Nevitt v. Robotham ( 2014 )

NO. COA13-1232
NORTH CAROLINA COURT OF APPEALS
Filed: 5 August 2014
KAREN B. NEVITT in her capacity as
Executrix of the Estate of David
R. Robotham and as Beneficiary of
the Robotham Real Property Trust
as set forth under Article VI of
the Robotham Revocable Trust
Agreement dated August 2, 2011,
Plaintiff-Appellee,
v. New Hanover County
No. 12 CVS 2715
RICHARD GORDON ROBOTHAM; WADE A.
NEVITT; RICHARD H. JAGER; STEPHEN
P. SHEFFIELD, JR.; STEPHEN L.
KELTNER; SARA SHEFFIELD; GRIFFIN
E. NEVITT; JACK K. HUMPHREY, JR.;
ROBERT E. NEVITT; WILMINGTON
CHAPTER OF THE COLONIAL DAMES
HISTORICAL SOCIETY; SABRINA
BURNETT; JACK K. HUMPHREY, JR., as
Trustee of the Robotham Real
Property Trust,
Defendants.
Appeal by Defendant Sabrina Burnett from judgment and order
entered 3 June 2013 by Judge Phyllis M. Gorham in Superior
Court, New Hanover County. Heard in the Court of Appeals 4
March 2014.
Lawrence S. Boehling for Plaintiff-Appellee Karen Nevitt.
The Lea/Schultz Law Firm, P.C., by James W. Lea, III and
Paige E. Inman, for Defendant-Appellant Sabrina Burnett.
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McGEE, Judge.
Karen B. Nevitt (“Plaintiff”), in her capacity as Executrix
of the Estate of David R. Robotham and as Beneficiary of the
David R. Robotham Revocable Trust, filed a complaint on 11 July
2012 against Richard Gordon Robotham, Wade A. Nevitt, Richard H.
Jager, Stephen P. Sheffield, Jr., Stephen L. Keltner, Sara
Sheffield, Griffin E. Nevitt, Jack K. Humphrey, Jr., Robert E.
Nevitt, the Wilmington Chapter of the Colonial Dames Historical
Society, Sabrina Burnett (“Ms. Burnett”), and Jack K. Humphrey,
Jr., as Trustee of the Robotham Revocable Trust (together,
“Defendants”). In her complaint, Plaintiff requested
declaratory judgment concerning whether a certain deed was
valid.
Plaintiff attached as Exhibit A to her complaint, an
agreement titled “David R. Robotham Revocable Trust Agreement”
(hereinafter “trust agreement”). The trust agreement, dated 2
August 2011, was “by and between” David R. Robotham as Grantor
and David R. Robotham as Trustee. The trust agreement provided
that, upon the “incapacity or death” of David R. Robotham (“Mr.
Robotham”), “[his] friend, Jack K. Humphrey, Jr., shall serve as
sole Trustee hereunder[.]” The trust agreement was immediately
funded with ten dollars by the express terms of the trust
agreement. In the trust agreement, Mr. Robotham clearly stated
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that the purpose of the trust was to hold his “personal
residence located at 225 Seacrest Drive, Wrightsville Beach,
North Carolina for [Ms. Burnett’s] remaining lifetime should she
survive me. It is my intent and desire that [Ms. Burnett] be
provided with uninterrupted and exclusive use and enjoyment of
the residence for as long as she shall live.”
Plaintiff also attached as Exhibit B to her complaint, a
document titled “North Carolina General Warranty Deed” (“the
deed”). The deed, also dated 2 August 2011, identified “David
R. Robotham” as Grantor and purported to convey the real
property at 225 Seacrest Drive in fee simple to Grantee “David
R. Robotham, Trustee [for the] David R. Robotham Revocable
Trust.”
Ms. Burnett filed an answer to Plaintiff’s complaint in
which she denied certain allegations, and asserted various
counterclaims against Jack K. Humphrey, Jr. Jack K. Humphrey,
Jr. filed an answer to Plaintiff’s complaint in which he stated:
“I [] Accept the Request of the Declaratory Judgment by Karen
Nevitt,” and he answered “Accept” to all allegations in
Plaintiff’s complaint.
