In re Mills

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

NO. COA13-1440
NORTH CAROLINA COURT OF APPEALS

Filed: 2 September 2014

IN THE MATTER OF THE ESTATE OF:
Cabarrus County
HAROLD LUTHER MILLS No. 08 E 169

Appeal by respondent from order entered 9 May 2013 by Judge

Richard L. Doughton in Cabarrus County Superior Court. Heard in

the Court of Appeals 23 April 2014.

Weaver, Bennett & Bland, P.A., by Michael David Bland; and
William L. Mills, III, for petitioner-appellee.

Orsbon & Fenninger LLP, by R. Anthony Orsbon, for
respondent-appellant.

GEER, Judge.

Respondent E. Thomas Hartsell ("respondent") appeals from

the trial court's order affirming the clerk of superior court's

removal of respondent as executor of Harold Luther Mill's

estate. Respondent argues that the trial court should have

conducted a de novo review of the clerk's decision and that its

factual findings were insufficient to support its conclusion

that respondent has a private interest that may be adverse to

the fair and proper administration of the estate. However, the
 -2-
statute upon which respondent relies in arguing for de novo

review had not come into effect as of the date of Harold Luther

Mills' death and, therefore, cannot be applied in this case. We

hold that the trial court applied the proper standard of review

and correctly concluded that the clerk's findings of fact

regarding respondent's private interests were sufficient to

justify respondent's removal as executor under N.C. Gen. Stat. §

28A-9-1(a)(4) (2009). Accordingly, we affirm.

Facts

Decedent Harold L. Mills ("decedent") was married to Audree

S. Mills. The couple owned a substantial amount of property and

did not have any children. Mrs. Mills suffered three strokes

between 1996 and 2002, rendering her physically and mentally

impaired and in need of a full-time caretaker.

On 8 September 2005, William L. Mills, III ("Mr. Mills,

III"), decedent's nephew, filed a special proceeding seeking a

declaration that both decedent and his wife were incompetent and

requesting the appointment of guardians. Respondent's brother,

Fletcher Hartsell ("Mr. Hartsell"), was decedent's attorney and

represented decedent and his wife in those proceedings.

Evidence before the clerk indicated that in early 2006,

while the incompetency proceedings were ongoing, Mr. Hartsell

suggested that David Piatt, a long-time friend, employee, and
 -3-
care-giver for decedent and his wife, persuade decedent to hire

respondent to do the Mills' estate planning. Mr. Piatt

introduced respondent to decedent in March 2006, and respondent

began assisting decedent in financial planning around that time.

Additionally, respondent, decedent, and Mr. Piatt, who were all

members of McGill Baptist Church, began sitting together during

church.

On 29 June 2006, decedent executed his last will and

testament naming respondent as the personal representative of

his estate. On 16 November 2006, decedent formed H & A Mills

Properties, LLC with decedent and his wife each owning a 50%

share of the LLC. Decedent then entered into an operating

agreement under which both he and respondent served as co-

managers of the LLC. Decedent and his wife transferred

substantially all of their real and personal property to the

LLC.

On 9 February 2007, Mr. Hartsell prepared the Harold L. and

Audree S. Mills Charitable Remainder Unitrust Agreement (the

"Trust"). Decedent and Mrs. Mills were named as the grantors of

the Trust, and Mr. Hartsell was designated its trustee. The

initial corpus of the Trust consisted of a 100% ownership

interest in the LLC, and the Trust's terms provided for

quarterly distributions to both decedent and Mrs. Mills in an
 -4-
"amount equal to six and one-half percent (6.5%) of the net fair

market value of the assets of [the Trust]" for the remainder of

their lives. The Trust's terms further provided that upon the

death of the survivor of decedent and Mrs. Mills, the entire

balance of the Trust's assets would pass to McGill Baptist

Church.

On 19 February 2008, decedent died, and the incompetency

proceeding relating to him was subsequently dismissed. Upon

decedent's death, respondent became the sole manager of the LLC.

On 20 February 2008, respondent, as the personal representative

named in decedent's will, was issued letters testamentary.

