Court Opinion

ID: 2687348
Source: CourtListenerOpinion
Date Created: 2014-07-31 21:39:54.736515+00
Date Added: 2024-06-11T11:16:33.415413
License: Public Domain

FINAL COPY
294 Ga. 711

                S13G1162. ROLLINS et al. v. ROLLINS et al.

      THOMPSON, Chief Justice.

      O. Wayne Rollins established ten irrevocable trusts, the Rollins Children’s

Trust (“RCT”), and nine Subchapter S-trusts, each for the benefit of his nine

grandchildren. Wayne’s sons, Gary and Randall, and a close friend of the

settlor, Henry Tippie, are the trustees of RCT.

      RCT was established in 1968 and was funded initially with Rollins, Inc.

stock. By its terms, beneficiaries are to receive “statements disclosing the

condition of the trust estate” no more than every six months. Wayne created

several family entities to hold assets within RCT: ROL, Inc., LOR, Inc., the

Rollins Grandchildren’s Partnership (“RGP”) and the Rollins Holding Company

(“RHC”).

      The Subchapter S-trusts were created in 1986. The original assets in the

S-trusts were interests in LOR. Wayne created another family entity in 1988,

RIF, which was held within the S-trusts. Gary and Randall shared voting

control of the family entities, but Gary is the sole trustee of the S-trusts. The S-
trusts require that all trust income be distributed annually to the beneficiaries,1

but do not speak to the issue of accountings.

       In 2010, four of the nine beneficiaries of the S-trusts brought suit against

the trustees alleging breach of trust and breach of fiduciary duty and seeking,

inter alia, an accounting of the family entities. The trial court awarded summary

judgment to the trustees and refused to order a judicial accounting of the entities

which hold the trust assets. In this regard the trial court noted, in part, that

although the trustees failed to provide an accounting of the trust assets, plaintiffs

ultimately received a report on trust assets and “complete relief” on their

requests for an accounting through discovery. The Court of Appeals reversed

and remanded, concluding (1) plaintiffs were entitled to an accounting of the

family entities, (2) the trustees may be held to trustee-level fiduciary standards

with regard to the family entities, and (3) genuine issues of material fact remain

as to whether the trustees breached their fiduciary duties in administering the

trusts. Rollins v. Rollins, 321 Ga. App. 140 (741 SE2d 251) (2013). We granted

the trustees’ petition for certiorari and posed these questions:

       1
         See also OCGA § 53-12-244 (“A trustee shall distribute all net income derived from
the trust at least annually.”).

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            1. Whether the Court of Appeals erred when it ruled in
      Division 1 of its opinion that the trial court should have ordered an
      accounting of the family entities that are held within the trusts at
      issue and are within the trustees’ control.

             2. Whether the Court of Appeals erred when it ruled in
      Division 2 (a) of its opinion that the appellants have trustee-level
      fiduciary duties as to their actions related to or taken through the
      family entities that are held within the trusts at issue and are within
      the trustees’ control.

      We answer these questions affirmatively.

      1. To determine whether the Court of Appeals erred in overruling the trial

court and ordering the trustees to provide plaintiffs with an accounting of the

family entities held within the trusts, we first look to OCGA § 53-12-243, which

defines the scope of a trustee’s duty to provide reports and accounts and which

provides, in pertinent part:

             (a) On reasonable request by any qualified beneficiary or
      the guardian or conservator of a qualified beneficiary who is not
      sui juris, the trustee shall provide the qualified beneficiary with a
      report of information, to the extent relevant to that beneficiary’s
      interest, about the assets, liabilities, receipts, and disbursements
      of the trust, the acts of the trustee, and the particulars relating to
      the administration of the trust, including the trust provisions that
      describe or affect such beneficiary’s interest.

            (b) (1) A trustee shall account at least annually, at the
      termination of the trust, and upon a change of trustees to each

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       qualified beneficiary of an irrevocable trust to whom income is
       required or authorized in the trustee’s discretion to be distributed
       currently, and to any person who may revoke the trust. At the
       termination of the trust, the trustee shall also account to each
       remainder beneficiary. Upon a change of trustees, the trustee
       shall also account to the successor trustee. In full satisfaction of
       this obligation, the trustee may deliver the accounting to the
       guardian or conservator of any qualified beneficiary who is not
       sui juris.

