Court Opinion

ID: 2726918
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:09:57.955141+00
Date Added: 2024-06-11T10:03:12.442329
License: Public Domain

NO. COA13-1232

                      NORTH CAROLINA COURT OF APPEALS

                            Filed: 5 August 2014

KAREN B. NEVITT in her capacity as
Executrix of the Estate of David
R. Robotham and as Beneficiary of
the Robotham Real Property Trust
as set forth under Article VI of
the Robotham Revocable Trust
Agreement dated August 2, 2011,
     Plaintiff-Appellee,

    v.                                     New Hanover County
                                           No. 12 CVS 2715
RICHARD GORDON ROBOTHAM; WADE A.
NEVITT; RICHARD H. JAGER; STEPHEN
P. SHEFFIELD, JR.; STEPHEN L.
KELTNER; SARA SHEFFIELD; GRIFFIN
E. NEVITT; JACK K. HUMPHREY, JR.;
ROBERT E. NEVITT; WILMINGTON
CHAPTER OF THE COLONIAL DAMES
HISTORICAL SOCIETY; SABRINA
BURNETT; JACK K. HUMPHREY, JR., as
Trustee of the Robotham Real
Property Trust,
     Defendants.

    Appeal by Defendant Sabrina Burnett from judgment and order

entered   3   June   2013   by   Judge   Phyllis   M.   Gorham   in   Superior

Court, New Hanover County.           Heard in the Court of Appeals 4

March 2014.

    Lawrence S. Boehling for Plaintiff-Appellee Karen Nevitt.

    The Lea/Schultz Law Firm, P.C., by James W. Lea, III and
    Paige E. Inman, for Defendant-Appellant Sabrina Burnett.
                                              -2-
       McGEE, Judge.

       Karen B. Nevitt (“Plaintiff”), in her capacity as Executrix

of the Estate of David R. Robotham and as Beneficiary of the

David R. Robotham Revocable Trust, filed a complaint on 11 July

2012 against Richard Gordon Robotham, Wade A. Nevitt, Richard H.

Jager,   Stephen       P.   Sheffield,         Jr.,     Stephen     L.   Keltner,     Sara

Sheffield, Griffin E. Nevitt, Jack K. Humphrey, Jr., Robert E.

Nevitt, the Wilmington Chapter of the Colonial Dames Historical

Society, Sabrina Burnett (“Ms. Burnett”), and Jack K. Humphrey,

Jr.,   as   Trustee     of       the    Robotham       Revocable     Trust    (together,

“Defendants”).              In     her       complaint,          Plaintiff     requested

declaratory     judgment         concerning         whether   a    certain     deed    was

valid.

       Plaintiff   attached            as    Exhibit    A   to    her    complaint,     an

agreement titled “David R. Robotham Revocable Trust Agreement”

(hereinafter “trust agreement”).                    The trust agreement, dated 2

August 2011, was “by and between” David R. Robotham as Grantor

and David R. Robotham as Trustee.                    The trust agreement provided

that, upon the “incapacity or death” of David R. Robotham (“Mr.

Robotham”), “[his] friend, Jack K. Humphrey, Jr., shall serve as

sole Trustee hereunder[.]”                  The trust agreement was immediately

funded   with    ten    dollars         by    the   express      terms   of   the   trust

agreement.      In the trust agreement, Mr. Robotham clearly stated
                                                -3-
that    the    purpose      of     the     trust       was    to     hold    his    “personal

residence      located     at    225      Seacrest      Drive,       Wrightsville       Beach,

North Carolina for [Ms. Burnett’s] remaining lifetime should she

survive me.          It is my intent and desire that [Ms. Burnett] be

provided with uninterrupted and exclusive use and enjoyment of

the residence for as long as she shall live.”

       Plaintiff also attached as Exhibit B to her complaint, a

document      titled      “North    Carolina          General      Warranty     Deed”       (“the

deed”).       The deed, also dated 2 August 2011, identified “David

R.   Robotham”       as    Grantor        and     purported         to     convey     the   real

property at 225 Seacrest Drive in fee simple to Grantee “David

R.   Robotham,       Trustee       [for    the]       David     R.       Robotham   Revocable

Trust.”

       Ms. Burnett filed an answer to Plaintiff’s complaint in

which    she    denied      certain        allegations,            and     asserted     various

counterclaims against Jack K. Humphrey, Jr.                               Jack K. Humphrey,

Jr. filed an answer to Plaintiff’s complaint in which he stated:

“I [] Accept the Request of the Declaratory Judgment by Karen

Nevitt,”       and    he    answered        “Accept”         to      all    allegations       in

Plaintiff’s complaint.

