate in its determination of the
distribution of the marital estate. Further, she challenges the dismissal of the trust
claim, claiming the suit was not barred by section 633A.4506 because she did not
consent to or affirm Carl’s actions relating to the Maribel Trust as she had no
1 The only trust document that identified Steven as trustee was Trust Document A, which Steven did not sign. 2 Maribel died during the pendency of this appeal. The executor of her estate was substituted as the party. See Iowa Code § 625A.17. For ease of readership, we will continue to identify the claims as hers rather than claims of her estate. 12
knowledge of his actions and had no access to the information. She also requests
an award of appellate attorney fees.
Carl cross-appeals, contending the trial court erred by not awarding him half
of the farm income for the 2016 crop year until the time the farm is sold. He also
challenged the determination that the Maribel Matherly account was a resulting
trust in favor of MaryBeth. He contends he disavowed the MEM Trust in 2005 and
claimed the property as his own when he removed the MEM designation from the
investment account. Further, he argues that because he failed to distribute the
trust assets in June 2006 when MaryBeth turned fifty, the statute of limitations
either began in 2005 or at the latest June 2006. Because MaryBeth did not bring
her claim until the present action, her claim to the investment account is barred.
He further argues the court erred by finding the MEM Trust was originally funded
with $250,000 in assets as the record is insufficient to prove the value of the trust
when it was established in 1977. Carl also requests an award of appellate attorney
fees, payment to be apportioned between Maribel and Steven.
II. Standard of Review
We review dissolution-of-marriage cases de novo. Iowa R. App. P. 6.907;
In re Marriage of Larsen, 912 N.W.2d 444, 448 (Iowa 2018). “On appeal, we give
weight to the fact findings of the trial court but are not bound by them.” Larsen,
912 N.W.2d at 448. We will not disturb the trial court’s ruling unless there was “a
failure to do equity.” In re Marriage of McDermott, 827 N.W.2d 671, 676 (Iowa
2013). “Proceedings concerning the internal affairs of a trust . . . are tried in equity”
therefore our review is de novo. In re Trust No. T-1 of Trimble, 826 N.W.2d 474, 13
482 (Iowa 2013). We review the trial court’s “interpretation of statutory provisions
for corrections of errors at law.” Id.
III. Analysis
A. Marital Estate
The court must equitably divide the martial estate. In re Marriage of Hazen,
778 N.W.2d 55, 59 (Iowa Ct. App. 2009). “The partners in the marriage are entitled
to a just and equitable share of the property accumulated through their joint
efforts.” Id. “[M]arriage does not come with a ledger,” In re Marriage of Fennelly,
737 N.W.2d 97, 103 (Iowa 2007), so the court must consider what is equitable and
fair depending on the circumstances. Hazen, 778 N.W.2d at 59. However, what
is equitable may not necessarily mean an equal division of the marital property. In
re Marriage of Hansen, 733 N.W.2d 683, 702 (Iowa 2007). Instead, the court must
consider a number of factors to determine what is equitable, including:
(a) The length of the marriage. (b) The property brought to the marriage by each party. (c) The contribution of each party to the marriage, giving appropriate economic value to each party’s contribution in homemaking and child care services. (d) The age and physical and emotional health of the parties. .... (i) Other economic circumstances of each party, including pension benefits, vested or unvested. Future interests may be considered, but expectancies or interests arising from inherited or gifted property created under a will or other instrument under which the trustee, trustor, trust protector, or owner has the power to remove the party in question as a beneficiary, shall not be considered. (j) The tax consequences to each party. .... (m) Other factors the court may determine to be relevant in an individual case.
Iowa Code § 598.21(5). While we review the case de novo, “we accord the trial
court considerable latitude in making [the marital-property-distribution] 14
determination and will disturb the ruling only when there has been a failure to do
equity.” In re Marriage of Okland, 699 N.W.2d 260, 263 (Iowa 2005) (quoting In re
Marriage of Romanelli, 570 N.W.2d 761, 763 (Iowa 1997)).
