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Ebling v. Hasken

Court of Appeals of Iowa

December 6, 2017

EELEN YOUNG EBLING and ABBY LYON McDONALD, Plaintiffs-Appellees,
v.
SARAH HASKEN, Defendant-Appellant.

         Appeal from the Iowa District Court for Dubuque County, Thomas A. Bitter, Judge.

         A former trust advisor appeals from the district court's decisions, removing the advisor and denying her the right to appoint her successor. REVERSED AND REMANDED.

          Sean P. Moore of Brown, Winick, Graves, Gross, Baskerville & Schoenebaum, P.L.C., Des Moines, for appellant.

          Darin S. Harmon and Kelsey J. Streinz of Kintzinger, Harmon, Konrardy, P.L.C., Dubuque, for plaintiffs.

          Heard by Vaitheswaran, P.J., and Potterfield and McDonald, JJ.

          POTTERFIELD, Judge.

         Sarah Hasken appeals from the district court's decisions, removing her as trust advisor and denying her the right to appoint her successor advisor. Hasken maintains both of the district court's decisions were in error. Specifically, Hasken claims her decision not to vote in one meeting and to "withhold" her vote at a second meeting did not constitute breaches of her fiduciary duty as a trust advisor, so the district court was wrong to remove her. In the alternative, she argues that if the court's decision to remove her stands, then she has the "inability" to serve and should be allowed to appoint her successor-as provided for in the trust instrument.

         I. Background Facts and Proceedings.

         The George L. McDonald Trust at issue was established in 1970 for the benefit of the plaintiffs, Eelen Young Ebling and Abby Lyon McDonald. Ebling and Abby McDonald, adult daughters of George L. McDonald, are the sole income beneficiaries of the trust. In the original action, there were a number of named defendants; all of the defendants except for Hasken are residuary beneficiaries of the trust. Only Hasken appealed the district court's rulings. The corpus of the trust is 1250 voting shares of A.Y. McDonald Industries, Inc. The trust instrument also establishes two trust advisors, each of whom vote one-half of the trust's shares. The trust advisors are fiduciaries, and "no advisor shall have any power or authority under any circumstance to act in a non-fiduciary capacity." At the time Ebling and Abby McDonald initiated this action, Sarah Hasken was one of the trust advisors and Robert McDonald was the other.

         As of August 2014, Hasken was the vice president of and a board member for A.Y. McDonald Industries, Inc., as well as being one of the trust advisors.

         On August 21, Robert McDonald informed Hasken he was eliminating her position as an officer of A.Y. McDonald Industries.

         In response, Hasken sent a letter to the other members of the board of directors, asking them to call a special meeting to consider the action and informing the board that she did not believe Robert McDonald or the executive committee had the authority, under the bylaws, to take such action.

         Then, at a September 2014 board meeting, Robert McDonald and the board of directors removed Hasken from her position as vice president.

         The day after she was removed as vice president, Hasken sent her fellow board of directors another letter. In it, she warned the board of her belief "that [her] purported termination as an officer of the company is a continuation of the efforts of the executive committee to subvert the authority of the board of directors and to marginalize the duly elected directors of the company." She also included two "other examples of the executive committee's improper actions."

         The next month, Robert McDonald asked for Hasken's resignation from the board of directors; she refused to resign. At a December special meeting of the shareholders, Hasken was removed from the board. Hasken did not attend the meeting, and she did not vote the 625 shares entrusted to her as a trust advisor on the question of her removal from the board. The votes cast were sufficient to remove Hasken. In her memorandum of authorities, Hasken states:

As a result, since Hasken could not in good conscience vote for her own removal from the board and subsequent replacement with Ron [sic] McDonald's inexperienced sister, and since voting against those actions would have no-doubt led to accusations by Rob McDonald that voting 'no' created a conflict of interest, Hasken decided to withhold her vote upon advice of counsel in an abundance of ...

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