Estate of Heller, Matter of

• Decision Date: 23 December 1986
• Docket Number: No. 85-1754,85-1754
• Citation: 401 N.W.2d 602
• Parties: In the Matter of the ESTATE OF John HELLER, Deceased. In the Matter of the Trust Under the LAST WILL AND TESTAMENT OF John HELLER, Deceased, Daniel Heller, Trustee, In the Matter of the CONSERVATORSHIP OF Nichole HELLER, Andrea Heller, Matthew Heller & Mark Heller, Minors. Appeal of Daniel HELLER, Trustee.
• Court: Iowa Court of Appeals

Page 602

401 N.W.2d 602

In the Matter of the ESTATE OF John HELLER, Deceased.

In the Matter of the Trust Under the LAST WILL AND TESTAMENT OF John HELLER, Deceased, Daniel Heller, Trustee,

In the Matter of the CONSERVATORSHIP OF Nichole HELLER, Andrea Heller, Matthew Heller & Mark Heller, Minors.

Appeal of Daniel HELLER, Trustee.

No. 85-1754.

Court of Appeals of Iowa.

Dec. 23, 1986.

Robert Kohorst, of the Kohorst Law Firm, Harlan, for appellant Daniel Heller individually.

Richard A. Heininger, of Smith, Peterson, Beckman & Wilson, Council Bluffs, for appellee Council Bluffs Sav. Bank.

J.C. Salvo, of Salvo, Deren, Schenck & Lauterbach, P.C., Harlan, for Mary Lou Heller, objector.

Grant McMartin, Harlan, guardian ad litem for the children.

Jack W. Peters, of Stuart, Tinley, Peters, Thorn, Smits & Sens, Council Bluffs, guardian ad litem for the purpose of investigating objection to the executor's final report.

Ken Sojka, of Buckley & Sojka, Harlan, for the estate.

Heard by DONIELSON, P.J., and HAYDEN and SACKETT, JJ.

SACKETT, Judge.

Decedent John Heller was the natural father of four children who are all minors. Decedent and the children's natural mother, Mary Lou Heller, were divorced on November 1, 1982. At the time of his death on September 25, 1984, decedent had not remarried.

On November 23, 1982, decedent signed his last will and testament. In the will he appointed his brother, Daniel, as executor and gave all his property to Daniel as trustee for the benefit of his children. Daniel was given discretion to use the funds for the children's living and educational expenses. The children would each receive an equal share of the remainder if they lived to age 21.

After decedent's death Daniel qualified as executor. Subsequently Daniel also qualified as conservator ¹ and trustee. This appeal involves the estate, trusteeship and conservatorship. Basically the four children share the benefits in each. However, their benefits in the estate and trust vest only if they survive to age 21. The conservatorship vests now.

On October 28, 1985, the trial court entered an order removing Daniel as executor, trustee and conservator and appointed the Council Bluffs Savings Bank as successor fiduciary in the matter. The trial court also ordered that Daniel receive no fees and be sued on his bond. The trial court, however, made no findings in its orders explaining the reason for the removal. Daniel filed a motion to enlarge and amend factfinding under Iowa R.Civ.P. 179, a motion for new trial and a motion to reconsider. These motions were overruled.

Daniel appeals contending (1) the trial court should not have removed him as executor, trustee and conservator, (2) the trial court should not have deprived him of his fees and (3) the trial court should not have ordered him sued on his bond. He further contends because payments were made after proper notice to the minors and under court order they are not subject to challenge. We reverse the orders removing Daniel as executor, trustee and conservator; disallowing Daniel fees; and ordering he be sued on his bond. We determine the minor heirs were not properly notified in earlier procedures. We remand to the district court with directions.

I.

When John Heller died he was a farmer. He owned approximately 157 acres of farmland in his name alone. Adjacent to the tract he owned was a homestead of 2.5 acres. When John and Mary Lou were divorced the 2.5 acres was deeded to John and Mary Lou as tenants in common. Mary Lou was given the right to live there as long as any of the minor children remained in her care. Both tracts were jointly encumbered on three notes signed by John and Mary Lou to Federal Land Bank, The Farmers Home Administration and Farmer's Trust and Savings Bank. John had agreed to assume these obligations in the parties' dissolution decree but Mary Lou remained obligated thereon. John also had personal property including machinery and growing crops, most of which was encumbered for other indebtedness.

John had four current life insurance policies. One was credit life and went to the creditor. The second went to Mary Lou. There was a $100,000 whole life policy with Woodman Life with a double indemnity provision for accidental death. John was killed in an automobile accident.