1. Maribel Matherly Account
Before making an equitable division of the marital estate, we must first
determine which property is marital property and thus subject to division. Here,
the parties disagree about the classification of the Maribel Matherly account. Carl
challenges the trial court’s determination that the Maribel Matherly account was a
resulting trust in favor of MaryBeth, contending the account is marital property to
be divided between himself and Maribel. Maribel conceded during trial that despite
the fact that the account is in her name, the funds in the account are not marital
property and instead belong to MaryBeth.
When “the owner of property gratuitously transfers the property and
manifests in the trust instrument an intention that the transferee should hold the
property in trust but the trust fails, the transferee holds the trust estate as a
resulting trust for the transferor or the transferor’s estate.” Iowa Code
§ 633A.2106. “A resulting trust is a reversionary, equitable interest implied by law
in property that is held by a transferee, in whole or in part, as trustee for the
transferor or the transferor’s successors in interest.” Restatement (Third) of Trusts
§ 7 (Am. Law Inst. 2003). “[A] resulting trust arises from an intention that is legally
attributed to a transferor based on the nature of the transaction, rather than from
manifested intent.” Id. § 7 cmt. a.
Here, no one disputes that in 1977, MaryBeth provided the assets and
expressly stated her intention to create a trust with Carl as trustee, evidenced in 15
the document establishing the trust. Carl also acknowledged the assets in the
MEM Trust were for MaryBeth’s benefit. The MEM Trust ultimately failed when
Carl, without consent from MaryBeth,3 transferred the assets into an investment
account under Maribel’s name. Once Carl transferred the assets into the
investment account under Maribel’s name and designated it with MaryBeth’s
initials, he created a resulting trust, in favor of MaryBeth.
Carl’s actions after the transfer provide further evidence that a resulting trust
was established as he acted with the intention that the assets in the account were
for MaryBeth’s benefit. First, he initially designated the investment account with
MaryBeth’s initials. Further, even after removing her initials, he held out the
account to be for MaryBeth and informed her of the status of the account when
asked. Carl continued to hold the account out as MaryBeth’s even after the
beginning of proceedings in this case. In July 2016, after Maribel filed for
dissolution, Carl wrote to MaryBeth and her sister, clearly stating that the funds in
the investment account were MaryBeth’s. At trial, Carl also testified that he
continued to treat the investment account as MaryBeth’s up until the dissolution
proceedings.
While Carl provides several arguments about other claims MaryBeth may
have against him as a result of his actions relating to her trust, the sole issue
presented here is who is the owner of the assets in the Maribel Matherly account
and whether those assets are marital property to be divided in the dissolution case.
Upon our review of the record, we agree with the trial court that a resulting trust
3 The trial court specifically found Carl’s claim that MaryBeth asked him to transfer the funds lacked credibility. 16
was established in favor of MaryBeth when Carl transferred the assets of the MEM
Trust into an investment account, first designated as Maribel-MEM and
subsequently the Maribel Matherly account. Accordingly, the assets in the Maribel
Matherly account are not marital property and are not subject to division in the
distribution of the marital estate. We affirm the trial court on this matter.
2. Marital Property Distribution
We now turn to the distribution of the marital estate. First, Carl’s challenge
to the marital-estate distribution focuses on the farm income for the harvest years
of 2016 and 2017. He challenges the trial court’s order that Maribel would continue
to receive the entirety of the farm income as provided in Trust Document C and
that he had no claim to the farm revenue for crop years 2016 and 2017, as Steven
assumed the responsibility as trustee in June 2016. Carl contends he should
receive half of the farm proceeds from those harvest years, arguing that whether
Trust Document A or C controls, the income from the farm proceeds is marital
property to be distributed equitably between the parties. Maribel seemingly does
not contest which trust document controls with respect to the court’s determination
that she would continue to receive the entirety of the farm income from harvest
years 2016 and 2017. Instead, Maribel argues the decision to award the income
and harvest proceeds was an exercise of the court’s discretion when dividing the
marital estate.