       The trial court held a hearing on 1 May 2013 and heard

testimony from Richard Inlow (“Mr. Inlow”), Jack K. Humphrey,

Jr.,    Ms.    Burnett,     Stephen        Sheffield,         Karen       Nevitt,     and   Mark
                                         -4-
Sheffield.    Mr. Inlow testified that he was the attorney who, at

Mr. Robotham’s request, had prepared the trust agreement and the

deed.      Mr. Inlow agreed that, at the same time Mr. Robotham

executed the trust agreement, Mr. Robotham “signed a deed to

transfer in the [real] property from himself to the trust[.]”

Mr. Inlow testified that he had told Mr. Robotham that “we were

not done until we funded the trust and we had to do that with a

bank account.       We’ll record a deed at the register of deed’s

office.”

      The trial court entered judgment and order on 3 June 2013

and made the following finding of fact number 18: “At the time

of   the   death    of    David   R.    Robotham,     the   David     R.   Robotham

Revocable Trust Agreement dated August 2, 2011 and the Robotham

Real Property Trust were funded with a bank account only.”                      The

trial court concluded         that: “The deed from grantor David R.

Robotham remained within the control of the grantor David R.

Robotham    until   his    death,      was   never   delivered   so    was   not   a

legally valid deed.”        (Emphasis added).        Ms. Burnett appeals.

                            I. Standard of Review

      “‘The standard of review in declaratory judgment actions

where the trial court decides questions of fact is whether the

trial court’s findings are supported by any competent evidence.

Where   the   findings     are    supported     by   competent      evidence,   the
                                        -5-
trial    court’s    findings    of    fact    are   conclusive    on     appeal.’”

Cross v. Capital Transaction Grp., Inc., 191 N.C. App. 115, 117,

661 S.E.2d 778, 780 (2008) (citations omitted).                  “‘However, the

trial court’s conclusions of law are reviewable de novo.’”                      Id.

(citation omitted).

                                 II. Analysis

       First, “[t]he exchanges between the parties covering the

subject in controversy are in writing, and manifest no ambiguity

which    would     require   resort     to    extrinsic      evidence,     or   the

consideration       of    disputed    fact.         Their     construction      is,

therefore, for the [C]ourt.”             Atkinson v. Atkinson, 225 N.C.

120, 124-25, 33 S.E.2d 666, 670 (1945).                It “‘is a fundamental

rule    that,    when    interpreting    . . . trust        instruments,    courts

must give effect to the intent of the . . . settlor, so long as

such intent does not conflict with the demands of law and public

policy.’”       First Charter Bank v. Am. Children’s Home, 203 N.C.

App. 574, 586, 692 S.E.2d 457, 466 (2010) (citations omitted).

       Ms. Burnett correctly observes that the present case “does

not fit the fact pattern” of previous cases regarding “delivery

of a deed from a grantor to a third-party grantee[.]”                    The rule

that “‘the creation of a trust must involve a conveyance of

property,’”      Bissette v. Harrod, ___ N.C. App. ___, ___, 738

S.E.2d 792, 799 (2013) (quoting In re Estate of Washburn, 158
                                                  -6-
N.C.   App.       457,    461,       581       S.E.2d    148,    151     (2003)),           does   not

contemplate the situation in the present case, in which the

settlor and the trustee are the same individual.                                      In Washburn,

this Court has acknowledged that a conveyance is not required

where settlor and trustee are the same individual.                                    Id.    “‘Aside

from   the    situation            in    which    a     settlor    of       a    trust      declares

himself      or    herself           trustee,         separation       of       the     legal      and

equitable interests must come about through a transfer of the

trust property to the trustee.’”                         Id. (citation and footnotes

omitted).

       It is well-established that, “[i]n creating an inter vivos

trust, the creator [settlor] and the trustee may be one and the

same person.”            Ridge v. Bright, 244 N.C. 345, 348, 93 S.E.2d

607, 610 (1956).               Given that the settlor of a trust and the

trustee    are     the        same      person    in    the     present         case,    the    trial

court’s    reliance           on     delivery      of   the     document         labeled       “North

Carolina      General          Warranty         Deed”    is     misplaced.              There      are

multiple      ways       in    which       a    valid    trust     may      be     created,        for

example:

              (1) Transfer of property by a settlor to a
              person as trustee during the settlor's
              lifetime or by will or other disposition
              taking effect upon the settlor's death[; or]

              (2) Declaration by the owner of property
              that the owner holds identifiable property
              as trustee unless the transfer of title of
                                             -7-
            that property is otherwise required by law.

