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In re Marriage of Matherly

Court of Appeals of Iowa

July 24, 2019

CARL W. MATHERLY, Defendant-Appellee/Cross-Appellant. Upon the Petition of MICHAEL STEVEN MATHERLY for the ESTATE OF MARIBEL MATHERLY, Petitioner-Appellant/Cross-Appellee, And Concerning CARL W. MATHERLY, Respondent-Appellee/Cross-Appellant, and MARY ELIZABETH SLEZAK, Intervenor/Cross-Appellee. MICHAEL STEVEN MATHERLY, As Trustee on behalf of the MARIBEL MATHERLY TRUST, as amended, Plaintiff-Appellant/Cross-Appellee,

          Appeal from the Iowa District Court for Polk County, Michael D. Huppert, Judge.

         Former spouses appeal and cross-appeal the property division in their dissolution-of-marriage decree. Trustee of the wife's trust appeals the dismissal of a breach-of-fiduciary-duty claim against the husband.

          William W. Graham and Wesley T. Graham of Graham, Ervanian & Cacciatore, L.L.P., Des Moines, for appellant/cross-appellee.

          Shaun Thompson of Newman Thompson & Gray PC, Forest City, for appellee/cross-appellant.

          Joseph G. Gamble and Tara J. Higgins of Duncan, Green, Brown & Langeness, P.C., Des Moines, for intervenor Mary Elizabeth Slezak.

          Heard by Tabor, P.J., and Mullins and Bower, JJ.

          MULLINS, JUDGE.

         Maribel Matherly, and subsequently her estate, appeal, and Carl Matherly cross-appeals, the property division in their dissolution-of-marriage decree. Maribel contends that an equitable distribution of the marital estate required her to receive the entirety of the marital property due to Carl's negative contributions to the marriage. Carl challenges the court's finding that assets in an investment account under Maribel's name are a resulting trust in the name of their daughter, Mary Elizabeth (MaryBeth), who intervened in the underlying trial. Carl contends the assets are marital property to be divided equitably between himself and Maribel. Michael Steven Matherly (Steven), as trustee of the Maribel Matherly Trust, appeals the district court's dismissal of his claims against Carl.

         I. Background Facts and Proceedings

         Carl and Maribel were married in September 1946. The marriage produced three children, now adults: Sheryl, MaryBeth, and Steven. From the 1950s through the pendency of the dissolution proceedings they lived in the same home in Johnston. During the course of the marriage, Carl provided the majority of the marital income while Maribel was primarily responsible for managing the home and raising the children. In the late 1950s, Carl established Park Investment Company (Park Investment), which provided financing for companies that were unable to obtain financing through traditional bank loans. Park Investment was successful for many years and provided Carl and Maribel with substantial income.

         In the late 1950s or early 1960s, Carl provided financing to a company in Forest City, Iowa. That business relationship continued for many years and Carl eventually worked for that company, serving as vice president and on the board of directors. Carl's business activities required him to be away from the home for the majority of the workweek, typically returning home on Friday or Saturday where he remained for the weekend. Carl's work often required him to be in Forest City.

         In the mid-to-late 1970s, Carl began an extra-marital relationship with a woman named Doris, who lived and owned a shop in Forest City. When Carl travelled to Forest City for business, he stayed with Doris. At some point, Maribel became aware of an extra-marital relationship, but she was unsure of who the other party was at the time. When Maribel confronted Carl, he promised to end the relationship. Unbeknownst to Maribel, Carl continued to live with Doris when he travelled for business. Carl told Maribel and their children that he was working in Illinois, Missouri, or Nebraska when he was actually with Doris in Forest City.

         During the course of their marriage, Carl and Maribel gave each of their children numerous gifts, including cash and stocks. In 1977, Carl helped MaryBeth establish the Mary Elizabeth Matherly Trust (MEM Trust) with the proceeds of the gifts from her parents. Carl was named as trustee. The terms of the trust required Carl to pay MaryBeth the trust's net income and any amount Carl, in his discretion, deemed necessary for MaryBeth's maintenance, health, and comfort until MaryBeth turned fifty. Once MaryBeth turned fifty, MaryBeth was to receive the remaining principal and the trust would terminate. Under the trust, Carl was not required to provide an accounting of the trust to MaryBeth unless requested. He did provide MaryBeth information about the trust's earned interest each year so MaryBeth could include that information in her tax returns. MaryBeth claimed she did not receive a copy of the trust instrument.

         In 1981, Carl received a salary of approximately $125, 000 from the Forest City company. Due to a business dispute, Carl left the company that year but did not inform Maribel. He continued to tell her that he was working and traveling for the Forest City company; but in reality, Carl did not obtain other paid employment and his source of income consisted of proceeds from his investments and a farm that he purchased in the 1970s (Fremont Farm).

         He then began working in Doris's shop for free, primarily handling the shop's bookkeeping. At the time Carl and Doris met, Doris had debts of approximately $250, 000. Carl arranged with Doris's creditors to forgive her debt after she paid a small percentage. Throughout their relationship, Carl gifted Doris money, a car, paid for home improvements, and managed Doris's investment accounts. When with Doris in Forest City, Carl withdrew money from the marital bank account for cash.

         In 1985, Carl deeded the Fremont Farm to Steven seeking to remove his name from any property of value in order to keep it from the reach of his creditors. During the marriage, Carl created other trusts in order to protect assets from creditor liability relating to his business work. He contends that despite the deed, the Fremont Farm was not intended to be Steven's property. The deed was recorded a few days later.

