In re Johnston

• Court: Iowa Court of Appeals
• Writing for the Court: BADDING, JUDGE
• Docket Number: 22-1801
• Decision Date: 08 November 2023
• Citation: In re Johnston, 22-1801 (Iowa App. Nov 08, 2023)
• Parties: IN THE MATTER OF THE ESTATE OF JOHN EUGENE JOHNSTON, Deceased. PEGGY JOHNSTON, Appellant.

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IN THE MATTER OF THE ESTATE OF JOHN EUGENE JOHNSTON, Deceased. PEGGY JOHNSTON, Appellant.

No. 22-1801

Court of Appeals of Iowa

November 8, 2023

Appeal from the Iowa District Court for Wapello County, Greg Milani Judge.

Peggy Johnston appeals an adverse grant of a directed verdict on her claim against her deceased husband's estate. Reversed and Remanded.

Richard J. Gaumer of Gaumer, Emanuel, Carpenter &amp Goldsmith, P.C., Ottumwa, for appellant.

Randall C. Stravers of Stravers Law Firm, Oskaloosa, and Greg Life, Oskaloosa, for appellees.

Heard by Tabor, P.J., Badding, J., and Blane, S.J. ^[*]

BADDING, JUDGE

After John Johnston died in March 2018, his wife, Peggy Johnston, filed a claim against his estate for "[o]ne-half of the joint accounts held by" them. The claim alleged funds from the joint accounts were transferred to John's daughter from a prior marriage-Rebecca Askeland. At the close of Peggy's evidence at the hearing on the claim, Rebecca and the estate moved for a directed verdict. The court granted the motion, analyzing Peggy's claim under the elements for the tort of conversion. Peggy appeals, claiming the court "applied the incorrect law to the facts presented." We agree. The court's directed verdict for Rebecca and the estate is reversed, and we remand for completion of the hearing on the claim.

I. Background Facts and Proceedings

John and Peggy married in 1980. Rebecca is John's daughter from a prior marriage. John and Peggy held joint checking and savings accounts throughout their marriage. They both used the accounts and deposited money into them, though most of the deposits were from John's retirement benefits and investments. John and Peggy would normally deposit their money into the savings account, which was interest-bearing, and then make transfers to their checking account to cover "household bills, groceries, any other things that came up." Peggy agreed that neither she nor John made "an attempt to distinguish in the accounts what was [hers] and what was his"-"it was all kind of bunched together as a joint account like married people often do."

This appeal involves two certificates of deposit purchased by John before his death with funds that Peggy contends came from, or went through, their joint accounts. Peggy testified that she did not know about the transactions involving the certificates of deposit until after John's death. She explained that she and John would discuss some financial decisions, like building a house, for example. But, generally, if John "wanted to do something, you know money-wise, he would go and shuffle money and withdraw money and not say anything about it." Peggy testified this behavior increased as the marriage went on, and she didn't see the bank statements later in the marriage because John would get the mail.

The first certificate-in the amount of $40,000.00-was issued on June 26, 2015, to John and Rebecca jointly with survivorship. Peggy testified the money for that certificate came from her joint savings account with John, although a letter from the bank that issued the certificate stated it "was purchased in 2015 after closing a CD with John as the only owner." A deposit slip, admitted into evidence as Exhibit 8, was dated the same day as the new certificate of deposit was issued. It listed a closed certificate of deposit in the amount of $45,736.05 in the deposit column and a "New CD" of $40,000 under the "less cash" column. The remaining $5736.05 went into the joint savings account shared by John and Peggy. At the hearing, the parties seemed to agree that all the money from the closed certificate of deposit went through the couple's savings account before the new $40,000 certificate of deposit was purchased.^[1] Once that certificate matured, John deposited the proceeds of $40,331.82 into a new checking account that he opened in his name only on January 3, 2017.

The second certificate-in the amount of $70,000.00-issued on September 6, 2016, to John and Rebecca jointly with survivorship. A bank statement from the savings account shared by John and Peggy shows a withdrawal of $70,000.00 from the account on September 7, 2016. Peggy agreed the $70,000.00 that was used for this certificate came from the sale of real property owned solely by John, but the evidence shows that sale occurred roughly five years earlier.^[2] This certificate of deposit was to mature in March 2017 at a value of $70,052.07. That exact sum was deposited into John's separate checking account on March 9.

