Can the Commissioner of Banks construe the phrase 'trust assets' in N.C.G.S. § 53-122(1) (which sets bank-examination assessment fees) to include all fiduciary assets except real estate held by a bank's trust department, including guardianships, managing agencies, and safekeeping accounts? And does the agency have to refund trust-assessment fees previously collected on that broader basis, as a prior Commissioner's January 1995 letters suggested?

Plain-English summary

The Commissioner of Banks asked the AG two questions about how to apply N.C.G.S. § 53-122, the statute that sets the fees banks pay for examination by the Commissioner. The first was about scope: can "trust assets" in § 53-122(1) be read to include all investments (except real property) held and managed by the trust department or trust company, not just assets held in narrow trust capacities? The second was about consequences: had former Commissioner William T. Graham been correct in his January 10 and 18, 1995 letters that the agency owed banks a refund (or credit against the 1995 assessment) for what he had called an overpayment under the broader interpretation?

Chief Deputy AG Andrew A. Vanore, Jr., and Assistant AG L. McNeil Chestnut said the broader reading was permissible and that, under it, the prior assessments had been correctly computed. So no refund was required.

The legal map. § 53-122(1) imposes a fee of three dollars and fifty cents for every $100,000 (or fraction) of "trust assets" held by a bank, "which said trust assets shall not include real estate carried as such." The fees go to the Office of the Commissioner of Banks to pay for the salaries and travel expenses of the Commissioner and the state bank examiners. § 53-117(a) requires the Commissioner to examine the "affairs" of every bank or trust company under Chapter 53 at least once every twelve months (extendable to eighteen at the Commissioner's discretion). The examination is supposed to cover everything the trust department does, not just the narrow set of accounts that fit the strict trust-law definition.

The narrow-vs.-broad reading. In the strict trust-law sense, a "trust" is the equity-courts creation in which a grantor transfers property to a trustee for the benefit of designated beneficiaries. Professor Scott's treatise (Austin Wakeman Scott, The Law of Trusts § 2 (4th ed. 1987)) acknowledges, however, that "the term trust is used by courts and lawyers in a variety of senses," including bailment, executorship, guardianship, and agency. A fiduciary relationship in the broader sense exists whenever one party owes a duty to act for the benefit of another in the matters within the scope of the relation.

The AG pulled together the broader reading from several sources within and beyond NC law:

• NC's Uniform Fiduciaries Act in G.S. § 32-2(a) defines "fiduciary" to include trustees of any trust (express, implied, resulting, or constructive), executors, administrators, guardians, conservators, curators, receivers, agents, and "any other person acting in a fiduciary capacity for any person, trust or estate."
• Chapter 36A on Trusts and Trustees, in G.S. § 36(a)(1), defines "fiduciary" to include "a guardian, personal representative, collector, trustee, or any other person charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship."
• Within Chapter 53 itself, § 53-2 authorizes incorporators of banks to engage in a "trust and fiduciary business"; § 53-17 transfers, upon merger, all "fiduciary rights, powers, duties and liabilities" including executor, administrator, guardian, trustee, and "any other fiduciary capacity"; § 53-43(6) refers to "uninvested fiduciary funds" and "fiduciary accounts" in the context of bank deposits of trust-department cash; Article 14 of Chapter 53 ("Banks Acting in a Fiduciary Capacity") explicitly recognizes guardian, assignee, receiver, executor, administrator (§ 53-159), and custodian/agent (§ 53-159.1) relationships as part of the fiduciary umbrella.
• Industry references reinforce the broader reading. The American Bankers Association Glossary of Fiduciary Terms (p. 45) defines "trust accounts" as "[a] general term to cover all types of accounts in a trust department, including estates, guardianships, and agencies as well as trusts proper." Barron's Dictionary of Banking Terms (2d ed. 1993) defines "trust account" as a "shorthand name for all types of accounts handled by a bank's trust department or by a trust company." The Comptroller's Handbook for Fiduciary Activities (Sept. 1990 ed., p. 52) defines personal trust accounts to include estates, guardianships, testamentary trusts, inter vivos trusts, and agencies. The FDIC Examination Manual (March 1983 ed., § X) acknowledges that the lines between pure trusts and other fiduciary functions are often blurred in practice, especially with managing-agency accounts in which a bank assumes full control of cash and investments.

