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IN THE MATTER OF THE TESTAMENTARY TRUST OF ETHYLENE R. CHARNOCK,
DECEASED
The trial court did not err by dismissing based on lack of subject matter
jurisdiction petitioner's case arising out of a request for modification of a trust seeking to remove
the trustee designated by the testatrix and to appoint new co-trustees, because: (1) the request for
modification of the trust was properly characterized as a motion for removal of respondent-
appellee as trustee; and (2) the plain language of N.C.G.S. § 36A-23.1(a) provides that the clerk
of superior court has exclusive jurisdiction over the removal and appointment of trustees.
Appeal pursuant to N.C.G.S. § 7A-30(2) from the
decision of a divided panel of the Court of Appeals, 158 N.C.
App. 35, 579 S.E.2d 887 (2003), affirming a judgment entered
23 May 2002 by Judge Catherine C. Eagles in Superior Court,
Guilford County. Heard in the Supreme Court 18 November 2003.
Wyatt Early Harris Wheeler, LLP, by William E. Wheeler,
for petitioner-appellants Sabrina C. Schumaker, Cleta
Mae Kearns, Bernice Ragsdale, Delbert Ragsdale, Faedene
Maness, and Daisy Vestal.
Molly N. Howard for guardian ad litem-appellee.
Robinson, Bradshaw & Hinson, P.A., by Edward F.
Hennessey, IV, for respondent-appellee Ben Farmer.
PARKER, Justice.
The issue before this Court is whether the Court of
Appeals erred in affirming an order dismissing petitioners' case
for lack of subject matter jurisdiction.
On 8 July 1999 Ethylene R. Charnock (decedent) executed
a will that had been prepared for her by respondent Ben Farmer.
Ms. Charnock's will left her entire estate in an irrevocable
trust for the benefit of her daughter, Sabrina C. Schumaker
(Schumaker), for life. The trust provided that any unexpended
principal and trust income left over at Schumaker's death wouldbe paid over to Ms. Charnock's five siblings (or to the living
issue of any predeceasing sibling) in fee simple. The will named
Ben Farmer as trustee, with High Point Bank and Trust Company
named as an alternate trustee in the event Ben Farmer was unable
to serve as Trustee for any reason. The will included a
direction to apply so much of the principal and net income
thereof to the support, education, welfare, and maintenance of
[Schumaker] as my Trustee shall deem necessary and proper. The
will also directed the trustee to consider written instructions
or opinions given to him by Ms. Charnock before her death. Ms.
Charnock wrote a note dated 5 September 1999 which read:
Also issue to Sabrina [a] monthly check in
the amount of $500. This with the $550
(TIAA) and insurance should be sufficient for
the time being. $500 could easily be
generated from interest on the CD's. I want
to hold as much as possible for her future --
but in case of medical emergency use your
judgment.
This letter, given to Ben Farmer by Ms. Charnock, also directed
that [a]t my death Sabrina is to receive anything in my home
. . . she needs.
Ms. Charnock died on 2 February 2000. Respondent Ben
Farmer acted as trustee and funded the trust. At Schumaker's
request respondent agreed not to sell the house as he had
intended. Respondent asserts that he and Schumaker agreed that
Schumaker and her husband could live in Ms. Charnock's house and
that the trust would pay the real estate taxes, insurance, major
repairs, and yard maintenance; this arrangement was to be in lieu
of Schumaker's $500 monthly check. In March of 2001 Schumaker,
through counsel, requested the $500 monthly payments from the
trust. Respondent wrote to Schumaker telling her that he wouldbegin paying her that amount if she elected to move out of the
house.
Decedent's five siblings and Schumaker entered into a
Consent and Agreement of Beneficiaries to Modification of Trust
(consent and agreement) and filed a Proceeding for Modification
of a Trust (petition) on 14 February 2002 in superior court.
The proposed modification was to change the number of trustees
and to replace Ben Farmer as trustee with substitute co-trustees
Wendy Heafner (a grandniece of decedent) and High Point Bank and
Trust Company. Petitioners cited dissatisfaction with the
conduct of Ben Farmer as trustee as the reason for the
modification request. A guardian ad litem was appointed by the
court to represent the interests of any unknown or unborn
potential beneficiaries of the trust. The guardian ad litem
consented to the modification.
On 23 May 2002 the trial court entered judgment
granting respondent's motion to dismiss for lack of subject
matter jurisdiction. Costs of the action were taxed to the
petitioners.
A divided panel of the Court of Appeals upheld the
dismissal of the petition for lack of subject matter
jurisdiction. In re Testamentary Tr. of Charnock, 158 N.C. App.
