Many estate plans provide for the creation of a trust for the benefit of the surviving spouse, with the trust property ultimately passing to the children upon the surviving spouse’s death. Typically, a child or several children are named as “Trustee.” Usually, no problems are encountered as the trustees administer the trust for the benefit of the surviving spouse, or in distributing the trust’s assets and income after the surviving spouse dies. But, sometimes problems arise. That’s what this case is all about.
The decedent, the plaintiff’s father, died in 2000, leaving a surviving spouse and a child – the plaintiff. The plaintiff’s brother pre-deceased the decedent leaving two children. The decedent’s will created a trust for the surviving spouse with the two son’s or their issue named as the residuary beneficiaries. The decedent’s estate was closed and the plaintiff and one of his nephews were named co-trustees. Disagreements arose, ultimately resulting in a bank and a third party being named as successor-trustees. Later, a family settlement agreement was entered into which resulted in the trust being terminated and the trust property being disbursed to the beneficiaries. A court order enforced the settlement agreement, closed the trust and discharged the trustees. The plaintiff challenged that order, but the trial court dismissed the case. The plaintiff had claimed that the co-trustees had failed to pay legal fees he incurred in successfully defending a criminal trespass charge for being on trust property during the time in which he was a co-trustee. The plaintiff had also claimed that the successor co-trustees had improperly disbursed trust assets in a manner not in accordance with the family settlement agreement, and that the successor co-trustees had conspired with his mother to file an action seeking to have him declared incompetent. The trial court, agreeing with the successor co-trustees, determined that the plaintiff had filed his petition too late – more than one year after he received the final report and accounting for the trust. But, the plaintiff claimed that his claims were subject to the two-year statute of limitations (for personal injuries and injury to reputation) or the five-year statute of limitations (breach of written contract) because the claims were independent of the probate claims. The Iowa Court of Appeals reversed and returned the case to the trial court to rule on the successor co-trustees’ motion for change of venue. The co-trustees then requested the Iowa Supreme Court to review the case, and the Court agreed.
The Court ruled that it could not determine whether the successor co-trustees’ defenses of res judicata, issue preclusion or claim preclusion (e.g., the issue has already been decided by another court and should not be relitigated) applied to the plaintiff’s petition. As for the statute of limitations issue, the Court, taking the plaintiff’s allegations as true, reasoned that the allegations were not against the successor co-trustees for breach of trust (subject to the one-year statute of limitations), but were for tortuous interference with the family settlement agreement. On this issue, the Court noted that prior Iowa caselaw has found that the tort of intentional interference with a bequest is an independent claim that is not subject to the one-year statute of limitations period that applies to probate actions. The successor co-trustees also wanted reimbursed for their attorney fees based on their claim that the plaintiff’s claims were baseless. But, the successor co-trustees did not request fees at the trial court level and the trial court did not provide for them on the court’s own motion. As such, the Court was unwilling to award them for the first time on appeal. Because the trial court granted the successor co-trustees’ motion to dismiss, it did not rule on their motion for a change of venue. The Supreme Court ruled that the trial court should consider the change of venue motion as the case proceeds on remand. Ultimately, the Supreme Court affirmed the appellate court’s ruling and remanded the case to the trial court for further proceedings. Turner v. Iowa State Bank & Trust Company of Fairfield, Iowa, et al.,743 N.W.2d 1 (Iowa Sup. Ct. 2007).