GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1999

H	2 

HOUSE BILL 1100
Committee Substitute Favorable 4/20/99

Short Title:  Removal/Resignation of Trustees.	(Public)

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Sponsors:

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Referred to: 

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April 15, 1999

A BILL TO BE ENTITLED
AN ACT TO AMEND THE PROVISIONS FOR THE RESIGNATION, REMOVAL, AND RENUNCIATION OF TRUSTEES AND FOR THE APPOINTMENT OF SUCCESSOR TRUSTEES.
The General Assembly of North Carolina enacts:
Section 1.  Article 3 of Chapter 36A of the General Statutes reads as rewritten:
"ARTICLE 3.
"Trust Administration.
. ”””
		"§ 36A-22.1.  Definitions.
As used in this Article:
(1)	‘Beneficiary' means a person who has any present or future interest, vested or contingent, in a trust, including (i)  the owner of an interest by assignment or other transfer and (ii) any person entitled to enforce a charitable trust.
(2)	‘Fiduciary' includes personal representatives, guardians of the person, guardians of the estate, attorneys-in-fact, and trustees.
(3)	‘Interested person' includes creditors, beneficiaries, and any others having a property right in or a claim against a trust estate which may be affected by the proceeding.  The term also includes fiduciaries representing interested persons.  The meaning of the term as it relates to particular persons may vary from time to time and must be determined according to the particular purposes of and matter involved in a particular proceeding.
(4)	‘Person' means an individual person, a corporation, an organization, or other legal entity.
(5)	‘Trust' includes any express trust, private or charitable, with additions to the trust, wherever and however created.  The term also includes a trust created for or determined by judgment or decree under which the trust is to be administered in the manner of an express trust.  The term does not include other constructive trusts, resulting trusts, conservatorships, personal representatives, trust accounts as defined in G.S. 53-146.2, 54-109.57, and 54B-129, custodial arrangements pursuant to G.S. 33A-1 through G.S. 33A-24 and G.S. 33B-1 through G.S. 33B-22, business trusts providing for certificates to be issued to beneficiaries, common trust funds, voting trusts, security arrangements, liquidation trusts, and trusts for the primary purpose of paying debts, dividends, interest, salaries, wages, profits, pensions, or employee benefits of any kind, or any arrangement under which a person is nominee or escrowee for another.
(6)	‘Trustee' includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court.  The term does not include trustees in mortgages and deeds of trust.  Substitution of trustees in mortgages and deeds of trust are governed by the provisions of G.S. 45-10.
36Aâ 
"§ 36A-23.1.  Court; jurisdiction of trusts.
(a)	The clerks of superior court of this State have original jurisdiction over all proceedings initiated by interested persons concerning the internal affairs of trusts except proceedings to modify or terminate trusts.  Except as provided in subdivision (3) of this section, the clerk's jurisdiction is exclusive.  Proceedings that may be maintained under this section are those concerning the administration and distribution of trusts, the declaration of rights, and the determination of other matters involving trustees and trust beneficiaries, to the extent that those matters are not otherwise provided for in the governing instrument.  These include proceedings:
(1)	To appoint or remove a trustee;
(2)	To review trustees' fees and review and settle interim or final accounts; and
(3)	To ascertain beneficiaries, to determine any question arising in the administration or distribution of any trust, including questions of construction of trust instruments, and to determine the existence or nonexistence of trusts created other than by will and the existence or nonexistence of any immunity, power, privilege, duty, or right.  The clerk, on the clerk's own motion, may determine that a proceeding to determine an issue listed in this subdivision shall be originally heard by the superior court.
(b)	To the extent that the procedures in this Article  for proceedings before the clerk concerning the administration of trusts conflict with the procedures for proceedings heard by the clerk, the provisions of this Article control.
(c)	A proceeding under this section does not result in continuing supervisory proceedings.
(d)	The management and distribution of a trust estate, submission of accounts and reports to beneficiaries, payment of trustees' fees and other obligations of a trust, acceptance and change of trusteeship, and other aspects of the administration of a trust shall proceed expeditiously, consistent with the terms of the trust, free of judicial intervention and without order, approval, or other action of any court, subject to the jurisdiction of the clerk as invoked by interested parties or as otherwise exercised as provided by law.  Nothing in this section shall be construed (i) to confer upon the clerk any authority to regulate or supervise the actions of a trustee except to the extent that the trustee's actions are inconsistent with the provisions of the governing instrument or of State law, or (ii) to confer upon any interested person any additional right, remedy, or cause of action not otherwise conferred by law.
(e)	Nothing in this section affects the right of a person to file an action for declaratory relief under the provisions of Article 26 of Chapter 1 of the General Statutes.
36AC 
"§ 36A-24.1.  Trust proceedings; venue.
(a)	If the trustee is required to account to the clerk, then unless the terms of the governing instrument provide otherwise, venue for proceedings under G.S. 36A-23.1 involving trusts is the place where the accountings are filed.
(b)	If the trustee is not required to account to the clerk, then unless the terms of the governing instrument provide otherwise, venue for proceedings under G.S. 36A-23.1 involving trusts is in any county of this State in which the trust has its principal place of administration or where any beneficiary resides.  Unless otherwise designated in the governing instrument, the principal place of administration of the trust is the trustee's usual place of business where the records pertaining to the trust are kept, or at the trustee's residence if the trustee has no such place of business.  In the case of cotrustees, the principal place of administration, if not otherwise designated in the governing instrument, is:
