Katina M. Little v. Keith A. Davis and Donald J. Davis, Co-Trustees of the Donald K. Davis and Collen Davis Family Trust ( 2022 )

IN THE SUPREME COURT OF IOWA
No. 21–0953
Submitted March 23, 2022—Filed May 6, 2022
KATINA M. LITTLE,
Appellee,
vs.
KEITH A. DAVIS and DONALD J. DAVIS, Co-Trustees of the DONALD K.
DAVIS and COLLEN DAVIS FAMILY TRUST,
Appellants.
Appeal from the Iowa District Court for Keokuk County, Crystal S. Cronk,
Judge.
Trustees appeal from a grant of summary judgment in favor of a trust
beneficiary who alleges a purported modification of the trust was invalid.
AFFIRMED.
McDonald, J., delivered the opinion of the court, in which all justices
joined.
John G. Daufeldt of John C. Wagner Law Offices, P.C., Amana, for
appellants.
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Randall C. Stravers of Stravers Law Firm, Oskaloosa, for appellee.
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McDONALD, Justice.
This case concerns a beneficiary’s challenge to modifications of the
dispositive provisions of an irrevocable trust. The Iowa Code provides that an
irrevocable trust may be modified in one of two ways. First, without court
approval, “[a]n irrevocable trust may be modified or terminated upon the consent
of the settlor and all of the beneficiaries.” Iowa Code § 633A.2202(1) (2020).
Second, with court approval, “[a]n irrevocable trust may be terminated or its
dispositive provisions modified . . . with the consent of all of the beneficiaries if
continuance of the trust on the same or different terms is not necessary to carry
out a material purpose.” Id. § 633A.2203(1). The question presented in this
appeal is whether the surviving settlor of an irrevocable trust can, with the
consent of all of the beneficiaries, modify the dispositive terms of an irrevocable
trust without court approval.
I.
Husband and wife Donald K. and Collen Davis established the Donald K.
& Collen Davis Family Trust in February 2016. The trust agreement provided
that while Donald and Collen were both living and competent, the trust could
“be altered or amended by written instrument signed by both Co-Trustors.” The
trust agreement also contained an irrevocability provision stating that “[u]pon
the death of the first Co-Trustor to die . . . the then surviving Co-Trustor . . .
shall not have the power to amend, revoke and/or terminate the [trust].” Upon
the death of the surviving spouse, the trust estate was to be distributed equally
to Donald’s four children: Keith Davis, Jeffrey Davis, Donald J. Davis, and Katina
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Little. The primary asset of the trust was Donald’s farmland, which he acquired
prior to marrying Collen, but which was held jointly by them. The apparent
purpose of the trust was to protect Donald’s farmland from any claims of Collen
(or her children from a previous relationship) in the event Donald predeceased
Collen. Donald did not predecease Collen; Collen died in September 2017,
leaving Donald as the surviving trustor (or settlor) and the surviving trustee.
At some point after Collen’s death, Donald decided he wanted to amend
the dispositive terms of the trust. His attorney prepared a two-page document
entitled “Consent to Modify Trust Agreement.” The consent document
acknowledged that the trust agreement provided the surviving trustor did not
have the power to amend, revoke, or terminate the trust. The consent document
stated the purpose of the irrevocability provision—to protect Donald’s farmland
against any claims from Collen or her children—no longer existed. The second
page of the consent document contained signature lines for Donald and each of
the four beneficiaries of the trust underneath a single paragraph. That paragraph
stated:
THEREFORE, the undersigned, being the current trustee, the
current income beneficiary, and all of the adult beneficiaries who
would receive a share of the trust if Donald K. Davis was not living,
hereby agree that Donald K. Davis, as surviving Trustor and as
surviving Trustee, shall have the power and authority to alter,
amend, or revoke the DONALD K. & COLLEN DAVIS FAMILY
TRUST[.]
Donald and his four children, including appellee Katina Little, signed the consent
document on different days in April and May of 2018.
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On May 30, 2018, Donald executed a document entitled “First Amendment
to Trust Agreement of Donald K. & Collen Davis Family Trust.” The amendment
altered the disposition of the trust estate. Upon Donald’s death, under the
amendment, Donald’s farmland was to pass one-half each to his sons Donald J.
and Keith. Meanwhile, Jeffrey was to receive $50,000, and Little was to receive
$25,000. The remainder of the trust estate was to be divided evenly between the
four beneficiaries. The amendment also changed the trustees to succeed Donald
after his death. The 2016 trust agreement provided Donald’s four children would
succeed Donald as co-trustees, but the amendment provided that only Donald’s
sons Donald J. and Keith would succeed Donald as co-trustees.