35, 579 S.E.2d 887 (2003). The Court of Appeals majority
concluded that the request for modification of the trust was
properly characterized as a motion for removal of appellee as
trustee. Id. at 41, 579 S.E.2d at 891. Therefore, the request
fell under N.C.G.S. § 36A-23.1(a), which provides that clerks of
superior court have exclusive jurisdiction over proceedings to
remove a trustee. N.C.G.S. § 36A-23.1(a) (2001). In hisdissent, Judge Wynn stated his opinion that the General Assembly
expressly created an alternative mechanism for beneficiaries to
remove a trustee: namely, removal without cause by enacting
N.C.G.S. § 36A-125.4(a). Charnock, 158 N.C. App. at 47, 579
S.E.2d at 894. Thus, by this reasoning, the superior court had
subject matter jurisdiction to hear the petition.
Before this Court the petitioners contend that their
request to modify the trust by changing the number of trustees
constitutes a modification for purposes of N.C.G.S. § 36A-125.4,
bringing this matter within the jurisdiction of the superior
court. N.C.G.S. § 36A-125.4 (2001). We disagree.
At the time this proceeding was instituted, section
36A-23.1(a) directed that
[t]he clerks of superior court of this
State have original jurisdiction over all
proceedings initiated by interested persons
concerning the internal affairs of trusts
except proceedings to modify or terminate
trusts. Except as provided in subdivision
(3) of this subsection, the clerk's
jurisdiction is exclusive. Proceedings that
may be maintained under this subsection are
those concerning the administration and
distribution of trusts, the declaration of
rights, and the determination of other
matters involving trustees and trust
beneficiaries, to the extent that those
matters are not otherwise provided for in the
governing instrument. These include
proceedings:
(1) To appoint or remove a
trustee; . . .
(3) To ascertain beneficiaries, to
determine any question arising in
the administration or distribution
of any trust, including questions
of construction of trust
instruments, and to determine the
existence or nonexistence of trusts
created other than by will and the
existence or nonexistence of any
immunity, power, privilege, duty,
or right. The clerk, on the
clerk's own motion, may determinethat a proceeding to determine an
issue listed in this subdivision
shall be originally heard by a
superior court judge.
N.C.G.S. § 36A-23.1(a) (2001). Effective 1 January 2004, the
first sentence of this statute was amended to delete the words
to modify or terminate trusts and to read except proceedings
governed by Article 11A of this Chapter. Act of June 26, 2003,
ch. 261, sec. 1, 2003 N.C. Sess. Laws 440, 440. This amendment
applied to all trusts, including the irrevocable trust at issue
here. Id., sec. 8, 2003 N.C. Sess. Laws at 443.
Modifications and terminations of irrevocable trusts
are addressed by Article 11A of Chapter 36A, Trusts and
Trustees, of the North Carolina General Statutes. Article 11A,
titled Modification and Termination of Irrevocable Trusts,
provides for modification by the consent of beneficiaries:
Except as provided in subsection (b) of this section, if all
beneficiaries of an irrevocable trust consent, they may compel
modification or termination of the trust in a proceeding before
the superior court. N.C.G.S. § 36A-125.4(a) (2001). The
statute goes on to say that if the beneficiaries seek to modify
the trust
in a manner that affects its continuance
according to its terms, and if the
continuance of the trust is necessary to
carry out a material purpose of the trust,
the trust cannot be modified or terminated
unless the court in its discretion determines
that the reason for modifying or terminating
the trust under the circumstances
substantially outweighs the interest in
accomplishing a material purpose of the
trust.
N.C.G.S. § 36A-125.4(b) (2001).
(See footnote 1)
Under both the pre- and post-amendment versions of
N.C.G.S. § 36A-23.1, the clerk of superior court lacked original
jurisdiction over proceedings to modify or terminate a trust.
Thus, an action that is characterized as a modification must be
brought before the superior court. The nature of an action will,
therefore, determine whether jurisdiction over the action lies
with the clerk of superior court or with the superior court.
In this case, the beneficiaries sought to change the
terms of the trust by changing the number of trustees from a
single trustee to two co-trustees. The result of this action
would be to remove the existing trustee, respondent Ben Farmer,
and replace him with the proposed co-trustees Wendy Heafner and
the High Point Bank and Trust Company. However, with respect to
Wendy Heafner, the consent and agreement provided:
In the event Wendy Heafner resigns, dies,
becomes incapacitated, incapable or unwilling
to act as Co-trustee, High Point Bank and
Trust Company, and its successors in
interest, shall serve as sole Trustee and
shall possess all powers and duties
originally granted under the Trust.
