Fox v. Fox ( 2022 )


Menu:
  •                     IN THE COURT OF APPEALS OF NORTH CAROLINA
    2022-NCCOA-334
    No. COA21-534
    Filed 17 May 2022
    Wake County, No. 20 CVS 6247
    ANN HERRING FOX, individually and on behalf of the P.G. FOX, JR. REVOCABLE
    TRUST and RUSSELL LEE STEPHENSON, III on behalf of the P.G. FOX, JR.
    REVOCABLE TRUST, Plaintiffs,
    v.
    SARAH WESLEY FOX and CRAIG B. WHEATON, individually, and in their
    representative capacities as Trustees of the P.G. FOX, JR. REVOCABLE TRUST;
    and SMITH, ANDERSON, BLOUNT, DORSETT, MITCHELL & JERNIGAN, L.L.P.,
    Defendants.
    Appeal by Plaintiffs from orders entered on 23 April 2021 by Judge G. Bryan
    Collins, Jr., in Wake County Superior Court. Heard in the Court of Appeals 22 March
    2022.
    Rossabi Law Partners, by Amiel J. Rossabi and Gavin J. Reardon, for Plaintiff-
    Appellant Ann Herring Fox.
    Penry Riemann PLLC, by J. Anthony Penry, for Defendant-Appellees Sarah
    Wesley Fox and Craig B. Wheaton as trustees, and Nelson Mullins Riley &
    Scarborough, LLP, by Mark A. Stafford, for Defendant-Appellees Sarah Wesley
    Fox and Craig B. Wheaton individually.
    JACKSON, Judge.
    ¶1           Ann Herring Fox (“Plaintiff”) appeals from the trial court’s orders dismissing
    her complaint under Rules 9 and 12 of the North Carolina Rules of Civil Procedure.
    Plaintiff Russell Lee Stephenson, III, with the other parties’ consent, moved to
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    voluntarily dismiss his appeal from the orders on 23 November 2021, which our Court
    allowed the following day. Plaintiff also moved on 23 November 2021 to voluntarily
    dismiss her appeal from one of the trial court’s 23 April 2021 orders of dismissal,
    which dismissed the case against Defendant Smith, Anderson, Blount, Dorsett,
    Mitchell & Jernigan, L.L.P. (“Smith Anderson”). That motion was also allowed by
    our Court on 24 November 2021.             Accordingly, Plaintiff is the sole remaining
    appellant and Defendants Sarah Wesley Fox and Craig B. Wheaton (“Defendants”)
    are the two remaining appellees. After careful review, we affirm the order of the trial
    court in part, reverse it in part, and remand the case for further proceedings.
    I.      Background
    ¶2         This is a dispute about P.G. Fox, Jr., M.D.’s (“Dr. Fox”) revocable trust and a
    home the trust owns jointly with Plaintiff. In late 2012 or early 2013, Dr. Fox engaged
    Smith Anderson, a law firm, to prepare his will and trust. The will and trust revoked
    all prior wills and trusts. On 28 January 2013, Dr. Fox executed the will and trust.
    On 22 February 2014, Dr. Fox died.
    ¶3         At the time of his death, Plaintiff was married to Dr. Fox. She was his third
    wife, and they had been married for 24 years. She lives in a home she purchased
    jointly with Dr. Fox as tenants in common, in which she owns an 11 percent interest,
    reflecting the proportion of the purchase price she paid with her separate funds. Dr.
    Fox’s trust owns the remaining 89 percent of the home, reflecting the proportion of
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    the price Dr. Fox paid for the home.
    ¶4         Defendant Fox is Dr. Fox’s daughter and Defendant Wheaton is her husband.
    Both are lawyers, and at the time Dr. Fox engaged Smith Anderson to prepare the
    will and trust, Defendants were employed by Smith Anderson.
    ¶5         Plaintiff, Defendant Fox, and Defendants’ children are the beneficiaries of the
    trust.1 The trust terms appoint Defendants and Russell Lee Stephenson, Jr., (“Mr.
    Stephenson”) as Dr. Fox’s successor trustees. Mr. Stephenson is Plaintiff’s former
    husband. On 8 July 2015, Mr. Stephenson resigned as a trustee, apparently on the
    understanding (1) that his appointment as a successor trustee was a mistake; (2) that
    Dr. Fox had intended to appoint Mr. Stephenson’s son, Russell Lee Stephenson, III,
    (“Lee”) as a successor trustee, not Mr. Stephenson; and (3) that Lee would be
    appointed as a trustee by a majority of Dr. Fox’s surviving issue upon Mr.
    Stephenson’s resignation, which the trust terms authorized. Lee is Plaintiff and Mr.
    Stephenson’s son.
    ¶6         After Dr. Fox passed away, Defendant Wheaton began making distributions
    from the trust to his wife and children for their health, maintenance, and support, as
    purportedly authorized by the terms of the trust.                 No distributions were made to
    Plaintiff for her health, maintenance, or support, however, despite trust terms
    1   All of Dr. Fox’s issue are beneficiaries, so any of Dr. Fox’s great-grandchildren also would
    be.
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    authorizing such distributions.    Instead, Defendants attributed distributions to
    Plaintiff for continuing to live in the home, essentially charging her rent for
    continuing to live in the home and treating the rent Plaintiff was not paying as a
    recurring distribution for Plaintiff’s health, maintenance, and support.
    ¶7            In 2016, Plaintiff engaged counsel and requested an accounting of the trust for
    the first time. The trust terms require Defendants to provide an accounting of the
    trust at least annually upon the request of a beneficiary.
