Case Name: IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Chap. 111, P.L. 1963). and IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Ch. 112, P.L. 1963). and IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Chap. 113, P.L. 1963)
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1964-01-17
Citations: 261 N.C. 1
Docket Number: 
Parties: IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Chap. 111, P.L. 1963). and IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Ch. 112, P.L. 1963). and IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Chap. 113, P.L. 1963).
Judges: PARKER and ShaRp, JJ., join in dissenting opinion.
Reporter: North Carolina Reports
Volume: 261
Pages: 1–17

Head Matter:
IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Chap. 111, P.L. 1963). and IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Ch. 112, P.L. 1963). and IN THE MATTER OF: THE TRUSTEESHIP OF SARAH GRAHAM KENAN. IN RE: PETITION TO THE RESIDENT JUDGE OF THE FIFTH JUDICIAL DISTRICT (Pursuant to Chap. 113, P.L. 1963).
(Filed 17 January 1964.)
1. Constitutional Law §§ 2, 6—
Within its compass the Constitution, is supreme and any governmental act which violates its mandates or which .thwarts the poweir granted to •the United States is void.
2. Constitutional Law § 23—
The constitutional prohibitions against the taking of private property without due process of law limits the powers of -the executive and judicial branches 'as well as the legislative branch, and protects incompetents equally with persons of sound mind. Constitution of North Carolina, Art. I, § 17; Fifth and Fourteenth Amendments to .the Constitution of the United States.
3. Same—
The constitutional prohibitions against the 'taking of private property except by due process of law preclude the Legislature from sanctioning .the taking of a person’s property except in satisfaction of a legal obligation or for a public purpose upon the payment of just compensation.
4. Same; Insane Persons § 4—
A count of equity may not, either in the exercise of its inherent jurisdiction or with legislative samction (G-..S. 35-29.1, .4, .5, .10, .11, .16), authorize the taking of income o.r corpus of the estate of an incompetent for a purpose other than the incompetent’s own support and the discharge of the incompetent’s legal obligations.
5. Same— Court may sanction gift to charity by trustee of incompetent
only upon finding that incompetent, if sane, would make such gift.
A court of equity may not authorize the fiduciary of an incompetent to make gifts to charity either from the income or the corpus of the incompetent’s .estate when such gifts are based upon the fiduciary’s sense of moral fitness or judgment in the proper management of the estate in view .of the rate .of income tax paid by the estate or the difference between the rate .of gift and inheritance taxes, since such order would amount to a .taking of property in derogation of the incompetent’s constitutional rights, but the court may authorize the fiduciary to make gifits to charity only on a finding .based upon the preponderance of the evidence at a hearing duly had after notice -that the incompetent, if then of sound mind, would make such gifts.
6. Same; Appeal and Error § 49—
Where upon the hearing by a count of equity of a fiduciary’s application for authority to make charitable gift® from the estate of his- incompetent, ■there is no evidence that the incompetent, if sane, would make such gifts, iordar authorizing the fiduciary to make such gifts, must be reversed, since such order must be predicated upon a finding based on evidence that the incompetent, if sane, would have made such gifts.
Higgins, J., dissenting.
Parker and Sharp, JJ., join in dissent.
Appeals by W. C. Murchison and Louis A. Burney as guardians ad litem and iby W. R. Kenan, Jr. and A. R. MacMannis as trustees from Mintz, J., June 1963 Ciwil Session of New HaNOveR.
Sarah Graham Kenan (hereafter Mrs. Kenan), a resident of New Hanower Ooumty was, in- M'ay 1962, found by a jury to. be “physically iand mentally incompetent from want of understanding to manage her ■affairs 'by reason of [physical and mental weakness on account of old age, disease or other like infirmities.” Based on this finding the clerk of the Superior Oourt adjudged her incompetent and, as authorized by G.S. 35-2, 'appointed her nephew, Frank H. Kenan, «as trustee “to con trol and ¡handle .the person, and entire estate oí. Sarah Graham Kenan wheresoever located.”