On 1 May 2008, Mrs. Mills was adjudicated incompetent, and

Ray White was appointed as the guardian of her estate. On 9

September 2008, Mr. White filed suit ("White v. Hartsell") on

behalf of Mrs. Mills against the Trust, Mr. Hartsell in his

capacity as trustee of the Trust, the LLC, decedent's estate,

respondent in his individual capacity and as executor of

decedent's estate, and McGill Baptist Church. The complaint

included causes of action, among others, for breach of fiduciary

duty, undue influence, conversion of personal property, and

unjust enrichment. As one of the remedies sought, the complaint

asked the trial court to invalidate the Trust, which would have

the effect of divesting McGill Baptist Church of its remainder
 -5-
interest in the real estate held by the Trust and of returning

ownership of that real estate to Mrs. Mills and decedent's

estate.

Mrs. Mills died on 29 January 2010. On 17 June 2011,

Michael David Bland was appointed collector of Mrs. Mills'

estate.

On 8 February 2010, Mr. Mills, III filed a Verified

Complaint for Removal of Personal Representative in the estate

proceedings below. The complaint was voluntarily dismissed on

16 March 2012 for failure to serve respondent. On the same day,

Mr. Mills, III filed a second complaint to remove respondent as

executor of decedent's estate alleging (1) conflict of interest

due to respondent's status as manager of the LLC, (2) lack of

jurisdiction, and (3) breach of fiduciary duty. In response, on

9 May 2012, respondent filed a declaratory judgment action in

superior court seeking a declaration whether the grounds alleged

in the complaint existed and whether those grounds justified

respondent's removal as executor under N.C. Gen. Stat. § 28A-9-

1.

Additionally, respondent moved pursuant to N.C. Gen. Stat.

§ 28A-2-4(b) (2013) to transfer the removal proceedings to the

superior court. On the same day, 9 May 2012, the clerk of court

entered an order granting respondent's motion to transfer
 -6-
pursuant to N.C. Gen. Stat. § 28A-2-4(b). Apparently, the clerk

orally rescinded the transfer order, although the record on

appeal does not include any written order.

On 13 July 2012, the Chief Justice of the North Carolina

Supreme Court designated the estate proceedings of decedent, the

estate proceedings of Mrs. Mills, respondent's declaratory

judgment action, and a separate civil action against decedent's

estate as exceptional cases under Rule 2.1 of the General Rules

of Practice for the Superior and District Courts. The order

assigned Special Superior Court Judge Richard L. Doughton to the

cases designated as exceptional.

Assistant Clerk Jonathan Watson, on his own motion, held a

hearing on 21 August 2012 for the purpose of addressing whether

respondent should be removed as executor of decedent's estate.

In an order entered 23 August 2012, the clerk concluded that

respondent "has a private interest that hinders and is adverse

to his being able to fairly and properly carry out his duties as

executor of Mr. Mills' estate" and revoked the letters

testamentary issued to respondent.

Respondent appealed the clerk's order, and, on 26 September

2012, Judge Doughton entered an order reversing the Assistant

Clerk's decision based on his determination that alternate

executors named in decedent's will had not been served and that
 -7-
the record did not contain evidence to support the clerk's

findings. Judge Doughton remanded to the clerk "for such

proceedings as the Clerk deems just and proper." On 11 October

2012, Mr. Bland, acting as collector for Mrs. Mills' estate,

filed a verified complaint also seeking removal of respondent as

executor of decedent's estate.

On 26 October 2012, 7 November 2012, and 16 November 2012

the Assistant Clerk held an evidentiary hearings regarding the

removal of respondent as executor. At the close of the

hearings, the Assistant Clerk orally rendered his decision. He

noted that he would not address questions of fiduciary duty

because that issue would be addressed in White v. Hartsell. On

19 November 2012, the Assistant Clerk entered an order revoking

the letters testamentary issued to respondent based again upon

the conclusion that, under N.C. Gen. Stat. § 28A-9-1(a)(4),

respondent "has private interests, direct or indirect, that

might tend to hinder or to be adverse to a fair and proper

administration of the Estate of Harold L. Mills . . . ."