             (2) An accounting furnished to a qualified beneficiary
       pursuant to paragraph (1) of this subsection shall contain a
       statement of receipts and disbursements of principal and income
       that have occurred during the last complete fiscal year of the trust
       or since the last accounting to that beneficiary and a statement of
       the assets and liabilities of the trust as of the end of the
       accounting period.

       Based on these provisions, the terms of the RCT trust instrument, and

New York case law,2 the Court of Appeals held that the trial court erred in

failing to order an accounting of the family entities under the trustees’

control. Although this decision may ultimately prove to be correct, we find it

       2
         See, e.g., In re Murray’s Will, 88 NYS2d 579, 581-582 (N.Y.Sur.Ct. 1949) (trustee
is obligated to render full and accurate account of transactions including management of
corporation in which trust holds controlling interest); In re Estate of Barrett, 6 NYS2d 689
(N.Y.Sur.Ct. 1938) (court will direct fiduciary to provide all information in his control which
bears on the estate); In re Estate of Witkind, 4 NYS2d 933, 944 (N.Y.Sur.Ct. 1938) (where
court can “require fiduciaries to report the transactions of corporations in which the estate
is interested the question of appropriateness should not be raised”).

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to be erroneous at this juncture because the Court of Appeals failed to give

due deference to the discretion of the trial court in this matter.

      “Trusts are peculiarly subjects of equity jurisdiction. . . .” OCGA § 53-

12-6 (a). Thus, in determining whether a trustee’s accounting is sufficient

under a given set of circumstances, an appellate court must consider whether

a trial court properly exercised its equitable discretion; and the decision of

the trial court should be sustained where such discretion has not been abused.

See Prime Bank v. Galler, 263 Ga. 286, 288 (4) (430 SE2d 735) (1993);

Estate of Hershel, 336 P2d 571 (168 Cal.App.2d 658) (1959) (whether

trustee’s account is sufficiently detailed is matter committed to sound

discretion of trial court). See also OCGA § 53-12-243 (e) (Ga. L. 2010, pp.

579, 611) (“Nothing in this Code section shall affect the power of a court to

require or excuse an accounting.”). On the face of its opinion, however, it

appears that the Court of Appeals failed to give any consideration to the trial

court’s discretion to require or excuse an accounting. Accordingly, we find it

necessary to vacate and remand this issue to the Court of Appeals to enable

the appellate court to reweigh the accounting issue by placing the sound

discretion of the trial court on the scales.

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      2. The second issue presented in this appeal requires us to consider

whether the Court of Appeals applied the proper fiduciary standard to the

conduct of the trustees with regard to their management of the corporate

family entities.

             The extent to which a court may interfere with the
             conduct of corporate affairs by the directors of an
             estate owned corporation, is a question that does not
             lend itself to a simple answer. . . . [T]he problem is
             one that usually falls “somewhere between the field
             of the law of corporations and that of the law of
             estate and trust administration. Its solution will
             generally be dictated by considerations of policy and
             the relative rights and interests of estate beneficiaries,
             creditors of the corporation and other stockholders,
             as well as the power, authority and opportunities of
             the executor director.” [Cit.]

In re Estate of Schnur, 242 N.Y.S.2d 126, 132 (N.Y.Sur.Ct. 1963).

      The Court of Appeals held that actions taken by the trustees in their

capacities as managers of the family entities must be scrutinized according to

heightened trustee-level fiduciary standards instead of the more deferential

standards that apply to the conduct of corporate entity managers. Although

that holding may be appropriate as a general rule,3 it is inappropriate in this

      3
       See generally Hanson v. First State Bank & Trust Co., 259 Ga. 710, 711-713 (385
SE2d 266) (1989).

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case both because the cardinal rule in trust law is that the intention of the

settlor is to be followed, Griffith v. First Nat. Bank & Trust Co., 249 Ga. 143,

146 (287 SE2d 526) (1982), and because the trusts hold only a minority

interest in the family entities. See Rosencrans v. Fry, 91 A2d 162 (N.J.

Super. Ct. 1952), aff’d, 95 A2d 905 (N.J. 1953).