In March 1963 the Legislature enacted three statutes, c. Ill, 112, and 113, S. L. 1963, codified a® G.S. 35-29.1 — 29.4, 29.5 — 29.10, and 29.11 — 29.16. These statutes authorize a guardian or trustee of an incompetent with the approval of the resident judge of the Superior Oourt to make gifts for religious, charitable, or educational purposes. 0. Ill permits gifts to be made from income, c. 112, from principal, and o. 113 permits the trustee to surrender the right to revoke a trust created by the incompetent and make a gift of the reserved -life estate.
In May 1963 Frank H. Kenan as trustee of Mrs. Kenan filed three petitions with the 'clerk of the Superior Oourt. In -the first he sought authority to make gifts aggregating $731,600 .from the income of his ward, in the second, a gift of $100,000 from the principal, and in the third, authority to surrender the right reserved by incompetent to revoke a trust created by her in 1956 and to donate to designated institutions the income reserved for her life.
Summarized, the petitions allege: Mrs. Kenan is and was in 1962 a resident of New Hanover Oounty. She was there adjudged incompetent. Petitioner was appointed a:s trustee of her person and estate. It is improbable that she will hereafter have mental capacity to manage her affairs. She is a widow. She has no descendants 'and will never have any. Her estate, worth many millions, consists in part of a revocable inter vivos trust created by her in December 1956. Her -annual income for the past five years has substantially exceeded $2,000,000. Her federal taxable income for 1963 is estimated -to exceed' $2,800,000. Her federal and state -income taxes for 1963 iare not expected to exceed $2,000,-000. Expenditures for her maintenance in the five years preceding 1962 averaged $31,000. They were $35,500 for the year 1962, 'and are expected to amount -to that sum in 1963. After the payment of -all taxes and other expenses of the incompetent and the making of 'the gifts as proP'osed, -the -remaining income would be adequate to. maintain Mrs. Kenan in the manner she is accustomed to and in excess of .twice .the sums expended .annually for 'her maintenance for the .preceding five yeans. The bulk o-f Mrs. Kenan’s estate consists of stocks and bonds deposited for safekeeping in. New York. She owns her home in Wilmington and other tangible property located in North Carolina. She (hias bank 'accounts in North Carolina and New York. On the same day in 1955 she executed two related testamentary writings. One, designated her North Carolina will, -disposes of .property located here; the other, designated her New York will, disposes of property located in that -state. Each of the proposed donees meets the -requirement of the particular statute under which petitioner seeks authority to act.
Tlhe gifts proposed ¡to ibe made from income total $731,600, from principal, $100,000, .and from the surrender of incompetent's right to receive the income from the 1956 trust created by shea*, approximately $300,000 per annum for her life.
The petition 'seeking authority to make gifts from income contains allegations in the language of G.S. 35-29.2(1); .the petition seeking authority ix> malee a gift from principal contains allegations in the language of G.S. 35-29.6(1). The proceeding to surrender the right to revoke the inter vivos trust and make a gift of Mrs. Kenan’s right to receive 'the income for her life not only seeks to. make a gift to' tax-exempt ibeneñciarieis but would impose a tax liability on Mrs. Kenan’s estate. Petitioner, in 'that proceeding, alleged:
“(A) That all gift taxes which will -be.incurred by reason of the making of said trust irrevocable .and the making a gift of the 'lifetime interest to charity are properly -payable out of the prin-oiioal assets of the estate of the incompetent .rather than from the •principal 'assets held in said revocable inter' vivas -trust and no part of said gift taxes should be paid out of said revocable inter vivos trust assets; that the long term effect under the present Internal Revenue Code and Rulings would enable the estate of the inooanp'etent to pay substantially leas 'in gift taxes than would be incurred in estate and .inheritance taxes by reason of the assignment of income and declaration of irrevoraibllity because gift .taxes are computed at a lower rate compared .to the maximum rate of estate 'and inheritance taxes and are a credit against any estate ■and inheritance taxes which might be payable with respect to the trust estate and because the 'amount paid on gift taxes will not be subject to' estate or inheritance taxes. In addition, it would save executors’ fees .and commissions on the amount of the gift taxes •and administration costs in .connection therewith and would constitute sound, wise, progressive, needed and essential estate planning in the best interests’of the incompetent -and of those who stand to take this estate upon her death and is within the discretionary authority .of the Court .and'it .is requested by your petitioner that he be permitted to raise sufficient funds for the purpose of paying said gift taxes by selling, or borrowing on the security of, such of the securities as your petitioner shall determine Which are owned by the incompetent and are now held by Morgan Guaranty Trust Company of New York in -custody in New York, New York. That in all probability, the incompetent, if ■competent, would take the necessary steps to accomplish these purposes. To allow the matter to remain in status quo with reference to the trust would serve only to needlessly deplete the estate and would benefit nobody except the executors or administrators of the incompetent’s estate and the taxing authorities.
