In the Matter of the ESTATE OF Ralph ROETHLER, Deceased, Kent Lewis and Becky Lewis, Appellees. v. Angela M. Kuehn, Cheryl L. Upton, Jacquelyn F. Betsworth, Daniel W. Roethler, Mary Anne James, James F. Roethler, Donald A. Roethler, Constance L. Duke, Gerald E. Roethler, Kathleen S. Good, John M. Roethler, Daniel Lee Homan, and Frank E. Homan, Appellants. R. Stephen Hankens, Intervenor-- Appellee.
No. 09-1105.
Supreme Court of Iowa
Aug. 19, 2011.
ZAGER, Justice.
In this appeal, we must determine when the district court can properly re-open a probate estate under Iowa Code section 633.489 (2009). Becky and Kent Lewis (“Lewises“), plaintiffs, sought to re-open Ralph Roethler‘s estate to allow them to exercise a “first right to purchase” eighty acres of farmland. The executor of the estate did not notify the Lewises that the will contained this right during the administration of this estate. The district court held the Lewises met the statutory grounds set out in section 633.489 to reopen Ralph Roethler‘s estate. The court of appeals reversed, holding the Lewises’ petition to reopen was time-barred under section 633.488, which controls when an estate‘s final accounting and settlement agreement may be re-opened. On further review, we find the Lewises’ petition to reopen satisfied the statutory grounds set forth in section 633.489 to reopen an estate. We also find the district court properly construed the will to permit the Lewises to exercise their first right of purchase irrespective of the executor‘s intent to sell the land. Accordingly, the decision of the court of appeals is vacated, and the district court‘s judgment is affirmed.
I. Background Facts and Proceedings.
In 1987, the Lewises entered into a lease to farm two parcels of property owned by Ralph and Marjorie Roethler. One parcel was eighty acres owned solely by Ralph. The other parcel was 160 acres owned solely by Marjorie. The Roethlers lived in a home in Aurelia, owned by Ralph. The Lewises and their children also rented the farmhouse located on Marjorie‘s parcel. This arrangement continued through 1994. During this time, the relationship between the Lewises and the Roethlers grew close.
On February 1, 1994, Ralph executed his last will and testament. Attorney Stephen Hankens drafted the will. Paragraph V of the will provided:
V. I herein give Kent Lewis and Becky Lewis the first right of purchase to the following described real estate, to-wit: 80 Acres in Diamond Township, Section One; at the appraised value in the Estate. This right to purchase shall be given them for a period of four months from my date of death. Notice of said right to purchase shall be filed in my Estate in writing.
The eighty-acre parcel of farm real estate listed in section V is the subject of this dispute. At the time of Ralph‘s death, it was valued at $140,600.
The Lewises always intended on purchasing farmland of their own. Toward the end of 1994, the Lewises purchased ten acres of their own and informed Ralph and Marjorie they would be moving out of the farmhouse. After the Lewises moved off the property, they also stopped farming the Roethlers’ land. On December 13, 1994, the Roethlers contracted with Neal and Kathleen Pearson to rent, live on, and farm their two parcels. After the Lewises moved off of the acreage, their relationship with the Roethlers grew apart.
Ralph‘s will was admitted to probate on July 19, 1999. The notice of probate was published in the local newspaper with a second publication date of August 2, 1999. Pursuant to the notice, any claims against the estate would be barred if not filed within four months. Also, an affidavit of mailing notice was given to all the residual beneficiaries (“the beneficiaries“) who are defendants in this appeal. No notice was mailed to the Lewises despite paragraph V of Ralph‘s will, which specifically named the Lewises. Marjorie was named the executor, and the will awarded her a life estate in all of Ralph‘s real property, with the remainder to the beneficiaries. Hankens was the attorney for the estate.
Hankens filed the final report in October 1999. The report of referee approved the final report, subject to a minor tax issue. The final report was approved on November 22, 1999, prior to the claims-bar date. Title to the eighty acres of real estate was changed the next day to reflect Marjorie‘s life interest and the beneficiaries’ remainder interest.
The Lewises were not made aware by the attorney for the estate, the executor of the estate, or any other party that Ralph‘s will specifically named them or that the will was being probated.
