Shaffer v. Tewes, 466 F.Supp.3d 980

Background

Settlor Ruth A. Draut created a revocable trust in 1997 and conveyed Clay County, Iowa farmland into the Trust by warranty deed in 1998; Draut reserved certain powers, including the right to "direct in writing" transfers of trust property and the trustee’s power to act without such written directions.
Draut was the original trustee and appointed Kim A. Shaffer as successor trustee; Draut remained trustee until her death in July 2018, at which point Shaffer succeeded.
On January 18, 2018 Draut signed a seven-year farm lease with defendants (the Tewes) for the Clay County property; the lease was signed and notarized in Draut’s name as "Landlord/Landlady," and defendants paid 2018 rent to Draut personally.
A paralegal from plaintiff’s law firm, Kim Wubbena, notarized the lease after being asked to attend; the law firm had performed various legal and administrative tasks for Draut over the years.
Plaintiff (trustee) sued to void the January 18, 2018 lease, arguing Draut lacked authority to lease Trust land in her individual capacity; after discovery the court granted plaintiff’s renewed motion for partial summary judgment and held the lease void.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the January 18, 2018 lease is valid given the property was held in the Trust	Draut could not lease Trust land in her individual capacity; no written direction to trustee nor evidence she acted as trustee, so lease is void	Lease valid because Draut was trustee at time of signing or otherwise authorized to convey	Lease is void: no written direction and no evidence Draut acted in trustee capacity when signing
Whether the Trust’s "direct in writing" requirement should be relaxed because the grantor and trustee are the same person	N/A (argues formal requirement controls)	Requirement should be relaxed/eliminated when settlor and trustee are same person	Court refused to relax the written-direction requirement; trust language controls and must be enforced
Whether defendants are protected by trust-code good-faith third-party provisions	N/A	Defendants dealt in good faith and so are protected even if trustee exceeded authority	Statute protects third parties dealing with a trustee; here defendants dealt with Draut as an individual (not a trustee), so protection does not apply
Whether ratification, promissory estoppel, or equitable estoppel prevent voiding the lease	N/A	Defenses (ratification, promissory and equitable estoppel) bar trustee from voiding lease	Defenses fail: no principal‑agent showing or Trust benefit for ratification; promissory estoppel barred by existence of written lease and lack of justifiable detrimental reliance; equitable estoppel cannot bind the Trust where representation was by Draut individually and public record showed Trust ownership

Key Cases Cited

Celotex Corp. v. Catrett, 477 U.S. 317 (summary-judgment burden-shifting framework)
Anderson v. Liberty Lobby, 477 U.S. 242 (standard for genuine issue of material fact)
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (requiring more than metaphysical doubt to survive summary judgment)
Tolan v. Cotton, 572 U.S. 650 (view evidence in light most favorable to nonmovant)
Corrado v. Life Inv’rs Ins. Co. of Am., 878 F.3d 648 (8th Cir. 2018) (trusts governed by instrument terms and trust code)
In re Steinberg Family Living Trust, 894 N.W.2d 463 (Iowa 2017) (interpret trust by settlor intent and instrument language)
Swenson v. Nickaboine, 793 N.W.2d 738 (Minn. 2011) (trustee holds legal title to trust property)
NFO Members’ Custodial Account v. Beneficiaries of Aforesaid Trust, 255 N.W.2d 162 (Iowa 1977) (legal/equitable title separation in trusts)
Brenneman v. Bennett, 420 F.2d 19 (8th Cir. 1970) (trust construction is fact-specific)
Austin v. City of Alexandria, 574 S.E.2d 289 (Va. 2003) (discussed by defendants on when trustee/grantor identity affects notice requirements)
Galdjie v. Darwish, 113 Cal. App. 4th 1331 (Cal. Ct. App. 2003) (California appellate discussion on trustee vs individual capacity in conveyances)