Baxter v. Jones

188 S.E.2d 622, 14 N.C. App. 296, 1972 N.C. App. LEXIS 2123

• Court: Court of Appeals of North Carolina
• Decided: May 24, 1972
• Docket: 7227SC38
• Status: Published

Opinion

MALLARD, Chief Judge.

Appeal of Plaintiffs

Plaintiffs contend that the trial judge committed error in failing to find that “Exhibit A” created a trust and invested title to the personalty and realty of Pearl Boyd Baxter in the plaintiffs.

“Trusts are classified in two main divisions: express trusts and trusts by operation of law. The cardinal distinction between the two classes is that an express trust is based upon a direct declaration or expression of intention, usually embodied in a contract; whereas a trust by operation of law is raised by rule or presumption of law based on acts or conduct, rather than on direct expression of intention. Teachey v. Gurley, 214 N.C. 288, 199 S.E. 83; 54 Am. Jur., Trusts, sections 186 and 187. See also 65 C.J., p. 220 et seq.” Bowen v. Darden, 241 N.C. 11, 84 S.E. 2d 289 (1954). See also Pegram, v. Tomrich Corp., 4 N.C. App. 413, 166 S.E. 2d 849 (1969).

We are concerned here with the question of whether “Exhibit A” created an express trust. We hold that it did not.

“The creation of a trust is a present disposition of property, and not an undertaking to make a disposition in the future.” 1 Restatement of Trusts 2d, § 16, p. 58.

“In order to create an enforceable trust it is necessary that the donor or creator should part with his interest in the property to the trustee by an actual conveyance or transfer, and, where the creator has legal title, that such title should pass to the trustee.” 89 C.J.S., Trusts, § 63, p. 837.

“It is essential to the creation of an express trust that the settlor presently and unequivocally make a disposition of property by which he divests himself of the full legal and equitable ownership thereof.” 54 Am. Jur., Trusts, § 34, p. 45.

“ * * * An express trust has been defined as ‘a fiduciary relationship with respect to property, subjecting the person by whom the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it.’ 1 Restatement Law of Trusts, 6. The term signifies the relationship resulting from the equitable ownership of property in one person entitling him to certain duties on the part of another person holding the legal title. 54 Am. Jur., 21. To constitute this relationship there must be a transfer of the title by the donor or settlor for the benefit of another. Coon v. Stanley, 230 Mo. App. 524. The gift must be executed rather than executory upon a contingency. Cazallis v. Ingraham, 119 Me., 240.” (Emphasis added.) Wescott v. Bank, 227 N.C. 39, 40 S.E. 2d 461 (1946).

“It is well settled in this State and others that to constitute a valid trust, undoubtedly three circumstances must concur— (1) sufficient words to raise it, (2) a definite subject, (3) and an ascertained object.” Thomas v. Clay, 187 N.C. 778, 122 S.E. 852 (1924). See also Trust Co. v. Taylor, 255 N.C. 122, 120 S.E. 2d 588 (1961); Finch v. Honeycutt, 246 N.C. 91, 97 S.E. 2d 478 (1957) ; and Starling v. Taylor, 1 N.C. App. 287, 161 S.E. 2d 204 (1968).

In the case of Callaham v. Newsom, 251 N.C. 146, 110 S.E. 2d 802 (1959), the Supreme Court said:

“When called upon to interpret a trust agreement or other contract, courts seek to ascertain the intent of the parties and, when ascertained, give effect thereto, unless forbidden by law. In re Will of Stimpson, 248 N.C. 262, 103 S.E. 2d 352; DeBruhl v. Highway Com., 245 N.C. 139, 95 S.E. 2d 553; Hall v. Wardwell, 228 N.C. 562, 46 S.E. 2d 556; Trust Co. v. Steele’s Mills, 225 N.C. 302, 34 S.E. 2d 425.

The intent of one who creates a trust is to be determined by the language he chooses to convey his thoughts, the purpose he seeks to accomplish, and the situation of the several parties to or benefited by the trust. Electric Co. v. Insurance Co., 229 N.C. 518, 50 S.E. 2d 295.”

When “Exhibit A” is read in its entirety and the circumstances under which it was written are considered, it appears that there was no present and unequivocal transfer of property to trustees by Mrs. Baxter, and the language employed in the writing is insufficient to create a trust. Although some of the plaintiffs may have been requested to perform certain duties prior to the decedent’s death, the overall testamentary character of the writing is apparent: There are numerous references by Mrs. Baxter to her impending death and of her desire to dispose of her property in light of that event. This intent is further demonstrated where it is stated, in a parenthetical way, on page three, the signature page, of “Exhibit A,” “She algo expressed a desire for me (Jessie Baxter, the draftsman) to write her will (pages 1 and 2). She said she had changed her mind about what she had said at one time she wanted.”

