Ridge v. Bright

• Citation: 244 N.C. 345,93 S.E.2d 607
• Decision Date: 26 June 1956
• Docket Number: No. 738,738
• Parties: Paul H. RIDGE, as Executor of the Estate of Lottle Rascoe McMillan lvey, v. Virginia Fitch BRIGHT and investors Mutual, Inc.
• Court: United States State Supreme Court of North Carolina

Page 607

93 S.E.2d 607

244 N.C. 345

Paul H. RIDGE, as Executor of the Estate of Lottle Rascoe

McMillan lvey, v. Virginia Fitch BRIGHT and investors Mutual, Inc.

No. 738

Supreme Court of North Carolina.

June 26, 1956

Long, Ridge, Harris & Walker, Graham, for appellant.

Sanders & Holt, Burlington, for appellee Virginia F. Bright.

Brooks, McLendon, Brim & Holderness, Hubert B. Humphrey, Jr., Greensboro, for appellee Investors Mutual, Inc.

DENNY, Justice.

It is not contended that the instrument under consideration was executed in the manner required by law so as to be valid as a testamentary disposition of the shares of stock involved. Consequently, the question to be determined is whether the instrument created a valid inter vivos trust which entitled Virginia Fitch Bright to the stock upon the death of the settlor-trustee, Lottie Rascoe McMillan Ivey. However, in making this determination we must consider (1) whether upon the execution of the so-called trust instrument, the defendant, Virginia Fitch Bright, acquired an interest in the subject matter of the trust; or (2) whether the settlor retained such control over the subject matter of the trust as to render it invalid as a trust but only an attempted testamentary disposition.

The appellant contends that the instrument under consideration is invalid because under our decisions, Speight v. Speight, 208 N.C. 132, 179 S.E. 461, Nixon v. Nixon, 215 N.C. 377, 1 S.E.2d 828, and Woodard v. Clark, 236 N.C. 190, 72 S.E.2d 433, a limitation over, after a life estate, in personal property is void. While we do not concede that these cases are controlling on the facts in this case, it is well to note that the restriction upon the right to create a remainder in personal property after a life estate by deed, or other written instrument, has been eliminated by Section 1, Chapter 198 of the Session Laws of 1953, codified as G.S. § 39-6.2, which reads as follows: 'Any interest or estate in personal property which may be created by a last will and testament may also be created by a written instrument of transfer.'

In creating an inter vivos trust, the creator and the trustee may be one and the same person. Bogert on Trusts and Trustees, Volume 1, section 41, page 270; Scott on Trusts, Volume 1, section 18, page 143; Restatement of the Law on Trusts, Volume 1, section 18, page 68; 90 C.J.S., Trusts, § 210b, p. 137; 54 Am.Jur., section 116, page 101. Likewise, in creating a trust inter vivos, 'where there is a completely executed voluntary contract to establish a trust and nothing further remains to be done by the grantor to transfer the title, the relation of trustee and cestui que trust is established and the equitable rights growing out of such conveyance in trust, although made without consideration, will be recognized and enforced, since it is considered as an executed gift, needing no consideration.' 89 C.J.S., Trusts, § 28, p. 746 et seq. 'Consideration is not necessary to the creation of a trust, or, in other words, consideration is not necessary to a trust that is executed in the sense of being perfectly created, whether by declaration or transfer.' 54 Am.Jur., Trusts, section 41, page 51, et seq.

In Bogert on Trusts and Trustees, Volume 1-A, section 202, page 254, et seq., it is said: 'The modern law is clearly to the effect that the existence of consideration is not necessary to the establishment of a trust, either by the transfer to a trustee of real or personal property, or by way of declaration of a trust of real or personal property. In order that the trust be enforceable, it is not necessary that there be any transaction which would amount to the giving of consideration if the trustee were treated as a promisor under a contract. It is not an essential feature of the trust creation that the settlor has received a benefit from the trustee, cestui, or another, or that benefits have moved from the settlor, cestui, or another, to the trustee. * * * If the settlor has otherwise effectively completed the trust, the fact that he has received nothing in return for the transfer of the equitable or legal and equitable property interest is immaterial. * * *'

Moreover, when the owner of personal property, in creating a trust therein, constitutes himself as trustee, it is not necessary as between himself and the beneficiary that he should part with the possession of the property. Warner v. Burlington Federal Savings & Loan Ass'n, 114 Vt. 463, 49 A.2d 93, 168 A.L.R. 1265; Cohen v. Newton Savings Bank, 320 Mass. 90, 67 N.E.2d 748, 168 A.L.R. 1321.

