IN THE COURT OF APPEALS OF NORTH CAROLINA
2021-NCCOA-301
No. COA20-561
Filed 6 July 2021
Mecklenburg County, No. 18-CVS-23026
JACOB SAMUEL MCELHANEY AND JULIA ELIZABETH MCELHANEY, as beneficiaries of the Jane Richardson McElhaney Revocable Trust and the Samuel Clinton McElhaney Revocable Trust, Plaintiffs,
v.
ORSBON & FENNINGER, LLP, and R. ANTHONY ORSBON, Defendants.
Appeal by Defendants from order entered 3 March 2020 by Judge Donnie
Hoover in Mecklenburg County Superior Court. Heard in the Court of Appeals
24 March 2021.
Shumaker Loop & Kendrick, L.L.P., by Stephanie C. Daniel and Lucas D. Garber, for Plaintiffs-Appellees.
Brooks Pierce McClendon Humphrey & Leonard, L.L.P., by Gary S. Parsons and Kimberly M. Marston, for Defendants-Appellants.
COLLINS, Judge.
¶1 Anthony Orsbon and his law firm, Orsbon & Fenninger, LLP, (collectively,
“Defendants”) appeal from an order denying their motion for summary judgment on
certain defenses and granting Plaintiffs’ motion for partial summary judgment.
Defendants argue that the trial court erred by denying their motion for summary
judgment as to the defenses of collateral estoppel and election of remedies and MCELHANEY V. ORSBON & FENNINGER, LLP
Opinion of the Court
granting Plaintiffs summary judgment on those defenses. Because Defendants have
not shown sufficient grounds for immediate appellate review of the trial court’s
interlocutory order as to the election of remedies defense, we deny Defendants’
petition for writ of certiorari and dismiss Defendants’ arguments concerning that
defense. Because Defendants cannot show that each element of collateral estoppel is
satisfied, we affirm the trial court’s order as to that defense.
I. Procedural History
¶2 The present action follows a declaratory judgment action (“Declaratory
Action”) brought by Wells Fargo Bank, N.A., as trustee of the Jane Richardson
McElhaney Revocable Trust (“Wells Fargo as Jane’s Trustee”), and a claim for
reformation of that trust (“Reformation Claim”) brought by Jacob and Julia
McElhaney. On 7 December 2018, the Mecklenburg County Superior Court
announced its ruling from the bench on a motion for summary judgment and
judgment on the pleadings in those actions.
¶3 The same day, Jacob and Julia McElhaney (together, “Plaintiffs”) brought this
action against Defendants alleging negligence, legal malpractice, and breach of
contract. Simultaneously, Wells Fargo as Jane’s Trustee, along with Wells Fargo
Bank, N.A., as trustee of the Samuel Clinton McElhaney Revocable Trust, and Wells
Fargo Bank, N.A., as executor of the Jane Richardson McElhaney Estate (together,
“Wells Fargo”) brought an action against Defendants alleging negligence and legal MCELHANEY V. ORSBON & FENNINGER, LLP
malpractice arising from the same set of facts. Upon consent motions in both cases,
the trial court consolidated the actions for the purposes of discovery. With leave of
the trial court, Defendants filed amended answers in each action. Defendants
asserted as defenses that each of the plaintiffs lacked standing and that collateral
estoppel and election of remedies barred each of the plaintiffs’ claims.
¶4 Defendants moved for summary judgment in both actions on their defenses of
collateral estoppel and election of remedies, as well as an alleged lack of damages
from some or all of Defendants’ alleged negligent acts. Defendants also moved for
summary judgment against Wells Fargo on the defense of lack of standing. Plaintiffs
moved for partial summary judgment on standing, collateral estoppel, and election of
remedies.
¶5 In a consolidated order (“Order on Appeal”), the trial court granted the motions
for partial summary judgment by Plaintiffs and Wells Fargo and denied Defendants’
motions. Defendants timely appealed.