Respondent appealed to the Superior Court. After a hearing

on 14 and 15 January 2013, the trial court entered an order on 9

May 2013 affirming the Assistant Clerk's 19 November 2012 order.

The order stated that the trial court had reviewed the Assistant

Clerk's order and the record as required by N.C. Gen. Stat. § 1-
 -8-
301.3 (2013) and had determined that the findings of fact in the

19 November 2012 order were supported by the evidence in the

record and that those findings of fact supported the conclusions

of law. Respondent timely appealed to this Court.

Statutory Framework

N.C. Gen. Stat. § 28A-9-1 (2009), the version of the

statute applicable to this case, sets forth the procedure by

which the clerk of superior court may revoke letters

testamentary and remove an executor in an estate proceeding.

Pursuant to N.C. Gen. Stat. § 28A-9-1(b), "[w]hen it appears to

the clerk of superior court, on his own motion or upon verified

complaint made to him by any person interested in the estate"

that grounds exist for revocation of letters testamentary, the

clerk "shall issue citation requiring such personal

representative or collector, within 10 days after service

thereof, to show cause why his letters should not be revoked."

Upon return of a duly executed citation, the clerk "shall set

the date for a hearing." Id.

The clerk must revoke the letters issued to the executor if

at the hearing he or she determines that any of the following

grounds exist:

(1) The person to whom [letters
testamentary] were issued was
originally disqualified under the
provisions of G.S. 28A-4-2 or has
 -9-
become disqualified since the issuance
of letters.

(2) The issuance of letters was obtained by
false representation or mistake.

(3) The person to whom they were issued has
violated a fiduciary duty through
default or misconduct in the execution
of his office, other than acts
specified in G.S. 28A-9-2.

(4) The person to whom they were issued has
a private interest, whether direct or
indirect, that might tend to hinder or
be adverse to a fair and proper
administration. The relationship upon
which the appointment was predicated
shall not, in and of itself, constitute
such an interest.

N.C. Gen. Stat. § 28A-9-1(a).

Under N.C. Gen. Stat. § 28A-9-4 (2009), "[a]ny interested

person may appeal from the order of the clerk of superior court

granting or denying revocation." In matters arising out of the

administration of an estate, "the clerk shall determine all

issues of fact and law" and enter an order "containing findings

of fact and conclusions of law supporting the order[.]" N.C.

Gen. Stat. § 1-301.3 (2013). On appeal of the clerk's order to

superior court, the judge reviews the order solely for the

purpose of determining:

(1) Whether the findings of fact are
supported by the evidence.

(2) Whether the conclusions of law are
supported by the findings of facts.
 -10-

(3) Whether the order or judgment is
consistent with the conclusions of law
and applicable law.

N.C. Gen. Stat. § 1-301.3(d).

Discussion

Respondent first argues that the trial court should have

considered de novo whether there existed grounds for removing

respondent as executor of decedent's estate because the clerk

lacked subject matter jurisdiction over the removal proceedings.

Specifically, respondent argues that the clerk was divested of

jurisdiction over the removal proceedings (1) by respondent's

filing of a declaratory judgment action and request for transfer

pursuant to N.C. Gen. Stat. § 28A-2-4(b), and (2) by the Chief

Justice's designation of the case as "exceptional" and

appointment of Special Superior Court Judge Doughton. We

disagree.

The General Assembly amended the jurisdictional and

procedural provisions of the probate code in 2011 and added N.C.

Gen. Stat. § 28A-2-4 -- a new section and the section upon which

respondent relies -- which now governs the subject matter

jurisdiction of the clerk of superior court in estate

proceedings for decedents dying on or after 1 January 2012.

2011 N.C. Sess. Laws ch. 344 § 14. Because decedent died in

2008, N.C. Gen. Stat. § 28A-2-4 does not apply to this case.
 -11-
Instead, N.C. Gen. Stat. § 28A-2-1 (2009) governs the clerk

of superior court's jurisdiction over the estate proceedings in

this case. N.C. Gen. Stat. § 28A-2-1 provides:

The clerk of superior court of each
county, ex officio judge of probate, shall
have jurisdiction of the administration,
settlement, and distribution of estates of
decedents including, but not limited to, the
following:

(1) Probate of wills;

(2) Granting of letters testamentary
and of administration, or other
proper letters of authority for
the administration of estates.

