Rollins v. Rollins

• Decision Date: 15 July 2016
• Docket Number: A12A2516
• Citation: 338 Ga.App. 308,790 S.E.2d 157
• Parties: Rollins et al. v. Rollins et al.
• Court: Georgia Court of Appeals

338 Ga.App. 308

790 S.E.2d 157

Rollins et al.

v.Rollins et al.

A12A2516

Court of Appeals of Georgia.

July 15, 2016

Reconsideration Denied July 27, 2016

H. Lamar Mixson, Timothy Scot Rigsbee, Lisa Rosenblum Strauss, Atlanta, for Appellant.

John J. Dalton, Atlanta, Lynette Eaddy Smith, Alan William Bakowski, James Andrew Lamberth, Atlanta, Sidney Leighton Moore III, Katie Lamb Balthrop, Atlanta, for Appellee.

Ray, Judge.

This case involves a dispute over trusts associated with a large estate. It comes to our Court for the third time, having also twice visited the Supreme Court of Georgia.¹ The case began in 2010 when four of the nine beneficiaries² of trusts set up by their grandfather, successful businessman O. Wayne Rollins (the “Settlor”), sued their father, Gary W. Rollins, and their uncle, R. Randall Rollins, individually and as trustees; and Henry B. Tippie, as trustee (collectively, the “Defendants”). Their amended complaint alleged, in brief, breaches of trust and of fiduciary duty regarding a failure to make proper accountings, making trust investments in illiquid family-owned entities, creating a conduct-based distribution scheme, creating conflicts of interest, and failing to maximize income distributions. They also asserted claims for an accounting, constructive fraud/recision, and fraudulent misrepresentation. Rollins IV , supra at 163–164, 780 S.E.2d 328. The parties filed cross-motions for summary judgment. The trial court ruled in the Defendants' favor on each of the Plaintiffs' claims, except for a breach of trust claim related to the Defendants' failure, at any time prior to the filing of the suit, to make required periodic accountings to the Plaintiffs of the assets held in the trusts. See id. at 164 and n. 6, 780 S.E.2d 328. The Plaintiffs filed the instant appeal, which continues to wend its way between our appellate courts.

In their original appeal before this Court, see Rollins I, supra, the Plaintiffs argued that the trial court erred in not granting them an accounting of the business entities, held within the trusts, which hold trust assets. They also argued that the trial court erred in failing to rule that: the Defendants breached their fiduciary duties or duties of trust by their conduct at the business entity level, rather than at the trust level; in creating a “false and misleading” distribution scheme imposing conduct-based requirements not found in any trust instrument; by replacing marketable securities in the trusts with illiquid investments in debt-ridden trust entities under the trustees' permanent control; in ruling that the Plaintiffs had to show actual harm to prevail on their fiduciary duty claims and in finding that they were not harmed by being “cut off” from trust distributions and assets; and in granting summary judgment to the Defendants because material factual disputes remained.

The further procedural history of the case is rather involved, and as the Supreme Court outlines this in Rollins IV , supra at 164–167, 780 S.E.2d 328, we will not unnecessarily repeat it here. Rather, we will simply note that in Rollins IV , the Supreme Court determined, inter alia, whether the applicable Defendants were to be held to a corporate- or partner-level fiduciary standard or to a trustee-level fiduciary standard related to the actions and decisions about which the Plaintiffs complain.³ The Supreme Court vacated our opinion in Rollins III and remanded the case to us with direction. See Rollins IV , supra. We thus proceed accordingly.

Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law[.]” OCGA § 9–11–56 (c).

Summary judgments enjoy no presumption of correctness on appeal, and an appellate court must satisfy itself de novo that the requirements of OCGA § 9–11–56 (c) have been met. In our de novo review of the grant [or denial] of a motion for summary judgment, we must view the evidence, and all reasonable inferences drawn therefrom, in the light most favorable to the nonmovant.

(Citations and punctuation omitted.) Cowart v. Widener , 287 Ga. 622, 624 (1) (a), 697 S.E.2d 779 (2010). See also Morgan Enterprises, Inc. v. Gordon Gillett Business Realty, Inc ., 196 Ga.App. 112, 112, 395 S.E.2d 303 (1990) (defining standard on cross-motions for summary judgment).

