author: TERNUS, Justice.

text:
    In the Matter of the ESTATE OF Henrietta P. RUTTER, Deceased. Dennis W. Rutter, Appellant, v. Dwight E. Rutter, Appellee.
    No. 99-0208.
    Supreme Court of Iowa.
    Sept. 6, 2001.
    Rehearing Denied Oct. 3, 2001.

      Robert W. Sackett of Sackett & Sackett, P.C., Milford, for appellant.
    Michael J. Houchins of Zenor & Houch-ins Law Office, Spencer, for appellee.
   TERNUS, Justice.

This case arises from an unfortunate dispute among the beneficiaries of the estate of Henrietta Rutter. The executor of the estate, Dennis Rutter, appeals the district court’s ruling sustaining some of the objections made by a beneficiary, appellee, Dwight Rutter, to the executor’s accounting, final report, and proposed distribution. The beneficiary cross-appeals from the court’s refusal to impose sanctions on the executor for his handling of these matters.

Upon our de novo review, we affirm the trial court’s ruling that the beneficiaries made an oral agreement to forgive debts owed by two of the beneficiaries, Dwight and Douglas Rutter. We reverse the trial court’s finding that this family agreement did not include an understanding that the beneficiaries would forego any challenge to the claim of the executor that the decedent had gifted two pieces of farm equipment to him prior to her death. In addition, we also affirm the trial court’s denial of extraordinary fees to the executor and his attorney. On the cross-appeal, we reverse the trial court’s refusal to remove the executor as a sanction for his handling of the estate. We remand for appointment of a new executor and attorney and for the preparation of an amended accounting, final report, and proposed distribution in accordance with this court’s decision on appeal.

I. Background Facts and Proceedings.

The decedent, Henrietta Rutter, died testate on September 2, 1995. Four children survived her: Douglas Rutter, Dwight Rutter, Dennis Rutter, and Jane Ann Stout. Henrietta’s husband and the children’s father, Dean Rutter, had predeceased Henrietta in 1982. In order to understand the objections made to the final report and distribution of assets in Henrietta’s estate, some history of Dean’s estate is helpful.

Dean was a farmer, as are Dean and Henrietta’s three sons. When Dean died, he bequeathed specific parcels of farmland to his sons, with each son receiving approximately one half section. Henrietta inherited Dean’s fifty-percent interest in Rutter’s, Inc., a family farm corporation that also owned farmland. Henrietta, by virtue of her ownership of the other fifty percent of Rutter’s, became the sole owner of the corporation.

The Rutter brothers decided to defer payment of the federal estate tax owed on the land they inherited. See I.R.C. § 6166 (West 1984). Under this election, the tax was to be paid over a fifteen-year period at four percent interest, with only interest payments in the first four years. In the initial years, each brother paid one-third of the estate tax installment. From 1988-1990, however, Dwight was unable to pay his share. During this period, Douglas and Dennis each paid one-half of the taxes when they came due. In 1991, Dwight was financially able to resume payment of his share of the yearly estate tax obligation. From that time until his mother died, Dwight paid one-third of the annual tax installment.

On April 4, 1989, Henrietta signed a new will. In this will, she provided that after payment of administration expenses and some specific bequests, all assets and funds remaining in her estate were to be placed in a trust. The trustee was directed to pay one fourth of the annual income of the trust to Jane Ann, and use the remaining income to satisfy the deferred estate tax liability on Dean’s estate. Any remaining trust income was to be distributed “for the use and benefit of [her] three sons” as provided in her will. The trust was to terminate “after November 1997,” and upon termination of the trust, the remaining trust assets were to be distributed equally to her four children. Henrietta nominated her son, Dennis, to serve as executor and trustee.

Henrietta’s will also disposed of Henrietta’s shares of Rutter’s, Inc. Jane Ann was to be paid a sum equal to twenty-five percent of the value of Henrietta’s shares within eighteen months of Henrietta’s death. After this payment, the three brothers were to become the sole shareholders of Rutter’s.

On March 3, 1992, Henrietta drew a codicil to her will to clarify her intent with respect to distribution of the trust funds. Referring to the fact that not all of her sons had been able to fully meet their obligation to contribute toward the tax liability assumed by them with respect to Dean’s estate, she stated that it was her “intention that those who did pay those tax bills will be fully reimbursed, with interest, before any other distribution would be made to or on behalf of ... [the] children” not making their required payment.

As previously noted, Henrietta died on September 2, 1995. Dennis was appointed executor of the estate and Robert Sackett was appointed the attorney for the executor. On October 7, 1995, a family meeting was held in Sackett’s office to read the will and to discuss the estate. What was said at this meeting is greatly disputed, but the brothers concur that a family agreement to settle various matters was discussed.

The executor maintained several accounts during his administration of Henrietta’s estate, including separate accounts for the estate and for the trust. During the course of the administration of the estate, Jane Ann was paid one-fourth of the value of Rutter’s as required by Henrietta’s will. This payment was made from the trust account.

On July 1, 1997, Dennis filed a final report, proposed distribution, and application for discharge in the district court. The report stated that Jane Ann had received her one-fourth share of Rutter’s, Inc. and that Dennis, Dwight, and Douglas would become owners of all shares of the corporation. The report included an accounting of the trust account, showing an ending balance of approximately $120,000, and an accounting for the estate account, which showed an ending balance of just under $17,000. The proposed distribution was calculated by adding the balances of these accounts together, subtracting attorney fees and probate expenses, and then dividing by four, to arrive at an initial proposed distribution to each child of $29,450.

It was undisputed that Dwight had never repaid his brothers for covering his share of the federal estate tax obligation in Dean’s estate from 1988 to 1990. Dennis, as the executor of Henrietta’s estate, determined that under the terms of the codicil, Dwight was required to pay this sum back with interest before he could receive a distribution from the trust fund. Using an interest rate of six percent, Dennis calculated that Dwight owed his brothers $21,823. This amount was deducted from Dwight’s share, leaving him with a final distribution of $7,627. One-half of Dwight’s debt was then added to Dennis’s and Douglas’s shares, leaving them each with a final distribution of $40,362.-

Upon receipt of the final report and proposed distribution, Dennis and Douglas waived notice of hearing. Jane Ann filed no response, and Dwight filed objections. After much wrangling over discovery issues, a hearing on the final report and accounting and on the objections to that report and accounting was held. All three brothers testified at the hearing, and Jane Ann, over Dennis’s objection, testified by phone. The substance of their testimony will be discussed in detail later in this opinion.

Dwight contended at the hearing that his proportionate share of the federal estate tax obligation on Dean’s estate was less than one-third due to differences in the value of the real estate received by each son from Dean’s estate. Second, Dwight asserted that some farm equipment owned by Henrietta had been improperly considered gifts to Dennis and that these items should have been included as assets of the estate. Third, Dwight claimed that it was agreed at the family meeting in Sackett’s office that Douglas’s $24,000 debt to his mother would be forgiven in exchange for forgiveness of Dwight’s debt with respect to the federal estate tax obligation on Dean’s estate. Dwight also contended that the estate accounting was improper, requiring that the distribution be amended. Finally, Dwight argued that because of the inaccuracies in the accounting and the proposed distribution, Dennis should be removed as the executor of the estate and a new executor should make a new accounting of the estate.

