Summary
The Georgia Supreme Court reviewed a dispute involving trustees’ duties concerning family corporate entities held within irrevocable trusts. It vacated and remanded the accounting issue for consideration of the trial court’s equitable discretion and held that trustees controlling corporate entities in which the trusts held minority interests should be evaluated under corporate-level fiduciary standards for their corporate actions. The court reversed the Court of Appeals in part and directed application of that standard on remand.
Topics
Practice areas
Questions Presented
- Whether the Court of Appeals erred by holding that the trial court should have ordered an accounting of family entities held within the trusts and within the trustees' control.
- Whether the Court of Appeals erred by holding that the trustees' actions related to or taken through the family entities had to be evaluated under heightened trustee-level fiduciary standards rather than corporate-level fiduciary standards.
Holdings
- The Court of Appeals erred by failing to give due deference to the trial court's equitable discretion concerning whether to require or excuse an accounting. The accounting issue was therefore vacated and remanded to the Court of Appeals for reconsideration.
- Where the terms of a trust place the trustee in control of a corporate entity in which the trust owns a minority interest, the trustee is subject to a corporate-level fiduciary standard with respect to corporate duties and actions, not a heightened trustee-level fiduciary standard.
Key quotations
“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.” (294 Ga. at 714)
“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, 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.” (294 Ga. at 718-719)
Factual background
O. Wayne Rollins established irrevocable trusts for his grandchildren, including the Rollins Children's Trust and nine Subchapter S-trusts. The trusts held interests in family entities, and the trustees or related individuals exercised control over those entities; the Subchapter S-trusts held only minority interests in the family entities. Four beneficiaries sued for breach of trust and fiduciary duty and sought an accounting of the entities. The trial court declined to order a judicial accounting and granted summary judgment to the trustees, while the Court of Appeals reversed.
Procedural history
Four beneficiaries sued the trustees for breach of trust and breach of fiduciary duty and sought, among other relief, an accounting of family entities holding trust assets. The trial court granted summary judgment to the trustees and declined to order a judicial accounting, reasoning in part that the beneficiaries had received reports and complete relief through discovery. The Court of Appeals reversed and remanded, holding that the beneficiaries were entitled to an accounting, that trustee-level fiduciary standards applied to the trustees' conduct concerning the family entities, and that factual issues remained concerning breach. The Supreme Court reversed in part, vacated in part, and remanded with direction.
Remand instructions
The Court of Appeals must reconsider the accounting issue while giving due weight to the trial court's sound equitable discretion, and must apply a corporate fiduciary standard when evaluating the trustees' conduct in managing the corporate family entities held within the trusts.