Marjorie passed away in 2008. The Lewises did not attend the funeral. During the probate of her estate, the beneficiaries contracted to sell Ralph‘s eighty acres to Neal and Kathy Pearson for the appraised value of $408,000. A title opinion performed on the real estate discovered Ralph‘s probate file did not contain a notice showing the Lewises waived their option to purchase the subject real estate as required under Ralph‘s will. The Pearsons’ attorney sent the Lewises a letter asking them to waive their option to purchase Ralph‘s eighty acres. This was the first time the Lewises were apprised that Ralph‘s will afforded them a first right to purchase Ralph‘s eighty-acre farm. The Lewises indicated they would have been interested in purchasing the eighty-acre farm and had the financial capacity to purchase the land in 1999.
On June 23, 2008, Kent Lewis filed a petition to reopen Ralph‘s estate. The beneficiaries resisted. After a hearing, the district court ordered the estate re-opened under Iowa Code section 633.489 to determine whether the Lewises had a valid option to purchase. Hankens, who was now a defendant in a negligence action filed against him by the Lewises, was allowed to intervene.
Trial was held on May 27, 2009, to construe Ralph‘s will and determine whether Ralph‘s will provided the Lewises a valid first right to purchase Ralph‘s eighty acres. The district court held Ralph‘s will gave the Lewises an option to purchase Ralph‘s eighty acres, irrespective of Marjorie‘s decision to sell the land.
The beneficiaries appealed. The case was transferred to the court of appeals. The court of appeals determined the district court abused its discretion in reopening the estate because the Lewises were time-barred under Iowa Code section 633.488. The court of appeals therefore did not have to reach the will construction issue. The Lewises petitioned for further review, which we granted.
A petition to reopen an estate requires the court to engage in a two-step decision process. First, the district court must make a preliminary determination whether the plaintiff has asserted a permissible reason for reopening the estate. In re Estate of Warrington, 686 N.W.2d 198, 202 (Iowa 2004). This determination is governed by Iowa Code sections 633.487, 633.488, and 633.489. We review the district court‘s preliminary decision as to whether to reopen the estate under section 633.489 for abuse of discretion. In re Estate of Witzke, 359 N.W.2d 183, 184-85 (Iowa 1984). The district court abuses its discretion when it exercises its discretion “on grounds clearly untenable, or to an extent, clearly unreasonable.” In re Estate of Lynch, 491 N.W.2d 157, 161 (Iowa 1992).
Once reopened, the district court must determine on the merits whether the plaintiffs are entitled to the relief they seek. Warrington, 686 N.W.2d at 202-04. Probate matters are tried in equity, and the district court‘s ruling on the merits is reviewed de novo. Id. at 202. “Under a de novo standard of review, we are not bound by the trial court‘s conclusions of law or findings of facts, although we do give weight to factual findings, particularly when they involve the credibility of witnesses.” Id.
First, we must determine whether the district court abused its discretion in reopening the estate.1 Second, if the district court properly reopened the estate, we must review the district court‘s holding that the will provided the Lewises a right to purchase the property within four months of Ralph‘s death. Third, if the Lewises have a right to purchase the land, we must determine whether they must pay the current value for the eighty acres, not the land‘s value at the time of the initial probate.
The beneficiaries assert the district court abused its discretion in reopening the estate because it applied section 633.489 when making its determination to reopen the estate. The beneficiaries argue the district court should have applied section 633.488 that time-bars the Lewises’ claim.
A. Background.
Iowa Code sections 633.487, 633.488, and 633.489 govern when an estate can be reopened, but only sections 633.488 and 633.489 are relevant in this matter. Section 633.488 states:
Whenever a final report and a final accounting has been approved and a final accounting has been settled in the absence of any person adversely affected and without notice to the person, the hearing on such report and accounting may be reopened at any time within five years from the entry of the order approving the same, upon the application of such person, and upon a hearing, after such notice as the court may prescribe to be served upon the personal representative and the distributees, the court may require a new accounting, or a redistribution from the distributees. In no event, however, shall any distributee be liable to account for more than the property distributed to that distributee. If any property of the estate shall have passed into the hands of good faith purchasers for value, the rights of such purchasers shall not, in any way, be affected.
Iowa Code § 633.488. Section 633.489 states:
Upon the petition of any interested person, the court may, with such notice as it may prescribe, order an estate reopened if other property be discovered, if any necessary act remains unperformed, or for any other proper cause appearing to the court.