    ¶8            The trust terms also require Defendants to pay for the trust’s share—that is,
    89 percent—of the cost of maintaining the home for as long as the home remains trust
    property. In 2017, Defendants refused to reimburse Plaintiff for certain expenses she
    claimed were incurred to maintain the home because they believed the expenses
    either were not incurred to maintain the home or were inadequately documented.
    They also notified Plaintiff that they wanted to sell the home. In 2019, Defendants
    again refused to reimburse Plaintiff for expenses she claimed were incurred to
    maintain the home because of what they considered inadequate documentation.
    ¶9            On 7 August 2019, Plaintiff filed a petition to remove Defendants as trustees
    with the Wake County Clerk of Superior Court. On 29 May 2020, Plaintiff filed this
    suit. The petition to remove Defendants as trustees was still pending at the time
    Plaintiff filed suit.
    ¶ 10          In her complaint, Plaintiff asserts eight claims: (1) breach of fiduciary duty;
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    (2) reformation of trust based on either unilateral mistake induced by fraud or mutual
    mistake; (3) legal malpractice; (4) civil conspiracy; (5) constructive fraud; (6)
    intentional infliction of emotional distress; (7) negligent infliction of emotional
    distress; and (8) conversion. In her prayer for relief, Plaintiff requests actual and
    punitive damages; reformation or modification of the trust; disgorgement of all
    distributions to Defendant Fox and Defendants’ children and their return to the trust;
    and costs and attorney’s fees.
    ¶ 11         On 5 August 2020, Defendants moved to dismiss Plaintiff’s complaint under
    Rules 9 and 12 of the North Carolina Rules of Civil Procedure. Smith Anderson filed
    a motion to dismiss under Rules 9 and 12 the same day. The motions came on for
    hearing before the Honorable G. Bryan Collins, Jr., in Wake County Superior Court
    on 15 September 2020. The trial court granted the motions in two orders entered on
    23 April 2021.
    ¶ 12         Plaintiff timely noticed appeal on 14 May 2021.
    II.     Analysis
    ¶ 13         Plaintiff’s complaint asserts numerous causes of action against Defendants as
    trustees and individuals and many of these claims overlap, are incorrectly captioned,
    and are time-barred. Several appear to lack any merit. Nevertheless, we hold that
    Plaintiff’s complaint states two valid claims for breach of trust, one valid claim for
    constructive fraud against Defendants as trustees, and one valid claim for civil
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    conspiracy against Defendants as trustees.
    ¶ 14         Specifically, the valid claims for breach of trust are (1) for allegedly making
    unauthorized distributions for health, maintenance, and support to Defendant Fox
    and her children while wrongfully withholding distributions for health, maintenance,
    and support from Plaintiff and (2) for failing to fully reimburse Plaintiff for the trust’s
    share of the cost to maintain the home Plaintiff owns jointly with the trust. The claim
    for constructive fraud against Defendants as trustees is based on an alleged error in
    Dr. Fox’s trust appointing Mr. Stephenson as a successor trustee and Defendant
    Wheaton inducing Mr. Stephenson to resign as a trustee on the pretext that Lee
    would be appointed after Mr. Stephenson’s resignation. The valid claim for civil
    conspiracy against Defendants as trustees is that Defendants agreed to take control
    of the trust through Mr. Stephenson’s resignation and make the allegedly improper
    distributions while withholding distributions from Plaintiff as part of a deliberate,
    premeditated plan. Because these are valid claims, the trial court erred in dismissing
    them. We therefore reverse the trial court’s order in part and remand the case for
    further proceedings.
    A. Introduction and Standard of Review
    ¶ 15         “A Rule 12(b)(6) motion tests the legal sufficiency of the pleading.” Sterner v.
    Penn, 
    159 N.C. App. 626
    , 628, 
    583 S.E.2d 670
    , 672 (2003) (citation omitted).
    A Rule 12(b)(6) motion will be granted (1) when the face of
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    the complaint reveals that no law supports plaintiff’s
    claim; (2) when the face of the complaint reveals that some
    fact essential to plaintiff’s claim is missing; or (3) when
    some fact disclosed in the complaint defeats plaintiff’s
    claim. We treat all factual allegations of the pleading as
    true but not conclusions of law. In sum, a Rule 12(b)(6)
    motion asks the court to determine whether the complaint
    alleges the substantive elements of a legally recognized
    claim.
    Id. at 628-29, 
    583 S.E.2d at 872
     (cleaned up). In determining whether to grant a Rule
    12 motion, exhibits attached to a complaint are considered a part thereof “because
    ‘[a] copy of any written instrument which is an exhibit to a pleading is a part thereof
    for all purposes.’” Krawiec v. Manly, 
    370 N.C. 602
    , 606, 
    811 S.E.2d 542
    , 546 (2018)
    (quoting N.C. Gen. Stat. § 1A-1, Rule 10(c)). However, “matters outside the complaint
    are not germane to a Rule 12(b)(6) motion.” Weaver v. Saint Joseph of the Pines, Inc.,
    
    187 N.C. App. 198
    , 203, 
    652 S.E.2d 701
    , 707 (2007). Moreover, “[g]eneral allegations
    of wrongdoing, which do not specify the alleged wrongful act or omission, such as the
    allegation that the defendant did other things not authorized by the laws of North
    Carolina in the management of a fiduciary estate, are mere conclusions of law.”
    Kuykendall v. Proctor, 
    270 N.C. 510
    , 514-15, 
    155 S.E.2d 293
    , 298 (1967) (internal
    marks omitted).
    ¶ 16         On appeal, our review is de novo. Spoor on behalf of JR Int’l Holdings, LLC v.