“ (B) The petitioner respectfully petitions the Court to effectuate this sound estate planning, based on the tax and other economies involved and for the preservation of' the estate of the incompetent which the incompetent would cto for herself if competent, and eliminate what would otherwise be an unjust penalty and treatment of an .incompetent and 'which would not befall a competent person making a sound estate plan.”
Notice and summons were served on (1) tboise who would take as heirs or distributees if Mrs. Kenan had died Whan, the petitions were filed, (2) those who would take as legatees or devisees under her wills, (3) fihe 'trustees of ¡the inter vivos 'trust created in December 1956, and those ¡beneficially interested in the trust. Guardians ad litem were appointed for Mrs. Kenan -and minor or other incompetent ‘beneficiaries.
Murchison, .guardian ad litem for Mrs. Kenan, ¡and Burney, guardian ad litem for minors and unborn parties, by answers challenge the right of ■the trustee to make the .proposed gifts. They allege .the statute? (o. Ill, 112, and 113, S.L. 1963) violate provisions of .the Constitutions of North Carolina and of the United States. Among other constitutional rights asserted to be violated if the gifts are authorized are Art. I, sec. 17 of the Constitution of North Carolina and the Fifth and Fourteenth Amendments of the Constitution of the United States.
W. R. Kenan, Jr. and A. It. MacMannis, two. of the trustees of the trust created by Mrs. Kenan in 1956, aver they ¡seek to faithfully perform the duties Mrs. Kenan imposed on them. Their answer to sec. 15 of the petition filed under* -the provisions of c. 113, S.L. 1963, reads:
“ (A) Answering the allegations of paragraph 15 (A) of the Petition, these respondents admit that no part of the gift taxes should be paid out of the revocable inter vivois trust assets. With regard to toe other allegations of paragraph 15(A), these respondents deny 'any knowledge or information sufficient to form a belief ais to toe truth thereof, except .as to such allegations which may be questions of law, which they are informed and believe that they ■are not required to- answer.
“(B) These respondents -deny any knowledge or information sufficient to form a belief as to the truth .of allegations of paragraph 15(B) of toe petition.”
Sec. 2 of tibeir further answer reads:
“Thiat your respondents ¡are informed and believe that the trust ■agreement dated December 26, 1956, is a validly executed and existing contract for which consideration has passed between the panties. That among other things the .trust agreement provide® in effect as .follows:
“ (a) Article 1-A. The net income shall be paid to. or .applied for ■the benefit of the donor iso long as ¡she shall live.
“ (b) Article 2-A(l). That in the event ¡any beneficiary shall be ‘incompetent,’ that the income payable to' isaid beneficiary may be paid to* the guardian or committee or other legal ¡representative wherever appointed of the -said incompetent.
“ (¡c) Article 2-D. That no beneficiary shall have the right to ¡dispose of or to assign or transfer .any income from said trust until the same shall be paid or distributed to such beneficiary.
“ (d) Article 5. The donor reserves .the right to -revoke or amend ■this .agreement 'at ¡any time .and from time to time by a written instrument other than a will, duly executed ¡and acknowledged by her ¡and delivered during her life to- ¡the trustee .ait the time in office.
