Appeal by trustees Jerry Scruggs and John Cabiness and by co-
executors Sylvia E. Hutchins and J.D. Champion from order and
judgment filed 7 January 2002 by Judge W. Robert Bell in Cleveland
County Superior Court. Heard in the Court of Appeals 19 May 2003.
Deaton & Biggers, by A. Susan Biggers, for trustee appellants.
Essex Richards, P.A., by G. Miller Jordan, Lisa T. Kelly, and
James C. Fuller; and Leslie C. Rawls for co-executor
appellants.
BRYANT, Judge.
Jerry Scruggs (Scruggs) and John Cabiness (collectively thetrustees) appeal an order and judgment entered 7 January 2002
distributing the assets of Vera Yarborough Washburn (Washburn)
between her estate and a trust established by her prior to her
death. Sylvia E. Hutchins and J.D. Champion, the co-executors of
Washburn's estate, also appeal from the January 7 order.
In this order, the trial court made the following undisputed
findings:
1. [Washburn] . . . died on October 23, 2000.
2. On December 22, 2000, the Cleveland County
Clerk of Superior Court probated [her] Last
Will and Testament . . . .
3. On December 22, 2000, Sylvia Hutchins and
J.D. Champion, niece and nephew, respectively,
qualified as Co-Executors of the Estate of
. . . Washburn.
4. On September 16, 1999, . . . Washburn
executed an Irrevocable Trust Agreement
(hereinafter “Trust”) appointing [the
trustees].
5. Accompanying the Trust agreement was an
“Assignment of Assets to Trust” . . . , which
provides in part that all common stock,
household furnishings and appliances,
$550,000.00 in cash and an Oldsmobile
automobile go to the Trust.
6. During October and November 1999, over
$590,000.00 in funds [were] transferred from
. . . Washburn to bank accounts in the name of
the Trust. At the time of . . . Washburn's
death, a total of over $612,000.00 had been
received in trust accounts at Centura Bank
from deposits and earnings.
7. At the time of her death, . . . Washburn
was the record owner of two Branch Banking and
Trust [(BB&T)] stock certificates totaling
27,016 shares, to wit:
a. BB&T stock certificate No.
BBT080224 . . . for 13,508
shares, and
b. BB&T stock certificate No.
BBT093753 . . . for 13,508
shares.
8. On the reverse side of stock certificate
No. BBT080224 . . . appears the signature of
. . . Washburn indicating a transfer on
October 3, 1999[] of the stock certificate to
the [t]rustees.
9. The signature of . . . Washburn on stock
certificate No. BBT080224 . . . did not
contain a “signature guaranteed”
certification.
10. The trustees took possession of stock
certificate No. BBT080224 . . . .
11. At the time of her death, . . . Washburn
was in possession of stock certificate No.
BBT093753 . . . , which was never delivered to
the trustees.
12. In February or March 2001, following the
death of . . . Washburn, the trustees located
BB&T stock certificate No. BBT093753 . . . in
. . . Washburn's residence. The reverse side
of the stock certificate was blank, was not
completed for transfer, was not signed by
. . . Washburn nor was a signature guaranteed.
13. [Prior to Washburn's death,] [t]he
trustees in November 1999 requested [BB&T]
transfer ownership of all BB&T stock in the
name of . . . Washburn to the Trust based upon
the terms of the Trust agreement and
assignment.
14. [BB&T] refused to make the transfer on
its books on that basis and notified the
trustees and . . . Washburn that the proper
procedure for the transfer of the certificates
on the records of the corporation[] would be
to deliver to BB&T the duly executed stock
certificates transferring ownership to the
Trust. In the event of a lost certificate,
. . . Washburn would have to make an
application for a replacement certificate and
post an indemnity bond before the stock could
be transferred to the Trust.
15. . . . Washburn and the trustees made no
further attempts with [BB&T] to transfer any
of the stock in the name of . . . Washburn tothe Trust, pending trying to locate the
certificate.
16. . . . Washburn continued as BB&T's record
owner of the two BB&T stock certificates . . .
and received in her name dividends from her
stock totaling some $17,020.08 from September
16, 1999[] to the date of her death on October
23, 2000, which were deposited in trust bank
accounts.
17. At the time of her death, . . . Washburn
was the record title owner of the two BB&T
[stock] certificates . . . .
18. The household furnishings and appliances
remained in the possession of . . . Washburn
from the date of the Trust until her death.
19. The Oldsmobile automobile title was not
changed to the Trust and the vehicle remained
in the possession of . . . Washburn from the
date of the Trust until her death.
20. On September 18, 2000, . . . Washburn
executed a deed of her residence to the
trustees, which was filed at the register of
deeds.
Based on these findings, the trial court concluded:
1. The assignment attached to the Trust
agreement is insufficient to transfer all
assets listed to the Trust.
2. [Washburn], with the requisite intent and
delivery, did place in the [T]rust the
following property:
A. All funds on deposit in trust
accounts at Centura Bank as of
October 23, 2000, and $50.00
[from the sale of an appliance
in Washburn's residence after
her death] deposited February
14, 2001.
