In re Estate of Poths
| Decision Date | 23 March 2016 |
| Docket Number | No. 15–0343.,15–0343. |
| Citation | 883 N.W.2d 536 (Table) |
| Parties | In the Matter of the ESTATE OF Mervin C. POTHS, Sheryl Poths, Intervenor–Appellant. |
| Court | Iowa Court of Appeals |
Louis R. Hockenberg, Samantha J. Gronewald, and Amanda A. James of Sullivan & Ward, P.C., West Des Moines, for appellant.
William L. Shelton and R. William Petersen of Shelton Law Firm, Chariton, for appellee.
Verle W. Norris of Verle W. Norris Law Firm, Corydon, for appellee.
Heard by TABOR, P.J., and BOWER and McDONALD, JJ.
Sheryl Poths appeals the district court's denial of her application to remove her brother, Ronald, as executor of their father's estate. She further argues her father, Mervin, did not complete an inter vivos gift of corporate stock to Ronald and the stock should be included as an asset of the estate. Because we find Mervin completed the gift of stock, and the district court did not abuse its discretion in refusing to remove Ronald as the executor, we affirm.
Mervin Poths died testate on September 14, 2012. His will—admitted into probate on October 10, 2012—appointed his son, Ronald, as executor. Verle Norris, who represented Mervin before he died and drafted the will, served as counsel for the estate. Ronald and Sheryl were beneficiaries of the will. The siblings did not have a close relationship even before their father's death. Sheryl hired an attorney to represent her in matters concerning the estate within two weeks of the admission of her father's will into probate.
Valued at approximately $1.17 million, the estate's assets included farm land, livestock, farm implements, bank accounts, an unincorporated feed store, stock in Poths Grain, Inc., a closely held corporation, and personal property. Sheryl's primary point of disagreement with Ronald is the Poths Grain. Ronald served as corporate president, while Mervin, as director, ran the day-to-day operations. Ronald drove the grain truck, and the corporation paid him twenty-five percent of the payment for each load delivered. Sheryl was not an officer of the corporation.
Since Mervin's will entered probate, Sheryl has been disenchanted with Ronald's filings on behalf of the estate. Ronald initially filed the estate's report and inventory on January 10, 2013. Sheryl filed a petition to remove Ronald as executor on June 5, 2013. Ronald filed an amended report and inventory on June 27, 2013. On August 19, 2013, Sheryl objected to the amended report and inventory. She claimed the inventory should reflect one-hundred percent of Mervin's shares in Poths Grain because an inter vivos gift of fifty percent of the stock from Mervin to Ronald was not completed.
The district court addressed the stock controversy by appointing a temporary executor under Iowa Code section 633.343 (2013). Both parties stipulated to the December 6, 2013 appointment of retired judge Dale Hagan as temporary executor. His role was “investigating and making a determination as to the decedent's ownership interest in said stock.” On April 28, 2014, Hagan issued a report finding Mervin completed the gift of stock to Ronald, and as a result, the estate inventory correctly included only Mervin's remaining one-half interest in the corporation. Sheryl filed an objection, contending the report contained hearsay and biased information. On November 3, 2014, the temporary executor resigned for health reasons. The district court granted his resignation.
On December 17, 2014, the district court held a hearing on Sheryl's removal petition, at which attorney Norris represented the estate. The next day, the court held a separate hearing on the question of the inter vivos gift, at which Norris testified regarding his personal knowledge of Mervin's actions in transferring the stock to Ronald. Ronald was represented by a different attorney at the second hearing. Norris remained in the hallway until called to testify and did not object or return to counsel table during the proceedings.
On January 28, 2015, the district court issued an order denying Sheryl's request to remove Ronald as executor and finding the inter vivos gift of stock was completed. Sheryl now appeals.
We review de novo as probate issues are tried in equity. See Iowa Code § 633.33. But we review the district court's decision declining to remove the executor for abuse of discretion. See In re Estate of Rutter, 633 N.W.2d 740, 745 (Iowa 2001). The trial court has broad discretion in deciding whether to remove an executor. In re Estate of Lininger, 297 N.W. 310, 312 (Iowa 1941) ; In re Estate of Randeris, 523 N.W.2d 600, 605 (Iowa Ct.App.1994). The appointment of an attorney is within the power of the executor. See generally In re Will of Kenney, 239 N.W. 44, 44 (Iowa 1931) ; In re Estate of Buck, 569 N.W.2d 400, 401–02 (Iowa Ct.App.1997). We also review de novo the determination of an inter vivos gift because the issue was tried in equity. See Raim v. Stancel, 339 N.W.2d 621, 622 (Iowa Ct.App.1983).