The consent and agreement further provided that Wendy Heafner
would receive no compensation and that High Point Bank and Trust
Company would receive compensation in accordance with its
applicable fee schedule. The petition recited that the
Modification does not effect any substantive change to the
Trust.
After considering the substance of the petition and of
the consent and agreement, the Court of Appeals majority
concluded that petitioners' request for 'modification' of the
trust is properly characterized as a motion for removal of
[respondent] as trustee. Charnock, 158 N.C. App. at 41, 579
S.E.2d at 891. The majority further determined that the
petition does not establish consent by the beneficiaries to a
structural or substantive change in the terms of the trust, but
only to the removal and replacement of a particular trustee.
Id. The Court of Appeals concluded that this appeal does not
present the general question of whether beneficiaries of a
testamentary trust may properly bring an action to modify the
terms of a trust instrument to provide for administration by two
co-trustees, rather than by a single trustee. Id. Accordingly,
the Court of Appeals did not determine the issue of whether a
proper proceeding to provide for the administration of the trust
by co-trustees rather than a single trustee would be brought
before the clerk of superior court or the superior court.
The dissent does not disagree with these conclusions by
the majority. Rather the dissent's position is that regardless
of whether the petition is characterized as a petition for
modification or a petition for removing a trustee, section 36A-
125.4 provides an alternative mechanism for beneficiaries toremove a trustee without showing cause. Id. at 47, 579 S.E.2d at
894.
Thus, the issue of whether the petition was for
modification of the trust has been resolved against petitioner
and is not a basis for appeal. N.C. R. App. P. 16(b). The sole
issue before this Court is whether the trial court had subject
matter jurisdiction to hear a proceeding to remove the trustee
designated by the testatrix and appoint new co-trustees. In this
regard we note that although the trial court did not make a
specific finding, the trial court by implication found that this
proceeding was one to remove a trustee. The trial court's
judgment states, This dismissal shall be without prejudice to
Petitioners' rights, if any, to seek removal of the Trustee in an
action before the Clerk of this Court pursuant to G.S. § 36A-
23.1, et seq.
In ascertaining legislative intent, the Court looks
first to the language of the statute and gives the words their
ordinary and plain meaning. Frye Reg'l Med. Ctr., Inc. v. Hunt,
350 N.C. 39, 45, 510 S.E.2d 159, 163 (1999). Section 36A-23.1(a)
by its plain language gives the clerk of superior court exclusive
jurisdiction over the removal and appointment of trustees. By
contrast, section 36A-125.4 says nothing about the removal of a
trustee but addresses only the modification or termination of an
irrevocable trust by consent of the beneficiaries. Of note,
Article 11A, including section 36A-125.4, was enacted in 1999,
Act of July 9, 1999, ch. 266, sec. 2, 1999 N.C. Sess. Laws 982,
984, and section 36A-125.4 was amended in 2003, Act of May 30,
2003, ch. 93, sec. 1, 2003 N.C. Sess. Laws 119, 119. Section
36A-23.1(a) was enacted in 2001, Act of Sept. 14, 2001, ch. 413,sec. 1, 2001 N.C. Sess. Laws 1594, 1595-96, and was amended in
2003, ch. 261, sec. 1, 2003 N.C. Sess. Laws at 440-41, to refer
specifically to Article 11A pertaining to modification and
termination of an irrevocable trust. From this treatment of
these statutes by the General Assembly, the inference can be
drawn that the legislature did not intend for modification of a
trust to include the removal and appointment of a trustee or for
section 36A-125.4 to be an alternative mechanism for removal of a
trustee without cause by consent of the beneficiaries. See
Victory Cab Co. v. Charlotte, 234 N.C. 572, 576, 68 S.E.2d 433,
436 (1951) (where the meaning of a statute is doubtful,
statutory changes over a period of years may be considered to
ascertain its true meaning). [A] statute dealing with a
specific situation controls, with respect to that situation,
other sections which are general in their application. State ex
rel. Util. Comm. v. Lumbee River Elec. Membership Corp., 275 N.C.
250, 260, 166 S.E.2d 663, 670 (1969).
Given the plain language of N.C.G.S. § 36A-23.1(a) that
the clerk of superior court has exclusive jurisdiction over the
removal and appointment of trustees, we conclude the trial court
did not have subject matter jurisdiction over petitioners'
petition. Accordingly, for the reasons stated herein, the
decision of the Court of Appeals affirming the trial court's
dismissal of petitioners' petition is affirmed.
AFFIRMED.
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