Case ID: nc_213/html/0462-01.html
Source: Caselaw Access Project
Author: {"author": "Barnhill, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

E. D. LATTA, JR., Executor and Trustee of the Estate of EDWARD D. LATTA, SR.; and EDWARD D. LATTA, JR., Individually, v. TRUSTEES OF THE GENERAL ASSEMBLY OF THE PRESBYTERIAN CHURCH IN THE UNITED STATES, and THE PRESBYTERIAN FOUNDATION, INC.; ASHEVILLE MISSION HOSPITAL; NORTH CAROLINA ORTHOPEDIC HOSPITAL; ACTON LATTA PORCHER and Husband, WILLIAM H. PORCHER; WILLIAM H. PORCHER, JR.; HARRIET PORCHER; JEANIE LEA FARGASON and Husband, JOHN T. FARGASON; and the Unborn Children and Grandchildren of MRS. ACTON LATTA PORCHER, and of EDWARD D. LATTA, JR.
    (Filed 4 May, 1938.)
    1. Executors and Administrators § 21 — Evidence held to disclose that payment was made to beneficiary from estate.
    The evidence disclosed that a check to testator’s daughter was endorsed by her and delivered to testator’s widow by the trustee under the will, in order to save interest, and that the widow gave the trustee a receipt stating that the amount was received on account of her interest in the estate. Held: The evidence discloses that the amount was paid the widow as a beneficiary under the will, and her contention that the transaction was a personal transaction between herself and daughter in which the court had no interest, is untenable.
    2. Executors and Administrators § 9 — Court has jurisdiction to direct administration of trust estates and to protect interests of minors.
    In the distribution of a trust estate under a family agreement, containing a provision for the retention of a certain sum by the trustee to pay annuities to minors as directed in the will, the court has plenary jurisdiction to direct that no' further sums be paid the beneficiaries under agreement for the distribution of the estate until funds fully sufficient to protect the interests of minor beneficiaries are received by the trustee from the estate and placed in the trust estate for the minors, the order being in the jurisdiction of the court over the administration of a trust estate and in its power to protect the interests of minors.
    8. Executors and Administrators § 24—
    An agreement of certain devisees for the distribution of their shares in a trust estate merely affects the method of the distribution of the corpus of the estate, and the estate remains a trust estate to be administered by the executor and trustee subject to control and power of modification by the court.
    4. Same—
    The agreement of certain devisees for the distribution of their shares in the trust estate U held to show the intent of the parties that the funds were to be distributed in installments ratably in proportion to the interest of each devisee under the agreement.
    5. Infants § 1—
    In a sense the courts are the supreme guardians of all infants, and in all suits or legal proceedings the powers of a court of chancery may be invoked to protect both their personal and property rights, and, when necessary, the courts will act ea> mero motu to afford them protection.
    6. Executors and Administrators § 24 — In distribution of estate under family agreement court should order executor to retain funds 'amply sufficient to guarantee payment of annuities to infants.
    Certain devisees under the will made a contract for the distribution of their shares in the trust estate, which agreement was approved by the court, with direction that the trustee retain a certain sum to guarantee the payment of annuities to certain minors as directed by the will. Held: The court should have heard the guardian of the minors upon the question of whether the amount ordered to be reserved was sufficient to guarantee the payment of the annuities to the minors, and the judgment is modified and affirmed in order that the court may investigate and order set apart in trust funds amply sufficient to guarantee to the infants their legacies under the will before any further disbursement of the corpus of the estate is made to any person.
    7. Same — Wills § 33e — Annuities to beneficiaries not parties to agreement for distribution of trust estate, constitute a charge on whole estate.
    Certain devisees entered an agreement for the distribution of their shares in the trust estate set up by the will, which agreement was approved by the court in proceedings duly instituted, in which certain annuitants were not parties. Held: The annuitants take under the will and not under the agreement, and their rights, in effect, constitute a charge on the whole estate, and the court should order adequate trust provisions to be made to guarantee sufficient funds for the payment of the annuities.
    Seawell, J., took no part in the consideration or decision of this case.
    Appeal by defendants Jeanie Lea Eargason, John H. Small, Jr., guardian ad litem for William H. Porcber, Jr., and Harriet Porcber, and E. J. Hanson, guardian ad litem for tbe unborn children of William H. Porcber, Jr., and Harriet Porcber. Modified and affirmed.
    Tbis is a proceedings instituted by tbe plaintiff executor and trustee of tbe estate of Edward D. Latta, Sr., in wbicb be seeks tbe advice and direction of tbe court in tbe administration of tbe estate committed to bis charge.
    Edward D. Latta, Sr., died in July, 1925, leaving a last will and testament and codicils thereto, wbicb were duly probated and in wbicb tbe plaintiff was named executor and trustee. Tbe testator, after making certain specific bequests and devises, minor in nature when compared to bis estate as a whole, devised all of tbe residuum of bis estate to E. D. Latta, Jr., as trustee, to manage and control tbe estate and out of tbe income pay certain annuities as follows: To bis widow, Jeanie Lea Eargason, $1,500 per month during her life; to bis daughter, Acton Latta Porcber, $1,500 per month during her natural life; to William H. Porcber, Jr., when and after be shall reach tbe age of 16 years and until be shall reach tbe age of 30 years, tbe sum of $3,000 annually, and upon bis arrival at tbe age of 30 years $50,000, to be bis absolutely; to any other child born to Acton Latta Porcber, who shall arrive at tbe age of 16 years, $3,000 annually from and after such child shall arrive at 16 years of age and until it shall arrive at tbe age of 30, at wbicb time said trustee shall pay said child $50,000; tbe said Acton Latta Porcber now has a second child, Harriet Porcber, 14 years of age, who is entitled to tbe benefits of tbis provision; Elizabeth O. Handley, Emma C. Drayton and Paul McCorkle $75.00 per month each during their respective lives, and Mrs. Carrie T. Johnson $50.00 per month during her natural life. There were other annuities for stated periods wbicb are not material here; also annuities were provided for any unborn child of Edward D. Latta, Jr., and of Acton Latta Porcber. Tbe court below held that these latter devises of annuities were void as being in violation of tbe rule against perpetuities. Tbe will provided that in tbe event a child or children of Acton Latta Porcber should die before reaching tbe age of 30 years, leaving child or children surviving, tbe annuity of said child should be paid over in equal shares to bis or her surviving children until such child or children reach tbe age of 20 years, at which time tbe corpus of tbe bequest to bis, her or their deceased parents should vest in such surviving grandchild or grandchildren in equal shares.
    
