Wing v. Goldman Sachs Tr. Co. ( 2020 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA19-1007
Filed: 20 October 2020
Wake County, No. 18 CVS 5916
MARY COOPER FALLS WING, Plaintiff,
v.
GOLDMAN SACHS TRUST COMPANY, N.A., et al., Defendants,
Wake County, No. 18 CVS 5830
RALPH L. FALLS, III, et. al., Plaintiff,
v.
GOLDMAN SACHS TRUST COMPANY, N.A., et al., Defendants.
Appeal by by plaintiffs from order entered 20 May 2019 by Judge Edwin G.
Wilson, Jr. in Wake County Superior Court. Heard in the Court of Appeals 24
September 2020.
Womble Bond Dickinson (US) LLP, by Johnny M. Loper, Elizabeth K. Arias
and Jesse A. Schaefer, for plaintiff-appellant Mary Cooper Falls Wing.
Penry Riemann PLLC, by J. Anthony Penry, for plaintiff-appellant Ralph Falls,
III.
Mullins Duncan Harrell & Russell PLLC, by Allison Mullins, Alan W. Duncan,
and Hillary M. Kies, for defendant-appellee Dianne C. Sellers.
Ellis & Winters LLP, by Leslie C. Packer, Alex J. Hagan and Michelle A.
Liguori, for defendant-appellees, Louise Falls Cone, Toby Cone, Gillian Falls
Cone, and Katherine Lenox Cone.
WING V. GOLDMAN SACHS TRUST CO.
Opinion of the Court
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., by Eva G.
Frongello, James K. Dorsett, III, and J. Mitchell Armbruster for defendant-
appellant Goldman Sachs Trust Company, N.A.
TYSON, Judge.
I. Background
Ralph Lane Falls Jr. (“Decedent”) died on 11 May 2015 at the age of seventy-
four. Decedent was survived by his wife, Dianne C. Sellers (“Sellers”), and his three
adult children from his first marriage, daughter Mary Cooper Falls Wing (“Wing”),
son, Ralph Lane Falls III (Falls III), and daughter, Louise Falls Cone (“Cone”).
Decedent is also survived by Falls III’s three children and by Cone’s two children and
her husband. Goldman Sachs Trust Company (“Goldman Sachs”) is the acting
trustee of Decedent’s trust (“Trust”).
Decedent created a revocable Trust as trustor in August 2011. Decedent
signed as both grantor and trustee in the Trust instrument. Wells Fargo Bank, N.A.
was designated as the successor trustee. Wing, her brother, Falls III, and two of his
children were named and designated as the beneficiaries of 90% of the Trust’s assets.
The Trust allocated 40% of the res upon Decedent’s death to Wing, 40% to Falls III,
and 5% each to two of Falls III’s children. Cone’s two children were to receive 5%
each, to equal 100% of the res (“Original Beneficiaries”). Decedent’s other daughter,
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Opinion of the Court
Louise Cone, her husband, and Sellers were not designated as beneficiaries nor listed
to receive any distributions of assets or income from the Trust.
Decedent executed his September 2012 will, prepared by a different attorney
from the Trust’s drafter, one month prior to scheduled surgery to remove three brain
tumors. Decedent’s September 2012 will named and appointed Falls III as trustee
“of each trust,” and Wing as his successor trustee. Decedent repeatedly acknowledged
his desire for his property to be divided equally between his three children, Wing,
Falls III, and Cone.
Decedent underwent brain surgery in October 2012. After surgery, he began
to suffer a series of serious physical and mental health problems, resulting in
recurring hospitalization and rehabilitative care. For the remainder of his life,
Decedent relapsed into heavy drinking, experienced depression, manic episodes, and
complications with bipolar disorder.
After removal of the brain tumors and beginning in December 2012 until 10
December 2014, Decedent intermittently executed six amendments (“purported
amendments”) to the 2011 Trust.
The first amendment in December 2012 added Sellers as successor trustee and
Falls III as her successor trustee. Falls III’s share was reduced to 30%, Wing’s share
was eliminated to 0%, Cone was named as a beneficiary of 30%, and the four
previously named grandchildren’s shares were increased to 10% each.
