Cocke v. Duke University, 253

• Decision Date: 19 July 1963
• Docket Number: No. 253,253
• Citation: 260 N.C. 1,131 S.E.2d 909
• Court: North Carolina Supreme Court
• Parties: Norman A. COCKE et al. v. DUKE UNIVERSITY et al.

Page 909

131 S.E.2d 909

260 N.C. 1

Norman A. COCKE et al. v. DUKE UNIVERSITY et al.

No. 253

Supreme Court of North Carolina.

July 19, 1963

John S. Cansler and Cansler & Lockhart, Charlotte, for defendants-appellants.

Lassiter, Moore & Van Allen, by Robert Lassiter, Jr., Charlotte, and Perkins, Daniels, McCormack & Collins, New York City, of counsel, for plaintiffs-appellees.

RODMAN, Justice.

Before considering the correctness of the judgment permitting plaintiffs, trustees, to make investments expressly prohibited by the trust indenture, we must dispose of the questions presented by the demurrer filed by defendant Cansler in the Superior Court and the demurrer filed in this Court by defendants Cansler and Walton.

For practical purposes the demurrers present these questions: (1) Does the due process clause of the Fourteenth Amendment to the Constitution of the United States forbid this Court from exercising its equitable jurisdiction with respect to the administration of a trust which by its express language is 'executed by a resident of the State of New Jersey in said State, is intended to be made, administered and given effect under and in accordance with the present existing laws and statutes of said State, notwithstanding it may be administered and the beneficiaries hereof may be located in whole or in part in other states, and the validity and construction thereof shall be determined and governed in all respects by such laws and statutes?' (2) Is the court without authority to act because it has not acquired jurisdiction of all necessary parties?

The argument made by appellants that the authority to control and supervise the administration of the trust is limited to the courts of New Jersey, because made in that state by a citizen thereof and by its terms must be interpreted and administered in accordance with the laws of that state, is lacking in merit. Appellants in their brief frankly say they 'know of no controlling authority in support of the grounds of such demurrer' but believe it their duty to present the question for decision.

The general rule with respect to the interpretation of contracts was stated by Connor, J., in Cannaday v. Atlantic Coast Line R. R., 143 N.C. 439, 55 S.E. 836, 8 L.R.A.,N.S., 939. He said: 'It is settled that 'Matters bearing upon the execution, interpretation and validity of a contract are determined by the law of the place where it is made.' ' The statement made in the Cannaday case was repeated by Winborne, C.J., in Roomy v. Allstate Ins. Co., 256 N.C. 318, 123 S.E.2d 817. This rule is generally recognized. Bundy v. Commercial Credit Co., 200 N.C. 511, 157 S.E. 860; 12 Am.Jur. 771; 17 C.J.S. Contracts § 12, p. 341.

But the rule, like most general rules, is subject to qualifications and exceptions. Bundy v. Commercial Credit Co., supra. It has been said: 'Where a contract is to be performed wholly outside the state in which the contract was made, the parties are presumed to adopt the law of the place of performance as the law of the contract.' Elk River Coal & Lumber Co. v. Funk, 222 Iowa 1222, 271 N.W. 204, 110 A.L.R. 1415; 17 C.J.S. Contracts § 12, pp. 342-343.

American Institute's Restatement of Conflict of Laws sec. 297 states the general rule governing the administration of an inter vivos trust of movables: 'A trust of movables created by an instrument inter vivos is administered by the trustee according to the law of the state where the instrument creating the trust locates the administration of the trust.' Comment a thereunder states: 'The administration by the trustee is the action of the trustee in carrying out the duties of the trust. In what securities can he invest? What interest should he receive on investment? To whom shall he pay the income? To whom shall he render an account? These are questions of administration and the rule stated in this Section is applicable to them.' In comment d it says: 'In order to determine where the administration of the trust is located, consideration is given to the provisions of the instrument, the residence of the trustees, the residence of the beneficiaries, the location of the property, the place where the business of the trust is to be carried on.' The rule there enunciated is seemingly the law of New Jersey. Swetland v. Swetland, 105 N.J.Eq. 608, 149 A. 50.

