Bowling v. Kindsfather (In re Glaser)

1

IN THE MATTER OF THE ESTATE OF FRANCIS O. GLASER, Deceased.

JUDY E. BOWLING, Fiduciary of the Estate of FRANCIS O. GLASER and STATE OF IOWA ex rel. DEPARTMENT OF REVENUE, Appellees, v. SHERRY M. KINDSFATHER, Appellant.

No. 22-0882

Court of Appeals of Iowa

June 7, 2023

Appeal from the Iowa District Court for Jackson County, Sean McPartland, Judge.

Sherry Kindsfather appeals a district court ruling following a remand in an estate proceeding. AFFIRMED.

John T. Flynn of Brubaker, Flynn &Darland, P.C., Davenport for appellant.

David Pillers, Dewitt, for appellee Judy E. Bowling.

Brenna Bird, Attorney General, and Laurie Heron McCown, Assistant Attorney General, for appellee Iowa Department of Revenue.

Considered by Bower, C.J., and Greer and Badding, JJ.

BADDING, Judge.

This appeal is the latest chapter in the story of decedent Francis Glaser's efforts to avoid paying taxes. In the earlier chapters, we learned that before his death, Glaser transferred real property to his friend, Sherry Kindsfather with the intent to defraud his creditors, one of which included the Iowa Department of Revenue. See In re Est of Glaser, 959 N.W.2d 379, 381-82 (Iowa 2021). The main story since then has been Kindsfather's attempts to hold onto her ill-gotten property against the department's claim for Glaser's unpaid income taxes in his estate proceeding.

On remand from Kindsfather's first appeal, the district court tried to end the story by approving the administrator's final report and rejecting Kindsfather's argument "that taxes owed by the decedent to the State of Iowa are not a 'debt' or 'charge' of the estate" under Iowa Code section 633.368 (2015). Kindsfather appeals this ruling, raising a mishmash of claims involving limitation of actions, a stipulation by the parties made before remand, bifurcation of trial, sufficiency of evidence, due process, statutory interpretation and construction, res judicata and law of the case, a request for an equitable lien as a remedy, and redemption. We affirm.

I. Background Facts and Proceedings

Glaser died intestate in September 2014 after he "pulled a gun on a meeting of the Jackson County Board of Supervisors as he was protesting tax matters and attempted to shoot local officials. In the resulting struggle, he turned the gun on himself and died of a resulting gunshot." Id. at 381.

An estate was opened in April 2015. Several creditors filed claims, among them a preferred claim by the department for $106,897.83 in unpaid income taxes.^[1] In June 2016, at the department's request, the administrator of the estate moved to set aside conveyances of property to Sherry Kindsfather that Glaser made before his death, specifically what has been called Lots 11, 12, and 13 in this litigation. The motion alleged the properties were fraudulently conveyed and sought their inclusion in the gross estate. See Iowa Code § 633.368 ("The property liable for the payment of debts and charges against a decedent's estate shall include all property transferred by the decedent with intent to defraud the decedent's creditors ...."). Kindsfather resisted the motion and raised affirmative defenses.

A bench trial was held on the motion in May 2018, at which Kindsfather objected to evidence the administrator and the department sought to present about a farm property that had been transferred to her as beyond the pleadings and barred by the statute of limitations for fraud actions. See id. § 614.1(4). At the close of evidence, the administrator orally moved to amend the motion to include the farm conveyance. The district court allowed the amendment and concluded it was not barred by the statute of limitations because it related back to the original motion to set aside conveyances. On the merits, the court found the conveyances of the farm and Lots 11, 12, and 13 were made to defraud creditors. As a result, the court set aside those conveyances.

