Citizens Nat. Bank, Concord v. Grandfather Home for Children, Inc.

• Decision Date: 28 January 1972
• Docket Number: No. 98,98
• Citation: 185 S.E.2d 836,280 N.C. 354
• Court: North Carolina Supreme Court
• Parties: CITIZENS NATIONAL BANK, CONCORD, North Carolina, and John A. Cunningham, Trustees under the Will of Joseph F. Cannon (Jr.) v. GRANDFATHER HOME FOR CHILDREN, INCORPORATED et al.

Page 836

185 S.E.2d 836

280 N.C. 354

CITIZENS NATIONAL BANK, CONCORD, North Carolina, and John A Cunningham, Trustees under the Will of Joseph F. Cannon (Jr.) v. GRANDFATHER HOME FOR CHILDREN, INCORPORATED et al.

No. 98.

Supreme Court of North Carolina.

Jan. 28, 1972.

Carson & Reynolds, Charlotte, for Grandfather Home for Children, Inc.

Grier, Parker, Poe, Thompson, Bernstein, Gage & Preston, Charlotte, for Observer Fresh Air Camp, Inc.

Henry W. Underhill, Jr., and W. A. Watts, Charlotte, for City of Charlotte.

B. Irvin Boyle, Charlotte, Guardian ad Litem.

Williams, Willeford & Boger and Clyde L. Propst, Jr., Concord, for Citizens National Bank and John A. Cunningham, Trustee.

LAKE, Justice.

It is elementary that it is the duty of the court to construe provisions of a will so as to discover the intent of the testator and to give effect to that intent if it is not in contravention of some established rule of law or public policy. Such intention is to be determined by an examination of the will, in its entirety, in the light of all surrounding facts and circumstances known to the testator. Wachovia Bank & Trust Co. v. Dodson, 260 N.C. 22, 131 S.E.2d 875; Little v. Wachovia Bank & Trust Co., 252 N.C. 229, 113 S.E.2d 689; Moore v. Langston, 251 N.C. 439, 111 S.E.2d 627; Wachovia Bank & Trust Co. v. Taliaferro, 246 N.C. 121, 97 S.E.2d 776; Cannon v. Cannon, 225 N.C. 611, 36 S.E.2d 17.

Item VI of the will before us divides the residuary estate into two parts and devises and bequeaths these to the plaintiffs upon two separate trusts. The trust here in question is established by Part A of Item VI, the properties of this trust consisting of seventy-five percent of the residuary estate. After making provision for the distribution of the income from these trust properties during the life of the testator's wife, Nella Douglas Cannon, and for the distribution of the income and principal thereof after her death if she should be survived by children or grandchildren of the testator, Paragraph (3) of Item VI directs what is to be done by the trustees upon the death of Mrs. Cannon if, as proved to be the case, there were no children or grandchildren of the testator 'capable of taking under the foregoing provisions.' No other portion of the will sheds light upon the intent of the testator as expressed in this Paragraph (3) of Part A of Item VI of the will. The portion pertinent to this appeal reads as follows:

'(3) After the death of my wife, Nella Douglas Cannon, * * * my Trustees shall administer the then remaining Principal of this seventy-five percent portion then remaining in their hands in the following manner: (Emphasis added.)

'(c) Twenty-five percent Thereof shall be paid over to the City of Charlotte, North Carolina, to be used by it in furnishing facilities for and in the furtherance of aviation * * *.' (Emphasis added.)

Very plainly this portion of the will directs the trustees to pay over to the city, upon the death of Mrs. Cannon, twenty-five percent of the principal of the trust properties then in the hands of the trustees. In contrast, Subparagraph (a) directs that one-half of the principal held by the trustees at the death of Mrs. Cannon be 'set aside in trust' for the benefit of the Grandfather Orphanage for Children (Grandfather Home for Children, Incorporated) and that the income therefrom be paid to it. Similarly, Subparagraph (b) directs that twenty-five percent of the principal held by the trustees at Mrs. Cannon's death be 'held for the benefit of' the Observer Fresh Air Camp, Inc., (Observer Fresh Air Camp, Incorporated) and that the income therefrom be paid over to the officials thereof. The testator chose his words carefully in these three subparagraphs. Obviously, he intended for the trustees to transfer to the city, free and clear from further control by these trustees, twenty-five percent of the trust properties held by them at the time of Mrs. Cannon's death. Subsequently received income, attributable to such twenty-five percent of the properties would, of course, follow this portion of the properties and be properly distributable to the city.

The statement in Subparagraph (c) that the properties so paid over to the city are 'to be used by it in furnishing facilities for and in the furtherance of aviation' do not have the effect of impressing a further trust upon the properties so as to require the city to account to these plaintiffs for its use of the properties. This provision in the will is not sufficient to create a new trust. Williams v. Thompson, 216 N.C. 292, 4 S.E.2d 609. Consequently, there was no error in the court's Conclusion of Law No. 7 or in Subparagraph (c) of the judgment ordering that this twenty-five percent of the principal be paid to the city 'free and discharged of trust,' together with the income accumulated thereon subsequent to the death of Mrs. Cannon.

We come now to the portion of the judgment directing that the costs of this action be paid 'out of the assets constituting the corpus or principal of the trust estate being administered under Item VI, A of the Will.' The judgment directs the costs to be paid from the principal in the hands of the trustees prior to transfer of properties to the city. Thus, one-fourth of the burden of this expense is to be borne by the city.

G.S. § 6--21 provides that costs, including reasonable attorneys' fees determined and allowed by the court, 'shall be taxed against either party, or apportioned among the parties, in the discretion of the court' in 'any action or proceeding which may require the construction of any will or trust agreement, or fix the rights and duties of parties thereunder.'

Item VII, Paragraph (2), of the will of Mr. Cannon provides that the trustees 'are hereby empowered to determine how receipts and disbursements shall be credited, charged or apportioned as between income and principal and their decision in this respect shall be final and not subject to question by any beneficiary under this trust.'

G.S. § 37--2, which is part of the Uniform Principal and Income Act, provides:

'Application of chapter; powers of settlor.--This chapter shall govern the ascertainment of income and principal, and the apportionment of receipts and expenses between tenants and remaindermen, in all cases where a principal has been established with, or, unless otherwise stated hereinafter, without the interposition of a trust; Except that in the establishment of the principal provision may be made touching all matters covered by this chapter, and The person establishing the principal may himself direct the manner of ascertainment of income and principal and the apportionment of receipts and expenses or Grant discretion to the trustee or other person to do so, and such provision and direction, where not otherwise contrary to law, shall control notwithstanding this chapter.' (Emphasis added.)

Consequently, G.S. § 37--12, providing for the allocation of expenses, including court costs and attorneys' fees as between income and principal, has no application to the present case.

G.S. § 1--263 provides: 'In any proceeding under this article (declaratory judgments) the court may make such award of costs as may seem equitable and just.' This section of G.S. Chapter 1 was not repealed by the enactment of G.S. Chapter 1--A. See: Session Laws of 1967, Chapter 954, §§ 4 and 5; G.S. § 1A--1, Rule 57.

Apart from statute and apart from a contrary provision in the trust instrument, extraordinary expenses incurred in the administration of a trust are usually payable out of principal. Scott on Trusts, 2d Ed. § 233.3, p. 1755. The expense of a proceeding brought by the trustee to obtain a construction of the trust instrument and the direction of the court as to the distribution of the trust properties is, ordinarily, such an...