II. Factual Background
A. The Estate Planning Documents
¶6 In May 1996, both Samuel and Jane McElhaney established revocable trusts,
Samuel’s Trust and Jane’s Trust, respectively. In the fall of 2010, attorney Anthony
Orsbon (“Orsbon”) assisted Samuel and Jane in amending these trusts and preparing
other estate planning documents. On 12 October 2010, Samuel and Jane executed MCELHANEY V. ORSBON & FENNINGER, LLP
separate trust agreements amending and restating their trusts. As amended, both
provided that the trust of the first spouse to die would be divided into a marital share
and a family share, each share to be administered as a trust. During the surviving
spouse’s lifetime, he or she would be entitled to certain distributions from both the
marital trust and the family trust.
¶7 Upon the surviving spouse’s death, the surviving spouse’s entire trust would
be allocated to the family share which, along with any remains of the marital share,
would be distributed to an identified set of beneficiaries (“Specific Beneficiaries”).
Following amendments in 2011, Samuel’s and Jane’s Trusts each provided for
identical bequests to identical lists of Specific Beneficiaries, comprised of relatives
and private organizations.
¶8 Each Specific Beneficiary would receive both the bequest provided in Samuel’s
Trust and the bequest provided in Jane’s Trust. The surviving spouse held a limited
power of appointment “at any time and from time to time by and through [his or her]
Last Will and Testament to reduce or decrease any or all bequest amounts
bequeathed to” the Specific Beneficiaries.
¶9 After disbursement to the Specific Beneficiaries, any remainder would be held
by the trustee “for the benefit of [Samuel and Jane’s] grandchildren who are living at
the Division Date.” Plaintiffs are the children of Samuel and Jane’s one son, Scott
McElhaney. Following Scott McElhaney’s death in 2010, Plaintiffs were the sole MCELHANEY V. ORSBON & FENNINGER, LLP
living descendants of Samuel and Jane. After Samuel died in August 2015, Jane
consulted Orsbon concerning her estate planning documents. In October 2015,
Orsbon provided drafts of updated estate documents to Jane’s Wells Fargo financial
advisor, Linda Montgomery. In November, Montgomery had discussions with Orsbon
concerning changes Jane desired to make to the draft documents.
¶ 10 On 8 December 2015, Jane executed a new Last Will and Testament (“Jane’s
Will”) and an Amended and Restated Trust Agreement modifying her Trust. Jane’s
Will disposed of certain personal property and otherwise left the remainder of her
estate to her Trust via a pour-over clause. Jane’s Trust, as amended in 2015, stated
that “[t]he Family Share shall be administered as a Family Trust” with a changed
list of specific bequests. The amendment eliminated certain Specific Beneficiaries,
reduced bequests to others, and added one new Specific Beneficiary. The remainder
of Jane’s Trust after payment to the Specific Beneficiaries was to be divided in equal
shares and held in trust for Jane’s grandchildren or, if applicable, the issue of her
deceased grandchildren. Jane died on 21 April 2017.
B. The Declaratory Action and Reformation Claim
¶ 11 On 3 October 2017, Wells Fargo as Jane’s Trustee instituted the Declaratory
Action in Mecklenburg County Superior Court. Its petition for declaratory judgment
included the following allegations:
22. Specifically, as [Jane’s] Trust does not provide MCELHANEY V. ORSBON & FENNINGER, LLP
for the creation and disposition of a Family Share or Family Trust, the reference to the Family Trust contained in [Jane’s] Trust creates a latent ambiguity as to whether by making such reference Jane intended to exercise her testamentary limited power of appointment over the Family Trust created under Samuel’s Revocable Trust.
23. [Jane’s] Trust does not reference the testamentary limited power of appointment granted to Jane. Even if it did, the power of appointment granted to Jane was limited to the power to “reduce or decrease” the bequest of the specific beneficiaries named in Samuel’s Trust, and the provision in [Jane’s] Trust adds a beneficiary, Ellen McElhaney, which is not authorized by the testamentary limited power of appointment granted to Jane . . . .
24. [Jane’s] Will does not reference the testamentary limited power of appointment granted to Jane in the Family Trust or any attempt to exercise such power of appointment.
....
35. The Trustee is not aware of any evidence that would be admissible to clarify Jane’s intent in using the term “Family Share” and/or “Family Trust” in [Jane’s] Trust.
