IN THE MATTER OF THE ESTATE OF JERRY L. NEWTON, JR. DECEASED
PAUL JEFFREY NEWTON, ANNE NEWTON GRAHAM, and JOSEPH WESLEY
NEWTON, Petitioners, v. JERRY LEWIS NEWTON, III, TRUSTEE IN RE:
THE MATTER OF REBA BURTON NEWTON REVOCABLE TRUST AGREEMENT DATED
THE 29TH DAY OF SEPTEMBER, 1992, Respondent
__________________________
PAUL JEFFREY NEWTON, ANNE NEWTON GRAHAM, and JOSEPH WESLEY
NEWTON, Petitioners, v. JERRY LEWIS NEWTON, III, TRUSTEE IN RE:
THE MATTER OF JERRY LEWIS NEWTON, JR. REVOCABLE TRUST AGREEMENT
DATED THE 29TH DAY OF SEPTEMBER, 1992, Respondent
NO. COA04-1508
Filed: 4 October 2005
1. Appeal and Error--preservation of issues--failure to argue
The assignments of error that respondent omitted in his brief are deemed abandoned
pursuant to N.C. R. App. P. 28(b)(6).
2. Trusts_-jurisdiction--removal of trustee--recusal of Clerk of Court
The trial court did not err by exercising jurisdiction over the proceedings seeking to
remove respondent as trustee of various trusts, because: (1) the Clerk of Court in the instant case
had recused himself; and (2) the instant matter was limited only to those estate proceedings aimed
at removing respondent as trustee. N.C.G.S. § 36A-23.1(a).
3. Trusts_removal of trustee_designation as special proceedings_reclassification as
estate matters_effectiveness of summonses
Summonses served in proceedings seeking to remove respondent as trustee of inter vivos
and testamentary trusts were not ineffectual because the proceedings were originally designated as
special proceedings rather than estate matters and either the clerk or the trial court entered orders
allowing reclassification of the files as estate matters, and petitioners were not required to re-serve
respondent with “E”-captioned summonses, where one proceeding was properly filed and served
as an estate matter prior to the effective date of N.C.G.S. § 36A-26.1, and respondent was not
prejudiced in the other two proceedings by petitioners' initial failure to file the cases under an “E”
caption or by the orders allowing reclassification of the files.
4. Trusts--motion to continue-_removal of trustee--applicability of Rules of Civil
Procedure
The trial court did not err in an action seeking the removal of respondent as trustee of
various trusts by denying respondent's motion to continue the proceedings based on respondent's
assertion that he was entitled to discovery as well as twenty days to prepare a responsive pleading
following the denial of his motions to dismiss, because: (1) although our general statutes provide
procedures allowing the removal of trustees, they do not expressly provide that the resulting
hearings are governed by the Rules of Civil Procedure; (2) the trial court conducted the
proceedings in a consistent and fair manner providing the parties with that amount of process due
to them under general principles of law; and (3) there was no indication that respondent suffered
any prejudice by the trial court's refusal to allow written discovery or a continuance to file aresponsive pleading.
5. Trusts--removal of trustee--abuse of discretion standard
The trial court did not abuse its discretion by removing respondent as trustee of several
trusts, because: (1) although respondent introduced several properly filed accountings and offered
explanations for his decisions while serving as trustee, much of respondent's actions and inactions
were beyond the bounds of reasonable judgment and uncharacteristic of a trustee demonstrating
complete loyalty to the trust beneficiaries; and (2) respondent failed to exercise that type of
unbridled loyalty due to the beneficiaries of the trusts based on his contempt for petitioners, and
he has thereby prevented the distribution of the trusts' assets more than six years after their
mother's death.
Appeal by respondent from orders entered 7 June 2004 and 10
June 2004 by Judge Michael E. Helms in Forsyth County Superior
Court. Heard in the Court of Appeals 6 June 2005.
BAILEY & THOMAS, P.A., by Wesley Bailey, for petitioner-
appellee Paul Jeffrey Newton.
BENNETT & GUTHRIE, P.L.L.C., by Richard V. Bennett, for
petitioner-appellee Anne Newton Graham.
WILSON & ISEMAN, L.L.P., by G. Gray Wilson and Maria C.
Papoulias, for petitioner-appellee Joseph Wesley Newton.
Stephen E. Lawing for respondent-appellant Jerry Lewis Newton,
III.
TIMMONS-GOODSON, Judge.
Jerry Lewis Newton, III (“respondent”) appeals the trial court
orders removing him as trustee of certain trusts, denying his
motions to continue and dismiss the proceedings, and allowing the
reclassification and consolidation of the actions. For the reasons
discussed herein, we affirm the trial court's orders.
