Deal v. Wachovia Bank & Trust Co.

Civil action instituted by and on behalf of Clarence R. Deal for the termination of testamentary trust for his benefit for life, created under the will of C. J. Deal, deceased.

The controversy centers around these provisions of the will of C. J. Deal: The Wachovia Bank Trust Company is appointed "as executor" thereof, and "as trustee of certain parts of my estate as hereinafter set forth." Then after making certain bequests and devises, the testator devised and bequeathed "all the remainder of my property, real, personal or mixed," to the Wachovia Bank Trust Company, as trustee, upon designated trusts, pertinent portions of item three of which reads: "3. At the death of my wife, to distribute all my property, real and personal, . . . as follows: . . . Of the residue, which shall be divided into six equal parts: . . . One-sixth to be held in trust upon the following conditions: All income to be paid to my son, Clarence R., during the term of his natural life, and at his death, if he leaves children alive and surviving him, the income to be paid to them, share and share alike, until each reaches the age of 21 years. As each reaches the age of 21 years, its part shall be paid to it in fee simple. If either dies before reaching the age of 21 years, its share shall go to the others. If none reaches the age of 21 years, said one-sixth shall revert to my estate. If my son, Clarence R., dies, leaving no children alive and surviving him, said one-sixth shall revert to my estate and be divided among my other children hereinbefore mentioned, or their heirs or representatives, as herein provided."

A like provision in almost identical verbiage is made for the benefit of his son, Claude F. Deal.

The will was duly admitted to probate in Rowan County. The Wachovia Bank Trust Company qualified as executor thereof and afterwards duly administered the estate and duly filed its final account, and then qualified as trustee as provided in said will with regard to the trusts for the benefit of Clarence R. Deal and Claude F. Deal, respectively, as above set forth.

C. J. Deal left surviving him, his wife, Sarah J. Deal, who is now dead, and the following children: Arthur L. Deal, James F. Deal, Mabel Deal Aull, Silas A. Deal, Claude F. Deal, and Clarence R. Deal.

Arthur L. Deal, James F. Deal and Mabel Deal Aull are married and each has children. Silas A. Deal died intestate leaving children.

In 1923, Claude F. Deal, who was then married but had no children, with his wife left the city of Charlotte, and the State of North Carolina, where they resided, and has not "been heard of since the said date," and, by order of the clerk of the Superior Court of Rowan County, dated 7 December, 1936, has been declared to be civilly dead, and Arthur L. Deal was appointed administrator of the estate of Claude F. Deal.

Clarence R. Deal, who is married but has no children, joined by his wife, and Arthur L. Deal and wife, James F. Deal and wife, and Mabel Deal Aull and her husband, children, devisees, and heirs at law of C. J. Deal, deceased, instituted this action against the Wachovia Bank Trust Company, as executor and trustee under the will of C. J. Deal, deceased, and against all of the present living children of Arthur L. Deal, James F. Deal, Mabel Deal Aull and Silas A. Deal, deceased, and against the unborn children, if any, of Arthur L. Deal, James F. Deal, Mabel Deal Aull, Claude F. Deal and Clarence R. Deal, and against Arthur L. Deal, as administrator of the estate of Claude F. Deal, for these purposes: 1. To remove and set aside the trust provided under the will of C. J. Deal for the benefit of Clarence R. Deal, as above set forth, upon the ground that it is "void, naked and passive" and to require the Wachovia Bank Trust Company, trustee, to deliver to him, divested of any trust, all property received by it under the will of C. J. Deal for his benefit. 2. In view of the fact that his brothers and sister, who have joined as plaintiffs in this action, have assigned, transferred and conveyed to him all of their right, title and interest in and to the property held by the defendant, Wachovia Bank Trust Company, as trustee, are "no longer interested, and the alleged or purported contingency, so far as they are concerned, is merged into the rights and title of the said Clarence R. Deal," to have a judgment entered declaring that their children "have no right, title or interest in and to" the said property, and, further, that the children of Silas A. Deal, deceased, who are defendants, be precluded and estopped from claiming any interest in and to same and, further, that "all unborn issue who might be in existence at the time of the death of the said Clarence R. Deal, and who are at this time not in esse," be likewise precluded and estopped. 3. To declare the agreement, by which the brothers and sister of Clarence R. Deal, who have joined as plaintiff in this action, assigned, transferred and conveyed to him all of their right, title and interest in and to the property so held by said trustee, "a family settlement" by which Clarence R. Deal be adjudged the owner of said property "in fee, freed of any trust," and of "any and all interests, apparent, contingent or otherwise, that they now have, or might have, and that their action, as parents of their respective children, be binding and conclusive upon said children, and estop them from ever raising any question, even though the said Clarence R. Deal should die without issue surviving him."

James F. Deal and his wife, Arthur L. Deal and his wife, and Mabel Deal Aull and her husband have executed a release in which they conveyed to Clarence R. Deal "all of their right, title and interest in and to the property devised to Wachovia Bank Trust Company, as trustee for the beneficial interest of Clarence R. Deal," and in which they ask to be joined as parties plaintiff in the present action.