“That under these ¡provisions of the said revocable -trust agreement dated December 26, 1956, it was ¡clearly tire intention of the donor that she should receive the net income from said trust so long as áhe should live, and ¡that ¡in tire event she became incompetent that the said income should be paid to- her guardian ¡or duly ¡authorized legal representative; that no person entitled to receive income from ¡said trust has the ¡right to. assign or dispose of the income ¡prior to its receipt, and that she ¡alone reserved the right to revoke or amend the said trust agreement ¡during her lifetime. That the ¡effect of the relief requested by the ¡petitioner ¡in this action would be to rewrite the provisions of the contract to -completely change donor’s intention with respect to- the paragraphs and articles hereinabove referred to, and that tirase respondents are informed and believe ¡that the court is without authority to rewrite ¡said trust agreement in the respects requested.”
Judge Mintz, resident judge of the Fifth District, of which New Hanover is a part, presided over the June 1963 Session. The parties stipulated that the proceedings might be consolidated for the purpose .of taking testimony, and waived a jury trial on all factual questions raised by the pleadings, except as to the probability of Mrs. Kenan’s regaining .mental capacity. To determine that question, /the court submitted this issue to a jury: “Is it improbable. that Sarah Graham Kenan, incompetent, will recover competency during her lifetime?” The jury answered in the affirmative.
Judge Mintz made findings of fact in each proceeding. Except as noted in ithe opinion, these findings are in accord with the allegations ■of the petition'. Based on .the factual findings, ¡the court drew legal conclusions and' entered orders authorizing petitioner to make ¡the gifts ¡as requested except the ¡proposed gift of $125,000 to The North Ctaolma Episcopal Church School for Boys, Inc., ¡which was not then authorized.
John T.. Manning and Poisson, Marshall, Barnhill -& Williams by Alan A. Marshall for 'petitioner appellee.
Hogue and Hill by C. D. Iiogue, Jr. for A. B. MacMannis and William B. Kenan, Jr., trustees under a revocable tmst agreement dated December 26, 1956, appellants.
Wallace C. Murchison and Louis A. Burney, guardians ad litem, appellants.

Opinion:
Rodman, J.
The appeals of Murchison ¡and Burney ¡ais guardians ad litem are directed to the orders entered in each proceeding. The appeal of MacManniis ¡and Kenan as trustees is directed to¡ the validity of the order entered in -the proceeding seeking permission to give away Mrs. Kenan's right to receive for her life the income from the trust ¡created by her.
Defendant Murchison, appointed by the court to protect Mrs. Kenan's rights, challenges both the right of the trustee to -make and the power of the Legislature or the court to authorize 'the proposed gifts.
The question for decision then is: Do-the facts found, standing alone, suffice to sustain the order? The ¡answer must, we think, be in the negative.
Ours .is ¡a constitutional form oif government. "It is .axiomatic under our system ¡of government that the Constitution within its compass is ¡supreme as the established' expression of the will and purpose of the people. Its provisions must be observed ¡by all." In re Advisory Opinion House Bill 65, 227 N.C. 708, 43 S.E. 2d 73.
Any governmental act which ¡overrides the restrictions declared in ¡our Constitution or which ¡thwarts the powers granted to the United States is void. S. v. Felton, 239 N.C. 575, 80 S.E. 2d 625; Freeman v. Comrs. of Madison, 217 N.C. 209, 7 S.E. 2d 354; Bayard v. Singleton, 1 N.C. 5.
Seic. 17, Art. I, of p-m^Oonrtitikion, imposes this limitation -on govern-, mental .auttlToriby:: "No person ¡ought .to. be . . . disseized of bis freehold . or in any manner deprived of . . . ills property, but by the law of the land." This limitation on governmental authority hais been in force moe the adoption of our first Constitution in 1776. See sec. 12 of .that Constitution.