The facts and procedural history pertinent to the instant
appeal are as follows: On 29 September 1992, respondent's father,
Jerry Lewis Newton, Jr. (“Jerry”), executed a revocable trust(“Jerry's inter vivos trust”) naming respondent co-trustee upon
Jerry's death. On the same date, respondent's mother, Reba Burton
Newton (“Reba”), executed a revocable trust (“Reba's inter
vivos trust”) naming respondent co-trustee upon Reba's death. On
18 August 1993, Jerry died, leaving a will creating a third trust
(“Jerry's testamentary trust”) which named respondent co-trustee.
Reba subsequently died on 5 September 1998. Upon Reba's death,
respondent served as the sole trustee of the three trusts. The
four beneficiaries of the trusts were respondent and his three
siblings: Anne Newton Graham (“Anne”), Joseph Wesley Newton
(“Joseph”), and Paul Jeffrey Newton (“Paul”) (collectively,
“petitioners”).
On 31 March 2004, petitioners filed a motion in Forsyth County
file number 04 SP 620, seeking to remove respondent as trustee of
Reba's inter vivos trust. On that same date, petitioners filed a
motion in Forsyth County file number 04 SP 621, seeking to remove
respondent as trustee of Jerry's inter vivos trust. Anne and Paul
had previously filed a motion in Forsyth County file number 97 SP
576, seeking to remove respondent, Reba, and Joseph as co-trustees
of Jerry's testamentary trust.
On 16 April 2004, respondent filed motions to dismiss the
petitions in file numbers 04 SP 620 and 04 SP 621. On 21 April
2004 and 22 April 2004, the Forsyth County Clerk of Superior Court
(“the Clerk”) filed separate orders in each file number,
disqualifying himself from ruling on the motions to remove
respondent as trustee. In support of his disqualification, theClerk cited respondent's prior request that the Public
Administrator of Jerry and Reba's estates prosecute the Clerk for
various statutory violations. On 6 May 2004, petitioners filed a
motion to consolidate the three file numbers for hearing and a
motion for a protective order to prohibit respondent from pursuing
discovery in the matters. On 14 May 2004, petitioners filed a
motion to reclassify file numbers 04 SP 620 and 04 SP 621 as file
numbers 04 E 620 and 04 E 621, respectively.
In May and June 2004, the trial court held a hearing to
determine all issues before it. After receiving testimony and
argument from both parties, the trial court denied respondent's
motions to dismiss the petitions and granted petitioners' motions
to reclassify the file numbers and consolidate the cases. The
trial court also ruled upon the petition to remove respondent as
trustee of the trusts, concluding in pertinent part as follows:
2. That the stated contempt and deep
hostility which [respondent] holds for
[petitioners] who are also his sister and
brothers, makes it impossible for
[respondent] to exercise that degree of
unbridled loyalty to the beneficiaries of
[the] trusts which is required of
[respondent] by the laws of the State of
North Carolina, including North Carolina
General Statutes Section 36A-165.
3. That [respondent], the sole and acting
Trustee under the Trusts, did violate his
fiduciary duty through default and
misconduct in the execution of his office
as Trustee of said Trusts in violation of
the laws of the State of North Carolina,
in failing to carry out the terms of the
Trusts by refusing to distribute the
assets of [Jerry's testamentary trust]
and [Jerry's inter vivos trust], and by
failing to distribute the assets ondeposit in [Reba's inter vivos trust], by
reason of self-interest and his animosity
towards the remainder beneficiaries.
Based upon these conclusions of law, the trial court thereafter
ordered that respondent be removed from serving as trustee of the
three trusts. Respondent appeals.
[1] We note initially that respondent's brief does not contain
arguments supporting each of his original assignments of error on
appeal. Pursuant to N.C.R. App. P. 28(b)(6) (2005), the omitted
assignments of error are deemed abandoned. Therefore, we limit our
present review to those issues properly preserved by respondent for
appeal.
The issues on appeal are whether the trial court erred by:
(I) exercising jurisdiction over the proceedings; (II) denying
respondent's motions to dismiss; (III) denying respondent's motions
to continue the proceedings; and (IV) entering the order removing
respondent as trustee.
[2] Respondent first argues that the trial court erred by
exercising jurisdiction over the proceedings. Respondent asserts
that the consolidated proceedings should have been heard as civil
actions rather than estate actions, and that the trial court erred
by entering various orders in the matter. We disagree.