The trial court held a hearing on 1 May 2013 and heard
testimony from Richard Inlow (“Mr. Inlow”), Jack K. Humphrey,
Jr., Ms. Burnett, Stephen Sheffield, Karen Nevitt, and Mark
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Sheffield. Mr. Inlow testified that he was the attorney who, at
Mr. Robotham’s request, had prepared the trust agreement and the
deed. Mr. Inlow agreed that, at the same time Mr. Robotham
executed the trust agreement, Mr. Robotham “signed a deed to
transfer in the [real] property from himself to the trust[.]”
Mr. Inlow testified that he had told Mr. Robotham that “we were
not done until we funded the trust and we had to do that with a
bank account. We’ll record a deed at the register of deed’s
office.”
The trial court entered judgment and order on 3 June 2013
and made the following finding of fact number 18: “At the time
of the death of David R. Robotham, the David R. Robotham
Revocable Trust Agreement dated August 2, 2011 and the Robotham
Real Property Trust were funded with a bank account only.” The
trial court concluded that: “The deed from grantor David R.
Robotham remained within the control of the grantor David R.
Robotham until his death, was never delivered so was not a
legally valid deed.” (Emphasis added). Ms. Burnett appeals.
I. Standard of Review
“‘The standard of review in declaratory judgment actions
where the trial court decides questions of fact is whether the
trial court’s findings are supported by any competent evidence.
Where the findings are supported by competent evidence, the
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trial court’s findings of fact are conclusive on appeal.’”
Cross v. Capital Transaction Grp., Inc., 191 N.C. App. 115, 117,
661 S.E.2d 778, 780 (2008) (citations omitted). “‘However, the
trial court’s conclusions of law are reviewable de novo.’” Id.(citation omitted).
II. Analysis
First, “[t]he exchanges between the parties covering the
subject in controversy are in writing, and manifest no ambiguity
which would require resort to extrinsic evidence, or the
consideration of disputed fact. Their construction is,
therefore, for the [C]ourt.” Atkinson v. Atkinson, 225 N.C.
120, 124-25, 33 S.E.2d 666, 670 (1945). It “‘is a fundamental
rule that, when interpreting . . . trust instruments, courts
must give effect to the intent of the . . . settlor, so long as
such intent does not conflict with the demands of law and public
policy.’” First Charter Bank v. Am. Children’s Home, 203 N.C.
App. 574, 586, 692 S.E.2d 457, 466 (2010) (citations omitted).
Ms. Burnett correctly observes that the present case “does
not fit the fact pattern” of previous cases regarding “delivery
of a deed from a grantor to a third-party grantee[.]” The rule
that “‘the creation of a trust must involve a conveyance of
property,’” Bissette v. Harrod, ___ N.C. App. ___, ___, 738
S.E.2d 792, 799 (2013) (quoting In re Estate of Washburn, 158
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N.C. App. 457, 461, 581 S.E.2d 148, 151 (2003)), does not
contemplate the situation in the present case, in which the
settlor and the trustee are the same individual. In Washburn,
this Court has acknowledged that a conveyance is not required
where settlor and trustee are the same individual. Id. “‘Aside
from the situation in which a settlor of a trust declares
himself or herself trustee, separation of the legal and
equitable interests must come about through a transfer of the
trust property to the trustee.’” Id. (citation and footnotes
omitted).
It is well-established that, “[i]n creating an inter vivos
trust, the creator [settlor] and the trustee may be one and the
same person.” Ridge v. Bright, 244 N.C. 345, 348, 93 S.E.2d
607, 610 (1956). Given that the settlor of a trust and the
trustee are the same person in the present case, the trial
court’s reliance on delivery of the document labeled “North
Carolina General Warranty Deed” is misplaced. There are
multiple ways in which a valid trust may be created, for
example:
(1) Transfer of property by a settlor to a
person as trustee during the settlor's
lifetime or by will or other disposition
taking effect upon the settlor's death[; or]
(2) Declaration by the owner of property
that the owner holds identifiable property
as trustee unless the transfer of title of
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that property is otherwise required by law.