The AG also relied on the statutory-construction canon that courts give weight to a long-standing agency interpretation that does not conflict with statutory intent or judicial construction. NC's Office of the Commissioner of Banks had read "trust assets" to include all fiduciary assets (except real estate) for more than 60 years, without challenge by any bank or trust company. The AG concluded that the long-standing reading lined up with the statute's purpose (allowing the Commissioner to assess banks for the cost of supervising and examining their fiduciary operations) and with NC's broader statutory use of "fiduciary."

Northcutt v. Clayton, 269 N.C. 428 (1967), supplied the underlying principle: fees under § 53-122 are "intended to pay the necessary expenses of licensing, regulating, and supervising the business." If the Commissioner has to examine all of the trust department's fiduciary affairs, the assessment base should match the examination base.

Bottom line: the Commissioner could continue to read "trust assets" to include all fiduciary assets (except real estate) held by a bank's trust department. Past assessments were correctly computed and no refund obligation arose from Commissioner Graham's earlier letters.

Currency note

This opinion was issued in 1995. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The fee schedule in N.C.G.S. § 53-122 has been amended over the years, and NC bank examination has been reorganized along with the rest of the banking code (Chapter 53C now governs many bank-supervision functions). The general principle that long-standing agency interpretation gets weight in statutory construction remains good NC law. The specific application to "trust assets" should be checked against current Chapter 53 / 53C fee provisions and any later interpretive guidance from the Commissioner of Banks before being relied on.

Common questions

Q: Why does a definitional dispute about "trust assets" matter financially?
A: The assessment under § 53-122(1) was three dollars and fifty cents per $100,000 of trust assets. For large bank trust departments managing billions in assets, the difference between the narrow and broader readings of "trust assets" could be meaningful in absolute dollars. The dispute also affected refund obligations: if the broader reading was wrong, the agency had been over-collecting, and Commissioner Graham's January 1995 letters indicated refunds (or credits) might be due.

Q: What is the difference between a "trust" account and a "fiduciary" account?
A: A trust account in the narrow sense is a relationship created when a grantor transfers property to a trustee to hold for designated beneficiaries (a private express trust). A fiduciary account is broader: any relationship where one party owes a duty to act for another's benefit (trustees, executors, administrators, guardians, custodians, managing agents). Most bank "trust departments" handle both narrow trusts and a wide range of other fiduciary accounts. The opinion concludes that the assessment statute reaches the whole fiduciary universe (except real estate).

Q: Why did the AG give weight to a "60-year agency interpretation"?
A: NC follows the general rule that a long-standing administrative interpretation of an ambiguous statute carries weight in construing it, provided the interpretation does not conflict with the legislature's intent or with judicial construction. Sixty years of consistent application, without challenge by the regulated industry, is strong evidence that the agency's reading reflects how the statute has been understood in practice. It is not dispositive (courts can still depart from agency readings) but it is a useful tiebreaker when the statutory text is open to more than one reading.

Q: Why doesn't real estate count as a trust asset?
A: The statute itself excludes it: "trust assets shall not include real estate carried as such." The opinion does not explain the policy choice. One historical guess is that real estate held in trust was thought to be passively managed and not to require the same examination effort as investment portfolios, but the statute speaks for itself.

Q: Could the General Assembly close the door on the broad reading?
A: Yes. If the legislature wanted "trust assets" to mean only express trusts in the narrow sense, it could amend § 53-122(1) to say so. As of 1995, the broader reading had support both from the statutory text (read in light of other Chapter 53 references to "fiduciary" relationships) and from 60 years of uncontested agency practice. The opinion does not foreclose a future legislative narrowing.

Q: What about managing-agency accounts where the bank controls the assets but isn't formally a trustee?
A: The opinion specifically calls these out. The FDIC Examination Manual notes that managing-agency accounts "wherein there is no trust relationship and yet the bank assumes full control of the cash and assets including investments" exceed the responsibility a passive trustee would have. The AG reads § 53-122 to reach these accounts as fiduciary holdings even though they would not be "trust assets" under the strict equity-courts definition.

