Chapman v. Citizens and Southern Nat. Bank of South Carolina

• Decision Date: 19 February 1990
• Docket Number: No. 1528,1528
• Citation: 395 S.E.2d 446,302 S.C. 469
• Court: South Carolina Court of Appeals
• Parties: Robert H. CHAPMAN, Jr., Sally Quantz and Alice Ballenger, and Robert H. Chapman, Jr. and T. Sam Means, Jr., as Trustees under the Will and of the Estate of Robert H. Chapman, deceased, Appellants, v. The CITIZENS AND SOUTHERN NATIONAL BANK OF SOUTH CAROLINA, as Trustee under the Will and of the Estate of Robert H. Chapman, deceased, The Citizens and Southern National Bank of South Carolina, as Executor under the Will and of the Estate of Laura Noell Carr Chapman, deceased, and Austin Heaton Carr and Charles Noell Carr, as Legatees, Devisees and Beneficiaries under the Will of Laura Noell Carr Chapman, deceased, Respondents. . Heard

Page 446

395 S.E.2d 446

302 S.C. 469

Robert H. CHAPMAN, Jr., Sally Quantz and Alice Ballenger and Robert H. Chapman, Jr. and T. Sam Means, Jr. as Trustees under the Will and of the Estate of Robert H. Chapman deceased, Appellants, v. The CITIZENS AND SOUTHERN NATIONAL BANK OF SOUTH CAROLINA as Trustee under the Will and of the Estate of Robert H. Chapman, deceased, The Citizens and Southern National Bank of South Carolina, as Executor under the Will and of the Estate of Laura Noell Carr Chapman, deceased, and Austin Heaton Carr and Charles Noell Carr, as Legatees, Devisees and Beneficiaries under the Will of Laura Noell Carr Chapman, deceased, Respondents.

No. 1528.

Court of Appeals of South Carolina.

Heard Feb. 19, 1990.

Decided July 23, 1990.

Thomas E. McCutchen and Hoover C. Blanton, both of Whaley, McCutchen, Blanton & Rhodes, Columbia, and Frank A. Lyles, of Lyles, Lyles & Hammet, Spartanburg, for appellants.

James B. Drennan, III, of Drennan, Shelor, Cole & Evins, Alan M. Tewkesbury, Jr., and Paul B. Zion, both of Holcombe, Bomar, Wynn & Gunn, Spartanburg, for respondents.

GARDNER, Judge:

In this action the plaintiffs seek, inter alia, to have a constructive trust imposed upon the subject property because of an abuse of a confidential relationship which existed between Robert H. Chapman, Sr., now deceased, and his second wife and widow, Laura Noell Carr Chapman, now deceased. The appealed order did not address the existence of a confidential relationship between Mr. and Mrs. Chapman nor did it address the effect that a confidential relationship between them would

                have had on the results of this case.   The appealed order relying, erroneously, we hold, on the case of All v. Prillaman, 200 S.C. 279, 20 S.E.2d 741 (1942) found there was no original fraudulent intent and therefore imposed no constructive trust.   The trial judge, erroneously, we hold, further held that even if the circumstances justified a constructive trust, the court could not impose one because its effect would be to enforce an illegal agreement in violation of the public policy of this state.   The trial court then denied by separate order a petition to amend by holding that there was no agreement between the parties.   We reverse and remand as to both orders
                

ISSUES

The dispositive issues of this case are whether (1) a confidential relationship existed between Mr. and Mrs. Chapman, (2) Mr. Chapman made and left in existence his will containing the marital trust as a result of a trust reposed in Mrs. Chapman arising from a confidential relationship between Mr. and Mrs. Chapman and a promise by Mrs. Chapman that she would not exercise the power of appointment contained in Mr. Chapman's last will or in the alternative during her lifetime make gifts of the subject property to Mr. Chapman's children, (3) the trial judge erred in failing to impose a constructive trust on the subject property and (4) the trial judge erred in holding that even if the imposition of a constructive trust on the marital trust were in order, the court could not impose the constructive trust because this would violate public policy and the law.

FACTS ¹

In 1948 Robert H. Chapman (Mr. Chapman), a widower, married Laura Noell Carr (Mrs. Chapman), a widow of Durham, North Carolina. At the time of his second marriage, he had two adult children, Robert H. Chapman, Jr. and Elizabeth Chapman Means. Mrs. Chapman had two adult sons by her prior marriage, Austin Heaton Carr and Charles Noell Carr. Upon their marriage, Mrs. Chapman moved to Spartanburg to live in Mr. Chapman's home. This was the only home they occupied during the remainder of their lives. At the time of their marriage, Mr. Chapman was an executive at Inman Mills. Inman Mills was founded by Mr. Chapman's father and was family owned.

Elizabeth Chapman married T. Sam Means, Jr. They had two daughters, Sally Means Quantz and Alice Means Ballenger. Elizabeth Means died in 1973. Robert H. Chapman, Jr., Mrs. Quantz and Mrs. Ballenger are the beneficial plaintiffs in this action.