But like the rule for the interpretation of contracts the general rule in trust administration is subject to exceptions and not universally applied. Haag v. Barnes, 9 N.Y.2d 554, 216 N.Y.S.2d 65, 175 N.E.2d 441, 87 A.L.R2d 1301; Wilmington Trust Co. v. Wilmington Trust Co., 26 Del.Ch. 397, 24 A.2d 309, 139 A.L.R. 1117; Hutchison v. Ross, 262 N.Y. 381, 187 N.E. 65, 89 A.L.R. 1007; and the annotations to those cases; 11 Am. Jur. 382-3.

Here the trust agreement had each of the elements referred to in commentd interpreting the Restatement rule. Some of the original trustees were residents of New Jersey, othrs of North Carolina, South Carolina, and New York. The instrument was executed and acknowledged in New Jersey. The trustees were authorized to select places from which the trust would be administered. Doubtless the draftsman saw that controversy might arise with respect to the administration of the trust and for that reason said the laws of New Jersey should provide the rule to govern the trustees in the administration of the trust; but this declaration was not intended to vest sole control over the administration of the trust in the courts of that state. Doubtless Mr. Duke and the draftsman saw that the courts of New Jersey might not be able to exercise any jurisdiction because of the nonresidence of the trustees and beneficiaries and the lack of control over the trust assets. A court called upon to supervise the administration should have no doubt as to what law the donor intended the trustees to obey.

The Superior Courts of this state are courts of general jurisdiction, G.S. § 7-63, exercising equitable powers. Settle v. Settle, 141 N.C. 553, 54 S.E. 445. They may, when all necessary parties are before the court, determine questions relating to the administration of trusts operating in this state.

There can be no doubt that this trust operates principally in this state and that this state has substantial contact with and interest in the trust. The trust instrument declares the trust was created to further the economic and social welfare of the states of North Carolina and South Carolina; donor wished the majority of the trustees to be natives of those states; the trustees have acted accordingly--nine are residents of North Carolina, one is a resident of South Carolina, and the others live in Hawaii, New York, or Connecticut; the trustees, pursuant to the authority given them, have established their principal office in Charlotte, N. C., with another office in Durham, N. C.; the principal office of Duke Power Co., the instrumentality expected to provide the bulk of the funds to be distributed to beneficiaries of the trust, is located in Charlotte, N. C.; five of the ten annual meetings required by the trust are held in North Carolina; most of the beneficiaries of the trust have their residence and operate in this state; substantial bank accounts are maintained in this state for distribution to the beneficiaries; the books and records of the trustees are maintained in this state. No fact alleged indicates the trust presently has any connection with the state of New Jersey or that any of its assets are in that state or that any beneficiary lives in New Jersey.

The due process clause does not forbid the courts of this state from exercising jurisdiction over the trust under the facts alleged and admitted by the demurrer.

Appellant's second position is: The court lacked authority to act because all potential beneficiaries have not been personally served with process and have not voluntarily submitted themselves to the jurisdiction of the court.

All specific beneficiaries are before the court. Representatives of all classes, where no specific beneficiary is named, are before the court. The agreement authorizes the trustees to select for donations nonprofit hospitals in North Carolina and South Carolina. The complaint alleges and the demurrer admits there are approximately 175 eligible hospitals in North Carolina and approximately 80 eligible hospitals in South Carolina. Cabarrus Memorial Hospital, a North Carolina corporation now a recipient of funds, and Greenville General Hospital a South Carolina corporation now a recipient of funds, are parties and were specifically directed to represent this class of beneficiaries.

There are approximately 30 institutions in North Carolina that care for orphans and 15 such institutions in South Carolina. Defendant Baptist Children's Homes of North Carolina and Epworth Children's Home of South Carolina typify this class of beneficiaries. They were by order of court specifically directed to represent the class. There are approximately 1450 rural churches in North Carolina eligible for selection by the trustees for benefits under the trust. The Quarterly Conference of Duke's Chapel Methodist Church and the Quarterly Conference of Hill's Chapel Methodist Church are representatives of that class. There are approximately 225 superannuated preachers, any of whom might be selected to receive benefits under the trust. Defendant Thompson, a citizen of North Carolina, is a representative of that class. There are approximately 240 eligible widows in North Carolina, any of whom might be selected for benefits under the trust. Defendant Mary Jane Walton typifies the class she is specifically directed to represent. She has employed counsel and challenges the right of the court to grant the relief sought. There are approximately 25 eligible orphans in North Carolina, any of whom might be selected for benefits. Defendant Patricia Jane Walton typifies that class. Thus, according to the allegations of the complaint, some 2240...