¶ 12 Wells Fargo as Jane’s Trustee requested the trial court to:
1. Declare that [Jane’s] Will did not exercise Jane’s testamentary limited power of appointment over the Family Trust.
2. Absent the admissibility of evidence to clarify the latent ambiguity in [Jane’s] Trust sufficient to find that Jane exercised her testamentary limited power of appointment over the Family Trust, declare that [Jane’s] Trust does not exercise Jane’s testamentary limited power MCELHANEY V. ORSBON & FENNINGER, LLP
of appointment over the Family Trust[.]
3. Absent the admissibility of evidence to clarify the latent ambiguity in [Jane’s] Trust sufficient to find that Jane exercised her testamentary limited power of appointment over the Family Trust, declare that the Trustee shall distribute the property of the Family Trust as set forth in . . . Samuel’s Revocable Trust.
4. Absent the admissibility of evidence to clarify the latent ambiguity in [Jane’s] Trust sufficient to find that Jane exercised her testamentary limited power of appointment over the Family Trust, declare that the references to Family Share and Family Trust in [Jane’s] Trust refer to all of the property of [Jane’s] Trust and that the Trustee shall distribute the property of [Jane’s] Trust pursuant to the provisions of . . . the Trust.
¶ 13 On 19 March 2018, Plaintiffs filed a response to the petition for declaratory
judgment and asserted their Reformation Claim against Wells Fargo as Jane’s
Trustee and the Specific Beneficiaries. Plaintiffs alleged that
[Jane’s] Trust’s express references to “The Family Share” and “Family Trust” created under Samuel’s Revocable Trust, the substantial identity in beneficiaries between [Jane’s] Trust and Samuel’s Revocable trust, and [Jane’s] Trust’s reduction of the specific bequests set forth in Samuel’s Revocable Trust each are indicative of Jane’s desire and intent to exercise the testamentary limited power of appointment granted to her under Samuel’s Revocable Trust.
Plaintiffs contended that additional extrinsic evidence “further reveals that Jane
intended, through execution of her Will and the Trust, to exercise the testamentary
limited power of appointment granted to her under Samuel’s Revocable Trust.” MCELHANEY V. ORSBON & FENNINGER, LLP
¶ 14 Plaintiffs sought reformation of Jane’s Trust under N.C. Gen. Stat.
§ 36C-4-415 on the ground that it “fail[ed] to include language clearly expressing
Jane’s intent to exercise the testamentary limited power of appointment granted to
her under Samuel’s Revocable Trust.” They prayed the court to eliminate the
bequests to Specific Beneficiaries in Jane’s Trust as contrary to Jane’s intent.
¶ 15 Several of the Specific Beneficiaries moved for summary judgment and, in the
alternative, judgment on the pleadings, arguing that reformation was not available
as a matter of law. Plaintiffs filed a brief and multiple affidavits in opposition. On
7 December 2018, the trial court orally announced its ruling:
I did read everything because I wanted to make sure that in addition to the arguments that I went back and reviewed everything in context of your arguments. . . . I read the depositions, read the affidavits, read the arguments and reformation and extrinsic evidence.
[I]n reviewing everything that was provided to me regarding Jane’s [T]rust and the issue of power of appointment and whether it was exercised. . . . I have to find that I don’t see any issues of material fact in this case as relates to what her intentions were at the time of the execution.
So as to the petition for declaratory judgment, I’m finding that Jane did not exercise her testamentary limited . . . power of appointment in either her will or her trust and that the claim for reformation will not be available based on the evidence of her intent at the time of execution. So again, as to the motion for summary judgment, I cannot find there are any genuine issues of material fact . . . . MCELHANEY V. ORSBON & FENNINGER, LLP
I will also grant the motion for judgment on the pleadings after reviewing the pleadings in the file in this case, and that will be my order.
¶ 16 The trial court entered a written order (“Underlying Order”) on 20 December
2018 stating as follows:
After review of the matters of record including, without limitation, the pleadings, including the Petition, the Counterclaim, the Crossclaim, the Answers, and the exhibits referenced therein, the parties’ submissions to the Court and materials filed in support of and in opposition to [the Specific Beneficiary] Movants’ Motions, including sworn deposition testimony, and having the benefit of legal briefs and oral argument by counsel for the parties, the Court finds and determines that there exists no genuine issue as to any material fact and that Movants are entitled to Judgment as a matter of law on all claims and causes of action asserted in this action, except the Movants’ Motion for attorneys’ fees and costs . . . .