N.C. Gen. Stat. § 36C-4-401 (2013), see also Restatement
(Second) of Trusts § 17 (1959), Restatement (Third) of Trusts §
10(c) (2003) (a trust may be created by “a declaration by an
owner of property that he or she holds that property as trustee
for one or more persons”). In order to create a valid trust by
transfer, under section (1) above, title to the trust property
has to be transferred by settlor to the designated trustee(s) to
hold for the benefit of the intended beneficiary. Bland v.
Branch Banking & Trust Co., 143 N.C. App. 282, 287, 547 S.E.2d
62, 66 (2001).
However, transfer of the trust property is not a
requirement for creating a valid inter vivos trust by
declaration – under section (2) above. Because the settlor of a
trust and the trustee may be the same person, it follows that
“where the settlor and the trustee are the same person, no
transfer of legal title is required, since the trustee already
holds legal title.” 76 Am. Jur. 2d Trusts § 46. The
Restatement Second provides illustrations of ways a valid inter
vivos trust may be created by declaration:
a. Declaration of trust. If the owner of
property declares himself trustee of the
property, a trust may be created without a
transfer of title to the property.
Illustration:
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1. A, the owner of a bond, declares himself
trustee of the bond for designated
beneficiaries. A is trustee of the bond
for the beneficiaries.
So also, the owner of property can create a
trust by executing an instrument conveying
the property to himself as trustee. In such
a case there is not in fact a transfer of
legal title to the property, since he
already has legal title to it, but the
instrument is as effective as if he had
simply declared himself trustee.
2. A, the owner of Blackacre, executes,
acknowledges and records a deed conveying
Blackacre to A as trustee for a
designated beneficiary. A is trustee of
Blackacre for the beneficiary.
Restatement (Second) of Trusts § 17, Comments (1959). This
method of creating a valid trust ‒ declaration of trust ‒ is
recognized in Ridge, 244 N.C. at 349, 93 S.E.2d at 611 (“when
the owner of personal property, in creating a trust therein,
constitutes himself as trustee, it is not necessary as between
himself and the beneficiary that he should part with the
possession of the property”); see also N.C. Gen. Stat. § 36C-4-
401(2) (2013) (a trust may be created by “[d]eclaration by the
owner of property that the owner holds identifiable property as
trustee unless the transfer of title of that property is
otherwise required by law”); Wiggins Wills & Administration of
Estates in N.C. § 23:3 (4th ed.) (“Where the property owner
declares himself trustee, delivery is not required.”).
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“The principle that a trust may be created by a declaration
contained in a separate instrument, or in several instruments,
other than the deed conveying the legal title, provided they
have sufficient relation to each other and construed together
evidence such trust, is generally recognized.” Peele v. LeRoy,
222 N.C. 123, 125, 22 S.E.2d 244, 246 (1942). “‘Express’
. . . trusts are those trusts intentionally created by the
direct and positive act of the settlor, by some writing, deed,
or will, or an oral declaration[.]” Williams v. Mullen, 31 N.C.
App. 41, 45, 228 S.E.2d 512, 514 (1976) (quoting 76 Am. Jur. 2d,
Trusts § 15, p. 263).
In the present case, the record on appeal presents two
documents relating to the Robotham Real Property Trust, both
duly executed in front of a notary: (1) the trust agreement and
(2) the deed. “Where there are two or more instruments relating
to a trust, the instruments should be construed together to
effectuate the settlor’s intent.” Davenport v. Central Carolina
Bank & Tr. Co., 161 N.C. App. 666, 672, 589 S.E.2d 367, 370
(2003) (citations omitted); see also Smith v. Smith, 249 N.C.
669, 675, 107 S.E.2d 530, 534 (1959) (“All instruments executed
at the same time and relating to the same subject may be
construed together in order to effectuate the intention.”).
