Opinion
No. 2-677 / 01-1972.
Filed December 11, 2002.
Appeal from the Iowa District Court for Wapello County, ANNETTE J. SCIESZINSKI, Judge.
The trustee of an estate appeals a district court order finding she breached the trust by failing to pay for the trust beneficiary's nursing home expenses. AFFIRMED IN PART AND REVERSED IN PART.
Bradley Grothe of Orsborn, Bauerly, Milani Grothe, L.L.P., Centerville, for appellant.
Richard Gaumer of Webber, Gaumer Emanuel, Ottumwa, for appellees McCabe and Demanche.
J. Terrence Denefe of Kiple, Denefe, Beaver, Gardner Zingg, L.L.P., Ottumwa, for intervenor-appellee Sunbridge Care.
Heard by HUITINK, P.J., and MAHAN and VAITHESWARAN, JJ.
We must decide whether a trustee breached a trust by failing to pay for her stepmother's nursing home expenses. The district court found a breach of trust, ordered the trustee to pay the expenses, and also awarded fees to the beneficiary's attorney. On our de novo review, we affirm all aspects of the ruling except the attorney fee award.
I. Background Facts and Proceedings
Daniel McCabe had two children from his first marriage, Suzanne McKinnon and a son Peter. After his first wife died, Daniel married Delores, a widow with a son from her first marriage. The couple's marriage lasted until Daniel's death twenty-five years later.
Before his death, Daniel executed a revocable trust agreement and appointed his daughter Suzanne as trustee. The agreement specified that, on Daniel's death, the trustee was to set aside money in two trusts. The first, in the name of Delores, was to be distributed to her as follows:
(a) The entire net income of the trust in convenient installments, at least as frequently as quarter-annually; and
(b) As much or all of the principal of the trust as the trustee from time to time believes desirable for the health, support in reasonable comfort, best interests, and welfare of my spouse, considering all circumstances and factors deemed pertinent by the trustee.
The second, known as the Family Trust, was to be distributed to Delores during her life as follows:
as much of the net income and principal, even to the extent of exhausting the principal. . . . as the trustee believes desirable from time to time for the health, support in reasonable comfort, education, best interests, and welfare of my spouse considering all circumstances and factors deemed pertinent by the trustee.
Delores suffered a debilitating stroke and was moved to Florida to live with her son. Several months after Daniel's death, Suzanne began sending Delores the income from the first trust, which amounted to $939 per month. She advised Delores that she would no longer pay Delores's monthly expenses on an ad hoc basis but would expect her to fund her needs from this monthly check.
Her letter to Delores stated, "[p]lease be advised that since the trust will be distributing this check to you in a gross amount, the Trustee will no longer be responsible for paying for any in-home care worker nor monthly expenses previously paid for food, etc."
Delores entered a nursing home in mid-2000. Suzanne declined to pay the nursing home bills absent verification from Delores of her income, assets, and expenses. When the nursing home threatened Delores with eviction, she applied for an order directing Suzanne to pay these expenses. The nursing home was allowed to intervene.
The district court granted Delores's application and ordered Suzanne to pay her past and future nursing home expenses as well as her attorney's legal fees. Following the court's denial of Suzanne's Iowa Rule of Civil Procedure 1.904(2) motion for enlarged findings and conclusions, Suzanne appealed, Delores and the nursing home cross-appealed.
II. Breach of Trust
Suzanne's obligations under the trust agreement turn in part on the type of trust that was created. The district court found and the parties do not dispute that the agreement created a discretionary support trust. See Strojek ex rel. Mills v. Hardin Cty. Bd., 602 N.W.2d 566, 570-71 (Iowa Ct.App. 1999). This type of trust establishes "minimal distributions a trustee must make in order to comport with the settlor's intent of providing basic support, while retaining broad discretionary powers in the trustee." Id. at 570. If the trustee abuses her discretion, the beneficiary may compel disbursements from the trust for minimal support. Id.
