State ex rel. Pilard v. Berninger

• Decision Date: 19 November 2002
• Docket Number: No. COA01-1272.,COA01-1272.
• Parties: STATE of North Carolina ex rel. Susan B. PILARD, Elizabeth B. Requena, John Berninger, Thomas Berninger and Joanne Berninger; Susan B. Pilard; Elizabeth B. Requena; John Berninger; Thomas Berninger; and Joanne Berninger, Plaintiffs, v. Blanca R. BERNINGER and Great American Insurance Company, Defendants.
• Court: North Carolina Court of Appeals

571 S.E.2d 836

154 NC App. 45

STATE of North Carolina ex rel. Susan B. PILARD, Elizabeth B. Requena, John Berninger, Thomas Berninger and Joanne Berninger; Susan B. Pilard; Elizabeth B. Requena; John Berninger; Thomas Berninger; and Joanne Berninger, Plaintiffs, v. Blanca R. BERNINGER and Great American Insurance Company, Defendants.

No. COA01-1272.

Court of Appeals of North Carolina.

November 19, 2002.

W.T. Culpepper, III, Edenton, for plaintiff-appellee.

The Twiford Law Firm, L.L.P. by H.P. Williams, Jr., and R. Michael Cox, Elizabeth City, for defendant-appellant.

MARTIN, Judge.

Plaintiffs, who are the children of John Alfred Berninger ("decedent") from his first marriage, brought this action against defendant Berninger, decedent's second wife, in her individual capacity, and Great American Insurance Company as surety, seeking damages for Berninger's alleged breach of fiduciary duty and conversion arising out of her administration of their father's estate. Defendants denied the substantive allegations of the complaint and moved to dismiss for failure to join a necessary party, lack of subject matter jurisdiction, and res judicata. The motion was denied.

Evidence presented at trial tended to establish that Berninger and decedent lived as husband and wife until decedent died intestate on 12 February 1992. On 15 May 1989, decedent and Berninger opened as co-owners two certificates of deposit (numbers XXXXXXXXXXX and XXXXXXXXXXX) with Centura Bank. The certificates were set up under a depositor's contract, or signature card, bearing the account number 13-0000815, which registered the account as a joint certificate of deposit with a right of survivorship. On the same day, decedent and Berninger also opened a demand deposit account (number XXXXXXXXXXX) as co-owners, and executed a signature card registering the account as joint with survivorship to be governed by G.S. § 41-2.1 (2001).

On 29 January 1990, decedent and Berninger purchased three new certificates of deposit (numbers XXXXXXXXXXX, XXXXXXXXXXX, and XXXXXXXXXXX) as co-owners at Centura Bank. The certificates were purchased with monies owned jointly and equally by decedent and Berninger. Decedent and Berninger did not execute a new or separate depositor's contract or signature card at this time. The new certificates of deposit referred to "Customer Number 13-0000815," the same account number contained on the 15 May 1989 signature card. According to bank records, the only depositor's contract or signature card ever jointly executed by decedent and Berninger for a certificate of deposit was the 15 May 1989 signature card.

On or about 26 December 1991, decedent was hospitalized, where he remained until his death on 12 February 1992. Testimony of family and friends who visited decedent in the hospital established that from the time he was hospitalized until his death, decedent was incapable of communicating; he was very weak, could barely move, and could neither talk nor write legibly.

In early January 1992, Linda Evans, a customer service representative with Centura Bank, received a telephone call from Berninger. Evans testified Berninger requested to redeem the certificates of deposit held jointly with decedent and to deposit the funds into their joint demand deposit account, which was then a survivorship account. Evans testified that for signature cards executed prior to September 1989, which included the signature card for the demand deposit account executed by decedent and Berninger in May 1989, the survivorship feature only provided the survivor with one-half of the account, while the remaining half would go to the decedent's estate. Evans testified that bank policy changed in September 1989, and thereafter, customers had the option of executing signature cards making their account "a hundred percent (100%) right of survivorship account" wherein the survivor would receive 100% of the funds. Evans discussed with Berninger the possibility that she and decedent could change their demand deposit account to a 100% right of survivorship account, and Berninger expressed a desire to do so. Evans informed Berninger that she would first need to submit a written request to redeem the certificates of deposit.