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Opinion of the Court
The second amendment in January 2013 left Sellers as the first successor
trustee. Successor trustee duties were given to Falls III on behalf of his children, and
to Cone and her husband as subsequent successor trustees on behalf of their children.
Falls III and Cone were named to receive 30% each, Wing’s share remained at 0%,
and the four grandchildren’s shares remained at 10% each.
The third amendment in January 2014 named Goldman Sachs as successor
trustee. Falls III’s and Cone’s shares were reduced to 20% each, and each of the four
grandchildren’s shares was increased to 15%.
In February 2014, the Trust was amended again. Goldman Sachs remained
successor trustee, and Sellers and Cone were added as successor trustees after
Goldman Sachs. Goldman Sachs was given discretionary power to distribute to Cone,
her husband and to Sellers. Cone’s share increased to 35% with her husband, Cone’s
two daughters’ share increased to 20% each, Sellers was given 25%. Wing, Falls III,
and his children are not mentioned in this amendment.
The Trust was again amended in July 2014. This amendment continued
Goldman Sachs’ discretionary distributions to Sellers and Cone, and Sellers and Cone
were given the power to remove Goldman Sachs as trustee.
The sixth and final amendment, entitled the “Fifth Amendment” was executed
on 10 December 2014. That same day, Sellers and Decedent applied for a marriage
license and were married. This amendment gave 25% to Sellers, now as Decedent’s
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Opinion of the Court
wife, 35% to Cone and her husband, and 20% each to Cone’s two children. An entire
section benefits Sellers as a surviving spouse. Cone and her husband are designated
to take Sellers’ 25%, should Sellers predecease Decedent. Wing, Falls III, and his
children are not mentioned in the document.
These amendments did not revoke the Trust nor create a new trust, and each
amendment affirmatively restated and reaffirmed all terms and provisions of the
Trust, not expressly amended.
Decedent died on 11 May 2015. On 12 June 2015, Goldman Sachs paid
distributions from the Trust to Sellers and Cone pursuant to the Trust’s Fifth
Amendment. In 2016, Wing and Falls III filed claims and challenged the validity of
the purported amendments and gave Goldman Sachs notice of their claims. Goldman
Sachs continued making distributions, despite being on notice the amendments were
challenged and that Sellers and Cone were not named beneficiaries under the original
Trust.
Sellers and Cone filed a Joint Motion to Pay Defense Cost (“Motion to Pay”) to
direct Goldman Sachs to pay the cost of “defending the Trust as amended” on 6
February 2019. Wing filed an amended Motion to Freeze Administration of Revocable
Trust until Beneficiaries are Determined or, alternatively, to Pay Defense Costs for
ALL Purported Beneficiaries (“Motion to Freeze”). Goldman Sachs did not
independently seek instructions on whether to make distributions to any of the
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Opinion of the Court
purported claimants or seek an interpleader action for the Trust res. See N.C. Gen.
Stat. § 1A-1, Rule 22(a) (2019) (Persons having claims against the plaintiff may be
joined as defendants and required to interplead when their claims expose or may
expose the plaintiff to double or multiple liability . . . . A defendant exposed to similar
liability may obtain such interpleader by way of crossclaim or counterclaim.).
The trial court granted Defendant’s Motion to Pay and denied Wing’s Motion
to Freeze on 20 May 2019. The order does not contain a Rule 54(b) certification that
the order is immediately appealable. See N.C. R. App. P. 54(b). Plaintiff timely
appealed from the superior court’s order.
II. Interlocutory Jurisdiction
Wing argues this Court possesses jurisdiction over this interlocutory appeal
pursuant to N.C. Gen. Stat. §§ 1-277(a) and 7A-27(b)(3) (2019).
Ordinarily, an appeal from an interlocutory order will be
dismissed as fragmentary and premature unless the order
affects some substantial right and will work injury to
appellant if not corrected before appeal from final
judgment . . . Essentially a two-part test has developed[:]
the right itself must be substantial and the deprivation of
that substantial right must potentially work injury to
plaintiff if not corrected before appeal from final judgment.
Goldston v. American Motors Corp., 326 N.C. 723, 726, 392 S.E.2d 735, 736 (1990)
(citations and internal quotation marks omitted).