This suit arises out of Little’s challenge to the validity of the amendment
to the trust agreement. Donald died on November 13, 2019. According to the
terms of the amended trust agreement, Donald J. and Keith became trustees of
the trust. In January 2020, Little received a notice regarding the disposition of
the trust estate that contained a copy of the 2016 trust agreement and the 2018
amendment to the trust agreement. Little filed this suit against Donald J. and
Keith as trustees. In her petition, Little contended the amendment to the trust
agreement was void.
The parties filed cross-motions for summary judgment. The co-trustees
argued the amendment was valid because Iowa Code section 633A.2202(1)
provides that an irrevocable trust can be modified with the consent of the settlor
and all of the beneficiaries. Little asserted several reasons why the amendment
was not valid. First, she argued the trust agreement, by its own terms, could not
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be amended, revoked, or terminated after Collen’s death. Second, she argued the
amendment was void without court approval because Collen could not and did
not consent to the amendment. Third, she argued the amendment was invalid
because the consent document did not identify the dispositive terms of the trust
that were to be modified. Finally, she argued she did not knowingly and
voluntarily consent to the amendment. In support of this last argument, Little
testified in her deposition that Donald pressured her to sign the consent
document. She testified she was visiting her father on April 25, 2018, when he
asked her to sign a one-page document. Little noticed that a staple had been
torn out of the document but there was no other page attached. Little asked to
see the other page and recalled that Donald looked for the additional page but
was unable to find it. Little testified that Donald became “more and more
agitated” as he was unable to find the missing page. Finally, Donald explained
the purpose of the document was to “tak[e] Collen’s name off” the trust
agreement. Little signed the document despite not seeing the other page. The
document she signed was only the second page of the two-page consent
document.
The district court granted Little’s motion for summary judgment and
denied the trustees’ motion for summary judgment. The district court held the
amendment to the trust agreement was “void for lack of authority.” In reaching
that conclusion, the district court relied on Iowa Code section 633A.1105, which
states, “The terms of a trust shall always control and take precedence over any
section of [the] trust code to the contrary.” In the district court’s view,
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section 633A.1105 compelled the conclusion that the provision of the trust
agreement stating that the surviving settlor could not amend, revoke, or
terminate the trust was controlling and disallowed modification of the trust
under any circumstances. Finding the issue dispositive, the district court did not
address the other arguments raised by the parties.
II.
“The standards for granting summary judgment are well established and
need not be repeated in full herein.” Kostoglanis v. Yates, 956 N.W.2d 157, 158
(Iowa 2021). Review of summary judgment rulings is for correction of errors at
law. Id. “Summary judgment is properly granted when there is no genuine issue
of material fact and the moving party is entitled to judgment as a matter of law.”
McQuistion v. City of Clinton, 872 N.W.2d 817, 822 (Iowa 2015). When an appeal
from a district court’s ruling on a summary judgment motion requires us to
resolve a legal question by interpreting a statute, our review is also for correction
of legal error. Homan v. Branstad, 887 N.W.2d 153, 164 (Iowa 2016). We can
affirm the district court’s grant of summary judgment on any ground urged on
appeal that was also raised in the district court. See Pitts v. Farm Bureau Life
Ins., 818 N.W.2d 91, 97 (Iowa 2012).
A.
Before 2000, the law of trusts was scattered throughout the Probate Code,
various other statutes, and judicial decisions. See Martin D. Begleiter, In the
Code We Trust—Some Trust Law for Iowa at Last, 49 Drake L. Rev. 165, 171
(2001) [hereinafter Begleiter]. To bring greater clarity to the law of trusts, the
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general assembly adopted a comprehensive Trust Code in 1999, which is now
codified in Iowa Code chapter 633A. Id. While the Trust Code now controls many
aspects of the law of trusts, it “does not attempt to cover every area of trust law
nor provide for every situation.” Id. at 185. Rather, “[e]xcept to the extent that
[chapter 633A] modifies the common law governing trusts, the common law of
trusts shall supplement th[e] trust code.” Iowa Code § 633A.1104. Prior judicial
decisions thus remain an integral part of the law of trusts and should be
harmonized with the Trust Code. See id.; see also, e.g., Keating v. Keating, 165
N.W. 74, 77–78 (Iowa 1917) (“Even in the absence of statute the authority to
entertain complaints alleging improper or arbitrary and unreasonable conduct
of trustees in the administration of trusts has long been held to be inherent in
courts of equity.”).
