Trusts--inter vivos--declaratory judgment--contingent beneficiaries--motion to dismiss
proper
The trial court did not err by granting defendants' motion to dismiss under N.C.G.S. §
1A-1, Rule 12(b)(6) based on plaintiffs' failure to state a claim upon which relief may be granted
in their complaint seeking a declaratory judgment regarding a trust, because: (1) plaintiffs admit
they are only contingent beneficiaries of the trust and as such are not entitled to monetary relief
from either defendant stepmother or the trust at this point in time; (2) the assets which plaintiffs
are requesting declaratory judgment did not belong to their father at the time of his death since he
transferred them to his wife by inter vivos transfer, meaning plaintiffs' interest in those assets are
not only contingent upon defendant's preceding estate ending but also upon her transfer of those
assets into the trust either by inter vivos transfer or by will; and (3) the additional contingency
disallows plaintiffs' interest from being considered vested as to the assets transferred by their
father to his wife.
Haywood, Denny & Miller, L.L.P., by B. M. Sessoms and Thomas
H. Moore, for plaintiff-appellants.
Webb & Graves, PLLC, by Rick E. Graves, for defendant-
appellees Evelyn V. Taylor, Amanda Lawson and Alex McCaskill.
Page and Page, by Robert N. Page, III, Trustee for defendant-
appellee Jack M. Taylor, Sr. and Evelyn V. Taylor Trust.
HUNTER, Judge.
Plaintiff-appellants Jack M. Taylor, Jr. and William H. Taylor
(herein collectively, “plaintiffs”) appeal: (1) the trial court's
grant of defendant-appellees', Jack M. Taylor, Sr. and Evelyn V.
Taylor Trust (herein individually, “the Trust”) and Robert N. Page,III, Trustee, motion to dismiss for misjoinder pursuant to N.C
.R.
Civ. P. 21; and (2) the trial court's grant of defendant-
appellees', Evelyn V. Taylor, Amanda Lawson, and Alex McCaskill
(herein collectively with the Trust and Trustee, “defendants”),
motion to dismiss pursuant to N.C.R. Civ. P. 12(b)(6). (Notably,
plaintiffs voluntarily dismissed their claims against Wingate
University pursuant to N.C. Gen. Stat. § 1A-1, Rule 41(a).) We
agree that plaintiffs have failed to state a claim upon which
relief may be granted. Thus, we affirm the trial court's orders.
Since defendants provide no factual background in their brief
to this Court, we accept the facts as presented by plaintiffs as
true. Those pertinent to the case are as follows: On 21 June
1991, defendant Jack M. Taylor, Sr. and his second wife, defendant
Evelyn V. Taylor (“Mr. and Mrs. Taylor”) created an irrevocable
living trust, making themselves the lifetime beneficiaries. Mr.
Taylor's three children (plaintiffs and Jim Taylor -- not a party
to this lawsuit) by a prior marriage, and Mrs. Taylor's two
children (Amanda Lawson and Alex McCaskill) also by a prior
marriage, were named remainder beneficiaries of the Trust. The
Trust agreement specifically provided that,
when both Jack M. Taylor[, Sr.] and Evelyn V.
Taylor are deceased, the Trustee shall collect
all property of the Trust whether due the
Trust by Will or otherwise. All such
property, together with all other property
constituting this Trust shall then be divided
into five (5) equal shares[] . . . [with each
of Jack and Evelyn Taylor's five children from
prior marriages] receiv[ing] one of the
aforementioned equal shares. . . .
However, Mr. and Mrs. Taylor created the Trust with an initial
deposit of only $100.00. Also on 21 June 1991, Mr. Taylor executedhis last will and testament in which, except for a few specific
things mentioned in the codicil of the will, he granted a life
estate to Mrs. Taylor and thereafter bequeathed
[a]ll of the rest, residue and remainder of my
Estate, all of my property of every sort, kind
and description, real, personal and mixed,
wheresoever located, whether now owned or
hereafter acquired, all of my residuary
Estate, all of my property not otherwise
disposed of in this Will and/or by the Codicil
aforementioned, I give, will, devise and
bequeath as follows: 10% . . . thereof to
First Baptist Church . . . , 10% . . . thereof
to Wingate College; and 80% . . . to the Jack
M. Taylor and Evelyn V. Taylor Trust . . . .
Between 1988 and the time that he died, Mr. Taylor
“transferred his bank accounts, stock holdings, and real estate
holdings to his wife, with Mrs. Taylor either taking sole or joint
ownership for the various assets. . . . These transfers . . .
involved more than $2 million in assets.” According to plaintiffs:
At the time the trust was created, Mr.