Admittedly the ‘substantial right’ test for appealability of
interlocutory orders is more easily stated than applied. It
is usually necessary to resolve the question in each case by
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Opinion of the Court
considering the particular facts of that case and the
procedural context in which the order from which appeal is
sought was entered.
Waters v. Personnel, Inc., 294 N.C. 200, 208, 240 S.E.2d 338, 343 (1978).
On a purported appeal from an interlocutory order without the trial court’s
Rule 54(b) certification, “the appellant has the burden of showing this Court that the
order deprives the appellant of a substantial right which would be jeopardized absent
a review prior to a final determination on the merits.” Jeffreys v. Raleigh Oaks Joint
Venture, 115 N.C. App. 377, 380, 444 S.E.2d 252, 254 (1994) (citations omitted).
Wing asserts the trial court’s order deprived her of substantial rights in two
ways: (1) it depletes the Trust res and mandates the immediate payment of a
substantial amount of money; and, (2) it risks inconsistent verdicts or outcomes with
the ultimate disposition of the wrongful distribution claim and on any potential
recovery against Goldman Sachs for funds already distributed.
A. Substantial Right Affected
The first part of the interlocutory test is the right affected must be substantial.
Goldman Sachs has distributed more than $2 million dollars from the Trust to Sellers
and Cone for expenses and legal fees they incurred in opposing Wing’s and Falls III’s
claims. In 2016, Wing and Falls III filed suit and distributions ceased in November
2017. The record before us is unclear whether Goldman Sachs resumed distributions
to Sellers and Cone for their legal fees or otherwise after November 2017. Counsel
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Opinion of the Court
for Goldman Sachs assert they have not been paid for defending the Trust since
November 2017.
This Court has held:
Remaining claims would jeopardize plaintiff’s substantial
right not only because it orders plaintiff to pay a not
insignificant amount—$48,188.15—The Order appealed
affects a substantial right . . . by ordering [Defendant] to
make immediate payment of a significant amount of
money; therefore this Court has jurisdiction over the
Defendant’s appeal pursuant to N.C. Gen. Stat. 1-277.
Beasley v. Beasley, 259 N.C. App. 735, 742, 816 S.E.2d 866, 872-873, (2018)
(alterations, citations, and internal quotations omitted.)
As this Court stated in Beasley, Goldman Sachs has paid out far more than an
“insignificant amount” in Trust funds for Sellers’ and Cone’s legal fees. The
disbursements for legal fees and expenses already surpass $2 million dollars, more
than forty times the amount this Court referenced in Beasley as “a not insignificant
amount.” Id.
Secondly, a ruling “purporting to determine who is entitled to money” affects a
substantial right. State ex rel. Comm’r of Insurance v. N. C. Rate Bureau, 102 N.C.
App. 809, 811, 403 S.E.2d 597, 599 (1991). In Rate Bureau, the Commissioner of
Insurance failed to order the release of funds placed in escrow pending judicial
review. “The Commissioner’s order only determine[d] that the funds are not to be
released now.” Id. The Commissioner had placed a temporary freeze on the
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Opinion of the Court
distribution of funds while the proper recipients were determined. As the freeze was
temporary, this Court determined no injury had occurred. Id.
The opposite result occurred here. Wing’s Motion to Freeze, if allowed, would
have had the same temporary impact as the Commissioner’s freeze in Rate Bureau.
“The Commissioner’s order does not purport to determine who is entitled to the
money. For these reasons, we hold that the appeal is interlocutory.” Id.
Unlike Rate Bureau, Goldman Sachs, as purported trustee, held Trust funds
whose beneficiaries are in dispute, but nonetheless distributed funds to one group,
while the Trust beneficiaries’ case is pending. Wing contends she, Falls III, and his
children are the proper beneficiaries of the Trust under the operative trust terms set
forth in the 2011 Trust Agreement. If Wing and Falls III succeed in their challenges
to the amendments to the Trust, the court’s ruling on Defendants’ Motion to Pay
adversely affects their equitable interests in the disbursed and depleted assets of the
Trust.