In a motion for sanctions filed after the hearing, Dwight renewed his request that Dennis be removed as the executor. In the alternative, he requested that the executor and his attorney be denied any fees.

The district court subsequently entered a ruling on the objections to the final report and Dwight’s motion for sanctions. The court found that all parties in interest had agreed to forego collection of the past due installments of federal estate tax owed by Dwight. The court also held that even if no agreement had been reached with respect to Dwight’s estate tax obligation, the codicil was unenforceable because “[t]he collection of the federal estate tax payments made by Douglas Rutter and Dennis Rutter is actually a matter outside the administration of this estate.” With respect to the $24,000 loan, the court found that Douglas owed this sum to Henrietta at the time of her death and that the children had agreed at the family meeting that this debt would also be forgiven. Regarding the alleged gifts of equipment to Dennis by Henrietta, the court ruled that Dennis had failed to prove that a gift had occurred. Therefore, the court stated, these items should have been included in the estate.

The court ruled that the accounting was “incomplete and lack[ed] appropriate detail.” The court also noted that the accounting was incorrect in that it failed to adjust the distribution to Jane Ann based on the fact that her interest in Rutter’s was paid using trust funds, one-fourth of which belonged to Jane Ann. Another problem identified by the district court was the fact that the estate had paid the Iowa inheritance tax, which was not a liability of the estate. Moreover, the accounting did not reflect each heir’s liability for this tax.

The court approved ordinary fees for the executor and attorney, rejecting Dwight’s objections to the fees and rejecting the executor’s and attorney’s requests for extraordinary fees. The court did not remove the executor, as Dwight had requested, but did order the executor to file an amended report, accounting and proposed distribution in accordance with the court’s ruling.

In a later order, the court overruled a rule 179(b) motion filed by Dennis, rejecting his argument that if there was any agreement among the siblings, it included the disputed farm machinery. See Iowa R. Civ. P. 179(b).

The executor has appealed, raising several issues: (1) the court abused its discretion in admitting the telephonic testimony of Jane Ann; (2) the court erred in finding a family agreement to disregard the terms of Henrietta’s codicil with respect to Dwight’s liability for the deferred taxes paid by his brothers; (3) the court erred in finding that Douglas had not repaid the $24,000 debt to his mother; (4) the court erred in determining that Henrietta had not gifted two pieces of machinery to Dennis; (5) the court erred in finding that the terms of the codicil were not enforceable; and (6) the court abused its discretion in denying extraordinary fees. Dwight has cross-appealed, claiming that the executor should be removed. In addition, Dwight argues that in the event the appellate court finds no family agreement existed and the codicil is enforceable, he should be liable only for his proportionate share of the federal estate tax liability in his father’s estate as determined by the relative value of the land inherited by the brothers.

II. Did the Trial Court Err in Allowing Jane Ann to Testify by Telephone?

At the hearing, Dwight sought to have Jane Ann testify by telephone. The executor objected, claiming that the witness should testify in person to enable the court to judge the demeanor of the witness. Notwithstanding this objection, the court permitted Jane Ann to be questioned over the telephone.

We review this evidentiary ruling for an abuse of discretion. See Dettmann v. Kruckenberg, 613 N.W.2d 238, 249 (Iowa 2000); Schlader v. Interstate Power Co., 691 N.W.2d 10, 11 (Iowa 1999). An abuse of discretion occurs when the trial court exercises its discretion “on grounds or for reasons clearly untenable or to an extent clearly unreasonable.” State v. Maghee, 573 N.W.2d 1, 5 (Iowa 1997). “A ground or reason is untenable when it is not supported by substantial evidence or when it is based on an erroneous application of the law.” Graber v. City of Ankeny, 616 N.W.2d 633, 638 (Iowa 2000).

In determining the allowable forms of evidence, we must first classify the action being tried. Civil actions are either ordinary (at law) or equitable. See Iowa Code § 611.3 (1997); Smith v. ADM Feed Corp., 456 N.W.2d 378, 387 (Iowa 1990) (Carter, J., dissenting). The present action is an equitable proceeding. See In re Estate of Todd, 585 N.W.2d 273, 275 (Iowa 1998) (holding that all matters triable in probate other than actions to set aside a will are tried by the probate court as a proceeding in equity (citing Iowa Code § 633.33 (1995))).

In actions at law, the case must be tried “upon oral evidence taken in open court.” Iowa Code § 624.1 (emphasis added); see In re Gust, 345 N.W.2d 42, 44 (N.D.1984) (interpreting requirement that “testimony of witnesses shall be taken orally in open court” to mean “that a witness testifying in a case must be present in court so that the trier of fact may observe the demeanor of the witness”). This requirement is relaxed in equitable actions where the court may allow a witness to testify by deposition. See Iowa Code § 624.3. The legislature has also authorized telephone testimony in specified situations. See, e.g., id. §§ 237.20(l)(d) (allowing testimony by “a tape recorded telephone call” in proceedings before local citizen foster care review boards), 252K.316(6) (providing for “[sjpecial rules of evidence and procedure” in proceedings under Uniform Interstate Family Support Act, including the allowance of witness testimony “by telephone”), 598B.111 (2001) (allowing “an individual residing in another state to be deposed or to testify by telephone, audiovisual means, or other electronic means” in child custody proceeding subject to Uniform Child Custody Jurisdiction and Enforcement Act). There is no rule or statutory provision, however, that would allow witnesses to testify tele-phonically in equitable proceedings in general. See In re Bieganowski, 520 N.W.2d 525, 528 (Minn.Ct.App.1994) (holding that rule allowing evidence to be submitted by deposition did not authorize submission of telephone testimony).

Given this statutory framework, the trial court had no authority to permit Jane Ann to testify by telephone over the objection of the executor. Therefore, the court’s ruling permitting such testimony was based on an erroneous application of the law and constituted an abuse of discretion. See id. (holding that trial court abused its discretion in allowing witness to testify by telephone in absence of rule or statute permitting such testimony as a “substitute for oral testimony in open court”). Having held that Jane Ann’s testimony should not have been allowed, we will address the remaining issues in this case without consideration of her testimony, with one minor exception noted later.

III. Was There a Family Agreement and, if So, What Were Its Terms ?

The trial court found there was an oral agreement by the four siblings to disregard the codicil and relieve Dwight of his obligation to repay his brothers for the federal estate tax payments Dennis and Douglas had made on Dwight’s behalf. The court also found that pursuant to this oral agreement, the beneficiaries agreed not to seek payment of a $24,000 note owed to Henrietta by Douglas. On appeal, Dennis claims there was not a meeting of the minds with respect to such an agreement, but if there was it included an understanding that the beneficiaries would abandon any claim that Henrietta had not gifted the disputed machinery to Dennis.

Our review of the trial court’s ruling is de novo. See In re Estate of Spurgeon, 572 N.W.2d 595, 597 (Iowa 1998) (holding that claims tried in equity are reviewed de novo). In a de novo review, we make our own fact findings, but we give weight to the trial court’s findings with respect to the credibility of witnesses. See In re Estate of Kiel, 357 N.W.2d 628, 630 (Iowa 1984).

