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Alberhasky v. Alberhasky

Court of Appeals of Iowa

May 15, 2019

MAXWELL R. ALBERHASKY, Plaintiff-Appellant,
GEORGE RODNEY ALBERHASKY, Defendant-Appellee, and GRAYSON H. ALBERHASKY, Intervenor-Appellee.

          Appeal from the Iowa District Court for Johnson County, Mary E. Howes, Judge.

         A son appeals the dismissal of the lawsuit against his father alleging breach of fiduciary duties.

          Stephen C. Gerard II and Angela Boeke, Breckenridge, Colorado, for appellant.

          Kerry A. Finley and Stephen B. Jackson Sr. of Shuttleworth & Ingersoll, PLC, Cedar Rapids, for appellee George Rodney Alberhasky.

          Justin A. Teitle of Teitle Law Offices, P.C., Bettendorf, for appellee Grayson H. Alberhasky.

          Heard by Vogel, C.J., and Doyle and Tabor, JJ.

          TABOR, JUDGE

         Maxwell Alberhasky sued his father, George Rodney Alberhasky, alleging Rod breached his fiduciary duties as a trustee of assets transferred to Max by Rod's mother, Alois Alberhasky.[1] The district court dismissed Max's petition on Rod's motion. Because we must assume the petition's well-pled facts to be true, and because those facts reveal a conceivable route for Max to prove a right of recovery, we find dismissal was premature. We reverse and remand for further proceedings.

         I. Facts and Prior Proceedings

         This father-son dispute inhabits the intersection of a grandmother's generosity and an acrimonious divorce. The divorce litigation dates back to 1999, when Rod petitioned to end his marriage to Angela Boeke. Together, Rod and Angela had two sons-Max and Grayson.[2] In 2000, the boys' paternal grandmother, Allie, established a revocable trust (Allie's Trust) as part of her estate planning. Allie named herself trustee and designated her son, Rod, and her daughter, JoEllen, as successor trustees upon her incapacitation. Rod and JoEllen assumed their roles as co-trustees of Allie's Trust in 2009.

         In 2010, Allie's Trust enrolled in an Iowa Advisor 529 Plan[3] with Max as the named beneficiary, depositing $65, 000 in trust assets into the account. The check drawn from Allie's Trust and deposited into the 529 plan was annotated: "FBO Max Alberhasky." Allie's Trust likewise set up 529 plans with identical deposits for the benefit of her other three grandchildren. Also as part of her estate planning, Allie transferred her interest in a North Liberty farm to the Alberhasky Family LLC and distributed shares to Rod, JoEllen, Max, Grayson, and JoEllen's two children. Allie gave these shares to her grandchildren through the Uniform Transfers to Minors Act (UTMA).[4]

         Allie died in 2011. In 2012, Rod modified the 529 plan initially naming Max as the beneficiary to instead name Max's younger brother Grayson as beneficiary.

         In December 2013, Max sued Rod.[5] The petition alleged these facts:

• Allie "made regular annual monetary gifts to each of her grandchildren."

• Allie "also funded 529 College Savings Plans for each of her grandchildren in equal amounts specifically to provide for her grandchildren's future education."

• Rod "has acted as a trustee of various assets and funds" belonging to Max, held under the UTMA.[6]

• Rod "also acted as co-trustee of the 529 College Savings Plan" established for Max's benefit by Allie's Trust.

• The district court presiding over the divorce proceedings removed Rod as trustee of Max's UTMA assets and 529 plan.

• The court subsequently appointed USBank as successor trustee of Max's UTMA funds.

• Max received the UTMA assets held by the USBank trust department in November 2013.

         Based on these facts, the petition contended Rod owed Max fiduciary duties in handling both the 529 plan and UTMA funds, and Rod breached those fiduciary duties.[7] The petition sought three remedies: (1) an accounting of the UTMA assets held for Max, (2) a voiding of the transaction transferring the beneficiary designation of the 529 account from Max to Grayson, and (3) damages stemming from Rod's alleged breach of fiduciary duties.

         In February 2014, Rod moved to dismiss Max's suit for failure to state a claim upon which relief can be granted. Rod argued the 529 plan was not subject to the Iowa Trust Code (Iowa Code chapter 633A) and Max lacked standing to challenge any change in beneficiary designation of the 529 plan because plan owners are authorized to change beneficiaries as they see fit. See Iowa Code § 12D.3(3)(a)-(b). Rod further asserted the UTMA assets were not governed by the trust code, but he agreed to provide an accounting of the UTMA funds.

         Grayson moved to intervene, alleging he had "a direct financial interest in the outcome of these proceedings." The court granted Grayson's motion.[8]

         The district court held a hearing on Rod's motion to dismiss. Rod offered the testimony of two experts on 529 plans-financial advisor Robert Milbrath and attorney Robert N. Downer. Rod additionally submitted a number of exhibits relating to Allie's Trust and the 529 accounts.[9]

         Following the hearing, the district court granted the motion to dismiss. On the UTMA assets, the court concluded: "[T]he Iowa Trust Code does not apply to the UTMA account and the UTMA account was closed with funds distributed to the petitioner in 2012." In dismissing Max's claim relating to the 529 plan, the court found Max had "no standing" to challenge how the account was controlled by the owner. The court also found no authority to support the proposition that a 529 account is subject to the trust code.

         Max appeals, arguing the district court erred in holding an evidentiary hearing on the motion to dismiss and misapplied legal standards in dismissing his claims. Because Max's petition satisfies Iowa's liberal notice-pleading standards, we reverse the district court's grant of Rod's motion to dismiss for failure to state a claim upon which relief can be granted.

         II. Scope and Standard of Review

         We review the grant of a motion to dismiss for correction of errors at law. Turner v. Iowa State Bank & Tr. Co., 743 N.W.2d 1, 2-3 (Iowa 2007). Dismissal is appropriate if the petitioner "fails to state a claim upon which any relief may be granted." Id. at 2 (citing Iowa R. Civ. P. 1.421(1)(f)). A motion to dismiss tests "the legal sufficiency of the petition." Id. at 3 (citing Berger v. Gen. United Grp., Inc., 268 N.W.2d 630, 634 (Iowa 1978)). We view the petition in the light most favorable to Max, resolving any doubts in his favor. See Rees v. City of Shenandoah, 682 N.W.2d 77, 79 (Iowa 2004).

         III. Analysis

         A. Did the district court treat Rod's motion as a request for summary judgment?

         Rod argues the evidence considered and standard employed by the district court are of no consequence, because "[w]hen a district court considers additional matters outside the pleadings, the reviewing court may treat a motion to dismiss as a motion for summary judgment." Rod's argument overstates when a court may consider substance over form and treat a motion that, in name, seeks dismissal on the pleadings, but in content, ...

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