There is more case law applying section 633.489. In Ritz v. Selma United Methodist Church, 467 N.W.2d 266 (Iowa 1991), the plaintiffs sought to reopen the estate after $24,000 in new property was found buried underneath a structure that had been abandoned by the estate. Ritz, 467 N.W.2d at 268. The district court concluded the plaintiffs were time-barred under section 633.488. Id. at 269. We reversed, finding the plaintiffs’ claim was governed by section 633.489, which expressly authorizes reopening an estate if new property is found. Id. at 270. In Lynch, 491 N.W.2d at 160-61, the executor, a bank, mistakenly believed a marital trust was part of the estate and subject to Iowa inheritance tax which thereby increased their fees. Id. We noted “equitable principles” favored reopening the estate to prevent the bank from profiting from its mistake at the expense of beneficiaries. Id. We later cited Lynch for the proposition that “[t]he correction of mistakes made by an executor may constitute proper cause to reopen an estate.” Warrington, 686 N.W.2d at 205. Finally, in Warrington, the deceased‘s wife sought to reopen the estate to sell a remainder interest in real property to generate cash for her support. Id. at 200-01. We found this was a “proper cause” to reopen the estate. Id. at 205. We also found the beneficiaries’ argument that section 633.488 created a statutory bar to plaintiffs claim “lacking in merit” and reversed the district court‘s decision not to reopen the estate. Id.
Section 633.488 contemplates a reopening of matters which have been previously considered in the final accounting, distribution, and settlement order. Section 633.489, on the other hand, is aimed at reopening a closed estate for the purpose of administering property omitted from the inventory or performing other necessary acts which were not performed during the original administration.
There is reason to distinguish the two provisions. Section 633.488 permits distributees, given notice of the final report, to have a hearing to reopen the accounting to ensure the estate was properly accounted, settled, and distributed. Section 633.489 governs when plaintiffs seek to readminister or structurally change the estate‘s administration in a way not contemplated during probate, as evidenced by its application in cases of newly found property. We reach this conclusion for a number of reasons.
First, the remedy each section affords supports this distinction. The remedy under section 633.488 is limited: “[T]he hearing on such report and accounting may be reopened ... [and] the court may require a new accounting, or a redistribution from the distributees.” Iowa Code § 633.488. Section 633.488 only authorizes the court to hold another final report hearing, order new accounting, or order redistribution amongst the distributees, but it does not authorize the court to perform property transactions or other substantial acts. In contrast, section 633.489 broadly authorizes the court “to administer any additional property or to perform other such acts as may be deemed necessary.” Id. § 633.489.
Second, section 633.488‘s time bar, and section 633.489‘s indefinite application support the articulated distinction. If section 633.488 applies to previously considered matters in which the final report was approved and “settled in the absence of ... and without notice to” the complaining party, then a five-year statute of limitations is logical. Id. § 633.488. Conceivably, the complaining party made his claim, but was not made a party to the resolution at final settlement. This party would be aware of the probate and, on notice, making a five-year time-bar apposite. Section 633.489 applies where future events require administration of matters not considered in the final report, and a time-bar is inconsistent with this purpose.
Distinguishing the two provisions on the basis of notice, however, is not the correct approach in reviewing the statutes. Section 633.489 is not defined in terms of notice. The provision simply says the district court “may” reopen an estate “if other property be discovered, if any necessary act remains unperformed, or for any other proper cause.” Iowa Code § 633.489. Notice, or the lack thereof, plays no part in this provision. Section 633.489 simply applies if some future happenstance or finding, unattended to during probate, requires the estate to be reopened.
The beneficiaries argue section 633.488 should apply because it protects good faith purchasers for value of estate property when title passes before a petition to reopen is filed. They contend the Pearsons are good faith purchasers for value of the eighty acres and therefore their rights should be protected by section 633.488‘s five-year limit. For several reasons this argument is unavailing.
First, the Pearsons have not completed their purchase; title has not passed to them. Their down payment is in escrow, and a title examiner raised an issue about the Lewises’ right to purchase which prevented the Pearsons from closing the sale. If the sale falls through, the Pearsons get their money back, and their only prejudice is having a down payment sit in escrow during the pendency of this litigation. The Pearsons have not purchased the eighty acres; therefore, they could not qualify as good faith purchasers for value.