There was some question raised about the Woodman policy after John's death. Woodman determined the beneficiary designation was not entirely clear and questioned whether the policy was payable to Daniel as conservator, Daniel as trustee, Daniel individually or to any person who may have been the children's conservator. To meet Woodman's requirement for immediate payment and to avoid protracted litigation with Woodman to determine the beneficiary, Daniel and Mary Lou agreed a conservatorship should be opened and jointly requested Daniel be conservator. Mary Lou also signed an affidavit recognizing the Woodman policy had been taken out as a condition of obtaining the Federal Land Bank mortgage, releasing any claim to the policy and asking the policy be paid to John's estate. The Woodman policy was paid to Daniel Heller, conservator. It is basically this $200,000 Woodman policy which has generated the controversy herein.

Daniel immediately sought to use the insurance he received as conservator to pay certain obligations of John's estate. In the conservatorship and estate proceedings Daniel filed an application with the court to apply a portion of the insurance proceeds to debts in John's estate. The application recited the fact the insurance had been taken out to satisfy requirements of the Federal Land Bank and the fact interest running on current obligations on the farmland made payment beneficial. The court ordered a five-day notice be given by ordinary mail to interested parties in the conservatorship. The court appointed Grant McMartin, attorney at law, as guardian ad litem to represent the four children at the hearing and in subsequent proceedings.

Notice of the hearing was mailed to Mary Lou Heller, natural mother of the children, at RFD # 3, Box 18, Harlan, Iowa ², and to attorney McMartin in his capacity as guardian ad litem for the children. McMartin filed an answer of guardian ad litem in which he entered his appearance for the children, denied the allegations of the application and asked the court to protect the children's interests. No notice was mailed to or served on any of the four children.

On November 5, 1984, in the estate, and on December 3, 1984, in the conservatorship, the court entered an order determining notice had been given as provided in the prior court order and no further notice need be given. The court found the guardian ad litem had filed an answer on behalf of the wards and the court had jurisdiction of both the parties and subject matter. The court then ordered Daniel to pay the requested debts. After the order was entered, $186,360.84 of the insurance money was used to pay debts in John's estate. These payments are now being challenged based on the exempt nature of the insurance proceeds and the insufficient notice to the minor children.

II.

We first must determine whether the trial court's orders in the estate proceeding and the conservatorship proceeding approving payment of bills were final orders. All orders and decrees of the court setting in probate are final decrees as to parties having notice and those who appeal without notice. Iowa Code § 633.36 (1985) and Matter of Estate of Bruene, 350 N.W.2d 209, 213 (Iowa App.1984). All orders without notice or appearance are reviewable at any time prior to the entry of the order approving the final report. Iowa Code § 633.37 (1985). If the children were properly notified the orders authorizing payment are final orders. If the children were not properly notified the executor's actions can still be examined.

Daniel argues the notices were sufficient and contends he paid bills with the knowledge and consent of Mary Lou, who was notified, and the guardian ad litem, who in his answer entered an appearance for the minor children.

Daniel argues Shoemake v. Smith, 80 Iowa 655, 657, 45 N.W. 744, 745 (1890) is controlling on this issue. In Shoemake, the defendant became insane and an attorney was appointed his guardian ad litem. The guardian ad litem answered and denied allegations of the petition. Id. A judgment was rendered for plaintiff. Id. A notice of appeal was not served on defendant, but rather on his guardian ad litem who also had appeared as the attorney for the defendant. Id. The court held the appeal was perfected because the rules in force provided an appeal is taken by service of notice in writing on the adverse party, the agent, or any attorney who appeared for him in the case below. Id. There was clearly statutory authority in Shoemake to serve the attorney. There being no such statutory authority here, we do not find Shoemake controlling.

In Irwin v. Keokuk Savings Bank & Trust Co., 218 Iowa 477, 480, 255 N.W. 671, 673 (1934), the court stated:

Minors who are unable to act for themselves may not be legally deprived of legacies or the property of an estate of which they are heirs without representation in judicial proceedings by a legally appointed guardian or a guardian ad litem. * * * Distribution thereof could only be made to the beneficiary if an adult or to a minor by payment to a legally appointed guardian of his property. The parent as natural guardian has no authority to act in the place thereof.

The Iowa Rules of Civil Procedure and the Iowa Probate Code which apply to probate procedures both contain provisions governing service on and representation of unrepresented minors. Iowa R.Civ.P. 56.1(b) provides the original notice may be served on a person under 18 years by serving the guardian of his person or property, but provides "... where notice is served on behalf of the guardian ... then the court shall appoint without prior notice on the ward a guardian ad litem upon whom...