         In July 1988, a document (Trust Document A) was signed by both Carl and Maribel and notarized. The document purported to establish the Maribel Matherly Trust (Maribel Trust). The trust declaration listed Steven as the trustee. A second trust document (Trust Document B) was also created in July 1988 but listed Carl as the trustee. Trust Document B included Carl and Maribel's signatures and was notarized. Maribel did not remember signing two separate documents and only remembered typing up one document. The listed notary public on both documents filed an affidavit, stating she believed she only notarized one version of the trust document. She believed that her handwritten name, date, and signature on both documents appeared to be too identical to come from separate documents. Carl initially denied altering either document. During trial, however, he stipulated Trust Document B was an alteration. Both Trust Documents A and B provided that Maribel and Carl would each receive one-half of the income of the trust. Upon the death of either spouse, the other would then receive the entire income of the trust. After both of their deaths, the trust residue would then be distributed equally to their children and the trust dissolved.

         In 1990, a third document (Trust Document C) was prepared and signed by both Carl and Maribel that also purported to establish the Maribel Trust. Trust Document C was not notarized. Trust Document C named Maribel as trustee and provided the entire trust income would be paid to her. Upon Maribel's death, the trust income would then be paid to Carl and, after his death, the residue would be distributed equally to their children and the trust dissolved. Maribel signed the document as the designated settlor and trustee while Carl signed and was designated as the beneficiary.

         In 1989, Steven deeded the Fremont Farm to the Maribel Trust. The deed was recorded in 1993. In 1996, a deed was recorded. The deed identified that it was a correction and supplementation of the 1985 deed from Carl to Steven. The correction deed listed Carl and Maribel as the grantors and the Maribel Trust as the grantee. At the same time, Carl filed an affidavit identifying himself as the trustee of the Maribel Trust.

         During the course of the marriage, Carl oversaw the farm's operations. After the establishment of the Maribel Trust, he continued overseeing the farm and, in addition, conducted business for the farm in the role of trustee of the Maribel Trust. Monies received by the Fremont Farm from grain sales were deposited into Carl and Maribel's joint bank account. Within a few days, those monies were then transferred into one of Carl's investment accounts. Both Carl and Maribel made the grain-sale deposits into their joint bank account. Both also designated themselves as trustee of the Maribel Trust when endorsing checks for deposit.

         In 1993, Carl transferred the proceeds of the MEM Trust into an investment account designated "Maribel Matherly, Special M.E.M. Account" (Maribel-MEM account). Carl claimed he received a letter from MaryBeth's husband that led him to believe that MaryBeth's marriage was in trouble and her husband would attempt to take the trust's assets. He also claimed MaryBeth requested the transfer of the MEM Trust assets in order to protect them from her husband. A communication regarding the transfer from the financial institution holding the MEM Trust stated that an authorization signed by MaryBeth was required to transfer the funds to the Maribel-MEM account. The communication includes a notation that the request was completed in March 1993. After Carl transferred the assets into the investment account, he continued to act as if the account was for MaryBeth's benefit. When MaryBeth asked about the state of the MEM Trust, Carl reported that it was "doing great." In the following years, MaryBeth continued to sign authorizations relating to the MEM Trust. Carl paid the taxes for the trust. In 2003, he filed a tax return noting that it was the final return for the trust with zero interest earned and no taxes owed. In approximately 2003, Carl terminated the MEM Trust.

         Carl deposited funds into the Maribel-MEM account at least once. In November 2005, the Maribel-MEM account had a value of $228, 224. Carl subsequently removed the MEM designation from the account, leaving it in only Maribel's name (Maribel Matherly account). He testified that he removed the MEM designation for multiple reasons, including his belief that he had extended MaryBeth the same amount of money outside of the trust and he had already given her more money than her siblings. By December, the statement for the same account number listed only Maribel's name. In June 2006, the month MaryBeth turned fifty, the value of the Maribel Matherly account was $207, 389.

         During the course of the marriage, Carl admitted he often signed other family member's signatures on documents, claiming to do so for convenience purposes since he was away from home for most of the week. This included signing Maribel's name on checks and on an investment document that allowed transfers between accounts Maribel was associated with and an account for Doris. He also admitted to signing Steven's name under penalty of law as the designated trustee of the Maribel Trust on a document sent to the Internal Revenue Service.

         Eventually, Steven became suspicious of Carl and his activities and hired a private investigator. Steven learned Carl was staying with Doris in Forest City when he claimed to be elsewhere. Steven subsequently informed his sisters who then informed Maribel. Maribel filed a petition for dissolution of marriage on June 22, 2016. The next day, Steven filed suit against Carl, alleging Carl has wrongfully held himself out to be and acted as the trustee of the Maribel Trust, including executing documents and diverting income away from trust assets. Steven further claimed that even if Carl was legally permitted to act on the trust's behalf, his actions of diverting trust income and assets constituted a breach of fiduciary duty, a wrongful taking, and Carl had been unjustly enriched by his actions. Steven assumed the duty of trustee of the Maribel Trust in June.

         In July, Carl wrote a letter to MaryBeth and Sheryl asking for assistance with some of the property at issue in this case. In the letter Carl stated:

[Steven] has shown [Maribel] as owning a Scottrade Account with $250, 000 value. [T]hat's only partially true. Yes, the account is in her name but with my conversation many times to you, MaryBeth, that money is yours and has been for many years "You can have it anytime you want," I said. I hope I can get this error ...

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