As to the reservation of the power to revoke or modify a trust, the general rule in this respect is stated in section 57.1, Scott on Trusts, Volume 1, page 336, et seq., as follows: 'It is well settled that the reservation by the settlor of a power to revoke the trust does not of itself make the trust testamentary. It is also settled * * that the reservation by the settlor of a life interest does not make the trust testamentary. Does the reservation of a life interest together with a power of revocation have any greater effect? It seems clear that it does not. If the owner of property transfers it in trust to pay the income to the settlor for life and on his death to pay the principal to others, the settlor reserving also power to revoke the trust at any time as long as he lives, it is held that the trust is not testamentary.' The foregoing view is supported by almost countless decisions, among them we cite: Becker v. St. Louis Union Trust Co., 296 U.S. 48, 56 S. Ct. 78, 80 L.Ed. 35; United Bldg. & Loan Ass'n v. Garrett, D.C., 64 F.Supp. 460; Cleveland Trust Co. v. White, 58 Ohio App. 339, 16 N.E.2d 588, affirmed 134 Ohio St. 1, 15 N.E.2d 627, 118 A.L.R. 475; Cohen v. Newton Savings Bank, supra; National Shawmut Bank of Boston v. Joy, 315 Mass. 457, 53 N.E.2d 113; Farkas v. Williams, 5 Ill.2d 417, 125 N.E.2d 600; Pinckney v. City Bank Farmers Trust Co., 249 App.Div. 375, 292 N.Y.S. 835; In re Sheasley's Trust, 366 Pa. 316, 77 A.2d 448; In re Shapley's Deed of Trust, 353 Pa. 499, 46 A.2d 227, 164 A.L.R. 877; Goodrich v. City National Bank, 270 Mich. 222, 258 N.W. 253; In re Brunswick's Estate, 143 Misc. 573, 256 N.Y.S. 879; Witherington v. Herring, 140 N.C. 495, 53 S.E. 303; Annotation 32 A.L. R.2d 1270 et seq.

In the last cited case, Clark, C. J., said [140 N.C. 495, 53 S.E. 304]: "A power of revocation may, however, be reserved and is perfectly consistent with the creation of a valid trust. If never exercised during the lifetime of the donor and according to the terms in which it is reserved, the validity of the trust remains unaffected.' 28 A. & E. Enc. (2 Ed.), 900, 950; Stone v. Hackett, 12 Gray (Mass.) 227; Kelley v. Snow, 185 Mass. 288, 70 N.E. 89; 1 Beach, Trusts, § 81, and cases cited. ' Waldroop v. Waldroop, 179 N.C. 674, 103 S.E. 381; Shannonhouse v. Wolfe, 191 N.C. 769, 133 S.E. 93; King v. Richardson, 4 Cir., 136 F.2d 849.

Also in the case of Farkas v. Williams, supra, the Supreme Court of Illinois held the identical declaration of trust which is involved in this appeal, to be a valid inter vivos trust.

It is further said in the above cited section in Scott on Trusts, that 'It is immaterial whether the settlor reserves simply a power to revoke the whole trust at one time or whether he reserves also a power to revoke the trust as to any part of the property from time to time.' Bear v. Millikin Trust Co., 336 Ill. 366, 168 N.E. 349, 73 A.L.R. 173; Jones v. Old Colony Trust Co., 251 Mass. 309, 146 N.E. 716; Goodrich City National Bank & Trust Co., supra; Leahy v. Old Colony Trust Co., 326 Mass. 49, 93 N.E.2d 238, 18 A.L.R.2d 1006.

It seems to be the generally accepted view, however, that where the settlor or creator purportedly transfers property in trust, and reserves not only a life estate therein but also the power to control the trustee as to the details of the administration of the trust, the purported trustee is a mere agent of settlor and there is no valid inter vivos trust, and the disposition insofar as it is intended to take effect after his death, is testamentary and is invalid unless the requirements of the statutes relating to the execution of wills are complied with. Restatement of the Law on Trusts, Volume 1, section 57(2), page 175; Application of Cerchia, 279 App.Div. 734, 108 N.Y.S.2d 753; In re Tunnell's Estate, 325 Pa. 554, 190 A. 906; Burns v. Turnbull, 266 App.Div. 779, 41 N.Y.S.2d 448; Atlantic Nat. Bank of Jacksonville, Fla. v. St. Louis Union Trust Co., 357 Mo. 770, 211 S.E.2d 2.

The appellant insists that the case of Application of Cerchia, supra, is on all fours with the case under consideration. We do not so construe it. While the opinion does not contain a copy of the writing interpreted by the New York Court, the Court does state, 'The writing relied upon as creating a trust of the securities does not accomplish that purpose. It manifests no intention on the part of the settlor to impose any enforceable duties upon himself as trustee. In the absence of such an intention no trust is created. Restatement, Trusts, Sec. 25.' We interpret section 25 of the Restatement of the Law on Trusts, Volume 1, page 76, et seq., which is the only authority cited in the opinion, to mean that mere precatory words, generally speaking, are not sufficient to manifest an intention to create a trust.

There can be no doubt...