Hasty v. Castleberry, s. S13A0989

• Decision Date: 07 October 2013
• Docket Number: S13A1189,S13A1190.,Nos. S13A0989,s. S13A0989
• Citation: 293 Ga. 727,749 S.E.2d 676
• Parties: HASTY v. CASTLEBERRY.
• Court: Georgia Supreme Court

293 Ga. 727

749 S.E.2d 676

HASTY

v.CASTLEBERRY.

Nos. S13A0989, S13A1189, S13A1190.

Supreme Court of Georgia.

Oct. 7, 2013.

Roy E. Barnes, Allison Barnes Salter, James Cameron Tribble, The Barnes Law Group, LLC, Marietta, Georgia, for appellant.

Laura Kennedy Bonander, Wade Hampton Watson III, Caldwell & Watson, LLP, Atlanta, Georgia, for appellee.

MELTON, Justice.

In these consolidated cases, the Superior Court of Cherokee County granted partial summary judgment to Joan Hasty Castleberry (“Joan”) and denied summary judgment to her brother, William G. Hasty, Jr. (“William”), with respect to Joan's claims regarding William's alleged mismanagement of trust assets as the trustee of a marital trust and with respect to William's alleged collection of excessive executor's fees as the executor of their parents' respective estates. For the reasons set forth below, we affirm in part and reverse in part the trial court's grant of partial summary judgment to Joan. ¹

The record reveals that William G. Hasty, Sr. (“Mr. Hasty”), died in November 2003, leaving a gross estate of over $10 million (“Mr. Hasty's Estate” or the “Estate”). His will (the “Will”) directed most of the Estate assets into a marital trust for the lifetime support of his wife (the “Marital Trust”), Hazel Wyatt Hasty (“Mrs. Hasty”), and the remainder to his three children: Dixie Kinard, William, and Joan. William was named Executor of the Estate and Trustee of the Marital Trust. The Marital Trust was valued initially at over $6 million, a large portion of which included almost 85,000 shares of Wachovia Bank common stock. Although the stock's value decreased precipitously over time, William, as Trustee of the Marital Trust, kept the stock as a Trust asset. The Will directed the Trustee to pay all Marital Trust income for the exclusive benefit of Mrs. Hasty and to encroach upon the principal of the Marital Trust for Mrs. Hasty's support if the Trustee determined that the income being paid to Mrs. Hasty would be insufficient to provide for her “proper support [or] maintenance, or to enable her to meet any difficulty produced by sickness, accident, or similar cause.”

Mrs. Hasty fell ill in 2005, and she required continuous care. Fearing that his mother could die at any time, William consulted with accountants in order to find ways to protect the assets in his mother's estate from estate taxes in the event that she died, including assets from the Marital Trust. Despite William's concerns about his mother's imminent demise, Mrs. Hasty did not pass away until 2009. Although William already served as Executor of Mr. Hasty's Estate and Trustee of the Marital Trust, he was also appointed as Executor of Mrs. Hasty's Estate.

While his mother was ill, William was a member of Reinhardt University's Board of Trustees, and at one time had served as the Board's secretary. During his tenure on the Board, William was asked to serve as co-chair of Reinhardt's Capital Campaign Committee and to make a substantial gift to the university in support of the Campaign. In order to make the gift, and, by William's explanation, in order to protect the assets in his mother's future estate in the event that she died from her illness, on May 18, 2005, William had Mrs. Hasty sign a power of attorney authorizing him to make a charitable gift to Reinhardt on her behalf.² On May 20, 2005, William borrowed $1 million from Southern National Bank (now United Community Bank) in his capacity as Trustee of the Marital Trust and secured the loan by using as collateral part of the Wachovia stock that was included in the Marital Trust. He then removed $1 million from the Marital Trust and purported to loan that $1 million to Mrs. Hasty, so that the $1 million gift to Reinhardt University could be completed on Mrs. Hasty's behalf (through William's power of attorney) in four installments over four years.

On May 3, 2011, Joan filed suit against William, seeking damages for William's alleged breach of fiduciary duty for making the Reinhardt transfer, his alleged mismanagement of Trust investments, and his alleged collection of excessive executor's fees. William denied any wrongdoing, and he also filed a cross-motion for summary judgment, contending that Joan was barred from bringing her claims based on the applicable statute of limitations and the equitable doctrines of unclean hands, laches, and estoppel. The trial court granted partial summary judgment to Joan on the breach of fiduciary duty claim, finding that William both abused his power and acted under a conflict of interest regarding the Reinhardt transfer, and denied summary judgment to William on all issues. The trial court also found that questions of fact existed as to William's breach of his duty to properly manage the Trust investments and as to damages sustained by Joan resulting from William's breach of his fiduciary duty with respect to the Reinhardt transfer. In addition, the trial court found that issues of fact existed regarding the extent to which William may have collected excessive executor's fees.