John executed his last will and testament in December 2017. His will left all his property to his three daughters, including Rebecca, either directly or through a testamentary trust. John died on March 11, 2018. According to the joint account report issued by the bank, the combined value of the joint checking and savings accounts shared by John and Peggy was $722.15 when John died, with Peggy as the surviving owner. As for the checking account that John opened with the proceeds of the first certificate of deposit, the bank's report form listed Rebecca as the surviving owner and noted the value at death was $79,761.12.

Rebecca petitioned to probate John's will shortly after his death. Peggy filed a notice of her election to receive her share of the estate as John's surviving spouse. In time, Peggy filed a claim against the estate for $94,500.00 attributable to "[o]ne-half of the joint accounts held by John Johnston and Peggy Johnston which were transferred to Rebecca Askeland," as reflected by "a certificate of deposit of $70,000, a certificate of deposit of $40,000 and a joint checking account of $79,000." After Peggy requested a hearing, see Iowa Code § 633.443 (2018), the estate denied the claim. An attorney for Rebecca entered an appearance before the hearing on the claim.

In a prehearing brief, Peggy argued that she was entitled to one-half of the money John used from joint accounts to buy the certificates of deposit, which would be $55,000.00.^[3] She likened her claim to one discussed by this court in Kettler v. Security National Bank, 805 N.W.2d 817, 823 (Iowa Ct. App. 2011), which held that "[i]n a case where a joint tenant makes a valid withdrawal of more than his proportional share," the remedy is "a suit between the joint tenants to recover the funds taken in excess of the withdrawing joint tenant's proportional share." Peggy concluded her brief by "seeking recover[y] for John's removal of excess funds from the joint tenant account, plus interest from the date of conversion."

At the hearing, Peggy's evidence was limited to her testimony and stipulated exhibits from the parties. Once Peggy rested, Rebecca and the estate moved for a directed verdict, arguing that "the testimony is clear there was no attempt by the parties to keep track of the monies in those accounts as my account, your account." They continued by challenging Peggy's contention that the funds used to buy the certificates of deposit came from her and John's joint accounts:

[W]e have a source of funds for the $40,000 as a prior CD in the name of John only. That's in a letter from the bank. It's undisputed. That $40,000 did not come from the money in a joint account. It came through. The money was transferred through because it had to go through the account, but it didn't originate there. It was from a prior CD and that's what the record shows.

Same thing with the $70,000. The claimant's own testimony is that $70,000 was from the proceeds from the sale in real estate. Real estate just in the name of the decedent, John Johnson.

In response, Peggy contended that under Kettler,

a cotenant may not withdraw from the account in excess of his interest. If he has done so, he's liable to the other joint [cotenant] for the excess so withdrawn. It's a joint account. There is no document that has been produced by anyone to show that this was other than an equal 50-50 division account.

Ruling from the bench, the court granted the motion for directed verdict:

The Court finds that for conversion there has to be ownership by the plaintiff or other possessory right in the plaintiff greater than that of the defendant. There was no evidence of that in this case.

Also has to show dominion or control over titles by the defendant inconsistent with or derogation of the plaintiff's possessory rights. There's limited evidence of that and limited evidence of damages. There's no evidence to prove this was anything other than estate planning done by the decedent. And there's also great evidence that th[e] account transfers were made and done with the knowledge of the plaintiff and with her consent.

When you consider the sources of the funds, particularly all the income apparently to the account came from income, retirement income, and earnings of the decedent. And therefore, the Court rules case dismissed.^[4]

The court then entered an order dismissing the claim "[f]or the reasons set forth on the record." Peggy appeals.

II. Standard of Review

Review of the district court's grant of a motion for directed verdict is for legal error. Rumsey v. Woodgrain Millwork, Inc., 962 N.W.2d 9, 20 (Iowa 2021).

We review the evidence in the light most favorable to the party against whom the motion was sustained. The movant is considered to have admitted the truth of all evidence offered by the adversary and every favorable inference that fairly and reasonably may be deduced from it. An order sustaining such a motion rests on legal grounds and does not find facts. Sustention is warranted only when the evidence is insufficient as a matter of law to permit the adverse party to recover.

Rodgers v. Baughman, 342 N.W.2d 801, 803-04 (Iowa 1983) (internal citations omitted).

III. Analysis

We start and end with Peggy's claim that the...