Second, if the beneficiaries’ construction is adopted, there is a conflict between the Lewises’ first option to purchase the eighty acres at “the appraised value” and Marjorie‘s authority to sell “any property ... without appraisal.” If Marjorie had to contemplate selling the eighty acres in order to trigger the Lewises’ option, then the provisions are contradictory as to whether Marjorie must sell the land to the Lewises at the “appraised value” or can sell the property “without appraisal.” These provisions, however, are entirely consistent if the Lewises’ option is viewed as an unqualified specific bequest, and Marjorie‘s authorization to sell property is viewed as a general authorization of authority. See Iowa Code § 633.436 (specific devisees take precedence over general or residuary devisees in abatement).
Alternatively, the beneficiaries have not shown the Pearsons are good faith purchasers for value of the eighty acres. “The rule is well established that to be a good faith purchaser for value, one must show that he made the purchase before he had notice of the claim of another, express or implied.” Moser v. Thorp Sales Corp., 312 N.W.2d 881, 886 (Iowa 1981) (quoting Moser v. Thorp Sales Corp., 256 N.W.2d 900, 910-11 (Iowa 1977)). The Pearsons signed a real estate contract, but title has not been transferred. A title examiner raised an issue about the Lewises’ right to purchase which prevented the Pearsons from closing on the sale. If the sale falls through, the Pearsons get their money back, and their only prejudice is having a down payment sit in escrow during the pendency of this litigation.
The district court reopened the estate under section 633.489. The beneficiaries claim the district court abused its discretion by not applying section 633.488. We disagree. For the reasons stated above, the Lewises’ right to purchase, which came to light years after the estate was closed, was the type of event which falls within section 633.489.
The district court determined section 633.489 applied because the plaintiffs’ option to purchase had not been previously considered. The court then looked to the three statutory grounds set forth in section 633.489 for reopening the estate. The court found the “necessary act” and “any other proper cause” grounds both applied in this case. The district court found the executor of the estate failed to perform “all necessary acts” because the executor failed to notify the plaintiffs of the probate of the will, in violation of Iowa Code section 633.304, which requires all persons “believed to own or possess a claim” to be notified. The district court also used its discretion to conclude “the lack of notice to the Lewises throughout the probate of the will constitutes proper cause for reopening the estate.” Moreover, there are minimal practical difficulties in exercising the option as the land still remains with the distributees. See Warrington, 686 N.W.2d at 205 (noting practical difficulties in reopening estate or deprivation of beneficiaries of testamentary devise are reasons that might justify not opening an estate).
We concur with the district court‘s reasoning on the “necessary act” ground and the “any other proper cause” ground. A court abuses its discretion only when its exercise of discretion is “clearly untenable, or to an extent, clearly unreasonable.” Lynch, 491 N.W.2d at 161. We find the district court‘s determination that this case‘s equitable facts constituted a “proper cause” to reopen the estate under Iowa Code section 633.489 to be neither untenable nor unreasonable. The district court did not abuse its discretion in reopening the estate.
The beneficiaries next contend the district court erred in construing the will. The beneficiaries contend the district court should have held Paragraph V only afforded the Lewises a right to purchase in the event Marjorie elected to sell the eighty acres within four months of Ralph‘s death.
A. Principles of Will Construction.
Our principles of will construction are long-settled: (1) the intent of the testator is the pole-star and must prevail; (2) this intent, however, must be derived from (a) all of the language contained within the four corners of the will, (b) the scheme of distribution, (c) the surrounding circumstances at the time of the will‘s execution and (d) the existing facts; (3) we resort to technical rules or canons of construction only when the will is ambiguous or conflicting or the testator‘s intent is uncertain. In determining intent, the question is not what the testator meant to say, but rather what is the meaning of what the testator did say.
The instrument should be considered as a whole, giving each part meaning and effect. The court considers extrinsic evidence only if there is an ambiguity, and extrinsic evidence cannot vary, contradict, or add to the will‘s terms. In re Estate of Rogers, 473 N.W.2d 36, 39 (Iowa 1991). The instruction should be considered as a whole, giving each part meaning and effect. Elkader Prod. Credit Ass‘n v. Eulberg, 251 N.W.2d 234, 237-38 (Iowa 1977). The court considers extrinsic evidence only if there is an ambiguity, and extrinsic evidence cannot vary, contradict, or add to the will‘s terms.
The will provisions, taken together, provide Marjorie “a life estate in all real estate I may own at the time of my death,” vest the Lewises with “the first right of purchase” to the eighty acres “at the appraised value in the Estate” for a period of four months from Ralph‘s death, and vest the executor, Marjorie, “the authority to sell and to turn into cash any property that I may own at the time of my death, without appraisal, court approval, or the giving of bond.” The beneficiaries stress this language vests the Lewises with a contingent first purchase option in the event Marjorie elects to sell the eighty acres within four months of Ralph‘s death. This construction is problematic for several reasons.