On our review, we agree the farm proceeds Maribel received under the trust
were marital property given the status of the farm as marital property when it was
bought and has remained as marital property since. Thus, the farm income was
subject to the court’s division, and after taking into consideration the factors 17
contained in Iowa Code section 598.21(5), we do not find the court granting Maribel
the farm income was inequitable given the circumstances of this case.
Accordingly, we affirm.
Maribel challenges the final marital-estate distribution, arguing the trial court
failed to take into consideration Carl’s negative contribution to the marriage when
dividing the marital estate. She argues she should have been awarded the entire
marital estate due to Carl’s (1) failure to earn income after leaving his Forest City
job and then subsequently working without compensation at Doris’s shop, (2)
transfer of marital assets to Doris and other unknown accounts, (3) reckless
investment of marital funds, and (4) dissipation of marital assets during the
pendency of this case.
Maribel cites to a number of cases outside Iowa in which those courts
unequally divided marital property based on one spouse’s financial misconduct
and neglect. However, “Iowa is a no-fault state.” Fennelly, 737 N.W.2d at 103.
Spouses agree to accept one another “for better or worse.” Each person’s total contributions to the marriage cannot be reduced to a dollar amount. Many contributions are incapable of calculation, such as love, support, and companionship. “Financial matters . . . must not be emphasized over the other contributions made to a marriage in determining an equitable distribution.”
Id. at 104 (quoting In re Marriage of Miller, 552 N.W.2d 460, 465 (Iowa Ct.
App.1996)). Maribel does not point to any Iowa precedent in which a trial court
considered the negative contributions of one spouse in its determination of an
equitable division of the marital property. Upon our review, we agree with the trial
court and find that awarding Maribel the entirety of the marital estate based upon 18
Carl’s negative contributions would be inequitable.4 Further, after taking into
consideration the circumstances in this case and the section 598.21(5) factors, we
find the trial court’s division of the marital estate was equitable and affirm the
marital-property distribution.
B. Maribel Trust
Steven, as trustee of the Maribel Trust, challenges the court’s finding his
claims of breach of fiduciary duty against Carl were barred pursuant to Iowa Code
section 633A.4506(1)(a) and (c). In making its decision, the trial court determined
Trust Document C governed the trust after finding both Trust Documents A and B
unenforceable as Steven never signed Trust Document A as trustee and Carl
altered Trust Document B.
Carl is only named the trustee of the Maribel Trust under Trust Document
B, and we agree with the trial court that this document is invalid. Carl conceded at
trial Trust Document B was an alteration of Trust Document A. As for Trust
Document A, in order for it to be a valid trust instrument, it must be written and
either “signed by the trustee” or one that “convey[s] the trust property signed by
the settlor.” Iowa Code § 633A.2103(1). Steven did not sign Trust Document A,
and the trust document does not identify that the farmland is or would be placed
into the trust. Further, in 1989, the deed conveying the farmland to the Maribel
4 The trial court did recognize Maribel’s claim of dissipation and adjusted the marital- property distribution based upon Carl’s dissipation of marital assets. Unlike Maribel’s negative-contribution claim, the dissipation doctrine has precedential support. See In re Marriage of Kimbro, 826 N.W.2d 696, 700–01 (Iowa 2013) (discussing the dissipation doctrine); Fennelly, 737 N.W.2d at 104 (“[D]issipation of assets is a proper consideration when dividing property.”); In re Marriage of Goodwin, 606 N.W.2d 315, 321 (Iowa 2000) (“[A] spouse’s disposal of assets that would otherwise be subject to division in the dissolution may properly be considered in making an equitable distribution of the parties’ property.”). Maribel does not challenge the adjustments on appeal. 19
Trust was signed by Steven. Section 633A.2103(1) required the settlor, Maribel,
to sign the written instrument. Accordingly, neither Trust Document A nor B serve
to establish an enforceable trust under section 633A.2103(1).