Dennis and Douglas testified at trial that the subject of Douglas’s note and Dwight’s obligation for deferred estate taxes in their father’s estate was discussed at the family meeting in the lawyer’s office, but there was no agreement that these debts would be forgiven. They also testified that Douglas had paid the note prior to Henrietta’s death. In contrast, Dwight testified that an agreement to fore-go collection of Dwight’s and Douglas’s debts was reached at that meeting, Dwight recalled that Sackett brought up the fact that Douglas had a note with Henrietta for $24,000. Dwight testified that Sackett suggested that everyone agree to forgive Dwight’s unpaid tax obligations and Douglas’s note. It was Dwight’s understanding when he left that meeting that everyone had agreed to this suggestion and that these matters “would just be forgot.” Before we consider whether a family agreement was reached at the meeting in the attorney’s office, we address Dennis’s claim that Douglas had paid the promissory note prior to Henrietta’s death.

Although Douglas testified that he had repaid the $24,000 prior to his mother’s death, no documentation of any such payment was produced and none was found in Henrietta’s accounts. Dennis did introduce documents showing that a piece of property owned by Douglas had been deeded to his mother and then subsequently deeded' back to Douglas. Dennis claimed that this property was security for Douglas’s debt to Henrietta and the fact that Henrietta deeded it back to Douglas showed that the note had been paid. Douglas’s testimony, however, did not support this scenario. Douglas acknowledged that at the time of the original deed from him to his mother, he was involved in bankruptcy proceedings and he “really didn’t want [the land] in [his] name at that time.” In fact, Douglas admitted that on the same day he transferred the property to his mother, she sold it on contract to Douglas’s children. He also admitted that after he “got [his] affairs together,” his children assigned the contract to him and then his mother deeded the property back to him.

In addition, Dennis testified that the promissory note was found in his mother’s safety deposit box after she died and was listed on an inventory of the contents of the safety deposit box. No one testified that the note was cancelled or marked “paid.” By the time of trial, the note had disappeared and Dennis testified he did not know what had happened to it.

We draw two inferences from this evidence. First, the fact that the promissory note was in Henrietta’s possession at the time of her death raises a rebuttable presumption that the note was not paid. See Burch Mfg. Co. v. McKee, 231 Iowa 730, 732, 2 N.W.2d 98, 99 (1942). Second, Dennis’s failure to produce the note at trial despite his possession of it as executor of Henrietta’s estate also raises an adverse inference. See Phillips v. Covenant Clinic, 625 N.W.2d 714, 718 (Iowa 2001). As we said in Phillips, “[i]t is a well-established legal principle that ... the failure to produce documents or physical evidence relevant to the proof of an issue in a legal proceeding supports an inference that the evidence would have been unfavorable to the party responsible for its ... nonproduction.” Id. We find, as did the trial court, that Douglas had not repaid the $24,000 loan from his mother.

We now turn to the primary issue — was there an agreement by the siblings to forgive Douglas’s debt to his mother and Dwight’s debt to his brothers? In addition to Dwight’s testimony that such an agreement was made, Dennis’s conduct as executor prior to his filing of the final report supports the existence of a family agreement. When the required forms were filed with the Iowa Department of Revenue and Finance with respect to Iowa inheritance and estate taxes, the executor showed the respective shares of the four siblings in amounts that did not reflect Henrietta’s directions in the codicil to her will to deduct unpaid deferred estate taxes from the share of any beneficiary who had not paid his portion of those taxes. In fact, the “computation of shares and tax” for Douglas and Dwight were identical, showing that each was entitled to a net share of approximately $60,000. Dennis could not explain at trial why the computation of shares in the inheritance tax forms varied from the proposed distribution filed with the final report.

We agree with the district court that the most credible testimony supports the existence of a family agreement to forgive Douglas’s unpaid obligation under the promissory note and Dwight’s obligation for past, deferred estate taxes. We turn, then, to Dennis’s claim that if such an agreement existed, it included an understanding that no one would challenge his ownership of the farm equipment he alleges his mother gave him.

Douglas and Dennis both testified that their mother had given this equipment to Dennis early in 1995. Although these transfers were within three years of Henrietta’s death and therefore includable in her estate for tax purposes, see Iowa Code § 450.3(2); I.R.C. § 2503 (1994), they were not listed in the estate’s Iowa inheritance and estate tax return, as required under Iowa law. See Iowa Code § 450.53. Similarly, Douglas’s debt to the estate, which was an asset of the estate notwithstanding any agreement that Douglas did not have to pay the note, was not listed as an estate asset. These actions by the executor are consistent with a family agreement that the various transactions concerning each brother would simply “be forgot[ten].” In addition, common sense and the less-than-warm relationship among the brothers suggest that any family agreement would include some benefit to each brother. If Dennis’s gifted equipment is included in the family agreement, all brothers benefited in a roughly equivalent amount. Dwight’s obligation of almost $22,000 was forgiven, Douglas’s debt of $24,000 was forgiven, and Dennis received equipment without objection valued at $25,500. Based upon our de novo review of the record, we find that the family agreement included an understanding that Dennis could have the disputed equipment free of any challenge by his siblings. We reverse the district court’s contrary finding.

In summary, we find that a family agreement was made that Douglas’s unpaid note to his mother and Dwight’s debt to his brothers would be forgiven, and that the beneficiaries would not contest Dennis’s ownership of the farm machinery. Accordingly, the brothers’ distributive shares of the estate should not have been adjusted for the debt Dwight owed to Douglas and Dennis. Although the executor acted properly in not requiring Douglas to pay the $24,000 note, this note was an asset of the estate and it should have been included in the estate for purposes of computing any taxes owed. Likewise, notwithstanding the family agreement to “forget” the gifts to Dennis, these items should also have been revealed in the tax returns as transfers made within three years of the decedent’s death. Contrary to the executor’s argument in his brief, inclusion of these items in the estate for tax purposes does not violate the family agreement. The family agreement only affects the rights and obligations of the beneficiaries as to the estate and each other; the agreement cannot alter the legal requirements with respect to the taxation of estate assets.

Our finding that a family agreement existed renders any question about the enforceability of the codicil moot. Pursuant to the family agreement, Dwight’s obligation for deferred estate taxes was forgiven. Therefore, as we have stated, there was no need to adjust Dwight’s distribution as required by the codicil. Consequently, we do not decide whether the codicil was enforceable. For the same reason, we need not determine whether Dwight’s share of the deferred taxes should have been computed on a proportionate basis rather than a pro rata basis. Finally, our finding that the family agreement included the abandonment of any challenge to Dennis’s ownership of the disputed equipment makes it unnecessary for the court to decide whether Henrietta had, in fact, given this property to Dennis prior to her death.

IV. Compensation and Retention of the Executor.

The only remaining issue on the executor’s appeal is his claim that he and his attorney are entitled to extraordinary fees. We think it makes sense to consider this claim with the contentions made in Dwight’s cross-appeal that the executor should be removed or, alternatively, should be denied any fee. We begin with the question of whether Dennis should be removed as executor.

At the hearing on the objections and in a subsequently filed motion for sanctions, Dwight requested that the court sanction Dennis by removing him from his position as executor or, alternatively, by denying any fees. In the court’s ruling on Dwight’s objections, the court denied any sanctions.