B.
With that background, we turn our attention to the district court’s ruling.
The district court held the amendment to the trust agreement was void. In
reaching that conclusion, the district court relied on Iowa Code section
633A.1105. That Code section provides:
The terms of a trust shall always control and take precedence
over any section of this trust code to the contrary. If a term of the
trust modifies or makes any section of this trust code inapplicable
to the trust, the common law shall apply to any issues raised by
such term.
Iowa Code § 633A.1105. In the district court’s view, section 633A.1105 compelled
the conclusion that the terms of the trust agreement—that the surviving settlor
could not amend, revoke, or terminate the trust—disallowed any amendment,
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revocation, or termination of the trust under any circumstances. We conclude
the district court erred in granting summary judgment on this ground.
The district court’s analysis of this issue was incomplete. Section
633A.1105 provides the terms of a trust “shall always control.” Here, the terms
of the trust agreement provide that “[u]pon the death of the first” settlor, the
surviving settlor “shall not have the power to amend, revoke and/or terminate”
the trust. The terms of the trust clearly express an intent to create an irrevocable
trust. See In re Work Fam. Tr., 151 N.W.2d 490, 492 (Iowa 1967) (stating the
intent to create an irrevocable trust must be construed from “the language of the
trust instrument as a whole”). But the conclusion that the terms of the trust
control and that the text of this trust instrument creates an irrevocable trust
does not address the question of whether and under what circumstances an
irrevocable trust can be amended, revoked, or terminated. That question is
answered by the common law and other provisions of the Trust Code.
The district court’s holding was contrary to our common law. At common
law, an irrevocable trust was not permanently unchangeable. The “traditional
rule” was that “an irrevocable trust may be modified or terminated on consent of
all the beneficiaries.” Begleiter, 49 Drake L. Rev. at 194; see Restatement
(Second) of Trusts § 338(1) (Am. L. Inst. 1959) (“If the settlor and all of the
beneficiaries of a trust consent and none of them is under an incapacity, they
can compel the termination or modification of the trust, although the purposes
of the trust have not been accomplished.”); see also, e.g., In re Green Valley Fin.
Holdings, 32 P.3d 643, 646 (Colo. App. 2001) (applying Restatement (Second) of
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Trusts section 338); Shire v. Unknown/Undiscovered Heirs, 907 N.W.2d 263, 271
(Neb. 2018) (citing the “common-law principle that a trust can be modified upon
the consent of the settlor and all the beneficiaries”). Iowa followed the traditional
rule. See Harrison v. City Nat’l Bank of Clinton, Iowa, 210 F. Supp. 362, 368–69
(S.D. Iowa 1962) (applying Iowa law and citing Restatement (Second) of Trusts
section 338); Sawyer v. Sawyer, 152 N.W.2d 605, 611 (Iowa 1967) (stating
consent of the settlor and all beneficiaries was required to terminate an
irrevocable trust and finding not all beneficiaries had consented to purported
termination). The common law rule applies “although the settlor does not reserve
a power of revocation, and even though it is provided in specific words by the
terms of the trust that the trust shall be irrevocable.” Restatement (Second) of
Trusts § 338, cmt. a.
The district court’s holding was also contrary to the Trust Code. Every
trust agreement in Iowa executed after July 1, 2000, is presumed revocable and
can be revoked or modified by the settlor “[u]nless the terms of the trust expressly
provide that the trust is irrevocable.” Iowa Code § 633A.3102(1). Thus, for an
Iowa trust to be irrevocable, the trust instrument necessarily must contain terms
that make it irrevocable. Despite this requirement, Iowa Code sections
633A.2202 and .2203 specify when and how an irrevocable trust can be modified
or revoked. See also Begleiter, 49 Drake L. Rev. at 194. Were we to read Iowa
Code section 633A.1105 as the district court did, then sections 633A.2202 and
.2203 would never be operable. As a general rule of statutory construction, we
avoid an interpretation or application of a statute that renders other portions of
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the statute superfluous or meaningless. See Rojas v. Pine Ridge Farms, L.L.C.,
779 N.W.2d 223, 231 (Iowa 2010).
We thus conclude the district court erred in holding that Iowa Code section
633A.1105 rendered the attempted modification of the trust void. An
irrevocability provision in a trust instrument makes a trust irrevocable. That
same irrevocability provision does not preclude future modification or revocation
of the trust when done in accord with the common law and statute.