Under subsection (3) of section 633A.2103, “[i]f an owner of property while
living transfers property to another person to hold upon a trust, the written
instrument evidencing the trust must be signed” either “by the settlor, concurrently
with or before the transfer” or “by the trustee, concurrently with or before the
transfer, or after the transfer but before the trustee has transferred the property to
a third person.” Here, Carl admittedly deeded the farm to Steven in order to hide
the property from creditors related to his investment business. Steven then
deeded the farm to the Maribel Trust in 1989. As determined above, this document
did not establish an enforceable trust, as Maribel did not sign the conveyance. She
did, however, sign Trust Document C, which purported to establish the Maribel
Trust. We agree with the trial court that Trust Document C is “inartfully drafted” as
its terms provided for Maribel’s benefit but designated Carl as the beneficiary.
However, we agree that this is the controlling trust instrument as it is the only one
that meets the elements required under section 633A.2103(3)(b). Though Trust
Document C was executed after Steven’s conveyance of the property to the trust,
at the time Maribel signed Trust Document C as its designated trustee, she had
not transferred the farm to another party. Further, Maribel and Carl both signed
and quitclaimed their interest in the farm to the Maribel Trust well after Trust
Document C’s execution. Accordingly, Trust Document C is the controlling trust
document. 20
While Trust Document C designates Maribel as the trustee, Carl acted as
such until 2016. Neither party seemingly disputes this, though Carl contends that
Maribel sometimes acted as trustee. After June 2016, Steven took over the role
of trustee. Steven’s claims are that while Carl acted as the trustee, Carl breached
the duties of a trustee by failing to provide the entirety of trust income to Maribel
as required by Trust Document C and instead took that income and placed it into
an investment account. Further, Steven contends Carl failed to prudently invest
the farm proceeds once deposited into his investment account and, after selling
parts of the farmland, he did not keep the sale proceeds separate from other funds
nor preserve them for the trust. Instead, Steven argues Carl gifted a portion of
sale proceeds to the three children and Doris, but made no such gift to Maribel.
Steven further argues Carl’s failure to prudently invest the trust income resulted in
damage to the accumulated trust income left in the trust. Steven seeks damages
representing the difference between the current value of the trust and what he
believes it should have been if properly managed.
The trial court found that Maribel consented to or affirmed Carl’s actions
which constituted breaches of fiduciary duty, therefore under Iowa Code section
633A.4506(1)(a) and (c), Steven’s claims were barred. On appeal, Steven argues
that Maribel was unaware of Carl’s transactions relating to the trust therefore she
could not consent nor affirm to his actions and thus section 633A.4506 is not a bar
to his claims of breach of fiduciary duty.
Unless the terms of a trust expressly make the trust irrevocable, the settlor
of a trust may modify or revoke the trust. Id. § 633A.3102(1). Here, the language
of the trust does not make it irrevocable, as Maribel reserved her right to amend, 21
revoke, or alter the trust. “For a revocable trust, however, the trustee’s duties of
prudence, loyalty, and impartiality are owed solely to the settlor while the settlor is
still alive and competent.” Trimble, 826 N.W.2d at 488. “A violation by a trustee
of a duty the trustee owes a beneficiary is a breach of trust.” Iowa Code
§ 633A.4501(1).
A beneficiary may charge a trustee who commits a breach of trust with the amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred, or, if greater, the amount of profit lost by reason of the breach.
Id. § 633A.4503. However, section 633A.4506(1) provides a trust beneficiary may
not hold a trustee liable for a breach of the trust if the beneficiary either “consents
to the conduct” or “affirms the transaction” constituting the breach. Nevertheless,
section 633A.4506(2) and (3) does provide exceptions to trustee immunity:
(2) A beneficiary may hold a trustee liable for breach of trust despite a consent, release, or affirmance by the beneficiary if, at the time of the consent, release, or affirmance, all of the following applied: (a) The beneficiary did not know of the beneficiary’s rights. (b) The beneficiary did not know the material facts known to the trustee or which the trustee should have known. (c) The trustee did not reasonably believe that the beneficiary knew the beneficiary’s rights and that the beneficiary knew material facts known to the trustee or which the trustee should have known. (3) A beneficiary may hold a trustee liable for breach of a trust despite a consent, release, or affirmance by the beneficiary if the consent, release, or affirmance was induced by improper conduct of the trustee.