N.C.     Gen.    Stat.   §    36C-4-401         (2013),      see    also       Restatement

(Second) of Trusts § 17 (1959), Restatement (Third) of Trusts §

10(c) (2003) (a trust may be created by “a declaration by an

owner of property that he or she holds that property as trustee

for one or more persons”).               In order to create a valid trust by

transfer, under section (1) above, title to the trust property

has to be transferred by settlor to the designated trustee(s) to

hold for the benefit of the intended beneficiary.                                   Bland v.

Branch Banking & Trust Co., 143 N.C. App. 282, 287, 547 S.E.2d

62, 66 (2001).

       However,     transfer        of    the      trust     property          is    not    a

requirement       for    creating        a     valid    inter       vivos       trust      by

declaration – under section (2) above.                  Because the settlor of a

trust and the trustee may be the same person, it follows that

“where    the    settlor     and   the    trustee      are    the   same       person,     no

transfer of legal title is required, since the trustee already

holds    legal    title.”          76    Am.    Jur.   2d     Trusts       §   46.         The

Restatement Second provides illustrations of ways a valid inter

vivos trust may be created by declaration:

            a. Declaration of trust.     If the owner of
            property declares himself trustee of the
            property, a trust may be created without a
            transfer of title to the property.

            Illustration:
                                       -8-

           1. A, the owner of a bond, declares himself
              trustee   of  the   bond for  designated
              beneficiaries. A is trustee of the bond
              for the beneficiaries.

           So also, the owner of property can create a
           trust by executing an instrument conveying
           the property to himself as trustee. In such
           a case there is not in fact a transfer of
           legal title to the property, since he
           already has legal title to it, but the
           instrument is as effective as if he had
           simply declared himself trustee.

           2. A, the owner of Blackacre, executes,
              acknowledges and records a deed conveying
              Blackacre   to   A  as   trustee  for   a
              designated beneficiary.   A is trustee of
              Blackacre for the beneficiary.

Restatement (Second) of Trusts § 17, Comments                 (1959).        This

method of creating a valid trust ‒ declaration of trust ‒ is

recognized in Ridge, 244 N.C. at 349, 93 S.E.2d at 611 (“when

the owner of personal property, in creating a trust therein,

constitutes himself as trustee, it is not necessary as between

himself   and   the    beneficiary     that    he    should   part   with     the

possession of the property”); see also N.C. Gen. Stat. § 36C-4-

401(2) (2013) (a trust may be created by “[d]eclaration by the

owner of property that the owner holds identifiable property as

trustee   unless      the   transfer   of    title    of   that   property    is

otherwise required by law”); Wiggins Wills & Administration of

Estates in N.C. § 23:3 (4th ed.) (“Where the property owner

declares himself trustee, delivery is not required.”).
                                       -9-
       “The principle that a trust may be created by a declaration

contained in a separate instrument, or in several instruments,

other than the deed conveying the legal title, provided they

have sufficient relation to each other and construed together

evidence such trust, is generally recognized.”                   Peele v. LeRoy,

222   N.C.   123,    125,    22   S.E.2d     244,   246   (1942).      “‘Express’

. . . trusts       are    those   trusts     intentionally       created   by    the

direct and positive act of the settlor, by some writing, deed,

or will, or an oral declaration[.]”                Williams v. Mullen, 31 N.C.

App. 41, 45, 228 S.E.2d 512, 514 (1976) (quoting 76 Am. Jur. 2d,

Trusts § 15, p. 263).

       In the present case, the record on appeal presents two

documents relating to the Robotham Real Property Trust, both

duly executed in front of a notary: (1) the trust agreement and

(2) the deed.       “Where there are two or more instruments relating

to a trust, the instruments should be construed together to

effectuate the settlor’s intent.”             Davenport v. Central Carolina

Bank & Tr. Co., 161 N.C. App. 666, 672, 589 S.E.2d 367, 370

(2003) (citations omitted); see also Smith v. Smith, 249 N.C.

669, 675, 107 S.E.2d 530, 534 (1959) (“All instruments executed

at    the   same   time    and    relating    to    the   same   subject   may   be

construed together in order to effectuate the intention.”).