First, the beneficiaries advocate a “first refusal” interpretation where the Lewises would be given the right to buy the land in the event Marjorie intended to sell. But Ralph‘s will contains a right of purchase, not a right of first refusal. The will‘s language is plain and there is no conditional language in paragraph V. It states, “I herein give Kent Lewis and Becky Lewis the first right of purchase.” Our case law has found conditional purchase options when express conditional language was used to qualify a right of first purchase. See Noel v. Uthe, 184 N.W.2d 686, 689 (Iowa 1971) (finding farm tenant did not have right of first purchase after the will was probated because it provided the renter a right of first purchase “in the event my Executor shall determine that any real estate . . . shall be sold“). The beneficiaries’ advocated construction is essentially a “right of first refusal“—where the Lewises would be given the right to buy the land in the event Marjorie intended to sell it. But Ralph‘s will contains a first right of purchase, not a right of first refusal.
Second, if the beneficiaries’ construction is adopted, there is a conflict between the Lewises’ right to purchase the eighty acres “at the appraised value” and Marjorie‘s authority to sell “any property ... without appraisal.” If Marjorie had to sell the eighty acres in order to trigger the Lewises’ option, then the provisions are contradictory as to whether Marjorie must sell the land to the Lewises at the “appraised value” or can sell the property “without appraisal.” These provisions, however, are entirely consistent if the Lewises’ option is viewed as an unqualified specific bequest and Marjorie‘s authorization to sell property is viewed as a general authorization of authority. Under this approach, Paragraph V would provide the Lewises with an unqualified right to purchase the eighty acres “at the appraised value” within four months from Ralph‘s death. In the event the Lewises decline, Paragraph VII authorizes Marjorie to sell the eighty acres at any subsequent date without another appraisal or without regard to appraised value. Construing Paragraph V as an unqualified option to purchase therefore gives effect to all the will provisions.
Third, Paragraphs II and V do not create ambiguity. Paragraph II provides Marjorie a life estate in all real property Ralph owned. Paragraph V then offers the Lewises an option to purchase a specific piece of real estate. This specific purchase option simply places a specific condition into Paragraph II‘s general devise to Marjorie. The paragraphs do not create ambiguity nor undermine our conclusion the will provides the Lewises an unqualified right to purchase Ralph‘s eighty acres.
C. Extrinsic Evidence and Circumstances Surrounding Will.
Both parties point to extrinsic evidence that favors their construction.3
The extrinsic evidence is contradictory and does not affect the construction of the language of the will. The will is unambiguous, and the will‘s plain language provides the Lewises an unqualified option to purchase the eighty acres because (1) the will contains no conditional language, and (2) such a construction gives effect to all provisions of the will and reconciles Paragraphs V and VII. To accept the beneficiaries’ construction would create an irreconcilable conflict between the provisions of the will. We find the will provides the Lewises an unqualified first option to purchase Ralph‘s eighty acres.
D. The Will Vests Lewises with an Unqualified Purchase Option.
On our de novo review, we find the will to be unambiguous and logically construed to provide the Lewises an unqualified option to purchase the eighty acres at the appraised value at Ralph‘s death. Rewording Ralph‘s will to provide the Lewises an option for first refusal, rather than an option to purchase, as advocated by the beneficiaries, would be a misuse of this court‘s equitable powers. This court does not have the power to rewrite a living testator‘s will, nor do we have the power to rewrite a decedent‘s. Accordingly, the decision of the court of appeals is vacated, and the district court‘s order is affirmed.
See Simpson v. Bostwick, 248 Iowa 238, 244, 80 N.W.2d 339, 343 (1957) (noting specific performance is an equitable remedy and “once equity has obtained jurisdiction of a controversy, it will determine all questions . . . to accomplish full and complete justice between the parties“); see also Whalen v. Connelly, 621 N.W.2d 681, 686-87 (Iowa 2001) (party who wrongfully delayed transfer of stock certificates bore risk of loss from change in value). The district court properly determined the purchase price to be $140,600, the appraised value of the eighty acres at the time of Ralph‘s death.
COURT OF APPEALS DECISION VACATED; DISTRICT COURT JUDGMENT AFFIRMED.
All justices concur except MANSFIELD, J., who takes no part.