Fortner v. Hornbuckle

761 S.E.2d 683

Earl Wayne FORTNER and Henry Fortner, Co–Administrators of the Estate of Johnnie H. Fortner, Sr., Plaintiffs,

v.Jonathan A. HORNBUCKLE and Lynda Hornbuckle Fortner, Defendants and Third Party Plaintiffs

v.Earl Wayne Fortner and Henry Fortner, Third Party Defendants.

No. COA13–1209.

Court of Appeals of North Carolina.

Aug. 5, 2014.

Appeal by defendants from judgment entered 8 April 2013 by Judge James U. Downs in Swain County Superior Court. Heard in the Court of Appeals 20 February 2014.

Moody & Brigham, PLLC, Bryson City, by Fred H. Moody, Jr., for plaintiffs-appellees.

McGuire, Wood & Bissette, P.A., Asheville, by Mary E. Euler, Joseph P. McGuire, and Starling B. Underwood III, for defendants-appellants.

DAVIS, Judge.

Jonathan A. Hornbuckle (“Jonathan”) and Lynda Hornbuckle Fortner (“Lynda”) (collectively “Defendants”) appeal from the trial court's entry of judgment upon a jury verdict awarding Earl Wayne Fortner (“Earl”) and Henry Fortner (“Henry”) (collectively “Plaintiffs”), co-administrators of the Estate of Johnnie H. Fortner, Sr. (“the Estate”), an apportioned share of the Estate's estate tax liability. On appeal, Defendants contend that the trial court erred by (1) denying their motion for a directed verdict; and (2) failing to appropriately instruct the jury. After careful review, we vacate the judgment and remand for a new trial.

Factual Background

Lynda and Johnnie H. Fortner, Sr. (“Johnnie”) lived together and held themselves out to the public as husband and wife although they were not actually married—from 1976 until 1988 and then from 1998 until Johnnie's death on 23 January 2007. Johnnie died intestate and two of his sons, Earl and Henry, were appointed as co-administrators of the Estate. At the time of his death, Johnnie owned a number of parcels of real property, five of which are pertinent to the present case. Also, in 2005, Johnnie and Lynda opened a joint checking account (“the Joint Checking Account”) with a right of survivorship at the State Employees' Credit Union in Bryson City, North Carolina.

In August and October of 2006, Johnnie executed three general warranty deeds to Jonathan, Lynda's son, encompassing (1) a 154–acre tract known as the “Round Hill Property”; (2) an 11.14–acre tract known as “Conley's Creek Property”; and (3) a 2.95–acre tract known as the “Macktown Property.” Johnnie also executed two general warranty deeds to Lynda for a 14.74–acre tract known as the “Galbraith Creek Property” and a 9.3–acre tract known as the “Shoal Creek Property.”

In October of 2006, Johnnie placed all five deeds in a manila envelope, which he handed to Lynda while the two of them were alone in his office. He then instructed her to “take [them] home, put [them] up and keep [her] mouth shut.” Lynda took the deeds home and placed them in a dresser drawer in her bedroom. On 23 January 2007, Johnnie died intestate. The five deeds were recorded in the Jackson and Swain County Register of Deeds offices on 5 February 2007.

Plaintiffs subsequently filed an action in Swain County Superior Court on 7 June 2011 alleging, in pertinent part, as follows:

4. That during his lifetime, Johnnie H. Fortner, Sr. executed five (5) certain deeds purporting to convey real property located in Swain and Jackson Counties, North Carolina, to the Defendants without consideration.

....

7. That the fair market values of said tracts or parcels of land were require [d] to be included in the gross estate of Johnnie H. Fortner, Sr. for purposes of estate ... taxes.

8. That the Plaintiffs have paid or will pay from the assets of the Estate of Johnnie H. Fortner, Sr., estate ... taxes upon the gross taxable Estate of Johnnie H. Fortner, Sr., including taxes attributable to the parcels of real property herein described.

9. That the Plaintiffs, as personal representatives of the Estate of Johnnie H. Fortner, Sr., are entitled to recover from the Defendants an apportioned share of the estate ... taxes paid by the Estate of Johnnie H. Fortner, Sr., which share shall be an amount which bears the same ratio to the total tax paid as the value of such tracts or parcels of land bear to the taxable estate.

10. That the Plaintiffs are also entitled to recover from the Defendants an apportioned share of any and all interest and penalty on the estate ... taxes paid by the Estate of Johnnie H. Fortner, Sr.

11. That at the time of the death of Johnnie H. Fortner, Sr., he and the Defendant, Lynda Hornbuckle Fortner, as joint tenants with right of survivorship, owned account # 3003309 at the State Employees Credit Union, Bryson City, N.C.

12. That at the time of the death of Johnnie H. Fortner, Sr., said account had a balance of $249,121.63.

13. That, to the information and belief of the Plaintiffs, all of the funds included in said account had been contributed to said account from the funds of Johnnie H. Fortner, Sr.