    Barth, 
    257 N.C. App. 721
    , 724, 
    811 S.E.2d 609
    , 612 (2018). “Under a de novo review,
    the court considers the matter anew and freely substitutes its own judgment for that
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    of the lower tribunal.” Fields v. H & E Equip. Servs., 
    240 N.C. App. 483
    , 486, 
    771 S.E.2d 791
    , 793 (2015) (citation omitted).
    B. Plaintiff’s Claims
    ¶ 17           This is an action against Defendants in both their individual capacities and as
    trustees of Dr. Fox’s trust. We address the claims against Defendants individually
    first. Then we turn to the claims against them as trustees.
    1. Individual Capacity Claims
    a. The Challenge to the Validity of the Trust Is Time-Barred
    ¶ 18           As noted previously, Plaintiff asserts claims against Defendants for breach of
    fiduciary duty, constructive fraud, and civil conspiracy.2 However, certain allegations
    in Plaintiff’s breach of fiduciary duty claim cannot be construed as a claim against
    Defendants individually because the allegations are based on alleged failures by
    Defendants to fulfill their duties as trustees. While “it is clear that the trustee of a
    trust has a fiduciary obligation to the beneficiary of the trust[,]” Melvin v. Home Fed.
    Sav. & Loan Ass’n, 
    125 N.C. App. 660
    , 664, 
    482 S.E.2d 6
    , 8 (1997), under the North
    Carolina Uniform Trust Code, “[a] violation by a trustee of a duty the trustee owes
    under a trust is a breach of trust[,]” N.C. Gen. Stat. § 36C-10-1001(a) (2021).
    2Although Plaintiff also asserted claims against Defendants for reformation of trust, legal
    malpractice, intentional infliction of emotional distress, negligent infliction of emotional distress, and
    conversion, Plaintiff does not argue any error in the dismissal of these claims, thereby abandoning
    them. See N.C. R. App. P. 28(a) (“Issues not presented and discussed in a party’s brief are deemed
    abandoned.”).
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    ¶ 19   Paragraph 52 of Plaintiff’s complaint alleges:
    52.    Despite the fiduciary duties owed, Defendants have
    breached their fiduciary duties to Plaintiffs by, among
    other things:
    (a)   denying Mrs. Fox distributions owed to her
    under the Trust;
    (b)    attributing to Mrs. Fox “rent” from the Trust
    that she has not received;
    (c)    making distributions to themselves, their
    children and others in violation of the express and
    implied terms of the Trust;
    (d)   devising, perpetrating and continuing to
    perpetrate the Scheme;3
    (e)     harassing       and      intimidating        Plaintiffs,
    3   The “Scheme” is defined in paragraph 10 of Plaintiff’s complaint as follows:
    10.    Upon information and belief, in or about 2012, Defendant Fox
    and Defendant Wheaton, together with one or more lawyers at
    Defendant Smith Anderson, formulated a scheme by which they would
    cause to be created and signed by Dr. Fox a trust document which
    would:
    (a)     contain ambiguous language that Defendant Fox and
    Defendant Wheaton could use, together with their inequitable
    bargaining power and superior knowledge of the law over
    Plaintiffs, illicitly, to construe in their favor and deprive Mrs.
    Fox of assets Dr. Fox intended her to have;
    (b)     nullify Dr. Fox’s intent and plan to have Lee serve as a
    co-trustee of the Trust; and
    (c)     misinterpret and violate the terms of the Trust
    (hereinafter, the “Scheme”).
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    including about the sale of the Primary Residence;
    (f)     failing to appoint Lee as a co-trustee; and
    (g)  failing to provide, at all and/or in a timely
    manner, accountings of the Trust.
    ¶ 20           In essence, Plaintiff’s claim for breach of fiduciary duty is two separate claims:
    (1) a claim challenging the validity of the trust based on the perpetration of what
    Plaintiff characterizes as a “scheme” to change Dr. Fox’s estate plan to wrongfully
    benefit Defendants and their children at Plaintiff’s expense; and (2) a claim for breach
    of trust for alleged failures to make required distributions, making unauthorized
    distributions, and failure to provide timely accountings.4 The claim challenging the
    validity of the trust is a claim against Defendants individually because it is based on
    alleged actions by Defendants outside their capacities as trustees, which allegedly
    occurred before they were appointed as trustees. The claim based on alleged failures
    to make required distributions, making unauthorized distributions, and failing to
    provide accountings is a claim for breach of trust against Defendants as trustees, not
    as individuals. See N.C. Gen. Stat. § 36C-10-1001(a) (2021).
    ¶ 21           The statute of limitations for a claim contesting the validity of a revocable trust
    is three years after the settlor’s death or, at the trustee’s election, 120 days after the
    4 Plaintiff also alleges that attributing distributions to her for continuing to live in the home
    she jointly owns with the trust constitutes a breach of fiduciary duty. We consider attributing
    distributions to Plaintiff for continuing to live in the home that allegedly was unauthorized to be a
    subcategory of alleged failures to make required distributions.
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    settlor’s death if the trustee gives proper notice. Id. § 36C-6-604(a). The claim
    challenging the validity of the trust is time-barred because Dr. Fox died on 22
    February 2014 and Plaintiff did not bring this suit until 29 May 2020, over six years
    after Dr. Fox’s death—over three years after the statute of limitations had run. This
    suit is the first time the validity of the trust has been challenged: notably, Plaintiff
    did not challenge the validity of the trust in the 7 August 2019 petition to remove
    Defendants as trustees filed with the Clerk of Superior Court of Wake County by her
    former counsel, nor does any of her counsel take the position that the trust is invalid
    in any of the correspondence included in the record on appeal.
    b. The Complaint Does Not State a Claim for Constructive Fraud Against
    Defendants Individually
    ¶ 22         Plaintiff’s claim for constructive fraud against Defendants individually fails
    because the allegations in the complaint do not adequately allege a fiduciary
    relationship between Plaintiff and Defendants as a matter of fact.