      Tbe will and codicils then provide tbat all tbe rest and residue of tbe income from tbe residuum of tbe estate, including tbat wbicb reverts upon tbe death of testator’s wife and daughter and other legatees and devisees, should be paid annually: one-fourth to tbe trustees of tbe General Assembly of tbe Presbyterian Church in tbe United States; one-half to tbe Mission Hospital of Asheville, N. 0.; and one-fourth to tbe Orthopedic Hospital of Gastonia, N. C. Tbe will further provided tbat after tbe trustee bad fully administered said trust tbe said trustee or bis successor should turn over tbe corpus of tbe residuum of said estate to said institutions.
    Acton Latta Porcher having refused to accept tbe benefits provided for her in said will and having threatened to caveat tbe same, she and her step-mother, Jeanie Lea Fargason, tbe trustees of tbe General Assembly of tbe Presbyterian Church, tbe North Carolina Orthopedic Hospital, Asheville Mission Hospital, and Edward D. Latta, Jr., individually and as executor and trustee, entered into a written agreement in wbicb a distribution of tbe corpus of tbe estate in lieu of tbe annuities to said parties to said agreement is provided for as follows: (1) 27% per cent to tbe Asheville Mission Hospital; (2) 13% per cent to tbe trustees of tbe General Assembly of tbe Presbyterian Church in tbe United States and tbe Presbyterian Foundation, Inc.; (3) 13% per cent to tbe N. C. Orthopedic Hospital; (4) 22% per cent to Mrs. Jeanie Lea Fargason until she has been paid tbe sum of $325,000, with interest; and (5) tbe remainder of tbe said net estate to Acton Latta Porcher, or her legal representatives, except tbat out of her part of said estate said trustee shall pay tbe annuities given in said will, other than tbe annuity given to Jeanie Lea Fargason and tbe annuity given to Acton Latta Porcher. Tbe agreement further provides tbat tbe rights of tbe grandchildren and great-grandchildren of tbe testator, annuitants under bis will, shall be adjudicated by tbe court in an action to be instituted, and tbat so much of such part of said estate to be set aside for Mrs. Porcher as tbe court shall deem proper shall be held in trust by tbe said E. D. Latta, Jr., for tbe benefit of said grandchildren; provided, tbat said trustee shall annually or oftener pay over to Mrs. Porcher so much of tbe income from tbe property so held in trust by him as shall remain in bis bands after making such payments to said grandchildren as shall be required by tbe terms of said decree, and provided further tbat any part of said trust estate wbicb shall remain in tbe bands of said trustee after tbe rights of said grandchildren as fixed by such decree shall have been satisfied shall be transferred and delivered to Mrs. Porcher or her legal representatives absolutely.
    Tbe parties to said agreement, in consideration of tbe terms of said agreement, expressly waive their respective rights to tbe annuities given in tbe will.
    
