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In re Steinberg Family Living Trust

Supreme Court of Iowa

April 28, 2017

IN RE STEINBERG FAMILY LIVING TRUST, DAVID L. STEINBERG, Appellee,
v.
STEVEN C. STEINBERG, Appellant.

         Appeal from the Iowa District Court for Decatur County, Dustria A. Relph, Judge.

         Two brothers, beneficiaries of a family trust, filed competing motions for summary judgment in this declaratory judgment action. The district court granted summary judgment to David and denied summary judgment to Steven. Steven appeals. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

          Erik W. Fern and Dale L. Putnam of Putnam, Fern & Thompson Law Office, P.L.L.C., Decorah, for appellant.

          Tonita M. Helton of Helton Law Offices, PLLC, Leon, for appellee.

          ZAGER, Justice.

         In this declaratory judgment action, we are asked to decide whether we should recognize an exception to the doctrine of ademption[1]for real estate in a trust that was replaced through a like-kind tax exchange. In the alternative, we are asked to judicially adopt section 2-606 of the Uniform Probate Code involving ademption. Two brothers, the sole beneficiaries of the Steinberg Family Living Trust, brought competing motions for summary judgment regarding the distribution of property under the trust. The brothers, David and Steven, disagree as to whether a specific bequest was adeemed. Specifically, they requested a declaration of how a Minnesota farm should be distributed. While the Minnesota farm is now a part of the trust, it was acquired after the creation of the trust through a like-kind tax exchange of property. The property exchanged was specifically bequeathed to Steven. However, the acquired Minnesota farm is not specifically bequeathed to either beneficiary.

         The district court held that the specific bequest was adeemed because the bequeathed parcel of land was no longer in existence or part of the trust assets. The district court further held that a piece of property that had been acquired in a like-kind tax exchange could not be substituted for the prior, specifically bequeathed parcel of property. Therefore, pursuant to a residuary clause of the trust, the Minnesota farm was ordered to be distributed equally between the two beneficiaries.

         Additionally, the district court was asked to interpret Article 5, section B(1) of the trust. The district court found that this provision of the trust granting one brother the right to purchase or rent the other brother's specifically bequeathed property was ambiguous and conflicting. The district court declared that the provision granting Steven the option to purchase the Iowa farm from David, whether called a repugnancy or an inconsistency, was ineffective and struck it. The district court thereby granted summary judgment to David.

         For the following reasons, we affirm the decision of the district court to the extent it declared the specific bequest to Steven was adeemed and to the extent it concluded the Minnesota farm was to be distributed equally between the brothers. We reverse the decision of the district court to the extent it granted summary judgment to David on the disputed trust provision. While we agree the trust provision was ambiguous, we also find that there are genuine issues of material fact which preclude the entry of summary judgment in favor of David. We remand to the district court for a trial on the disputed trust provision.

         I. Background Facts and Proceedings.

         On February 18, 2000, Jack and Clarine Steinberg established the Steinberg Family Living Trust. They appointed themselves and their son, Steven Steinberg, to serve as cotrustees. The trust provided that Steven and their other son, David Steinberg, would serve together as cotrustees upon the deaths of both Jack and Clarine. In addition to ultimately serving as cotrustees, David and Steven were the only named beneficiaries. The trust was never amended by Jack or Clarine.

         Jack passed away on August 22, 2011, and Clarine passed away on July 24, 2013. At Clarine's death, the trust became irrevocable and triggered the appointment of David as cotrustee. David was appointed cotrustee in April 2014. At the time of Clarine's death, the trust held several assets, including the two parcels of real estate at issue in this case. David and Steven disagree as to their respective rights to the two properties and how they should be distributed.

         The first property, the Minnesota property, consists of approximately eighty acres of land and is legally described as

The West Half of the Southeast Quarter of Section 34, Township 105 North, Range 19 West, Steele County, Minnesota, excepting therefrom the following tract: Parcel Number 1 of Steele County Highway Right of Way Plat filed in the Office of the County Recorder the 5th day of April, 2001, at 8:00 A.M. in Book 13 of Plats, page 278 as Instrument No. 288400.

         The second property, the Iowa property, consists of approximately forty acres of land and is legally described as "The Northwest Quarter of the Northwest Quarter of Section 16, in Township 99 North, Range 26 West of the 5th P.M., in Winnebago County, Iowa." At the time of Clarine's death, the Minnesota property was appraised at $567, 000. The Iowa property was appraised at $9500 per acre, which amounts to approximately $380, 000.

         The trust paragraph at issue, Article 5, section B, provides,

To the Trustors' son, David L. Steinberg, shall be distributed the house at 112 N. Mill Rd., Buffalo Center, IA, Lots 24, 25, & 26, Block 24, Buffalo Center, Winnebago County, IA and the NW1/4NW1/4 Sec. 16-99-26. To the Trustors' son, Steven C. Steinberg, shall be distributed the W1/2SW1/4 Sec. 16-99-26. Steven C. Steinberg shall be given the first right to purchase or rent David L. Steinberg's interest in the NW1/4NW1/4 Sec. 16-99-26 for $1500.00 per acre and can exercise this right at any time. All of the remaining Trust Estate is to be distributed as provided in Section C, or as specified in the "Specific Distribution Schedule" attached hereto.

         The parties agree that the "NW1/4NW1/4 Sec. 16-99-26" gifted to David refers to the Iowa property. Article 5, section C provides that Steven and David will have equal fifty percent shares of any remaining trust assets.

         In 2008, while Clarine and Steven were cotrustees, the trust sold the Winnebago County, Iowa property described as "W1/2SW1/4 Sec. 16-99-26" (Winnebago property) and purchased the Minnesota property in a like-kind tax exchange. Therefore, at the time of Clarine's death, there were two parcels of land contained in the trust: the Iowa property and the Minnesota property. However, only the Iowa property was ...


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