In re Estate of Skinner , 804 S.E.2d 449 ( 2017 )

IN THE SUPREME COURT OF NORTH CAROLINA
No. 277A16
Filed 29 September 2017
IN THE MATTER OF THE ESTATE OF CATHLEEN BASS SKINNER
Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of
the Court of Appeals, ___ N.C. App. ___, 787 S.E.2d 440 (2016), reversing an order
entered on 22 October 2014 by Judge Donald W. Stephens in Superior Court, Wake
County. Heard in the Supreme Court on 29 August 2017.
Ward and Smith, P.A., by Jenna Fruechtenicht Butler and Alexander C. Dale,
for petitioner-appellants Nancy Bass-Clark and Douglas Ray Bass.
Braswell Law, PLLC, by Ira Braswell IV, for respondent-appellee Mark
Skinner.
ERVIN, Justice.
The resolution of this case hinges upon the identification and proper
application of the appropriate standard of review for use in reviewing an order
removing a guardian of the estate and trustee under a special needs trust for breach
of fiduciary duty. After careful consideration of the record evidence in light of the
relevant legal principles, we conclude that the Court of Appeals erred by reversing
the removal order.
On 20 January 2010, a representative from the Adult Protective Services
Division of the Wake County Human Services Department filed a petition seeking to
have Cathleen Bass Skinner, who was, at that time, known as Cathy Bass,
IN RE ESTATE OF SKINNER
Opinion of the Court
adjudicated as an incompetent and to have a guardian appointed for Ms. Skinner. In
support of these requests, Adult Protective Services alleged that Ms. Skinner “is a
disabled adult who has short term memory loss,” “carries a diagnoses [sic] of seizure
disorder and early stages of dementia,” “[l]acks sufficient understanding and the
capacity to make or communicate responsible decisions concerning her person,” and
“requires 24 hour supervision, something her siblings and extended family can not
[sic] commit to her.” On 13 April 2010, Assistant Clerk of Superior Court Bill
Burlington found Ms. Skinner incompetent and appointed Wake County Human
Services to serve as Ms. Skinner’s guardian.
In July 2010, Ms. Skinner’s long-time friend, Mark L. Skinner, Jr., retained
Gilbert W. File, III, of the Brownlee Law Firm, for the purpose of determining
whether he and Ms. Skinner could legally marry and whether he could legally serve
as Ms. Skinner’s guardian. On 3 August 2010, Mr. and Ms. Skinner married. On the
following day, Mr. Skinner filed a motion seeking to have himself appointed as Ms.
Skinner’s guardian. On 10 October 2010, Mr. Skinner retained Christine S. Eatmon
to assist him in litigating his motion to modify the existing guardianship
arrangement. On 20 January 2011, following an evidentiary hearing held on 13
January 2011 and with the consent of Mr. Skinner, Ms. Eatmon, the attorneys for
Wake County Human Services, Ms. Skinner’s former guardian of the person, and Ms.
Skinner’s guardian ad litem, the Assistant Clerk entered an order concluding that
Mr. Skinner should, on a trial basis, be appointed as the guardian of Ms. Skinner’s
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person. On 2 August 2011, the Assistant Clerk made Mr. Skinner’s appointment as
the guardian of Ms. Skinner’s person permanent.
Ms. Skinner’s mother, Kathleen Holton Bass, died on 27 August 2012. Along
with a number of her siblings and a niece and nephew, Ms. Skinner was named as a
beneficiary in Ms. Bass’s will. On 23 August 2013, one of Ms. Skinner’s brothers,
Douglass Bass, and one of Ms. Skinner’s sisters, Nancy Bass Clark, filed a motion
seeking to have Ms. Clark appointed as the guardian of Ms. Skinner’s estate on the
grounds that, since Ms. Skinner had been declared incompetent, any distributions
payable to Ms. Skinner from Ms. Bass’s estate “will need to be distributed to an
authorized recipient in order to comply with Estate requirements/laws.” On 29
August 2013, Mr. Skinner requested that he be appointed to serve as guardian of Ms.
Skinner’s estate instead of Ms. Clark. As Kimberly Richards, who had been
appointed to serve as Ms. Skinner’s guardian ad litem, noted in her report, Ms.
Skinner’s family questioned the appropriateness of appointing Mr. Skinner as the
guardian of Ms. Skinner’s estate given that he had “sold [Ms. Skinner’s] car during
the pendency of the original incompetency hearing and reportedly used the funds for
his own personal gain,” took Ms. Skinner “to the bank so that she could withdraw
fund[s] to give to him for his use,” unsuccessfully sued Ms. Skinner’s nephew “for
reimbursement of [Mr. Skinner’s] travel expenses to visit [Ms. Skinner] after she was
placed in a facility by . . . Wake County Human Services,” “does not appreciate the
full nature of [Ms. Skinner’s] mental incapacity,” and “removed [Ms. Skinner] from
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the adult day care center that she formerly attended, perhaps to redirect her social
security funds.”
On 9 October 2013, after an evidentiary hearing, the Assistant Clerk entered
an order appointing Mr. Skinner as the guardian of Ms. Skinner’s estate. The
Assistant Clerk found, in pertinent part, that:
1. That [Ms. Skinner] resides with [Mr.]
Skinner, in an apartment located . . . in Wake Forest, North
Carolina. Mr. Skinner married [Ms. Skinner] after this
court declared her incompetent. To date, no legal action
has been filed to challenge the validity of this marriage.
2. That [Ms. Skinner] receives SSI
[Supplemental Security Income] benefits of approximately
$700.00 per month and is a Medicaid recipient.
....
7. [Ms. Skinner’s] mother, [Ms. Bass], died on
August 27, 2012. [Ms. Skinner] will inherit from her
mother. [Ms. Skinner’s] inheritance is expected to be
between $200,000.00 and $250,000.00.
....
11. [Ms. Skinner] would be at risk of losing her
SSI benefits and Medicaid assistance if her inheritance is
not placed in a Special Needs Trust. [Ms. Skinner] was
born October 20, 1951 and at the time of the hearing was
62 years old. [Ms. Skinner] will have medical needs for the
remainder of her life.
12. [Mr. and Ms.] Skinner appear to love each
other. The Guardian ad Litem . . . . represented to the
Court that [Ms. Skinner] had expressed a desire that [Mr.]
Skinner be the Guardian of her Estate.
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13. [Ms.] Richards is of the opinion that [Ms.]
Clark should be the guardian of [Ms. Skinner] estate. She
expressed concern with regard to [Mr.] Skinner’s use of a
document he believes is a valid Power of Attorney. Ms.
Richards does not believe the Power of Attorney is valid.
She further indicated that [Mr.] Skinner does not
appreciate the seriousness of Cathy’s mental illness, might
be resistant to placing the inheritance in a Special Needs
Trust, and was further concerned by testimony of [Mr.]
Skinner that he had experienced significant losses in an
IRA account during the recession.
Based upon these and other findings of fact, the Assistant Clerk concluded as a
matter of law, in pertinent part:
2. That an inheritance by [Ms. Skinner] of the
size testified to in this case would best be managed by a
Special Needs Trust. If [Ms. Skinner] were to directly
receive the inheritance, it would compromise her ability to
receive essential government benefits.
....