       A “Statement of Grantor’s Intent” appeared in Section 6.3
                                     -10-
of the trust agreement, and set out Mr. Robotham’s purpose for

creating the trust:

           I am creating and funding this trust in an
           effort to grant Sabrina Burnett exclusive
           use and enjoyment of my personal residence
           located at 225 Seacrest Drive, Wrightsville
           Beach, North Carolina for her remaining
           lifetime should she survive me.       It is my
           intent and desire that Sabrina Burnett be
           provided with uninterrupted and exclusive
           use and enjoyment of the residence for as
           long as she shall live. Furthermore, it is
           my desire that the trust bear the costs
           associated   with    maintaining    the   home,
           including but not limited to, the costs
           associated     with      taxes,      insurance,
           association fees (if any), pest control,
           assessments and necessary repairs.       I have
           attempted to fund the trust with sufficient
           working   capital   to   cover   the   expenses
           associated   with    the   residence    for   a
           reasonable period of time. (Emphasis in
           original).

    The    deed   contained    the    following     declaration    that    Mr.

Robotham   held   the   real   property     at    225   Seacrest   Drive   as

trustee:

           WITNESSETH, that the Grantor, David R.
           Robotham, also known as David Ray Robotham
           (the    “Settlor”),     for     a    valuable
           consideration   (non-taxable   consideration)
           paid by the Grantee, the receipt of which is
           hereby   acknowledged,  has   and  by   these
           presents does grant, bargain, sell and
           convey onto the Grantee [David R. Robotham,
           Trustee, David R. Robotham Revocable Trust]
           in fee simple, all that certain lot or
           parcel of land situated in the Town of
           Wrightsville Beach, County of New Hanover,
           State of North Carolina, and being more
           particularly described as follows:[.]
                                        -11-

       When the      trust agreement and the             deed quoted above           are

considered in conjunction with each other, Mr. Robotham’s intent

concerning the real property at issue in this case is clear.

Mr. Robotham desired that Ms. Burnett have exclusive use and

enjoyment      of    Mr.    Robotham’s       residence      for     Ms.     Burnett’s

remaining lifetime, and intended to hold the property as trustee

for    the    use   and    enjoyment    of   Ms.   Burnett,       as    beneficiary.

Because      we     have   two      contemporaneously       executed        documents

relating to the trust, we do not decide whether either document,

when considered alone, would have been sufficient to create a

valid inter vivos trust by declaration.

       We    must   consider     the   conditional       language      in   N.C.   Gen.

Stat. § 36C-4-401(2) (emphasis added):

              A trust may be created by . . .:

               . . . .

              Declaration by the owner of property that
              the owner holds identifiable property as
              trustee unless the transfer of title of that
              property is otherwise required by law.

We must determine whether our law required additional action,

such   as    recordation,      to    effectuate    Mr.    Robotham’s        intent   to

include the real property in the trust.                      The North Carolina

Comment to N.C. Gen. Stat. § 36C-4-401 states:

              Paragraph (2) [of N.C.G.S. § 36C-4-401]
              differs from the Uniform Trust Code by
                              -12-
          adding the phrase “unless the transfer of
          title of such property is otherwise required
          by law.”   The Uniform Trust Code adopts the
          common law rule that a declaration of trust
          can be funded by declaring assets to be held
          in   trust    without   executing   separate
          documents of transfer.     See the Official
          Comment to this section and authorities
          cited.    North Carolina courts have not
          addressed   this   issue.      The  drafters
          concluded that the best practice is to
          require compliance with state law provisions
          governing the transfer of title in order to
          eliminate questions regarding ownership of
          property and provide better protection of
          the rights of third parties and trust
          beneficiaries.

N.C. Gen. Stat. § 36C-4-401, Comments (emphasis added).

    In the present case, Mr. Robotham made no promise to convey

legal title to Ms. Burnett.    Rather, the record plainly shows

that Mr. Robotham retained legal title to the real property at

issue.    It is well-established that the trustee holds legal

title to trust property.   In re Estate of Pope, 192 N.C. App.

321, 335, 666 S.E.2d 140, 150 (2008) (“There is no dispute that

legal title to the trust assets was lodged in the trustees.”);

see also Strong’s N.C. Index 4th, Trusts and Trustees, § 236

(2008).   The documents at issue in the present case did not

convey, as in transfer or deliver, legal title,      because Mr.

Robotham already held legal title to the real property.    Legal

title remained vested in Mr. Robotham.   We can locate no North

Carolina law requiring the transfer of property when creating an
                                        -13-
inter vivos revocable trust by declaration.                  Other jurisdictions

clearly do not require any transfer of title when creating a

trust by declaration.              See Taliaferro v. Taliaferro, 260 Kan.