N.C. Gen. Stat. § 7A-104(a1) (2003) provides that “[t]he clerk
may disqualify himself in a proceeding in circumstances justifying
disqualification or recusement by a judge.” Following such a
disqualification, N.C. Gen. Stat. § 7A-104(b) provides that anyparty in interest may thereafter request that the trial court make
“all necessary orders and judgments in any proceeding in which the
clerk is disqualified[.]”
In the instant case, following petitioners' request to remove
respondent as trustee, the Clerk recused himself from the case,
stating that any ruling by him in the action “would be subject to
the interpretation of having been influenced by [a] pending matter
in the Declaratory Judgment action relating to the request for
prosecution of the Clerk” by respondent. Petitioners thereafter
filed a N.C. Gen. Stat. § 7A-104(b) motion, which the trial court
subsequently allowed. On appeal, respondent contends that the
trial court was without jurisdiction to hear or enter orders
regarding his removal as trustee because the matter “is an action
for breach of fiduciary duty, negligence, and fraud[.]” However,
respondent's contention ignores the plain language of petitioners'
pleadings as well as our state's general statutes.
N.C. Gen. Stat. § 36A-23.1(a) (2003) defines the
jurisdictional reach of the clerks of our superior courts.
Notwithstanding exceptions inapplicable to this case, N.C. Gen.
Stat. § 36A-23.1(a) grants the clerks exclusive jurisdiction “over
all proceedings initiated by interested persons concerning the
internal affairs of trusts,” including “those concerning the
administration and distribution of trusts, the declaration of
rights, and the determination of other matters involving trustees
and trust beneficiaries[.]” Specifically included in the list of
such proceedings are those hearings “[t]o appoint or remove atrustee[.]” N.C. Gen. Stat. § 36A-23.1(a)(1).
In the instant case, although petitioners' filings detail
various acts of alleged fraud, negligence, and breach of fiduciary
duty, the filings only request the issuance of an order removing
respondent as trustee of the three separate trusts. It is clear
the petitions were not filed in an effort to recover damages or to
commence a civil action against respondent. Instead, petitioners'
efforts to recover damages from respondent were limited to 02 CVS
1091, a case properly filed against respondent in civil court.
Therefore, as the Clerk in the instant case had recused himself, we
conclude that the trial court did not err by exercising
jurisdiction over the matter or entering orders regarding the
removal of respondent as trustee. Furthermore, because the instant
matter was limited only to those estate proceedings aimed at
removing respondent as trustee, we conclude that the trial court
did not err by denying respondent's motion to join the instant
matter with 02 CVS 1091. Accordingly, we overrule respondent's
first argument.
[3] Respondent next argues that the trial court erred by
denying his motions to dismiss. Respondent asserts that service
regarding the individual cases was improper, and that therefore the
matter should have been dismissed. We disagree.
N.C. Gen. Stat. § 36A-26.1 (2003)
(See footnote 1)
provides in pertinent part
as follows: Proceedings under G.S. 36A-23.1 are initiated
by filing a petition in the office of the
clerk of superior court. Upon the filing of
the petition, the clerk shall docket the cause
as an estate matter. All trustees and
interested persons not joined as petitioners
shall be joined as respondents. The clerk
shall issue the summons for the
respondents. . . . The summons shall notify
the respondents to appear and answer the
petition within 10 days after its service upon
the respondents. The summons shall comply
with the requirements set forth in G.S. 1-394
for a special proceeding summons except that
the clerk shall indicate on the summons by
appropriate words that the summons is issued
in an estate matter and not in a special
proceeding or in a civil action.
In the instant case, a special proceedings summons was issued
in file number 97 SP 576 and served upon respondent on 11 August
1997. Two additional special proceedings summons were issued in
file numbers 04 SP 620 and 04 SP 621 and served upon respondent on
7 April 2004. On 20 April 2004, prior to his disqualification from
the matter, the Clerk filed two separate orders reclassifying 04 SP
620 and 04 SP 621 as 04 E 620 and 04 E 621, respectively. On 10
June 2004, the trial court entered an order allowing “petitioners
to classify [97 SP 576] as an estate matter and amend the 'SP'
caption . . . .”
On appeal, respondent contends that because the proceedings
were originally docketed as special proceedings rather than estate
matters, the process served upon him did not comply with N.C. Gen.
Stat. § 36A-26.1 and was thus ineffectual. However, we decline to
read N.C. Gen. Stat. § 36A-26.1 so broadly. Instead, we conclude
that where, as with 97 E 576, an estate matter was properly filed
and served prior to the effective date of current N.C. Gen. Stat.§ 36A-26.1, the petitioner is not required to thereafter re-serve
the respondent with an “E”-captioned summons.