Taylor was a defendant in a pending civil
action filed by the Environmental Protection
Agency in the United States District Court
. . . . The action, filed pursuant to Section
107 of the Comprehensive Environmental
Response, Compensation and Liability Act
. . . sought reimbursement costs for a
“Superfund” site being cleaned up in Moore
County. The site had been used as a dump by a
company once owned by Mr. Taylor. . . .
Thus, plaintiffs believe
the above conveyances and transfers by [Mr.]
Taylor were motivated by [the] civil action
against him . . . .
. . .
[And that it was Mr. Taylor's intent that he]
would transfer and convey such property to
[Mrs.] Taylor and she would transfer and
convey the property to the Trust either byinter vivos transfer or by will[. T]hus the
property would be available to [Mr. and Mrs.
Taylor] during their joint lives, to [Mr.]
Taylor upon [Mrs.] Taylor's prior death; and
upon the death of the survivor the remainder
of the property would be divided equally
between [Mr.] Taylor's three children . . .
and [Mrs.] Taylor's two children . . . .
(Emphasis added.)
On 12 May 1994, Mr. Taylor died. During the administration of
Mr. Taylor's estate, plaintiffs encouraged and requested Mrs.
Taylor to fund the Trust with the assets transferred to her by Mr.
Taylor. Though “Mrs. Taylor did not deny that the trust was
created with the intention that it would be funded with these
assets, [she] took no steps to [so fund the Trust].” Following the
probate of Mr. Taylor's will, the Trust received $3,405.10 from Mr.
Taylor's estate. Thereafter, on 9 September 1999, Mrs. Taylor
offered to “transfer her home (and its contents) . . . to the
[plaintiffs and their brother Jim,]” on condition that plaintiffs
release her, “her family and her agents” from any further liability
as to Mr. Taylor's assets or the Trust. Plaintiffs declined Mrs.
Taylor's offer and instead, on 1 October 1999, instituted an Action
for Declaratory Judgment (pursuant to N.C. Gen. Stat. § 1-253
(1999)) requesting the trial court settle the parties' respective
rights and obligations regarding the Trust. On 7 October 1999,
Mrs. Taylor filed an Offer of Judgment with the trial court, which
made the same offer of the family home to be transferred to
plaintiffs and their brother, Jim. Then on 8 November 1999,
defendants Mrs. Taylor, Amanda Lawson and Alex McCaskill filed a
motion to dismiss for failure to state a claim upon which reliefmay be granted, pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6).
That motion was granted on 20 January 2000. Finally, on 9 February
2000, the trial court granted a motion to dismiss in favor of the
Trust and Trustees, dismissing them as parties to the lawsuit
pursuant to N.C. Gen. Stat. § 1A-1, Rule 21 regarding misjoinder of
parties. Plaintiffs appeal.
Plaintiffs bring forward two assignments of error. However,
due to our disposition of the first, we need not address the
second. Plaintiffs assign error to the trial court's grant of
defendants' motion to dismiss pursuant to N.C. Gen. Stat. § 1A-1,
Rule 12(b)(6), arguing that “plaintiffs' complaint states a claim
under the Declaratory Judgment Act” and therefore, they are
entitled to have the trial court issue the requested declaration.
We disagree.
It has long been the law in North Carolina that:
A motion to dismiss pursuant to Rule
12(b)(6) tests the legal sufficiency of a
complaint. Harris v. NCNB, 85 N.C. App. 669,
670, 355 S.E.2d 838, 840 (1987). This Court
has summarized the trial court's duty in
ruling upon such a motion as follows:
“In order to withstand [a 12(b)(6) motion],
the complaint must provide sufficient notice
of the events and circumstances from which the
claim arises, and must state allegations
sufficient to satisfy the substantive elements
of at least some recognized claim. The
question for the court is whether, as a matter
of law, the allegations of the complaint,
treated as true, are sufficient to state a
claim upon which relief may be granted under
some legal theory, whether properly labeled or
not. In general, 'a complaint should not be
dismissed for insufficiency unless it appears
to a certainty that plaintiff is entitled to
no relief under any state of facts which could
be proved in support of the claim.'”
Id. at 670-671, 355 S.E.2d at 840 (citations
omitted).
Werner v. Alexander, 130 N.C. App. 435, 437-38, 502 S.E.2d 897,
899-900 (1998) (emphasis added and emphasis in original). Thus, in
the case at bar, where plaintiffs' claim is that they are entitled
to have a declaratory judgment rendered by the trial court,
plaintiffs' complaint must establish every element of the claim.
