McPherson v. First & Citizens Nat. Bank of Elizabeth City, 24
| Decision Date | 07 April 1954 |
| Docket Number | No. 24,24 |
| Court | North Carolina Supreme Court |
| Parties | McPHERSON er al. v. FIRST & CITIZENS NAT. BANK OF ELIZABETH CITY et al. |
John H. Hall, Killian Barwick, Elizabeth City, for defendant guardian ad litem, appellant.
Chas. L. Kaufman, Norfolk, Va., and LeRoy & Goodwin, Elizabeth City, for plaintiffs-appellees.
The initial question presented by this appeal is whether the provisions of the trust instrument relating to the grandchildren violate the rule against perpetuities. This rule prescribes the time within which title to a future interest must vest. Under the rule, McQueen v. Branch Banking & Trust Co., 234 N.C. 737, 741, 68 S.E.2d 831, 835. See also Fuller v. Hedgpeth, 239 N.C. 370, 80 S.E.2d 18; Gray, The Rule Against Perpetuities, Fourth Ed., Sec. 201, p. 191.
In 1944, the effective date of the declaration of trust, Exhibit A, James E. McPherson had four children. They were eighteen, sixteen, ten, and one years of age, respectively. The crucial section of the trust instrument is paragraph 9. It provides: '* * * at the death of the last child of the primary beneficiary (the last living grandchild of the donor) the trust shall be terminated and the assets thereof distributed equally to the legitimate heirs of the primary beneficiaries' children per stirpes and not per capita. * * *'
By the terms of paragraph 9, it thus appears that the assets of this trust could not vest until the death of the last surviving grandchild, unborn on the effective date of the trust instrument, but who might be born at any time during the next fifty years or more. Should he live out his normal life expectancy, it is quite likely that to give effect to the trust instrument, the trust might continue for more than one hundred years, with the ultimate beneficiaries unknown and with the greater portion of the estate not vested. It is manifest that the provisions of the trust instrument relating to the grandchildren violate the rule against perpetuities. McQueen v. Branch Banking & Trust Co., supra, and cases cited; Gray, The Rule Against Perpetuities, Fourth Ed., Sec. 201; 41 Am.Jur., Perpetuities and Restraints on Alienation, Sections 7, 14, 19, and 24.
The appealing guardian ad litem challenges the judgment below only in respect to the question whether the original trust instrument is violative of the rule against perpetuities. The guardian ad litem concedes in his brief that if the question of perpetuity be resolved against him, then it is to the advantage of those parties represented by him that the judgment below take effect as entered. It is noted that the judgment as entered interprets the provisions of the trust relating to the grandchildren of James E. McPherson as being the parts of the instrument which violate the rule against perpetuities. These provisions are treated by the judgment as being distinct and severable from the provisions relating to the children of James E. McPherson. Upon this premise the court below interpreted the portions which provide for the grandchildren as being stricken down by application of the rule against perpetuities, while holding that the parts which provide for the children of the trustor McPherson
were salvageable and subject to reformation in accordance with the provisions of Exhibit H.
Necessarily, then, if the rule against perpetuities applies, obviously it is for the best interest of the children of James E. McPherson that its application be limited to the parts which relate to the grandchildren, with the portions which make provision for the children being treated as severable and subject to reformation.
Similarly, if the rule against perpetuities applies, it is to the advantage of the grandchildren that the trust be preserved for the children of the donor. This is so for the reason that if any or all of them should die, their children would likely succeed to beneficial interests. But not so if the trust instrument should fall in toto because of perpetuity. (On the questions of severability and reformation see: 41 Am.Jur., Perpetuities and Restraints on Alienation, Sections 55 through 65; American Law Insitute, Restatement, Property, Vol. IV, Sections 373 to 376; 45 Am.Jur., Reformation of Instruments, Sec. 6; American Trust Co. v. Williamson, 228 N.C. 458, 46 S.E.2d 104.)
It thus appears that the position taken by the guardian ad litem in limiting the scope of his appeal so as to desist from further challenging the judgment below in the event the question of perpetuity be resolved against him is entirely consistent with the best interests of the grandchildren of the donor. And the judgment as entered below, reforming the trust instrument in accordance with Exhibit H so as to confer all the primary benefits of the trust on the four living children of the McPherson donors, to the exclusion of possible unborn children, is manifestly conducive to the best interest of the children in esse.
But there is more to the case than that. This Court, in the exercise of its supervisory powers over the lower courts, Const. of N. C. Art. IV, Sec. 8; Ellege v. Welch, 238 N.C. 61, 68, 76 S.E.2d 340, is necessarily concerned with the judgment below as it affects the interests of possible unborn children of James E. McPherson. As to this, it is noted that the original trust instrument in providing benefits for the four children of James E. McPherson then born also makes provision for 'all other legal children * * * which may be hereafter born' to him. The court below found and concluded in substance that the donor's dominant intent was to provide for his children, as distinguished from his grandchildren, and upon the basis of such finding and conclusion adjudged that the trust instrument be reformed in accordance with the provisions of Exhibit H. This instrument makes no provision whatsoever for 'other legal children * * * which may be hereafter born' to James E. McPherson.
This exclusion of possible afterborn children of James E. McPherson, age now 53 years, may not be sustained on the theory that such unborn children are before the court and represented by the guardian ad litem. As to this, while the record indicates the order appointing the guardian ad litem recites that he is to represent, in addition to certain named grandchildren of James E. McPherson, 'all other persons, * * * in esse or not in being, who are now or might by any contingency become beneficiaries of * * * the James E. McPherson trust * * *,' nevertheless, the record indicates that the guardian ad litem never presumed to represent the possible unborn children of James E. McPherson. The record and brief show...
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