A district court is “allowed to exercise a large discretion” in determining whether to remove an executor. In re Estate of Lininger, 230 Iowa 201, 205, 297 N.W. 310, 312 (1941); accord In re Estate of Lovell, 344 N.W.2d 576, 579 (Iowa Ct.App.1983). Accordingly, we will not interfere with the exercise of this discretion unless it has been abused. See In re Estate of Lininger, 230 Iowa at 205, 297 N.W. at 312.

A fiduciary may be removed if he or she “has mismanaged the estate [or] failed to perform any duty imposed by law.” Iowa Code § 633.65. The burden to prove conduct sufficient for removal of the executor is upon the person seeking removal. See In re Estate of Atwood, 577 N.W.2d 60, 63 (Iowa Ct.App.1998).

Here, Dwight claims that Dennis should be removed because he has failed in his statutory duty to render a fair and accurate accounting of the property of the estate. Iowa law requires an executor to set forth in his final report “[a]n accounting of all property coming in the hands of the personal representative and a detailed accounting of all cash receipts and disbursements.” Iowa Code § 633.477(9). It should go without saying that this accounting must be true and accurate. Moreover, the executor is a fiduciary. See id. § 633.3(17). As such, the executor has an obligation to treat the beneficiaries of a trust or estate impartially. See Restatement (Third) of Trusts § 183, at 149 (1992). Similarly, a fiduciary “cannot use [his] position, directly or indirectly, for [his] own advantage or profit.” Coster v. Crookham, 468 N.W.2d 802, 806 (Iowa 1991).

With respect to the accounting rendered by the executor, the district court made the following findings, which were not challenged by the executor on appeal:

The accounting made as a part of the Final Report is incomplete and lacks appropriate detail. Many of the receipts and disbursements are not adequately identified. Disbursements are made from the trust account, which appear to be unauthorized. These disbursements from the trust account could, however, be of little significance, if the intent is to close the trust forthwith, but, as mentioned earlier, the proposed accounting is incorrect, as to the share of Jane Ann Stout.
The Iowa inheritance taxes were paid out of the estate. The Final Report and Accounting does not reflect each heirs [sic] liability for Iowa inheritance tax. Iowa inheritance tax is not an estate expense. Each share must be computed separately, and if paid out of the estate account, appropriate adjustments must be made to reflect the individual tax liability.

(Emphasis added.) Coloring this conduct is the fact that the executor’s payment of Jane Ann’s share of the family corporation out of the trust account and his subsequent failure to adjust the distribution of the trust funds accordingly benefited the executor personally, and, coincidentally, his brothers. Because one-fourth of the trust funds used to pay Jane Ann were funds to which she was already entitled, the executor’s use of these funds had the effect of increasing his and his brothers’ distributions from the trust fund. A similar result occurred with respect to the executor’s handling of the Iowa inheritance tax. Because Dennis inherited more property than did his siblings, he owed more than twice as much inheritance tax than they owed. By using estate funds to pay these taxes and not adjusting the beneficiaries’ distributive shares accordingly, Dennis benefited at the expense of the other heirs. Finally, in determining the distribution to be made to each beneficiary, Dennis clearly favored himself and his family ally, Douglas, by not accounting for the gifted property or the $24,000 note, yet making adjustments for Dwight’s debt.

At the hearing, Dennis explained his actions by asserting that he simply signed what his attorney had prepared. Even if this explanation is true, the attorney was chosen by Dennis, see Iowa Code § 633.82, and Dennis signed the various forms and filings stating that he had read them and that they were true and correct. He cannot now disclaim responsibility for his actions. See generally id. § 633.85 (discussing personal liability of fiduciary for acts or omission of agent).

We think the trial court abused its discretion in failing to remove the executor. The executor, in breach of his duty of impartiality, clearly handled the estate in a manner that favored some beneficiaries over others. In addition, as the trial court found, the accounting was incomplete and showed unauthorized disbursements from both the trust account (payment of Jane Ann’s share of Rutter’s) and the estate account (payment of the beneficiaries’ inheritance taxes). It is also significant that these disbursements were to Dennis’s personal advantage. See In re Estate of Atwood, 577 N.W.2d at 63 (“evidence the executor is using his or her position as a personal advantage may also serve as grounds for an executor’s removal”). In view of this conduct, the executor should not have been allowed to continue to administer this estate. See In re Estate of Jones, 492 N.W.2d 723, 726-27 (Iowa Ct. App.1992) (reversing trial court’s refusal to remove executor where executor had used her position as conservator and executor to benefit her son who had divergent interests from the other beneficiaries); cf In re Estate of Amick, 226 Iowa 829, 832, 281 N.W. 786, 788 (1938) (holding that inadvertent failure to include certain assets in the estate did not necessarily require removal of executors). Therefore, we reverse the trial court’s ruling denying Dwight’s request to remove the executor. This decision necessarily results in the removal of the attorney chosen by the executor as well.

Our conclusion that the executor should be removed moots Dwight’s alternative request that the executor should be denied any fee. That leaves only the claim for extraordinary fees. The probate court has “considerable discretion” in allowing attorneys’ fees. See In re Estate of Bass v. Bass, 196 N.W.2d 433, 435 (Iowa 1972). For the same reasons justifying Dennis’s removal as executor, we find no abuse of discretion in the trial court’s denial of Dennis’s request for extraordinary fees incurred by the executor and his attorney in defending against Dwight’s objections. Cf In re Estate of Pence, 611 N.W.2d 651, 652 (Iowa Ct.App.1993) (disallowing fees for attorney and special administrator incurred in litigating matters of personal interest between the heirs); In re Estate of Bolton, 403 N.W.2d 40, 47 (Iowa Ct.App. 1987) (holding attorney not entitled to extraordinary fees for advocating the position of one executor/beneficiary against that of another beneficiary/executor). Therefore, we affirm the trial court’s fee award to the executor and attorney.

V. Conclusion and Disposition.

We reverse the trial court’s decision to allow Jane Ann to testify by telephone. Nonetheless, we affirm the trial court’s finding that a family agreement existed to forgive Dwight’s debt to his brothers and Douglas’s debt to his mother. We reverse the court’s finding that the agreement did not include an understanding that the beneficiaries would not contest Dennis’s entitlement to the disputed pieces of farm equipment.

We hold that the district court abused its discretion in failing to remove the executor .after finding that the executor had made unauthorized disbursements from the trust account and the estate account to his personal advantage. We affirm the district court’s award of fees and deny the executor’s request for extraordinary fees.

The case is remanded to the district court for the appointment of a new executor and a new attorney. The new executor shall file an amended inventory, accounting, final report, and proposed distribution. These filings shall be in accordance with this opinion and those portions of the district court ruling not challenged on appeal. By specifying that certain filings shall be amended, we do not mean to restrict the authority of the executor to exercise any other powers an executor has by law.

AFFIRMED IN PART AND REVERSED IN PART ON APPEAL; REVERSED ON CROSS-APPEAL; CASE REMANDED.

All justices concur except STREIT, J., who takes no part.

      . It appears that the three brothers agreed to use the trust corpus to pay the outstanding estate tax balance on Dean's estate and then distribute the remaining funds prior to the trust termination date specified in Henrietta's will.

      . We are not aware of any statute or rule that would prohibit the parties, by mutual agreement, from submitting a witness’s testimony by telephone, provided the court has no objection to such a procedure. See In re Gust, 345 N.W.2d at 44 (noting that despite requirement that witness be present in court to testify, such testimony may be presented otherwise "by agreement of the patties, with approval of the court”).