"It is well-settled that the clerk of court is 'given exclusive

original jurisdiction in the administration of decedents'

estates except in cases where the clerk is disqualified to

act.'" Livesay v. Carolina First Bank, 200 N.C. App. 306, 309,

683 S.E.2d 453, 455 (2009) (quoting In re Estate of Longest, 74

N.C. App. 386, 390, 328 S.E.2d 804, 807 (1985)).

This Court has held that proceedings to remove an executor

involve an estate matter over which the clerk has exclusive

original jurisdiction. See In re Estate of Parrish, 143 N.C.

App. 244, 251, 547 S.E.2d 74, 78 (2001). See also In re Estate

of Lowther, 271 N.C. 345, 354, 156 S.E.2d 693, 700 (1967)

(holding that proceedings to revoke letters of administration

"must be commenced before the clerk who issued them in the first
 -12-
instance" and "the judge of the Superior Court has no

jurisdiction to appoint or remove an administrator or a

guardian"); Porth v. Porth, 3 N.C. App. 485, 497-98, 165 S.E.2d

508, 517 (1969) (holding superior court judge in declaratory

judgment action properly denied motion to remove administrator

of estate because such motion "must be presented by direct

proceedings before the Clerk of Superior Court, who, as probate

judge, has exclusive original jurisdiction to hear and decide"

the motion).

Consequently, this Court has applied the standard of review

applicable to appeals from estate matters to an appeal from a

clerk's order revoking letters testamentary. See In re Estate

of Monk, 146 N.C. App. 695, 697, 554 S.E.2d 370, 371 (2001). As

explained by this Court in In re Estate of Pate, 119 N.C. App.

400, 402-03, 459 S.E.2d 1, 2 (1995):

On appeal to the Superior Court of an order
of the Clerk in matters of probate, the
trial court judge sits as an appellate
court. When the order or judgment appealed
from does contain specific findings of fact
or conclusions to which an appropriate
exception has been taken, the role of the
trial judge on appeal is to apply the whole
record test. In doing so, the trial judge
reviews the Clerk's findings and may either
affirm, reverse, or modify them. If there
is evidence to support the findings of the
Clerk, the judge must affirm. Moreover,
even though the Clerk may have made an
erroneous finding which is not supported by
the evidence, the Clerk's order will not be
 -13-
disturbed if the legal conclusions upon
which it is based are supported by other
proper findings.

(Internal citations and quotation marks omitted.) In this case,

the trial court, therefore, properly declined to review the

clerk's order de novo.

Respondent contends, nonetheless, that "the complaints and

evidence presented were based upon purported breach of fiduciary

duty" and "[s]uch matters are clearly not a part of the

administration of an estate." However, as explained in In re

Estate of Parrish, although "an action for damages resulting

from a fiduciary's breach of duty in the administration of a

decedent's estate is not a claim under the original jurisdiction

of the clerk of court[,]" a proceeding to remove an estate

administrator based upon a breach of fiduciary duties is "not a

civil action, but a proceeding concerning an estate matter,

which [is] exclusively within the purview of the Clerk's

jurisdiction, and over which the Superior Court retain[s]

appellate, not original, jurisdiction." 143 N.C. App. at 251,

547 S.E.2d at 78.

Accordingly, we conclude that the clerk had subject matter

jurisdiction over the revocation hearing. Furthermore, the

clerk did not have authority to transfer the removal proceedings

to the superior court pursuant to N.C. Gen. Stat. § 28-2-4(b)
 -14-
because that statute was inapplicable to these estate

proceedings. Therefore, the transfer order was invalid and did

not divest subject matter jurisdiction from the clerk.1 Finally,

the trial court applied the proper standard of review.

Respondent next contends that the Supreme Court's

designation of the estate proceedings as "exceptional" and the

appointment of Special Superior Court Judge Doughton divested

the clerk of subject matter jurisdiction over the removal

proceedings. We disagree.

