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IN THE SUPREME COURT OF IOWA
No. 63 / 06-0067 Filed July 27, 2007 NORMAN J. KOLB, Trustee of the Robert James Kolb Memorial Trust, Appellee, vs. CITY OF STORM LAKE, IOWA, Appellant. ________________________________________________________________________ Appeal from the Iowa District Court for Buena Vista County, Richard J. Vipond, Judge.

City appeals district court decision that charitable trust failed and could not be modified under cy pres. REVERSED AND REMANDED.

Ivan T. Webber of Ahlers & Cooney, P.C., Des Moines, for appellant.

Mark McCormick of Belin Lamson McCormick Zumbach Flynn, P.C., Des Moines, for appellee.

2 CADY, Justice. In this case a charitable trust was established by an altruistic and benevolent family to maintain a flower garden at a designated location in a city park for the enjoyment of the public in the memory of a family member whose young life was tragically cut short. We must decide

whether the trust may be modified under Iowa Code section 633A.5102 (2007) to permit expenditures by the trust to maintain the garden at a different location in the park, after the city removed the garden to make room for a major economic development project. The district court

refused to modify the trust. We believe section 633A.5102 applies, and we modify the trust as requested. charitable intentions were to We conclude the settlors' general a family member by

memorialize

maintaining a flower garden for the enjoyment of the public, and this charitable purpose is superior to the specific language of the trust regarding where the funds were to be spent. In addition, because

changed circumstances have made it impracticable, if not impossible, to ever carry out the trust at its original designated location, we conclude the trust may be modified to fund the garden at its new location. The evidence and arguments against the continuation of the trust are moving and substantial, but, in the end, we think it is clear the settlors would have wanted the trust to continue, and such a result is consistent and appropriate under Iowa law. We reverse the decision of the district court and remand for further proceedings. I. Background Facts and Proceedings. Almost a century ago Henry and Martha Kolb started a family owned floral business in Storm Lake, Iowa. Over time, the business Both grew into

became a fixture in town, as did the Kolb family.

3 prominence, and enjoyed much success. Tragedy, however, gripped the family when the Kolb's grandson, Robert, died in a hunting accident. This gut-wrenching event led to the creation of a trust, which is the centerpiece of this litigation. In 1968 Henry established an agreement with the city of Storm Lake (City) to establish a flower garden in memory of Robert. The agreement provided for the "establishment, installation and maintenance of a formal flower garden" at a specific location within the City park on the north shore of Storm Lake. The agreement made it clear the garden was a gift to the City, and that the agreement was to "continue during the period of the trust as created in [Henry's] Will . . . providing for the continued maintenance of said formal flower garden." In 1969 Henry and Martha were "desirous of supplementing" their previous gift by establishing a "water fountain on the park area immediately adjacent and West of the land specifically described in [their previous] agreement." As a result, the Kolbs entered into an agreement with the City in which the City granted the Kolbs permission to install the water fountain next to the garden. This agreement acknowledged the parties' previous agreement, but did not reference any testamentary trust or period of time the agreement was to last. 1 The Robert James Kolb Memorial Trust Fund was finally established in 1970. Henry and Martha established the trust by deeding a quarter section of farmland they owned to their sons "Robert H. Kolb and Norman J. Kolb, as Trustees for the use and benefit of the City of Storm Lake." The warranty deed stated in pertinent part:
was, however, a supplemental agreement made between the City and the Kolbs in 1972 that recognized the Kolbs had completed the construction of the fountain and the City would assume all liability and maintenance of the fountain thereafter.
1There

4 It is the purpose of the grantors to hereby establish the Robert James Kolb Memorial Trust Fund out of the real estate above described and the proceeds derived from the sale thereof and/or the income derived therefrom, or any investments created by said trust fund. . . . .... The said trust fund shall be used in connection with improvements needed for the planting and upkeep of flower beds, such as annuals and perennials of all kinds, also flowering bulbs and rose bushes as may be put upon the tract of real estate hereinafter described, as follows: [legal description of the location of the garden that was included in the previous agreements] The Trustees are further authorized to use said trust fund for the paying of a park custodian to maintain said flower beds on the park area herein referred to. The Trustees are given full power to collect the rents, issues and profits from the above described tract of real estate, pay the necessary costs of operation thereof and the net income derived therefrom shall be used for the purposes herein set out. In event the Trustees determine there is any surplus in the funds to be currently used for the improvement and maintenance of the park area they may invest the funds in Government Bonds and use the principal and income for the maintenance of the park area herein described. If in the future there are enough funds available to handle a larger flower garden, then the Trustees are to ask permission from the Park Board for an extension of the present plot to the East side. .... The Trustees are further authorized to borrow money, which may later be repaid out of the income or principal of the trust fund, and with borrowed money, or with the proceeds from income or principal from the trust fund, the Trustees are authorized to construct a water fountain upon park property owned by the City of Storm Lake, adjacent to the tract of real estate herein described as flower beds. The warranty deed also named the Security Trust & Savings Bank of Storm Lake as the successor trustee. Three years later, in 1973, Henry and Martha deeded another quarter section of their farmland to their sons, Robert and Norman, as