573, 580, 921 P.2d 803, 809 (1996) (“Where, as here, the settlor

and the trustee are the same person, no transfer of legal title

is required, since the trustee already holds legal title.”);

Estate of Heggstad, 16 Cal. App. 4th 943, 950, 20 Cal. Rptr. 2d

433, 436 (1993) (“authorities provide abundant support for our

conclusion that a written declaration of trust by the owner of

real property, in which he names himself trustee, is sufficient

to create a trust in that property, and that the law does not

require     a    separate     deed    transferring     the    property    to   the

trust”).        Transfer is, of course, required when the settlor and

trustee are not the same person.              N.C.G.S. § 36C-4-401(1).

    We hold that the trial court erred in concluding: “The

trust     was    never     funded    with     the   real   property[.]”        When

considered together, the trust agreement and the deed created a

valid trust by declaration, which included the real property.

There was not a requirement that Mr. Robotham execute a deed

transferring       title    from    himself    to   himself   as   trustee.      We

reverse and remand to the trial court for further action in

accordance with this opinion.

    In      addition,       assuming    arguendo      transfer     of   the    real
                                             -14-
property was required, that transfer would still have to have

been from Mr. Robotham to Mr. Robotham, as trustee.                                  The deed

was    executed       by    Mr.     Robotham,         as    grantor,       to    himself,       as

“Trustee, David R. Robotham Revocable Trust.”                                This deed was

executed       by     Mr.        Robotham        simultaneously           with     the        trust

agreement.          Once these documents were executed by Mr. Robotham,

the David R. Robotham Revocable Trust was created, and the real

property became part of the corpus of that trust.                                    There is

nothing in these two documents evincing any intent on the part

of    Mr.    Robotham       to    prevent    the      trust       from    taking     immediate

effect,      or     prevent       title     to    the      real    property       from        being

immediately delivered to himself, as trustee.                               Mr. Robotham’s

intent is clear from the documents, and manifests “no ambiguity

which       would    require       resort        to   extrinsic          evidence,       or    the

consideration of disputed fact.”                      Atkinson, 225 N.C. at 124-25,

33 S.E.2d at 670.

       Because there exists no ambiguity in the documents, it is

irrelevant that Mr. Inlow informed Mr. Robotham after the fact

that the transaction would not be “done” until the deed was

recorded.         At that point, the revocable trust had already been

created, the real property was already part of the corpus, and

Mr. Robotham was already trustee.                          Had Mr. Robotham wanted to

revoke       the      trust,       he     could         have      done      so,      but        any
                                 -15-
misunderstanding about the nature of the trust, its corpus, or

Mr. Robotham’s authority under the trust, could not alter the

nature of the trust itself.

    “A conveyance of land can only be by deed.”         New Home Bldg.

Supply Co. v. Nations, 259 N.C. 681, 683, 131 S.E.2d 425, 427

(1969) (citation omitted).      “The word ‘deed’ ordinarily denotes

an instrument in writing, signed, sealed, and delivered by the

grantor, whereby an interest in realty is transferred from the

grantor to the grantee.”     Gifford v. Linnell, 157 N.C. App. 530,

532, 579 S.E.2d 440, 442 (2008) (citation omitted).        Recordation

of the deed was not required to effect transfer of title in this

instance, even assuming transfer of title between Mr. Robotham

and Mr. Robotham as trustee was required, or possible, in the

creation of a trust by declaration.       Washburn, 158 N.C. App. at

461, 581 S.E.2d at 151 (“‘Aside from the situation in which a

settlor   of   a   trust   declares   himself   or   herself   trustee,

separation of the legal and equitable interests must come about

through a transfer of the trust property to the trustee.’”)

(citation and footnotes omitted); see also Ridge, 244 N.C. at

349, 93 S.E.2d at 611 (“when the owner of personal property, in

creating a trust therein, constitutes himself as trustee, it is

not necessary as between himself and the beneficiary that he

should part with the possession of the property”).
                                        -16-
       Therefore,      we     hold   that      the        trial    court    erred     in

concluding:     “The    deed    from    David      R.      Robotham    to    David    R.

Robotham, Trustee, David R. Robotham Revocable Trust . . . was

not delivered and is not a valid deed.”                           Though we do not

believe a properly executed deed                  was required to create the

trust, we hold the deed was properly executed and delivered, and

is therefore valid.         Though the deed has not been recorded, that

does   not    impact    its    validity      in    this        instance.     Lack     of

recordation     only        denies     the     deed        the    protections        that

recordation affords.

       We hold that, in the present case, the documents satisfied

N.C.G.S.     § 36C-4-401(2)      and    served       as    a   declaration    “by    the

owner of property that the owner h[eld] identifiable property as

trustee[.]”        N.C.G.S. § 36C-4-401(2).                Accordingly, the trial

court’s order is reversed.

       Reversed.

       Judges STEELMAN and ERVIN concur.