It is a matter of common knowledge .that North Carolina delayed ratification of the Constitution of the United States until Congress bad submitted to the States -amendments guaranteeing fundamental right®. Among the amendments -so submitted was .the Fifth, declaring: "No person áiali . . . be deprived of . . . property, without due process of law; nor .sinail padvate property be taken for public use without just compensation." The Fourteenth Amendment to- the Constitution of the United States isays: "No state . . . shall . . . deprive any person of life, liberty, or property, without due process of law; nor deny to any person ¡within its jurisdiction the equal protection of the laws." These constitutional limitations .are not .confined to- the Legislature. They are applicable to courts and to- the -executive 'branch of ¡the government. It is immaterial, therefore, whether a ¡court of equity has the authority, without legislative sanction, to authorize the use of 'an incompetent's income or the principal of -his estate for a purpose other ¡than -his own support ¡and the discharge of his legal -obligations. Blake v. Respass, 77 N.C. 193, or whether the right to so direct is dependent upon legislative authority. Brooks v. Brooks, 25 N.C. 389; In the Matter of Latham, 39 N.C. 231; In re Hybart, 119 N.C. 359; Binney v. R. I. Hospital Trust Co., 110 A. 615.
It scarcely need be said that the constitutional limitation against taking of property of a citizen affords -the same protection to -a lunatic that it .affords ¡to- a person of ¡sound mind.
Tire Legislature cannot sanction the taking of one's property unleisis (-a) in satisfaction of -a legal obligation, or (<b) for a public purpose, Utilities Comm. v. Story, 241 N.C. 103, 84 S.E. 2d 386; Charlotte v. Heath, 226 N.C. 750, 40 S.E. 2d 600; Cozard v. Hardwood Co., 139 N.C. 283; and when taken for a public purpose, just compensation must be paid. Davidson v. Stough, 258 N.C. 23, 127 S.E. 2d 762; Eller v. Board of Education, 242 N.C. 584, 89 S.E. 2d 144.
An interesting illustration of the scope of the -constitutional limitation against -taking of property of -a citizen is to be found in Allen v. Peeden, 4 N.C. 442. There the Legislature enacted a statute emancipating slaves of .a deceased owner. Although the deceased bad expressed ¡a wish that the slaves be emancipated, ¡the ¡statute was ¡held void -because title to the slaves had passed to- others upon ¡the death of the former owner.
Tibe motives 'prompting the filing of the several petitions are in mo way challenged. The gifts, which the trustee proposes making for 'his wand, are to deserving beneficiaries and would undoubtedly be .of material assistance in promoting the laudable purposes for which each was created and is mow functioning.
The amounts proposed to be given from the current income would largely be offset .by a reduction in income taxes. The net cost would still leave Mrs. Kenan 'with ample income for her own needs. She has no financial' (legal) obligation which would be adversely affected. The gift from the principal and the taxes to foe paid from the principal for the privilege of .surrendering the life -income from the trust estate, while large when- considered as individual items, are relatively small in relation to the total of Mrs. Kenan's estate. If the gifts are authorized, there will be a substantial saving in estate taxes.
While am incompetent's .property may not, either with legislative sanction or court order, foe taken for .charitable purposes notwithstanding the part not taken is ample for incompetent's needs, Monds v. Dugger, 144 S.W. 2d 761, Binney v. R. I. Hospital Trust Co., supra; it is nonetheless .true that courts of equity have authorized the gift of a part of incompetent's income or principal.
A .court may authorize a fiduciary to make a -gift of <a part of the estate of an incompetent only on a finding, .on a preponderance of the evidence, .at a hearing of which interested parties have notice, .that the lunatic, if then of .sound mind, would make the gift. Appellees' argument -that the gift may be authorized "if the court under all of the circumstances believes that such gift should foe made," if accepted ais a correct statement of the law, would permit the court to. .do that which the lunatic had not done and would not do if sane. Such an -order, would amount to a taking of property in derogation of 'lunatic's constitutional rights.
Perhaps the most frequently cited ease on the power-of a court of equity to authorize the use of an incompetent'is property for purposes other than his own support and the support of those to whom he owes a legal obligation is Ex parte Whitbread, 35 Eng. Rep. 879, decided in 1816. There a niece of the incompetent sought an allowance' from his estate. Lord Chancellor Eldon said: "The difficulty I have, had was as to the extent of relationship to. which -an allowance ought tofoe-'gr.añted. I have found instances in which the Court has, in its- allowances- to the relations of the Lunatic, gone to a further distance than grandchildren —to brothers and other collateral kindred; and- if we' get to. the .principle, we find that it is not ¡because the parties-jare next ¡of kin. of .the Lunatic,lor as such, have any right to an-allow anbe;, ,bu,t-'becay,$e?,the Court will not refuse to do, for the benefit of the Lunatic, that which it is probable the Lunatic himself would have done." (Emphasis supplied) .