4. That it is in the best interest of [Ms.] Skinner,
that [Mr.] Skinner, be appointed Guardian of the Estate if
he can satisfy the following conditions:
a. That he can secure a bond in the amount of
$250,000.00.
b. That he set up a Special Needs Trust for [Ms.]
Skinner and that no inheritance received by [Ms.]
Skinner be spent except pursuant to the provisions
of the Special Needs Trust. . . .
c. That the Special Needs Trust shall contain an
accounting provision whereby [Mr.] Skinner shall
annually report all receipts and expenditures in the
Special Needs Trust to [Ms.] Clark.
5. That [Ms.] Clark is capable of, and shall serve
as Guardian of the Estate of [Ms.] Skinner should [Mr.]
Skinner not be able to meet the above conditions . . . set out
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herein. The same conditions set out herein shall apply if
[Ms.] Clark serves as Guardian of the Estate.
Based upon these findings and conclusions, the Assistant Clerk ordered that Mr.
Skinner be appointed as guardian of Ms. Skinner’s estate subject to the posting of a
$250,000.00 bond and the establishment of a Special Needs Trust for the use and
benefit of Ms. Skinner, with the Special Needs Trust to contain a provision “requiring
an annual accounting to [Ms.] Clark of any and all receipts and expenditures from
the Special Needs Trust,” and that, in the event that Mr. Skinner failed to comply
with these conditions, Ms. Clark be appointed to serve as the guardian of Ms.
Skinner’s estate.
On 5 December 2013, Mr. Skinner posted the required $250,000.00 bond. On
18 March 2014, Mr. Skinner executed the Cathleen Bass Skinner Special Needs
Trust, which was approved by the Assistant Clerk by means of an order entered on
25 March 2014, in which Mr. Skinner’s appointment as guardian of Ms. Skinner’s
estate was reaffirmed. On 30 April 2014, letters appointing Mr. Skinner as the
guardian of Ms. Skinner’s estate were issued. On 21 May 2014, the Assistant Clerk
entered an order directing Ms. Bass’s estate to distribute Ms. Skinner’s share to the
Special Needs Trust.
On 28 July 2014, Mr. Bass and Ms. Clark filed a petition seeking to have Mr.
Skinner removed as trustee for the Special Needs Trust “due to his non-compliance
with Trust Provision Section 5.04 Duty to Report and Account” and to have Ms. Clark
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appointed as successor trustee of the Special Needs Trust.1 On 27 August 2014,
following another evidentiary hearing, the Assistant Clerk entered an order removing
Mr. Skinner as trustee under the Special Needs Trust and as guardian of Ms.
Skinner’s estate and appointing Ms. Clark as successor trustee and guardian of Ms.
Skinner’s estate in lieu of Mr. Skinner.2 As a basis for these determinations, the
Assistant Clerk found as fact, in pertinent part, that:
2. In July 2010, [Mr.] Skinner engaged the
Brownlee Law Firm and attorney Gil File to provide legal
advice with respect to Mr. Skinner’s desire to marry and
become Guardian of the Person for [Ms.] Bass. The
Brownlee Law Firm charged [Mr.] Skinner the sum of
$1,000.00 for these legal services by invoice dated July 16,
2010.
....
4. In October 2010, [Mr.] Skinner engaged the
Eatmon Law Firm, P.C. and attorney Christine Eatmon to
represent him in connection with pending guardianship of
the person and incompetency proceedings. The Eatmon
Law Firm charged [Mr.] Skinner the sum of $1,537.50 for
1 According to Section 5.04 of the Special Needs Trust, Mr. Skinner was required,
among other things, to “cause monthly statements reflecting the current balance of the
Trust’s assets and all receipts, disbursements and distributions made within the reporting
period to be mailed to [Ms. Skinner], [Ms.] Clark . . . and [Ms. Skinner’s] legal representative.”
2 Although the removal petition filed by Mr. Bass and Ms. Clark did not address the
issue of whether Mr. Skinner should be allowed to continue to serve as the guardian of Ms.
Skinner’s estate, the Assistant Clerk determined that a finding of breach of fiduciary duty
“would warrant Mr. Skinner’s removal as Guardian of the Estate and the hearing would . . .
encompass Mr. Skinner’s suitability as Guardian of the Estate in addition to his suitability
as Trustee” of the Special Needs Trust. Although the Assistant Clerk “afforded [Mr. Skinner]
and his counsel the opportunity to continue the hearing to another date to allow for additional
preparation,” Mr. Skinner elected, after conferring with his counsel, “not to continue the
hearing to another date and indicated a desire to proceed with the hearing, indicating his
understanding and consent as to the expanded scope of what was to be heard and decided.”
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these services as evidenced by a Fee Agreement dated
October 18, 2010.
....
9. After a contested hearing, [Mr.] Skinner was
appointed Guardian of the Estate for [Ms. Skinner] subject
to and in accordance with the Order Appointing Guardian
of the Estate of Cathleen Bass Skinner entered October 9,
2013 (the “GOE Order”).
10. As set forth in the GOE Order, the Court
determined that [Ms. Skinner’s] share of the Estate of [Ms.]
Bass was best managed by a Special Needs Trust and that
[Ms. Skinner’s] share of the Estate of [Ms.] Bass should be
distributed directly to the Cathleen Bass Skinner Special
Needs Trust to be used for the sole benefit of [Ms. Skinner]
pursuant to and in accordance with the terms of such trust,
and in order to preserve those assets for [Ms. Skinner’s]
long term health needs.
....
14. On or about June 14, 2014, an initial
distribution was made to the Trust from the Estate of [Ms.]
Bass. On June 16, 2014, the amount of $170,086.67 was
deposited into the Trust’s bank account with Fidelity Bank
(the “Trust Account”).
15. As of July 31, 2014, only $10,313.66 remains
in the Trust Account.
16. The amounts Mr. Skinner has withdrawn
from and/or distributed from the Trust Account since June
16, 2014 include a check payable to the Violin Shop, [Mr.]
Skinner’s personal business, in the amount of $8,387.50[.]
17. Mr. Skinner testified that the $8,387.50 paid
from the Trust Account to The Violin Shop included
reimbursement for his payment of $1,000.00 to the
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Brownlee Law Firm and reimbursement for his payment of
$1,537.50 to the Eatmon Law Firm.
18. The legal services provided by the Brownlee
Law Firm and the Eatmon Law Firm were for Mr. Skinner
personally.
19. The legal services provided by the Brownlee
Law Firm and the Eatmon Law Firm pre-date the
appointment of [Mr.] Skinner as Guardian of the Person for
[Ms. Skinner], pre-date the appointment of [Mr.] Skinner
(or anyone else) as Guardian of the Estate for [Ms. Skinner]
and pre-date the establishment of the Cathleen Bass
Special Needs Trust.
20. Mr. Skinner has no authority, implied or
explicit, to reimburse himself from the Trust for personal
attorney’s fees incurred before he became a guardian for
[Ms. Skinner] and that had no relationship to his
performance of any duties on behalf of [Ms. Skinner] or the
Trust.
21. Mr. Skinner also used the Trust assets to
purchase a house (Wake Co. Deed Book 014713, Page
01402-06), new furniture, new appliances, and a prepaid
burial/funeral insurance policy.
22. Mr. Skinner resides with [Ms. Skinner] in the
house purchased by the Trust and he benefits from the
Trust purchases and expenditures relating to the house.
23. The terms of the Trust require that the Trust
assets be used for [Ms. Skinner’s] sole benefit.