Background and statutory framework

Chapter 53 of the NC General Statutes is the state banking code. § 53-122 funds the Office of the Commissioner of Banks through assessments on the institutions the office regulates. Different categories of regulated entities pay different fee structures, and within each category, the assessment base depends on the institution's size and the volume of business that creates the supervisory burden.

For banks with trust departments, the supervisory burden includes examining all the fiduciary work the bank does. § 53-117(a) requires the Commissioner to examine the bank's "affairs" at least once every twelve months. The phrase "affairs" is broad and is not limited to any particular type of transaction or account relationship. The 1995 opinion ties the assessment base under § 53-122(1) to that broad examination scope.

The opinion is a useful primer on the interplay between agency practice, statutory text, and statutory construction. When a statute is genuinely ambiguous and the agency has been reading it the same way for decades, that reading carries weight even when a fresh-eyes reading of the text might support a narrower interpretation. The AG signals that the Commissioner's prior interpretation was defensible and need not be reversed on the basis of a different textual gloss applied by Commissioner Graham's January 1995 letters.

Citations

• N.C.G.S. § 32-2(a) (Uniform Fiduciaries Act; definition of "fiduciary" includes trustees of any trust, executors, administrators, guardians, conservators, curators, receivers, agents, and any other person acting in a fiduciary capacity)
• N.C.G.S. § 36(a)(1) (Chapter 36A; fiduciary defined to include guardian, personal representative, collector, trustee, or any other person charged with duty of acting for benefit of another)
• N.C.G.S. § 53-2 (incorporators of banks may engage in "trust and fiduciary business")
• N.C.G.S. § 53-17 (merger of bank/trust company transfers all fiduciary rights, powers, duties, and liabilities)
• N.C.G.S. § 53-43(6) (uninvested fiduciary funds; fiduciary accounts; bank deposits of trust-department cash)
• N.C.G.S. § 53-101 (Commissioner of Banks may employ clerical, secretarial, and necessary labor)
• N.C.G.S. § 53-117(a) (Commissioner appoints state bank examiners; must examine affairs of every bank under Chapter 53 at least every 12 months, extendable to 18 at Commissioner's discretion)
• N.C.G.S. § 53-122 (Fees for Examination and Other Services)
• N.C.G.S. § 53-122(1) (Fee of $3.50 per $100,000 of trust assets, excluding real estate)
• N.C.G.S. § 53-159 (banks acting as executor or administrator)
• N.C.G.S. § 53-159.1 (banks acting as custodian or agent)
• Northcutt v. Clayton, 269 N.C. 428, 152 S.E.2d 471 (1967) (§ 53-122 fees pay necessary expenses of licensing, regulating, supervising the business)

Source

• Landing page: https://ncdoj.gov/opinions/trust-assets/

Original opinion text

The available extract of this opinion begins with the questions presented; the salutation and opening paragraph were not captured by the available retrieval. The body below faithfully reproduces the substantive analysis as available.

(1) Whether or not the reference in N.C.G.S. § 53-122(1) to "trust assets" can be construed to include all investments, except real property, held and managed by the trust department or a trust company, for the purposes of calculating trust assessments?

(2) Whether or not your agency is required to refund trust assessment fees as outlined by former Commissioner Graham in his letters of January 10 and 18, 1995 (i.e., a credit against a bank's 1995 assessment for the amount he deemed to be an overpayment)?

For the reasons set forth below, it is our opinion that you may construe N.C.G.S. § 53-122(1) to include all assets, except real estate, held by a bank in a fiduciary relationship. This is the interpretation that the Office of the Commissioner of Banks has consistently taken for more than sixty years, without challenge by any of the banks or trust companies. If you choose to construe N.C.G.S. § 53-122 to include all assets, except real estate, held by a bank or a trust company in a fiduciary account, then it would appear that assessments were correctly computed. Therefore, you would not be required to refund assessments (as outlined by Commissioner Graham in his letters of January 10 and 18, 1995).

DISCUSSION OF THE LAW

We have not found any North Carolina decision specifically construing the term "trust assets" for the purposes of N.C.G.S. § 53-122. We are, therefore, guided in our discussion by the principles of statutory construction in general, and the law of trust and fiduciary relationships in particular.

