North Carolina Nat. Bank v. Goode

• Court: North Carolina Supreme Court
• Writing for the Court: EXUM; After reviewing the evidence and arguments of counsel; CARLTON
• Citation: North Carolina Nat. Bank v. Goode, 259 S.E.2d 288, 298 N.C. 485 (N.C. 1979)
• Decision Date: 06 November 1979
• Docket Number: No. 102,102
• Parties: NORTH CAROLINA NATIONAL BANK and Ethel Stowe, as Trustees of the Trusts created under Items VII and VIII of the Will of Allison Lloyd Goode v. Alson Lloyd GOODE, Jr.; Kathryn Goode Clark; Alson Lloyd Goode, III; WinstonGlasgow Goode; Kathryn King Goode; David Clark, Jr.; Allison Thorne Clark;Walter Clark; Caroline Clark; the Unknown and Unborn Children of Alson LloydGoode, Jr. andKathryn Goode Clark and the Issue of such Unknown and Unborn Children; theUnknown and Unborn Issue of Alson Lloyd Goode, III, Winston Glasgow Goode,Kathryn King Goode; David Clark, Jr., Allison Thorne Clark, Walter Clark andCaroline Clark.

Page 288

259 S.E.2d 288

298 N.C. 485

NORTH CAROLINA NATIONAL BANK and Ethel Stowe, as Trustees of the Trusts created under Items VII and VIII of the Will of Allison Lloyd Goode v. Alson Lloyd GOODE, Jr.; Kathryn Goode Clark; Alson Lloyd Goode, III; WinstonGlasgow Goode; Kathryn King Goode; David Clark, Jr.; Allison Thorne Clark;Walter Clark; Caroline Clark; the Unknown and Unborn Children of Alson LloydGoode Jr. andKathryn Goode Clark and the Issue of such Unknown and Unborn Children; theUnknown and Unborn Issue of Alson Lloyd Goode, III, Winston Glasgow Goode,Kathryn King Goode; David Clark, Jr., Allison Thorne Clark, Walter Clark andCaroline Clark.

No. 102.

Supreme Court of North Carolina.

Nov. 6, 1979.

Appeal by H. Morrison Johnston, Guardian Ad Litem for Kathryn King Goode and Caroline Clark and the Unknown and Unborn Issue of Alson Lloyd Goode, III, Winston Glasgow Goode, Kathryn King Goode, David Clark, Jr., Allison Thorne Clark, Walter Clark and Caroline Clark, from a judgment entered 21 September 1978 by Judge Grist in the Schedule A Mixed Session of Mecklenburg Superior Court. Petition for discretionary review under G.S. 7A-31, prior to review by the Court of Appeals, allowed 4 January 1979. This case was docketed and argued as No. 30, Spring Term, 1979.

Fleming, Robinson, Bradshaw & Hinson by Neill G. McBryde and Peter C. Buck, Charlotte, for plaintiffs-appellees.

Farris, Mallard & Underwood by Ray S. Farris and H. Morrison Johnston, Charlotte, for defendants-appellants.

EXUM, Justice.

Plaintiff trustees instituted this action under our Declaratory Judgment Act, G.S. 1-253 Et seq., seeking a construction of the will of Allison Lloyd Goode, who died 14 August 1968. The will was written by the testator himself and was properly executed on 31 August 1965. A codicil, immaterial to this dispute, was executed 30 December 1966. The will provides in pertinent part as follows:

"ITEM VIII.

The remainder of my estate shall be held in trust for the benefit of grandchildren of mine who may be living at the time of my death, and said trust shall be administered and disbursed equally as follows:

(a) If, in the opinion of my Trustees, sickness or an emergency arises with any beneficiary, the Trustees shall advance any money the Trustees deem adequate. Any money so advanced shall be deducted from said beneficiary's share at the time of final distribution.

(b) Distribution of the estate shall be made by the Trustees at the time Caroline Clark becomes twenty-six years of age, or should she die before she becomes twenty-six, then at such time as she would have been twenty-six.

(c) If any beneficiary should die before his or her share is received by him or her, and leaving issue, then their share shall be held in trust for the issue of such beneficiary until he or she becomes twenty-one years of age, and shall be administered and disbursed in the same manner as the trust created hereunder. If the beneficiary does not leave issue, their share shall immediately be and become a part of the trust to be divided among the remaining beneficiaries, and not to any relatives whatsoever.

(d) Notwithstanding any provisions hereinbefore contained to the contrary, no grandchild of mine born after my death shall become a beneficiary under this Will, and a trust shall not be set up hereunder for him or her if such grandchild shall have been born subsequent to the time when any beneficiary hereunder, a grandchild of mine or the issue of a grandchild of mine, shall have become entitled to receive his or her distribution of the principal or corpus of the trust held for him or her; provided, however, that a distribution of the corpus or principal under the provisions of Subsection (a) of this Item VIII shall not be considered a distribution thereof under this Subsection (d).