      . Dennis argues that an adverse inference should be drawn from the fact that Dwight's wife, Beverly, who was present at the family meeting, did not testify at trial. The decision not to call Beverly as a witness may have been due to the fact that the court had received the testimony of Jane Ann into evidence. Jane Ann was the only disinterested witness and her testimony fully supported Dwight's version of the meeting. Dwight’s attorney may have viewed the testimony of Beverly, an interested witness by virtue of her marriage to Dwight, as unnecessary in view of Jane Ann’s favorable testimony. Therefore, we hesitate to draw an adverse inference from Beverly's failure to testify given the state of the record at the time that decision was made.

      . There were some specific bequests made to Dennis that had the effect of increasing his share of the estate over that of the other beneficiaries and pushing him into a higher tax bracket for inheritance tax purposes.


source: Caselaw Access Project

author: NEUMAN, Justice. SNELL, Senior Judge

license: Public Domain

text:
    STATE of Iowa, Appellee, v. Theodore ALLEN, Jr., Appellant.
    No. 00-0041.
    Supreme Court of Iowa.
    Sept. 6, 2001.
    As Amended on Denial of Rehearing Oct. 3, 2001.

      Linda Del Gallo, State Appellate Defender, and Trida A. Johnston, Assistant State Appellate Defender, for appellant.
    Thomas J. Miller, Attorney General, Kevin Cmelik, Assistant Attorney General, John P. Sarcone, County Attorney, and Stephanie Cox, Assistant County Attorney, for appellee.

       Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2001).

   NEUMAN, Justice.

Defendant, Theodore Allen, appeals his conviction for aiding and abetting the delivery of a controlled substance, cocaine. See Iowa Code § 124.401(l)(c)(3) (1997). His claim for reversal rests on application of the “procuring agent defense,” a theory recognized in State v. Lott, 255 N.W.2d 105 (Iowa 1977), but neither applied in that case nor in subsequent Iowa cases in which it has been raised. We conclude the widely discredited doctrine no longer retains vitality here or elsewhere. We therefore reject Allen’s attempt to rely on it and affirm his conviction.

I. Background Facts and Proceedings.

Three Des Moines undercover narcotics officers approached Allen on a street corner and inquired about purchasing a “twenty” — a $20 rock of crack cocaine. Allen entered the officers’ vehicle and directed them to an area known as Homes of Oakridge. There Allen and two of the officers exited the vehicle to pursue their search for drugs on foot.

Allen stopped two individuals. The officers hung back and heard only the word “no” from one of the unidentified males. The trio then came upon a man later identified as Ray Wilson. Standing apart from the officers, Allen spoke to Wilson and nodded in the officers’ direction. Wilson then approached the officers and asked them what they needed. The officers responded that they wanted a “twenty.” Wilson placed some “crumbs” in one officer’s hand but the officer complained the transaction seemed “light.” Wilson gave the officer another rock, whereupon the officers arrested both Allen and Wilson.

The State charged Allen with conspiracy to deliver a controlled substance and aiding and abetting the delivery of a controlled substance, crimes violating Iowa Code section 124.401(1)(c)(3). The case was tried to the court. Allen moved for judgment of acquittal on the ground his conduct was insufficient, as a matter of law, to support a conviction for drug delivery as either a principal or on a theory of aiding and abetting. He claimed entitlement to application of the procuring agent defense, theorizing he was acting at the behest of the buyers, not the seller, and thus could not be convicted of a delivery offense.

The district court rejected Allen’s argument, finding he

actively participated in the crime by his assuring the officers he could get them the drugs they requested, by going with them to the area where he knew the drugs could be obtained, and by pointing out the officers to the person who had the drugs to sell. These facts indicate an active role in the delivery of cocaine to the officers.

Allen appealed and we transferred the case to the court of appeals. Although Alen renewed his procuring agent defense as a ground for reversal, the court of appeals declined to apply it. Instead it affirmed the judgment of the district court, finding substantial proof that Alen directed the officers to where they could purchase drugs, located the person who sold them cocaine, and stood by while Wilson and the officers negotiated the sale. “By this conduct,” the court held, “Alen assented or lent countenance or approval to the illegal delivery of drugs.” We granted further review to settle the lingering question over the viability of the procuring agent defense.

II. Issue on Appeal/Scope of Review.

The question on appeal is whether the procuring agent defense, recognized in State v. Lott, 255 N.W.2d at 107, is still valid and, if so, whether the district court should have applied it to the facts before it, thereby sustaining Alen’s motion for judgment of acquittal.

Our review is for the correction of errors at law. A defendant is entitled to submit a theory of defense if the theory correctly states the law and is supported by substantial evidence. State v. Ross, 573 N.W.2d 906, 913 (Iowa 1998). The legal validity of a proposed defense is, in the first instance, a question of law for the court.

III. Applicable Legal Principles.

The crime with which Alen was charged, Iowa Code section 124.401(1), makes it unlawful for any person to

manufacture, deliver, or possess with the intent to manufacture or deliver, a controlled substance, a counterfeit substance, or a simulated controlled substance, or to act with, enter into a common scheme or design with, or conspire with one or more other persons to manufacture, deliver, or possess with the intent to manufacture or deliver a controlled substance, a counterfeit substance, or a simulated controlled substance.

Delivery is defined as the “actual, constructive, or attempted transfer from one person to another of a controlled substance, whether or not there is an agency relationship.” Iowa Code § 124.101(7).

One who aids and abets the drug activities just described may be found guilty as a principal. See Iowa Code § 703.1. A person is guilty of aiding and abetting if he or she

knowingly approve[s] and agree[s] to the commission of a crime, either by active participation in it or by knowingly advising or encouraging the act in some way before or when it is committed.... Mere nearness to, or presence at, the scene of the crime, without more evidence, is not “aiding and abetting”. Likewise, mere knowledge of the crime is not enough to prove “aiding and abetting”.

I Iowa Grim. Jury Instructions 200.8 (1988). To secure a conviction based on aiding and abetting, the State must introduce substantial proof to show that the accused “assented to or lent countenance and approval to” the criminal act. Lott, 255 N.W.2d at 107. Knowledge of the crime is essential, “but neither knowledge nor presence at the scene of the crime is sufficient to prove aiding and abetting.” Id.

A. Procuring agent defense. In Lott this court considered the principle of aiding and abetting in the context of a defendant who claimed to be an agent only of a person buying cocaine, not selling it. Id. at 106-07. Rejecting the State’s claim that a person participating on either side of a drug sale is guilty of delivery, we drew on federal authority to recognize the “procuring agent defense,” reasoning as follows:

An aider and abettor is culpable ... for the crime of his principal. The principal whose crime is defined in § 204.401(1) is a person who participates in the delivery of a controlled substance. A customer is not guilty of delivery under that provision. “Delivery” means “the actual, constructive, or attempted transfer from one person to another of a controlled substance.” § 204.101(8), The Code. By definition the recipient is not the deliverer. Nor does [the aider and abettor statute] make him one. A person is not guilty as a principal under that provision unless he is an accessory before the fact. Acceptance of delivery does not occur “before the fact.” Moreover, because the deliverer is not the transferee, one who aids only the transferee cannot be guilty of delivery. This principle is recognized in United States v. Moses, 220 F.2d 166 (3rd Cir.1955), under an analogous federal statute. We reject the State’s contention that a transferee or one who aids only the transferee is guilty of delivery.

