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Iowa Supreme Court Atty. Disciplinary Bd. v. Ouderkirk

Supreme Court of Iowa

March 28, 2014


Appeal fro the report of the Grievance Commission of the Supreme Court of Iowa. Ouderkirk appeals from the grievance commission's recommendation of a public reprimand.

Michael J. Carroll of Babich Goldman, P.C., Des Moines, for appellant.

Charles L. Harrington and Amanda K. Robinson, Des Moines, for appellee.

WATERMAN, Justice. All justices concur except Cady, C.J., who takes no part.


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WATERMAN, Justice.

How far can a lawyer go to assist a client in preserving assets from a potential creditor? In this appeal, we must decide whether Mason James Ouderkirk violated our prior disciplinary rules [1] in his representation of Rodney Heemstra, a wealthy Iowa farmer who shot and killed his neighbor, Tommy Lyon. Heemstra was charged with first-degree murder and ultimately convicted of voluntary manslaughter. Ouderkirk represented Heemstra at the outset of the criminal proceedings and during

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part of the civil wrongful-death litigation, which later resulted in a multimillion dollar judgment against Heemstra. The Board's complaint is based on Ouderkirk's drafting of transfer documents in the months following the shooting. These documents conveyed property from Heemstra to his wife, then to various trusts, and finally to purported third parties who were actually Heemstra relatives.

The Lyon estate brought collection actions challenging the asset transfers as fraudulent conveyances. The district court ruled in favor of the estate and found the transactions with which Ouderkirk assisted to be " part of a complex shell game." The court found the Heemstras transferred assets in an " intentional, harsh and cruel effort to put truth in Rodney Heemstra's arrogant claim that Ronda Lyon would never see a dime of his money." The court unwound a number of the asset transfers and awarded actual and punitive damages against the Heemstras.

Tommy Lyon's widow, Ronda Lyon, filed an ethics complaint against Ouderkirk, and the Iowa Supreme Court Attorney Disciplinary Board charged him with violating several rules. The Grievance Commission of the Supreme Court of Iowa found that the Heemstras had deceived Ouderkirk, telling him that they had valid reasons for transferring their property and that they were selling much of their property to a bona fide purchaser. The commission also found that Ouderkirk lacked actual knowledge the key transaction was a sham. Nevertheless, the commission found Ouderkirk's representation in one transaction violated several rules and recommended a public reprimand. For the reasons explained below, on our de novo review, we find the Board failed to prove any rule violation by the requisite convincing preponderance of the evidence. We therefore dismiss the Board's complaint against Ouderkirk with prejudice.

I. Scope of Review.

We review attorney disciplinary proceedings de novo. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Rhinehart, 827 N.W.2d 169, 171 (Iowa 2013). We give deference to the commission's credibility findings because the commission hears live testimony and observes the demeanor of witnesses. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Clarity, 838 N.W.2d 648, 659 (Iowa 2013). The Board must prove attorney misconduct by a convincing preponderance of the evidence. Rhinehart, 827 N.W.2d at 171. This standard is more demanding than proof by preponderance of the evidence, but less demanding than proof beyond a reasonable doubt. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Adams, 809 N.W.2d 543, 545 (Iowa 2012). We respectfully consider the commission's findings of fact and recommended sanction, but we are not bound by them. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Earley, 774 N.W.2d 301, 304 (Iowa 2009).

II. Background Facts and Proceedings.

The commission held a two-day evidentiary hearing on December 18-19, 2012. Two witnesses testified for the Board. The Board offered no expert testimony that Ouderkirk violated any of our disciplinary rules. Ouderkirk testified on his own behalf, along with an expert witness and six character witnesses, which included two district court judges. In total, over two hundred exhibits were submitted. Based on our de novo review of the record, we find the following facts.

Ouderkirk graduated from Drake University Law School in 1978 and joined his father in general practice at the Ouderkirk Law Firm in Indianola. Ouderkirk has

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practiced law for over thirty-five years there with an unblemished disciplinary record. He enjoys a reputation as a zealous advocate for his clients and received an AV Rating from Martindale-Hubbell.