Wing also relies upon this Court’s precedents in Tanner v. Tanner, 248 N.C.
App. 828, 789 S.E.2d 888 (2016) and Estate of Redden v. Redden, 179 N.C. App. 113,
632 S.E.2d 794 (2006). In Tanner, the plaintiff-husband moved $300,000 from his
business account to his mother’s bank account and separated from his wife two
months later. Tanner, 248 N.C. App. at 829, 789 S.E.2d at 889. The defendant-wife
alleged the plaintiff had anticipated the marital separation and the money
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Opinion of the Court
distributed was marital property, properly included in equitable distribution. Id.
This Court applied the two-part test for an immediate appeal of an
interlocutory ruling to determine if the mother-appellant’s substantial rights were
affected by the defendant’s claim of substantial money for which appellant had
ownership and control. Id. at 831, 789 S.E.2d at 890. The mother-appellant asserted
her grounds for appellate review, quoting Redden: “The order appealed affects a
substantial right of [mother-appellant] by ordering her to make immediate payment
of a significant amount of money; therefore, this Court has jurisdiction over [mother-
appellant’s] appeal pursuant to N.C. Gen. Stat. § 1-277.” Tanner, 248 N.C. App. at
831, 789 S.E.2d at 891 (citation omitted).
In Redden, decedent had executed a power of attorney in favor of his wife. He
also designated his wife as the payable-on-death beneficiary of funds in a specific
bank account. Redden, 179 N.C. App. at 114, 632 S.E.2d at 796. The wife testified
decedent had instructed her to move $200,000 from the specific account to decedent’s
work account so she could proceed with office work on decedent’s behalf. After the
decedent died, his wife moved the remaining money she had transferred to the work
account, back to her specific bank account. Id. at 115, 632 S.E.2d at 796. The plaintiff
sued the wife on behalf of Redden’s estate for conversion. The trial court granted
partial summary judgment in favor of the plaintiff, and the wife appealed to this
Court. Id. at 114, 632 S.E.2d at 797.
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Opinion of the Court
In both Tanner and Redden, this Court held a substantial right is affected
when a payment is made or required and ownership of the funds is in dispute. See
Tanner, 248 N.C. App at 831, 789 S.E.2d 890-91. Like Tanner and Redden, Wing also
contests the payment of Trust funds over which there is a dispute to the rightful
owners.
Defendants and Goldman Sachs rely upon workers’ compensation and other
two-party, duty-to-pay cases to argue no substantial right exists to an immediate
appeal. This Court has consistently held in interlocutory appeals of workers’
compensation and contract disputes “when a party has been required to make
payments pendente lite, this Court has nonetheless held that no substantial right
exists to justify an interlocutory appeal.” Perry v. N.C. Dep’t of Corr., 176 N.C. App.
123, 130, 625 S.E.2d 790, 795 (2006). This is not a workers’ compensation or a two-
party, duty-to-pay case.
Defendants and Goldman Sachs rely on Miller v. Henderson, 71 N.C. App. 366,
368, 322 S.E.2d 594, 596 (1984) (allowing plaintiff to bring an interlocutory appeal
because plaintiff faced a possibility of inconsistent verdicts and a partial summary
judgment for a monetary sum, plaintiff’s claim was dismissed as meritless and she
was ordered to pay attorney fees). Our Supreme Court permitted the interlocutory
appeal in Miller using the exact same reasoning Wing asserts in this case. The
outcome of Miller required the plaintiff to pay attorney’s fees because the statute
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Opinion of the Court
required them to do so after allegations were found to be meritless. Id. at 372, 322
S.E.2d at 598. For our interlocutory analysis, Miller supports Wing’s assertion, but
the ultimate conclusion in Miller regarding plaintiff’s duty to pay is easily
distinguished from our facts. Id.
Goldman Sachs heavily relies on Perry, a workers’ compensation case. In
Perry, plaintiff-employee was injured, and defendant-employer paid the employee for
a term, and then unilaterally ceased payment. Perry, 176 N.C. App. 123, 625 S.E.2d
790. Defendant was ordered to reinstate workers’ compensation benefits to plaintiff,
and defendant appealed with a motion to stay the payment order. The motion was
denied. Defendant appealed to this Court for an interlocutory appeal asserting a
substantial right. Id. at 127, 625 S.E.2d at 793. This Court stated: “an order denying
a stay is an interlocutory order not subject to immediate appeal.” Id. at 129, 625
S.E.2d at 794.