Id. at 107. Despite our view on the merits of the defense, we nevertheless affirmed Lott’s conviction, finding the record furnished substantial proof that he was no mere agent for the buyers. Id. at 108. The record revealed that Lott had arranged the transaction, supplied the drugs, vouched for their quality and agreed to arrange future sales. Id.

Subsequent Iowa cases have proved the defense to be equally unavailing based on the factual records. In State v. Zaruba, 306 N.W.2d 772, 774 (Iowa 1981), this court affirmed that the defense was not available to a defendant who actually delivered the controlled substance. Likewise, in State v. Brown, 466 N.W.2d 702, 703-04 (Iowa Ct.App.1990), the court of appeals recognized the defense but rejected its application where the defendant initiated the drug transaction and actively promoted the supplier’s interests.

Other state and federal jurisdictions, meanwhile, have long since abandoned the rationale of Moses and the procuring agent defense. Moses was decided in 1956. The Uniform Controlled Substances Act of 1970, enacted by Iowa as well as forty-eight other states, substantially broadened criminal liability for participation in drug transactions by eliminating any distinction between buyers and sellers. See Unif. Controlled Substances Act § 101(f) (amended 1994); Iowa Code § 124.101(7). The law’s emphasis on delivery arguably shifted the focus of the offense from conduct by individual buyers and sellers to conduct of participants in the transaction as a whole. Scott W. Parker, Note, An Argument for Preserving the Agency Defense as Applied to Prosecutions for Unlawful Sale, Delivery, and Possession of Dmgs, 66 Fordham L.Rev. 2649, 2662 (1998).

In United States v. Pmitt, 487 F.2d 1241, 1245 (8th Cir.1973), the Eighth Circuit Court of Appeals recognized that the concept of selling underlying Moses had been discarded in favor of a statutory scheme creating “an offense of participation in the transaction viewed as a whole.” Other federal circuit courts have uniformly rejected the procuring agent defense in federal drug crime prosecutions under 21 U.S.C. § 841(a)(1). See United States v. Snow, 537 F.2d 1166, 1169 (4th Cir.1976); United States v. Marquez, 511 F.2d 62, 64 (10th Cir.1975); United States v. Pierce, 498 F.2d 712, 713 (D.C.Cir.1974); United States v. Redwood, 492 F.2d 216, 216 (3d Cir.1974); United States v. Masul-lo, 489 F.2d 217, 221 (2d Cir.1973); United States v. Johnson, 481 F.2d 645, 646-47 (5th Cir.1973); United States v. Hernandez, 480 F.2d 1044, 1046-47 (9th Cir.1973).

State courts that have addressed the validity of the procuring agent defense in light of enactment of statutes similar to the Uniform Controlled Substances Act have likewise been uniform in rejecting the defense. See McKissick v. State, 522 So.2d 3, 4 (Ala.Crim.App.1987) (defense does not apply when defendant charged with furnishing drugs rather than merely selling drugs); State v. Burden, 948 P.2d 991, 993-94 (Alaska Ct.App.1997) (statute prohibits delivery of controlled substance); Webber v. State, 15 Ark.App. 261, 692 S.W.2d 255, 257 (1985) (statute prohibits delivery of controlled substance); People v. Dinkel, 189 Colo. 404, 541 P.2d 898, 900 (1975) (statute prohibits unlawful dispensing, which includes sale and delivery); Minor v. United States, 623 A.2d 1182, 1186-87 (D.C.1993) (statute prohibits distribution, defined as transfer); State v. Sharp, 104 Idaho 691, 662 P.2d 1135, 1138-39 (1983), overruled on other grounds by State v. Alanis, 109 Idaho 884, 712 P.2d 585 (1985); People v. Porta, 191 Mich.App. 503, 479 N.W.2d 707, 711 (1992); People v. Williams, 54 Mich.App. 448, 221 N.W.2d 204, 205-06 (1974) (statute prohibits delivery of controlled substance); Tipton v. State, 528 P.2d 1115, 1116 (Okla.Crim.App.1974) (statute prohibits distribution of controlled substance, defined as delivery); State v. Grace, 61 Wash.App. 787, 812 P.2d 865, 867-68 (1991) (statute prohibits delivery of controlled substance); State v. Hecht, 116 Wis.2d 605, 342 N.W.2d 721, 727-28 (1984) (statute prohibits delivery of controlled substance not merely sale of controlled substance).

Only New York’s highest court appears to recognize the continued viability of the procuring agent defense. See People v. Roche, 45 N.Y.2d 78, 407 N.Y.S.2d 682, 379 N.E.2d 208, 211 (1978). The court of appeals’ view is premised, however, on a drug statute which retains the distinction between buyers and sellers and an expressed philosophy that the defense “may be seen as a common-law attempt, in appropriate cases, to recognize the existence of medical and sociological aspects which complicate the factual setting within which the nature of a particular defendant’s participation is to be determined.” Id.

Turning to our own statute, we note that section 124.401(1) makes it a felony, not to buy or sell drugs, but to “manufacture, deliver, or possess with the intent to manufacture or deliver” controlled substances. Plainly the legislature’s focus is on manufacture and delivery — defined as the transfer of drugs from one person to another irrespective of an agency relationship. Iowa Code § 124.101(7). We agree with the State’s claim that, under this statutory scheme, the procuring agent defense simply has no place. An agent who facilitates a drug transaction, whether at the behest of a buyer or a seller, may be found guilty of aiding and abetting the transfer of drugs. We therefore reject the purely semantic analysis applied in Lott, and now overrule its holding that one who aids only the transferee of drugs cannot be found guilty of delivery.

B. Aiding and abetting. The question remains whether substantial evidence supports the court’s factual finding that Allen aided and abetted the transfer of cocaine. Based on the record before us, we entertain no doubts about the court’s conclusion. Allen’s conduct not only lent countenance and approval to the delivery of a controlled substance, he made the transaction possible. He may not have handled the drugs, or urged a sale upon either the undercover officers or the seller, but he plainly facilitated the transfer and stood by while the transaction took place. Under this record, Allen was not entitled to judgment of acquittal. We therefore affirm the judgment of conviction entered by the district court.

DECISION OF COURT OF APPEALS AND JUDGMENT OF DISTRICT COURT AFFIRMED.

All justices concur except SNELL, Senior Judge, who dissents.

STREIT, J., takes no part.

SNELL, Senior Judge

(dissenting).

I respectfully dissent.

I believe our court, in State v. Lott, 255 N.W.2d 105, 107 (Iowa 1977), correctly interpreted our statute defining “delivery” of a controlled substance. The case should not be overruled. In 1977, when Lott was decided, “delivery” was defined by the legislature as “the actual, constructive, or attempted transfer from one person to another of a controlled substance.” See Iowa Code § 204.101(8) (1977). The same wording is still used to define “delivery.” See id. § 124.101(7) (1999).

In Lott, we said the principal whose crime is defined is a person who participates in the delivery of a controlled substance. A customer is not guilty of delivery because by definition the recipient is not the deliverer. “Moreover, because the deliverer is not the transferee, one who aids only the transferee cannot be guilty of delivery.” Lott, 255 N.W.2d at 107.