A “Statement of Grantor’s Intent” appeared in Section 6.3
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of the trust agreement, and set out Mr. Robotham’s purpose for
creating the trust:
I am creating and funding this trust in an
effort to grant Sabrina Burnett exclusive
use and enjoyment of my personal residence
located at 225 Seacrest Drive, Wrightsville
Beach, North Carolina for her remaining
lifetime should she survive me. It is my
intent and desire that Sabrina Burnett be
provided with uninterrupted and exclusive
use and enjoyment of the residence for as
long as she shall live. Furthermore, it is
my desire that the trust bear the costs
associated with maintaining the home,
including but not limited to, the costs
associated with taxes, insurance,
association fees (if any), pest control,
assessments and necessary repairs. I have
attempted to fund the trust with sufficient
working capital to cover the expenses
associated with the residence for a
reasonable period of time. (Emphasis in
original).
The deed contained the following declaration that Mr.
Robotham held the real property at 225 Seacrest Drive as
trustee:
WITNESSETH, that the Grantor, David R.
Robotham, also known as David Ray Robotham
(the “Settlor”), for a valuable
consideration (non-taxable consideration)
paid by the Grantee, the receipt of which is
hereby acknowledged, has and by these
presents does grant, bargain, sell and
convey onto the Grantee [David R. Robotham,
Trustee, David R. Robotham Revocable Trust]
in fee simple, all that certain lot or
parcel of land situated in the Town of
Wrightsville Beach, County of New Hanover,
State of North Carolina, and being more
particularly described as follows:[.]
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When the trust agreement and the deed quoted above are
considered in conjunction with each other, Mr. Robotham’s intent
concerning the real property at issue in this case is clear.
Mr. Robotham desired that Ms. Burnett have exclusive use and
enjoyment of Mr. Robotham’s residence for Ms. Burnett’s
remaining lifetime, and intended to hold the property as trustee
for the use and enjoyment of Ms. Burnett, as beneficiary.
Because we have two contemporaneously executed documents
relating to the trust, we do not decide whether either document,
when considered alone, would have been sufficient to create a
valid inter vivos trust by declaration.
We must consider the conditional language in N.C. Gen.
Stat. § 36C-4-401(2) (emphasis added):
A trust may be created by . . .:
. . . .
Declaration by the owner of property that
the owner holds identifiable property as
trustee unless the transfer of title of that
property is otherwise required by law.
We must determine whether our law required additional action,
such as recordation, to effectuate Mr. Robotham’s intent to
include the real property in the trust. The North Carolina
Comment to N.C. Gen. Stat. § 36C-4-401 states:
Paragraph (2) [of N.C.G.S. § 36C-4-401]
differs from the Uniform Trust Code by
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adding the phrase “unless the transfer of
title of such property is otherwise required
by law.” The Uniform Trust Code adopts the
common law rule that a declaration of trust
can be funded by declaring assets to be held
in trust without executing separate
documents of transfer. See the Official
Comment to this section and authorities
cited. North Carolina courts have not
addressed this issue. The drafters
concluded that the best practice is to
require compliance with state law provisions
governing the transfer of title in order to
eliminate questions regarding ownership of
property and provide better protection of
the rights of third parties and trust
beneficiaries.
N.C. Gen. Stat. § 36C-4-401, Comments (emphasis added).
In the present case, Mr. Robotham made no promise to convey
legal title to Ms. Burnett. Rather, the record plainly shows
that Mr. Robotham retained legal title to the real property at
issue. It is well-established that the trustee holds legal
title to trust property. In re Estate of Pope, 192 N.C. App.
321, 335, 666 S.E.2d 140, 150 (2008) (“There is no dispute that
legal title to the trust assets was lodged in the trustees.”);
see also Strong’s N.C. Index 4th, Trusts and Trustees, § 236
(2008). The documents at issue in the present case did not
convey, as in transfer or deliver, legal title, because Mr.
Robotham already held legal title to the real property. Legal
title remained vested in Mr. Robotham. We can locate no North
Carolina law requiring the transfer of property when creating an
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inter vivos revocable trust by declaration. Other jurisdictions
clearly do not require any transfer of title when creating a
trust by declaration. See Taliaferro v. Taliaferro, 260 Kan.