    ¶ 23         “It is axiomatic that ‘[f]or a breach of fiduciary duty to exist, there must first
    be a fiduciary relationship between the parties.’” Howe v. Links Club Condominium
    Assoc., Inc., 
    263 N.C. App. 130
    , 147, 
    823 S.E.2d 439
    , 453 (2018) (quoting Dalton v.
    Camp, 
    353 N.C. 647
    , 651, 
    548 S.E.2d 704
    , 707 (2001)). “In the event that a party fails
    to allege any special circumstances that could establish a fiduciary relationship,
    dismissal of a claim which hinges upon the existence of such a relationship would be
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    appropriate.” Azure Dolphin, LLC v. Barton, 
    371 N.C. 579
    , 599, 
    821 S.E.2d 711
    , 725
    (2018) (cleaned up).
    Though difficult to define in precise terms, a fiduciary
    relationship is generally described as arising when there
    has been a special confidence reposed in one who in equity
    and good conscience is bound to act in good faith and with
    due regard to the interests of the one reposing confidence.
    A fiduciary relationship may exist in law or in fact. For
    that reason, even when a fiduciary relationship does not
    arise as a matter of law, that is, due to the legal relations
    between two parties, it may yet exist as a matter of fact in
    such instances when there is confidence reposed on one
    side, and the resulting superiority and influence on the
    other.
    Id. at 599-600, 821 S.E.2d at 725 (cleaned up).
    ¶ 24         However, “detailed factual allegations, rather than mere conclusory assertions,
    are necessary to demonstrate the existence of a fiduciary relationship as a matter of
    fact.” Id. at 600, 821 S.E.2d at 726 (citation omitted). Moreover, “it has long been
    established that the finding of a familial relationship alone does not create a fiduciary
    relationship.” Holloway v. Holloway, 
    221 N.C. App. 156
    , 165, 
    726 S.E.2d 198
    , 204-05
    (2012) (citation omitted). “Only when one party figuratively holds all the cards—all
    the financial power or technical information, for example—have North Carolina
    courts found that the ‘special circumstance’ of a fiduciary relationship has arisen.”
    Crumley & Assocs., P.C. v. Charles Peed & Assocs., P.A., 
    219 N.C. App. 615
    , 621, 
    730 S.E.2d 763
    , 767 (2012) (citation omitted).
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    ¶ 25          The most Plaintiff’s complaint does to allege that a fiduciary relationship
    existed between her and Defendants as a matter fact is to allege that Defendant Fox
    is Dr. Fox’s daughter and Defendant Wheaton is her husband, and that Plaintiff
    “reposed special confidence and trust in Defendants because of the close familial
    relationship with Defendant[s] . . . and because of their status as co-trustees and
    attorneys licensed to practice law in the State of North Carolina.” These allegations
    are mere conclusory assertions that are not supported by any allegations regarding
    any special circumstance giving rise to a fiduciary relationship between Plaintiff and
    Defendants as a matter of fact. While attorneys “owe a fiduciary duty to their
    clients[,]” N.C. State Bar v. Gilbert, 
    151 N.C. App. 299
    , 311, 
    566 S.E.2d 685
    , 692
    (2002), they do not to non-clients, see Noblot v. Timmons, 
    177 N.C. App. 258
    , 263-64,
    
    628 S.E.2d 413
    , 415-16 (2006), and there is no allegation in this case that Defendants
    or any other attorney associated in practice with either of them has ever represented
    Plaintiff.5   Accordingly, the trial court did not err in dismissing the claim for
    5 As we observed in Piraino Brothers, LLC v. Atlantic Financial Group, Inc., 
    211 N.C. App. 343
    , 349-50, 
    712 S.E.2d 328
    , 333 (2011),
    [t]he Courts of this State have held attorneys liable for actions that
    impact non-client third parties in only a few limited situations . . . . See
    Title Ins. Co. of Minn. v. Smith, Debnam, Hibbert & Pahl, 
    119 N.C. App. 608
    , 
    459 S.E.2d 801
     (1995), affirmed and modified in part, 
    342 N.C. 887
    , 
    467 S.E.2d 241
     (1996) (duty applies where the attorney
    renders a title opinion upon which the non-client is entitled to rely);
    Jenkins v. Wheeler, 
    69 N.C. App. 140
    , 
    316 S.E.2d 354
     (1984) (duty
    applies where there is a complete unity of interests between the
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    constructive fraud against Defendants individually.
    c. Civil Conspiracy Is Not an Independent Basis of Liability
    ¶ 26         Plaintiff’s claim for civil conspiracy against Defendants individually fails
    because it is derivative of Plaintiff’s other claims against Defendants individually and
    all of Plaintiff’s other individual capacity claims against Defendants fail.
    ¶ 27         “A civil action for conspiracy is an action for damages resulting from acts
    committed by one or more of the conspirators pursuant to the formed conspiracy,
    rather than the conspiracy itself.” Burton v. Dixon, 
    259 N.C. 473
    , 476, 
    131 S.E.2d 27
    ,
    30 (1963).