Our Supreme Court has clearly outlined the elements a
plaintiff must establish in order to be entitled to a declaratory
judgment regarding a will or trust:
“Where, . . . it appears from the allegations
of the complaint in an action instituted under
the authority and pursuant to the provisions
of the act, (1) that a real controversy exists
between or among the parties to the action;
(2) that such controversy arises out of
opposing contentions of the parties, made in
good faith, as to the validity or construction
of a . . . will [or, as in the present case, a
trust] . . . ; and (3) that the parties to the
action have or may have legal rights, or are
or may be under legal liabilities which are
involved in the controversy, the court has
jurisdiction, and on the facts admitted in the
pleadings or established at the trial, may
render judgment, declaring the rights and
liabilities of the respective parties, as
between or among themselves, and affording the
relief to which the parties are entitled under
the judgment.” Light Co. v. Iseley, [203
N.C.] at page 820, [167 S.E. at page 61
(1933).]
Little v. Trust Co., 252 N.C. 229, 243, 113 S.E.2d 689, 701 (1960).
Further, under N.C. Gen. Stat. § 1-253, our General Assembly has
given:
Courts of record within their respective
jurisdictions . . . power to declare rights,
status, and other legal relations, whether or
not further relief is or could be claimed. No action or proceeding shall be open to
objection on the ground that a declaratory
judgment or decree is prayed for. The
declaration may be either affirmative or
negative in form and effect; and such
declarations shall have the force and effect
of a final judgment or decree.
Id. Therefore, we focus on whether plaintiffs have met their
burden in showing that “. . . 'there is an actual or real existing
controversy between parties having adverse interests in the matter
in dispute.'” Adams v. Dept. of N.E.R. and Everett v. Dept. of
N.E.R., 295 N.C. 683, 703, 249 S.E.2d 402, 413-14 (1978) (quoting
Lide v. Mears, 231 N.C. 111, 118, 56 S.E.2d 404, 409 (1949)). In
the present case, we find that plaintiffs have failed to show an
actual controversy between themselves and defendants.
It is true that an action for declaratory judgment may be
maintained without a showing that there has been a wrong done or an
actual loss incurred. McCabe v. Dawkins, 97 N.C. App. 447, 449,
388 S.E.2d 571, 572, cert. denied, 326 N.C. 597, 393 S.E.2d 880
(1990). However, plaintiff must prove that an actual loss is
certain to occur or that an asserted right will be invaded. Newman
Machine Co. v Newman, 2 N.C. App. 491, 494, 163 S.E.2d 279, 281
(1968), rev'd on other grounds, 275 N.C. 189, 166 S.E.2d 63 (1969).
Looking to the facts of the present case, plaintiffs admit
that they are only “contingent beneficiaries” of the Trust and as
such, “[p]laintiffs are not entitled to monetary relief from either
Mrs. Taylor or the . . . Trust at this point in time . . . .”
Plaintiffs further state in their complaint that they believed Mr.Taylor desired Mrs. Taylor to “transfer and convey the proper
ty to
the Trust either by inter vivos transfer or by will[.]” (Emphasis
added.) Moreover, plaintiffs admit that it was their father's
intent that “the property . . . be available to [both himself and
Mrs. Taylor] during their joint lives . . . and upon the death of
the survivor the remainder of the property . . . be divided equally
between [the five] children . . . .” Nonetheless, plaintiffs argue
that “Mrs. Taylor has a[] duty to provide additional assets for the
trust . . . ,” which Mrs. Taylor has, by her actions if not
expressly, refused to do thus far; and therefore, plaintiffs are
entitled to the requested declaratory judgment. We find
plaintiffs' own argument thwarts their claim.
Applying the law to the facts where, as here, plaintiffs' only
actual “. . . 'loss . . . or . . . asserted right [to] be invaded'”
(Newman Machine Co., 2 N.C. App. at 494, 163 S.E.2d at 281 (quoting
22 Am. Jur. 2d, Declaratory Judgments, § 1)) is based on a
contingency interest, plaintiffs must necessarily have demonstrated
in their complaint that the contingency would be satisfied so that
their right was certain to become valid -- and thus, could be
invaded by defendants.