24. The Trust specifically states that funeral
expenses are not permitted to be paid from the Trust prior
to reimbursement to North Carolina (or any other state) for
medical assistance.
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Based upon these findings of fact, the Clerk concluded as a matter of law, in pertinent
part, that
3. Mr. Skinner’s use of Trust assets to reimburse
himself for personal expenditures was improper,
constitutes self-dealing, and is a breach of his fiduciary
duties both as Trustee and as Guardian of the Estate of
[Ms. Skinner].
4. Mr. Skinner’s payment of $3,644.00 to
Columbus Life for prepaid funeral expenses also is in
contradiction to the terms of the Trust and in violation of
his fiduciary duties as Trustee.
5. A Trustee is required, among other things, to
administer a trust as a prudent person would by
considering the purposes, terms, distributional
requirements, and other circumstances of the trust in the
exercise of reasonable care, skill, and caution.
6. Mr. Skinner has demonstrated that he lacks
appropriate judgment and prudence.
7. Mr. Skinner is in breach of his fiduciary
duties pursuant to the terms of the Trust, the terms of the
GOE Order, and applicable law.
8. Mr. Skinner has wasted the Trust assets,
mismanaged the Trust assets, and converted the Trust’s
assets to his own use.
9. [In] the discretion of the Court, and based
upon the evidence presented at the hearing, Mr. Skinner is
unsuitable to continue serving as Trustee of the Trust and
Guardian of the Estate [of Ms. Skinner], and the removal
of [Mr.] Skinner as Trustee and as Guardian of the Estate
best serves the interests of [Ms. Skinner].3
3 In view of the fact that the Assistant Clerk’s order did not address Mr. Skinner’s
compliance with the reporting and accounting provisions of the Special Needs Trust, no issue
relating to those provisions was properly before the trial or appellate courts in this case,
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Based upon these findings of fact and conclusions of law, the Assistant Clerk removed
Mr. Skinner as Trustee under the Special Needs Trust and guardian of Ms. Skinner’s
estate, appointed Ms. Clark to replace Mr. Skinner in both of these capacities,
precluded Mr. Skinner from spending additional amounts from the Trust or Ms.
Skinner’s estate, and required Mr. Skinner, among other things, to repay any
amounts disbursed from the Trust or Ms. Skinner’s estate since the date of the
evidentiary hearing, to reimburse the Trust for the payments that he made to himself
using Trust assets relating to his legal fee payments to the Eatmon and Brownlee law
firms, and to provide all relevant records and make a full accounting to Ms. Clark.
On 5 September 2014, Mr. Skinner filed a notice of appeal seeking review of
the Assistant Clerk’s order in the Superior Court, Wake County. On 22 October 2014,
the trial court entered an order affirming the Assistant Clerk’s order. On 18
November 2014, Mr. Skinner noted an appeal to the Court of Appeals from the trial
court’s order.
In seeking relief from the trial court’s order before the Court of Appeals, Mr.
Skinner noted that “[t]he standard of review on appeal from a judgment entered after
a non-jury trial is ‘whether there is competent evidence to support the trial court’s
findings of fact and whether the findings support the conclusions of law and ensuing
judgment,’ ” quoting Cartin v. Harrison, 151 N.C. App. 697, 699, 567 S.E.2d 174, 176
obviating the necessity for us to examine the extent, if any, to which Mr. Skinner violated
those reporting and accounting requirements.
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(quoting Sessler v. Marsh, 144 N.C. App. 623, 628, 551 S.E.2d 160, 163, disc. rev.
denied, 354 N.C. 365, 556 S.E.2d 577 (2001)), disc. rev. denied, 356 N.C. 434, 572
S.E.2d 428 (2002), with the trial court’s legal conclusions being subject to de novo
review, citing In re D.H., 177 N.C. App. 700, 703, 629 S.E.2d 920, 922 (2006).
According to Mr. Skinner, the record did not contain sufficient evidence to show that
he had engaged in self-dealing, committed a breach of fiduciary duty, acted
imprudently, wasted or mismanaged trust assets, or converted trust assets to his own
use. More specifically, Mr. Skinner contended that “the trial court made no findings
that [he] . . . abused his discretion, acted with a dishonest motive, acted beyond the
bounds of reasonable judgment or violated any specific provision of the Cathleen Bass
Special Needs Trust” by using trust funds to pay for the home and associated services
or attorneys’ fees associated with the preparation of the trust and that the Assistant
Clerk had not given sufficient deference to the discretionary decisions that he had
made in the course of acting as the guardian of Ms. Skinner’s estate and trustee under
the Special Needs Trust.
On the other hand, Mr. Bass and Ms. Clark argued that “great deference [is
accorded] to the trial court, and its ruling may be reversed only upon a showing that
its action was manifestly unsupported by reason or so arbitrary that it could not have
been the result of a reasoned decision,” quoting In re Estate of Newton, 173 N.C. App.
530, 539, 619 S.E.2d 571, 576, disc. rev. denied, 360 N.C. 176, 625 S.E.2d 786 (2005).
According to Mr. Bass and Ms. Clark, the record “support[s] the [Assistant] Clerk’s
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conclusion that [Mr. Skinner] inappropriately used trust funds to benefit himself,”
“lacks appropriate judgment,” and “mismanaged the Trust assets,” with Mr.
Skinner’s right to exercise his discretion being insufficient, given the facts at issue in
this case, to insulate him from removal as the guardian of Ms. Skinner’s person and
the trustee under the Special Needs Trust.
On 21 June 2016, the Court of Appeals reversed the Assistant Clerk’s order
removing Mr. Skinner as the guardian of Ms. Skinner’s estate and trustee under the
Special Needs Trust. In re Estate of Skinner, ___ N.C. App. ___, 787 S.E.2d 440(2016). After noting that the abuse of discretion standard of review was only relevant
with respect to “decisions that are based upon properly supported findings and legally
correct conclusions” and that “ ‘the extent to which the trial court [had] exercised its
discretion on the basis of an incorrect understanding of the applicable law raise[d] an
issue of law subject to de novo review on appeal,’ ” id. at ___, 787 S.E.2d at 444
(quoting In re A.F., 231 N.C. App. 348, 352, 752 S.E.2d 245, 248 (2013) (quoting Koon
v. U.S., 518 U.S. 81, 100, 116 S. Ct. 2035, 2047, 135 L.Ed.2d 392, 414 (1996))), the
Court of Appeals held that the Assistant Clerk had erred by determining that the
Special Needs Trust had been created “in order to preserve those assets for [Ms.
Skinner’s] long term health needs” given that “the subject assets were not intended
to be used for [Ms.] Skinner’s future medical needs,” id. at ___, 787 S.E.2d at 445-46
(brackets in original). In addition, the Court of Appeals held that the Assistant Clerk
had erred by finding “that the ‘trust specifically states that funeral expenses are not
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permitted to be paid from the Trust prior to reimbursement to North Carolina (or any
other state) for medical expenses’ ” given that “[t]he Trust does not bar the use of
Trust funds to purchase a prepaid burial insurance policy,” id. at ___, 787 S.E.2d at
447. Moreover, the Court of Appeals stated that the Assistant Clerk had erred by
deciding that “the terms of the Trust did not permit the Trustee to use Trust assets
for the purpose of a house, furniture, or appliances”; that these purchases constituted
“waste and mismanagement of Trust assets”; and that the use of these assets by Mr.