The ruling in Perry is inapplicable to the order before us. Wing and Falls III
are not appealing from a motion to stay, but rather from an order affirmatively
ordering payments by a trustee with distributions from a trust to some purported
beneficiaries, and not others, when the rightful beneficiaries are disputed. This Court
reasoned in Perry that workers’ compensation cases create unique issues:
These same circumstances arise in almost every case in
which a workers’ compensation defendant fails to prevail
in connection with [a] request to terminate benefits. To
allow a defendant to take an interlocutory appeal from any
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Opinion of the Court
requirement that it continue to pay benefits pending
Commission proceedings would result in precisely the yo-
yo procedure, up and down, up and down, which this Court
has held works to defeat the very purpose of the Workers’
Compensation Act.
Id. at 130, 625 S.E.2d at 794. (alterations in original) (quotation marks omitted).
Finally, this Court noted: “When an employer meets the requirements of N.C.
Gen. Stat. § 97-42 (2005), it may receive a credit for overpayments.” Perry, 176 N.C.
App. at 131, 625 S.E.2d at 795 (citation omitted). This available alterative is
distinguished here, as Goldman Sachs claims it has no liability from distributing
funds. If Wing prevails on her claims of wrongful distribution, no return of funds or
credit to offset future payments is guaranteed. Perry and Miller differ substantially
from the facts before us.
Further, in cases involving escrow, like Rate Bureau, cases involving
constructive trust, like Tanner, or cases involving disputed distributions, like
Redden, this Court has consistently held a substantial right is affected when the
dispute is between claims of competing owners of funds to be distributed. Two million
dollars was distributed from the Trust to Sellers and Cone, who may be held to be
non-beneficiaries in the pending litigation. The order allowing Defendant’s Motion
to Pay diverts funds from the Trust, which would otherwise be held in the Trust and
recoverable by the Wing, Falls III, and two of his children, if they prevail.
B. Deprivation Works Injury
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Opinion of the Court
The second part of the test for interlocutory appeals is whether the deprivation
immediate appellate review works injury to the appellant. “[W]e may generally state
that so long as a claim has been finally determined, delaying the appeal of that final
determination will ordinarily affect a substantial right if there are overlapping
factual issues between the claim determined and any claims which have not yet been
determined.” Davidson v. Knauff Ins. Agency, 93 N.C. App. 20, 26, 376 S.E.2d 488,
492 (1989).
Issues overlap whenever “the facts relevant to the resolution overlap in such a
way as to create a risk that separate litigation of those issues might result in
inconsistent verdicts.” Wells Fargo Bank, N.A. v. Corneal, 238 N.C. App. 192, 194,
767 S.E.2d 374, 376 (2014). The overlapping issues will work injury as inconsistent
verdicts could deprive Wing and Falls III of their equitable interest in the Trust.
The wrongful distribution claim, along with all the pending claims, hinge upon
undue influence and Decedent’s capacity to execute the purported amendments. If
Decedent lacked capacity to execute any or all amendments to the Trust, the
purported amendments, together or singularly, are void; Sellers and Cone take
nothing from the Trust, and Goldman Sachs breached their fiduciary duties to
preserve the Trust res. The order allowing the Motion to Pay and the pending claims
overlap substantially.
The rightful beneficiaries of the Trust are in dispute. Wing’s and Falls III’s
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Opinion of the Court
substantial rights are affected by the large sums being distributed from the Trust.
Further, the court’s order does not clearly define the liability of Goldman Sachs. This
creates the possibility of multiple trials on claims involving overlapping issues and
could result in inconsistent verdicts. Immediate appeal to and review by this Court
is proper, as this interlocutory order affects Plaintiffs’ substantial rights. We allow
Plaintiffs’ interlocutory appeal.