    To create civil liability for conspiracy there must have been
    a wrongful act resulting in injury to another committed by
    one or more of the conspirators pursuant to the common
    scheme and in furtherance of the objective. This is because
    a conspiracy charged does no more than associate the
    defendants together and perhaps liberalize the rules of
    evidence to the extent that under the proper circumstances
    the acts of one may be admissible against all. Therefore,
    we have determined that a complaint sufficiently states a
    claim for civil conspiracy when it alleges (1) a conspiracy,
    (2) wrongful acts done by certain of the alleged conspirators
    in furtherance of that conspiracy, and (3) injury as a result
    of that conspiracy.
    Krawiec, 370 N.C. at 613-14, 811 S.E.2d at 550-51 (cleaned up).
    ¶ 28         However, “there is not a separate civil action for civil conspiracy in North
    attorney’s client and the non-client).
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    Carolina.” Dove v. Harvey, 
    168 N.C. App. 687
    , 690, 
    608 S.E.2d 798
    , 800 (2005).
    Because conspiracy is a mode of liability rather than a cause of action, it is derivative
    of the other claims against a party, and if the other claims fail, so does the conspiracy
    claim. Piraino Bros., LLC v. Atlantic Fin. Grp., Inc., 
    211 N.C. App. 343
    , 350, 
    712 S.E.2d 328
    , 333-34 (2011). Accordingly, the trial court did not err in dismissing
    Plaintiff’s claim for civil conspiracy against Defendants individually because the
    individual capacity claim challenging the validity of the trust is time-barred and the
    individual capacity claim for constructive fraud fails to adequately allege a fiduciary
    relationship as a matter of fact.
    2. Defendants as Trustees
    a. The Complaint States Two Valid Claims for Breach of Trust
    ¶ 29         As previously noted, we hold that Plaintiff’s complaint states two valid claims
    for breach of trust: one for allegedly making unauthorized distributions for health,
    maintenance, and support to Defendant Fox and her children while wrongfully
    withholding distributions for health, maintenance, and support from Plaintiff; and a
    second for failing to fully reimburse Plaintiff for the trust’s share of the cost to
    maintain the home Plaintiff owns jointly with the trust.
    ¶ 30         The duties and powers of trustees are codified in Article 8 of the North Carolina
    Uniform Trust Code. See N.C. Gen. Stat. § 36C-8-801 (2021), et seq. These duties
    include the duties of good faith, loyalty, impartiality, and prudence. See id. §§ 36C-
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    8-801, -802, -803, -804. In general, while “the extent to which a . . . 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[,]” In re
    Skinner, 
    370 N.C. 126
    , 144, 
    804 S.E.2d 449
    , 461 (2017), violation of a specific
    provision of a trust constitutes a breach of trust unless the terms of the trust are
    inconsistent with a trustee’s fiduciary duties, see N.C. Gen. Stat. §§ 36C-10-1001(a),
    -1-105(b)(2), (3) (2021).
    ¶ 31          “Trustees . . . must act in good faith. They can never paramount their personal
    interest over the interest of those for whom they have assumed to act.” Miller v.
    McLean, 
    252 N.C. 171
    , 174, 
    113 S.E.2d 359
    , 362 (1960) (citations omitted).           In
    addition, a trustee must “maintain complete loyalty to the interests of his
    beneficiaries.” Howe, 263 N.C. App. at 149, 823 S.E.2d at 454 (quoting Wachovia
    Bank & Trust Co. v. Johnston, 
    269 N.C. 701
    , 711, 
    153 S.E.2d 449
    , 457 (1967))
    (internal marks omitted). “Should there be any self-interest on the trustee’s part in
    the administration of the trust which would interfere with this duty of complete
    loyalty, a beneficiary may seek the trustee’s removal.” In re Wills of Jacobs, 
    91 N.C. App. 138
    , 143, 
    370 S.E.2d 860
    , 864 (1988). In North Carolina, such an action must
    be brought before the Clerk of Superior Court. N.C. Gen. Stat. § 36C-2-203(a)(1)
    (2021).
    ¶ 32          Not all self-dealing by trustees is categorically prohibited, however. As the
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    official commentary to N.C. Gen. Stat. § 36C-8-802 notes, “it is not uncommon that
    the trustee will also be a beneficiary.” N.C. Gen. Stat. § 36C-8-802, off. cmt. (2021).
    “The grant to a trustee of authority to make a distribution to a class of beneficiaries
    that includes the trustee implicitly authorizes the trustee to make distributions for
    the trustee’s own benefit.” Id.
    ¶ 33         “The powers of a trustee are either mandatory or discretionary.” Woodard v.
    Mordecai, 
    234 N.C. 463
    , 471, 
    67 S.E.2d 639
    , 644 (1951). “A power is mandatory when
    it authorizes and commands the trustee to perform some positive act.” 
    Id.
     “A power
    is discretionary when the trustee may either exercise it or refrain from exercising it,
    or when the time, or manner, or extent of its exercise is left to his discretion.” 
    Id.
    (cleaned up). While a court “will always compel the trustee to exercise a mandatory
    power[,] . . . [it] will not undertake to control the trustee with respect to the exercise
    of a discretionary power, except to prevent an abuse by him of his discretion.” 
    Id.
    The trustee abuses his discretion in exercising or failing to
    exercise a discretionary power if he acts dishonestly, or if
    he acts with an improper even though not a dishonest
    motive, or if he fails to use his judgment, or if he acts
    beyond the bounds of a reasonable judgment.
    
    Id.
     (citations omitted).