(1)	The usual place of business of the corporate trustee if there is but one corporate cotrustee;
(2)	The usual place of business or residence of the individual trustee who is a professional fiduciary if there is but one such person and no corporate trustee; or
(3)	The usual place of business or residence of any of the cotrustees as agreed upon by the cotrustees.
36Aâ 
"§ 36A-25.1.  Trust proceedings; dismissal of matters relating to foreign trusts.
The clerk of superior court shall not, over the objection of a party, entertain proceedings under G.S. 36A-23.1 involving a trust having its principal place of administration in another state, except:
(1)	When all appropriate parties could not be bound by litigation in the courts of the state where the trust has its principal place of administration; or
(2)	When the interests of justice otherwise would be seriously impaired.
The clerk may condition a stay or dismissal of a proceeding under this section on the consent of any party to jurisdiction of the state in which the trust has its principal place of administration, or the clerk may grant a continuance or enter any other appropriate order.
36Aa 
"§ 36A-26.1.  Trust proceedings; necessary parties.
Proceedings under G.S. 36A-23.1 are initiated by filing a petition or complaint in the office of the clerk of superior court.  Upon the filing of the petition, the clerk shall docket the cause as a special proceeding, with the petitioner as plaintiff.  All known beneficiaries, trustees, or cotrustees not joined as plaintiffs shall be joined as defendants.  The clerk shall issue the summons for the defendants, and except as provided in this Article, the procedure shall be the same as in other special proceedings.  The clerk may order notification of additional persons.  An order is valid as to all persons who are given notice of the proceeding even if all interested persons are not notified.  The beneficiaries, creditors, or any other persons interested in the trust estate have the right to answer the petition and to offer evidence against granting the petition.  The clerk shall then proceed to hear and determine the matter.
"§ 36A-26.2.  Waiver of notice.
An interested person, or a person representing an interested person as provided in G.S. 36A-26.3, may waive notice by a writing signed by the person or the person's attorney and filed in the proceeding.
"§ 36A-26.3.  When parties represented by others.
In proceedings involving trusts, the following rules apply:
(1)	Interests to be affected shall be described in pleadings that give reasonable information to interested persons by name or class, by reference to the instrument creating the interests, or in some other appropriate manner.
(2)	Interested persons shall be represented by others in the following cases:
a.	The sole holder or all coholders of a power of revocation or a presently exercisable general power of appointment, including one in the form of a power of amendment, shall represent other persons to the extent that their interests, as objects, takers in default, or otherwise, are subject to the power.
b.	If the clerk finds that there is no conflict of interest between the interested person and the person representing the interested person, or among persons represented, a guardian of the estate shall represent the person whose estate the guardian controls; a guardian of the person shall represent the ward if no guardian of the ward's estate has been appointed; a trustee shall represent beneficiaries of the trust in proceedings to probate a will establishing or adding to the trust, to review the acts or accounts of a prior fiduciary, and in other proceedings involving creditors or other third parties; and a personal representative shall represent persons interested in the undistributed assets of the decedent's estate in actions or proceedings by or against the estate.  If there is no conflict of interest and no guardian of the estate or guardian of the person has been appointed, a parent shall represent a minor child.
c.	If the clerk finds that another party has an interest in the proceeding substantially identical to the interest of an unborn or unascertained person who is not otherwise represented, that party shall represent the unborn or unascertained person.
d.	At any point in a proceeding, a clerk shall allow an attorney-in-fact to represent the attorney-in-fact's principal, provided that, if the principal is incapacitated, the power of attorney is durable as defined in G.S. 32A-8, and provided that the power of attorney grants to the attorney-in-fact either (i) the authority to do, execute, or perform any act that the principal might or could do or otherwise evidences the principal's intent to give the attorney-in-fact full power to handle the principal's affairs or deal with the principal's property; (ii) the powers described under G.S. 32A-2(2) and G.S. 32A-2(8) and, if interests in real property are affected, the powers described in G.S. 32A-2(1); or (iii) other direct or indirect authority the clerk deems sufficient in the clerk's discretion.
(3)	At any point in the proceeding, the clerk may appoint a guardian ad litem to represent the interest of a minor, an incapacitated, unborn, or unascertained person, or a person whose identity is unknown, if the clerk determines that representation of the interest otherwise would be inadequate.  If not precluded by a conflict of interest, a guardian ad litem may be appointed to represent several persons or interests.  The clerk shall set forth the clerk's reasons for appointing a guardian ad litem as a part of the record of the proceedings.
(4)	An order binding a person who represents an interested person binds the interested person.
Nothing in this section authorizes the disbursement of funds distributable to any person to those authorized to represent that person under this section.
"§ 36A-27.  Appeal; stay effected by appeal.
