An update to Our Previous Article

In our November, 1995 newsletter, we prepared an article entitled "Sales By Personal Representatives Pursuant To Powers Contained In A Will And Other Certain Problems." Since that article, The Matter of Hunter, ____ N.C. App. ____, ____ S.E.2d ____ (1996) is a case worth noting.

In Hunter, the will of the testator named her son and another person as co-executors and created a trust with the son receiving income for life and the remainder going to his surviving children. The son became the sole executor when the co-executor resigned. The son borrowed money from a bank. He gave as security estate property, signing the loan documents personally and individually and also as executor. After the son defaulted on the loan he was removed as executor. A new personal representative was appointed, sold the property at a special proceeding and wanted approval for a settlement among the parties for proceeds distribution. But the guardian ad litem for the son's unborn children denied that the loan was a valid estate debt. The bank cited G.S. 28A-13-3(a)(12), G.S. 28A-15-1(c) and G.S. 32-27 (the will incorporated the provisions of G.S. 32-27), which statutes are discussed in our November, 1995 newsletter, as justification for the borrowing of money and pledging estate assets as collateral. The Court of Appeals ruled that the bank did not have a valid lien on the estate real property. The court stated that the loan was not for the purpose of paying debts, taxes and other charges against the estate or for the management of real property under G.S. 32-27.