    Whether a power is mandatory or discretionary depends
    upon the intent of the settlor as evidenced by the terms of
    the trust. The intent of a settlor is determined by the
    language he chooses to convey his thoughts, the purposes
    he seeks to accomplish and the situation of the parties
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    benefitted by the trust. Use by the settlor of words of
    permission or option, or reference to the discretion of the
    trustee, in describing the trustee’s power indicates that the
    settlor intended that the power be discretionary, whereas
    use of directive or commanding language indicates that a
    mandatory power was intended.
    Linebacker v. Stout, 
    79 N.C. App. 292
    , 297, 
    339 S.E.2d 103
    , 107 (1986) (cleaned up).
    “Under a true discretionary trust, the trustee may withhold the trust income and
    principal altogether from the beneficiary and the beneficiary, as well as the creditors
    and assignees of the beneficiary, cannot compel the trustee to pay over any part of
    the trust funds.” Id. at 296, 
    339 S.E.2d at 106
    .
    ¶ 34         The terms of Dr. Fox’s trust demonstrate that it is a discretionary trust as to
    distributions for health, maintenance, and support to the beneficiaries, but
    mandatory with respect to the trust’s share of the cost of maintaining the home it
    owns jointly with Plaintiff and certain other decisions related to the home. Article
    III, Section One of the trust directs the trustees until Plaintiff’s death or remarriage
    “to distribute all or any portion of the trust property to [] [Plaintiff] in such amounts
    and at such times as the Trustee deems necessary for her health, maintenance or
    support” and to “distribute all or any portion of the trust property to any of [Dr. Fox’s]
    issue in such amounts and at such times as the Trustee deems necessary for the
    health, maintenance or support in reasonable comfort of any of them.” Defendants’
    powers as trustees to make distributions for Plaintiff’s health, maintenance, and
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    support, as well as distributions for the health, maintenance, and support of Dr. Fox’s
    issue are discretionary because of Dr. Fox’s “[u]se . . . of words of permission or
    option,” id. at 297, 
    339 S.E.2d at 107
    , to wit—“all or any portion of the trust
    property”—with the time, manner, and extent of the exercise of this discretion left to
    the trustees, see Woodard, 
    234 N.C. at 471
    , 
    67 S.E.2d at 644
    . (Emphasis added.)
    ¶ 35          The trust creates three important discretionary powers to be exercised by the
    trustees in connection with the home the trust owns jointly with Plaintiff. Article III,
    Section Six provides in relevant part that the trustees may retain the 89 percent
    interest in the home and permit Plaintiff “to use and occupy the residence rent free”
    until her death or remarriage. In addition, this section authorizes the trustees to
    “sell, rent or otherwise dispose of the trust’s interest in the residence if [they]
    determine[] that occupancy of such residence by [] [Plaintiff] is contrary to her best
    interests and the interests of the beneficiaries succeeding to the trust property after
    her death or remarriage.” (Emphasis added.) Finally, this section authorizes the
    trustees, in the event of a sale of the home, “to purchase an interest in a replacement
    residence using such portion of the principal of the trust, including, but not limited
    to, the trust’s share of net proceeds from any sale or other disposition of the trust’s
    interest in the residence[,]” at Plaintiff’s election.
    ¶ 36          The trust terms that are mandatory relate to the cost of maintaining the home
    and to sale or rental of the home at Plaintiff’s election. For as long as the home
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    remains trust property, Article III, Section Six directs the trustees to “pay out of the
    trust that percentage of all expenses incurred in connection with carrying, upkeep,
    maintenance and repair of the residence including, without limitation, taxes,
    assessments, utilities, insurance and repairs, which is equal to the trust’s percentage
    ownership[.]” That section additionally directs the trustees to “sell or rent the trust’s
    interest in the residence within a reasonable time upon receipt of signed instructions
    from [] [Plaintiff] to that effect.”
    ¶ 37          There is considerable documentation in the record on appeal of distributions to
    beneficiaries other than Plaintiff for health, maintenance, and support and to
    Plaintiff for the trust’s share of the cost of maintaining the home, as well as an
    appraisal of the home completed after Dr. Fox’s death that Defendants apparently
    used to determine a rental value of the home.6 However, none of this documentation
    would have been properly considered by the trial court at the hearing on Defendants’
    motion to dismiss, and nothing in the record indicates that the court so considered it,
    6   The terms of the trust neither expressly authorize nor prohibit attributing distributions to
    Plaintiff for health, maintenance, and support for continuing to live in the home. As noted above, the
    trustees enjoy a discretionary power to permit Plaintiff to continue living in the home unless she
    informs them in writing that she wants them to sell or rent the trust’s interest in the home. Because
    the trustees’ powers to make distributions to the beneficiaries for health, maintenance, and support,
    including to Plaintiff, are wholly discretionary, on the undeveloped record before us, we cannot say as
    a matter of law that attributing distributions to Plaintiff for health, maintenance, and support for
    continuing to live in the home was an abuse of discretion by the trustees or constituted a breach of
    trust. Nothing in this opinion is intended to suggest or imply what the correct resolution of this issue
    is in further proceedings on remand, however, which will require considering matters outside the
    pleadings.
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    thereby converting the motion to dismiss into one for summary judgment without
    notice to Plaintiff, which would have been improper. See, e.g., N.C. Gen. Stat. § 1A-
    A, Rule 12(b) (2021) (“If, on a motion . . . to dismiss for failure of the pleading to state
    a claim upon which relief can be granted, matters outside the pleading are presented
    to and not excluded by the court, the motion shall be treated as one for summary
    judgment and disposed of as provided in Rule 56, and all parties shall be given
    reasonable opportunity to present all material made pertinent to such a motion by
    Rule 56.”). Indeed, in the order of dismissal, the trial court states that it considered
    only “the complaint and attachments filed by plaintiffs, along with the brief served
    by defendants and the material served by plaintiffs, as well as the arguments of
    counsel.”