Kindsfather's subsequent appeal was transferred to this court. See generally In re Est. of Glaser, No. 19-0008, 2020 WL 4200830 (Iowa Ct. App. July 22, 2020). She raised claims about the farm property, clean-hands doctrine, homestead exemption, and excessive relief but did not challenge the court's finding that Glaser transferred the properties to her to defraud his creditors. Id. at *2-6. On the first issue, we found the district court did not abuse its discretion by allowing the administrator to amend its motion to include the farm transfers. Id. at *4. But we concluded the claim was barred by the statute of limitations because it did not relate back to the time of the filing of the motion and reversed the district court's decision to set aside the farm conveyance. Id. at *4-5. Kindsfather's claims about the clean-hands doctrine and homestead exemption were rejected, as was her contention that "the district court erred in voiding all Glaser's conveyances instead of ordering just enough relief to satisfy the [department's] liens." Id. at *6.

On further review, the supreme court only considered "whether recovery under the late amendment to the estate relates back to the original filing and therefore survives the statute of limitations and whether the district court order provided the administrator with excessive relief." Glaser, 959 N.W.2d at 381. The supreme court agreed with our court on the former issue-that the amendment for the farm transfers did not relate back and was therefore barred by the statute of limitations. Id. at 381,384-85. But the court parted ways with us on the excessive-relief issue, holding that "Iowa Code section 633.368 is limited to setting aside the conveyances to the extent necessary to satisfy only the debts and charges against the estate." Id. at 386. As a result, the supreme court reversed and remanded "to the district court with instruction to dismiss the administrator's claim with respect to the farm property as untimely" and "fashion a remedy consistent with [its] interpretation of" section 633.368, which "may be used only to satisfy the debts and charges of the estate." Id. at 387.

Back before the district court, Kindsfather filed her "position regarding the appropriate remedies following the remand." She (1) asked the court to limit the department's claim to the stipulated amount of pre-transfer liens at the first trial, (2) argued the transfers could not be considered fraudulent as to the department because those liens were secured, (3) asserted the administrator did not prove the amount of post-transfer liens, (4) claimed any amounts in excess of the stipulated amount of pre-transfer liens are not debts and charges of the estate and thus not collectible, (5) argued the preferred claim filed by the department was statutorily defective, (6) claimed any creditors other than the department are not entitled to recover anything, and (7) reprised her claim about the homestead exemption.

The department simply responded that the court had one directive: "determine the extent of the debts and charges of the estate and convey sufficient property to satisfy those debts and charges, up to and including all of Lots 11, 12, and 13." All of Kindsfather's proposed requests for relief were outside of that directive, according to the department, and she had no ability to dispute the validity of any debts and charges of the estate. In her position statement, the administrator concurred with the department, provided an itemization of the debts and charges against the estate totaling $151,318.42 in comparison to liquid estate assets of $55,000.00, and requested authorization to sell the real estate to satisfy those debts and charges.

At a telephonic hearing in September 2021, the court framed the issues before it on remand as determining the total debts and charges against the estate and, depending on that figure, which conveyances needed to be set aside to satisfy that amount. The parties agreed those were the issues that needed to be decided. To that end, the department proposed having the administrator prepare a final report showing all debts and charges against the estate and determine which properties needed to be sold to satisfy them. The department continued: "Kindsfather should receive any funds remaining after all debts and charges of the [e]state have been satisfied. If only one or two of the properties are needed to satisfy all debts and charges of the [e]state, the remaining property(ies) should be re-conveyed from the [e]state to Kindsfather." In her briefs that followed, Kindsfather continued to advocate for an outcome that would not result in a sale of any property that had been fraudulently transferred to her.

A second hearing was held in January 2022, following which the court issued a detailed ruling to bring the estate to a close. First, the court rejected Kindsfather's claims that the department was only entitled to recover the amount the parties had previously stipulated were pre-transfer tax liens, totaling $40,278.28, and that the department failed to provide sufficient evidence to show Glaser had delinquent income taxes beyond that amount. The court reasoned the initial trial before the appeal was on the issue of fraudulent conveyances and not the determination of debts and charges of the estate. Next, the court rejected Kindsfather's argument that taxes do not qualify as debts and charges of the estate. The court then concluded Kindsfather's request for an equitable lien or constructive trust in lieu of setting aside the conveyances was not an appropriate remedy. With those issues out of the way, the court adopted the department's proposal to have the administrator prepare a final report itemizing all debts and charges of the estate, including administrator and attorney fees. Once the final report was filed, any...