III. Trustee’s Duty to the Trust
A. Interpreting Trust Terms
“The rules of construction that apply in this State to the interpretation of and
disposition of property by will also apply as appropriate to the interpretation of the
terms of a trust and the disposition of the trust property.” N.C. Gen. Stat. § 36C-1-
112 (2019). A caveat proceeding determines whether the writing purporting to be a
testamentary will or a codicil thereto is in fact the last will and testament of the
decedent. See In re Spinks, 7 N.C. App. 417, 423, 173 S.E.2d 1, 5 (1970). If “a caveat
is filed the clerk of the superior court shall forthwith issue an order that shall apply
during the pendency of the caveat to any personal representative, having the estate
in charge, as follows: (1) . . . [T]here shall be no distributions of assets of the estate to
any beneficiary.” N.C. Gen. Stat. § 31-36 (2019) (emphasis supplied).
Our general statutes compel us to interpret wills’ and trusts’ provisions and
dispositions consistently. N.C. Gen. Stat. § 36C-1-112 (2019). N.C. Gen. Stat. § 31-
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36(a)(1) provides the framework for the case before us. Plaintiff’s’ challenge of the
purported amendments is comparable to a caveat to determine who the rightful
beneficiaries should be. The plain text of the statute directs the clerk of the superior
court to order the executor or administrator to freeze all distributions until the caveat
is resolved.
Wing filed a will caveat in the superior court on 13 November 2017. Wing also
challenged the probated will on the basis of Decedent’s incapacity and Seller’s
purported undue influence. Upon filing her caveat, “any personal representative,
having the estate in charge . . . shall [make] no distributions of assets of the estate to
any beneficiary.” N.C. Gen. Stat. § 31-36(a)(1) (emphasis supplied).
B. Duty of Neutrality
In August 2011, Decedent created the Trust and thereafter purportedly
amended the trust six times in less than two years between 2012 and 2014 after
having undergone surgery for multiple brain tumors. Decedent wrote, “This
amendment amends and restates in its entirety the trust originally executed by me
on August 4, 2011.” This phrase is found at the top of each purported amendment,
incorporating the Trust as purportedly amended.
Goldman Sachs argues a trustee has a duty to defend the Trust. The first issue
is whether a trustee has a duty to defend the purported amendments during pending
litigation between purported beneficiaries. Wing and Falls III are not challenging
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the underlying validity of the Trust. They are challenging the trustor’s capacity to
execute the amendments thereto and to determine the rightful beneficiaries of their
father’s Trust.
Aside from the guidance and mandates of N.C. Gen. Stat. §§ 31-36 and 36C-1-
112, the trustee’s duty of and liability for distribution to disputed beneficiaries during
pending litigation is an issue of first impression in North Carolina. Other
jurisdictions have considered similar factual scenarios.
In Terry v. Conlan, the trustor’s children challenged their stepmother
regarding the validity of trust amendments. Terry, 33 Cal. Rptr. 3d 603 (Cal. Ct. App.
2005). The California Court of Appeals concluded, “The dispute between
[Stepmother] and the Children is over the validity of the various trust instruments
and amendments . . . The trust remains intact, leaving the parties in their original
positions prior to the beginning of litigation.” Id. at 616. The court in Terry held,
“[B]ecause the dispute between the parties was related to the benefits of the trust,
rather than an attack on the validity of the trust itself, there was no basis for the
trustee to have taken other than a neutral position in the contest.” Id. at 615.
In another case with similar facts to Wing, the decedent and his wife created
a trust which named their niece, Whittlesey, as the trustee and primary beneficiary.
Whittlesey v. Aiello, 128 Cal. Rptr. 2d 742, 743 (Cal. Ct. App. 2002). The wife died,
and decedent remarried and amended the trust to make his second wife and her son
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the primary beneficiaries of the trust. Id. Whittlesey challenged the validity of the
amendment and opposing attorney’s claim he should be paid from the trust. The
amendment was determined to be void due to undue influence, and the attorney’s fees
incurred during litigation were denied Id. at 744.
The California Court of Appeals held: “Where the trust is not benefited by
litigation, or did not stand to be benefited if the trustee had succeeded, there is no
basis for the recovery of expenses out of the trust assets.” Id. at 748. The court
further ruled, “The essence of the underlying action was not a challenge to the
existence of the trust, it was a dispute over who would control and benefit from it.