    ¶ 38          Determining whether Defendants are liable for making unauthorized
    distributions for health, maintenance, and support to Defendant Fox and their
    children while withholding distributions for health, maintenance, and support from
    Plaintiff and for failing to fully reimburse Plaintiff for the trust’s share of the cost to
    maintain the home Plaintiff jointly owns with the trust will require a developed
    factual record of all distributions of trust property and potentially other evidence,
    such as evidence in the form of expert opinion regarding whether attributing
    distributions to Plaintiff for health, maintenance, and support for continuing to live
    in the home was consistent with the trustees’ duties to administer the trust in good
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    faith, loyally, impartially, and prudently with respect to the interests of all
    beneficiaries, including Plaintiff. Because Plaintiff’s claims for breach of trust are
    legally sufficient, and resolution of these claims will require consideration of matters
    outside the pleadings and the exhibits thereto, we hold that the trial court erred in
    dismissing these claims.
    b. The Complaint States a Valid Claim for Constructive Fraud Against
    Defendants as Trustees
    ¶ 39          Plaintiff’s claim for constructive fraud against Defendants as trustees is
    likewise legally sufficient.
    ¶ 40          “In order to maintain a claim for constructive fraud, [a] plaintiff[] must show
    that [she] and [the] defendants were in a relation of trust and confidence which led
    up to and surrounded the consummation of the transaction in which [the] defendant
    is alleged to have taken advantage of his position of trust to the hurt of [the] plaintiff.”
    Barger v. McCoy Hillard & Parks, 
    346 N.C. 650
    , 666, 
    488 S.E.2d 215
    , 224 (1997)
    (internal marks and citation omitted).
    Constructive fraud differs from actual fraud in that it is
    based on a confidential relationship rather than a specific
    misrepresentation. Implicit in the requirement that a
    defendant take advantage of his position of trust to the
    hurt of plaintiff is the notion that the defendant must seek
    his own advantage in the transaction; that is, the
    defendant must seek to benefit himself.
    
    Id.
     (cleaned up).
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    ¶ 41         “Although the elements of constructive fraud and breach of fiduciary duty
    overlap, each is a separate claim under North Carolina law.” Chisum v. Campagna,
    
    376 N.C. 680
    , 706, 2021-NCSC-7 ¶ 47 (internal marks and citation omitted).
    A successful claim for breach of fiduciary duty requires
    proof that (1) the defendants owed the plaintiff a fiduciary
    duty; (2) the defendant breached that fiduciary duty; and
    (3) the breach of fiduciary duty was a proximate cause of
    injury to the plaintiff. A successful claim for constructive
    fraud requires proof of facts and circumstances (1) which
    created the relation of trust and confidence between the
    parties, and (2) which led up to and surrounded the
    consummation of the transaction in which defendant is
    alleged to have taken advantage of his position of trust to
    the hurt of plaintiff.
    
    Id. at 706
    , 2021-NCSC-7 ¶ 48 (cleaned up). “Intent to deceive is not an element of
    constructive fraud.” White v. Consol. Plan., Inc., 
    166 N.C. App. 283
    , 294, 
    603 S.E.2d 147
    , 156 (2004) (citation omitted). Thus, “[t]he primary difference between pleading
    a claim for constructive fraud and one for breach of fiduciary duty is the intent and
    showing that the defendant benefitted from his breach of duty.” Ironman Med. Props.
    v. Chodri, 
    268 N.C. App. 502
    , 513, 
    836 S.E.2d 682
    , 691 (2019) (citing White, 166 N.C.
    App. at 294, 
    603 S.E.2d at 156
    ).
    ¶ 42         Article V, Section Three of the trust appoints Defendants and Mr. Stephenson
    as successor trustees. That section also provides that if any one or two of the trustees
    cease to act, the remaining trustee or trustees can continue to serve without a
    successor being appointed and that a majority of Dr. Fox’s adult issue who are living
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    and competent may appoint a successor trustee.          These terms thus confer a
    discretionary power on Defendant Fox and her children to appoint a successor
    trustee, assuming they are all competent.
    ¶ 43         Paragraph 82 of Plaintiff’s complaint alleges:
    82.   Defendant Fox and Defendant Wheaton obtained
    their present control over the Trust and its assets,
    mismanaged the trust and its assets, and misappropriated
    to themselves and others Funds from the Trust by
    breaching their fiduciary positions as alleged herein,
    including by:
    (a)    causing Mr. Stephenson’s name, rather than Lee’s,
    to be listed in the Trust as co-trustee;
    (b)    inducing Lee to secure Mr. Stephenson’s resignation
    as co-trustee under false pretenses;
    (c)    falsely representing to Lee, with the intent that he
    would be convinced and Lee would convince Mrs.
    Fox, that Lee would be appointed as a co-trustee;
    (d)    misappropriating and depleting funds from the
    Trust through the Scheme and as otherwise alleged
    herein; and
    (e)    violating the terms of the Trust and preventing Mrs.
    Fox from receiving distributions from the Trust to
    which she was entitled.
    ¶ 44         In essence, this claim is that including Mr. Stephenson as a successor trustee
    rather than Lee in Article V, Section Three was either a simple mistake or some kind
    of ploy and that Defendant Wheaton induced Mr. Stephenson to resign as a trustee
    on the pretext that Lee would be appointed upon Mr. Stephenson’s resignation while
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    knowing full well that a majority of Dr. Fox’s adult issue—his wife and his children—
    would refuse to appoint Lee as a successor trustee, which they in turn refused to do
    once Mr. Stephenson resigned.
