A recent decision by the North Carolina Court of Appeals reinforced the distinction between claims over which the trial divisions have original jurisdiction and claims which are properly brought before the Clerk of Court.[1]
In Morgan-McCoart v. Matchette, an elderly woman, Ms. Simpson, created a revocable trust and executed a Durable Power of Attorney in 2008. Her daughter, Julie, was named as her trustee and attorney-in-fact, and her other daughter, Claudia, was named as the alternate trustee and attorney-in-fact. Ms. Simpson was declared incompetent in 2009. Julie lived in California, making it difficult to fulfil her duties. Accordingly, Julia and Claudia entered into an agreement which provided, in part, (1) Claudia would assume the role as trustee; (2) Julie would submit a request for reimbursement for expenses she incurred while serving as trustee and as attorney-in-fact; (3) Julie would not contest Claudia being named as guardian of their mother during the incompetency proceeding; and (4) Claudia would keep Julie informed of their mother’s whereabouts and mental and physical status.
In 2010, Julie petitioned the Clerk for reimbursement of $13,856.76 for expenses incurred while serving as trustee and as attorney-in-fact, and to receive an “annual distribution” of $8,548.80 as a beneficiary under the trust. The Clerk entered an order allowing Julie to recover only $1,906.04 in expense reimbursements and $0 for the claimed beneficiary distribution from the trust. Julie subsequently filed a complaint in District Court for breach of contract against Claudia individually, as trustee of the trust, and as their mother’s general guardian. The trial court entered an order dismissing Julie’s claims, concluding that it did not have subject matter jurisdiction over Julie’s claims, but rather jurisdiction lay with the Clerk.
Original jurisdiction refers to the authority of a court to hold trial and render judgments in cases, which may be instituted in those courts in the first instance. Pursuant to North Carolina statutes, the trial division of the court (District and Superior Court) have original jurisdiction over claims which are “justiciable matters of a civil nature.”[2] Likewise, the Clerk of Court has original jurisdiction over the appointment of “general guardians for incompetent persons and of related proceedings” and “all proceedings concerning the internal affairs of trusts.”[3] The North Carolina Court of Appeals noted Julie’s claims against Claudia as trustee differed from her claims against Claudia individually, and therefore addressed each claim separately.
Julie’s claims against the trust, for reimbursement of her expenses incurred as trustee and for the annual beneficiary distribution, were properly dismissed by the District Court because the Clerk’s jurisdiction over the internal affairs of trusts include “the administration and distribution of trusts … and the determination of other matters involving trustees and trust beneficiaries[.]”[4]
Julie also sought to recover a judgment from Claudia individually, based on the assertion that Claudia was contractually obligated to reimburse Julie’s expenses pursuant to their agreement. Treating it as a breach of contract claim, the Court of Appeals determined the District Court had jurisdiction regarding Claudia’s liability in her individual capacity.
Finally, Julie asked the court for specific performance to order Claudia to comply with the terms of their agreement, ensuring reasonable communication and information regarding their mother’s health care, location, and status. Julie argued that Claudia was contractually obligated to perform based on their agreement, apart from any obligation Claudia might otherwise have in her capacity as guardian, attorney-in-fact, or as trustee. Therefore, the Court of Appeals treated this claim as one based in contract, against Claudia in her individual capacity. Accordingly, the District Court had jurisdiction to hear this claim.
As such, the Court of Appeals affirmed the trial court’s dismissal of Julie’s claims against the trust and Claudia in her capacity as trustee or guardian, as the Clerk of Court has original jurisdiction over such claims. However, the Court of Appeals remanded the case to the trial court as to Julie’s claims against Claudia for breach of their agreement in her individual capacity only.
[1] Morgan-McCoart v. Matchette, N.C. App. No. COA15-416 (January 5, 2016)
[2] N.C. Gen. Stat. § 7A-240.
[3] N.C. Gen. Stat. § 35A-1203 and N.C. Gen. Stat. § 36C-2-203.
[4] N.C. Gen. Stat. § 36C-2-203.