The legislature has not changed this statute since our interpretation of it in 1977. It is irrelevant that other state courts in viewing their statutory scheme have reached other interpretations. The meaning of Iowa’s statutory definition of “delivery” is crystal clear, as shown by our holding in Lott.

I would reverse the conviction and remand for a new trial.

      . The court’s written ruling indicated that Allen waived jury trial. It appears no other record was made on the matter as required by Iowa Rule of Criminal Procedure 16(1). On appeal Allen claims the waiver was not voluntarily or intelligently made, an error he ascribes to the ineffectiveness of trial counsel. Because the record is inadequate to address his ineffectiveness claim on direct appeal, we preserve Allen’s right to raise it in an action for postconviction relief.

       Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2001).


author: CARTER, Justice.

text:
    CAVEMAN ADVENTURES UN, LTD. d/b/a The Electronics Cave, Appellee, v. PRESS-CITIZEN CO., INC. d/b/a Iowa City Press-Citizen, Appellant.
    No. 99-0435.
    Supreme Court of Iowa.
    Sept. 6, 2001.
    Rehearing Denied Oct. 3, 2001.

      Michael A. Giudicessi and Kasey W. Kincaid of Faegre & Benson LLP, Des Moines, and Randall B. Willman of Leff, Haupert, Traw & Willman, L.L.P., Iowa City, for appellant.
    Martin A. Diaz, Iowa City, for appellee.

       Senior Judge assigned by' order pursuant to Iowa Code section 602.9206 (2001).

   CARTER, Justice.

Press-Citizen Co., Inc., (the Press-Citizen) appeals from a judgment awarding substantial, punitive damages against it in a libel action. The plaintiff-appellee is Caveman Adventures UN, Ltd. d/b/a the Electronics Cave (the Electronics Cave), a retail vendor of electronic equipment in Iowa City, including VCRs and camcorders. The gravamen of the Electronics Cave’s claim in the district court was that a business competitor, Woodburn Electronics, Inc. (Woodburn), had libeled it by publishing a paid advertisement in the Press-Citizen accusing the Electronics Cave of false and misleading advertising designed to deceive the buying public. It contended that the Press-Citizen joined in the publication of the libel.

In seeking to reverse the judgment against it for punitive damages, the Press-Citizen urges that (1) the evidence was insufficient to support the jury’s finding that it acted with actual malice in publishing the statement; (2) insufficient evidence was presented to show that the Electronics Cave suffered any injury to its reputation so as to be entitled to recovery under the standard established in Schlegel v. Ottum-wa Courier, 585 N.W.2d 217 (Iowa 1998); and (3) the punitive damages awarded were excessive. We agree with the contention that the evidence does not support the jury’s finding that the Press-Citizen acted with actual malice. That conclusion warrants reversal of the district court’s judgment without regard to the other claims on appeal.

The point of beginning in this dispute was an advertisement by the Electronics Cave in the Press-Citizen featuring VCRs and camcorders. The camcorders advertised by the Electronics Cave were of the 8mm variety. The advertisement sought to portray a competing variety of camcorders, using a VHS technology, as less desirable. The advertisement asserted that those camcorders produced poor video quality, did not copy well, had poor quality linear audio sound, cost more per minute of recording, were too heavy and thus required shoulder mounting, required an expensive adapter if used in a home VCR, and were not designed to be child proof. The advertisement touted the features of the 8mm camcorders, stating a single tape records for a longer period of time than a VHS tape, produces better video and audio quality, and is cheaper. In an effort to achieve balance, the advertisement revealed that 8mm tapes cannot be played on a home VCR.

Woodburn features VHS camcorders. It elected to respond to the Electronics Cave advertisement with its own paid advertisement in the Press-Citizen. Because this advertisement refers to the Electronics Cave by name and insinuated that its advertising was misleading, the account executive who took the order sought approval from his superiors to run the copy that had been submitted. The proposed advertisement was reviewed first by the retail advertising manager, then by the advertising manager, and finally by the publisher of the paper. It was approved for publication by the publisher.

The Woodburn advertisement began by listing the negative statements about VHS camcorders that had been contained in the Electronics Cave advertisement and identified the Electronics Cave by name as the purveyor of the negative information. The advertisement then stated:

We at WOODBURN ELECTRONICS, INC., have, since 1946, been the leading authority in consumer electronics in the Iowa City area and want you to know the TRUTH, not fiction being cloaked as “fact”.
THE TRUTH IS:
1. Even full size VHS Camcorders only weigh between two and three times that of an 8mm (about 4 pounds) and does not have to be carried on the shoulders (but it does conjure up a vivid image to say so, doesn’t it?).
2. The LOWEST RESOLUTION of any Panasonic VHS or VHS-C CAMCORDER is 330 LINES and the HIGHEST RESOLUTION OF an 8MM CAMCORDER is 270 LINES. The LOWEST RESOLUTION of any Panasonic S-VHS (Super VHS) is 425 Lines and THE HIGHEST RESOLUTION of a Hi-8mm CAMCORDER is 410 LINES.
In addition, VHS & VHS-C Camcorders typically have shutter speeds of more than twice that of 8mm Camcorders (10,000 frames per second for VHS & VHS-C versus 4,000 frames per second for 8 mm & Hi-8) giving VHS & VHS-C excellent slow motion and still-frame resolution and unparalleled video quality.
3. The copies produced from VHS & VHS-C are superior to those of 8mm because of the higher resolution afforded by both VHS & VHS-C. The need for copies is all but eliminated in VHS & VHS-C because, since it IS VHS, it plays back in ANY VHS VCR (see # 4 Below).
4. One Play-Pak Adapter is included with EVERY VHS-C Camcorder and others can be purchased for about the price of three 8mm tapes.
5. Al VHS & VHS-C Camcorders have excellent quality sound. Certain models have the same Hi-Fi Stereo sound found on the same VHS tapes used for Dolby Pro-Logie in-Home Theater Systems. These models’ sound have a dynamic range exceeding 80 dB (a Compact Disc has a Dynamic range of 92 dB).
6. 8mm tape was originally designed as computer backup tape and later used for video.
7. A small child can “easily destroy” any VCR tape regardless of what type it is (just ask any parent!).
8. Much has been made of the fact that 8mm gives three hours of tape time to only 1.5 hours in VHS-C. The tapes themselves are comparatively priced. And when you get right down to it, when was the last time you and the family sat down to a nice three hour long home video?
9. VHS & VHS-C Camcorders connect just as easily to a TV for playback or a VCR for making copies. The big difference is, with a VHS or VHS-C, you don’t HAVE TO connect it to your TV for playback or make copies. The VHS & VHS-C Tapes playback in your VHS VCR saves your camcorder for what you bought it for — making videos. This saves wear on your Camcorder, protecting it from death due to overuse.
MORE TRUTHS THEY “FORGOT” TO MENTION:
1. VHS is the accepted format for VCRs, not only in the U.S., but also in many parts of the world.
2. VHS, S-VHS and VHS-C Camcorders now comprise over 54% of all Camcorders in use and this format is the fastest growing category of all home video cameras for overall sales.
3. In addition to the standard features found on the 8mm Camcorders featured in the “Informative” ad, VHS S-VHS & VHS-C Camcorders are available with features like color, viewfinders, digital 20X power zoom, strobe, Genlock titling, freeze frame, time-lapse and many more.
4. The prices of the VHS-C Camcorders and 8mm Camcorders are model for model and feature for feature, close across the board with the edge going to VHS due to the greater number of features.
5. The battery life of 8mm Camcorders is 1 hour. If you are not near an outlet, you would have to buy additional batteries ($40 — $60 each), charge them all and carry them with you to tape one tape. A VHS, VHS-C or S-VHS Camcorder’s battery life equals or exceeds the tape recording time of the machine, i.e.[,][o]ne VHS tape uses one battery charge. (What a novel concept!)
6. No matter what, the 8mm and Hi-8 Format can never be changed to be compatible with accepted VHS format.
7. The Video Resolution of 8mm does not equal VHS or VHS-C and the Video Resolution of Hi-8 does not equal S-VHS.
8. The 8mm and Hi-8 tapes will never be able to play in VHS or S~ VHS Machines.
9. The only true “Advantage” of 8mm or Hi-8 is that certain models made by certain manufacturers are a few ounces lighter in weight than comparable VHS-C Camcorders.
10. The more misinformed and confused a consumer is, the more units they sell.