      Looking to the intention of the settlor, we find that he took great pains

to ensure that the trustees could not take actions at the family entity level

solely to benefit plaintiffs as S-trust beneficiaries — unless those actions

were also in the interests of the other shareholders. The settlor accomplished

this by making Gary Rollins the sole trustee of the S-trusts, but giving him

shared control of LOR, RHC and RIF with his brother Randall, who has no

obligations to the beneficiaries as a trustee of the S-trusts. Moreover, like the

testator in Rosencrans v. Fry, supra, the settlor in this case, O. Wayne

Rollins, was “a man of considerable business experience. He could not but

have appreciated the delicate role which he assigned to [the trustees]. [He]

presumably was confident that [the trustees] would act with fairness in

discharging [their] corporate duties and [their] fiduciary duty under the [trust

instrument].” Id. at 167. On these facts, the only reasonable conclusion with

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regard to the settlor’s intention is that he did not intend for the trustees to be

held to trustee level fiduciary standards when performing their corporate

duties. See In re Estate of Schnur, supra at 132 (in determining obligations

of fiduciary “paramount consideration [should be given] to the testamentary

plan and scheme, and effectuating it in the manner prescribed by the

testator”). That being so, the trustees in this case “cannot be criticized upon

the naked basis of potentially conflicting interests, nor can the existence of

that potentiality per se constitute a culpable circumstance to be charged

against [them] in determining whether [they] violated [their] duty as

trustee[s].” Rosencrans v. Fry, supra at 166. See also In re Estate of Halas,

568 NE2d 170, 178 (Ill.App.Ct. 1991) (“creator of the trust can waive the

rule of undivided loyalty by expressly conferring upon the trustee the power

to act in a dual capacity, or he can waive the rule by implication where he

knowingly places the trustee in a position which might conflict with the

interests of the beneficiaries”).

      The standard set forth by the Court of Appeals is also inappropriate in

this case because the trusts hold only a minority interest in the family entities.

Under this circumstance, it is generally best to allow the trustees to act in the

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interest of all the shareholders and to require that they be held to a corporate

level fiduciary standard when acting as directors. See In re Estate of Carlisle,

278 N.Y.S.2d 1011, 1017 (N.Y.Sur.Ct. 1967) (where trust asset is minority

interest in corporate stock, court will not interfere in internal affairs of

corporation unless acts of directors are harmful to interest of corporation);

Rosencrans v. Fry, supra at 168 (where trust asset is minority interest in

corporate stock a trustee/director does not have “a duty to advance the

interest of a beneficiary at the expense of the corporation and other

outstanding stockholders’ interests”).

       In sum, under the circumstances of this case, it was error for the Court

of Appeals to hold that the trustees’ management of the family entities should

be scrutinized using a heightened trustee level fiduciary standard. While

other courts may have held otherwise,4 we hold that where, under the terms

of a trust, the trustee is put in control of a corporate entity in which the trust

owns a minority interest, the trustee should be held to a corporate level

fiduciary standard when it comes to his or her corporate duties and actions.

       4
       See, e.g., In re Scuderi, 667 N.Y.S.2d 913 (N.Y.App.Div. 1998); In re Shehan’s Will,
141 N.Y.S.2d 439 (N.Y.App.Div. 1955).

                                            9
Our holding in this regard is buttressed by the legislature’s 2010 amendment

to the Trust Code which expressly recognizes that trustees may act in a dual

role where the trust estate owns an interest in a corporation or business

enterprise, as long as it is “fair to the beneficiaries.” OCGA § 53-12-246 (b).

      On remand, the Court of Appeals is directed to apply a corporate

fiduciary standard when considering the trustees’ conduct with regard to their

management of the corporate family entities held within the trusts.

      Judgment reversed in part and vacated in part, and case remanded with

direction. Hines, P. J., Benham, Hunstein, Nahmias, Blackwell, JJ., and

Judge Robert D. Leonard II, concur. Melton, J., not participating.

                           Decided March 3, 2014.

      Certiorari to the Court of Appeals of Georgia – 321 Ga. App. 140.

      Troutman Sanders, John J. Dalton, James A. Lamberth, Alan W.

Bakowski, Katie L. Balthrop, Lynette E. Smith, Summerville Moore, Sidney

L. Moore III, for appellants.

      Bondurant, Mixson & Elmore, H. Lamar Mixson, Timothy S. Rigsbee,

Lisa R. Strauss, for appellees.

                                       10
      Ean K. Cullefer, Rogers & Hardin, Robert B. Remar, Chilivis, Cochran,

Larkins & Bever, John K. Larkins III, Caplan Cobb, James W. Cobb, Ellis,

Painter, Ratterree & Adams, Paul W. Painter, Jr., amici curiae.

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