A. Statutory Construction Generally.

N.C.G.S. § 53-101 provides that the Commissioner of Banks is empowered to employ clerical and secretarial help, and other necessary labor to conduct the affairs of his office. Additionally, N.C.G.S. § 53-117(a) directs that the Commissioner of Banks, in order to carry out the provisions of Chapter 53 — the examination and supervision of banks and other entities under the Commissioner's jurisdiction, is to appoint state bank examiners, assistant state bank examiners, clerks and stenographers as may be necessary to examine the affairs of every bank doing business under Chapter 53 at least once every year, unless that period is extended up to eighteen (18) months at the Commissioner's discretion.

For the Commissioner to accomplish these statutory responsibilities, N.C.G.S. § 53-122, entitled "Fees for Examination and Other Services" provides, in relevant part, as follows:

For the purpose of paying the salaries and necessary travel expenses of the Commissioner of Banks, state bank examiners, assistant state bank examiners, clerks, stenographers, and other employees of the Commissioner of Banks, the following fee shall be paid into the Office of the Commissioner of Banks:

(1) Each bank and each branch and each limited service facility of any bank which under the laws of the State of North Carolina is subject to supervision and examination by the Commissioner of Banks and is authorized to do business or is in the process of voluntary liquidation, shall, within 10 days after the assessment has been made, pay into the Office of the Commissioner of Banks according to its total resources as shown by its Report of Condition made to the Commissioner of Banks at the close of business December 31, 1978, and on the 31st-day of December, or the date most nearly approximating same of each year thereafter on which a Report of Condition is made to the Commissioner of Banks not in excess of the following fees for its annual examination . . three dollars and fifty cents ($3.50) for each one hundred thousand dollars ($100,000) or a fraction thereof of trust assets, which said trust assets shall not include real estate carried as such. . . . (emphasis added)

In ascertaining the intent of the preceeding, or any statute, courts consider the language of the statute itself, the spirit of the Act, and what is sought to be accomplished. See, 27 NC Index 4th, Statutes (1994). In Northcutt v. Clayton, 269 N.C. 428, 152 S.E.2d 471 (1967), the North Carolina Supreme Court construed the general purpose of N.C.G.S. § 53-122 in determining the character of fees paid by a consumer finance company pursuant to that section of law. The Court determined that fees assessed pursuant to N.C.G.S. § 53-122 ". . . are intended to pay the necessary expenses of licensing, regulating, and supervising the business." It is, therefore, our view that the clearly delineated purpose of N.C.G.S. § 53-122, and its subsequent subsections, is to provide the Commissioner's office with authority to assess banks, and certain other industries, for the cost of supervision and examination. In that you are required to examine all of the fiduciary activities of a trust department, or trust company, and not just the affairs of an express trust, it is our opinion that the phrase "trust assets," within the provision for assessments, may reasonably be construed to cover all of those assets, except real estate, held by the trust department in a fiduciary relationship.

Our conclusion on this issue is further supported by numerous other references in Chapter 53 to banks engaging in "trust and fiduciary" relationships. For instance, N.C.G.S. § 53-2 authorizes the incorporators of banks to engage in a ". . . trust and fiduciary business." N.C.G.S. § 53-17 provides that upon the merger or consolidation of a bank or trust company organized under North Carolina law, ". . . all the then existing fiduciary rights, powers, duties and liabilities (of the merging or transferring bank) including the rights, powers and duties and liabilities as executor, administrator, guardian, trustee and/or any other fiduciary capacity… shall be performed by the transferee bank. . . ." Also, within the provisions for a bank to deposit trust department cash in the commercial banking department, the statutes speak to "uninvested fiduciary funds" and "fiduciary accounts," not just trust accounts. See, N.C.G.S. § 53-43(6).

Finally, Article 14 of Chapter 53, "Banks Acting in a Fiduciary Capacity" clearly recognizes that in addition to trusteeships, fiduciary accounts shall include guardian, assignee, receiver, executor or administrator, N.C.G.S. § 53-159, as well as custodian or agent, N.C.G.S. § 53-159.1.

Again, N.C.G.S. § 53-117 requires the Commissioner to examine the "affairs" of every bank or trust company doing business under Chapter 53. The scope of this examination is not limited to any one particular type of transaction or account relationship. We, therefore, believe that the banking laws require the Commissioner to examine all of the affairs of the trust department and that N.C.G.S. § 53-122 provides the Commissioner with the authority to assess the bank, including assets held in a fiduciary capacity, for the cost of the supervision and examination.