Skinner violated “the requirement that the Trust be administered for the ‘sole benefit’
of Ms. Skinner” on the grounds that the house, furniture, and appliances had been
titled to the Trust; that the purchase of such assets constituted a permissible use of
Trust resources; that, while “[t]he wisdom of this investment is a separate question,”
it was “factually and legally inaccurate” to state that the purchase constituted waste
or mismanagement “in the absence of any findings regarding the wisdom of this
particular investment”; and that “an examination of the relevant regulations in the
context of trust common law and the common sense realities of the life of any person,
and especially of the challenges faced by a disabled person, makes it clear that the
term ‘sole benefit’ does not mean that a disabled person . . . must live in a state of
bizarre isolation in which no other person may ‘benefit’ from her house or
furnishings.” Id., at ___, 787 S.E.2d at 448-51 (citing 42 U.S.C. § 1396p(d)(4)(A) and
Program Operations Manual Systems Transmittal No. 48, SI 01120 TN 48). Finally,
the Court of Appeals held that the Assistant Clerk had erred by concluding that “the
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Trust funds could not properly be used to reimburse [the] attorneys’ fees” that Mr.
Skinner incurred in the course of determining whether he could legally marry Ms.
Skinner or be appointed as guardian for her on the grounds that “[t]he relevant Trust
provisions are ambiguous” and the Assistant Clerk’s findings do not “support its
implied conclusion that this error constitute[d] ‘a serious breach of trust’ as opposed
to an honest mistake,” id. at ___, 787 S.E.2d at 452, particularly given “Mr. Skinner’s
uncontradicted testimony . . . that he believed that he could use Trust funds to
reimburse himself for [the relevant] attorneys’ fees” and the fact “that [Mr. Skinner
had] agreed to repay the Trust when this error was pointed out,” id, at ___, 787 S.E.2d
at 452. As a result, the Court of Appeals held that the trial court’s order upholding
the Assistant Clerk’s order “must be reversed for application of the proper legal
standards.” Id. at ___, 787 S.E.2d at 453.
Judge Bryant dissented from the Court of Appeals’ decision to reverse the trial
court’s order on the grounds that the majority had effectively “reweigh[ed] the
evidence” and “disregard[ed] the deferential standard of review on appeal.” Id. at
___, 787 S.E.2d at 453 (Bryant, J., dissenting). In the dissenting judge’s opinion, the
Assistant Clerk “made findings of fact which were supported by competent evidence,”
except for “the [Assistant] Clerk’s finding that funeral expenses are not permitted to
be paid from the Trust,” and “those findings in turn supported his conclusion that Mr.
Skinner ‘is unsuitable to continue serving as Trustee of the Trust’ and the guardian
of Ms. Skinner’s estate.” Id. at ___, 787 S.E.2d at 454. As a result, since “the
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[Assistant] Clerk’s findings of fact are supported by the evidence, which findings in
turn support the conclusions of law,” the dissenting judge could not find that the
Assistant Clerk’s decision to remove Mr. Skinner as trustee of the Special Needs
Trust and as guardian of Ms. Skinner’s estate constituted an abuse of discretion. Id.
at ___, 787 S.E.2d at 455. Mr. Bass and Ms. Clark noted an appeal to this Court from
the Court of Appeals’ decision pursuant to N.C.G.S. § 7A-30(2) (providing for “an
appeal . . . of right to the Supreme Court from any decision of the Court of Appeals
rendered in a case . . . [i]n which there is a dissent”).
In seeking to persuade us to reverse the Court of Appeals’ decision, Mr. Bass
and Ms. Clark contend that the Court of Appeals erred by failing to limit its review
of the Assistant Clerk’s order to determining whether an abuse of discretion had
occurred. According to Mr. Bass and Ms. Clark, “[b]ecause the removal of a trustee
and the removal of a guardian are ‘left to the discretion of the clerks of superior court,’
appellate review ‘is limited to a determination of whether there was a clear abuse of
discretion,’ ” quoting White v. White, 312 N.C. 770, 777, 324 S.E.2d 829, 833 (1985).
As a result, Mr. Bass and Ms. Clark argue that, “in order to reverse the [Assistant]
Clerk’s Order, the appellate court was required to find that the [Assistant] Clerk’s
Order was so manifestly unsupported by reason that it could not have been the result
of a reasoned decision.” Mr. Bass and Ms. Clark contend that, “regardless of what
the trust allowed, [Mr. Skinner] was required to act with prudence and in [Ms.
Skinner’s] best interests” and that the Assistant Clerk had properly determined “that
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[Mr. Skinner] had not acted accordingly.” Finally, Mr. Bass and Ms. Clark contend
that, even if the Court of Appeals had correctly concluded that the Assistant Clerk’s
order rested on a misinterpretation of the applicable law, the Court of Appeals should
have remanded this case to the trial court for further remand to the Assistant Clerk
“for consideration of the evidence in its true legal light,” quoting Allen v. Rouse Toyota
Jeep, Inc., 100 N.C. App. 737, 740, 398 S.E.2d 64, 65 (1990), rather than simply
reversing the trial court’s decision to uphold the Assistant Clerk’s order.
Mr. Skinner, on the other hand, contends that the Court of Appeals correctly
applied the applicable standard of review in determining that the Assistant Clerk’s
order was “so arbitrary that it could not have been the result of a reasoned decision,”
quoting State v. T.D.R., 347 N.C. 489, 503, 495 S.E.2d 700, 708 (1998). According to
Mr. Skinner, “[n]o deference . . . is owed to the [trial court] on conclusions of law,”
which are “are reviewed de novo,” quoting Everett v. Pitt Cty. Bd. of Educ., 678 F.3d
281, 288 (4th Cir. 2012) (alterations in original), with “a court by definition [having]
abuse[d] its discretion when it makes an error of law,” quoting A Helping Hand LLC
v. Baltimore County, 515 F.3d 356, 370 (4th Cir. 2008) (rev’d per curiam, 355 F. App’x
773 (4th Cir. 2009)). Mr. Skinner asserts that the Assistant Clerk’s order was replete
with “findings and conclusions of law that were unsupported by the evidence of record
and inconsistent with prevailing law,” including his determination that the purpose
of the Special Needs Trust was to “preserve those assets for [Ms. Skinner’s] long term
health needs.” Thus, Mr. Skinner claims that the Assistant Clerk’s decision to
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remove him as trustee under the Special Needs Trust and as the guardian of Ms.
Skinner’s estate was unwarranted given that his actions did not “injure[ ] [Ms.]
Skinner by causing her to suffer any period of ineligibility for any federal or state
government benefits to which she was entitled.” As a result, since he acted “in good
faith and with an honest purpose to effectuate the trust,” Mr. Skinner argues that
the Court of Appeals properly overturned the Assistant Clerk’s removal order.
In the appointment and removal of guardians and trustees, the superior court
exercises derivative jurisdiction, so that “appeals [from the clerk] present for review
only errors of law [that were] committed by the clerk,” with the trial court in such
instances being required to conduct a “hearing on the record rather than de novo” and
being “confined to the correction of errors of law.” In re Simmons, 266 N.C. 702, 707,
147 S.E.2d 231, 234 (1966) (citations omitted). In like manner, the essential inquiry
that we are required to conduct in this proceeding involves a determination of
whether the Assistant Clerk, who effectively served as the trial tribunal in this
matter, committed an error of law in the course of determining that Mr. Skinner
should be removed as the trustee under the Special Needs Trust and the guardian of
Ms. Skinner’s person.