It seems that Mrs. Baxter intended to and attempted to make a will, but failed to comply with the statutory provisions which grant and control the right to dispose of property by will. See Article 1 of Chapter 31 of the General Statutes and Ridge v. Bright, 244 N.C. 345, 93 S.E. 2d 607 (1956). An instrument which is testamentary in effect but does not follow the prescribed formalities for the proper execution of a will is void. See Bogert, Trusts & Trustees, 2d Ed., § 102.

Moreover, it appears that the parties have stipulated that Mrs. Baxter died in Gaston County “on January 29, 1969, while a resident of said county, and owned property, both real and personal, in said county at the time of her death.” It would seem that this stipulation, together with the admissions in paragraph 7 of the plaintiffs’ complaint which reads, “(t)hat since the death of the said Pearl Boyd Baxter there has been no sale, distribution or disposition of the estate and property owned by her at the time of her death,” negatives any concept of a transfer of title to all of Mrs. Baxter’s property in her lifetime. The parties also admit that “Exhibit A” is not a will.

In the case before us, we hold that “Exhibit A” is neither a trust nor a will, and plaintiffs acquired no interest in the estate of Mrs. Baxter thereunder.

Appeal op Dependants

The answering defendants assign as error those parts of the “order and judgment” signed by Judge Thornburg and dated 17 September 1971, in which it was asserted that “this Court” (probably meaning a superior court at which he, Judge Thornburg, was the presiding judge) would enter a judgment allowing plaintiff’s motion for summary judgment, if it were held on appeal that “Exhibit A” is a trust instrument. Although such a ruling is erroneous and is irregular, in this case it is not now prejudicial to the answering defendants because this court has affirmed Judge Thornburg’s ruling that “Exhibit A” did not create a trust. But it should be noted that though a superior court judge is vested with great power, he does not have the power to deny a motion and also to allow it in the same judgment, or to bind another judge by such a premature anticipatory and conditional ruling. Moreover, under our system of rotation of superior court judges, the same judge may not be assigned to hold the superior courts of a given county when a case from that county is finally decided on appeal, and therefore it is improper for such judge to include in his judgment how he would rule on a hypothetical state of facts if presented to him at some future date.

The answering defendants also assign as error the signing and entering of those portions of the “order and judgment,” dated 17 September 1971 and filed 23 September 1971, designated (a), (d) and (g), and the findings and conclusions of law upon which they were based.

On 10 September 1971, plaintiffs filed a motion under Eule 37 (d) in which it was asserted that on 12 March 1971, plaintiffs, pursuant to Eule 33, served written interrogatories on the 30 answering defendants. However, this record shows that a notice and interrogatories dated 13 March 1971 were directed to only one of the defendants, to wit: “Effie Leah Murrell Jones and Henry M. Whitesides', Attorney of Eecord for said defendant.” In their motion plaintiffs assert that fifteen of the answering defendants filed answer and fifteen failed to file answer to the interrogatories. However, on this record the only defendant to whom notice and interrogatories was addressed, Effie Leah Murrell Jones, did file an answer and the plaintiffs are not entitled to have their motion under Eule 37 (d) allowed.

At the time they filed their motion under Eule 37(d), plaintiffs also filed a motion for judgment by default in which they alleged, among other things, that the summons and complaint in this cause had been duly served upon “the defendants named in said action and/or upon such of them as will fairly insure the adequate representation of all of them (Eule 23, NCECP).” Although the plaintiffs did not allege in their complaint that the defendants constituted a class so numerous as to make it impracticable to bring them all before the court, they seem to have proceeded, in part, upon such theory, at least in this motion. It was held under old G.S. 1-70, the class action statute, which has now been superseded by Eule 23 of the Eules of Civil Procedure, that in order to bring a proceeding under this section of the statute, it was necessary to make such an allegation. The plaintiffs, in moving for judgment by default, contradict themselves in that they seem to treat this lawsuit as a class action in the first paragraph of the motion, and in the second paragraph thereof, state that although a number of the defendants filed answer to the complaint, plaintiffs are entitled to a judgment by default under Eule 55 of the Eules of Civil Procedure against the sixty-seven defendants who did not.

Judge Thornburg entered a “Judgment” by default dated . 17 September 1971 and filed 23 September, against the sixty-seven defendants who did not file answer, as follows:

“Now, Therefore, It Is Ordered, Adjudged and Decreed as follows:

1. That as against the above-named defendants, the plaintiffs, Jessie Baxter and Ellen B. Beam, are trustees by virtue of the instrument attached to the Complaint herein and marked ‘Exhibit A’, and that the said Jessie Baxter and Ellen B. Beam and the other plaintiffs herein are, as against the above-named defendants, the sole cestuis que trustent under said instrument.

2. That the plaintiffs in this action, as cestuis que trustent under the instrument above-mentioned, are entitled to have and recover of the above-named defendants such share of the property and estate of Pearl Boyd Baxter, deceased, as would otherwise accrue to said defendants as heirs at law of the said Pearl Boyd Baxter, deceased.”