1. William contends that, because this case involves trust administration, and because “[t]rusts are peculiarly subjects of equity jurisdiction” (OCGA § 53–12–6(a)), he is automatically entitled to invoke the equitable defenses of unclean hands, laches, and estoppel to shield himself from potential liability with respect to the legal claims asserted against him by Joan. We disagree.

Not all cases involving the administration of trusts are considered to be equitable in nature. See OCGA § 53–12–6(a) (“Suits by or against a trustee which sound at law may be filed in a court of law”). See also, e.g., Durham v. Durham, 291 Ga. 231, 728 S.E.2d 627 (2012) (For purposes of an appeal, it is the primary issue raised, and not the mere fact that the administration of a trust is involved, that determines whether the case is an equity case or an action at law). Here, Joan filed an action at law against William seeking only money damages. Because this is an action at law, the equitable defenses of laches and unclean hands have no application here. Marsh v. Clarke County School Dist., 292 Ga. 28, 29–30, 732 S.E.2d 443 (2012) (“[I]nasmuch as laches is an equitable defense, it cannot be applied to actions at law.”); Holmes v. Henderson, 274 Ga. 8, 8–9(1), 549 S.E.2d 81 (2001) (“The equitable doctrine of unclean hands ... has no application to an action at law”) (footnote omitted). William's arguments to the contrary are unpersuasive.

On the other hand, equitable estoppel may be applied as a defense in an action at law. See, e.g., Robinson v. Boyd, 288 Ga. 53(4), 701 S.E.2d 165 (2010). Nevertheless, the doctrine would not shield William from potential liability with respect to the claims asserted by Joan.

In order for equitable estoppel to arise, there shall generally be some intended deception in the conduct or declarations of the party to be estopped, or such gross negligence as to amount to constructive fraud, by which another has been misled to his or her injury.

OCGA § 24–14–29. There is no evidence of record that Joan intentionally deceived William or somehow misled him to believe that she wanted him to use money from the Marital Trust to execute the $1 million gift to Reinhardt. Nor is there any evidence that Joan was grossly negligent in some way that would amount to constructive fraud in relation to William's decision to execute the gift. We therefore affirm the trial court's ruling that William's attempt to rely on the equitable defenses of unclean hands, laches, and equitable estoppel fails.

2. William next contends that Joan failed to file her claim within the prescribed statute of limitations of OCGA § 53–12–307. We disagree.

OCGA § 53–12–307(a) provides two different limitations periods with respect to actions against trustees. Where the beneficiary bringing a breach of trust claim against the trustee has

received a written report that adequately discloses the existence of a claim against the trustee for a breach of trust, the claim shall be barred as to that beneficiary unless a proceeding to assert the claim is commenced within two years after receipt of the report. A report adequately discloses existence of a claim if it provides sufficient information so that the beneficiary knows of such claim or reasonably should have inquired into the existence of such claim. If[, on the other hand,] the beneficiary has not received a report which adequately discloses the existence of a claim against the trustee for a breach of trust, such claim shall be barred as to that beneficiary unless a proceeding to assert such claim is commenced within six years after the beneficiary discovered, or reasonably should have discovered, the subject of such claim.

Id. William contends that the two-year statute of limitations is applicable here, arguing that a letter that he received from his accountants, and which he showed to Joan, constituted a “written report” sufficient to trigger the running of the two-year statute of limitations upon Joan's receipt of it in late August 2005. William is incorrect.

Pursuant to OCGA § 53–12–307(a), two things must occur in order for a beneficiary's breach of trust claim to become subject to the two-year, rather than six-year, statute of limitations: (1) the beneficiary must receive a “written report,” and (2) that written report must “adequately disclose[the] existence of a claim [by] provid[ing] sufficient information so that the beneficiary knows of such claim or reasonably should have inquired into the existence of such claim.” Id. If both of these requirements are not met, the beneficiary's claim may be “commenced within six years after the beneficiary discovered, or reasonably should have discovered, the subject of [the] claim.” Id. As explained more fully below, because the document that William provided to Joan did not constitute a “report” as required by OCGA § 53–12–307(a), Joan's claim against...