U.S. Bank, Nat'l Ass'n v. Bittner

• Docket Number: 21-0455
• Decision Date: 03 March 2023
• Citation: 986 N.W.2d 840
• Parties: U.S. BANK, NATIONAL ASSOCIATION, Appellee, v. Jeffrey S. BITTNER, Individually and as Trustee of the Joan Y. Bittner Marital Trust, Appellant, and MidWestOne Bank, as Conservator of the Joan Y. Bittner Marital Trust, Appellee, and Joan Y. Bittner, Kimberly Montgomery, Todd Richard Bittner, and Lynn Von Schneidau, Defendants.
• Court: Iowa Supreme Court

986 N.W.2d 840

U.S. BANK, NATIONAL ASSOCIATION, Appellee,

v. Jeffrey S. BITTNER, Individually and as Trustee of the Joan Y. Bittner Marital Trust, Appellant,andMidWestOne Bank, as Conservator of the Joan Y. Bittner Marital Trust, Appellee,andJoan Y. Bittner, Kimberly Montgomery, Todd Richard Bittner, and Lynn Von Schneidau, Defendants.

No. 21-0455

Supreme Court of Iowa.

Submitted January 18, 2023

Filed March 3, 2023

Rehearing Denied April 7, 2023

Jeffrey S. Bittner, Davenport, and M. Leanne Tyler, Bettendorf (limited appearance), for appellant.

Lynn W. Hartman and Nicholas D.K. Petersen of Simmons Perrine Moyer Bergman PLC, Cedar Rapids, for appellee U.S. Bank, N.A.

Timothy J. Krumm and Danica L. Bird of Meardon, Sueppel & Downer, P.L.C., Iowa City, for appellee MidWestOne Bank, as Conservator of the Joan Y. Bittner Marital Trust.

Mansfield, J., delivered the opinion of the court, in which all participating justices joined. Waterman and May, JJ., took no part in the consideration or decision of the case.

MANSFIELD, Justice.

I. Introduction.

Contract interpretation can involve somewhat of a paradox. Extrinsic evidence may be used to interpret an integrated agreement but not to alter its terms. As a practical matter, this means that an agreement first needs to be examined by the court in light of relevant extrinsic evidence before such evidence is turned away on the ground that it contradicts the agreement's terms. This approach sounds counterintuitive, but it is supported by our caselaw and the Restatement (Second) of Contracts. Context may not be "king," Des Moines Flying Serv., Inc. v. Aerial Servs. Inc. , 880 N.W.2d 212, 221 (Iowa 2016) (using that expression with regard to statutory interpretation), but it is at least part of the royal family, and a court should not ignore context before it determines the unambiguous meaning of an agreement.

Here, one of four children of the decedent faces a steep uphill climb in a case of contract interpretation. He argues that his father's Individual Retirement Account (IRA) beneficiary designation, which begins by stating that the decedent's spouse is the 100% primary beneficiary of the IRA, actually designates an unnamed family trust as the primary beneficiary. On further review, we hold that the district court should not have short-circuited this child's claim by ruling that the beneficiary designation was unambiguous without there being a need to consider extrinsic evidence. Yet having said that, we are capable here of examining the extrinsic evidence as contained in the son's offer of proof. And after reviewing that evidence, we too conclude that the designation unambiguously conveys the IRA to the decedent's spouse rather than the unnamed family trust. Accordingly, we affirm both the district court judgment and the decision of the court of appeals.

II. Facts and Procedural History.

A. The Parties. R. Richard Bittner, a longtime Iowa attorney, passed away in February 2019 at the age of ninety. His surviving family included his wife, Joan Y. Bittner, and their four children: Kimberly Montgomery, Jeffrey Bittner, Todd Bittner, and Lynn Von Schneidau. Joan is currently under a conservatorship. Jeffrey, like his late father, is an attorney. Jeffrey is the appellant in this case.

Richard accumulated considerable real and personal property assets during his lifetime. These assets included an IRA worth over $3 million. U.S. Bank, N.A. served as the trustee for that IRA.

B. The 2010 Will. During his lifetime, Richard prepared and signed several wills, each of which revoked his prior wills. One of those wills was executed on January 11, 2010. Subject to certain specific devises and bequests, it provided that Richard's estate would go to the Joan Y. Bittner Marital Trust (Marital Trust) to the extent necessary to ensure that no federal estate tax would be paid; the balance would go to the R. Richard Bittner Family Trust (Family Trust). Thus, the will made the Family Trust a residual beneficiary:

While I have, during my lifetime, attempted to equalize the value of assets owned by me and those owned by my wife, I have not succeeded. The assets standing in my name substantially exceed those in the name of JOAN Y. BITTNER. I have therefore concluded to establish a family trust which will make full use and benefit of all tax credits and deductions (other than the marital deduction) allowed to my estate for federal estate tax purposes. Therefore, and except to the extent of the JOAN Y. BITTNER MARITAL TRUST and the specific bequests to my children as hereinafter provided, all of the rest, residue and remainder of my estate I do hereby give, devise and bequeath to the R. RICHARD BITTNER FAMILY TRUST for the use and benefit of my wife and my descendants as therein provided.