Rule 2.1(a) of the General Rules of Practice for the

Superior and District Courts allows the Chief Justice to

"designate any case or group of cases as (a) 'exceptional' or

(b) 'complex business'" and to appoint a specific superior court

judge to the case. The Rule explains:

Factors which may be considered in
determining whether to make such
designations include: the number and diverse
interest of the parties; the amount and
nature of anticipated pretrial discovery and
motions; whether the parties voluntarily
agree to waive venue for hearing pretrial
motions; the complexity of the evidentiary
matters and legal issues involved; whether
it will promote the efficient administration
of justice; and such other matters as the
Chief Justice shall deem appropriate.

1
We express no opinion on whether the clerk has authority to
grant a N.C. Gen. Stat. § 28-2-4(b) transfer over matters that
are otherwise within the clerk's exclusive original
jurisdiction.
 -15-
Gen. R. Pract. 2.1(d).

Where, as here, a group of cases requires substantial

judicial expertise and involves multiple claims regarding the

same subject matter and parties, the appointment of one judge to

preside over each case is intended to promote judicial

efficiency and prevent inconsistent rulings. Beroth Oil Co. v.

N.C. Dep't of Transp., ___ N.C. ___, ___, 757 S.E.2d 466, 476

(2014). The appointment of a specific superior court judge in

this case simply meant that any matters for the superior court

to decide would be decided by Judge Doughton. Nothing in the

General Rules of Practice suggests that the appointment of a

specific superior court judge divests a clerk of superior court

of jurisdiction over matters within its statutory exclusive

original jurisdiction. Respondent cites no authority suggesting

that Rule 2.1 designations are intended to -- or legally could -

- alter the allocation of subject matter jurisdiction decided

upon by the General Assembly.

Accordingly, we conclude that the trial court invoked the

proper standard of review in reviewing the clerk's order. The

question remains whether the trial court applied that standard

of review properly.

The Assistant Clerk revoked respondent's letters

testamentary based on his conclusion that respondent "has
 -16-
private interests, direct or indirect, that might tend to hinder

or to be adverse to a fair and proper administration of the

Estate of Harold L. Mills in violation of N.C.G.S. § 28A-9-

1(a)(4)." "[T]he determination of whether to revoke an

executor's Letters should be guided by consideration of whether

the Estate is harmed or threatened with harm." In re Estate of

Monk, 146 N.C. App. at 698, 554 S.E.2d at 371. There exist

grounds for removal under N.C. Gen. Stat. § 28A-9-1(a)(4) "when

it appears that the personal interests of the prospective

executor are so antagonistic to the interests of the estate and

those entitled to its distribution that the same person cannot

fairly represent both[.]" In re Moore, 292 N.C. 58, 65, 231

S.E.2d 849, 854 (1977). However, "it is not necessary to show

an actual conflict of interest to justify a refusal to issue

letters of administration; it is sufficient that the likelihood

of a conflict is shown." In re Moore, 25 N.C. App. 36, 40, 212

S.E.2d 184, 187 (1975)2.

In this case, the Assistant Clerk made the following

pertinent findings of fact in support of his conclusion that

respondent has a personal interest. Prior to decedent's death,

respondent and decedent were co-managers of H & A Mills
2
Although the Court of Appeals case in In re Moore involved
the same parties as the Supreme Court case, the two opinions
related to separate appeals, and the Supreme Court decision did
not disturb the Court of Appeals' holding in In re Moore.
 -17-
Properties, LLC, and respondent continued to be manager of the

LLC until August 2012. As a manager, respondent "exercised a

great deal of control" over decedent's property and transferred

a large amount of decedent's and Mrs. Mills' assets to a

Charitable Remainder Unitrust created by his brother, Mr.

Hartsell, with Mr. Hartsell serving as trustee. Respondent was

paid in excess of $150,000.00 by the LLC for his services as

manager.

The Assistant Clerk found that as executor of decedent's

estate, respondent was tasked with determining how the estate

should proceed in litigation. Specifically, respondent would

have to decide whether the estate would join the Estate of Mrs.