Shortly after 14 January 1992, Evans received a letter from Berninger stating that she and decedent were "in New York staying with my sister on a short vacation" and requesting transfer of the three most recent certificates of deposit (numbers XXXXXXXXXXX, XXXXXXXXXXX, and XXXXXXXXXXX) into their demand deposit account. Evans responded to the letter on 23 January 1992 by mailing Berninger redemption forms to redeem the certificates of deposit, and a new signature card to change decedent's and Berninger's demand deposit account into "a hundred percent (100%) right of survivorship account" as previously discussed. Around 28 January 1992, Evans received the redemption forms signed by Berninger and the signature card purportedly signed by decedent and Berninger. As a result, Evans redeemed the certificates as requested and deposited the proceeds into the demand deposit account controlled by the new signature card.

Plaintiffs presented expert testimony in the field of document examination to the effect that the purported signature of decedent on the 1992 signature card was not, in fact, decedent's signature. Plaintiffs themselves also testified that the signature was not their father's, and that decedent was incapable of having signed his name at the time the new signature card was executed.

On 10 February 1992, at Berninger's request, Evans transferred $225,000 from the demand deposit account into three new certificates of deposit in the amount of $75,000 each issued solely in Berninger's name. Evans testified that she never had any contact with decedent while handling the transactions, and that she only dealt with Berninger.

On 27 February 1992, Berninger was qualified as administratrix of decedent's estate, and served as such until the filing of a final account on 12 November 1993. On 28 February 1992, Berninger, as principal, and defendant Great American, as surety, executed a joint and several security bond obligation to the State of North Carolina for $50,000 conditioned on Berninger's proper and lawful administration of decedent's estate.

On 5 October 1992, plaintiffs filed a petition in the estate proceeding alleging decedent's assets had not been entirely accounted for and reported by Berninger on a 90-Day Inventory filed 11 June 1992. The petition requested the production of records from various financial institutions, as well as tax returns of decedent and Berninger for various years. As a result, a Consent Order was entered on 12 November 1992 requiring the production of bank records from eleven separate financial institutions. No further actions resulting from the petition were taken in the estate, and a final account of the estate was filed 12 November 1993.

On 10 February 1995, plaintiffs instituted this action by filing a complaint alleging Berninger had converted three certificates of deposit, as well as various other property owned by decedent, and that Berninger breached her fiduciary duty as administratrix of decedent's estate by failing to account for and properly distribute decedent's assets. Plaintiffs also sought damages pursuant to G.S. § 28A-8-6 against Great American on the bond executed by Berninger and Great American. The matter was tried by the court sitting without a jury. At the close of plaintiffs' evidence, defendants renewed the previous motion and also moved to dismiss for insufficiency of the evidence under G.S. § 1A-1, Rule 41(b) (2001). The trial court again denied the original motion to dismiss, and granted the Rule 41(b) motion with respect to Berninger's conversion of certain items of tangible personal property and household furnishings, but not as to plaintiffs' claims based on the monies held in the three certificates of deposit. Defendants renewed both motions to dismiss at the close of all of the evidence; the motions were denied.

The trial court entered judgment in favor of plaintiffs on 1 June 2001, finding and concluding, among other things, that the signature on the new signature card for the joint demand deposit account was not decedent's; that "[a]t the time of his death ... [decedent] was the legal or equitable owner of a one-half (½) interest in" the three certificates of deposit Berninger opened in her sole name with funds from the joint demand deposit account; that this one-half interest should have been included in decedent's estate and administered as such; that Berninger failed to properly account for and distribute all assets of decedent's estate, and in so doing, breached her fiduciary duties as administratrix of the estate; and that Great American is therefore obligated on the surety bond. The trial court ordered that defendants pay $67,187.93 plus interest and costs of the action, that Great American and Berninger were jointly and severally liable for $50,000 of the amount, and that Berninger was individually liable for the remainder. Defendants appeal.

Defendants argue on appeal that the trial court erred in denying their motions to dismiss for four reasons: (1) plaintiffs failed to join a necessary party; (2) the trial court lacked subject matter jurisdiction; (3) plaintiffs' action was barred by res judicata; and (4) the evidence was insufficient to support the trial court's finding and conclusion that plaintiffs had an interest in the monies held in the three certificates of deposit which Berninger opened solely in her name, or that Berninger was guilty of wrongdoing. We agree with defendants that Berninger, in her official capacity as administratrix of decedent's estate, was a necessary party to plaintiffs' claim for breach of fiduciary duty.

I.

Defendants first maintain the trial court should have dismissed the complaint for plaintiffs' failure to join a necessary party....