McPherson v. First & Citizens National Bank of Elizabeth City

81 S.E.2d 386, 240 N.C. 1, 1954 N.C. LEXIS 669

Opinion

Johnson, J.

The initial question presented by this appeal is whether the provisions of the trust instrument relating to the grandchildren violate the rule against perpetuities. This rule prescribes the time within which title to a future interest must vest. Under the rule, “no devise or grant of a future interest in property is valid unless title thereto must vest, if at all, not less than twenty-one years, plus the period of gestation, after some life or lives in being at the time of the creation of the interest. If there is a possibility such future interest may not vest within the time prescribed, the gift or grant is void.” McQueen v. Trust Co., 234 N.C. 737, 741, 68 S.E. 2d 831. See also Fuller v. Hedgpeth, 239 N.C. 370, 80 S.E. 2d 18; Gray, The Rule Against Perpetuities, Fourth Ed., Sec. 201, p. 191.

In 1944, the effective date of the declaration of trust, Exhibit A, James E. McPherson had four children. They were eighteen, sixteen, ten, and one years of age, respectively. The crucial section of the trust instrument is paragraph 9. It provides: “. . . at the death of the last child of the primary beneficiary (the last living grandchild of the donor) the trust shall be terminated and the assets thereof distributed equally to the legitimate heirs of the primary beneficiaries’ children per stirpes and not per capita . . .”

By the terms of paragraph 9, it thus appears that the assets of this trust could not vest until the death of the last surviving grandchild, unborn on the effective date of the trust instrument, but who might be born at any time during the next fifty years or more. Should he live out his normal life expectancy, it is quite likely that to give effect to the trust instrument, the trust might continue for more than one hundred years, with the ultimate beneficiaries unknown and with the greater portion of the estate not vested. It is manifest that the provisions of the trust instrument relating to the grandchildren violate the rule against perpetuities. McQueen v. Trust Co., supra, and cases cited; Gray, The Rule Against Perpetuities, Fourth Ed., Sec. 201; 41 Am. Jur., Perpetuities and Restraints on Alienation, Sections 7, 14, 19, and 24.

The appealing guardian ad litem challenges the judgment below only in respect to the question whether the original trust instrument is viola-tive of the rule against perpetuities. The guardian ad litem concedes in his brief that if the question of perpetuity be resolved against him, then it is to the advantage of those parties represented by him that the judgment below take effect as entered. It is noted that the judgment as entered interprets the provisions of the trust relating to the grandchildren of James E. McPherson as being the parts of the instrument which violate the rule against perpetuities. These provisions are treated by the judgment as being distinct and severable from the provisions relating to the children of James E. McPherson. Upon this premise the court below interpreted the portions which provide for the grandchildren as being stricken down by application of the rule against perpetuities, while holding that the parts which provide for the children of the trustor McPherson were salvageable and subject to reformation in accordance with the provisions of Exhibit H.

Necessarily, then, if the rule against perpetuities applies, obviously it is for the best interest of the children of J ames E. McPherson that its application be limited to the parts which relate to the grandchildren, with the portions which make provision for the children being treated as severable and subject to reformation.

. Similarly, if the rule against perpetuities applies, it is to the advantage of the grandchildren that the trust be preserved for the children of the donor. This is so for the reason that if any or all of them should die, their children would likely succeed to beneficial interests. Rut not so if the trust instrument should fall in koto because of perpetuity. (On the questions of severability and reformation see: 41 Am. Jur., Perpetuities and Restraints on Alienation, Sections 55 through 65; American Law Institute Restatement, Property, Vol. IV, Sections 373 to 376; 45 Am. Jur., Reformation of Instruments, Sec. 6; Trust Co. v. Williamson, 228 N.C. 458, 46 S.E. 2d 104.)

It thus appears that the position taken by the guardian ad litem in limiting the scope of his appeal so as to desist from further challenging the judgment below in the event the question of perpetuity be resolved against him is entirely consistent with the best interests of the grandchildren of the donor. And the judgment as entered below, reforming the trust instrument in accordance with Exhibit H so as to confer all the primary benefits of the trust on the four living children of the McPherson donors, to the exclusion of possible unborn children, is manifestly conducive to the best interest of the children in esse.

But there is more to the case than that. This Court, in the exercise of its supervisory powers over the lower courts (Const. of N. C., Art. IV, Sec. 8; Elledge v. Welch, 238 N.C. 61, 68, 76 S.E. 2d 340), is necessarily concerned with the judgment below as it affects- the interests of possible unborn children of James E. McPherson. As to this, it is noted that the original trust instrument in providing benefits for the four children of James E. McPherson then born also makes provision for “all other legal children . . . which may be hereafter born” to him. The court below found and concluded in substance that the donor’s dominant intent was to provide for his children, as distinguished from his grandchildren, and upon the basis of such finding and conclusion adjudged that the trust instrument be reformed in accordance with the provisions of Exhibit H. This instrument makes no provision whatsoever for “other legal children . . . which may be hereafter born” to James E. McPherson.