Sheryl argues the district court wrongly concluded that, before his death, Mervin completed a gift of shares in Poths Grain to Ronald. She further contends the court should have removed Ronald as executor of Mervin's estate. She claims the gift created a conflict of interest for Ronald, he engaged in self-dealing, he did not provide her with information in a timely manner, and he did not obtain an appraisal of Poths Grain based on its fair market value. She also claims he is hostile and their lack of communication is cause for removal. Lastly, she seeks removal of Norris as estate counsel.
After Mervin's wife Merilea died in early 2011, his thoughts turned to estate planning. That fall, Mervin contacted attorney Norris and expressed his desire to give half of his 5000 shares in Poths Grain to his son Ronald. Mervin told Norris that Ronald deserved the gift because of his hard work and loyalty to the corporation. Because Mervin could not find the original stock certificate, Norris helped him execute an Affidavit of Lost Certificate.
On March 1, 2012, a new stock certificate issued reflecting Mervin's ownership of all 5000 shares in the grain corporation. Mervin then assigned fifty percent of his shares to Ronald, and two additional stock certificates issued—one showing Mervin owned 2500 shares and one showing Ronald owned 2500 shares. Mervin signed the front of the certificates, which indicated he was president of the corporation. Norris completed forms on the back of the second and third certificates, indicating transfers from the original issuance dated March 1, 2012. The certificates remained in Norris's office. Norris testified that, because Mervin could not locate complete records for the corporation, Norris “thought it necessary to document the [stock] transfer in a formal way.” So Norris “started a formal corporate record book” for Poths Grain after his March 1 meeting with Mervin.
Ronald testified his father told him about the transfer of stock sometime in March 2012, but Ronald did not see the stock certificates until after Mervin died. Neither Ronald nor the corporation reported the gift to tax authorities.
Sheryl asserted in the district court that Mervin did not complete the gift of stock to Ronald and therefore died owning all 5000 shares in the corporation. The district court determined Mervin's intent in transferring the shares to Ronald was “not in doubt” and his intent prevailed over any errors by the corporation in the issuance of the new certificates. On appeal, Sheryl argues the record does not support the court's finding of a completed gift.1
A gift is complete when the donor has a present intent to make a gift and divests himself of “all control and dominion over the subject of the gift.” In re Estate of Crabtree, 550 N.W.2d 168, 170 (Iowa 1996) (quoting Taylor v. Grimes, 273 N.W. 898, 901 (1937) ). The transfer of dominion and control must be a present transfer, not a future transfer. Id. The transfer must also be accompanied by three elements: (1) donative intent, (2) delivery, and (3) acceptance. Gray v. Roth, 438 N.W.2d 25, 29 (Iowa Ct.App.1989). “The intent of the grantor is the controlling element.” Id. Although less positive proof is required to establish gifts between parent and child, delivery is still required. Gartin v. Taylor, 577 N.W.2d 410, 412 (Iowa 1998). Here, Ronald bears the burden to show the gift is supported by clear and convincing evidence. See Raim, 339 N.W.2d at 624. Clear and convincing evidence means we find “no serious or substantial doubt about the correctness of the conclusion drawn from it.” Id.
Sheryl contests all three elements. On the question of donative intent, she points to testimony that her father did not tell his long-time tax advisor about the stock transfer. Despite that evidence, the record contains clear and convincing proof that Mervin communicated his donative intent to both Norris and Ronald. Mervin also went to the effort to have new stock certificates created. Nothing in the record suggests Mervin left himself the option to rescind the transfer. We find Mervin possessed the present intent to give the stock to Ronald.
We turn next to the question whether Mervin acted on his donative intent or as Justice Ladd asked: “Was it ever delivered?” Dolph v. Wortman, 168 N.W. 252, 254 (Iowa 1918). Delivery can be actual, constructive, or symbolic. Carlson v. Bankers Trust Co., 50 N.W.2d 1, 7 (Iowa 1951). Manual transfer is not required; instead, we may construe words and actions evincing the donor's intent to satisfy the element of delivery. See Ferrell v. Stinson, 11 N.W.2d 701, 704 (Iowa 1943).
When it comes to certificates of stock, our supreme court has not required physical delivery. Leedham v. Leedham, 254 N.W. 61, 62 (Iowa 1934). The Leedham court explained:
A certificate of stock is not the stock itself, but merely written evidence of the ownership thereof and of the rights and liabilities...
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