Whether or not the contest prevailed, the trust would remain intact.” Id. at 746. The
court reasoned the dispute was to determine who was the rightful taker, so the trust
would not be affected negatively, and thus the trustee did not have a duty to take
either position. Id. at. 748.
The court’s reasoning is persuasive: “[A]n award of fees to [attorney defending
second wife] from the trust would be, in effect, an award from Whittlesey
. . . Whittlesey would be required to finance her own trust litigation and that of her
opponent, despite the fact she prevailed. There can be no equity in that.” Id. (internal
quotations omitted).
Wing’s position is similar to Whittlesey. Goldman Sachs asserts attorney’s fees
are “costs of administration” and a valid expense if incurred by the trustee while
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defending the Trust. See Phillips v. Phillips, 296 N.C. 590, 603, 252 S.E.2d 761, 769
(1979). The Trust does not need defending in the case before us because there is no
contest to the validity of the Trust. This dispute is between the rightful beneficiaries,
and the Trust is not in peril. Goldman Sachs has breached their duty of neutrality
by deciding who the rightful beneficiaries are before pending litigation has resolved
that issue.
Many other states have also held a trustee has a duty to remain neutral
regarding competing claims between putative beneficiaries. See In re Duke, 305 N.J.
Super. 408, 440, 702 A.2d 1008, 1023-24 (Ch. Div. 1995) (holding in a dispute between
two parties claiming to be beneficiaries, a trustee may not advocate for either side or
assume the validity of either side’s position.”); Dueck v. Clifton Club Co., 2017-Ohio-
7161, 95 N.E.3d 1032, 1059 (Ohio Ct. App. 2017) (holding a trustee “breached the
duty of impartiality by engaging in advocacy between the beneficiaries”); In re
Connell Living Trust, 393 P.3d 1090, 1094 (Nev. 2017) (holding a trustee breached
fiduciary duties by advocating for a position which benefitted some putative
beneficiaries but not others); Hershatter v. Colonial Trust Co., 73 A.2d 97, 101 (Conn.
1950) (“[W]here an attack is being made upon the validity of a trust, the trustee has
the duty of participating actively in its defense . . .[but where] he acts . . . merely as
a defendant stakeholder, he ordinarily has neither duty nor right to so participate”).
We have found no cases arising on similar context and facts, which reach a contrary
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result.
IV. Conclusion
“A trustee shall administer the trust as a prudent person would, by considering
the purposes, terms, distributional requirements, and other circumstances of the
trust.” N.C. Gen. Stat. § 36C-8-804 (2019). A prudent trustee must act impartially
towards all purported beneficiaries. N.C. Gen. Stat. § 36C-8-803 (2019). Here, the
Trust does not require defending, rather, as purported beneficiaries, Defendants seek
to use Trust assets to maintain their positions. The trustee is not required to pay
attorney fees or legal costs unless the res of the Trust is in peril. See Whittlesey, 128
Cal. Rptr. 2d at 743.
Wing’s substantial rights are affected by the large sums distributed to
competing beneficiaries, which could belong to Wing, Falls III and his children with
potentially no way to recover the wrongful payments. The Motion to Pay order
creates the possibility of multiple trials on claims involving overlapping issues, which
might result in inconsistent verdicts. Immediate appeal of this interlocutory order to
this Court is proper.
The beneficiaries of the Trust are in dispute. There is no final determination
of who are the rightful beneficiaries. In accordance with the general statutes and
precedents, the trial court should have allowed Plaintiff’s motion and ordered a freeze
on distributions of the Trust assets until resolution of the competing claims.
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WING V. GOLDMAN SACHS TRUST CO.
Opinion of the Court
The trial court erred by not freezing and by ordering distributions from the
Trust to some putative beneficiaries but not others during pending litigation. We
reverse the Motion to Pay order and remand to the trial court for entry of an order
allowing Wing’s Motion to Freeze. All remaining claims, rights, and defenses are
undisturbed. It is so ordered.
REVERSED AND REMANDED.
Chief Judge McGEE and Judge COLLINS concur.
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