Case Title: Grant v. Banks

Citation: 155 S.E.2d 87, 270 N.C. 473

Docket Number: 

State: north-carolina

Court: North Carolina Supreme Court

Date: 1967-06-20T00:00:00Z

Document:
155 S.E.2d 87 (1967) 270 N.C. 473 George R. GRANT, Executor of Rebecca Kennedy, Deceased, Petitioner v. Sarah Kennedy BANKS et al., Respondents. No. 696. Supreme Court of North Carolina. June 20, 1967. *89 Tally, Tally & Lewis, Fayetteville, for plaintiff Executor, petitioner. John B. Regan, St. Pauls, Nance, Barrington, Collier & Singleton, Fayetteville, for appellant respondents. BRANCH, Justice. The first and principal question presented by this appeal is whether there was an ademption of the specific devise of the store building described in Item Third of the last will and testament of Rebecca Kennedy when the property was sold under court order by the trustee during the lifetime *90 of the testatrix, but during her mental and physical incompetency, which incompetency continued until her death. The principle of ademption is a well recognized legal principle in the law of wills, but its application or even definition often presents difficulty. The doctrine of ademption by extinguishment does not apply to general or demonstrative legacies or devises, since neither class of gift depends upon the existence of any particular property in testator's estate. 57 Am.Jur., § 1582, p. 1082; Moore v. Langston, 251 N.C. 439, 111 S.E.2d 627. The history of this Court's decisions reflects the difficulties of application of this principle and reveals conflict upon the matter of whether ademption by extinguishment or alienation depends upon the intention of the testator or simply operates as a matter of law, depending entirely on whether the specific property given by the testator remains in specie in the estate at the time of testator's death. In Anthony v. Smith, 45 N.C. 188, testator executed a will, bequeathing to his debtor the bond which constituted a debt. Thereafter, the testator caused the debtor to renew the bond for the convenience of other creditors, adding the amount of accrued interest to the principal on the renewed note. After testator's death, the debtor brought action against the executor to recover the renewed bond, contending this was the same bond bequeathed to him. On appeal from the sustaining of a demurrer, this Court overruled the demurrer, holding that no ademption resulted from the renewing of the note. The Court stated: In Nooe v. Vannoy, 59 N.C. 185, testator executed a will which provided in part: "I further give to my children, by a former marriage, the proceeds of the sale of my town property * * *." Thereafter, testator sold the property and reinvested the proceeds in the bonds or notes of other persons. After his death, plaintiffs brought action to have the legacy declared adeemed. Defendants contended that the proceeds from the sale were traceable and no ademption resulted. The Court, noting the general rule regarding ademption, and that the bequest was to testator's children, stated: In Chambers v. Kerns, 59 N.C. 280, testator executed a will, devising certain land to one Kerns. Thereafter, testator sold the land to others, giving bond to make title upon payment of the purchase price. Title was not given until after testator's death. On suit to determine distribution of the proceeds from the sale, this Court held an ademption had occurred from the testator's contract to sell and bond to make title. The Court stated: See also Gillis v. Harris, 59 N.C. 267. In Starbuck v. Starbuck, 93 N.C. 183, testator executed a will, Item Fourth of which provided: "I will and devise that such portion of the purchase money of my old home plantation which I sold to my son Clarkson as may still be owing me at my death, and any of this money then on hand, shall be equally divided between my said children, (naming them)." Thereafter, by codicil, additional parties were added to Item Fourth. Prior to his death, testator collected the total amount of the purchase price and deposited it in a bank. He thereafter withdrew the money and bought United States bonds. He later sold the bonds and used the proceeds to purchase stock in Wachovia Bank, which stock he owned at his death. On suit instituted by the executor for instructions, this Court held the legacy provided in Item Fourth had adeemed, and stated: However, in Rue v. Connell, 148 N.C. 302, 62 S.E. 306, the Court refused to find an ademption, stating: In the Rue case testator executed a will which provided, in part: "To my wife, Addie May Connell, during her widowhood, I give, grant and bequeath all and every right, title and interest in and to my Tusculum *92 plantation * * *." During administration of his estate after death, one Alston brought suit to recover title to this particular property. Alston