Mrs. Chapman was wealthy in her own right. Her first husband had established a trust administered by the Durham Bank and Trust Company (later the Central Carolina Bank and Trust Company) in Durham, North Carolina (Durham Bank). There is evidence of record that on March 10, 1966, this trust had a value of $170,000. On September 19, 1961, Mrs. Chapman set up a revocable trust in favor of herself for life and at her death to her children by her prior marriage to be administered by the Durham Bank. The record reflects that this trust had an asset value of $590,000 on March 10, 1966. Mr. Chapman paid the income taxes for Mrs. Chapman on the income from these trusts until shortly before his death.

In 1949, 1954 and 1955 Mr. Chapman made wills which in effect created a life income for Mrs. Chapman from part of his estate with remainder to his two children. Mr. Chapman's last will was executed on December 19, 1958, some ten years after his second marriage. In this will Mr. Chapman devised his home and furniture to Mrs. Chapman and established a marital trust in the subject property. The trust provided that Mrs. Chapman have a life estate in the corpus with the right of having the corpus transferred to her and a power of appointment upon her death, but should she fail to exercise the power of There are numerous letters of record which establish that Mrs. Chapman promised ³ Mr. Chapman that, upon Mr. Chapman's death and the probate of his will, Mrs. Chapman would either during her lifetime make gifts of the subject property to Mr. Chapman's children or die without exercising the power of appointment contained in Mr. Chapman's will.

appointment, the subject property would then pass to Mr. Chapman's children, the child or children of deceased child to take his parents share. ²

The record reflects that Mr. and Mrs. Chapman had a loving relationship. The record also reflects, without detail, that Mr. Chapman became very ill in about 1967 at which time around-the-clock nurses were employed. Nurse Nesbit testified that she worked for Mr. Chapman for 7 or 8 years until he died in 1975, and that during this period, there were numerous employees at the Chapman home including a cook, a maid, two yard men, a butler and three graduate nurses.

The record establishes that beginning in 1962, Mrs. Chapman executed wills devising all of her property to her own children, but, consistent with her promise to Mr. Chapman, she devised the subject property to Mr. Chapman's children with the provision that all federal and state estate or inheritance taxes which her estate would have to pay by reason of the inclusion of the subject property in her estate would be paid from the subject property. In a letter to Robert F. Chapman, her then attorney and the nephew of her husband, Mrs. Chapman wrote that it was her hope and intent to give as much of the marital trust as conditions would allow directly to Mr. Chapman's issue. This hope and desire lasted until Mr. Chapman's death but about a year after Mr. Chapman's death, she underwent a change of mind.

The record establishes by letters in Mrs. Chapman's own handwriting that about a year after Mr. Chapman's death she began "struggling with her conscience" about whether she should leave the subject property to her own children rather than Mr. Chapman's children. On August 15, 1977, Mrs. Chapman executed a new will. The basic change in the new will was that she appointed the assets in the marital trust established by Mr. Chapman to her own sons, Austin and Noell Carr. None of the marital trust assets went to the children or issue of Mr. Chapman. This new will was drawn by attorney Bernelle Demo who had not previously worked for Mrs. Chapman.

Mrs. Chapman died on May 8, 1986, and was buried in Durham, North Carolina.

DISCUSSION

I.

We hold there was a confidential relationship existing between Mr. and Mrs. Chapman when Mr. Chapman executed his last will and until his death.

Although a precise definition of a confidential relationship is elusive, a thorough review of available material left us impressed with the definition found in Black's Law Dictionary 270 (5th Ed.1979):

Confidential relation. A fiduciary relation. It is a peculiar relation which exists between client and attorney, principal and agent, principal and surety, landlord and tenant, parent and child, guardian and ward, ancestor and heir, husband and wife, trustee and cestui que trust, executors or administrators and creditors, legatees, or distributees, appointor and appointee under powers, and partners and part owners. In these and like Confidential relations are deemed to arise whenever two persons have come into such a relation that confidence is necessarily reposed by one and the influence which naturally grows out of the confidence is possessed by the other, and this confidence is abused or the influence is exerted to obtain an advantage at expense of confiding party. Ruebsamen v. Maddocks, Me., 340 A.2d 31, 34.

                cases, the law, in order to prevent undue advantage from the unlimited confidence or sense of duty which the relation naturally creates, requires the utmost degree of good faith in all transactions between the parties.   It is not confined to any specific association of parties.   It appears when the circumstances make it certain that the parties do not deal on equal terms, but on the one side there is an overmastering influence, or, on the other, weakness, dependence, or trust, justifiably reposed.   The mere existence of kinship does not, of itself, give rise to such relation.   It covers every form of relation between parties wherein confidence is reposed by one in another, and former relies and acts upon representations of the other and is guilty of no derelictions on his own part.  Peckham v. Johnson, Tex.Civ.App., 98 S.W.2d 408, 416.  [Emphasis ours.]
                

Our Supreme Court in All v. Prillaman, supra, held that persons in a...