B. Trust and Fiduciary Relationships.

Professor Scott in his treatises on the Law of Trusts indicates that in a narrow sense, the term "trust" is applied to the particular kind of fiduciary relationship originating from the English Court's separation of law and equity, i.e., principally a private express trust, whereby the grantor transfers property (the "trust assets") to a trustee for the benefit of a designated beneficiary. He also suggests, however, that "[t]he term trust is used by courts and lawyers in a variety of senses. It is sometimes used to include various fiduciary relationships; not only trust in the narrow sense, but also bailment, executorship, guardianship, and agency." Austin Wakeman Scott, The Law of Trusts, §2 (4th ed. William Franklin Fractcher, 1987).

Professor Scott goes on to define a fiduciary relationship as involving ". . . a duty on the part of the fiduciary to act for the benefit of the other party to the relation as to the matters within the scope of the relation." Id. at §2.5. As indicated above, the relationship includes not only trusts in the more narrow sense, but guardianships, agencies and bailments. In fact, North Carolina, in adopting the Uniform Fiduciaries Act, has embraced this definition at N.C.G.S. § 32-2(a) wherein it is provided that the term "fiduciary" includes ". . . a trustee of any trust, express, implied, resulting or constructive, executive, administrator, guardian, conservator, curator, receiver… agent, or any other person acting in a fiduciary capacity for any person, trust or estate."

See also, Chapter 36A, Trusts and Trustees, more specifically Article 1, Investment and Deposit of Trust Funds, wherein N.C.G.S. § 36(a)(1) provides that "the word 'fiduciary' shall be construed to include a guardian, personal representative, collector, trustee, or any other person charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between them."

We find that in the context of banks engaged in the trust business, references to trust and fiduciary relationships are intended to cover a wide variety of accounts. The American Bankers Association Glossary of Fiduciary Terms at p.45, defines "trust accounts" as "[a] general term to cover all types of accounts in a trust department, including estates, guardianships, and agencies as well as trusts proper." Baron's Dictionary of Banking Terms (2nd. ed., 1993) defines a "trust account" as a ". . . shorthand name for all types of accounts handled by a bank's trust department or by a trust company." Additionally, we note that the Comptroller's Handbook for Fiduciary Activities (September, 1990 ed.) at p. 52, defines personal trust accounts to include estates, guardianships, testamentary trusts, inter vivos trusts and agencies.

Finally, we find from the Federal Deposit Insurance Corporation Examination Manual (March, 1983 ed.) at § X, that some state statutes define "trust activity" as serving in the legally defined capacity of trustee, executor or administrator of estates, guardian of the estate of a minor or incompetent, or other well understood capacities; however, it is not as clear when a bank may be performing an agency or other function requiring trust powers. Some banks handle managing agency accounts wherein there is no trust relationship and yet the bank assumes full control of the cash and assets including investments. Therefore, the responsibility exceeds that exercised in the case of a passive, directed personal trust account, or court directed estate or guardianship, wherein the bank could reasonably assert that it is not acting in a "trust" capacity for such accounts. In other words, from a regulatory perspective, the lines between pure trusts and other fiduciary functions are not always clear. This, we believe, lends further credence to the conclusion that reference to "trust assets" can reasonably be interpreted to include any assets, except real estate, held in a fiduciary relationship.

CONCLUSION

It is not our position here, nor do we conclude, that guardianships, managing agencies and safekeeping are trusts; nor are the assets held in those relationships trust assets in the narrow sense. They are, however, fiduciary relationships established with the banks which you must examine and supervise. As we have said, the clearly expressed purpose of N.C.G.S. § 53-122 is designed to allow the Commissioner to assess "trust assets" for the purpose of examining and supervising the bank's trust operations. Therefore, we conclude that you may reasonably construe that section of the law to include in this assessment the assets held by a bank in a fiduciary capacity.

We trust that this adequately addresses the issues raised in your request to us. If, however, we may be of further assistance, please do not hesitate to let us know.

Andrew A. Vanore, Jr.
Chief Deputy Attorney General

L. McNeil Chestnut
Assistant Attorney General