Failing to comply with the terms of a will or to completely settle a will can have significant and long-lasting effects. In August 2011, the Iowa Supreme Court issued an opinion in the case In re Estate of Roethler, which allowed the reopening of an estate settled in 1999.
The plaintiffs in the case, Becky and Kent Lewis – one time tenants of the deceased landowner – were given a right to purchase 80 acres of land in the landowner’s will. However, despite provisions in the will specifically giving the Lewises the right to purchase the land, they were not notified of their right for almost 10 years after the landowner’s death – until the death of the landowner’s spouse in 2008 and the attempted sale of the land by the remaining beneficiaries.
The Lewises were notified of their right to purchase when they received a letter asking them to waive this right so the land might be sold. The Lewises then filed a petition to have the district court reopen the estate to determine the validity of the first right of purchase. The district court ordered the estate reopened and a subsequent trial determined the will gave the Lewises an option to purchase. However, on appeal the court determined that the estate was time-barred from being reopened under Iowa statute 633.488, which limits the reopening of estates under this statute to five years.
Iowa Code S 633.488: Whenever a final report 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.
The Supreme Court reversed the appellate decision finding that the above section of the Iowa Code did not apply. Rather it found that the estate could be reopened as the circumstances fell under section 633.489 of the Code.
Iowa Code S 633.489: 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. It may reappoint the personal representative, or appoint another personal representative, to administer any additional property or to perform other such acts as may be deemed necessary. The provisions of law as to original administration shall apply, insofar as applicable, to accomplish the purpose for which the estate is reopened, but a claim which is already barred can, in no event, be asserted in the reopened administration.
Finding that section 633.489 applied to the circumstances of the case – in particular, that the Lewises had never been notified of their inclusion and right of purchase in the will – precludes the five year time bar against reopening estates under such circumstances. The court made important distinctions between the two statutes:
“The provisions seem to concern two distinct scenarios. Section 633.488 permits distributees, not 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.”
Therefore, the five year time-bar only applies to cases that involved a lack of notice of the final report, not lack of notice of a party’s inclusion in a will. It also means the protection for good-faith purchasers found in section 633.488 does not necessarily apply in such circumstances. This provides an indefinite amount of time for those wronged by lack of notice in the execution of an estate and for potentially far reaching effects in terms of real estate transactions. In this case, the Lewises were able to reopen the estate and given the right to purchase the land at its 1999 appraised value, $140,600, instead of its 2008 value of $408,000.
The application of the extended remedies under section 633.489 demonstrates the capacity of courts to protect the rights granted under estate planning instruments. It also expresses the long-term dangers to executors and beneficiaries, as well as their advisors and subsequent purchasers of estate property, when attempting to skirt the intentions expressed in such instruments. The Court had the following to say regarding attempts by the estate’s beneficiaries to reap the benefits of the failure to provide notice to the Lewises.
The beneficiaries claim awarding the Lewises a right to purchase the eighty acres at the 1999 appraised value, unjustly enriches the Lewises as it provides them, not the beneficiaries, with the farmland’s increased value over the last decade.Unjust enrichment is a doctrine that “evolved from the most basic legal concept of preventing injustice.” State ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 149 (Iowa 2001). For nearly a decade, the executor, her attorney, and the beneficiaries failed to notify the Lewises that Ralph’s will specifically provided them a first right to purchase his eighty farmland acres within four months of his death. Only through this silence did the beneficiaries gain title to Ralph’s eighty acres. The beneficiaries now seek to invoke an equitable doctrine to seize a decade’s worth of appreciation which was only procured through the failure to address the purchase option during Ralph’s probate. Equities do not favor the beneficiaries, and equity entitles the Lewises to specific performance of the “the first right to purchase” the eighty acres “at the appraised value in the Estate” which is $140,600.