C.
Although we hold the district court erred in its interpretation and
application of section 633A.1105, we conclude the district court’s grant of
summary judgment should be affirmed on an alternate ground. See Pitts, 818
N.W.2d at 97. An irrevocable trust may be modified or terminated without court
approval only “upon the consent of the settlor and all of the beneficiaries.” Iowa
Code § 633A.2202(1). Little argues that where, as here, a trust was created by
more than one settlor, it can be modified without court approval only with the
consent of all settlors. Obviously, Collen could not and did not consent to the
modification of the trust. Therefore, according to Little, any modification of the
trust required approval of the district court pursuant to Iowa Code section
633A.2203(1). For the reasons set forth below, we agree.
We begin with the plain language of the statute. When interpreting a
statute “we seek to determine the ordinary and fair meaning of the statutory
language at issue” using “traditional interpretative tools.” Doe v. State, 943
N.W.2d 608, 610 (Iowa 2020). Iowa Code section 633A.2022(1) permits
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modification or termination of an irrevocable trust with “the consent of the settlor
and all of the beneficiaries.” The trustees argue that the statute’s use of the
singular term “settlor” shows that only the consent of the surviving settlor is
required to modify the trust without court approval. We disagree. Iowa Code
section 4.1(17) states, “Unless otherwise specifically provided by law the singular
includes the plural, and the plural includes the singular.” See also Porter v.
Harden, 891 N.W.2d 420, 426 (Iowa 2017); Sexton v. Lauman, 57 N.W.2d 200,
202 (Iowa 1953). Nothing in the Trust Code suggests this rule of construction is
inapplicable to section 633A.2202. The plain language of the statute thus
requires the consent of all settlors of the trust.
This interpretation of the statute is consistent with one of the fundamental
tenants of our trust law. Our chief focus when interpreting a trust agreement is
to effectuate the intent of the settlor or settlors. See In re Tr. of Killian, 459
N.W.2d 497, 499 (Iowa 1990) (en banc) (“The polestar of our analysis is the rule
that the testator’s (or, in this case, the settlor’s) intent must prevail.”). We have
repeatedly stated that protecting and effectuating the wishes of a settlor is of
primary importance to our trust law. See O’Brien v. Stoneman, 288 N.W. 447,
447–48 (Iowa 1939) (“[W]e start with the fundamental principle that under
ordinary circumstances, one has the absolute right to dispose of his property as
he pleases. It is not the business of the courts to interfere with the disposition
an aged person makes of her property.”); see also In re Spencer’s Est., 232 N.W.2d
491, 497 (Iowa 1975) (stating courts are “bound to carry out” the intent of a
settlor or testator); In re Butler’s Tr., 154 N.W.2d 705, 709 (Iowa 1967) (stating
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Iowa courts “prefer[] a rule which emphasizes the intention of the settlor”);
Sawyer, 152 N.W.2d at 611 (stating “a spendthrift trust created by will cannot
be terminated by a court if contrary to the expressed wish of the settlor even
though all beneficiaries desire that it should be,” in a case where the settlor was
deceased and thus “incapable of consenting to termination of the trust”);
Wohlgemuth v. Des Moines Nat’l Bank, 192 N.W. 248, 250 (Iowa 1923) (“Effect
should be given to the intention of the testator, unless to do so would contravene
some applicable rule or principle of the common law.”); Guilford v. Gardner, 162
N.W. 261, 264 (Iowa 1917) (“The meaning being plain and the intent being lawful,
there is no room left for controversy. It is not for the court to question or consider
the absolute justice of the condition; its only function is to ascertain the
testator’s intent and give it effect.”). To allow the surviving settlor and
beneficiaries of an irrevocable trust to amend the dispositive provisions of a trust
without court approval is inconsistent with Iowa’s focus on protecting the intent
of all settlors of a trust, including a deceased settlor.
Persuasive authority supports our conclusion that modification of the
dispositive terms of an irrevocable trust requires court approval where all settlors
of a trust cannot consent. In Culver v. Title Guarantee & Trust Co., the New York
Court of Appeals was faced with a similar question and reached the same
conclusion we reach today. 70 N.E.2d 163 (N.Y. 1946). At issue was an
irrevocable trust created by three settlors. Id. at 164. One of the settlors died,
after which the two living settlors and the beneficiaries (the daughter and
grandchildren of the deceased settlor) all agreed to modify the trust by returning
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to the surviving settlors the portion of the trust principal they had contributed.