The trial court granted the Specific Beneficiary Movants’ motion for summary
judgment and, in the alternative, granted their motion for judgment on the pleadings.
As to the petition for declaratory judgment, the trial court declared that Wells Fargo
Bank, N.A., shall distribute the property in Samuel’s Trust and Jane’s Trust as
written in the trust instruments. Finally, the trial court dismissed the Reformation
Claim with prejudice. Plaintiffs timely appealed to this Court, but withdrew their
appeal after the parties entered into a confidential settlement agreement.
C. The Negligence and Malpractice Actions
¶ 17 On 7 December 2018, shortly after the trial court orally announced its decision MCELHANEY V. ORSBON & FENNINGER, LLP
in the Declaratory Action and Reformation Claim, Plaintiffs and Wells Fargo filed
their respective actions for negligence and legal malpractice. The trial court granted
summary judgment in favor of Plaintiffs and Wells Fargo on the defenses of lack of
standing, collateral estoppel, equitable estoppel, laches, and election of remedies, and
against Defendants with respect to their defenses of collateral estoppel, election of
remedies, standing, and the alleged lack of damages due to some or all of Defendants’
alleged negligent acts. Defendants appealed.
III. Appellate Jurisdiction
¶ 18 We first address whether Defendants’ appeal is properly before this Court. The
Order on Appeal is interlocutory because it does not “dispose[] of the cause as to all
the parties, leaving nothing to be judicially determined between them in the trial
court.” See Veazey v. City of Durham, 231 N.C. 357, 361-62, 57 S.E.2d 377, 381 (1950).
There is generally no right to immediate appeal of an interlocutory order. Goldston
v. Am. Motors Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990). The purpose of
this rule is to “prevent fragmentary, premature and unnecessary appeals by
permitting the trial court to bring the case to final judgment before it is presented to
the appellate courts.” Fraser v. Di Santi, 75 N.C. App. 654, 655, 331 S.E.2d 217, 218
(1985) (citation omitted). A party may immediately appeal an interlocutory order,
however, if the order “affects a substantial right claimed in any action or
proceeding[.]” N.C. Gen. Stat § 1-277(a) (2021). MCELHANEY V. ORSBON & FENNINGER, LLP
¶ 19 Defendants contend that the Order on Appeal is immediately appealable to the
extent that its denial of their motion for summary judgment on the defense of
collateral estoppel affects a substantial right. “The doctrine [of collateral estoppel] is
designed to prevent repetitious lawsuits, and parties have a substantial right to avoid
litigating issues that have already been determined by a final judgment.” Turner v.
Hammocks Beach Corp., 363 N.C. 555, 558, 681 S.E.2d 770, 773 (2009). Thus, “[i]t is
well established that the denial of a motion for summary judgment ‘affects a
substantial right when the motion . . . makes a colorable assertion that [a] claim is
barred under the doctrine of collateral estoppel.’” Gray v. Fannie Mae, 264 N.C. App.
642, 645, 830 S.E.2d 652, 655-56 (2019) (quoting Turner, 363 N.C. at 558, 681 S.E.2d
at 773); see also Fox v. Johnson, 243 N.C. App. 274, 281, 777 S.E.2d 314, 321 (2015)
(holding that appellants made a colorable assertion of collateral estoppel by including
the defense in their answer and as a basis for their motion for judgment on the
pleadings); Hillsboro Partners, LLC v. City of Fayetteville, 226 N.C. App. 30, 35, 738
S.E.2d 819, 823 (2013) (concluding that appellant made a colorable assertion of
collateral estoppel because the prior and instant lawsuits both arose from the same
building demolition).
¶ 20 In this case, before the trial court, Defendants moved for summary judgment
based on collateral estoppel. Defendants thoroughly briefed and argued each element
of collateral estoppel and referenced numerous citations to caselaw and the MCELHANEY V. ORSBON & FENNINGER, LLP
evidentiary record. We conclude that Defendants have made a colorable assertion of
collateral estoppel and the Order on Appeal may affect their “substantial right to
avoid litigating issues that have already been determined by a final judgment.” See
Turner, 363 N.C. at 558, 681 S.E.2d at 773. Accordingly, we will review the Order on
Appeal’s denial of the defense of collateral estoppel.
