Opinion
No. 5-508 / 03-1688
Filed August 17, 2005
Appeal from the Iowa District Court for Dallas County, Gary G. Kimes and Gregory A. Hulse, Judges.
Cynthia Grandquist appeals district court decisions finding she did not have standing to challenge the actions of a trustee. REVERSED AND REMANDED.
Eric F. Turner of Turner Law Offices, West Des Moines, for appellant.
Harvey L. Harrison of Harrison Dietz-Kilen, Des Moines, for appellee Douglas Grandquist.
Ned P. Miller of Beattie Miller, P.C., West Des Moines, for appellee Iowa State Bank.
Considered by Mahan, P.J., and Zimmer and Hecht, JJ.
I. Background Facts Proceedings
In 1998 Kenneth Grandquist created the Kenneth L. Grandquist Revocable Trust Agreement. The trust provided that at Kenneth's death his daughter, Cynthia Grandquist, would receive $1 million outright and his son, Douglas Grandquist, would receive $1 million in a trust. If Douglas predeceased Cynthia, and had no children, then Cynthia would receive the remainder interest of Douglas's share.
A similar provision of the trust provides that if Cynthia predeceases Douglas, and has no children, then Douglas will receive Cynthia's share. At the present time, however, Cynthia has two children, while Douglas has none.
The terms of the trust for Douglas provide that during his lifetime:
The Trustee may pay to Douglas K. Grandquist such sums from the income or principal of the trust as the Trustee in Trustee's discretion deems necessary or advisable after giving consideration to any other funds known to the Trustee to be available to Douglas K. Grandquist to provide for his proper care, support, maintenance, education, and hospital and medical expenses.
The trust also provides:
The Trustee shall not be required to qualify or file reports, either interim or final, with any court; provided, however, that the Trustee or any beneficiary may invoke the jurisdiction of any proper court at any time it is deemed advisable. The Trustee shall, at least annually, make an accounting to all beneficiaries, and the approval by a beneficiary . . . shall release and relieve the Trustee from any further responsibility or liability with respect to that beneficiary . . . for its actions during the period covered by the accounting.
Kenneth died in 1999, and Wells Fargo Bank Iowa, N.A., became the trustee for Douglas. The trust was not under court supervision until March 25, 2003, when Douglas petitioned to have Wells Fargo removed as trustee and Iowa State Bank appointed instead. Wells Fargo filed a final report, outlining the disbursements to Douglas. Cynthia filed objections to the final report due to concerns the trust fund was being exhausted prematurely so that it would not be available to support Douglas on a long-term basis. In September 2003, in a calendar entry, the district court determined Cynthia did not have standing to object to the final report. The Iowa Supreme Court granted Cynthia's application for interlocutory review.
There was evidence in the record to show that Douglas has severe health problems which have decreased his life expectancy. Due to his health problems, Douglas is not capable of employment and relies upon the trust for his support.
In the meantime, in October 2003 Iowa State Bank filed an interlocutory report and accounting. Cynthia also filed objections to this report. The court determined that based on its previous ruling it would not consider Cynthia's objections and approved the trustee's report. Cynthia then appealed this order. The supreme court determined the two appeals should be consolidated and the case transferred to the court of appeals.
II. Standard of Review
This case was tried in equity. See Iowa Code § 633.33 (2003). Our review in equity cases is de novo. Iowa R. App. P. 6.4. We give weight to the fact findings of the district court, especially when considering the credibility of witnesses, but are not bound by them. Iowa R. App. P. 6.14(6)( g).
III. Standing
Standing means that a party must have a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of the controversy. Birkhofer ex rel. Johannsen v. Brammeier, 610 N.W.2d 844, 847 (Iowa 2000). A complaining party must show (1) a specific, personal, and legal interest in the litigation, and (2) an injury. Id. "When a question is presented to a court by an individual having no standing to raise the issue, the court is deprived of jurisdiction over the question." In re Trust of Willcockson, 368 N.W.2d 198, 202 (Iowa Ct.App. 1985).
The Iowa Trust Code should be applied in this case. See Iowa Code §§ 633.1106(1)-(2), 633.1107. Section 633.6202(1) provides, "a trustee or beneficiary of a trust may petition the court concerning the internal affairs of the trust or to determine the existence of the trust." The term "beneficiary" is defined as "a person who has any present or future interest in the trust, vested or contingent, and also includes the owner of an interest by assignment or other transfer." Iowa Code § 633.1102(1).