The relevant statutory provisions clearly enunciate the approach that the
Assistant Clerk was required to take in determining whether the removal petition
filed by Mr. Bass and Ms. Clark should have been allowed or denied, as will be set
forth in more detail below. In each instance, the clerk is authorized, but not required,
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Opinion of the Court
to remove a trustee or guardian in the event that the clerk determines that statutory
grounds for removal exist. For that reason, the clerk must, in a proceeding convened
to consider the removal of a trustee or guardian, ascertain what the relevant facts
are, decide whether those facts establish that any of the statutorily specified grounds
for removal exist, and, if one or more grounds for removal do exist, make a
discretionary determination as to whether the acts or omissions of the trustee or
guardian justify removal from the position that he or she occupies, with the exact
contours of the applicable standard of review flowing from the nature of the inquiry
that the Assistant Clerk is required to undertake. See id. at 706, 147 S.E.2d at 234(affirming a removal order on the grounds that “[t]he records and summary of the
evidence warrant the clerk’s findings which are sufficient to support the order of
removal”).
In light of the nature of the review conducted by the Superior Court in cases
like this one, involving review of an Assistant Clerk’s decision for errors of law, the
Assistant Clerk’s order can be analogized to that of a trial judge sitting without a jury
or by an administrative agency. When the trial court conducts a trial without a jury,
“the trial court’s findings of fact have the force and effect of a jury verdict and are
conclusive on appeal if there is competent evidence to support them, even though the
evidence could be viewed as supporting a different finding.” Bailey v. State, 348 N.C.
130, 146, 500 S.E.2d 54, 63 (1998) (citing Curl v. Key, 311 N.C. 259, 260, 316 S.E.2d
272, 273 (1984)). Although findings of fact “supported by competent, material and
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Opinion of the Court
substantial evidence in view of the entire record[ ], are conclusive upon a reviewing
court, and not within the scope its of reviewing powers,” In re Berman, 245 N.C. 612,
616-17, 97 S.E.2d 232, 235 (1957), “[f]indings not supported by competent evidence
are not conclusive and will be set aside on appeal.” Penland v. Bird Coal Co., 246
N.C. 26, 30, 97 S.E.2d 432, 436 (1957) (citing Logan v. Johnson, 218 N.C. 200, 10
S.E.2d 653 (1940)). “[F]acts found under a misapprehension of the law are not
binding on this Court and will be set aside, and the cause remanded to the end that
the evidence should be considered in its true legal light.” Hanford v. McSwain, 230
N.C. 229, 233, 53 S.E.2d 84, 87 (1949) (citing, inter alia, McGill v. Town of Lumberton,
215 N.C. 752, 3 S.E.2d 324 (1939)). Even if one or more factual findings were made
in error, the remaining findings may still suffice to support the trial tribunal’s legal
conclusions. See In re Greene, 328 N.C. 639, 650, 403 S.E.2d 257, 263-64 (1991) (per
curiam) (concluding that, even though “the finding [by the Commission] that
respondent told the prosecuting witness in the assault case that she deserved to be
hit and had not been hit that much is not supported by clear and convincing evidence,”
because “the other findings of the Commission are supported by clear and convincing
evidence,” “we adopt them as our own” and “agree with the conclusion of the
Commission”); King v. Nat’l Union Fire Ins. Co., 258 N.C. 432, 439, 128 S.E.2d 849,
855 (1963) (concluding that, even though “the finding . . . that . . . plaintiff . . . [while]
in possession, . . . made extensive repairs and improvements to the dwelling house is
not supported by the evidence,” “[b]ased upon the crucial findings of fact, which are
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Opinion of the Court
supported by competent evidence” the trial court’s judgment was proper); In re Estate
of Pate, 119 N.C. App. 400, 403, 459 S.E.2d 1, 2 (noting that, “[i]n a non-jury trial,
[w]here there are sufficient findings of fact based on competent evidence to support
the trial court’s conclusions of law, the judgment will not be disturbed because of
other erroneous findings”) disc. rev. denied, 341 N.C. 649, 462 S.E.2d 515 (1995)
(quoting Black Horse Run Prop. Owners Ass’n—Raleigh v. Kaleel, 88 N.C. App. 83,
86, 362 S.E.2d 619, 622 (1987) cert. denied, 321 N.C. 742, 366 S.E.2d 856 (1988)). On
appeal, “[c]onclusions of law drawn by the trial court from its findings of fact are
reviewable de novo.” In re Foreclosure of Bass, 366 N.C. 464, 467, 738 S.E.2d 173,
175 (2013) (quoting Carolina Power & Light Co. v. City of Asheville, 358 N.C. 512,
517, 597 S.E.2d 717, 721 (2004)). “When an order has been made by the judge in the
exercise of the discretion vested in him by the statute, his order is not reviewable by
this Court, on appeal, except upon the ground that there has been an abuse of such
discretion.” In re LaFayette Bank & Tr., 198 N.C. 783, 789-90, 153 S.E. 452, 455
(1930). An abuse of discretion exists when there has been “a showing that [the]
actions are manifestly unsupported by reason . . . [and] so arbitrary that the ruling
could not have been the result of a reasoned decision.” White, 312 N.C. at 777, 324
S.E.2d at 833 (citing Clark v. Clark, 301 N.C. 123, 271 S.E.2d 58 (1980)).
According to well-established North Carolina law, “[t]he clerk has the power
and authority on information or complaint made to remove any guardian.” N.C.G.S.
§ 35A-1290(a) (2015). A clerk has a “duty to remove a guardian or to take other action
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Opinion of the Court
sufficient to protect the ward’s interests” in the event that a “guardian wastes the
ward’s money or estate or converts it to his own use,” “mismanages the ward’s estate,”
“has violated a fiduciary duty through default or misconduct,” or is “unsuitable to
continue serving as guardian for any reason.” Id. § 35A-1290(b)(1), (2), (6), (c)(8)
(2015), recodified as N.C.G.S. § 35A-1290(b)(1), (2), (6), (15) by Act of June 29, 2017,
ch. 158, sec. 4, 2017 N.C. Sess. Laws __, __). Similarly, the clerk “may remove a
trustee” who “has committed a serious breach of trust” or in the event that, “[b]ecause
of unfitness, unwillingness, or persistent failure . . . to administer the trust
effectively,” “removal of the trustee best serves the interests of the beneficiaries.” Id.
§ 36C-7-706(b)(1), (3) (2015); see also id. § 36C-2-203(a)(1) (2015). As a result, the
Assistant Clerk had the authority, pursuant to N.C.G.S. § 35A-1290 and N.C.G.S. §
36C-7-706(b), to remove Mr. Skinner as the guardian of Ms. Skinner’s estate and as
trustee under the Special Needs Trust, for a number of different reasons.
“A trustee shall invest and manage trust assets as a prudent investor would,
by considering the purposes, terms, distribution requirements, and other
circumstances of the trust” and must “exercise reasonable care, skill, and caution”
while acting in his or her fiduciary capacity. Id. § 36C-9-902 (a) (2015).