(e) In making a distribution of income among the several beneficiaries of this my Will, the action of my Trustees in this connection shall be binding upon all the beneficiaries hereunder and shall not be subject to question by any one whether or not the distributions are equal, it being my intention that my said Trustees shall have full authority to exercise this discretion with reference to the distribution of such income, and this shall likewise apply to any distributions of principal or corpus made under the provisions of Subsection (a) of this Item VIII.

ITEM IX.

Notwithstanding any of the provisions herein contained to the contrary, I do direct that distribution of income or principal to or among the issue of my grandchildren shall be per capita and not per stirpes."

Upon distribution to plaintiffs as trustees in 1973, they divided the residuary estate into seven equal shares and managed each share as a separate "trust" for the benefit of each of the testator's seven grandchildren living at his death. During subsequent taxable years, plaintiffs filed separate federal and state tax returns for each of the individual shares. In October, 1976, the District Director of the Internal Revenue Service notified plaintiffs of proposed adjustments to federal income tax liability of the trusts for taxable years 1973 and 1974. A tax deficiency was ultimately assessed by the Service on the theory that testator's will created a single trust for multiple beneficiaries rather than seven independent trusts as plaintiffs contended. ¹ Plaintiffs paid the alleged deficiency; they then filed this action for construction of the will in Mecklenburg Superior Court which came on for hearing before Judge Grist.

After reviewing the evidence and arguments of counsel, Judge Grist entered findings of fact and conclusions of law interpreting the will. His judgment provided in pertinent part that:

(1) The will of Allison Lloyd Goode created seven separate trusts for the benefit of his seven grandchildren living at his death;

(2) The will further established additional separate trusts for any grandchildren born after the testator's death but before the date of termination of the trust and final distribution of the residuary estate (10 December 1988) ²;

(3) The trust interest of any grandchild beneficiary who predeceases the date of distribution shall continue to be held in trust for that grandchild's issue and distributed Per capita to the grandchild's issue surviving at the time of termination of the trust or distributed equally among the remaining trusts should no such issue be then surviving.

All of these conclusions are before us for review. ³ We find no error in any of them. The judgment is affirmed.

As in any case requiring the construction of a will, we are mindful of the warning by Justice, later Chief Justice, Parker that "(p)robing the minds of persons long dead as to what they meant by words used when they walked this earth in the flesh is, at best, perilous labor." Gatling v. Gatling, 239 N.C. 215, 221, 79 S.E.2d 466, 471 (1954). Nevertheless, it is our fundamental duty to give effect to a testator's intent, at least insofar as that intent does not conflict with the demands of law or public policy. North Carolina National Bank v. Carpenter, 280 N.C. 705, 187 S.E.2d 5 (1972). And the intent which controls is that which is gleaned from the writing of the testament in its entirety. Every word and phrase in the instrument has its place and none ought to be rejected. Each should be given a meaning that, wherever possible, harmonizes with the other. "Every string should give its sound." Edens v. Williams, 7 N.C. (3 Mur.) 27, 31 (1819). But where parts conflict and lead to ambiguity, their discord must be resolved in light of the prevailing purpose of the whole. To this end we must examine the will in light of the facts and circumstances known to the testator at the time of the instrument's execution. Worsley v. Worsley, 260 N.C. 259, 132 S.E.2d 579 (1963); Wachovia Bank and Trust Co. v. Wolfe, 243 N.C. 469, 91 S.E.2d 246 (1956).

Applying these principles to the will before us, we agree with Judge Grist that its particular terms and provisions, when read together, indicate a testamentary intent to establish individual trusts. Although the singular reference to a "trust" in the preamble to Item VIII may be read in isolation to suggest a single trust corpus managed for the use of all beneficiaries, subsequent language in the will strongly suggests the contrary. Item VIII(c) provides that the "share" of a deceased grandchild shall retain its individual existence "in trust" for that grandchild's issue. Item VIII(d) directs that "A trust shall not be set up" under certain circumstances for a grandchild born after testator's death. This same provision then refers to a beneficiary's entitlement to "his or her distribution of the principal or corpus Of the trust held for him or her." (Emphasis added.) These latter references weigh heavily in favor of the creation of multiple trusts. See Robert L. Moody Trust, 65 T.C. 932 (1976).

The multiple trusts issue is not easily resolved, however, by simply marshalling plural references in the document against singular. See, e. g., Strauss v. van Beuren, 378 A.2d 1057 (R.I.1977). On the face of the instrument, these terms simply conflict. Too laborious a search for some deep meaning "hidden" in their inconsistency may do no more than further obscure the testator's true intent, and yet it is that intent which must control. Clark v. Conner, 253 N.C. 515, 117 S.E.2d 465 (1960); Commercial Bank at Winter Park v. United States, 450 F.2d 330 (5th Cir. 1971). Certainly there is such an ambiguity here as to the question of multiple trusts to permit the trial court's examination of the circumstances known to the testator and attendant to his execution of the will. See Wachovia Bank and Trust Co. v. Wolfe, supra, 243 N.C. 469, 91 S.E.2d 246.

From affidavits and stipulations before him, Judge Grist found as a fact that testator had consistently handled his personal and corporate financial affairs to minimize the bite of federal and...