The Iowa Trust Code applies to trusts, except for those specifically excluded from the definition of a trust by § 633.1102(17). Iowa Code § 633.1107. For all trusts which are included in the definition of a trust, the code applies whether the trust was created before or after July 1, 2000. Iowa Code § 633.1106(1); In re Clement Trust, 679 N.W.2d 31, 37 n. 1 (Iowa 2004). Also, where the code is otherwise applicable, it applies to all trust proceedings commenced on or after July 1, 2000. Iowa Code § 633.1106(2); Clement, 679 N.W.2d at 37 n. 1.
We note that effective July 1, 2005, the provisions of the Iowa Trust Code were moved to a new code chapter, chapter 663A. We will use the section designations in effect at the time of the district court proceedings.
An exception to Iowa Code § 633.6202(1) is created where the trust, under § 633.3101, is revocable and the person holding the power to revoke the trust is competent.
We note that in some instances, the trust code refers to a qualified beneficiary. See Iowa Code §§ 633.4105(2)(b)(1), 633.4106(1)(c), 633.4111(2)(a). A qualified beneficiary is entitled to receive, or is a permissible distributee of, income or principal from the trust. Iowa Code § 633.1102(13). Section 633.6202(1) is not limited to qualified beneficiaries.
We believe Cynthia has a contingent remainder interest in the trust. A remainder is contingent where "the estate in remainder is limited to take effect either to a dubious or uncertain person or upon a dubious or uncertain event, so that the particular estate may be determined and the remainder never take effect." In re Will of Uchtorff, 693 N.W.2d 790, 793 (Iowa 2005) (quoting Moore v. McKinley, 246 Iowa 734, 745, 69 N.W.2d 73, 80 (1955)). Under the terms of the trust, Cynthia will receive any remainder of Douglas's trust if Douglas, having no children, predeceases her.
Due to her contingent remainder interest, Cynthia comes within the definition of a beneficiary under section 633.1102(1). A commentator has noted that the Iowa Trust Code broadly defines a beneficiary. Martin D. Begleiter, In the Code We Trust — Some Trust Law for Iowa at Last, 49 Drake L. Rev. 165, 177 (2001). As a beneficiary under the trust code, Cynthia should have the ability to "petition the court concerning the internal affairs of the trust. . . ." See Iowa Code § 633.6202(1).
We find no contrary provision in the trust instrument itself. See Iowa Code § 633.1105 ("The provisions of a trust shall always control and take precedence over any section of this trust code to the contrary."); Uchtorff, 693 N.W.2d at 798 ("Notwithstanding the enactment of the new trust code, the intent of the testator still reigns supreme. . . ."). As noted above, the trust provides, "any beneficiary may invoke the jurisdiction of any proper court at any time it is deemed advisable."
The trust code also provides, "[e]xcept to the extent that this division modifies the common law governing trusts, the common law of trusts shall supplement this trust code." Iowa Code § 633.1104; Clement, 679 N.W.2d at 36-37. Under the common law, a person with a contingent remainder interest was entitled to demand an accounting from the trustee. See Cox v. Cox, 357 N.W.2d 304, 306 (Iowa 1984) ("Even contingent remaindermen are entitled to guard against damage to their interest."). Also, a beneficiary was able to bring an equitable action against the trustee, such as to compel the trustee to perform its duty. See Carstens v. Central Nat'l Bank Trust, 461 N.W.2d 331, 333 (Iowa 1990).
A person with a contingent remainder interest could not bring a legal action against a trustee, however, because the trustee had no duty to pay money immediately and unconditionally to the beneficiary. Id. at 334; see also Hamilton v. Mercantile Bank, 621 N.W.2d 401, 409 (Iowa 2001) (contingent remainderperson had no standing to bring a legal action for waste).
Furthermore, where the contingent interest is dependent upon the discretionary exercise of a power of appointment by another person, we have found the contingent remainder interest was too remote, and there was no standing. See Willcockson, 368 N.W.2d at 203. Likewise, where a settlor retains the ability to revoke the trust, a contingent remainder person does not have a sufficient interest in the trust to bring an action. Hoelscher v. Sandage, 462 N.W.2d 289, 294 (Iowa Ct.App. 1990).
This exception is now statutorily mandated in §§ 633.3101 and 633.6202(1).
In the present case, Cynthia did not seek legal damages from the trustee. In addition, her contingent remainder interest was not dependent upon the discretionary exercise of a power of appointment by another, and the settlor, Kenneth, no longer had the ability to revoke the trust. We conclude that under the Iowa Trust Code and the common law she had standing to raise her equitable claims.
We reverse the decision of the district court and remand for further proceedings in accordance with this opinion.