14. That, to the information and belief of the Plaintiffs, the assets of the Estate of Johnnie H. Fortner, Sr. are not sufficient to pay the debts of said estate.

15. That the Plaintiffs are entitled to recover of the Defendant, Lynda Hornbuckle Fortner, the sum of $249,121.63 to be used solely for the payment of debts of the Estate of Johnnie H. Fortner, Sr., which are not payable from the other assets of the Estate.

16. That, alternatively, if the Plaintiffs are not able to recover the sum of $249,121.63 from the Defendant Lynda Hornbuckle Fortner, said sum was required to be included in the gross estate of Johnnie H. Fortner, Sr. for purposes of estate ... taxes and the Plaintiffs have paid or will pay from the assets of the Estate of Johnnie H. Fortner, Sr. estate ... taxes upon the gross taxable estate of Johnnie H. Fortner, Sr. including taxes attributable to the bank account hereinabove referred to and are entitled to recover from the Defendant Lynda Hornbuckle Fortner an apportioned share of the estate ... taxes paid by the Estate of Johnnie H. Fortner, Sr., which share shall be an amount which bears the same ratio to the total tax paid as the value of said account bears to the taxable estate and are entitled to recover from the Defendant, Lynda Hornbuckle Fortner an apportioned share of any and all interest and penalty on the estate ... taxes paid by the Estate of Johnnie H. Fortner, Sr.

Defendants filed an answer, counterclaim, and third-party complaint ¹ on 17 August 2011. With regard to the five deeded properties, Defendants asserted that the transfers to Lynda and Jonathan constituted completed gifts and that as a result (1) the five properties were not properly includable in the Estate for purposes of calculating its tax liability; and (2) Plaintiffs were therefore not entitled to recover an apportioned share of the Estate's tax liability from Defendants attributable to those properties. Defendants also contended that the Estate should not be permitted to use any funds in the Joint Checking Account to pay the debts of the Estate.

A jury trial was held in Swain County Superior Court on 6 March 2013. The jury returned a verdict in favor of Plaintiffs, responding to the issues on the verdict sheet as follows:

WE, THE JURY, AS OUR UNANIMOUS VERDICT, ANSWER AS FOLLOWS:

1. Are the Plaintiffs as representatives of the estate of Johnnie H. Fortner, Sr. entitled to an apportioned share of the federal and state estate taxes and interest on the asset referred to as:

Round Hill Property Answer: yes

1a. If so, what amount? $541,275.69

2. Conley's Creek Property Answer: yes

2a. If so, what amount? $58,210.18

3. Macktown Property Answer: yes

3a. If so, what amount? $23,968.90

4. Galbraith Creek Property Answer: yes

4a. If so, what amount? $128,273.12

5. Paul Cooper/Shoal Creek Property Answer: yes

5a. If so, what amount? $129,853.48

6. What amount, if any, are the Plaintiffs as representatives of the estate of Johnnie H. Fortner, Sr. entitled to recover from the joint account with right of Survivorship at the State Employees Credit Union having an approximate balance of $248,322.00 at the time of Mr. Fortner, Sr.'s death?

ANSWER: $248,322.00 = 100%

7. If none, what is the amount of the apportioned share of the federal and state estate taxes and interest that is attributable to the State Employees Credit Union account that the Plaintiffs, as representatives of the Estate of Johnnie H. Fortner, Sr., are entitled to recover from Lynda Hornbuckle Fortner?

ANSWER: _______________.

Defendants filed a timely notice of appeal to this Court.

Analysis

I. Denial of Motion for Directed Verdict

Defendants initially argue that the trial court erred in denying their motion for a directed verdict based on their contention that the transfer of the five deeded properties constituted a completed gift such that the Estate was not entitled to an apportioned share of its tax liability attributable to these properties. We disagree.

In reviewing the denial of a motion for a directed verdict, we examine

whether the evidence, taken in the light most favorable to the non-moving party, is sufficient as a matter of law to be submitted to the jury. In determining the sufficiency of the evidence to withstand a motion for a directed verdict, all of the evidence which supports the non-movant's claim must be taken as true and considered in the light most favorable to the nonmovant. The non-movant is given the benefit of every reasonable inference which may legitimately be drawn from the evidence, resolving contradictions, conflicts, and inconsistencies in the non-movant's favor. A motion for directed verdict should be denied if more than a scintilla of evidence supports each element of the non-moving party's claim.

Trantham v. Michael L. Martin, Inc., ––– N.C.App. ––––, ––––, 745 S.E.2d 327, 331 (2013) (internal citations, quotation marks, and brackets omitted).

The elements required to show the valid delivery of a deed in the form of a completed gift are “(1) an intention by the grantor to give the instrument legal effect...