Trusts & Estates – Wills – Omitted Son – Sibling as Fiduciary – Holographic Codicil

Hughes v.  Craddock. (Lawyers Weekly No. 10-16-1072, 17 pp.) (Cheri Beasley, J.) Appealed from Randolph County Superior Court (Vance Bradford Long, J.) N.C. App. Unpub. Click here for the full text of the opinion.

Holding: When no evidence is forecast regarding fraud, breach of duty or inequitable conduct, a constructive trust is inappropriate. The fact that property is transferred to an heir is not sufficient to support allegations that the child convinced her mother to make the transfer or that the action was done to circumvent Medicaid rules.

Summary judgment for defendants Lois and Allen Levine is affirmed.

When a confidential relationship exists and a defendant becomes her mother’s fiduciary at the time of a conveyance of property to defendant, thus damaging the estate and obtaining benefit, plaintiff forecasts evidence that he can establish a prima facie case.

Summary judgment for Bonnie Craddock is reversed.

The absence of a testator’s name from a holographic codicil is not fatal, provided a name used for purposes of the making the instrument is used.

Background

Plaintiff filed a complaint seeking a constructive or resulting trust upon real property in Asheboro that had been owned by his mother before her death in 2006. Defendants are two of his sisters and a brother-in-law.

Defendant’s mother made a will in 1998 in which she intentionally left out plaintiff and divided the property among her four other children. On Nov. 2, 2002, plaintiff’s mother conveyed a remainder interest to defendants Bonnie Craddock and Lois Levine. She had earlier executed a deed conveying a remainder 1 percent undivided interest in the property to the same defendants.

Plaintiff contends the purpose of the transfer was to qualify his mother for Medicaid and to shield the property from claims or liens for nursing home expenses, but it was never intended to be a gift to her two children in exclusion of the other three. Plaintiff says the property was his mother’s sole asset of any value at the time of her death. While he acknowledges that he was excluded from her will, he alleges that she subsequently executed a handwritten codicil dividing the property equally among the five siblings. He says the codicil was not offered for probate because defendant Bonnie Craddock, administrator of the estate, deliberately and fraudulently withheld it.

Plaintiff requested that the trial court impose a constructive or resulting trust upon the property, equitably convey title to his mother’s heirs at law or devisees and administer her estate, and order the estate reopened if the clerk of superior court did not do so.

In August 2009 defendants moved to dismiss and for summary judgment and introduced affidavits of non-party siblings. At the hearing the trial court accepted the holographic codicil as an exhibit. The court ruled that plaintiff’s claim does state a claim for relief but that there is no genuine issue as to material fact, consequently granting defendants’ summary judgment motion.

Discussion

Plaintiff argues that the trial court erred in granting summary judgment where defendants’ answer was unverified and supporting affidavits lacked a clear jurat and notarial seal. The identical affidavits of the non-party siblings state that they had full knowledge of the conveyance without any expectation of receiving ownership and that defendants are entitled to full ownership. Plaintiff argues the only statement of consequence is that his mother was competent when she executed the deed conveying the interest, and while this statement is not based on facts and could impermissibly provide a legal conclusion, there is no indication that the trial court relied on the challenged affidavits.

Plaintiff also argues that summary judgment was improper because the record reveals issues of material fact as to the judicial creation of a constructive trust. A constructive trust arises when one obtains the legal title to property in violation of a duty he owes to another. But neither actual fraud nor distinct breach of duty is required. Here, nothing in plaintiff’s complaint or affidavit tends to show fraud, breach of duty or other inequitable conduct.

The allegations concerning defendant Lois Levine address her familial relationship with plaintiff’s mother and indicate that she, along with defendant Craddock, received a remainder interest in the property via two conveyances. While the complaint does raise suspicion that the conveyances were intended to qualify his mother for Medicaid, there is no claim that defendant Lois Levine prompted her mother to circumvent Medicaid rules. We reject plaintiff’s argument that the fact of defendant Lois Levine’s receipt of the property is sufficient to support his allegation that she wrongfully convinced their mother to transfer the lot.

The only other reference to defendant Lois Levine is the allegation that her remainder interest had vested, giving her legal title to the property and that she and defendant Craddock listed the property for sale. There is no allegation of impropriety in Lois Levine’s acquisition of the property, rendering inappropriate the imposition of a constructive trust. Accordingly, plaintiff did not establish that there was a genuine issue of material fact regarding the property held by defendants Lois Levine and her husband. Summary judgment is affirmed as to these defendants.

However, it is undisputed that a confidential relationship existed between defendant Craddock and plaintiff’s mother when the second deed was made, if not at the time of both conveyances. Plaintiff attested by affidavit that after filing his complaint he learned that defendant Craddock was made his mother’s attorney-in-fact at the time of the execution of the first deed and was acting as his mother’s fiduciary at the time of the second deed. Where evidence presented at a hearing on a motion for summary judgment would justify an amendment of the pleadings, such amendment should not be precluded by entry of summary judgment.

The complaint did not refer to power of attorney on the part of defendant Craddock. However, plaintiff’s affidavit was admitted without objection and raised the existence of a fiduciary relationship that would entitle plaintiff to certain presumptions on summary judgment. Plaintiff’s counsel also made this point in oral arguments; the issue was clearly before the trial court with the consent of both parties. It is proper to treat the complaint as though it were amended.

Plaintiff’s evidence shows that his mother’s only asset of substantial value passed to defendant Craddock outside the will, damaging the estate at a time when Craddock was the mother’s fiduciary. Plaintiff’s evidence tends to show that defendant Craddock received a benefit, which raises a presumption that constructive fraud occurred. As such, the plaintiff forecast evidence that he could at least establish a prima facie case for a constructive trust at trial.

Defendant Craddock presented no evidence to rebut the presumption; therefore, she failed to prove the absence of genuine issue of fact; thus, the trial court erred in ruling that she was entitled to summary judgment.

Defendants argue that even if there was sufficient evidence to show a genuine issue of wrongdoing, plaintiff could not be the beneficiary because he was excluded from the will. We acknowledge that a constructive trust would be irrelevant if the party bringing the action could not benefit, thereby lacking standing. But here, plaintiff produced a paper writing from August 2001 in which the writer says she “left my son Baxter” out of her last will and that she would like to change that. The letter provides that the proceeds from property sale be divided among the five children. The document is signed, “Love to you all. From Mom.”

Defendants argue this is not a valid holographic codicil because it is not subscribed and the testator’s name does not appear in the document. However, there is direct precedent that the signature of the letter is not fatal, holding that the word “Mother” is sufficient if that was the name the maker adopted for writing the instrument.

Summary judgment is affirmed as to defendants Lois and Allen Levine. We reverse the grant of summary judgment as to defendant Craddock and remand that case for further proceedings.