In the Matter of The Earl of Carysfort, 41 Eng. Rep. 418, the committee oif tiie person of a luna,tic proposed that an annuity be granted to a personal servant who had served the lunatic for many years. The allowance was1 made upon the statement that if the lunatic was sane he would approve.
In the Matter of Willoughby, decided in 1844, 11 Paige (N.Y.) 257, a stepdaughter of the incompetent sought an allowance. The chancellor isaid: "The court, in isucih cases, acts for the lunatic, 'and in reference to hiis estate, las it supposes the lunatic himself would have acted if he had been1 of sound mind."
In In re Strickland, 6 Ch. Ap., 225, a donation was requested by the officials of a church and school. The lunatic had an income after the payment of annuities and other charges of about 2,656 pounds. The sum of 900 pounds was set aside 'annually for liáis maintenance "and it appeared! that his comfort could not be increased by any addition to it." The committee of the lunatic's 'estate -and person requested authority to make a donation of 250 pounds to' the 'building of a .church and a like sum to- the building of a school. The court authorized the donations, citing as authority therefor Ex parte Whitbread, supra, and Oxendin v. Lord Crompton, 2 Ves. 69.
In In the Matter of Heeney, 2 Barb. (N.Y.) 326, the chancellor said: "In tire case .under' consideration, the lunatic, when in full possession of all his faculties, placed himself in the situation of a father to> the two young ladies mentioned in- the petition, and supported them as members oif his family and sent them to a boarding school; where one of them completed her* education 'and has again returned and become a member of Iris family, leaving the other still at school. I have no doubt, therefore, that if Mr. Heeney had retained the full possession of his faculties he would have continued to 'support them in the same way while .they remained unmarried. I shall therefore but carry out bis undoubted intentions, by directing the committee ho let these two young ladies remain in the family and be supported as they have heretofore been, until their marriage, or the death of the lunatic, or the further order of the court."
In a later New York case, In re Flagler, 224 N.Y.S. 30, a second cousin of Mrs. Flagler (the incompetent) sougjbt an. allowance from the surplus income. The court said: "In granting application® of this character 'the .court is not actuated by any supposed interest which the applicant may have in the property of the incompetent. Relief may be tad upon the principle -that tihe court will acst iwitlb reference to ¡the lunatic amid for ibis 'benefit ais it ils probable that he would have acted for himself, i-f he were of sound mind." The 'order there approved was reviewed by the New York Count of Appeals, Re Flagler, 162 N.E. 471. That 'Court said: "If Mrs. Flagler today could decide upon, the disposition o,f itLhe irnoome of her great estate, moral or charitable considerations would dictate her decision only to the extent that islhe felt their force. Her -great 'affluence might impel -her to .relieve the distress of her cousin; -the -law would not compelí her -to- do so- if she decided otherwise. The power of the court ,to dispose of her income is mot plenary. The court may mot be moved by its own' generous impulses in the disposition- of the income of ithe incompetent. In reaching 'decision it may give moral or charitable consider,1 ations -only such weight a© it finds that the incompetent herself would have -given to them. Allowances for the support -of collateral relatives of the incompetent have been made 'upon the theory that the lunatic would, in all probability, have made such payments if he had been of sound mind.' Re Lord, 227 N.Y. 145, 124 N.E. 727. The appellate'division correctly held that-the allowance made at special term may .be justified upon no other theory." See also In re Hudleson's Estate, 115 P. 2d 805; In re Brice Guardianship, 8 N.W. 2d 576; Re Beilstein, 62 N.E. 2d 205; Potter v. Berry, 53 N.J. Eq. 151; and the annotations in 34 L.R.A. 297, 59 A.L.R. 653, and 160 A.L.R. 1435.