Mills in White v. Hartsell. That lawsuit "raised issues of both

extrinsic and intrinsic fraud" by respondent relating to the

creation and implementation of the Trust. In a separate matter,

respondent was responsible for deciding whether the estate

should sue Wachovia Bank for mismanagement of the estate's

funds. At the time respondent decided that the estate would not

pursue a lawsuit, respondent's wife was employed by Wachovia.

Additionally, the Assistant Clerk found that respondent

"has control of the attorney-client privilege which exists

between the Estate of Harold L. Mills and Attorneys William L.

Mills, III, Tony Orsbon, Jerry Parnell, Fletcher L. Hartsell,
 -18-
Jr., Michael Burgner and others who may have relevant

information and testimony which is adverse to the interests of

[respondent] but necessary for a proper and just administration

of the Estate of Harold L. Mills."

As this Court explained in In re Moore, "[o]ne cannot

represent his own interest and at the same time represent those

of another which are in conflict with his own with fairness and

impartiality to either." Id. In In re Moore, this Court held

that the executor could not act impartially when one of his

duties as executor would require him to decide whether to sue

his former employer, for whom he had performed accounting

services for approximately 19 years. Id. The Court explained

that "[e]specially when a decision to bring suit might endanger

respondent's chances of future employment by the firm, the

possibility that his decision to bring suit will be influenced

by his own personal interests is great. . . . Even if

respondent actually brings suit on behalf of the estate, his

position would be such as to make him amenable to suggestions of

failure to prosecute the action fully because of his

relationship with [his former employer]." Id.

Here, as in In re Moore, the findings establish a

likelihood that respondent cannot act impartially in making

decisions involving litigation on behalf of decedent's estate.
 -19-
With respect to the alleged mishandling of the estate's funds by

Wachovia, respondent faced a choice of (1) filing suit against

Wachovia and potentially adversely affecting his wife's

employment there or (2) not vigorously pursuing the recovery of

funds owed to the estate.

Even more significant, however, is the potential conflict

arising with respect to the estate's position in White v.

Hartsell. If the allegations of fraud raised in that lawsuit

are proven true, the Trust would be voided and the property

respondent transferred from the LLC to the Trust would be

distributed to decedent's and Mrs. Mills' estates. The estate,

therefore, would benefit by recovering a significant amount of

assets. On the other hand, respondent has a personal interest

in establishing that he committed no wrongdoing and in

vindicating his and his brother's actions.

Even if respondent is not a party, the pending litigation

would confront him with a decision related to the attorney-

client privilege that would place his personal interests at odds

with those of the estate. On the one hand, as the manager of

the LLC and the brother of the Trust's creator and trustee,

respondent would have an interest in enforcing the privilege in

order to protect his own personal interests by concealing

harmful information. In doing so, however, respondent could be
 -20-
preventing decedent's estate from recovering assets of which it

may have been fraudulently deprived.

Although it may be that respondent did not in fact commit

any wrongdoing, under In re Moore, the findings need not show an

actual conflict of interest, but rather "it is sufficient that

the likelihood of a conflict is shown." Id. The Assistant

Clerk's findings, in this case, are sufficient to show a

likelihood of a conflict of interest and, therefore, support the

conclusion that respondent has a private interest "that might

tend to hinder or be adverse to a fair and proper

administration." N.C. Gen. Stat. § 28A-9-1(a)(4).

Respondent's arguments on appeal regarding the Assistant

Clerk's findings of fact amount to factual arguments that he did

not in fact engage in any misconduct or breach of a fiduciary

duty. The Assistant Clerk, however, made no determination

regarding whether respondent engaged in misconduct. Instead,

the Assistant Clerk's findings simply recognize that evidence

exists to support the allegations of misconduct and that this

created a potential conflict of interest with respect to

respondent's personal interests and the best interests of the

estate. Because the Assistant Clerk's findings are supported by

evidence in the record, and those findings support the

conclusion that respondent has a private interest that might
 -21-
tend to hinder or be adverse to a fair and proper administration

of decedent's estate, we affirm.

Affirmed.

Judges STEPHENS and ERVIN concur.

Report per Rule 30(e).