Trusts & Estates – Ademption – Partnership – Holographic Will – Intestate Succession

Stanford v. Paris. (Lawyers Weekly No. 11-07-0018, 11 pp.) (John C. Martin, Ch.J.) Appealed from Orange County Superior Court. (Carl R. Fox, J.) N.C. App. Click here for the full text of the opinion.

Holding: The testator’s gift of his stock, which became the same proportional interest in the same assets upon their transfer from a dissolved corporation to a partnership, did remain in his estate in specie as personal property at the time of his death and, therefore, did not adeem upon the dissolution and termination of the corporation. The trial court did not err by dismissing the plaintiffs’ complaint because they did not allege facts sufficient to establish that they had a legal right to the testator’s interest in the partnership.

Facts

This action concerns the distribution of property from the estate of Charles Whitson Stanford, who died in 1990, leaving a signed, holographic will from 1970. In his will, Stanford, who never married and had no children, devised all interest in Redfields, Inc. to his sisters, Jean and Jane. The plaintiffs are the children of Stanford’s brothers.

Redfields, Inc. was a closely-held real estate corporation. In 1975, Stanford and his two brothers and two sisters dissolved the corporation. His two brothers formed a partnership to carry on the business. The plaintiffs alleged that certain tracts of property were conveyed to the partnership.

When the partnership was dissolved in 1994, the property was distributed to Jane and Jean and their husbands. The plaintiffs alleged that 60 percent of the Redfields partnerships’ property holdings was distributed to the sisters and their husbands. The plaintiffs sought to determine whether some portion of Stanford’s estate should have been distributed according to the Intestate Succession Act and whether and what damages to which certain plaintiffs might have been entitled.

The trial court granted motions to dismiss brought by all defendants except Stanford’s personal representative. The trial court granted the plaintiffs’ motion for summary judgment in part, ordering that two undevised assets be distributed according to intestate succession.

The trial court also granted summary judgment in favor of the personal representative, in his individual capacity, with respect to Stanford’s interest in Redfields, determining that his devise of Redfields stock did not adeem.

Ultimately the court entered a judgment ordering payment of $7,000 for improper distribution of a Buick LeSabre and resolving all remaining issues.

The plaintiffs appealed.

Analysis

On appeal, the plaintiffs argued that Stanford’s interest in the Redfields partnership should not have passed only to his sisters.

The principle of ademption is recognized as applicable to specific legacies as a rule of law rather than of particular intent on the part of the testator. An ademption is the extinguishment of a testamentary gift.

Specific legacies are said to be adeemed when, in the lifetime of the testator, the particular thing bequeathed is lost, destroyed or disposed of, or it is changed in substance or form, so that it does not remain at the time the will goes into effect in specie, to pass to the legatees.

We must determine whether Stanford’s bequest of Redfields, Inc. stock remained in specie in his estate at the time of his death.

Redfields, Inc. was dissolved, and the five shareholders, including Stanford, formed a partnership of the same name. Just as the shares of Redfields, Inc. were evenly divided among its five shareholders, these same persons held a one-fifth interest in the net profits and losses of the Redfields partnership and had equal rights in the management of the Redfields partnership business.

They each agreed to surrender their shares of the corporation in consideration for the receipt as partners of the net assets of the corporation. The partnership agreement provided that the capital of the partnership would consist of all the assets of Redfields, Inc., distributed in kind upon its liquidation.

We do not agree with the plaintiffs that Stanford’s bequest of stock in Redfields, Inc. was sufficiently changed in substance or form, so that it did not remain at the time the will went into effect in specie. We conclude that Stanford’s gift of his Redfields, Inc. stock, which became the same proportional interest in the same assets left to him by his father upon their transfer to the Redfields partnership, did remain in his estate in specie as personal property at the time of his death and, therefore, did not adeem upon the dissolution and termination of Redfields, Inc.

The trial court did not err by dismissing the plaintiffs’ complaint because they did not allege facts sufficient to establish that they had a legal right to Stanford’s interest in the Redfields partnership.

Affirmed.