A summary of the English .and Irish oases dealing with the right of a 'court of equity to use an incompetent's estate other than for his own maintenance .and the maintenance and support of his dependants may be found in an article entitled "The ¡Surplus Income -of a Lunatic," 8 Harv. L. Rev. 472 (1894-95).
The power -and limitation on the power of a court of -equity to authorize a fiduciary with respect to the use or other handling -of the estate entrusted to him is illustrated in- two recent decisions of this Court.
In Ford v. Bank, 249 N.C. 141, 105 S.E. 2d 421, .adult children of an 'incompetent sought permission to use a part of his estate to purchase a home. We said: "No one can doubt that financial .assistance would ibe of benefit to the children of the incompetent occupying ¡the economic status in life depicted by the -evidence and the findings ¡of fact. If their father were mentally competent, would he not .aid them? If so, the court has the authority to use his money for that purpose."
In Cocke v. Duke University, 260 N.C. 1, we denied authority to invest -trust funds in securities not sanctioned by the trust agreement. As the basis for the denial, we quoted with approval the. language of Carter v. Kempton, 233 N.C. 1, 62. S.E. 2d 713: "It is not tibe province of the courts to substitute their judgment or 'the wishes of the beneficiaries for rtlhe judgment and wishes of -the testator."
After oral argument 'appellees, with our permission, filed a supplemental brief .which contained a copy of the opinion of the chancery court of the state of Delaware in the case of In re Dupont, 194 A. 2d 309. There the 'chancellor as the basis of his oirder 'authorizing large gifts from the incompetent's estate, said: "The guardians have offered substantial and convincing proof that the ward in fact intended to make such distributions prior to his incompetency."
Relating to the question of what Mrs. Kenan would do if competent, the court -found in the proceedings relating to gifts from 'income and principal:
"In the absence of tax deductible gifts, income retained by Sarah Graham Kenan would be depleted in excess of 85% by State iand Federal income taxes and any balance thereof remaining in her estate at her death would be depleted in excess of 75% by death taxes; so that, even in the absence of current expenditure by the general trustee, less than 4% of the income received by Sarah Graham Kenan would remain to' be transmitted to her legatees, heirs or next of kin upon her death . . . ."
"Petitioner herein, 'trustee of the estate and person of Sarah Graham Kenan, has concluded that it is wise 'and provident, and consistent with the desires of Sarah Graham Kenan (if she were competent) to- make the .gifts herein authorized 'and directed."
"It is proper in the exercise of sound judicial discretion, if not mandatory under the provisions of Chapter 111 of the 1963 Session Laws of North Carolina, to> approve such declaration and gifts . . ."
Based on his findings of fact the court concluded as a matter of law:
"Considering the situation of Sarah Graham Kenan and her estate, it is in no way detrimental to Sarah Graham Kenan, as a practical matter, but rather it is wise and provident for the petitioner to' malee the gifts herein authorized and directed.
"It is reasonable to assume that if Sarah Graham Kenan were competent and heeding sound- advice, she would make these or similar gifts.
"It is proper in the exercise of sound judicial discretion, if not mandatory under the provisions- of Chapter 111 of the 1963 Session Lews of North Carolina, to-.approve these gifts'." . .
In the proceeding relating to the surrender oí life income reserved in the trust, the 'Court found:
"The Petitioner herein, trustee of the estate ¡and person of Sarah Graham Kenan, has 'concluded that, for the total net benefit of Sarah Graham Kenan land the natural objects of her bounty, it is wise and provident to declare the trust irrevocable and to make gifts of the life income to the donees named in paragraphs 30 and 31 above."
Based on its factual findings the court concluded as a matter of law:
"Considering the situation of 'Sarah Graham Keoan 'and her estate, it is m no way detrimental to Sarah Graham Kenan, and from the standpoint of total net benefit to her and the natural obj ects of her bounty, it is wise and provident for .the Petitioner to declare the 1956 trust agreement irrevocable and to make gifts of the life income to the donees specified in the Order herein. Indeed, it would be improvident not to' dp so.