In acquiring, investing, reinvesting, exchanging,
retaining, selling and managing property for the benefit of
another, a fiduciary shall observe the standard of judgment
and care under the circumstances then prevailing, which
an ordinarily prudent person of discretion and intelligence,
who is a fiduciary of the property of others, would observe
as [such] fiduciary; and if the fiduciary has special skills or
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Opinion of the Court
is named a fiduciary on the basis of representations of
special skills or expertise, he is under a duty to use those
skills.
Id. § 32-71(a) (2015). While “the terms of the trust, in conjunction with the North
Carolina Uniform Trust Code, govern[ ] the duties and powers of a trustee,” id. § 36C-
1-105(a) (2015), those terms do not prevail over the trustee’s duty “to act in good faith
and in accordance with the terms and purposes of the trust and the interests of the
beneficiaries,” id. § 36C-1-105(b)(2) (2015). As a result, while “the courts will not
undertake to supervise or control [a trustee’s] actions” “[w]hen it appears that a
trustee has exercised or proposes to exercise discretion in good faith, and with an
honest purpose to effectuate the trust,” Lichtenfels v. N.C. Nat’l. Bank, 268 N.C. 467,
476, 151 S.E.2d 78, 84 (1966) (ellipses in original) (quoting Carter v. Young, 193 N.C.
678, 681-82, 137 S.E. 875, 877 (1927)), “[t]he court of equity will always compel a
trustee to exercise a mandatory power and will control his exercise of a discretion
vested in him when it is shown that he has exercised it dishonestly or from other
improper motive.” Kuykendall v. Proctor, 270 N.C. 510, 520, 155 S.E.2d 293, 302
(1967) (citation omitted).
Similarly, the guardian of an incompetent person’s estate “has the power to
perform in a reasonable and prudent manner every act that a reasonable and prudent
person would perform incident to the collection, preservation, management, and use
of the ward’s estate to accomplish the desired result of administering the ward’s
estate legally and in the ward’s best interest.” N.C.G.S. § 35A-1251 (Supp. 2016). In
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Opinion of the Court
carrying out these responsibilities, the guardian is entitled, among other things, “[t]o
expend estate income on the ward’s behalf and to petition the court for prior approval
of expenditures from estate principal,” id. § 35A-1251(12), and “[t]o acquire and retain
every kind of property and every kind of investment,” id. § 35A-1251(16). This Court
affirmed the removal of a guardian after stating that the clerk had found that “the
net income from the ward’s estate [had] dwindled” and “total expenditures for the
period” included the purchase of a truck, refrigerator for the guardian’s mother, and
a television set, while the “remainder was paid for board and room for the ward.” In
re Simmons, 266 N.C. at 706, 147 S.E.2d at 233; see also State ex rel. Roebuck v. Nat’l
Sur. Co., 200 N.C. 196, 202, 156 S.E. 531, 535 (1931) (ordering a surety company that
executed a bond for the faithful performance of a bank acting as guardian for a ward
to pay the successor guardian a stated sum to reimburse the ward for the bank’s
failure to “invest[ ] the funds of its ward”; stating that, by “intermingling [the funds
of the ward] with other funds of its bank, [the bank] was faithless to the trust reposed
in it; and pointing out that its bondsman, the defendant, must suffer the loss for such
faithlessness”). As a result, because the “level of conduct for fiduciaries . . . [must be]
higher than that trodden by the crowd,” Wachovia Bank & Tr. Co. v. Johnston, 269
N.C. 701, 711, 153 S.E.2d 449, 457 (1967) (quoting Meinhard v. Salmon, 249 N.Y.
458, 464, 164 N.E. 545, 5460 (1928)), Mr. Skinner was required to carry out his duties
as guardian and trustee reasonably and prudently and in a manner that served Ms.
Skinner’s best interests.
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Opinion of the Court
The unchallenged findings of fact contained in the Assistant Clerk’s order
establish that, within less than two months after the $170,086.67 amount that Ms.
Skinner inherited from Ms. Bass was transferred to the Special Needs Trust, only
$10,313.66 remained available for Ms. Skinner’s use. Among other things, Mr.
Skinner paid $8,387.50 from the Special Needs Trust to The Violin Shop, with
$1,000.00 of this amount being used to reimburse Mr. Skinner for the legal fees that
he had paid to the Brownlee Law Firm for advice concerning the extent to which he
could lawfully marry Ms. Skinner and become Ms. Skinner’s guardian and with
another $1,537.50 being used to reimburse Mr. Skinner for the legal fees that he had
paid to the Eatmon Law Firm for personal representation in the guardianship and
incompetency proceedings. In addition, the unchallenged findings of fact
demonstrate that Mr. Skinner used monies derived from the Special Needs Trust to
purchase a new house, along with furniture and appliances, in which he and Ms.
Skinner were residing at the time of the removal hearing. Thus, the Assistant Clerk’s
unchallenged findings of fact establish that Mr. Skinner, while acting as the trustee
under the Special Needs Trust and as the guardian of Ms. Skinner’s estate, spent
more than ninety percent of the monies that had been deposited in the Special Needs
Trust for purposes for which he received some, if not all, of the benefit within sixty
days of obtaining control of those monies. As a result, we have no hesitancy in
concluding that the Assistant Clerk’s unchallenged findings of fact support his
conclusions that “Mr. Skinner’s use of Trust assets to reimburse himself for personal
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Opinion of the Court
expenditures was improper, constitutes self-dealing, and is a breach of his fiduciary
duties both as Trustee and Guardian” of Ms. Skinner’s estate; that “Mr. Skinner has
demonstrated that he lacks appropriate judgment and prudence”; that “Mr. Skinner
is in breach of his fiduciary duties pursuant to the terms of the Trust, the . . . order
[appointing him guardian of Ms. Skinner’s estate], and the applicable law”; and that
“Mr. Skinner has wasted the Trust assets, mismanaged the Trust assets, and
converted the Trust assets to his own use.” In view of the fact that his findings and
conclusions demonstrate that Mr. Skinner had “waste[d] the ward’s money or estate
or convert[ed] it to his own use,” N.C.G.S. § 35A-1290(b)(1), “mismanage[d] the ward’s
estate,” id. § 3A-1290(b)(2), and “violated a fiduciary duty through default or
misconduct,” id. § 35A-1290(b)(6), and that Mr. Skinner “has committed a serious
breach of trust,” id. § 36C-7-706(b)(1), the Assistant Clerk had ample justification for
determining that grounds for Mr. Skinner’s removal as both the guardian of Ms.
Skinner’s estate and as trustee under the Special Needs Trust existed in this case.
Finally, we are unable to say that the Assistant Clerk’s determination that removal
constituted a valid remedy for Mr. Skinner’s breaches of fiduciary duty was
“manifestly unsupported by reason” or “so arbitrary that it could not have been the
result of a reasoned decision.” White, 312 N.C. at 777, 324 S.E.2d at 833. As a result,
while the Assistant Clerk appears to have erroneously construed a number of the
provisions of the Special Needs Trust and while the entry of a more detailed and
clearly focused order would have facilitated our review on appeal, we hold that the
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Opinion of the Court
Assistant Clerk’s order should be affirmed and that the Court of Appeals erred by
reaching a contrary conclusion.