There are contradictions in this “Judgment” by default and the “Order and Judgment,” both signed by Judge Thorn-burg and both dated 17 September 1971, and filed 23 September 1971, in that in this “Judgment” by default, it was held that “Exhibit A” was a valid trust instrument and that the plaintiffs take under it as against the sixty-seven defendants who did not file answer, whereas in the “Order and Judgment,” as to the thirty answering defendants, the holding was that the instrument did not create a trust. We hold that the instrument cannot be a trust instrument against the defendants who failed to file answer and, on the other hand, not a trust instrument against the answering defendants. The fact that some of the defendants failed to file answer, or may have failed to properly answer interrogatories did not affect the validity or invalidity of the instrument to be construed and did not operate as a conveyance to the plaintiffs herein of the interest to which such defendants were entitled under the Intestate Succession Act, Chapter 29, North Carolina General Statutes, in the property owned by Mrs. Baxter at the time of her death, nor can the failure of the administrator to file answer, under these circumstances, operate as a conveyance to the plaintiffs of the property to which the administrator, as such, is entitled under the statutory laws of North Carolina.

The rule is stated in 22 Am. Jur., Declaratory Judgments, § 94, p. 959, as follows:

“The failure of a defendant who has been duly served to appear and answer a complaint seeking a declaratory judgment constitutes an admission of every material fact pleaded which is essential to the judgment sought, but the court must, nevertheless, proceed to construe such facts or instruments set out in the complaint and enter judgment thereon; the default caused by the defendant’s failure to appear and answer does not entitle the plaintiff to a judgment based on the pleader’s conclusions. The default admits only the allegations of the complaint and does not extend either expressly or by implication the scope of the determination sought by the plaintiff, or which could be granted by the court.” (Emphasis added.)

The plaintiffs’ purpose in bringing this action was to have the court construe “Exhibit A” and enter judgment upon the construction thereof. The failure of sixty-seven of the defendants to file answer in this declaratory judgment action, or the failure of some answering defendants to answer interrogatories, did not entitle the plaintiffs to a judgment based on their own conclusions and contentions. The proper construction of “Exhibit A” determined the rights of the plaintiffs. See Hall v. Hartley, 146 W.Va. 328, 119 S.E. 2d 759 (1961); and St. Paul Mercury Ins. Co. v. Nationwide Mut. Ins. Co., 209 Va. 18, 161 S.E. 2d 694 (1968). See also Machine Co. v. Newman, 275 N.C. 189, 166 S.E. 2d 63 (1969).

We hold as follows:

1. “Exhibit A” is neither the last will and testament of Mrs. Baxter, deceased, nor a trust instrument creating a trust as to the property of Mrs. Baxter during her lifetime.

2. Jessie Baxter and Ellen Baxter Beam are not trustees of the property of Mrs. Baxter, and “Exhibit A” did not vest title to the personalty and realty of Mrs. Baxter in said persons as trustees for the purpose of managing the estate and property of Mrs. Baxter during her lifetime or for delivering any part thereof to the plaintiffs after her death. Inasmuch as “Exhibit A” did not create a trust, we are of the opinion and so hold that this summary judgment could not and did not convey any interest in the estate of Mrs. Pearl Baxter to the plaintiffs.

3. The summary judgment dated 16 September 1971, filed 16 September 1971, entered against S. J. Boyd and wife, Pearl Boyd, did not convey to the plaintiffs the interest of S. J. Boyd and wife, Pearl Boyd, in the property owned by Mrs. Baxter at the time of her death.

4. The “Judgment” by default final dated 17 September 1971 and filed 23 September 1971, entered against the sixty-seven defendants who did not file answer to the complaint, including J. Ben Morrow, administrator of the estate of Mrs. Baxter, did not convey to the plaintiffs any interest in the property owned by Mrs. Baxter at the time of her death.

5. Those portions of the “Order and Judgment” of Judge Thornburg dated 17 September 1971 and filed 23 September 1971 reading as follows (together with the “findings of fact” and “conclusions of law” upon which they are based) are hereby declared to be null, void and of no effect and the same are hereby stricken therefrom:

“(a) * * * If, however, the ruling of this Court as to the validity of ‘Exhibit A’ attached to the Complaint as a trust instrument is reversed on appeal, then the said Motion of the plaintiffs is allowed and judgment to that effect will be entered at the conclusion of said appeals.”

“(d) That the plaintiffs are entitled to have and recover in equal shares that portion of the estate and property of Pearl Boyd Baxter, deceased, not awarded herein to those defendants against whom summary judgment has been entered and signed and not awarded to those defendants against whom default judgment has been entered and signed because of their failure to answer the Complaint or otherwise file pleadings herein.”

“(F) • • • (H)owever, if upon appeal it is held that the paper writing attached to the Complaint and marked ‘EXHIBIT A’ constitutes a trust instrument as alleged by the plaintiffs in the Complaint, this Court will thereafter enter a summary judgment against the answering defendants as prayed in motion heretofore filed by the plaintiffs.”

As thus modified, the “Order and Judgment” of Judge Thornburg dated 17 September 1971 and filed 23 September 1971 is affirmed.

Modified and affirmed.

Judges Morris and Parker concur.