Come To The Store That Will Give You The Fads!!

The Press-Citizen refused the Electronics Cave’s request that it print a retraction of the contentions that its advertising was designed to deceive consumers.

In an earlier libel action against Wood-burn Electronics, Inc., arising out of the same facts, the Electronics Cave obtained a judgment for $30,000 in actual damages. It claimed no additional actual damages in the present action against the Press-Citizen but did request punitive damages. Following a trial of this claim, the jury awarded the Electronics Cave $240,000 in punitive damages. Further facts which bear on the resolution of the appeal will be considered in our discussion of the legal issues presented.

I. The Constitutional Basis for the Actual-Malice Requirement.

The Press-Citizen argues that the punitive-damage claim against it must fail unless the evidence shows that it acted with actual malice in publishing the challenged material. We recognized the validity of that argument in Jones v. Palmer Communications, Inc., 440 N.W.2d 884 (Iowa 1989), wherein we stated that an interpretation of the First Amendment by the Supreme Court dictated that punitive damages may not be recovered in defamation actions against media publishers or broadcasters unless actual malice is established. Jones, 440 N.W.2d at 891.

As noted in our Jones case, the Supreme Court in Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), federalized a large portion of libel law by adjusting the relationship between state libel law and the First Amendment guarantees of freedom of speech and of the press. In the wake of Gertz, the common-law rules of libel recovery have been most altered with regard to private-party actions against media publishers or broadcasters. As to those defendants, the Court held that, consistent with the First Amendment,

the States may not permit recovery of presumed or punitive damages, at least when liability is not based on a showing of knowledge of falsity or reckless disregard for the truth.

Gertz, 418 U.S. at 349, 94 S.Ct. at 3011, 41 L.Ed.2d at 810. In placing this limitation on the recovery of punitive damages from media defendants, the Court did not distinguish between media advertising and ordinary reportage. Because the plaintiff does not rely on that distinction to avoid a requirement to show actual malice, we do not consider it.

Knowledge of falsity or reckless disregard for the truth are the elements of actual malice laid down in New York Times Co. v. Sullivan, 376 U.S. 254, 279-80, 84 S.Ct. 710, 726, 11 L.Ed.2d 686, 706 (1964). New York Times Co. made this determination in the context of deciding what type of publisher conduct would defeat the qualified privilege that the Court derived under the First Amendment for media coverage of public officials. Gertz mandated that this same standard of publisher conduct must be shown in order to recover punitive damages from a media defendant.

Our common-law definition of actual malice differs from the definition established in the New York Times Co. case. We have described actual malice in the defamation context as statements made with “ill-will, hatred or desire to do another harm.” Vojak v. Jensen, 161 N.W.2d 100, 107 (Iowa 1968). We reaffirmed this common-law definition in Vinson v. Linvr-Mar Community School District, 360 N.W.2d 108 (Iowa 1984), yet, in the same case, we applied the New York Times Co. definition of knowledge of falsity or reckless disregard for the truth in determining what conduct must be shown under Gertz in order to recover punitive damages. Vinson, 360 N.W.2d at 117. The trial court instructed the jury that it must find actual malice in accordance with the New York Times Co. standard. It also instructed the jury in accordance with Iowa Code section 668A.1 that proof of actual malice must be made by a preponderance of clear, convincing, and satisfactory evidence. Neither party claims that those instructions were improper.

In seeking to uphold the jury’s verdict, the Electronics Cave urges that actual malice on the part of the Press-Citizen can be found from the following circumstances:

(1) The Press-Citizen’s retail advertising manager testified that she believed the advertisement accused the Electronics Cave of trying to defraud the consuming public,
(2) The advertisement was accepted contrary to the Press-Citizen’s established policy of not printing attack advertisements, and
(3) By running the advertisement the Press-Citizen hoped to motivate the Electronics Cave to run a responsive advertisement.

We believe the issue of whether the Press-Citizen acted with actual malice must be judged within the context in which the challenged statements were published. This court has recognized that

[t]he law does not hold a seller to a strict accountability for those vague commendations of his wares which manifestly are open to difference of opinion, and which do not imply untrue assertions concerning matters of direct observations, nor has the buyer any right to rely on such statements.

Hogan v. McCombs Bros., 190 Iowa 650, 656,180 N.W. 770, 773 (1921); accord Barr v. Butler, 197 Iowa 575, 577, 195 N.W. 980, 981 (1923) (a seller may puff and commend the qualities of his property and may declare his own opinion of its value). We are satisfied that a comparable, albeit somewhat less permissive, rule exists with respect to attempts to deflate the puffery resorted to by a competitor. When attempts are made to counter such puffery through the use of comparative-product advertising, we are not persuaded that a newspaper in which this type of advertisement is run is guilty of reckless conduct if it does not ascertain which of the competing claims is closest to the truth. In the present case, unless the Press-Citizen made that determination it would not know whether Woodburn’s accusations of false advertising against the Electronics Cave were themselves false.

The test for determining the existence of actual malice under the New York Times Co. standard is purely subjective. St. Am-ant v. Thompson, 390 U.S. 727, 88 S.Ct. 1323, 20 L.Ed.2d 262 (1968). The Court in St. Amant noted:

[The] cases are clear that reckless conduct is not measured by whether a reasonably prudent man would have published, or would have investigated before publishing. There must be sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication.

Id. at 731, 88 S.Ct. at 1325, 20 L.Ed.2d at 267. In Garrison v. Louisiana, 379 U.S. 64, 74, 85 S.Ct. 209, 216, 13 L.Ed.2d 125, 135 (1964), the Court held that the actual malice standard required a “high degree of awareness of ... probable falsity.” Judged by these standards none of the evidence relied on by the Electronics Cave to show actual malice was sufficient to establish that the Press-Citizen acted with knowledge that the claims made in Wood-burn’s advertisement were false or that the Press-Citizen acted with a reckless disregard for the truth. Consequently, the claim for punitive damages must fail.

We have considered all issues presented and conclude that the judgment of the district court should be reversed. The case is remanded to the district court for a judgment for defendant.

REVERSED.

SNELL, S.J., participates in lieu of STREIT, J., who takes no part.