    ¶ 45         Mr. Stephenson was the only obstacle to Defendants’ control of the trust before
    his resignation.   Once he resigned, it is alleged that Defendants exercised the
    discretionary powers created by the trust and conferred upon them as trustees in a
    manner that breached their duties to Plaintiff as trustees, thereby benefitting
    Defendant Fox and their children at Plaintiff’s expense. We hold that the allegations
    in paragraph 82 of Plaintiff’s complaint state a valid claim for constructive fraud
    against Defendants as trustees. Accordingly, the trial court erred in dismissing it.
    c. The Complaint States a Valid Claim for Civil Conspiracy Against
    Defendants as Trustees
    ¶ 46         Because Plaintiff’s complaint states two valid claims for breach of trust and
    one valid claim for constructive fraud against Defendants as trustees, Plaintiff’s claim
    for civil conspiracy against Defendants as trustees, which is derivative of the valid
    claims against them as trustees, should have survived Defendants’ motion to dismiss.
    Plaintiff alleges in her complaint that Defendants “agreed among themselves to take
    the actions complained of herein[,]” and, “[a]s a proximate result of Defendants’
    conspiracy, Plaintiff[] and the Trust have been damaged by: (a) failure to properly
    administer the Trust; (b) misuse and misappropriation of Trust funds; and (c) loss of
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    money to which they are entitled.” We hold that these allegations state a valid claim
    for civil conspiracy against Defendants as trustees because they allege that
    Defendants agreed to take control of the trust by securing Mr. Stephenson’s
    resignation and then made allegedly improper distributions while withholding
    distributions from Plaintiff as part of a deliberate, premeditated plan. Accordingly,
    the trial court erred in dismissing this claim.
    3. Amendment of Complaint
    ¶ 47         In her final argument on appeal, Plaintiff contends that she should be allowed
    an opportunity to amend her complaint to state her claims more fully. We hold that
    this issue has not been preserved for appellate review.
    ¶ 48         While generally speaking, “[a] party may amend his pleading once as a matter
    of course at any time before a responsive pleading is served or, if the pleading is one
    to which no responsive pleading is permitted and the action has not been placed upon
    the trial calendar, he may so amend it at any time within 30 days after it is served,”
    N.C. Gen. Stat. § 1A-1, Rule 15(a) (2021), otherwise, “a party can only amend a
    pleading with the consent of the trial judge[,]” Mauney v. Morris, 
    316 N.C. 67
    , 72,
    
    340 S.E.2d 397
    , 400 (1986) (citation omitted).            A trial court’s refusal to allow
    amendment of a complaint is reviewed for an abuse of discretion. 
    Id.
    ¶ 49         Moreover, to preserve an issue for appellate review, a party must both (1)
    “present[] to the trial court a timely request, objection, or motion, stating the specific
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    grounds for the ruling . . . desired . . . if the specific grounds [are] not apparent from
    the context” and (2) “obtain a ruling upon the party’s request, objection, or motion.”
    N.C. R. App. P. 10(a).      Relatedly, “[u]nder North Carolina Rules of Appellate
    Procedure 7, 9, and 11, the burden is placed upon the appellant to commence
    settlement of the record on appeal, including providing a verbatim transcript if
    available.”   State v. Berryman, 
    360 N.C. 209
    , 216, 
    624 S.E.2d 350
    , 356 (2006)
    (citations omitted). Thus, Plaintiff, “as the appellant, bore the burden . . . of ensuring
    that the record on appeal . . . [was] complete, properly settled, in correct form, and
    filed[.]” Id. at 217, 
    624 S.E.2d at 356
    .
    ¶ 50         Plaintiff has chosen not to include a transcript of the hearing on Defendants’
    motion to dismiss in the record on appeal on the grounds that no evidence was
    presented at the hearing and the hearing consisted only of arguments of counsel and
    colloquy with the court. Plaintiff asserts in her appellate brief that she made an
    express request for findings of fact and conclusions of law pursuant to Rule 52 of the
    North Carolina Rules of Civil Procedure to support the trial court’s dismissal of her
    claims, but Defendants dispute this assertion, and there is nothing in the record that
    indicates such a request was made at the hearing. Because Plaintiff chose not to
    include a transcript of the hearing in the record, and neither the alleged Rule 52
    request nor any ruling on this alleged request are in the record, the issue of whether
    the trial court abused its discretion by refusing to grant a request that might or might
    FOX V. FOX
    2022-NCCOA-334
    Opinion of the Court
    not have been made has not been preserved for appellate review. As the appellant,
    Plaintiff bore the burden of including any Rule 52 request in the record.
    III.     Conclusion
    ¶ 51         We affirm the trial court’s dismissal of Plaintiff’s individual capacity claims
    against Defendants. We reverse the trial court’s dismissal of Plaintiff’s claims for
    breach of trust for (1) making unauthorized distributions to Defendant Fox and her
    children while withholding distributions from Plaintiff and for (2) failing to fully
    reimburse Plaintiff for the trust’s share of the cost to maintain the home. In addition,
    we reverse the trial court’s dismissal of Plaintiff’s claim for constructive fraud and
    civil conspiracy against Defendants as trustees for securing control of the trust by
    inducing Mr. Stephenson to resign as a trustee and then making allegedly improper
    distributions to Defendant Fox and their children while withholding distributions
    from Plaintiff. We remand the case for further proceedings on these four claims.
    AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
    Chief Judge STROUD and Judge HAMPSON concur.