“'The remainder is vested, when, throughout
its continuance the remainderman and his heirs
have the right to the immediate possession
whenever and however the preceding estate is
determined; or, in other words, a remainder is
vested if, so long as it lasts, the only
obstacle to the right of immediate possession
by the remainderman is the existence of the
preceding estate; or, again, a remainder is
vested if it is subject to no condition
precedent save the determination of the
preceding estate.' It is the general rulethat remainders vest at the death of the
testator, unless some later time for vesting
is clearly expressed in the will, or is
necessarily implied therefrom. It is likewise
a prevailing rule of construction with us that
adverbs of time, and adverbial clauses
designating time, do not create a contingency
but merely indicate the time when the
enjoyment of the estate shall begin.” Trust
Co. v. McEwen, [241 N.C. 166, 84 S.E.2d 642];
Priddy & Co. v. Sanderford, 221 N.C. 422,
424-5, 20 S.E.2d 341. . . .
Little, 252 N.C. at 249, 113 S.E.2d at 705 (emphasis added).
Therefore, under Mr. Taylor's will and pursuant to case law,
we find that after his death plaintiffs did have a vested, although
contingent, interest in the assets of the Trust and the income to
be derived therefrom. However, the assets about which plaintiffs
are requesting declaratory judgment did not belong to Mr. Taylor at
the time of his death -- having been transferred by him to Mrs.
Taylor by inter vivos transfer. Thus, plaintiffs' interest in
those assets are not only contingent upon Mrs. Taylor's “preceding
estate” ending, but is also contingent upon Mrs. Taylor's transfer
of those assets into the Trust either by inter vivos transfer or by
will. Id. at 249, 113 S.E.2d at 705 (quoting Trust Co. v. McEwen,
supra, at 169, 84 S.E.2d at 644). This additional contingency
disallows plaintiffs' interest from being considered vested as to
the assets transferred by Mr. Taylor to Mrs. Taylor. Id. (Of
specific importance here is the fact that Mr. Taylor himself was
under no obligation to fund the Trust with those assets either by
inter vivos or testamentary transfer.)
We find the line of cases regarding life insurancebeneficiaries instructive. In those cases where an insured has t
he
right to change -- at any time during their lifetime -- the
designated beneficiary of his or her life insurance policy, our
courts have repeatedly stated that
“the rights of a designated beneficiary do not
vest until the death of the insured.”
[Fidelity Bankers Life Ins. Co. v. Dortch, 318
N.C. 378,] 382, 348 S.E.2d [794,] 797
[(1986)]. [Until then, t]he designated
beneficiary has a “mere expectancy,” Harrison
v. Winstead, 251 N.C. 113, 117, 110 S.E.2d
903, 906 (1959), which cannot “ripen into a
vested interest before the death of the
insured.” Russell v. Owen, 203 N.C. 262, 266,
165 S.E. 687, 689 (1932). “This is true,
because the beneficiary whose right, under the
policy, or certificate, may thus be taken
away, has only a contingent interest therein,
which will not vest until the death of the
insured.” Wooten v. Grand United Order of Odd
Fellows, 176 N.C. 52, 56, 96 S.E. 654, 656
(1918).
Pierson v. Buyher, 330 N.C. 182, 185, 409 S.E.2d 903, 905 (1991).
Likewise then, we believe that where, as here, Mrs. Taylor has the
right to the assets to the Trust, plaintiffs cannot become vested
contingent beneficiaries of those assets until such time as Mrs.
Taylor actually makes the transfer -- whether in life or death.
Again, without being vested beneficiaries, plaintiffs cannot
produce evidence necessary to gain a declaratory judgment, namely:
that they are certain to suffer an actual loss, or that they have
an asserted right which will be invaded. Newman Machine Co., 2
N.C. App. at 494, 163 S.E.2d at 281.
Moreover, if we consider plaintiffs' argument in light of the
fact that Mrs. Taylor's right to use the property was unlimited,
even if she had an obligation to transfer into the Trust thoseassets she did not exhaust, we believe it is feasible that Mrs.
Taylor could theoretically need and use all of the assets to
support herself until her death. Under such circumstances, there
would be no loss to plaintiffs because there would be no assets to
be transferred into the Trust. Further, because plaintiffs admit
that Mrs. Taylor can transfer the remaining assets post mortum by
will, it must also be undisputed that she is under no obligation to
transfer the assets while she is living. Until Mrs. Taylor dies,
plaintiffs' contention that Mrs. Taylor refuses to fund the Trust
while living, are irrelevant and groundless as plaintiffs have no
vested interest in the property. Therefore, under these
circumstances, plaintiffs have failed to state a claim upon which
relief may be granted, and the trial court did not err in granting
defendants' Rule 12(b)(6) motion.
Affirmed.
Judges WALKER and TYSON concur.
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