Throughout the 1990s, Ouderkirk represented Rodney Heemstra and his wife, Berta, in transactions involving their extensive farm real estate interests. He periodically prepared title work, real estate contracts, and deeds for the Heemstras. The Heemstras did not employ Ouderkirk on a retainer, nor were they one of his law firm's biggest clients. According to Ouderkirk, the Heemstras were sophisticated real estate buyers and sellers who " did all their own deals" and were intensely private about their finances. Rodney would come to Ouderkirk for help drafting land-transfer documents. Rodney would dictate the particulars to Ouderkirk, who would draft the legal documents to effectuate Rodney's plan. James Dougherty, who practiced with Ouderkirk in the 1990s, described Rodney as " the type of client that would run in, say something like, 'I bought a farm. Here [are] the details, put down a purchase agreement, I need it right now.'" Ouderkirk would give the completed paperwork to the Heemstras, who then typically handled their own closings and filings. According to Ouderkirk, the Heemstras " always just took care of things" once he drafted the necessary documents.

On January 13, 2003, Rodney fatally shot Tommy Lyon over a dispute relating to farmland and hid Tommy's body in a cistern. See State v. Heemstra, 721 N.W.2d 549, 551-52 (Iowa 2006) (describing the facts of the criminal case). Rodney was arrested and charged with first-degree murder on January 15. Rodney asserted he had shot Tommy in self-defense and retained Ouderkirk to defend him against the charges. Ouderkirk meanwhile continued to assist the Heemstras with real estate transactions, as the Heemstras transferred millions of dollars of property out of their names in the ensuing months. Ouderkirk's assistance with these transfers forms the basis of the Board's complaint.

The Heemstras moved quickly after the shooting to ensure continuity for their farming operation. On January 16, Ouderkirk wrote to Berta to " follow up with a number of items regarding the business and farming matters." He enclosed a power of attorney to " aid [Berta] in conducting the family business with respect to farming operation loans, farm programs, refinancing farm programs, operating loans, etc." He also alerted Berta that, if any of the family property was transferred, " the Lyon family may attempt to set aside any conveyance as fraudulent or an attempt to avoid a creditor" and noted " should a court deem the conveyance fraudulent . . . there is always the possibility that the conveyances could be set aside."

Ouderkirk recounted that the Heemstras' creditors pressed for a reorganization of the couple's assets after Rodney's arrest. The Heemstras' net worth--represented primarily by real estate holdings--exceeded $4,000,000 in January 2003. They were considerably indebted to Wells Fargo, John Deere, Commodity Credit Corporation, and Farm Credit Services for money they had borrowed to purchase farm implements and farmland. Farm Credit Services's security interest was secured on land, but Wells Fargo's security interest was mostly in the Heemstras' farm equipment, which they had valued at around $900,000. Wells Fargo urged a reorganization that would give it a security interest in some of the Heemstras' mortgaged real estate. Additionally, both Wells Fargo and Farm Credit Services

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wanted a reorganization of the Heemstras' assets to place Berta in control, in order to provide continuity if Rodney was convicted and imprisoned. Ouderkirk testified, " We had to reorganize, or they would have called the loans." Rodney was released on bond January 21, and Ouderkirk and Rodney entered into negotiations with Farm Credit Services and Wells Fargo.

Tommy Lyon's widow, Ronda, filed a wrongful-death lawsuit against Rodney on January 27 and secured writs of attachment on some of the Heemstras' Warren County real estate. Ouderkirk disputed the validity of these writs of attachment on behalf of the Heemstras. The writs were eventually set aside by the court of appeals in Estate of Lyon v. Heemstra, No. 09-0164, 2010 WL 200454, at *3 (Iowa Ct. App. Jan. 22, 2010) (unpublished opinion), after Wells Fargo moved to quash the writs because they were adversely affecting the company's ability to enforce a judgment lien.

Throughout January and February of 2003, the Heemstras, with Ouderkirk's assistance, transferred ownership of a significant amount of their property into revocable trusts. The Heemstras told Ouderkirk the impetus for the transfers was Berta's expected need for cash flow to make scheduled loan payments to their creditors and to pay federal and state real estate taxes. Ouderkirk drafted almost three dozen real estate documents concerning fourteen parcels of land held by Rodney and Berta. These documents created four revocable trusts and enabled the Heemstras to transfer over a thousand acres of farmland--worth millions of dollars--from Rodney, through Berta, to the trusts. All of the trustees of the four revocable trusts were relatives of the Heemstras. Much of the property passed through the Brisco Revocable Trust, for which Berta served as the trustee.