As to 04 E 620 and 04 E 621, we note that although respondent
contested the effectiveness of the service of these cases at the
hearing, respondent managed to file,
inter alia, a set of
interrogatories and a request for production of documents, as well
as motions seeking the dismissal and continuance of the actions.
In one motion to continue, respondent alleged that he was “served
herein on April 7, 2004” and had “filed and served a Motion to
Dismiss . . . this action pursuant to Rule 12(b)(6) of the North
Carolina Rules of Civil Procedure . . . .” In light of the
foregoing, we are not convinced that respondent suffered any
prejudice as a result of either petitioners' initial failure to
file the cases under an “E” caption or the Clerk and trial court's
subsequent orders allowing the reclassification of the files.
Accordingly, we overrule respondent's second argument.
[4] Respondent next argues that the trial court erred by
denying his motions to continue the proceedings. Respondent
asserts that the Rules of Civil Procedure apply to estate
proceedings and thus he was entitled to discovery as well as twenty
days to prepare a responsive pleading following the denial of his
motions to dismiss. We disagree.
Although our general statutes provide procedures allowing the
removal of trustees, they do not expressly provide that the
resulting hearings are governed by the Rules of Civil Procedure.
Rule 1 of the Rules of Civil Procedure provides in pertinent partas follows:
These rules shall govern the procedure in the
superior and district courts of the State of
North Carolina in all actions and proceedings
of a civil nature except when a differing
procedure is prescribed by statute.
N.C. Gen. Stat. § 1A-1, Rule 1 (2003). Similarly, N.C. Gen. Stat.
§ 1-393 (2003) provides that “[t]he Rules of Civil Procedure and
the provisions of this Chapter on Civil Procedure are applicable to
special proceedings, except as otherwise provided.”
While respondent would have us conclude that any estate matter
is subject to the Rules of Civil Procedure by virtue of its nature
and similarity to a special proceeding, we note that, as detailed
above, trustee removal proceedings are held “in an estate matter
and
not in a special proceeding or in a civil action.” N.C. Gen.
Stat. § 36A-26.1 (emphasis added). Although Chapter 36A does not
expressly or “otherwise” prescribe “differing [rules of]
procedure,” we are not persuaded that, in addition to the duties
already placed upon them, clerks of court must also make decisions
regarding discovery and other issues of law arising during estate
matters. Instead, we conclude that the clerks of our superior
courts hear the matters before them summarily, and are responsible
for determining questions of fact rather than providing judgment in
favor of one party or the other. Thus, where a clerk of superior
court is presented with a petition to remove a trustee, the clerk
examines the affidavits and evidence of the parties and determines
only whether the trustee is qualified or fit to faithfully
discharge his or her duties. The process due to the parties duringsuch a determination, having not been expressly prescribed by
statute, is only that which is reasonable when applying general
principles of law.
See Edwards v. Cobb, 95 N.C. 5, 12 (1886) (“The
statute conferring power on the Clerk to remove executors and
administrators, does not prescribe in terms how the facts in such
matters shall be ascertained, but it plainly implies that he shall
act promptly and summarily. Applying general principles of law,
the method of procedure we have above indicated, or one
substantially like it, is the proper one.”).
In the instant case, after careful review of the record, we
conclude that the trial court conducted the proceedings in a
consistent and fair manner, thereby providing the parties with that
amount of process due to them under general principles of law. The
trial court allowed extensive presentation of evidence and argument
from both parties, allowing each side to introduce necessary
exhibits and cross-examine opposing witnesses. The proceedings
lasted six days, and took place over a period of three weeks. In
light of the foregoing, there is no indication that respondent
suffered any prejudice by the trial court's refusal to allow
written discovery or a continuance to file a responsive pleading.
Accordingly, respondent's third argument is overruled.
[5] Respondent's final argument is that the trial court erred
by entering the order removing him as trustee. In his
corresponding assignments of error, respondent makes several
assertions in support of this argument, including that he “rendered
to [p]etitioners the annual accountings of [Jerry's testamentarytrust] each year in compliance with requirements of the Will,” that
he “performed the powers and duties and complied in all respects
with the express terms and limitations set forth in the Trusts,”
and that he “acted honestly in a reasonable, open, fair, and honest
manner” in following the provisions of the trusts.
(See footnote 2)
In his brief,
respondent also asserts that he “did not, and does not, object to
a distribution to [the] beneficiaries, of which he is one, or to
his removal[.]” Despite the inconsistencies inherent in these
assertions, we have reviewed respondent's argument and, as detailed
below, we conclude that the trial court did not err.
