King v. King
| Decision Date | 16 May 2023 |
| Docket Number | S23Q0105 |
| Parties | KING v. KING, JR. |
| Court | Georgia Supreme Court |
Appellant Elkin King sued in federal court Appellee Forrest King, Jr. his former stepfather, alleging that Forrest had concealed misused, and converted the proceeds of a wrongful death settlement that had been placed in an account for Appellant's benefit when Appellant was a minor with Forrest as the custodian. Appellant further alleged that Forrest's actions had allowed Appellant's mother Peggy Fulford, to spend the funds remaining in the account after Appellant turned 18 years old. The district court granted summary judgment in favor of Forrest. The United States Court of Appeals for the Eleventh Circuit affirmed summary judgment on the misuse claim and held that Appellant had forfeited his conversion claim. See King v King, 46 F4th 1259, 1263 n.4 (2022). But as to the concealment claim, the Eleventh Circuit certified three questions to this Court, seeking clarification of the parameters of Georgia's duty to disclose in a confidential relationship. See King, 46 F4th at 1267. We respond to the Eleventh Circuit's certified questions as follows. When a confidential relationship is also a fiduciary relationship, the fiduciary's fraudulent breach of the duty to disclose can give rise to a breach-of-fiduciary-duty tort claim if that breach violates a fiduciary's duty to act with the utmost good faith. But whether a fiduciary has failed to act with the utmost good faith in a particular circumstance is a question of fact, not law. Accordingly, we answer the Eleventh Circuit's first question and decline to answer the other two questions.
On September 6, 1985, when Appellant was almost seven years old, his father died in a plane crash. After Peggy filed a wrongful death suit against the airline on her and Appellant's behalf, she reached a settlement with the airline in 1989 that set aside at least $200,000 for Appellant's benefit ("the Settlement Funds"). The check for the Settlement Funds listed both Peggy and her then-husband Forrest as payees, but on the advice of Peggy's attorney, Forrest placed the Settlement Funds in an account entitled "Elkin's Account with Custodian of Forrest King" at Charles Schwab in Atlanta; the parties dispute whether Peggy was also a party to that account. Despite recommending that Forrest receive the funds as "custodian," Peggy's attorney did not set up a formal, written trust governing the use of the Settlement Funds. Approximately $150,000 of the Settlement Funds were spent for Appellant's benefit before he turned 18.
On September 22, 1996, while living with Forrest and Peggy in Georgia, Appellant turned 18 years old. At that time, Forrest did not turn over the Settlement Funds to Appellant. Instead, the Settlement Funds remained in the account with Forrest as the custodian until February 1999, when Forrest and Peggy divorced. Following the divorce, Forrest took his name off the account, although the parties dispute whether Forrest retained any control over the Settlement Funds. In 2005, Peggy used the remaining $50,000 of the Settlement Funds to purchase a condominium in Louisiana. Peggy was later arrested and is currently incarcerated in federal prison for fraud-related crimes unrelated to this case.
In 2018, Appellant sued Forrest in the United States District Court for the Middle District of Florida, alleging that Forrest converted the Settlement Funds and breached fiduciary duties to Appellant under Georgia law. Appellant testified in a deposition that he would have taken control of the Settlement Funds had he known about them when he turned 18 years old, but he did not learn about the Settlement Funds until his maternal grandfather mentioned them in 2017. Forrest testified in a deposition that he told Appellant about the Settlement Funds when Appellant was 17 or 18 years old. Peggy testified in a deposition that in high school Appellant talked about the Settlement Funds with his friends.
The district court granted summary judgment to Forrest on both the conversion and breach-of-fiduciary-duty claims after finding no evidence that Forrest used the Settlement Funds for any purpose other than for Appellant's benefit. The district court concluded that a reasonable jury could find that naming Forrest as the custodian of the Settlement Funds account had created a confidential or fiduciary relationship between Forrest and Appellant. However, the district court ruled that Forrest's fiduciary duty would only be to use the Settlement Funds for Appellant's benefit, which Forrest had done. On a motion for reconsideration, the district court ruled that Appellant did not sufficiently plead a breach-of-fiduciary-duty claim based on the duty to disclose but, even if he had, that Forrest had not breached his fiduciary duties.
On appeal, the Eleventh Circuit held that Appellant forfeited his conversion claim but had potentially raised a claim for breach of fiduciary duty based on the duty to disclose. The Eleventh Circuit first agreed with the district court that a jury could find that Forrest entered into a confidential relationship with Appellant when Forrest placed the Settlement Funds in an account in his name. The Eleventh Circuit then concluded that, if a confidential relationship existed, the failure to disclose a material fact constituted fraud for the purpose of tolling the statute of limitation for the over two decades that had passed since Forrest was last associated with the Charles Schwab account. The Eleventh Circuit also concluded that a confidential relationship may establish the existence of a fiduciary duty for a breach-of-fiduciary-duty claim. However, because the Eleventh Circuit was unable to find a Georgia case that addressed "whether a breach of the duty to disclose can support a breach of fiduciary duty claim," King, 46 F4th at 1265, the Eleventh Circuit certified three questions to this Court. The three questions are:
Having concluded that a jury could find that Forrest entered into a confidential relationship with Appellant, the Eleventh Circuit makes two explicit assumptions in its first question. First, the question assumes the existence of a confidential relationship creating a duty to disclose. Second, the question assumes a fraudulent breach of the duty to disclose sufficient to toll the statute of limitation. Based on these assumptions, the Eleventh Circuit poses the following question: Does a breach of the duty to disclose in a confidential relationship also support a breach-of-fiduciary-duty tort claim under Georgia law?
Our answer to this question starts with the law of confidential relationships. A confidential relationship may be created in two categories of circumstances. First, a confidential relationship is created "where one party is so situated as to exercise a controlling influence over the will, conduct, and interest of another." OCGA § 23-2-58. Second, a confidential relationship may also be created "where, from a similar relationship of mutual confidence, the law requires the utmost good faith." Id. In 2020, an amendment to OCGA § 23-2-58 clarified that this latter circumstance encompasses "fiduciary relationships," as was already established by Georgia law. See Ga. L. 2020, p. 377, § 2-26. See also Forlaw v. Augusta Naval Stores Co., 124 Ga. 261, 274 (52 SE 898) (1905) (). So, while all fiduciary relationships are confidential in nature, only some confidential relationships are fiduciary relationships.
A fiduciary's duties are established by Georgia law. See, e.g., OCGA § 14-8-21 (partner); OCGA § 14-11-305 (4) (); OCGA § 29-4-22 (guardian); OCGA § 53-12-261 (). While the precise contours of a fiduciary's duty may vary depending on the type of fiduciary relationship and the particular facts of a situation, the guiding principle is that the fiduciary has a duty to act with the utmost good faith. See Jordan v. Moses, 291 Ga. 39, 43 (727 S.E.2d 460) (2012) (); Greenway v. Hamilton, 280 Ga. 652, 653 (631 S.E.2d 689) (2006) (). Consequently, a failure to act with the utmost good faith constitutes a breach of fiduciary duty.
When, as is assumed here, a party to a confidential relationship has a duty to disclose and breaches that duty in a manner sufficient to toll the statute of limitation under OCGA § 93-96, such a breach could violate a fiduciary's duty of utmost good faith. As this Court has recently reiterated:
To benefit from tolling under OCGA § 9-3-96, [a plaintif...
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