B. The BB&T stock certificate No.
BBT080224 representing 13,508
shares of BB&T stock.
C. All her household furnishings
and appliances located in her
home . . . .
D. [Washburn's] residence . . . .
3. Funds transferred to the Washburn [T]rust,
including the $1,270.00 cash found in the
decedent's home, or funds received after
October 23, 2000, [totaling $11,847.11] are
assets of the decedent's estate, except that
one-half of each BB&T stock dividend check
will belong to the Washburn [T]rust and one-
half of each BB&T stock dividend check will
belong to the decedent's estate until the
certificates are divided on the BB&T corporate
records between the [T]rust and the decedent's
estate and dividend checks are issued
accordingly.
4. The assets of . . . Washburn not
transferred to the Trust are assets of the
decedent's estate.
The record also contains a power of attorney issued by
Washburn to allow Scruggs to act, inter alia, as her agent with
respect to her banking transactions, tax matters, personal affairs,
estate transactions, and gifts to charities.
___________________________
The issues are whether: (I) the stock certificates, household
furnishings, and appliances were properly conveyed to the Trust and
thus became trust assets and (II) the deposit of funds into the
Trust account by Scruggs as Washburn's power of attorney was
proper.
I
By definition, the creation of a trust must
involve a conveyance of property, and before
property can be said to be held in trust by
the trustee, the trustee must have legal
title. . . . Aside from the situation in
which a settlor of a trust declares himself or
herself trustee, separation of the legal and
equitable interests must come about through a
transfer of the trust property to the trustee.
90 C.J.S
Trusts § 68, at 193-94 (2002) (footnotes omitted). Accordingly, “the owner must surrender control of the property
which he or she has subjected to the alleged trust.” 90 C.J.S.
Trusts § 70, at 196;
see also Wescott v. Bank, 227 N.C. 39, 42, 40
S.E.2d 461, 463 (1946) (“there must be a transfer of the title by
the donor or settl[o]r for the benefit of another”);
Baxter v.
Jones, 14 N.C. App. 296, 307, 188 S.E.2d 622, 628 (1972) (citation
omitted) (“'[i]n 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'”). “[I]f the owner of property makes a conveyance
inter vivos of the property to another person to be held by him in
trust for a third person and the conveyance is not effective to
transfer the property,
no trust of the property is created.”
Restatement (Second) of Trusts § 32 (1959) (emphasis added).
BB&T Stock
[1] The trustees and the estate claim the trial court erred by
failing to assign both stock certificate No. BBT080224 (Certificate
1)
and stock certificate No. BBT093753 (Certificate 2) to them.
The trustees, in support of their position, contend that the
“Assignment of Assets” executed contemporaneously with the Trust
was sufficient to transfer both stock certificates to the Trust.
We disagree.
In order to determine the proper transfer of legal title to a
security, we must look to Article 8 of the Uniform Commercial Code
governing investment securities. Under Article 8, “a valid
transfer of a certificated security requires both the indorsementand delivery of the certificate by its holder to the transferee.”
Tuckett v. Guerrier, 149 N.C. App. 405, 410, 561 S.E.2d 310, 313
(2002) (citing N.C.G.S. §§ 25-8-301, -304 (1999));
see Russell M.
Robinson, II,
Robinson on North Carolina Corporation Law § 10.10,
at 10-26 (7th ed. 2002) [hereinafter
Robinson] (“[t]he title to a
share certificate, and to the shares represented thereby, is
normally transferred by the delivery of the certificate to the
transferee, either duly endorsed or with a separate document
containing a written assignment or a power of attorney to transfer
the shares”). An “'[i]ndorsement' means a signature that alone or
accompanied by other words is made on a security certificate in
registered form or on a separate document for the purpose of
assigning, transferring, or redeeming the security.” N.C.G.S. §
25-8-102(a)(11) (2001). Delivery, in turn, “occurs when: (1) [t]he
[transferee] acquires possession of the security certificate; [or]
(2) [a]nother person . . . acquires possession of the security
certificate on behalf of the [transferee].” N.C.G.S. §
25-8-301(a)(1)-(2) (2001).
In this case, the parties do not contest that Washburn
indorsed Certificate 1 by signing it and designating the “Vera Y.
Washburn Trust Fund c/o Jerry R. Scruggs and John W. Cabiness,
Trustees” as transferee in the allotted space on the certificate.
The evidence is also clear that Certificate 1 was delivered to the
trustees before Washburn's death. The estate nevertheless contends
that because Washburn's signature was not guaranteed as required to
transfer the stock on the corporate books, the transfer was not
complete and could therefore not serve to create a trust in thatstock. This argument is of no avail.
“A registration of . . . a [stock] transfer on the stock
transfer books of the corporation is not necessary to complete the
transfer of title.”
Robinson § 10.10, at 10-26. It simply means
that “until the transfer is recorded on the stock transfer books,
the corporation can treat the record holder as the true owner of
the shares.”
Id.;
see also N.C.G.S. § 25-8-306 (2001) (a guarantee
merely warrants that the signature is genuine and that the person
signing is the appropriate person to indorse the certificate and
has the legal capacity to sign). Thus, in accordance with the
statutory requirements for a valid transfer, the trustees acquired
legal title of Certificate 1 when Washburn signed it over to the
Trust and delivered it to the trustees.