This Court has previously stated that “[t]rust beneficiaries
may expect and demand the trustee's complete loyalty in the
administration of any trust. Should there be any self-interest on
the trustee's part in the administration of the trust which would
interfere with this duty of complete loyalty, a beneficiary may
seek the trustee's removal.”
In re Trust Under Will of Jacobs, 91
N.C. App. 138, 143, 370 S.E.2d 860, 864 (citing
Trust Co. v.
Johnston, 269 N.C. 701, 153 S.E.2d 449 (1967)),
disc. review
denied, 323 N.C. 476, 373 S.E.2d 863 (1988).
The court will always compel the trustee to
exercise a mandatory power. It is otherwise,
however, with respect to a discretionarypower. The court will not undertake to
control the trustee with respect to the
exercise of a discretionary power, except to
prevent an abuse by him of his discretion.
The trustee abuses his discretion in
exercising or failing to exercise a
discretionary power if he acts dishonestly, or
if he acts with an improper even though not a
dishonest motive, or if he fails to use his
judgment, or if he acts beyond the bounds of a
reasonable judgment.
Woodard v. Mordecai, 234 N.C. 463, 471, 67 S.E.2d 639, 644 (1951)
(citations omitted). As the removal of a trustee is left to the
discretion of the clerks of superior court, or in this case, the
trial court, our review is limited to determining whether the trial
court abused its discretion.
White v. White, 312 N.C. 770, 777,
324 S.E.2d 829, 833 (1985). Under this standard, we accord “great
deference” to the trial court, and its ruling may be reversed only
upon a showing that its action was “manifestly unsupported by
reason” or “so arbitrary that it could not have been the result of
a reasoned decision.”
Id.
In the instant case, the trial court based its order removing
respondent as trustee upon its conclusions that “the . . . contempt
and deep hostility which [respondent] holds for three of the
beneficiaries of the three Trusts . . . makes it impossible for him
to exercise that degree of unbridled loyalty to the beneficiaries”
required by our law, and that respondent's “self-interest
and . . . animosity towards the remainder beneficiaries” led to his
“refus[al] to distribute the assets of the Trust[s]” and “carry out
the terms of the Trusts . . . .” These conclusions were supported
by several findings of fact detailing respondent's “animosity,hostility, disloyalty, and self-interest” toward petitioners,
including his refusal to pay indebtedness due to Anne, Paul, and
Reba's Estate, his participation in “divisive and costly”
litigation, his refusal to distribute the assets of the trusts more
than five years following Reba's death, and his “artificial[]
inflat[ion] [of] the principal of the Trusts by including . . .
baseless claims [against petitioners] as Trust assets [and] adding
eight percent (8%) annually, thereby paying himself improper
commissions on the principal of the Trusts each year.” The trial
court's findings were supported by competent evidence introduced
during the hearings, including testimony from respondent, who
admitted that “there is a great deal of conflict between [him] and
the other beneficiaries” and that he believes “there's a deep, a
fundamental conflict of character between [his] brothers and
sisters.” Respondent further testified that he had no intention of
distributing money to petitioners until he had been reimbursed for
his participation in the lawsuits, and he admitted to physically
assaulting Anne, attempting to strike Paul, informing Anne's
employer that she had filed incompetency litigation against her
mother, and informing the Georgia State Bar of Joseph's alleged
misdeeds.
After reviewing the record in this case, we conclude that
sufficient evidence supports the trial court's findings of fact,
and its findings of fact support its conclusions of law. Although
respondent introduced several properly filed accountings and
offered explanations for his decisions while serving as trustee, itis clear from a reading of the record that much of respondent's
actions and inactions were beyond the bounds of reasonable judgment
and uncharacteristic of a trustee demonstrating complete loyalty to
the trust beneficiaries. As the trial court noted, “when the wills
and trust documents are read the primary an[d] overriding purpose
of these trusts was for the distribution of the fruits of [Jerry
and Reba's] labor . . . to be distributed to their four children
equally[.]” However, due to his “contempt” for petitioners,
respondent has failed to “exercise that type of unbridled loyalty”
due to the beneficiaries of the trusts, and he has thereby
prevented the distribution of the trusts' assets more than six
years after Reba's death. Therefore, in light of the foregoing, we
conclude that the trial court did not abuse its discretion by
ordering that respondent be removed from serving as trustee of
Jerry and Reba's trusts. Accordingly, we overrule respondent's
final argument.
In light of the foregoing conclusions, we affirm the trial
court orders removing respondent as trustee of the trusts, denying
his motions to continue and dismiss the proceedings, and allowing
the reclassification and consolidation of the actions.
Affirmed.
Chief Judge MARTIN and Judge WYNN concur.
Footnote: 1