conservators authority farm lease iowaOn May 21, 2021, the Iowa Supreme Court issued an opinion In The Matter and Conservatorship of Marvin M. Jorgensen, No. 18-1235 (Iowa Sup. Ct. May 21, 2021).  Marvin Jorgensen suffered a stroke in 2016 that left him unable to manage his nearly 18,000 acres of Iowa farmland.  Prior to the stroke, Marvin leased approximately half of his farmland to his children and to several grandchildren in “handshake” agreements that were never put in writing.  After the stroke, a Conservatorship was opened for Marvin and the Conservator entered into new written leases with family members which continued with Marvin’s practice of discounts from market rates.  The Conservator, at the unanimous recommendation of the three children, provided a $40-per-acre discount on leases with such children.  The leases ran to the year 2030.

Approximately six months later the Conservator filed a motion seeking direction on whether the farm leases which were entered into by the Conservator were appropriate.  Two of Marvin’s children testified that they misrepresented facts regarding the previous rental discounts.  The District Court concluded that the leases were not consistent with Marvin’s past practices and reformed the leases to provide a $25-per-acre discount.  On appeal, the Court of Appeals reversed the District Court’s ruling as to the reformation of the farm leases with Marvin’s daughter.

The Supreme Court noted that after Marvin’s stroke, his three children, Marvin’s Guardian-ad-Litem, Marvin’s Conservator, Security National Bank, Marvin’s grandsons, and their respective attorneys, all participated in mediation to resolve various disputes.  The issue resulted in a “Jorgensen Family Settlement Agreement”.  Pursuant to the Agreement, Security National Bank agreed to act as Conservator provided that the children agreed to form a Family Council to provide the bank with assistance and guidance regarding the management of Marvin’s estate.  The Conservator agreed to give “due deference, which will not be unreasonably withheld, as to matters and issues on which the family council unanimously consents, in writing and signed by all parties” as long as the action did not contravene Marvin’s intent or the Conservator’s fiduciary duties.  The Agreement further provided that the determinations of Marvin’s intent would take into consideration his “past course of dealings with his children and their family members”.  Attached to the Family Settlement Agreement was a “Family Recommendation to Conservator” signed by all three family council members which recommended that the Conservator (1) keep all current farm leases in effect, (2) extend all farm leases to the year 2030, and (3) the cash rent would be calculated at the Iowa State University cash rent for medium quality ground, effective March 1, 2018, less $40 per acre as per past course of dealing.  The Family Settlement Agreement was filed with the District Court, no objections were filed and there was not a request for hearing on the Application.  The District Court approved the Family Settlement Agreement on January 31, 2017. In May of 2017, the Conservator filed an Application requesting the Court’s authorization and direction to enter into leases and other agreements to manage the farmland, and the District Court granted the Application.

Later in the year disputes began to arise among the siblings involving the leases.  In February 2018, the Conservator filed an Application with the District Court to review the issues involving the farm leases.  The Conservator requested that the Court decide if the Conservator had complied with its fiduciary duties when it followed the Family Council’s recommendations.  The Conservator asked the Court to either confirm the existing leases or to adjust the existing leases.

The District Court ordered the Guardian-ad-Litem to negotiate a contract with one of the farm management companies that Marvin had interviewed to manage the farmland in place of the Conservator.  The Court went on to order that the farm management company should rewrite all family leases to include only a $25-per-acre discount.  The District Court also ordered that the farm management company should amend the leases to prohibit subleasing at a profit.  Finally, the District Court ordered that the Family Council should be dissolved.  Upon appeal to the Court of Appeals, the Court of Appeals held that the District Court lacked authority to reform the leases.

Upon appeal, the Supreme Court held that the Conservator had specific prior authority to enter into the family leases.  The Court noted that no one opposed or requested a hearing on the Application to approve the Family Settlement Agreement and its attached Family Council recommendation.

In regard to the issue of the amount of discount, the Supreme Court did not find a breach of fiduciary duty by the Conservator noting that all three of the children entered into a Family Settlement Agreement along with its attached recommendation proposing the $40-per-acre discount. The Court noted that the Ward’s “Guardian-ad-Litem” endorsed the $40-per-acre discounts and the 2030 lease terms.

In regard to the issue of whether the Conservator breached its fiduciary duty in regard to the length of lease terms running to the year 2030, the Court noted that the Ward’s Will specified that his property wouldn’t be liquidated until the year 2030.  The Court held that the Conservator’s lease terms ending in 2030 were consistent with the Ward’s wishes and found no breach of fiduciary duty.  The Supreme Court went on to state that the parties seeking to set aside a written instrument affecting real estate bear the burden to establish their right to relief by clear, satisfactory, and convincing proof.  The Supreme Court found that such burden of proof to reform the leases was not met.

In response to the argument that the leases consisted of gifts to the family members that should have been authorized by the Court, the Supreme Court noted that a Conservator may make gifts on behalf of the Ward to persons to whom or to which such gifts were regularly made prior to the commencement of the Conservatorship.  The Court found that the Family Settlement Agreement coupled with the June 2018 order authorizing the Conservator to enter into farm leases, satisfies the legal requirements of the gifting provisions of the Iowa Code.  The Court went on to find that the evidence supports the $40-per-acre discount.  The Supreme Court affirmed the Court of Appeals ruling reversing the District Court’s order in so far as it modifies the rental rates, duration and for-profit subleasing rights involving the leases.  The Court went on to otherwise affirm the District Court’s rulings.