In reversing the Assistant Clerk’s order, the Court of Appeals focused upon the
extent, if any, to which Mr. Skinner’s conduct violated the specific provisions of the
Special Needs Trust. Although the existence or non-existence of such violations is, of
course, relevant to a proper removal inquiry, the Court of Appeals’ apparent
determination that Mr. Skinner was not subject to removal in the absence of a
showing that he had, in fact, violated one or more provisions of the Special Needs
Trust misapprehends the applicable law. Instead of being concentrated exclusively
upon the extent to which Mr. Skinner’s actions violated the provisions of the Special
Needs Trust, the Assistant Clerk’s order clearly and appropriately recognized that
N.C.G.S. §§ 35A-1290 and 36C-7-706(b) focus upon the broader issue of whether the
guardian or trustee acted in such a manner as to violate the fiduciary duty that he or
she owes to the ward or beneficiary. A careful reading of the challenged removal
order satisfies us that the Assistant Clerk did not remove Mr. Skinner from his
position as guardian of Ms. Skinner’s estate and trustee under the Special Needs
Trust because he violated the terms and conditions of the Special Needs Trust;
instead, the Assistant Clerk’s findings and conclusions satisfy us that he acted as he
did on the basis of a belief that Mr. Skinner’s actions, regardless of their consistency
with specific provisions of the Special Needs Trust, constituted waste and
mismanagement of the assets committed to his care. As we have already noted, the
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Opinion of the Court
extent to which a guardian or trustee violated his or her fiduciary duty is a separate,
and broader, question than the issue of whether he or she violated a specific provision
of a written trust instrument. See N.C.G.S. § 36C-1-105(b)(2) (providing that “[t]he
duty of a trustee . . . to act in good faith and in accordance with the terms and purposes
of the trust and the interests of the beneficiaries” overrides “[t]he terms of a trust”).
Thus, the fact that Mr. Skinner’s conduct may have been consistent with the terms
of the Special Needs Trust did not insulate him from removal.
In seeking to persuade us to reach a different result, Mr. Skinner emphasizes
the scope of his discretionary authority and defends the spending decisions upon
which the Assistant Clerk’s order rests as having benefitted Ms. Skinner and been in
her best interest. Although we recognize that a guardian and trustee has discretion
in the manner in which he or she attempts to meet the needs of his or her ward or
beneficiary, there are, as this Court has previously noted, limits to the scope and
extent of that discretion. In view of the fact that the Assistant Clerk’s findings of fact
demonstrate that Mr. Skinner expended over ninety percent of the monies committed
to his custody for Ms. Skinner’s use and care within a short time after receiving them
in ways that either directly or indirectly benefitted himself while leaving insufficient
monies in the Trust to either preserve the assets into which he had invested the bulk
of the Trust’s funds or to take care of Ms. Skinner’s long term needs, we cannot say
that the Assistant Clerk erred in determining that Mr. Skinner exceeded the scope of
the discretion that was admittedly available to him to such an extent that grounds
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Opinion of the Court
for his removal as the guardian of Ms. Skinner’s person and as trustee under the
Special Needs Trust existed under N.C.G.S. §§ 35A-1290 and 36C-7-706(b) and that
these breaches of fiduciary duty justified his removal. As a result, the Court of
Appeals’ decision in this case is reversed.
REVERSED.
Justice MORGAN dissenting.
I respectfully dissent from the decision of the majority that the Assistant Clerk
was authorized, in his discretion as exercised under the circumstances presented in
this case, to properly remove Mr. Skinner as the Trustee of his legally incompetent
wife’s Special Needs Trust and guardian of her estate. While the majority in its
opinion acknowledges that the Assistant Clerk erroneously construed a number of
the provisions of the Special Needs Trust at issue, my learned colleagues stretch far
too much to bring these critical errors within the realm of the proper exercise of broad
discretion while simultaneously minimizing these missteps by overemphasizing the
strength of his remaining findings. The fundamental misapprehension of the law
exhibited by the Assistant Clerk is too profound to be salvaged in this manner. As a
result, in my view, Mr. Skinner’s removal from his position as Trustee of Mrs.
Skinner’s Special Needs Trust and guardian of her estate was not justified. I agree
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MORGAN, J., dissenting
with the rationale of the Court of Appeals decision. In my view, the case should be
remanded to the trial court for proper application of the correct legal standard.
In the first instance, the Assistant Clerk misinterpreted the essence of a
special needs trust when making his decision to remove Mr. Skinner as Trustee and
as guardian of his wife’s estate. A special needs trust, such as the one at issue in the
present case, which meets designated federal requirements as identified in 42 U.S.C.
§ 1396p(d)(4)(A) allows the beneficiary to maintain eligibility for Medicaid and Social
Security disability benefits. “The whole purpose of a special needs trust is to shelter
resources so that the state, through Medicaid, pays for medical expenses rather than
having the beneficiary’s family pay for them.” Hobbs v. Zenderman, 542 F. Supp. 2d
1220, 1234 (D.N.M. 2008), aff’d, 579 F.3d 1171 (10th Cir. 2009); ACS Recovery Servs.,
Inc. v. Griffin, 723 F.3d 518, 539 (5th Cir. 2013) (“The primary purpose of special
needs trusts is to allow beneficiaries to maintain eligibility for public benefits—such
as Medicaid—while supplementing those benefits so that the beneficiary enjoys a
better quality of life.” (Haynes, J. concurring in part and dissenting in part), cert.
denied, 134 S. Ct. 618, 187 L. Ed. 2d 400 (2013)). This was a proper consideration by
the Assistant Clerk, manifested by his requirement in his 9 October 2013 order
appointing Mr. Skinner as guardian of Mrs. Skinner’s estate that a special needs
trust be established. This recognition is displayed in the Assistant Clerk’s finding,
which is also cited in the majority opinion, that “[Mrs. Skinner] would be at risk of
losing her SSI benefits and Medicaid assistance if her inheritance is not placed in a
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MORGAN, J., dissenting
Special Needs Trust . . . [Mrs. Skinner] will have medical needs for the remainder of
her life.”
Subsequently, however, the Assistant Clerk incorrectly determined that the
purpose of the Special Needs Trust was to shield Mrs. Skinner’s resources for future
medical expenses, rather than the actual purpose referenced in federal statutory and
case law that authorizes a special needs trust to fund resources that will improve a
beneficiary’s quality of life while still protecting that beneficiary’s ability to access
governmental resources such as Medicaid and Social Security. The Court of Appeals
correctly understood and applied this fundamental purpose of a special needs trust
in reversing the Assistant Clerk’s order that removed Mr. Skinner from the positions
of authority for his wife.
The Assistant Clerk’s misunderstanding of the purpose of the Special Needs
Trust is a misapprehension of law that renders his decision to remove Mr. Skinner as
Trustee and guardian of Mrs. Skinner’s estate an abuse of discretion. While this
Court’s standard of review is limited to a determination of whether the Assistant
Clerk abused his discretion, “an abuse-of-discretion standard does not mean a
mistake of law is beyond appellate correction.” Koon v. United States, 518 U.S. 81,
100, 116 S. Ct. 2035, 2047, 135 L. Ed. 2d 392, 414 (1996) (citation omitted). It is well-
established in this Court’s decisions that a misapprehension of the law is
appropriately addressed by remanding the case to the appropriate lower forum in
order to apply the correct legal standard. See, e.g., Wilson v. McLeod Oil Co., 327
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MORGAN, J., dissenting
N.C. 491, 523, 398 S.E.2d 586, 603 (1990); State v. Grundler, 249 N.C. 399, 402, 106
S.E.2d 488, 490 (1959), cert. denied, 362 U.S. 917, 80 S. Ct. 670, 4 L. Ed. 2d 738 (1960).