Id. The applicable statute permitted revocation of a trust as follows:
Upon the written consent of all the persons beneficially interested in
a trust in personal property or any part thereof heretofore or
hereafter created, the creator of such trust may revoke the same as
to the whole or such part thereof, and thereupon the estate of the
trustee shall cease in the whole or such part thereof.
Id. at 165 (quoting N.Y. Pers. Prop. Law § 23 (1946)). The court held the
purported revocation by the surviving settlors and the beneficiaries was
ineffective. Id. First, the court held that the reference to the “creator” of a trust
in the revocation statute included, for trusts with multiple settlors, the plural
“creators,” since New York (like Iowa) construes statutes written in the singular
to include the plural. Id. Further explaining its rationale, the court stated:
Were all of the joint settlors living, the consent of each to a
revocation either in whole or in part would be necessary. There
appears to be equal reason for forbidding whole or partial revocation
when one of them is dead and may not be heard. The deceased
settlor may have departed this life secure in her belief that she had
so arranged her affairs that her daughter would be benefitted, if
alive, by the receipt of a principal sum contributed not only by her
but by other settlors . . . . We think it fairer and more in consonance
with legislative intent not to deprive her by reason of her death, of
her right to refuse to consent to partial or total revocation.
Id.Like Iowa and New York, other courts have concluded the interests of the
deceased settlor must be protected. See, e.g., Buckalew v. Arvest Tr. Co., N.A.,
425 S.W.3d 819, 823 (Ark. Ct. App. 2013) (stating modification of trust was
invalid because the settlor was deceased and the court was “required to consent
on behalf of a deceased settlor”); L’Argent v. Barnett Bank, N.A., 730 So. 2d 395,
396 (Fla. Dist. Ct. App. 1999) (provision in trust agreement that during “the life
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of the Settlors, this trust may be amended, altered, revoked, or terminated, in
whole or in part, or any provision hereof, by an instrument in writing signed by
the Settlors” meant amendment was prohibited after the death of one settlor
(emphases added)); Williams v. Springfield Marine Bank, 475 N.E.2d 1122, 1125
(Ill. App. Ct. 1985) (“Where the power to modify a trust has been reserved to the
joint settlors of the trust, both must join in executing an instrument to effectuate
a change. An attempted modification by one after the death of the other is a
nullity.”).
There is some authority to the contrary, but we do not find that authority
persuasive. At issue in In re Frei Irrevocable Trust Dated October 29, 1996, was
an irrevocable trust created by two settlors—a wife and husband. 390 P.3d 646,
649 (Nev. 2017). Shortly after the wife died, the husband and beneficiaries agreed
to modify the trust to grant “any beneficiary the right to compel distribution of
his or her share of the trust.” Id. The Supreme Court of Nevada held the
modification was not invalid. Id. at 650. In the court’s view, all beneficiaries and
all settlors had consented to the modification—the husband had consented on
his own, and though the wife had died, one of the beneficiaries acted through
her power of attorney and consented on her behalf. Id. at 650 & n.4. In re Frei is
not in accord with Iowa law, which is focused on protecting the intent of all
settlors, including deceased settlors.
To best protect the intent of a deceased settlor who held the power to
modify the trust during her lifetime, we should not permit the surviving settlor
and beneficiaries to amend a trust on their own after that settlor passes. The
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language of Iowa Code section 633A.2202(1) and our rules of statutory
construction command this result. The persuasive caselaw from other
jurisdictions supports this result. We thus hold that the dispositive terms of an
irrevocable trust can be modified without court approval pursuant to section
633A.2202(1) only upon the consent of all settlors and beneficiaries. In the
absence of consent by all the settlors and beneficiaries, the dispositive terms of
an irrevocable trust can be modified only with court approval pursuant to section
633A.2203(1). Here, the purported amendment was obtained without court
approval and is not valid.
III.
Because we hold that the consent of Donald and the four beneficiaries was
insufficient to modify the trust after Collen’s death, we need not address Little’s
argument that she did not effectively consent to the amendment. We affirm the
district court’s grant of summary judgment in Little’s favor and hold the
amendment to the Donald K. & Collen Davis Family Trust is invalid.
AFFIRMED.