The commission's decision sets forth the timeline of these transfers:

January 22, 2003 -- Ouderkirk drafts and notarizes a warranty deed in which Rodney and Berta convey their interests in Parcel 22 to Rodney's parents. . . .
January 28, 2003 -- Ouderkirk drafts and notarizes a quitclaim deed transferring Rodney and Berta's interests in Parcels 1, 3, 4, 5, 6, 7, 7A, and 10 to Berta.
January 30, 2003 -- Ouderkirk drafts and notarizes a quitclaim deed transferring Rodney and Berta's interest in Parcels 8, 9, and 11 to Berta.
January 31, 2003 -- Ouderkirk (1) drafts Brisco Revocable Trust and (2) drafts and notarizes a warranty deed conveying Berta's interest in Parcels 1, 3, 4, 5, 6, 7, 7A, 8, 9, 10, and 11 to Brisco Revocable Trust.
February 3, 2003 -- Ouderkirk drafts several documents related to parcels 14 and 15:
a. Parcel 14 -- He drafts (1) a quitclaim deed conveying Rodney and Berta's interest in Parcel 14 to Berta, (2) a warranty deed conveying Rodney and Berta's interest in Parcel 14 to Berta's mother, and (3) a mortgage between Berta and her mother.
b. Parcel 15 -- He drafts and notarizes (1) a quitclaim deed in which Rodney and Berta convey their interest in Parcel 15 to Berta, (2) a warranty deed in which Berta conveys her interest in Parcel 15 to Rodney's parents as co-trustees of the Heemstra Revocable Trust, and (3) a mortgage between this trust and Berta.
February 10, 2003 -- Ouderkirk drafts a quitclaim deed in which Rodney's parents convey their interest in Parcel 22 to themselves as trustees for the Heemstra Revocable Trust.

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February 19, 2003 -- Ouderkirk drafts and notarizes a correction warranty deed conveying Berta's interest in Parcels 8 and 9 to Brisco Revocable Trust.

(Internal citations and emphasis omitted.) All of these conveyances were publicly recorded.

In February, Wells Fargo forced a nationally advertised sale of Rodney's farm equipment. The Heemstras had no control over this sale and received no proceeds from it.

Ouderkirk recounted that the Heemstras came to his office around March 10 to discuss various options to protect their assets for Berta and their two sons. Ouderkirk rejected Berta's suggestion that the couple should create an irrevocable trust. Ouderkirk testified that he told the Heemstras, " I really think this is a bad idea, and I think you guys should really consider not doing any of this." He further stated he was " very happy" when Berta later called to say she would follow his advice and abandon the irrevocable trust idea. On March 12, Ouderkirk wrote to the Heemstras in confirmation of Berta's phone call. His letter stated:

As I understand it, Berta and you have decided not to proceed with irrevocable trusts, corporate formation, offshore trusts, etc. Additionally, it appears that you are not in favor of exchanges out of state or sales. Taking that approach will certainly make judgment and asset collection easier in the event judgments are entered against any assets held individually or by the revocable trust.

Yet, only a week later, the Heemstras told Ouderkirk they had found--through an arms' length transaction--an unnamed, bona fide, out-of-state buyer for much of the land now held by Brisco: the Appleroon Irrevocable Trust.[2] Ouderkirk knew the Heemstras had previously listed this property for sale and believed the sale was nothing out of the ordinary. Ouderkirk did not ask and was not told who was behind Appleroon. In fact, Rodney's sister was the initial trustee of Appleroon, and the successor trustee was Rodney's cousin's wife. The Heemstras' two sons were the beneficiaries of the trust.

On March 26, Ouderkirk drafted a memorandum of contract for the sale of parcels 3, 4, 5, 6, 7, 7A, 8, 9, 10, and 11--around 600 acres total--from Brisco to Appleroon for the price of $2,300,000. The Heemstras gave Ouderkirk the terms for the ...

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