¶ 21 Defendants aptly concede that no precedent holds that the denial of summary
judgment on the defense of election of remedies affects a substantial right. Indeed,
“[t]he avoidance of one trial is not ordinarily a substantial right.” Green v. Duke
Power Co., 305 N.C. 603, 608, 290 S.E.2d 593, 596 (1982). As such, Defendants have
petitioned for a writ of certiorari requesting this Court to review the Order on Appeal
as to their defense of election of remedies.
¶ 22 This Court may issue the writ of certiorari “in appropriate circumstances . . .
to permit review of . . . orders of trial tribunals when . . . no right of appeal from an
interlocutory order exists . . . .” N.C. R. App. P. 21(a). We assess petitions seeking
review of interlocutory orders in light of our “general policy against the piecemeal
review of” such orders. See Harbor Point Homeowners’ Ass’n ex rel. Bd. of Directors
v. DJF Enterprises, Inc., 206 N.C. App. 152, 165, 697 S.E.2d 439, 448 (2010). We have
emphasized that “the routine allowance of interlocutory appeals would have a
tendency to delay, rather than advance, the ultimate resolution of matters in
litigation.” Newcomb v. Cnty. of Carteret, 207 N.C. App. 527, 554, 701 S.E.2d 325, MCELHANEY V. ORSBON & FENNINGER, LLP
344 (2010).
¶ 23 Defendants argue that this Court should grant certiorari because (1) the issue
of election of remedies “arises from substantially the same facts as the collateral
estoppel issue; (2) the issue could be equally dispositive; (3) the issue is ripe; and (4) it
would promote judicial economy by eliminating the need for a later appeal on this
issue.” These arguments are unavailing because “similar considerations would
support the issuance of a writ of certiorari in virtually any case in which a trial court
refuses to grant summary judgment” on one out of several affirmative defenses. See
id. at 553, 701 S.E.2d at 344. Additionally, as Plaintiffs argue, a decision by this
Court on the merits of the issue would not necessarily dispose of all claims as to all
parties. Accordingly, in our discretion, we deny Defendants’ petition for a writ of
certiorari and decline to review the merits of their arguments concerning the defense
of election of remedies.
IV. Discussion
¶ 24 Defendants argue that the trial court erred by denying their motion for
summary judgment on the defense of collateral estoppel and granting Plaintiffs’
motion as to that defense. Summary judgment is proper where “the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that
any party is entitled to a judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule MCELHANEY V. ORSBON & FENNINGER, LLP
56(c) (2020). “The standard of review for summary judgment is de novo.” Forbis v.
Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007) (citation omitted).
¶ 25 “Under the collateral estoppel doctrine, parties and parties in privity with
them are precluded from retrying fully litigated issues that were decided in any prior
determination and were necessary to the prior determination.” Turner, 363 N.C. at
558, 681 S.E.2d at 773 (alteration, citation, and quotation marks omitted). “The
issues resolved in the prior action may be either factual issues or legal issues.” Doyle
v. Doyle, 176 N.C. App. 547, 549, 626 S.E.2d 845, 848 (2006). The party alleging
collateral estoppel must demonstrate
that the earlier suit resulted in a final judgment on the merits, that the issue in question was identical to an issue actually litigated and necessary to the judgment, and that both the party asserting collateral estoppel and the party against whom collateral estoppel is asserted were either parties to the earlier suit or were in privity with parties.
State ex rel. Tucker v. Frinzi, 344 N.C. 411, 414, 474 S.E.2d 127, 128-29 (1996)
(emphasis added) (brackets, quotation marks, and citation omitted). For issues to be
considered “identical” to ones “actually litigated and necessary” to a previous
judgment:
(1) the issues must be the same as those involved in the prior action, (2) the issues must have been raised and actually litigated in the prior action, (3) the issues must have been material and relevant to the disposition of the prior action, and (4) the determination of the issues in the prior action must have been necessary and essential to the MCELHANEY V. ORSBON & FENNINGER, LLP
resulting judgment.
State v. Summers, 351 N.C. 620, 623, 528 S.E.2d 17, 20 (2000) (citation omitted). “The
burden is on the party asserting [collateral estoppel] to show with clarity and
certainty what was determined by the prior judgment.” Miller Bldg. Corp. v. NBBJ
N.C., Inc., 129 N.C. App. 97, 100, 497 S.E.2d 433, 435 (1998) (internal quotation
marks and citation omitted); accord Powers v. Tatum, 196 N.C. App. 639, 642, 676
S.E.2d 89, 92 (2009).