This exclusion of possible after born children of James E. McPherson, age now 53 years, may not be sustained on the theory that such unborn children are before the court and represented by the guardian ad litem. As to this, while the record indicates the order appointing the guardian ad litem recites that he is to represent, in addition to certain named grandchildren of James E. McPherson, “all other persons, ... in esse or not in being, who are now or might by any contingency become beneficiaries of . . . the James E. McPherson trust . . nevertheless, the record indicates that the guardian ad litem never presumed to represent the possible unborn children of James E. McPherson. The record and brief show that he limits his representation to the grandchildren. Indeed, no such direct representation by guardian ad litem is sanctioned by law. The rule is that, in the absence of statute, the capacity to be sued exists only in persons in being. 67 C.J.S., Parties, Sec. 30; McIntosh, North Carolina Practice and Procedure, pp. 228, 230, and 235. With us, in the absence of statute, an unborn infant cannot be made a defendant in an action and be represented by a guardian ad litem. Deal v. Sexton, 144 N.C. 157, 56 S.E. 691. No statute has been called to our attention, and our investigation discloses none, authorizing the joinder of possible unborn children in an action like this one. Chapter 811, Session Laws of 1949, now codified as G.S. 41-11.1, appears to be limited to actions or proceedings involving the sale, lease, or mortgage of property. See 27 N.C.L.R. 415; Cole v. Cole, 229 N.C. 757, 51 S.E. 2d 491; McIntosh, North Carolina Practice and Procedure, Sec. 251, pp. 234 and 235.

As bearing further on the question of reformation, the general rule is that an instrument cannot be reformed against unborn persons unless they are before the court through the doctrine of virtual representation; that is, where living persons who have a privity of estate with them are before the court. 45 Am. Jur., Reformation of Instruments, Sec. 72; Annotations: 8 L.R.A. (N.S.) 66. This doctrine, resting as it does on principles of convenience and necessity in the administration of justice and being in derogation of the general rule that a judicial decree does not bind persons not before the court, is applied with great caution. And ordinarily, the principle of virtual representation may be invoked only when it is made to appear, and the pleadings should so show, that the persons not before the court have an interest in common — an interest similar — to that of the parties who sue or defend on behalf of others. In short, to bind unborn persons, it must be made to appear that the rights or interests asserted by the parties before the court are identical with those that might reasonably be expected to be asserted by the unborn persons if they were in esse and before the court. See 39 Am. Jur., Parties, Sections 44 to 53; 30 Am. Jur., Judgments, Sec. 228; G.S. 1-70; Ex Parte Yancey, 124 N.C. 151, 32 S.E. 491; Beam v. Gilkey, 225 N.C. 520, 35 S.E. 2d 641, and cases cited. See also Downey v. Seib, 185 N.Y. 427, 78 N.E. 66.

In the case at hand the judgment excludes the possible unborn children of James E. McPherson from any benefits whatsoever in the trust. It thus appears that the McPherson children in esse assert, and by the terms of the judgment are allowed, rights and benefits wholly inconsistent with the interests of possible unborn children. This being so, it is manifest that the children in esse do not represent those in fosse. Accordingly, the judgment below is no bar to the rights of possible unborn children of James E. McPherson under application of the doctrine of virtual representation.

Nor have we overlooked Finding of Fact No. 17, wherein the court below found “that it is physically impossible for . . . James E. McPherson to have additional children.” On the basis of this finding, without further elaboration or supporting allegation, the court decreed in effect that the living children of James E. McPherson are entitled to all the benefits of the McPherson trust. This decree may not be treated as conclusive in view of the presumption indulged by the law that so long' as a man lives he is capable of procreation. 20 Am. Jur., Evidence, Sec. 213; 31 C.J.S., Evidence, Sec. 149; 57 Am. Jur., Wills, Sec. 1249. Indeed, by the ancient rule of the common law, to which this Court adheres (Shuford v. Brady, 169 N.C. 224, 85 S.E. 303), it is irrebuttably presumed that any person — man or woman — may have issue so long as life lasts. 2 Blaekstone *125. While in many jurisdictions, including England, the question whether the possibility of issue is ever extinct, has been re-examined in the light of exact processes of medical science by which in given cases sterility or impotency may be shown as matters of scientific certainty, nevertheless, thus far this Court has not been presented with a situation sufficiently compelling to warrant relaxation of the common law rule. Shuford v. Brady, supra; Smith v. Moore, 178 N.C. 370, 100 S.E. 702; Prince v. Barnes, 224 N.C. 702, 32 S.E. 2d 224. But see Annotation: 67 A.L.R. 538.

Conceding, without deciding, that the parts of the trust instrument which make provision for the children of James E. McPherson as a class are severable from other parts of the instrument and subject to salvage by reformation, even so, the judgment below, reforming the trust instrument in accordance with the provisions of Exhibit H, may not upon the record as presented be upheld as binding upon the possible unborn children of James E. McPherson. For the reasons indicated, the judgment below is inconclusive as to the interests of such unborn children and must be held for error in so far as it purports to exclude them from benefits of the trust estate.

The cause will be remanded to the court below to the end that further proceedings may be had and judgment entered in accordance with this opinion.

Error and remanded.