Plaintiff Hit With Large Attorney Fee Judgment in Action Against Trustee
Cooper v. Jordan, No. 14-0157, 2015 Iowa App. LEXIS 339 (Iowa Ct. App. Apr. 22, 2015)
The Iowa Court of Appeals has affirmed a judgment against the plaintiff in an action where one sister was suing another for breach of trust. The defendant was ultimately granted $38,893.62 in attorney fees and expenses as litigation expenses incurred in administering the trust.
The dispute arose because the plaintiff sister had a “sincere feeling” that she was wronged because her sister, the defendant, was appointed by her mother to be the successor trustee of her revocable trust. The appointment was made at the mother’s death, when her trust became irrevocable, ready for equal distribution to her four children. Included in the property of the trust were four farms. Because the plaintiff was in conflict with the rest of her family over the distribution plan, 18 months passed before the property was transferred from the trust to the four beneficiaries as tenants in common. Two months later, the siblings reached an agreement under which each sibling received a farm and value inequalities were offset with equalization payments.
The plaintiff received the “home farm,” which comprised two houses, the main house where the mother had lived and a second trailer home with no apparent value. The home farm was valued at $1.3 million in 2009.
Shortly after acquiring the property, the plaintiff filed an action against the defendant, asserting that while she trustee, she failed to keep the two houses on the farmstead in good and habitable condition. Specifically, the plaintiff asserted claims of negligence and breach of trust.
The district court entered judgment for the defendant, citing evidence that the homes were in disrepair before the mother’s death and that the defendant had been a diligent trustee. The district court then awarded the defendant $40,003.02 in attorney fees and expenses for litigation expenses incurred in the administration of the trust. The plaintiff appealed.
Court of Appeals
The Iowa Court of Appeals agreed there was an absence of evidence supporting the conclusion that the defendant’s conduct as trustee was negligent or grossly negligent. She kept a journal of activities that showed she was actively involved with the properties, she visited the home property frequently, and she worked with her other sister to clean the house in question. This concluded with 25 boxes of donations for Goodwill and 180 bags of garbage for the dump. The defendant hired an auctioneer to dispose of salable items, paid all taxes, and repaired the driveway to the home farm. The attorney for the trust testified that the defendant was one of the best trustees he had ever worked with. The court concluded that the evidence showed that the problems with the properties—and there were many—arose before the death of the mother. The mother’s frugality, the court found, led to a lack of maintenance, which caused mold to grow in the basement, ceiling tiles to sag and fall, and water lines to break. Other family members testified that the condition of the house when the property was transferred out of the trust was about the same as it had been when the mother died. The plaintiff failed to allege the specific conduct she contended constituted a breach of duty. She also failed to demonstrate any connection between an alleged breach of duty and damage. As such, the district court did not err in entering judgment in favor of the defendant.
The court also concluded that the district court properly awarded attorney fees and costs to the defendant to compensate her for litigation expenses incurred while administering the trust. The court ruled that the district court properly looked to the Trimble factors in determining that “justice and equity” required to award:
- Reasonableness of the claims (The district court found no proof of negligence and causation.)
- Due diligence (Both parties proceeded with due diligence.)
- Ability to bear financial burden (The district court found that the plaintiff was able to bear the burden, given the value of the farmland she inherited.)
- Result obtained (The defendant prevailed.)
- Whether a party has acted in bad faith (The district court found that the plaintiff felt wronged by her mother’s selection of trustee and that when a dispute arose, it was of the plaintiff’s making.)
The court found that the district court did not abuse its discretion in determining that costs and expenses should be assessed against the plaintiff. The court did, however, determine that one cost—that for deposition expenses not used at trial—should not be taxed against the plaintiff. As such, the district court’s award in favor of the defendant was reduced by $1,109.40.
Unfortunately, Court of Appeals Wednesdays nearly always document fiercely litigated disputes between siblings. This case highlights a statutory protection for trustees. Iowa Code §633A.4507 exists to allow district courts the discretion to award fees and costs to trustees embroiled in costly breach of trust litigation. In other words, if a beneficiary brings a spurious claim, the beneficiary, not the trustee, will bear the costs of the trustee’s attorney fees and litigation expenses. Properly understood, this provision should serve as a deterrent against the filing of such claims.
Although it was not necessary in this case for the trustee to prevail, this trust also contained language restricting trustee liability to damages resulting from conduct rising to the level of gross negligence. This limitation is authorized by Iowa Code §633A.4505. This limitation did not alter the result in this case because the court found that the trustee did not act even negligently. These limitations should also help protect trustees from meritless litigation.
As this case demonstrates, however, protections don’t always ward off litigation, especially when it arises from a family dispute. In the end, the plaintiff in this case paid big.
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