"It is reasonable to assume that if Sarah Graham Kenan were competent and heeding sound advice, she would declare the 1956 trust agreement irrevocable and make these or similar gifts, in view of the amount of 'the estate involved.
"It is proper in the exercise of ¡sound judicial discretion, if not mandatory under the provisions of Chapter 113 oif the 1963 Session Laws of North Carolina, to approve ¡such declaration and gifts . .
The language in which the court phrases its findings of facts 'and its legal conclusions is, we think, significant. They 'amount only to' this: The coat to Mrs. Kenan of making -the gifts is, when considered- with the size ¡of her income and the principal of her estate, insignificant; and the ¡trustee, not Mrs. Kenan or the court, hais 'concluded that it is wise and consistent with the desires of Sarah Graham Kenan, if she were competent. The legal conclusion that it is reasonable to assume that Mrs. Kenan, if competent, "and heeding sound ¡advice," would make the gifts is not supported by the findings of fact. If it be said that although (stated as a conclusion of law this is -in reality ¡a finding of fact, we find no evidence to support such a finding.
Mr. MacMaimis, selected by Mrs. Kenan as one of .the trustees of the trust created by her in December 1956, has acted as financial ad-visor and accountant for Mrs. Kenan, her brother, Mr. William R. Kenan, another 'trustee appointed by Mrs. Kenan, and her sister, Mrs. Wise, for many years. He testified: •
"I did state that I met Mrs. Kenan at least ornee a year, to go over (her ¿meóme tax returns and have her sign them, land that she and I discussed these returns, .and that she was fully aware of the impact of the taxes . She was .aware that her income was being taxed 87% -or 89% for the last ten or fifteen years. That is the fiat percentage .applied to her entire taxable income . I have discussed with Mrs. Kenan .and she was -aware -of -tlhe fact that her ikucome was -being taxed .at clo-se to or perhaps slightly over 90% each year, and that if gifts were -made to 'Charity, which were deductible on the return, -the out-oif-pocket expense to. Mrs. Kenan f-or making those gifts would ibe about 10% of the amount of the •gift, within the applicable limits of deductibility."
John L. Gray, Jr., -a member of the firm of Dewey, Bailantime, Bush-by, Palmer & Wood, ia -prominent law firm in New York City, for many yeans -represented land advised Mrs. Kenan with respect to> legal matters. Mr. Gray specialized "in tire field of estate -and -trust work 'and taxation 'as it relates to those fields-." He drafted Mrs. Kenan's wills. He 'drafted for her the trust 'created in 1956. He did this after consultation with Mrs. Kenan's 'brother, Mr. William R. Kenan, well informed with respect to financial problems -and a generous benefactor of educational and 'Charitable institutions in North Carolina.
There is nothing in the record to- -contradict the testimony of Mr. MacMannis that Mrs. Kenan was well aware of the impact of federal taxes on her income -and her estate. Fully informed ats ©he was, her gifts to charity were $8,160 in each of -the yeans 1958, 1959, 1960, and 1961, and in 1962, the year in which ¿he was adjudged incompetent, $8,360. These charitable .gifts she had been accustomed to' make for many years. After Mrs. Kenan was adjudged incompetent, the -trustee filed his petition with and was authorized by the count by order dated 26 November 1962 to continue to make these charitable -gifts. The largest single .gift which Mr. MacMannis could recollect Mrs. Kenan making in -the past 'twenty-(five or thirty years was'a gift of $25,000.
The orders, hased as they -are, either on a misapprehension of the power of the Legislature -or upon findings not supported by -any evidence, are erroneous and must be vacated.
In view of the conclusion we reach on the fundamental question raised by 'appellants, we deem it unnecessary to lengthen- -this opinion by -discussing the other -assignments of error.
Petitioner may, if he elects, obtain permission to amend his petitions to allege that the authority which he seeks is something which Mrs. Kenan would do, if competent..If permission to- amend is allowed, petitioner may then offer evidence to establish 'the truth of his 'allegations.
The -order -in each proceeding is
Reversed.