Steven contends the trial court erred by finding that Maribel was aware of
how Carl invested the monies derived from the Fremont Farm and allowed him to
continue for decades. He challenges the court’s finding that though Maribel never
opened the statements from the investment account, she had access to its 22
equivalent as the statements were incorporated into the couple’s joint tax filings.
Steven claims the court erred by deciding, based upon these findings, that Maribel
affirmed and consented to Carl’s action, thus barring claims of breach of fiduciary
duty.
Neither challenges the court’s finding that Carl acted as trustee of the
Maribel Trust, despite not being designated as such. Maribel signed Document C
which named her as trustee but she allowed Carl to act as trustee. Maribel signed
some documents as trustee, but for the most part, Carl held himself out to be
trustee and took actions in the trust’s name. This included depositing proceeds
from the farm into their joint bank account and then subsequently transferring those
proceeds into one of his investment accounts.
Carl primarily ran the Fremont Farm. However, Maribel kept the records for
the farm. She kept track of the farm’s yield, expenses, and income. Maribel
testified and Steven concedes that she was aware that the farm proceeds that both
Carl and Maribel initially deposited into the couple’s joint bank account were then
transferred into the investment accounts. Maribel made several of the deposits
into the investment accounts and balanced the couple’s checkbook for their joint
bank account. Further, while Steven contends that Maribel did not have any
access to the investment accounts information and thus was unaware of what
occurred within those accounts, Maribel admitted she reviewed the information in
the couple’s tax returns. She initially testified that Carl hid the information by
folding over the form so that only the signature block was visible, but clarified under
cross-examination that she reviewed all of the entries on the form. Maribel also
signed each return under penalty of perjury stating that she “examined [the] return 23
and the accompanying schedules and statements,” and the information contained
in the return was “true, correct, and complete.” Each return contained tax
information and schedules from the investment accounts. Based upon our review
of the record, we agree with the trial court that Maribel had access to the equivalent
of the monthly investment account statements. Thus, she was or should have
been aware of Carl’s actions. Accordingly, we find she consented to and affirmed
Carl’s conduct he undertook as trustee of the Maribel Trust. We also find no
exception applies and, as such, Steven’s claims of breach of fiduciary duty against
Carl are barred pursuant to section 633A.4506. We affirm the court’s decision.
C. Appellate Attorney Fees
On appeal, “attorney fees are not a matter of right, but rather rest in this
court’s discretion.” Okland, 699 N.W.2d at 270. We consider “the needs of the
party seeking the award, the ability of the other party to pay, and the relative merits
of the appeal.” In re Marriage of Sullins, 715 N.W.2d 242, 255 (Iowa 2006) (quoting
Okland, 699 N.W.2d at 270). Based upon these considerations, we decline to
award appellate attorney fees.
IV. Conclusion
We find Carl created a resulting trust in favor of his daughter, MaryBeth,
when he transferred the assets of her trust into an investment account without her
consent. The resulting trust is not marital property and not subject to the court’s
division of the marital estate. We find the trial court’s division of the marital estate
equitable, taking into consideration the factors under Iowa Code section 598.21(5)
and the circumstances in this case. We further find Steven’s claims against Carl
relating to Maribel’s trust are barred under Iowa Code section 633A.4506. Based 24
upon these findings, we affirm the trial court’s decision in its entirety. We decline
to award appellate attorney fees. Costs on appeal are assessed one-third to
Maribel’s estate, one-third to Carl, and one-third to the Maribel Matherly Trust.
AFFIRMED.