5 trustees, "for the use and benefit of the City of Storm Lake." This

warranty deed stated "that this shall become a part of the Robert James Kolb Memorial Trust Fund established by the grantors in the year 1970, in order that this trust and the previously established trust may be handled as a single trust." The language in the 1973 warranty deed was very similar to the previous deed (it contained all but the first and last paragraphs in what is quoted above), but it also stated "[t]he Trustees are fully authorized to cooperate with the Park Board of the City of Storm Lake, Iowa, in carrying out the provisions of this trust." warranty deed stated when the trust terminated. The trust operated without much trouble or question for over thirty years under the direction of Robert and Norman as trustees. 2 Norman usually filed the trust's annual reports. The reports indicated the income produced from the trust res, or farmland, was more than enough to pay for the trust expenses. The trust disbursements mainly consisted of Neither

farm, garden and fountain expenses, which often equaled twenty to thirty thousand dollars. A significant portion of these expenses, sometimes ten to twenty thousand dollars, included managerial fees to the trustees for administering the trust. Despite such expenses, over the years the trust accumulated surpluses that were usually invested in CDs or placed in checking accounts. On one occasion, however, the trustees used surplus trust funds to help the Storm Lake School District purchase additional school property. This transaction was memorialized in a 1980 agreement The agreement specifically

between Norman and the school district.

died in 2002, and thereafter Norman acted as sole trustee until his own death just recently in July 2007.

2Robert

6 acknowledged the trust was "designated to provide for the establishment of flower gardens, park improvements, planting of shrubberies, trees and flower gardens upon publicly owned properties in Storm Lake." Pursuant to the agreement, the trustees paid $34,605 out of trust funds towards the purchase price of the property. 3 Henry died testate 4 in 1978 and his wife, Martha, died a short time later. Despite their deaths, the garden and fountain survived for many years with the help of the City's maintenance and funds provided by the trust. It was a cherished location in Storm Lake, and often provided an ideal spot for weddings and celebrations. In 2003, however, the existence of the garden and fountain was placed in jeopardy. At this time the City was developing plans for an

economic revitalization project called "Project Awaysis," funded with Vision Iowa grant money. See Project Awaysis, http://www.awaysis.com (last visited July 24, 2007). The plans sought to turn the City's park on the north shore of Storm Lake and surrounding areas into a Midwest vacation destination. Among other things, the project was to provide a new public beach, a lighthouse, a family playground, a lodge, and an indoor/outdoor water park. Most importantly, the plans called for

relocating the memorial gardens and fountain within the City's park. The project was viewed by its planners, and others, as a vital and necessary move for the City to grow and compete for jobs and residents in the future.

record clearly shows the trust paid $34,605 in 1981 to help the school purchase the land. Curiously, however, this disbursement does not appear to be indicated in the trust's annual reports. will, however, did not mention any kind of trust. Therefore, there was no testamentary trust as referred to in the 1968 agreement between Henry and the City.
4Henry's

3The

7 When Norman heard about the project he approached the City with a plan to modify the trust. Modify." The plan was contained in a "Petition to

The petition stated Norman and the City had "entered into

meaningful discussion relative to the modification of said trust with the purpose in mind of moving the water fountain and flower garden and to alter the financing of said trust." It also stated "[t]he trustee believes it would be in the best interest of the beneficiary if the Water Fountain and Flower Garden could be moved from its present location to a new location within the proposed Lakeside development." Finally, the petition listed several terms and conditions the parties would agree to. These terms

included the condition that the garden and fountain "be of the same design and size as it now is," and that the City convey the better farm to Norman and his family. implemented. Instead, Norman and his attorney met with the City's attorney and the project director for Project Awaysis. At the meeting, and in a followup letter dated June 6, 2005, Norman expressed his position that "the garden and fountain cannot be moved, or reconfigured in any way." The City responded it could not change the plans for Project Awaysis, and the garden and fountain would be removed in the fall of 2005. In order to prevent the removal of the garden and fountain, Norman filed a petition against the City. The petition requested the court to issue a temporary and permanent injunction, or, in the alternative, a declaratory judgment that a resulting trust had been created because the original trust had failed. The City eventually filed an amended answer and counterclaim and requested the court to supervise the trust and remove Norman as trustee. It also requested an accounting to justify the This petition, however, was never signed or

8 managerial fees, and requested Norman reimburse the trust for any excess fees or losses incurred under his supervision. Finally, it alleged the cy pres doctrine precluded declaration of a resulting trust. Both parties filed motions for summary judgment. On

September 6, 2005, the court held a hearing to rule on these motions and Norman's request for a temporary injunction. The court denied the temporary injunction the same day. Thereafter, the City began to remove the garden and fountain. The court later denied both parties' motions for summary judgment because a genuine issue of material fact existed as to the purpose of the trust. The matter was then tried before the court in October of 2005. The court entered a decree finding "the purpose of the trust is to provide funds for the maintenance of a flower garden and fountain on a specific plot of ground." It noted the decisive issue was whether the cy pres doctrine applied, and answered that question in the negative "because the purpose of the trust has not become impracticable, unlawful or impossible to fulfill." It based its decision on the fact the City voluntarily destroyed the fountain, and without such destruction "it was possible for [the garden and fountain] to continue in existence for an indefinite time in the future." As a result, the court entered an order finding the trust's purpose had been destroyed and that it therefore became a resulting trust to benefit the settlors' successors. The court also dismissed the City's counterclaim with prejudice. appealed. II. Issue and Standard of Review. We have one issue to decide. The question presented is whether the cy pres doctrine applies to allow the modification the City requests. The City

9 Never before have we specifically stated our standard of review in deciding such questions. 5 See, e.g., In re Trust of Rothrock, 452 N.W.2d 403 (Iowa 1990) (deciding whether the cy pres doctrine should apply when the trial court determined it did); Simmons v. Parsons Coll., 256 N.W.2d 225 (Iowa 1977) (deciding whether the cy pres doctrine should apply when the trial court determined it did not). Other jurisdictions

have indicated an appellate court should review a trial court's modification under cy pres for an abuse of discretion. See Burr v.

Brooks, 393 N.E.2d 1091, 1097

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