573, 580, 921 P.2d 803, 809 (1996) (“Where, as here, the settlor
and the trustee are the same person, no transfer of legal title
is required, since the trustee already holds legal title.”);
Estate of Heggstad, 16 Cal. App. 4th 943, 950, 20 Cal. Rptr. 2d
433, 436 (1993) (“authorities provide abundant support for our
conclusion that a written declaration of trust by the owner of
real property, in which he names himself trustee, is sufficient
to create a trust in that property, and that the law does not
require a separate deed transferring the property to the
trust”). Transfer is, of course, required when the settlor and
trustee are not the same person. N.C.G.S. § 36C-4-401(1).
We hold that the trial court erred in concluding: “The
trust was never funded with the real property[.]” When
considered together, the trust agreement and the deed created a
valid trust by declaration, which included the real property.
There was not a requirement that Mr. Robotham execute a deed
transferring title from himself to himself as trustee. We
reverse and remand to the trial court for further action in
accordance with this opinion.
In addition, assuming arguendo transfer of the real
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property was required, that transfer would still have to have
been from Mr. Robotham to Mr. Robotham, as trustee. The deed
was executed by Mr. Robotham, as grantor, to himself, as
“Trustee, David R. Robotham Revocable Trust.” This deed was
executed by Mr. Robotham simultaneously with the trust
agreement. Once these documents were executed by Mr. Robotham,
the David R. Robotham Revocable Trust was created, and the real
property became part of the corpus of that trust. There is
nothing in these two documents evincing any intent on the part
of Mr. Robotham to prevent the trust from taking immediate
effect, or prevent title to the real property from being
immediately delivered to himself, as trustee. Mr. Robotham’s
intent is clear from the documents, and manifests “no ambiguity
which would require resort to extrinsic evidence, or the
consideration of disputed fact.” Atkinson, 225 N.C. at 124-25,
33 S.E.2d at 670.
Because there exists no ambiguity in the documents, it is
irrelevant that Mr. Inlow informed Mr. Robotham after the fact
that the transaction would not be “done” until the deed was
recorded. At that point, the revocable trust had already been
created, the real property was already part of the corpus, and
Mr. Robotham was already trustee. Had Mr. Robotham wanted to
revoke the trust, he could have done so, but any
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misunderstanding about the nature of the trust, its corpus, or
Mr. Robotham’s authority under the trust, could not alter the
nature of the trust itself.
“A conveyance of land can only be by deed.” New Home Bldg.
Supply Co. v. Nations, 259 N.C. 681, 683, 131 S.E.2d 425, 427
(1969) (citation omitted). “The word ‘deed’ ordinarily denotes
an instrument in writing, signed, sealed, and delivered by the
grantor, whereby an interest in realty is transferred from the
grantor to the grantee.” Gifford v. Linnell, 157 N.C. App. 530,
532, 579 S.E.2d 440, 442 (2008) (citation omitted). Recordation
of the deed was not required to effect transfer of title in this
instance, even assuming transfer of title between Mr. Robotham
and Mr. Robotham as trustee was required, or possible, in the
creation of a trust by declaration. Washburn, 158 N.C. App. at
461, 581 S.E.2d at 151 (“‘Aside from the situation in which a
settlor of a trust declares himself or herself trustee,
separation of the legal and equitable interests must come about
through a transfer of the trust property to the trustee.’”)
(citation and footnotes omitted); see also Ridge, 244 N.C. at
349, 93 S.E.2d at 611 (“when the owner of personal property, in
creating a trust therein, constitutes himself as trustee, it is
not necessary as between himself and the beneficiary that he
should part with the possession of the property”).
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Therefore, we hold that the trial court erred in
concluding: “The deed from David R. Robotham to David R.
Robotham, Trustee, David R. Robotham Revocable Trust . . . was
not delivered and is not a valid deed.” Though we do not
believe a properly executed deed was required to create the
trust, we hold the deed was properly executed and delivered, and
is therefore valid. Though the deed has not been recorded, that
does not impact its validity in this instance. Lack of
recordation only denies the deed the protections that
recordation affords.
We hold that, in the present case, the documents satisfied
N.C.G.S. § 36C-4-401(2) and served as a declaration “by the
owner of property that the owner h[eld] identifiable property as
trustee[.]” N.C.G.S. § 36C-4-401(2). Accordingly, the trial
court’s order is reversed.
Reversed.
Judges STEELMAN and ERVIN concur.