At the same time, the will contained a complicated provision dealing with the IRA and the Marital Trust:

There shall be specifically included in the JOAN Y. BITTNER MARITAL TRUST, the value of any and all interest received by such trust attributable to a beneficiary designation with respect to my Individual Retirement Account ("IRA"). Provided, however, that there shall be included in the JOAN Y. BITTNER MARITAL TRUST, for the purpose of achieving an equalization of the assets to assure sufficient assets as will result in no federal estate tax and only that portion of my IRA as is necessary to achieve the asset transfers that are necessary to result in no federal estate tax. If and in the event there is no federal estate tax in force at the date of my demise and in the event JOAN Y. BITTNER survives me, she shall be entitled to all of the required distributions from such IRA during her lifetime and upon her death or in the event she does not survive me, then the balance of my IRA shall pass to and be distributed under the R. RICHARD BITTNER FAMILY TRUST ....

In addition, an article of the will devoted to one of Richard's daughters referred to the IRA:

A substantial part of the income for the benefit of my daughter will be income from my IRA and it is my hope and expectation that my daughter, LYNN VON SCHNEIDAU, will elect the option which extends the payment of the income from such trust over the longest period of time available at the time that she becomes entitled to her share of that income.

C. The IRA Beneficiary Designation. On the same day that he executed the 2010 will, Richard dictated and signed a new beneficiary designation for the IRA. The designation took the form of a separate, typed addendum. Under the heading, "Primary Beneficiary," Richard identified "Joan Y. Bittner" and indicated that her share was "100%." Beneath her name and information, Richard added the following paragraphs:

My wife, Joan Y. Bittner, is and shall be a primary beneficiary under my IRA Account No. XXXXXX which is currently administered by U.S. Bank, N.A. Joan Y[.] Bittner is the primary beneficiary under the Joan Y. Bittner Marital Trust under my Last Will & Testament dated January 11, 2010 and she shall be entitled to all annual distributions from my IRA based upon her life expectancy under the then applicable federal income tax rules and regulations.

The value of such IRA, to the extent necessary to achieve the marital deduction which shall result, shall be included in the Joan Y. Bittner Marital Trust.

That part of my IRA which is necessary to achieve the minimum marital deduction which will result in no federal income tax is devised to the Joan Y. Bittner Marital Trust with respect to which Joan Y. Bittner is the beneficiary.

The addendum contained an additional section with the heading, "Contingent Beneficiaries." Beneath that heading, Richard listed his four children by name and indicated that each would receive a "25%" share. Below their names and identifying information, Richard included the following paragraph:

Upon the death of my wife, my children, Kimberly Montgomery, Jeffrey S. Bittner, Todd R. Bittner and Lynn Von Schneidau, shall become the primary beneficiaries and each shall have an equal share. In the event any child of mine shall not survive me and my wife and is survived by descendants, then such descendants shall succeed to the interest of my child (or children) herein.

Separate from the addendum, Richard checked a box under "Successor Beneficiary(ies)" on the preprinted portion of the beneficiary designation form. The purpose of this box was to indicate what should happen "[i]f a beneficiary who survives me dies before his or her entire interest in the IRA has been distributed." The form instructions specifically stated, "Not applicable if Trust or Estate is beneficiary." Nonetheless, Richard checked one of the boxes and thereby selected "[t]he then living descendants, per stirpes, of the deceased beneficiary" as successor beneficiaries of the IRA.

D. The 2014 Will. On January 7, 2014, Richard executed a new will, revoking the 2010 will. The 2014 will provided generally for an equal division of assets between the Marital Trust and the Family Trust, subject to certain specific devises and bequests. As before, there was a complicated paragraph dealing with the Marital Trust and the IRA:

There shall be specifically included in the JOAN Y. BITTNER MARITAL TRUST, the value of any and all interest received by such trust attributable to a beneficiary designation with respect to my Individual Retirement Account ("IRA"). Provided, however, that there shall be included in the JOAN Y. BITTNER MARITAL TRUST, for the purpose of achieving an equalization of the assets to assure sufficient assets as will result in no federal estate tax and only that portion of my IRA as is necessary to achieve the asset transfers that are necessary to result in no federal estate tax. If and in the event there is no federal estate tax in force at the date of my demise and in the event JOAN Y. BITTNER survives me, she shall be entitled to all of the required distributions from such IRA during her lifetime and upon her death or in the event she does not survive

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