      Pursuant to said agreement, tbe plaintiff instituted this proceedings and, in his petition filed, fully sets out the facts and requests the court to advise and direct him: (1) As to whether the bequests made to the great-grandchildren of the testator upon the contingency therein set forth are void as being in violation of the rule against perpetuities; (2) as to whether the bequests made to the unborn children of the testator’s daughter, Acton Latta Porcher, and the unborn children of E. D. Latta, Jr., are likewise void as being in violation of the rule against perpetuities; and (3) as to whether the contract referred to is a valid and binding obligation between the parties thereto and as to whether the court would authorize and instruct the petitioner to carry out the terms and provisions thereof in final settlement, division and distribution of the net residuum of income and corpus of said estate as being in, substantial compliance with the spirit and intention of the testator’s will.
    Thereupon, at the December Special Term, 1927, Mecklenburg Superior Court, Harding, J., entered a decree, after hearing the evidence offered, in which the said agreement was ratified and approved, the devise of annuities to unborn grandchildren and great-grandchildren other than the children of W. H. Porcher, Jr., and Harriet Porcher are adjudged to be void, and the trustee is directed to observe and comply with the terms of said agreement in the settlement of said estate.
    In this decree there is no provision made for the protection of the. annuitants under the will of the plaintiff’s testator other than the children of Acton Latta Porcher. As to them it is provided that out of the share allotted to Mrs. Acton Latta Porcher under said agreement the sum of $125,000 shall be retained by the trustee in trust for the use and benefit of 'William H. Porcher, Jr., and Harriet Porcher, to be paid over to them or to their children, as the case may be, as provided in said will. It then provided that the trustee shall annually or oftener pay over to Mrs. Porcher so much of the income from the funds so held-in trust by him as shall not be required to make the payments to said-beneficiaries.
    The cause was retained for other and further decrees.
    Thereafter, the plaintiff filed a supplemental petition in which the former proceedings are fully recited and the status of the estate at the time of the petition is fully set forth. This petition likewise discloses that substantially all of the liquid assets of the estate have been distributed among the parties to said agreement and that the assets now remaining on hand are composed almost entirely of unimproved, unproductive and nonsalable real estate. The purpose of the petition was to request further time in which to settle said estate.
    Mrs. Porcher, answering, admitted the allegations of the petition and set up by way of further answer that the trust fund for her children had not been created; tbat in tbe distribution of tbe estate $81,450 payable to her under tbe agreement bad been paid to Mrs. Eargason, with her consent, as an advancement to protect her share against tbe payment of interest, and tbat she bad been charged with interest on sums paid to annuitants under tbe will. She prayed tbat tbe court order tbe trustee to make no further distribution to Mrs. Eargason until there bad been restored to her share tbe said sum of $81,450, so tbat it may be used in tbe establishment of tbe trust fund for her children, and tbat tbe trustee be directed to charge no interest against her share on tbe annuity payments made in tbe past, or those to be made in tbe future.
    Tbe defendant Jeanie Lea Fargason replied to tbe further answer of Mrs. Porcher, setting out fully tbe terms of tbe agreement, tbe disbursements made under tbe agreement and alleging tbat tbe payment of $81,450 to her was made by Mrs. Porcher as a personal transaction between them, with which neither tbe trustee nor tbe court was concerned, and praying tbat no order be made adversely affecting her right to future payments in tbe distribution of tbe estate.
    John A. Small, Jr., guardian ad litem, for William H. Porcher, Jr., and Harriet Porcher, and E. J. Hanson, guardian ad litem, for tbe unborn children of William H. Porcher, Jr., and Harriet Porcher, answering, admit tbe allegations of tbe petition and set forth tbe terms of tbe agreement, tbe nature and amounts of tbe devises to their wards, and tbe failure of tbe trustee to retain tbe trust fund ordered by tbe court for tbe protection of their wards; and in detail further prayed orders of tbe court to protect their wards, including tbe requirement that tbe payment of $81,450 be restored to tbe estate by Mrs. Fargason to be used in tbe creation of said trust fund.
    Thereupon tbe court entered its decree, setting forth tbe facts which show tbat $550,000 of tbe estate has been disbursed among tbe parties to said agreement and tbat only $6,358.24 has been set apart for the protection of tbe infants involved, and adjudging (1) tbat tbe trustee should make no further payment' to Mrs. Fargason until tbe sum of $81,450 has been restored to tbe share of Mrs. Acton Latta Porcher from funds which, except for tbe payment of said sum, would be available for distribution to Mrs. Fargason, and directing tbe trustee to set apart tbe trust fund provided in tbe first decree for tbe benefit of tbe infants; (2) directing tbe trustee to charge no further interest to Mrs. Acton Latta Porcher on account of payment of annuities from tbe general funds. Tbe court declined to pass upon tbe question raised by tbe guardian ad litem as to whether or not tbe sum of $125,000 is an adequate trust fund at this time to protect tbe interest of tbe infants. Tbe defendants Jeanie Lea Fargason, John H. Small, Jr., guardian ad litem, and E. J. Hanson, guardian ad litem, each excepted and appealed.
    