¶ 26 Defendants argue that the instant malpractice and negligence suits present
the identical issue as the Declaratory Action and Reformation Claim: whether Jane
intended to exercise her limited power of appointment. Defendants contend that this
issue was actually litigated and that in the course of deciding the motions for
summary judgment and judgment on the pleadings in the Declaratory Action and
Reformation Claim, the trial court actually and necessarily determined that Jane did
not intend to exercise her limited power of appointment. Plaintiffs respond that
(1) the previous and instant actions present different issues, (2) the trial court did not
actually decide the issue of Jane’s intent in the previous actions, (3) any
determination of Jane’s intent was not necessary to the Order on Appeal, and (4) the
previous and instant actions involve different facts.
¶ 27 Plaintiffs did raise the issue of Jane’s intent in the Declaratory Action.
Specifically, they argued that a material issue of Jane’s intent precluded entry of MCELHANEY V. ORSBON & FENNINGER, LLP
summary judgment as to the petition for declaratory judgment. They contended that
the issue was material to whether Jane had successfully exercised her power of
appointment by substantially complying with the terms set out in Samuel’s Trust, as
required by N.C. Gen. Stat. § 31D-3-304.
¶ 28 Plaintiffs also raised the issue of Jane’s intent while pursuing their
Reformation Claim, which sought “to correct a mistake that occurred as the result of
a scrivener’s error which caused [Jane’s Trust] to fail to conform the terms of trust to
[Jane’s] intent.” Plaintiffs and the Specific Beneficiaries extensively litigated the
issue of Jane’s intent prior to entry of the Underlying Order. Nonetheless,
Defendants cannot meet their burden of showing “with clarity and certainty” that the
issue of Jane’s intent was actually and necessarily determined by the Underlying
Order. See Miller Bldg. Corp., 129 N.C. App. at 100, 497 S.E.2d at 435.
¶ 29 When the trial court orally announced its ruling, it stated in pertinent part
that
in reviewing everything that was provided to me regarding Jane’s [T]rust and the issue of power of appointment and whether it was exercised . . . . I have to find that I don’t see any issues of material fact in this case as relates to what her intentions were at the time of the execution.
So as to the petition for declaratory judgment, I’m finding that Jane did not exercise her testamentary limited . . . power of appointment in either her will or her trust and that the claim for reformation will not be available based on the evidence of her intent at the time of execution. So MCELHANEY V. ORSBON & FENNINGER, LLP
again, as to the motion for summary judgment, I cannot find there are any genuine issues of material fact . . . . (emphasis added).
The written Underlying Order stated in pertinent part that
there exists no genuine issue as to any material fact and that [the Specific Beneficiary] Movants are entitled to judgment as a matter of law on all claims and causes of action asserted in this action, except the Movants’ Motion for attorneys’ fees and costs . . . .
¶ 30 The Underlying Order granted the moving Specific Beneficiaries’ motion for
summary judgment and, in the alternative, the motion for judgment on the
pleadings.1 While the “slightest doubt” as to a material fact entitles a party opposing
summary judgment to trial, Adventure Travel World, Ltd. v. Gen. Motors Corp., 107
N.C. App. 573, 577, 421 S.E.2d 173, 176 (1992) (citation omitted), a dispute as to an
immaterial fact will not preclude summary judgment, Capps v. City of Raleigh, 35
N.C. App. 290, 293, 241 S.E.2d 527, 529 (1978). Likewise, “[j]udgment on the
pleadings is proper when ‘the movant clearly establishes that no material issue of
1 We note that where “matters outside the pleadings are presented to and not excluded
by the court,” a motion seeking judgment on the pleadings must be treated as a motion for summary judgment. See N.C. Gen. Stat. § 1A-1, Rule 12(c) (2018). Because the trial court explicitly stated that it considered matters outside the pleadings, it was improper to grant judgment on the pleadings in the alternative. See Battle v. Clanton, 27 N.C. App. 616, 618, 220 S.E.2d 97, 98 (1975) (holding that judgment on the pleadings was inappropriate where “matters outside the pleadings were presented to and considered by the court”). Even so, the Underlying Order’s grant of judgment on the pleadings in the alternative illuminates the possible bases of the trial court’s dismissal of the Reformation Claim. MCELHANEY V. ORSBON & FENNINGER, LLP
fact remains to be resolved and that he is entitled to judgment as a matter of law.’”