The Assistant Clerk’s decision to remove Mr. Skinner as Trustee is replete with
other examples of misapprehensions of the law which amounted to an abuse of
discretion, and which were duly noted by the Court of Appeals, in the Assistant
Clerk’s interpretation of the Special Needs Trust and Mr. Skinner’s actions regarding
it.
The Assistant Clerk erred by failing to distinguish between the use of Trust
funds for funeral expenses after termination of the Trust and the use of Trust funds
for the purchase of prepaid funeral or burial insurance during the beneficiary’s
lifetime. In his removal order, the Assistant Clerk reasoned that “[t]he Trust
specifically states that funeral expenses are not permitted to be paid from the Trust
prior to reimbursement to North Carolina (or any other state) for medical assistance.”
The Assistant Clerk then concluded that “Mr. Skinner’s payment of $3,644.00 to
Columbus Life for prepaid funeral expenses . . . is in contradiction to the terms of the
Trust and in violation of his fiduciary duties as Trustee.” However, in accord with 42
U.S.C. § 1396p(d)(4)(A), upon the death of a beneficiary or upon early termination, a
Special Needs Trust must reimburse the State for medical expenses. To comply with
this provision, the Special Needs Trust provides that upon Mrs. Skinner’s death, the
Trustee is required to “notify the appropriate state agency of [Mrs. Skinner’s] death
and must promptly obtain an accounting from the states (or local Medicaid agencies
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MORGAN, J., dissenting
of the states) that have made Medicaid payments on [Mrs. Skinner’s] behalf during
her lifetime.”1 The Special Needs Trust further provides that after the State is fully
reimbursed, the Trustee may pay for funeral expenses. There is no provision in the
Special Needs Trust that prevented Mr. Skinner from using trust funds to purchase
prepaid funeral and burial insurance during Mrs. Skinner’s lifetime. Therefore, the
Assistant Clerk misinterpreted the federal statutory provision mandating that, after
death, the State was to be reimbursed before other expenses were paid, by
erroneously construing the 42 U.S.C. § 1396p(d)(4)(A) language to bar payment for
funeral and burial insurance before death.
The Assistant Clerk’s inaccurate construction of the purpose of the Special
Needs Trust likewise yielded an improper analysis of Mr. Skinner’s decision to use
trust funds to purchase a house to serve as the marital home for the Skinners, plus
some furnishings. The Assistant Clerk found that Mr. Skinner used such assets to
purchase the home, new furniture, and new appliances, and that because Mr. Skinner
is the husband of the trust beneficiary wife and therefore resides in the home with
her, he improperly benefits from the purchases. As a result, the Assistant Clerk
reached the conclusion that Mr. Skinner showed a lack of prudence and judgment
and “breach[ed] . . . his fiduciary duties pursuant to the terms of the Trust, the terms
of the GOE Order, and applicable law.”
1 Medicaid would have to be paid first if the Special Needs Trust was terminated early
as well.
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MORGAN, J., dissenting
Contrary to the Assistant Clerk’s misapprehension of the law, the purchase of
the house and related expenditures were authorized by the Special Needs Trust
consistent with the purpose of a special needs trust. Article Two of the Special Needs
Trust here provides, in pertinent part, that
[t]he Trustee will hold, manage, invest and reinvest the
Trust Estate, and will pay or apply the income and
principal of the Trust Estate in the following manner: . . .
During Beneficiary’s lifetime, the Trustee will pay from
time to time such amounts from the Trust Funds for the
satisfaction and benefit of [the] Beneficiary’s Special Needs
(as hereinafter defined), as the Trustee determines in the
Trustee’s discretion, as hereinafter provided.
Section 7.02(a) of the Trust defines the term “special needs” as the “Beneficiary’s
needs that are not covered or available from any local, state, or federal government,
or any private agency, or any private insurance carrier covering Beneficiary.”
Here Mr. Skinner authorized trust assets to pay approximately $135,000.00
for the purchase of the house, which is titled to the Trust, and between $3,200.00 and
$4,500.00 for furniture, appliances, and repairs to the house. The evidence shows
that the house, furnishings, and appliances are owned by the Trust; the house is
handicapped-accessible to readily accommodate Mrs. Skinner; and it is located in
close proximity to where Mrs. Skinner previously lived. The determination of Mr.
Skinner, in his role as Trustee, to improve Mrs. Skinner’s quality of life through this
move to a new home is consistent with the express purpose of a special needs trust.
With the physical enhancements of new furnishings and fresh repairs for a better
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IN RE ESTATE OF SKINNER
MORGAN, J., dissenting
house suited to fit Mrs. Skinner’s ongoing needs in a neighborhood which was familiar
to her, Mr. Skinner’s expenditures of the trust funds in this regard fall squarely
within his discretionary authority to periodically pay such amounts for the
satisfaction and benefit of his wife’s special needs. The failure of the Assistant Clerk
to recognize Mr. Skinner’s sanctioned fulfillment of his duties as Trustee of Mrs.
Skinner’s Special Needs Trust, coupled with the Assistant Clerk’s concomitant
negative view of these permissible expenditures, constitutes a clear misapprehension
of the law.
Finally, I must address the Assistant Clerk’s ruling that Mr. Skinner’s
reimbursements which he obtained from the Special Needs Trust in the amounts of
$1,000.00 and $1,537.50 for his payments to two law firms were unauthorized
because these expenditures arose before Mr. Skinner’s appointment to the roles of
Trustee and guardian of Mrs. Skinner’s estate. I embrace the Court of Appeals’
position that the Assistant Clerk’s misapprehension of the law on the other
questioned usages of trust funds extended to a narrow view by the Assistant Clerk
that Mr. Skinner was automatically ineligible for any reimbursements of
expenditures that he plausibly made with regard to his guardianship status and the
potential legal impact of the Skinners’ marriage upon her financial well-being. I
evaluate the Assistant Clerk’s view of Mr. Skinner’s withdrawal of $8,387.50 from
the Special Needs Trust for payment to his violin business to be consistent with the
Assistant Clerk’s misapprehension of the law, which was reflected in the Assistant
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IN RE ESTATE OF SKINNER
MORGAN, J., dissenting
Clerk’s dark lens of perceived “self-dealing,” “violation of [Mr. Skinner’s] fiduciary
duties as Trustee,” “lack[ ] [of] appropriate judgment,” and “waste [ ],”
“mismanage[ment]” and “conver[sion]” of Trust assets regarding the prepaid funeral
expenses, burial insurance, marital home, marital home furnishings, law firm bills
and overall special needs trust administration. I believe that the Assistant Clerk’s
fundamental misapprehension of the law amounts to an abuse of discretion that
would necessitate a reversal and remand of the trial court’s order affirming the
Assistant Clerk’s order to remove Mr. Skinner as Trustee of his wife’s Special Needs
Trust and guardian of her estate.
For these reasons, I respectfully dissent and adopt the rationale of the Court
of Appeals’ decision, and would remand this case to the Court of Appeals for remand
to the trial court with instructions to apply the appropriate legal standard.
Justices NEWBY and JACKSON join in this dissenting opinion.
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