      
      Gansler ■& Oansler for plaintiff Edward B. Latta, Jr., Trustee, ap-pellee.
    
    
      W. 8. O’B. Robinson and John M. Robinson for Acton Latta Porcher, defendant, appellee.
    
    
      Parker, Bernard & Parker for Mrs. Jeanie Lea Par gasón, defendant, appellant.
    
    
      John H. Small, Jr., guardian ad litem of William H. Porcher, Jr., and Harriet Porcher; and E. J. Hanson, guardian ad litem of the unborn children of William H. Porcher, Jr., and Harriet Porcher, defendants, appellants.
    
   Barnhill, J.

Mrs. Eargason excepts to so much, of the judgment as prohibits the distribution to her of any further portion of the estate until the payment of $81,450 made to her out of the share of Mrs. Porcher is restored upon the theory that the court was without jurisdiction to make such order for the reason that the payment of said sum to her was a personal transaction between her and Mrs. Porcher. This exception cannot be sustained. The record discloses that check for said sum was issued to Mrs. Porcher, endorsed by her, and delivered to Mrs. Eargason by the trustee as an advancement upon Mrs. Eargason’s share under the agreement, to save the payment of interest, and that Mrs. Eargason gave her receipt to the trustee in acknowledgment of the payment of said sum “on account of my interest in the estate of Edward I). Latta.” The order of the judge is fully sustained by the facts appearing of record and found by him. The court had full jurisdiction, both by reason of the fact that this proceeding relates to the administration of a trust estate and it involves the interest of infants, over each of which the court has full equity jurisdiction.

The agreement entered into by certain of the devisees under the will of plaintiff’s testator merely affects the method of the distribution of the corpus of the estate. Under the terms of the will and the provision of the contract it remains a trust estate, to be administered by the plaintiff, executor and trustee. Mrs. Eargason’s exceptive assignments of error based upon the contention that the distribution is to be made under the terms of the contract and not under the terms and provisions of the will, and that the contract is binding and cannot be modified or in anywise disturbed by the court, are without merit.