was successful in his suit, but by the judgment entered was required to pay into testator's estate a certain amount of money representing testator's interest in the property. On suit brought by the devisee of the property, the Court held the devise had not adeemed, and the devisee was entitled to the property in the form of the proceeds. In King v. Sellers, 194 N.C. 533, 140 S.E. 91, Samuel Blossom executed a will which included a devise "to my daughter, Mary King, a mortgage of $4,000 executed by H. H. Hall, trustee, to Samuel Blossom * * *." Thereafter, the mortgage, with interest, was paid, and the money deposited in a bank. During the lifetime of testator, $3,500 of this money was loaned to one Peschau upon a note secured by deed of trust upon real estate. After testator's death, Mary King brought suit, claiming the Peschau mortgage under the above quoted Item of testator's will. On appeal, the Court held no ademption had occurred, and awarded the Peschau mortgage to plaintiff, stating: In Tyer v. Meadows, 215 N.C. 733, 3 S.E.2d 264, testator bequeathed two policies of insurance upon his life to his daughter by his first marriage. The will recited that the daughter had been named beneficiary in the policies. Subsequent to the execution of the will, testator changed the beneficiary in the policies to his estate and borrowed money on the policies. The daughter brought suit to recover the proceeds from the policies in the hands of the executrix. On appeal, the Court, looking to testator's intent as evidenced by his will, held that the change in beneficiary to testator's estate did not result in an ademption of the legacy to plaintiff, except for that amount borrowed by testator during his lifetime which was not repaid, and ordered the proceeds from the policies paid to plaintiff. In Green v. Green, 231 N.C. 707, 58 S.E.2d 722, testator executed a will which contained bequests of certain mortgage notes. Prior to his death, testator foreclosed on many of these notes and bought the property at sale. After testator's death, plaintiffs brought action to have the legacies declared adeemed in order that the property bought by testator would pass intestate to his heirs at law. Sustaining plaintiffs' contention that the specific legacies adeemed, the Court stated: The cases where the Court has looked to the intent of the testator were not overruled, but were distinguished by Green v. Green, supra, on the ground that "[t]hose cases and others of similar import illustrate the modification of the rule when the language of the devise is sufficiently comprehensive *93 to prevent the application of the principle of ademption." Our research reveals that the North Carolina cases on ademption are based on acts of the testator or events happening during the lifetime of the testator while he retained testamentary capacity. Thus, the question presented for decision is apparently one of first impression in this jurisdiction. The question of ademption by extinction or alienation by act of a trustee or guardian where the ward remains mentally incompetent until death, has been considered by many other jurisdictions, and a sharp conflict as to the rule in such cases exists among various courts. The English rule holding that where the testator has become mentally incompetent and his guardian or trustee has dealt with his or her property so that it does not remain in specie in the estate of the testator at the time of his death, the bequest or devise is adeemed, is recognized, among others, by New York, Pennsylvania and Vermont. Hoke v. Herman, 21 Pa. 301; In re Barrows' Estate, 103 Vt. 501, 156 A. 408; Holmes v. Goodworth, 7 L.J.Ch. 128 (1829 Eng.). One of the leading cases applying the English rule is In re Ireland's Estate, 257 N.Y. 155, 177 N.E. 405. There testator owned common and preferred stock in a corporation at the time his son was appointed committee of his estate and person because of testator's incompetency. The committee sold all of the preferred stock and used a part of the proceeds for the care of testator until his death. Holding that a specific bequest of the preferred stock was adeemed, and that the incompetency of the testatorsuch that testator could exercise no intention in the matter was immaterial, the Court stated: The Scottish rule, or the rule of necessity, holds that a conversion of the subject matter of a specific legacy by the guardian or trustee of an insane testator does not adeem the legacy unless it can be shown not only that it was a proper and necessary act on the part of the trustee or guardian, but that it would have been a necessary and unavoidable act on the part of the testator if sui juris. Macfarlane v. Macfarlane, 47 Scot.L.R. 266, 1 Scots.L.T. 40. Closely allied to the Scottish rule is the view taken by