Summons and complaint have been duly served personally upon named defendants, who are residents of the State of North Carolina, and "upon affidavit and order of court, summons and process were served on all nonresident defendants named in this action, by publication, as prescribed by law."

While the defendant, Wachovia Bank Trust Company, trustee, in answer filed admits the provisions of the will, it denies the material allegations of the complaint upon which plaintiffs rely for the relief sought.

The children of Silas A. Deal, deceased, filed answer, setting up claim to a contingent interest in the trust fund in accordance with the provisions of item three of the will of C. J. Deal.

Upon no other answers being filed, the clerk of Superior Court entered judgment by default against all named defendants who had not answered; and appointed George R. Uzzell as guardian ad litem of two named minor defendants; and also appointed C. P. Barringer as guardian ad litem for "any and all unborn issue of the plaintiffs, Clarence R. Deal, James F. Deal, Arthur L. Deal and Mabel Deal Aull, and also any unborn issue of any of the non-answering defendants."

Thereupon, the cause was transferred to the civil issue docket of Superior Court for trial upon the issues raised by the answers filed.

Afterward the children of Silas A. Deal, deceased, as above named, through their attorneys of record withdrew their answer, and together with the respective spouses of such as were married, executed a release similar to that executed by Arthur L. Deal and others as above stated, in which they conveyed to Clarence R. Deal "any and all rights, claims and demands" of them "by reason of any trust of rights as heirs contingent, expectant or by way of remaindermen, or reversioners to the same effect as if no such trust had ever been provided for or mentioned in the aforesaid will of C. J. Deal," and formally authorized withdrawal of their answer, as well as releasing any and all claim against the Wachovia Bank Trust Company as trustee.

George R. Uzzell, as guardian ad litem of named minor defendants, filed an answer, admitting all of the allegations of the complaint, basing the admissions "upon the information furnished to and obtained by said guardianad litem; and further because of the remote interest of said minors, and because of the fact that both parents of said minors whose interests are not as remote as theirs, have joined in an application requesting that the relief prayed for in the complaint be granted to the plaintiffs," and "joins in the prayers of the plaintiffs, and asks that the relief in said complaint be granted."

C. P. Barringer, appointed guardian ad litem of unborn issue as aforesaid, filed answer as such, admitting all the allegations of the complaint, and requesting "the court to pass upon the matters and things alleged and render such judgment as is proper and correct according to the pleading and evidence in this case."

Thereafter, at the November Term, 1939, of Superior Court of Rowan County, upon motion of plaintiffs, Gwyn, J., presiding, entered judgment "against the defendants, and each of them, except the Wachovia Bank Trust Company, trustee, and in favor of the plaintiffs, and especially the plaintiff Clarence R. Deal, as prayed for in the complaint, establishing his rights, so far as these defendants are concerned, and that said defendants, and each of them, and their issue, born or unborn, children or heirs at law, present, future, or contingent, are henceforth and forever estopped to assert or claim any right or interest in and to the real or personal property willed to and devised to the Wachovia Bank Trust Company, trustee, for the use and benefit of Clarence R. Deal, under the will of the said C. J. Deal, deceased" — and

"2. That this judgment shall not estop or prevent the said Wachovia Bank Trust Company, trustee, from further asserting its rights, as set out in its answer, at some subsequent term of court."

The defendant, Wachovia Bank Trust Company, as executor and trustee under the will of C. J. Deal, excepts in so far as said judgment operates as a bar or estoppel against it.

When the case came on for hearing at the May Term, 1940, the plaintiffs and the answering defendant, the Wachovia Bank Trust Company, as trustee, waived a jury trial and agreed for the court to find the facts and declare the law, based upon the records, proceedings, pleadings and admissions of the different parties. The court finds facts substantially as hereinabove set forth. And, further, that while the said judgment of Gwyn, J., entered at the November Term, 1939, of Rowan Superior Court, "estops Arthur L. Deal, James F. Deal, Mabel Deal Aull, and the children of Silas A. Deal from claiming any right, title and interest in or to the share devised in trust to Wachovia Bank Trust Company for the beneficial interest of Clarence R. Deal," "the court is of the opinion and concludes as a matter of law that Clarence R. Deal is not entitled to have the trust removed, revoked or declared inoperative, or to order Wachovia Bank Trust Company, as trustee, to turn over to him the property it has in its hands, which was devised to Wachovia Bank Trust Company for his use and benefit so long as he shall live, and thereafter to his issue, if any, and that if he should die without issue that this share, or property, should go to his brothers and sister, or their issue, and that as a matter of law, the court holds that the trust should not be terminated and declared at an end."

From judgment denying to plaintiffs, particularly Clarence R. Deal, the right "to have the trust terminated and declared at an end, and the property held by the Wachovia Bank Trust Company turned over to him as prayed for in the complaint," the plaintiffs appeal to the Supreme Court and assign error. The challenge of appellants to the judgment below is untenable.

