Opinion
No. 5-516 / 04-0903
Filed August 17, 2005
Appeal from the Iowa District Court for Montgomery County, James M. Richardson, Judge.
Jan Arkfeld appeals from a jury verdict awarding the Estate of Milton Johnson, Jr. a judgment against her in the amount of $90,000. REVERSED AND REMANDED.
Thomas Tarbox of The Law Office of Thomas T. Tarbox, Des Moines, for appellant.
R. John Swanson and Mark D. Swanson of Swanson Law Firm, Red Oak, for appellee.
Considered by Vogel, P.J., and Miller and Hecht, JJ.
Shortly before Milton Johnson, Jr. passed away, his daughter, Jan Arkfeld, distributed $90,000 from the Milton Johnson, Jr. Revocable Trust to various family members. Jan claims she did this at her father's direction, in an attempt to reduce his nearly $4 million estate and thereby lessen eventual federal estate tax liability. Milton's surviving spouse, and Jan's mother, Irene Ina Johnson, brought an action in her capacity as co-executor of Milton's estate, claiming Jan's actions were fraudulent and a misappropriation of funds. A jury found for Irene, and judgment was entered against Jan for $90,000 plus interest. Because we conclude Irene as co-executor was not the real party in interest we reverse the judgment of the district court.
I. Background Facts and Proceedings
Milton Johnson, Jr. was a successful farmer in Montgomery County, Iowa. He and Irene had three children: Donald Johnson, Jan Arkfeld, and Lana Bruning. In the fall of 2000 Milton sought legal advice in planning his estate. As a result, Milton transferred his assets into a revocable trust known as the Milton Johnson, Jr. Revocable Trust. Milton was both the settlor and the sole trustee, with Irene and Jan nominated as successor co-trustees. Milton also executed a "pour-over" will and a durable power of attorney appointing Irene and Jan his attorneys-in-fact.
In March of 2001 Jan, ostensibly acting under the power of attorney, withdrew $100,000 from an account at Firstar Bank in Red Oak titled in the trust and transferred it to a new account which was also titled in the trust. Both Jan and Donald signed as authorized signatories to the account, with Jan signing as attorney-in-fact for Milton. No mention was made of the assets being in trust. Jan, with the assistance of a bank employee, issued nine cashier's checks in the amount of $10,000 each to various family members.
The cashiers checks made out to Jan's brother Donald and his two step-children from his dissolved marriage were not given to Donald or the children but were kept in a lock box.
Milton died in April 2001. In February of 2002, both Irene and Jan resigned as successor co-trustees for the trust and U.S. Bank was appointed as successor trustee. One asset omitted from the trust necessitated the opening of and administration of a probate estate with Jan and Irene appointed as co-executors.
In October 2003, Irene filed a petition alleging that Jan had misappropriated the $100,000 she had taken from the trust. Following limited discovery both Jan and Irene filed motions for summary judgment. The district court denied Irene's motion and partially sustained Jan's insofar as it alleged that Irene was not the real party in interest.
Irene then amended the petition substituting herself, in her capacity as co-executor of Milton's estate, as plaintiff. Jan then filed a motion to dismiss contending, among other things, that "the estate" was not a real party in interest as the assets were taken from the trust, and therefore "the trust" was the real party in interest. The district court overruled this motion and directed that the case proceed to trial. The jury found in favor of the co-executor and set damages at $90,000 plus interest. Jan then moved for judgment notwithstanding the verdict or in the alternative for a new trial, once again asserting, among other things, that the trust and not the estate was the real party in interest. The court overruled these motions. Jan appeals.
II. Discussion
Because this case was tried as a law action, our scope of review is for corrections of errors of law. In re Estate of Boyd, 634 N.W.2d 630, 635-36 (Iowa 2001). "Every action must be prosecuted in the name of the real party in interest." Iowa R. Civ. P. 1.201; see also Boyd, 634 N.W.2d at 637.
The Milton Johnson, Jr. Revocable Trust is an entity which continued to exist through the date of trial, with US Bank as the corporate trustee. Although raised by neither party nor by the district court, we note that Jan had no authority as attorney-in-fact for her father in his individual capacity to invade trust assets, properly titled in the name of the trust. Only a trustee has that power.
"A power of attorney is an instrument . . . by which one person, as principal, appoints another as his or her agent and confers upon the agent the authority to perform certain specified acts or kinds of acts on behalf of the principal." 3 Am. Jur. 2d Powers of Attorney § 21, at 445 (2002). In this case, the principal was Milton Johnson, Jr. in his individual capacity. Milton never conferred any authority upon any agent in his capacity as trustee of the Milton Johnson, Jr. Revocable Trust.
See generally Iowa Code § 633.699 (2003) (titled "Powers of Trustees"; Iowa Code §§ 633.4201-633.4214 (delineating the fiduciary duties of a trustee)).
While not admitting she lacked authority to invade trust assets, Jan does repeatedly assert the trust and not the estate would have suffered the loss, if such a loss were proven as a result of the distributions she made. We agree with Jan. If assets were to be recovered, they would belong to the trust estate and not the eventual probate estate. Therefore if the trust suffered a loss, any claim against Jan should have been brought by the trustee of the trust as the real party in interest and not by the co-executor of the probate estate.
Consequently, we conclude the real party in interest is the trustee of the Milton Johnson, Jr. Revocable Trust, not the co-executor of the probate estate. As this litigation was not brought by, nor in any way involved the trustee, the district court should have granted Jan's motion to dismiss. We accordingly reverse the judgment of the district court and remand for dismissal of the judgment entered.