Any party in interest may appeal from the decision of the clerk to the superior court. If an appeal is taken from the decision of the clerk, such appeal shall stay the judgment and order of the clerk until the cause is heard and determined by the superior court upon the appeal taken.  To the extent that the procedure for an appeal from an order of the clerk concerning administration of a trust provided under this Article conflicts with the procedure for appeal from orders of the clerk in other matters, the provisions of this Article control.
"§ 36A-28.  On appeal judge determines facts.
Upon an appeal taken from the clerk to the superior court, the judge shall have the power to review the findings of fact made by the clerk and to find the facts or to take other evidence, but the facts found by the judge shall be final and conclusive upon any appeal to the appellate division.
"§ 36A-29.  Final accounting before resignation.
If the trustee is required to account to the clerk of superior court, then unless the terms of the governing instrument provide otherwise, no trustee shall be permitted to resign as trustee until a final account of the trust estate is filed with the clerk, and until the court shall be satisfied that the account is true and correct.
36Ai 
"§ 36A-31.  When bond required.
A trustee need not provide bond to secure performance of the trustee's duties unless required by the terms of the governing instrument, or found by the clerk to be necessary to protect the interests of beneficiaries who are not able to protect themselves and whose interests otherwise are not adequately represented.  However, in no event shall bond be required if the governing instrument directs otherwise.  On petition of the trustee or other interested person, the clerk may excuse a requirement of bond, reduce the amount of the bond, release the surety, or permit the substitution of another bond with the same or different sureties.  If bond is required, it shall be in a sum double the value of the personal property to come into the trustee's hands when bond is executed by a personal surety, and in an amount not less than one and one-fourth times the value of all personal property of the trust estate when the bond is secured by a suretyship bond executed by a corporate surety company authorized by the Commissioner of Insurance to do business in this State, provided that the clerk of superior court, when the value of the personal property exceeds one hundred thousand dollars ($100,000), may accept bond in an amount equal to the value of the personal property plus ten percent (10%) thereof, conditioned upon the faithful performance of the trustee's duties and for the payment to the persons entitled to receive all moneys, assets, or other things of value which may come into the trustee's hands.  All bonds executed under the provisions of this Article shall be filed with the clerk.
"§ 36A-32.  Rights and duties devolve on successor.
A successor trustee shall succeed to all the rights, powers, and privileges, and shall be subject to all the duties, liabilities, and responsibilities that were imposed upon the original trustee unless a contrary intent appears from the governing instrument.
"§ 36A-33.  Appointment of successor trustee on clerk's own motion.
	Unless the governing instrument provides otherwise, if the trustee is required to account to the clerk of court, nothing in this Article shall be construed to limit the authority of the clerk to appoint a successor trustee to a deceased or incapacitated trustee upon the clerk's own motion.
36Ac 
					"§ 36A-36.  Appointment of special trustee.
If it appears necessary to the protection of the trust estate, the clerk of superior court having jurisdiction over the administration of the trust may appoint a special trustee until a successor trustee can be appointed or, where a trust has terminated, to distribute the assets.  A special trustee may be appointed without notice and may be removed whenever the court so orders.  The special trustee shall give such bond, if any, as the court may require and shall have the powers conferred by the order of appointment.
"§ 36A-37.  Consolidation, merger, reorganization, reincorporation, or transfer of assets and liabilities by a corporate trustee.
Whenever any corporate trustee doing business in this State shall consolidate or merge with or shall sell to and transfer its assets and liabilities to any other corporation, or where such corporate trustee is in any manner reorganized or reincorporated, all existing rights, powers, duties, and liabilities of such consolidating, merging, transferring, reorganizing or reincorporating corporation as trustee shall, upon the effective date of such consolidation, merger, reorganization or reincorporation, or sale and transfer, vest in and devolve upon the transferee corporation or the consolidated, merged, reorganized or reincorporated corporation in the manner prescribed in G.S. 53-17.
36AS 
"§ 36A-39.  Powers of cotrustees.
Unless otherwise provided in the governing instrument, if one of several trustees dies, resigns, or is removed, the remaining trustees shall have all rights, title, and powers of all the original trustees.  If the governing instrument manifests an intent that a successor trustee be appointed to fill a vacancy, the remaining trustees may exercise the powers of all the original trustees until such time as a successor is appointed, except those powers which the remaining trustees are prohibited from exercising under the governing instrument or by law.
"§ 36A-40.  Vesting of title.
A special or successor trustee is vested with the title of the predecessor trustee.  A predecessor trustee shall execute such documents transferring title to trust property as may be appropriate to facilitate administration of the trust and upon the predecessor trustee's failure to do so, the clerk may order the predecessor trustee to execute such documents, or the clerk may transfer title.
"§§ 36A-42 through 36A-46:  Reserved for future codification purposes."
Section 2.  This act becomes effective October 1, 1999, and applies to all trustees covered by the provisions of Article 36A of the General Statutes, whether administering trusts established before or after that date.