The key question here is whether Suzanne abused her discretion in insisting on a detailed accounting of Delores's financial circumstances before disbursing principal from the first trust account. Under the circumstances of this case, we believe she did. Although the trust agreement afforded Suzanne discretion to consider "all circumstances and factors deemed pertinent" by her, it also instructed her to maintain Delores in "reasonable comfort" and to consider her "best interests." As early as 1997, Delores's son apprised Suzanne that his mother required constant care, might eventually need to be placed in a nursing home, and presently needed trust funds to facilitate her in-home care. Suzanne responded by stating the purpose of the trust was "not to replace Dolores's (sic) income and assets, but to supplement her assets to provide her with adequate care." She sought a schedule of Delores's assets, a copy of her 1996 federal income tax return, a detailed list of monthly expenses, Delores's "place of birth," and a statement of whether she was a naturalized citizen and when she became a citizen. Suzanne continued to insist on this and other verification while at the same time advising Delores that the required $939 disbursal of trust income would have to be used to cover her monthly expenses. After learning that Delores had been living in a nursing home for several months and had incurred unpaid expenses of more than $25,000, Suzanne's attorney responded, "the Trustee will not be responsible for any charges for the care of Delores McCabe that have not been previously approved in writing by the Trustee." We agree with the district court that these actions contravene the letter and spirit of the trust agreement.
In reaching this conclusion, we have considered and found unpersuasive Suzanne's contention that she would have been derelict in her duties as trustee had she not obtained documentation of Delores's financial condition before invading the trust principal. Hamilton v. Mercantile Bank of Cedar Rapids, 621 N.W.2d 401, 406 (Iowa 2001) (holding trustee has a general duty "to protect trust property against loss or destruction, taking such action as a reasonably prudent person would take to protect his or her own property"). The record reflects she had sufficient knowledge of Delores's finances before she was asked to pay her nursing home expenses. Specifically, the record reveals Delores lived in Iowa with Daniel for over twenty years, in close proximity to Suzanne. When Delores was hospitalized in Iowa, Suzanne collected and paid her bills. At the time of trial, she still had Delores's checkbook registers showing how Delores and Daniel spent their money and she knew from those registers that they possessed no credit cards. She further acknowledged Delores had never been employed outside the home after she married Daniel, and stated she understood her income "was just the Social Security, whatever investments that they had, savings accounts, interest off of those." Finally, as trustee, Suzanne was in a position to know her father's entire financial picture and, consequently, the financial picture of his wife, Delores. While it is certainly possible Delores had independent assets of which Suzanne was unaware, nothing in the trust agreement required Delores to deplete those assets before laying claim to the trust principal. For these reasons, we are unconvinced that Suzanne's obligations as trustee required her to seek the documentation she did.
We conclude Suzanne abused her discretion and, accordingly, breached the trust by failing to pay Delores's nursing home expenses.
III. Adequacy of Remedy
Suzanne maintains the district court's order requiring her to pay all of Delores's future nursing home expenses inappropriately divested her of the discretion afforded by the trust agreement. We disagree. In Strojek, our court remanded the case "to determine the precise amount necessary for Strojek's care." Strojek, 602 N.W.2d at 571. Having found a breach of trust and, by implication an abuse of the trustee's discretion, the court was free to specify a remedy that limited her discretion. See In re Estate of Tone, 240 Iowa 1315, 1322-23, 39 N.W.2d 401, 405 (1949) ("The exercise of discretion by the trustee is subject to review by the court and to correction in a proper case.").
IV. Amount of Past Nursing Home Expenses
Suzanne next contends the bill for past nursing home expenses on which the district court relied is inaccurate. The inaccuracy is not reflected in the record. Therefore, we will not consider it. Kalell v. Petersen, 498 N.W.2d 413, 417 (Iowa Ct.App. 1993).
V. Attorney Fees
Suzanne finally contends the district court should not have ordered her to pay Delores's attorney fees. A party generally may not recover fees in the absence of a statute or agreement authorizing them. Thorn v. Kelley, 257 Iowa 719, 726-27, 134 N.W.2d 545, 548 (1965). Delores maintains Iowa Code section 633.4502(3) (2001) authorizes payment of such fees. That provision states a court may "[c]ompel the trustee to redress a breach of trust by payment of money or otherwise." Iowa Code § 633.4502(3). This provision does not expressly authorize payment of a beneficiary's attorney fees. As Delores has cited no other authority expressly authorizing the payment of her attorney fees, we are compelled to reverse the award. For the same reason, we decline, to award attorney fees on appeal.
Delores does not argue she is entitled to a common law attorney fee award. See Hockenberg Equipment Co. v. Hockenberg's Equipment Supply Co., 510 N.W.2d 153, 158 (Iowa Ct.App. 1993).
VI. Removal of Trustee
In its cross-appeal, the nursing home argues the court should have removed Suzanne as trustee. The district court declined to do so "[a]t this time," but noted it would continue to exercise supervision over the trust. We find no abuse of discretion in this ruling. See In re Estate of Randeris, 523 N.W.2d 600, 605-06 (Iowa Ct.App. 1994).