Shearin v. Brown, 2021-NCCOA-4, ¶ 11 (quoting Samost v. Duke Univ., 226 N.C. App.
514, 518, 742 S.E.2d 257, 260 (2013)). The petition for declaratory judgment and the
counterclaim and crossclaim for reformation took inconsistent positions on the issue
of Jane’s intent. Prior to entry of the Underlying Order, the parties submitted plainly
conflicting evidence on this issue to the trial court.2
¶ 31 The trial court may have determined the issue of Jane’s intent by concluding
that it was required to disregard some of the conflicting evidence of Jane’s intent as
a matter of law. But it is also possible that the trial court merely determined that
the conflicting evidence of Jane’s intent was immaterial as a matter of law.
Specifically, the trial court could have resolved the Declaratory Action by determining
that Jane had not substantially complied with the requirements on her limited power
of appointment, regardless of her intent. See N.C. Gen. Stat. § 31D-3-304 (2015).
Section 31D-3-304 provides that
[a] power holder’s substantial compliance with a formal requirement of appointment imposed by the donor . . . is sufficient if both of the following apply:
(1) The power holder knows of and intends to
2 This evidence included, inter alia, Orsbon’s deposition testimony denying that Jane
intended to exercise the limited power of appointment or directed him to draft her estate documents to do so, Linda Montgomery’s deposition testimony that Jane did intend to exercise the limited power of appointment, and affidavits from various witnesses attesting that Orsbon had acknowledged Jane’s intent to exercise the limited power of appointment during a “family meeting” concerning trust administration. MCELHANEY V. ORSBON & FENNINGER, LLP
exercise the power.
(2) The power holder’s manner of attempted exercise of the power does not impair a material purpose of the donor in imposing the requirement.
Id. The Underlying Order could be based on a determination under section 31D-3-304
that Jane’s “manner of attempted exercise . . . impair[ed] a material purpose” of the
restrictions in Samuel’s Trust, and Defendants cannot show that Jane’s intent was
material to, and therefore actually and necessarily determined in, the Declaratory
Action.
¶ 32 Nor can Defendants show that the issue of Jane’s intent was material to the
Reformation Claim, and therefore actually and necessarily determined. The trial
court’s oral announcement could be understood as stating that reformation was
unavailable because there was no genuine issue that Jane did not intend to exercise
the power of appointment. But a closer examination of the Record and Underlying
Order demonstrates that, as Plaintiffs argue, the trial court likely determined that
Jane’s intent was immaterial to the Reformation Claim. Plaintiffs did not cite any
precedent supporting the proposition that a court may reform a trust under
§ 36C-4-415 based on the settlor’s intent to exercise a power of appointment that by
its terms could only be exercised in the power holder’s will. The moving Specific
Beneficiaries underscored this issue and argued that “the relief [Plaintiffs] seek far
exceeds the scope of permissible reformations under North Carolina Law.” On these MCELHANEY V. ORSBON & FENNINGER, LLP
facts, Defendants cannot show with clarity and certainty that the issue of Jane’s
intent was actually and necessarily determined in the Declaratory Action or
Reformation Claim.3 Accordingly, collateral estoppel does not bar Plaintiffs’ claims.
See Frinzi, 344 N.C. at 414, 474 S.E.2d at 128-29. The trial court did not err in
denying Defendants’ motion for summary judgment and granting Plaintiffs’ motion
for partial summary judgment on the defense of collateral estoppel.
V. Conclusion
¶ 33 We deny Defendants’ petition for a writ of certiorari to review the Order on
Appeal as to the defense of election of remedies. Because Defendants cannot show
that each element of the affirmative defense of collateral estoppel is satisfied, the
trial court did not err in denying their motion for summary judgment and granting
Plaintiffs’ motion for partial summary judgment as to that defense.
AFFIRMED.
Judges ZACHARY and HAMPSON concur.
3 We therefore need not reach Plaintiffs’ additional arguments that collateral estoppel
cannot apply here.