In Re Estate Of Rider

756 S.E.2d 136 (2014)

Facts

Charles Rider (H) executed an Investment Agency Agreement / Discretionary Account with First Union National Bank of North Carolina (D). The Agreement authorized First Union 'to open and maintain an Agency Account' for H and 'to hold therein, as H's Agent, all cash, stocks, bonds, securities, and other property . . . subject to' H's current and future written instructions. D was 'to provide investment review and management of the Account, taking such action as D, in its discretion, deems best . . . as though [the bank] were the owner of such property.' D had the authority to buy, sell, and exercise certain rights regarding the securities in accordance with the overall investment objectives of H. the Account Agreement called for its termination upon D acquiring actual knowledge of H's death, but that H's death 'shall not affect the validity of any prior actions.' On June 8, 2005, H called Ruth DiLella in the Capital Management Group of D and informed her that he had met with his estate attorney, who had advised him to transfer some assets to his spouse, Carolyn S. Rider (W). H was suffering from terminal cancer and wanted W to have sufficient funds to maintain her standard of living during the inevitable time that probate would be going on. H instructed D to move $2 million in securities from his account and place them in a new account in W's name. D e-mailed a list of assets totaling $2 million to D's trust department, along with H's instruction, so it could prepare a letter and asset listing for H's approval. H signed the letter and returned it D's trust administrator. The letter provided: 'Please accept this letter as my authority and direction to transfer the assets listed on the following page to a new agency account to be opened for my wife, Carolyn Sue Rider.' The letter listed the $2 million in assets and a small sum of cash. D made a series of four transfers from June to October 2005. On June 21, 2005, D made the first transfer of $733,228.00. On July 8, 2005, D transferred $39,672.00 in securities (stocks). That afternoon, H passed away in Charlotte, North Carolina, and H's daughter, Deborah Rider McClure, notified D the same day. The next business day, Monday, July 11, 2005, D transferred $935,032.64 in securities (mutual funds) to W's account, and on October 20, 2005, Wachovia made a fourth and final transfer of $304,182.46 in securities (mutual funds). The total amount transferred to W's account was $2,012,115.00, the excess being due to the appreciation in the value of the securities. In 2006, Grady, as personal representative of H's estate ('PR'), instituted a declaratory judgment action asking the court to determine the status of the fund transfers made after H's death. The issue was whether the UCC or the law of agency under the South Carolina common law controlled the outcome. W argued the UCC applies and that H's June 17, 2005 directive was an 'entitlement order' under the applicable definition in the UCC found in UCC 8-102, the transfer was effectuated on June 17, 2005, and it was unaffected by H's death before completion of the transfers. H's two daughters from his prior marriage, Deborah Rider McClure, and Ginger C. McClure, and his two grandsons, Christian McClure, and Austin McClure argued that the law of agency governed the Account Agreement. They argued that D's authority to make the transfers ended when it acquired actual knowledge of H's death, and the disputed assets belonged to H's probate estate. The probate court found the UCC controlled this securities transaction. The court determined an entitlement order's 'effective date' is a distinguishable concept from when an entitlement order is 'effectuated.' It held H's entitlement order was 'effective' upon its issuance to D on June 17, 2005, but reasoned it still had to be carried out by D, the securities intermediary, to be 'effectuated,' and the UCC did not supplant the laws of property or agency, nor did it vitiate the terms of the Account Agreement. The court determined that D took the necessary actions to effectuate the second and third transfers before it knew of H's death. The court observed, 'In the commercial context of the transactions, it would be unreasonable to conclude otherwise.' The probate court concluded the first three transfers were carried out and effectuated before H's death and are not part of his probate estate. It found that the amount from the October 20, 2005 transfer belonged to H's probate estate because it was not effectuated until after H's death when Wachovia's authority to act had already terminated. 

W appealed to the circuit court, which affirmed. W appealed to the Court of Appeals, which found both the third and fourth transfers properly belonged to the estate because they occurred after D had actual knowledge of H's death. W again appealed.