"While the agreement does not specifically state that payments under the agreement are to be made to the parties thereto ratably in proportion to the interest of each of such parties under the agreement, it clearly appears from the agreement as a whole that this was the intent of the parties. Distributions were made on three separate occasions on that basis without exception on the part of either person interested. It was not error for the court below to base its order upon the theory that in the distribution to the parties to said agreement there was to be equality in the amounts to be received by such parties in the ratio of their respective interests in the estate. As to the interest of Mrs. Fargason, there is no error in the decree.

The failure of the court below in any of its decrees to make adequate provision for the protection of the annuitants under the will other than the Porcher children, and the questions presented by the appeal of the guardians ad litem, give us more concern.

Prom our earliest history infants have been regarded as entitled to the especial protection of the State and as wards of the court. In a sense courts of chancery are the supreme guardians of all infants and are charged with the protection alike of their personal and property rights. The State is parens pairice of the infants within its borders and the jurisdiction of its courts to protect the interest of infants is broad, comprehensive and plenary. In all suits or legal proceedings of whatever nature, in which the personal or property rights of a minor are involved, the protective powers of a court of chancery may be invoked whenever it becomes necessary to fully protect such rights. When necessary the courts will go so far as to take notice ex mero motu that the rights of infants are endangered and will take such action as will properly protect them. Speaking to the subject in Bank v. Alexander, 188 N. C., 667, Adams, J., says: “It is unquestionable that courts of equity have general jurisdiction over the property of infants and that infancy alone is sufficient to sustain the right of supervision. The jurisdiction in all cases is complete and may be exercised in order to afford relief wherever it may be necessary to preserve and protect the estates and interests of those who are under age.” And in 10 R. C. L., 340, see. 89, it is stated: “Equity has full and complete jurisdiction over the persons and property of infants and all other persons laboring under legal disabilities. . . . The jurisdiction in all these cases is plenary and potent to reach and afford relief in every case where it may be necessary to preserve their estates and protect their interests.”

While under the will of the testator practically all of his estate was to be held in trust, under the agreement entered into by certain of the devisees and the decree of the court, only $125,000, out of an estate valued at more than two million dollars, is to be reserved in trust to protect the infant parties to this proceeding. At the time this order was made it may have then appeared that said sum was fully sufficient for that purpose. It is now a matter of common knowledge, however, that under present conditions the securities in which a trustee is authorized to invest trust money will not produce a net return sufficient to guarantee the payment of the annuities accruing to these infants and the other annuitants. They take under the will and not under the agreement. Those who are sui juris having elected to substitute, by agreement, a different mode of payment to them of their interest in the estate, the rights of these infants and the other annuitants in effect constitute a charge upon the whole estate. It is the duty of the court to require the segregation in the hands of the trustee assets unquestionably adequate to protect their interests.

Although it appears that practically all of the liquid assets of this estate have been disbursed and that practically nothing now remains except unproductive real estate, only the sum of $6,358.24 has been retained in the trust fund created by order of the court. It was error for the court to decline to consider the petition of the guardians ad litem in this respect. The judgment below should be modified so as to provide that the trustee shall retain out of the corpus of the estate as a whole an amount which the court shall find to be amply sufficient to be set apart in trust to guarantee to these infants their legacies under the will before any further disbursement of the corpus is made to any other person.

The record discloses that there are four annuitants, other than the Porcher children, who were not parties to the agreement. These annuitants have not been made parties to this proceeding. It appears that the only provision made for their protection is contained in the agreement, which provides that the trustee shall pay these annuities out of the portion of the estate to be paid to Mrs. Acton Latta Porcher. At the same time the agreement and the decree of the court provide that Mrs. Porcher shall receive all of her share except the $125,000 to be set apart for the benefit of the Porcher children. We do not consider that adequate trust provisions have been attached to the portion of said estate payable to Mrs. Acton Latta Porcher to protect these annuitants. These parties likewise take under the will and not under the agreement and their right is against the whole estate. Adequate provision should be made for their protection. The court below, after adequate investigation, will enter judgment modifying the decree entered in accordance with this opinion.

Modified and affirmed.

Seawell, J., took no part in the consideration or decision of this case.