Illinois, Missouri, New Jersey, and other jurisdictions, that the relationship between the trustee or guardian and the incompetent testator is a trust relation, the estate is a trust fund for support of himself and his family, and the original character of the estate may be interfered with only to the extent necessary to provide support for them and pay debts thus incurred, including cost of administration. *94 In the case of Lewis v. Hill, 387 Ill. 542, 56 N.E.2d 619, real estate was specifically devised by an incompetent testatrix and thereafter was sold by her conservator under order of court for the purpose of providing funds for incompetent's support, and the testatrix died a short time later, leaving unexpended funds from the sale in the hands of the executor which were not needed to meet any debts or costs of administration. The Court held that no ademption of the devise resulted, and that the devisee was entitled to receive the remaining fund, which under the circumstances must be regarded as a substitute for the land from which it was derived, and which would pass under the will to the person to whom the land had been devised. The Court considered that the conveyance made by the conservator was in no sense to be regarded as a conveyance by the incompetent, and that the conversion of the real estate into personalty was for the particular purpose ordered by the court. See also National Board of C. W. B. M. v. Fry, 293 Mo. 399, 239 S.W. 519; Re Cooper's Estate, 95 N.J.Eq. 210, 123 A. 45, 30 A.L.R. 673. Reaching results similar to the trust fund theory, other jurisdictions such as Michigan and Virginia rely on the theory of equitable conversion. In the case of Bryson v. Turnbull, 194 Va. 528, testatrix became mentally incompetent and remained under guardianship until her death. During the guardianship the guardian received proceeds from the sale of timber, from a condemnation suit filed by the United States Government, and from a partition proceeding, all under order of court. The Virginia court referred to a number of statutes demonstrating that it was the legislative intent that the character of an incompetent's land not be changed except to the extent required, and that the proceeds received be impressed with the character of the land. While the Virginia case does not deal strictly with the subject of ademption, it applies the doctrine of equitable conversion and considers the guardian of an incompetent merely a custodian and conservator of the estate, without power to change the descent or distribution of incompetent's property. Looking to our own statutes, we find that G.S. § 33-32 provides: In construing G.S. § 33-32, this Court in Brown v. Cowper, 247 N.C. 1, 100 S.E.2d 305, speaking through Parker, J. (now C. J.), stated: Although this case applies to an intestate, we see no reason why, upon the statute and the principles enunciated above, this rule should not apply to an incompetent testator. American Law on Property, Vol. 3, Sec. 14.13, p. 608, states: Also, in Wiggins: Wills and Administration of Estates in North Carolina, § 143, p. 463, we find the following: In the instant case we hold the sale of the property of Rebecca Kennedy by the trustee under order of court did not by operation of law cause an ademption of the specific devise of the lot and store building as set out in Item Third of her will. To the extent that the proceeds of such property remain in and are traceable into the estate at her death, without having been applied to the support or expenses of the said Rebecca Kennedy, and are not needed to meet debts or costs of the administration, the proceeds will be regarded as retaining the character of realty so that the specific devise in Item Third will not be adeemed. G.S. 33-1 in part provides: Trustee and ward is a trust relation in which the trustee acts for the ward, whom the law regards as incapable of managing his own affairs. The legal title to the property is in the ward, the trustee being merely the custodian, manager, or conservator of the ward's estate. Owen v. Hines, 227 N.C. 236, 41 S.E.2d 739. In his limited capacity as custodian or conservator, the trustee has no power to change the will of his ward by merely commingling assets in his hands. To so hold would reach the preposterous result of allowing *96 a guardian or trustee to rewrite and alter the provisions of a will so as to destroy the testamentary intent of the testator by merely commingling funds. Jury trial having been waived, the judge's finding of fact that the funds in the estate "were traceable to a part of the proceeds of the sale of said Hay Street store building," being supported by competent evidence, is as conclusive as the verdict of a jury. Branch Banking & Trust Co. v. Bank of Washington, 255 N.C. 205, 120 S.E.2d 830. Affirmed.