The trust in question is active, and not passive. In cases of passive trusts the legal and equitable titles are merged into the beneficiary and the beneficial use is converted into legal ownership. But this is not true as to active trusts. Fisher v. Fisher, ante, 42, 6 S.E.2d 812, and cases cited.

If a special duty be imposed upon the trustee, such, for example, as the collection and application of the income or the rents and profits of the estate, the trust is active, because the trustee must have the legal title in order to perform his duties. Webb v. Borden, 145 N.C. 188,58 S.E. 1083; Cole v. Bank, 186 N.C. 514, 120 S.E. 54; Heyer v. Bulluck,210 N.C. 321, 186 S.E. 356; Fisher v. Fisher, supra, and numerous other cases.

The factual situation in Cole v. Bank, supra, is not unlike that here.Adams, J., speaking for the Court there, said that "the general rule is that a gift of the income of property is to be regarded as a gift of the property itself only when no limitation of time is attached; but where a testator directs that the interest on a sum of money be paid to a designated beneficiary annually during his natural life, and that after his death the principal should be distributed among other legatees, the legacy is construed, not as a gift to the first taker of the corpus of the fund, but only of the income for the intermediate period." Then, with regard to an agreement signed by legatees to give their interest in the fund to the immediate beneficiary, the Court held that under the circumstances the agreement could not destroy the trust and deprive the bank of its right to hold and disburse the fund in controversy as provided in the will.

Applying these principles to the present case, the income is to be paid to Clarence R. Deal "during the term of his natural life, and at his death," to others. Contingent remainders are created and the trustee is, by operation of law, required to hold the property and pay over the income as directed, and finally to account for the corpus. The releases signed by James F. Deal and wife, Arthur L. Deal and wife, Mabel Deal Aull and husband, and the children of Silas A. Deal, deceased, cannot destroy the trust nor deprive the trustee of its right to hold the property and execute the trust nor relieve the trustee of liability entirely.

While it is stipulated in the release that it is intended as a family settlement agreement, we are of opinion and hold that the family settlement doctrine is inapplicable to the present factual situation. See Reynolds v.Reynolds, 208 N.C. 578, 182 S.E. 341; Bohannon v. Trotman, 214 N.C. 706,200 S.E. 852.

Furthermore, it is pertinent to note that neither Claude F. Deal, if living, nor his children, if any, though unknown, are parties to this action. In this connection, while the principle of law that "the absence of a person from his domicile, without being heard from by those who would be expected to hear from him, if living, raises a presumption of his death, that is, that he is dead at the end of seven years," Beard v. SovereignLodge, 184 N.C. 154, 113 S.E. 661; University v. Harrison, 90 N.C. 387;Steele v. Ins. Co., 196 N.C. 408, 145 S.E. 787, "the presumption of his death, arising from seven years absence under the rule, is presumption of fact which may be rebutted." Chamblee v. Bank, 211 N.C. 48,188 S.E. 632, and cases there cited.

It may also be noted that, though Claude F. Deal be declared to be civilly dead, and if he be in fact dead, it does not necessarily follow that he died without leaving issue surviving him. In fact, the decree of the clerk of Superior Court of Rowan County merely declared him to be civilly dead, and does not attempt to make any adjudication on the question as to whether he is actually dead, or as to whether he left surviving issue.

Moreover, in order to sustain the judgment below it is not required that we pass upon the question of the extent to which the judgment entered by Gwyn, J., at the November Term, 1939, is res judicata. Nevertheless, it has been said that the Court has no higher duty than the protection of infant defendants, and that there can be no trust more sacred than that of a guardian. The object of the appointment of a guardian ad litem is to protect the interest of the infant defendants. It is the duty of a guardianad litem to file an answer and to protect their interests. Latta v.Trustees, 213 N.C. 462, 196 S.E. 862; Graham v. Floyd, 214 N.C. 77,197 S.E. 873.

A guardian ad litem has no authority, without valid consideration, to relinquish rights of the infant defendants whom he represents.

As applied to the present case, even though the parents of the named infants and unborn issue have assigned, transferred and conveyed to Clarence R. Deal, the immediate cestui que trust, all of their contingent right, title, interest and estate in and to property in the trust in question, and even though the interest of such infants and unborn issue be remote, their guardians ad litem, in the absence of valid consideration therefor, are without authority to relinquish those rights to the immediate beneficiary of the trust estate.

In Latta v. Trustees, supra, Barnhill, J., said: "In all suits or legal proceedings of whatever nature, in which the personal or property rights of a minor are involved, the protective powers of a court of chancery may be invoked whenever it becomes necessary to fully protect such rights. When necessary, the Court will go so far as to take notice ex mero motu that the rights of infants are endangered and will take such action as will properly protect them." And, further, quoting from 10 R.C.L., 340, it is there stated: "Equity has full and complete jurisdiction over the persons and property of infants and all other persons laboring under legal disabilities. . . . The jurisdiction in all these cases is plenary and potent to reach and afford relief in every case where it may be necessary to preserve their estates and protect their interests."

The judgment below is

Affirmed.