See Wescott, 227 N.C. at
42, 40 S.E.2d at 463;
Tuckett, 149 N.C. App. at 410, 561 S.E.2d at
313. Certificate 2, on the other hand, which was not found until
after Washburn's death, was neither indorsed nor delivered to the
trustees. Under these circumstances, there was no transfer of
legal title to Certificate 2 by Washburn to the trustees and the
asset belongs to the estate.
Therefore, the trial court did not
err in distributing Certificate 1 to the Trust and Certificate 2 to
the estate and dividing the respective dividends accordingly.
Household Furniture and Appliances
[2] The estate next contends the trial court erred in
assigning to the Trust Washburn's furniture and appliances, items
that remained in her possession until her death.
As discussed above,
in order to create a valid trust in
certain property, there must be a transfer of legal title by thesettlor to the trustee.
See Wescott, 227 N.C. at 42, 40 S.E.2d at
463. Generally, this can be accomplished by either “actual
delivery of the . . . property or of a legal assignment thereof to
the trustee, with the intention of passing legal title to him or
her as trustee.” 90 C.J.S.
Trusts § 70, at 197. In the case of
securities, our statutes define the proper method of conveying
legal title. With respect to personal property such as furniture
and appliances, however, there are no statutory guidelines to
follow. Thus, we are solely guided by the intent of the parties.
Callaham v. Newsom, 251 N.C. 146, 149, 110 S.E.2d 802, 804 (1959)
(“[w]hen 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”).
We hold that in this case the “Assignment of Assets” was
sufficient as a legal assignment of Washburn's furniture and
appliances to the trustees.
See 90 C.J.S.
Trusts § 70, at 197.
Furthermore, Washburn's retention of possession of the items during
her lifetime was not inconsistent with the intention to pass legal
title as the Trust provided that the income and/or principal were
to be used for Washburn's benefit during her lifetime. The trial
court therefore did not err in assigning the furniture and
appliances to the Trust.
II
[3] Finally, the estate argues the trial court erred in
concluding that all funds deposited in the Trust account prior to
Washburn's death belonged to the Trust because $10,507.32 of these
funds were deposited in violation of the power of attorney grantedby Washburn to Scruggs. The deposits at issue consist of
$10,038.32 in funds from SouthTrust Bank accounts Scruggs closed
for Washburn and a $469.00 tax refund. The estate contends that
these deposits exceeded the scope of Scruggs' power of attorney
because the document did not authorize transfers to the Trust. We
disagree.
“A power of attorney is an instrument in writing granting
power in an agent to transact business for his principal.”
Cabarrus Bank & Trust Co. v. Chandler, 63 N.C. App. 724, 726, 306
S.E.2d 184, 185 (1983). Thus, “an agent is a fiduciary only
pertaining to matters within the scope of his agency.”
In re Will
of Sechrest, 140 N.C. App. 464, 472, 537 S.E.2d 511, 517 (2000).
The power of attorney executed by Washburn specifically grants
Scruggs the authority to act on Washburn's behalf
with respect to
her banking transactions and tax matters, and the transfers and
deposits clearly constituted banking transactions. In addition,
the designation of the funds to the Trust involved gifts to
charities as the beneficiaries of the Trust were churches.
Consequently, the deposits fell within the scope of the power of
attorney.
[4] The estate further contends that an agent cannot transfer
the principal's assets to a trust under a power of attorney and
thereby change the dispositive provisions of the principal's will.
The estate bases its argument on a 1977 article that engaged in a
hypothetical discussion of an agent's powers based on an agent's
lack of authority to create, alter, or revoke a principal's will.
See William S. Huff,
The Power of Attorney -- Durable andNondurable: Boon or Trap, Eleventh Annual Institute on Estate
Planning 3-1, 3-10 (1977). This article, however, bears no weight
on our analysis in light of the binding precedent established by
this Court “permit[ting] the conveyance of property which would
comprise the estate under a will without revoking or altering that
will.”
Duncan v. Duncan, 147 N.C. App. 152, 156-57, 553 S.E.2d
925, 928 (2001) (where the testator had entered an enforceable
agreement not to revoke or alter her will and subsequently deeded
away the property to be disposed of under the will, there was no
breach of the agreement not to revoke or alter the will),
disc.
review denied, 355 N.C. 211, 559 S.E.2d 800 (2002);
see also
N.C.G.S. § 31-5.6 (2001) (“[n]o conveyance . . . made or done
subsequently to the execution of a will of, or relating to, any
real or personal estate therein comprised, . . . shall prevent the
operation of the will with respect to any estate or interest in
such real or personal estate
as the testator shall have power to
dispose of by will at the time of his death”) (emphasis added).
Accordingly, Scruggs was permitted to transfer the assets to the
Trust under the power of attorney and the trial court did not err
in concluding that all funds deposited in the Trust account prior
to Washburn's death belonged to the Trust.
Affirmed.
Chief Judge EAGLES and Judge LEVINSON concur.
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