This case turns on claims of breach of fiduciary duty and breach of trust. “It is well settled that a claim for breach of fiduciary duty requires proof of three elements: (1) the existence of a fiduciary duty; (2) breach of that duty; and (3) damage proximately caused by the breach.” (Citations omitted.) Griffin v. Fowler , 260 Ga.App. 443, 445, 579 S.E.2d 848 (2003). “A breach of trust is a violation by the trustee of any duty which as trustee he owes to the beneficiary.” (Citation omitted.) Citizens and Southern Nat. Bank v. Haskins , 254 Ga. 131, 134 (I) (1), 327 S.E.2d 192 (1985).

As outlined by the Supreme Court, the facts are as follows:

Each of the four [P]laintiffs/appellees is (or was until age 45 when the trust assets were transferred to him or her) the beneficiary of a Subchapter S–Trust established by their grandfather O. Wayne Rollins in 1986. Defendant Gary Rollins (Wayne's son and plaintiffs' father) is the trustee of these S–Trusts. Although at least two of the S–Trusts have now terminated as a result of the age of the beneficiary, and the assets of those trusts have been transferred to the individual beneficiary, for simplicity's sake we will refer to the interests originally held in these trusts as the S–Trusts.

In 1968, in what became an ongoing effort to establish a network of entities to preserve and convey assets to his heirs, Wayne first established the Rollins Children's Trust (“RCT”), and each of his grandchildren are the beneficiaries of RCT. Wayne created several family entities to hold RCT's assets, including Rollins Holding Company (“RHC”) and LOR, Inc. (“LOR”). The S–Trusts hold minority interests in these family entities, and defendants Gary Rollins and his brother Randall Rollins are the managers of these entities. Later, in 1988, Wayne created a general partnership, Rollins Investment Fund, known as RIF. Each plaintiff's S–Trust is a partner in RIF, along with the S–Trusts of the other grandchildren; Gary, Randall, and the Estate of O. Wayne Rollins are also partners. Upon reaching age 45, a beneficiary's S–Trust is terminated and the beneficiary becomes a partner in RIF. As a result of this structure, most of the family-owned assets in dispute in this case are ultimately held in the RIF partnership and, until a plaintiff reaches age 45, each plaintiff's partnership interest is held in trust. The original partnership agreement authorized only pro rata distributions of cash flow to the partners “at such times as the [p]artners shall reasonably decide” to make distributions.

Wayne died in 1991. In 1993, the RIF partnership agreement was amended so that, inter alia, for the first time since its inception, non-pro rata distributions could be made in the form of redemptions from a partner's capital account. The amendment also changed the structure of the partnership by vesting exclusive authority to manage the partnership and make distribution decisions in Gary and Randall, who were named managing partners....

Gary and Randall contend that the primary purpose of this amendment was to permit Wayne's estate to redeem assets to fulfill a charitable pledge in a manner that permitted the remaining partners to avoid capital gains taxes on the assets that were liquidated. Several years after this amendment, Gary and Randall created a distribution program whereby the two of them, in their capacities as RIF managing partners, may authorize non-pro rata distributions from the partnership capital accounts of the S–Trusts, or directly to the partnership accounts of the grandchildren if their S–Trusts have terminated by virtue of their age, based upon a formula that includes a personal code of conduct for eligibility. Gary and Randall also created several new family entities controlled by them and funded by RCT assets. Gary and Randall contend these new entities were established primarily for the purpose of estate planning for future generations and also to minimize tax liability.

Rollins IV , supra at 162–163, 780 S.E.2d 328.

1. We first address the questions of whether Gary and Randall, acting as partners, breached their applicable duties when they executed the RIF amendment; and whether Gary, acting as a trustee of his children's S–Trusts, breached his trustee-level duties when he voted on behalf of the S–Trust partners to execute the amendment. See Rollins IV , supra at 170–171 (1) (c) (i), 780 S.E.2d 328.⁴

Specifically, the Plaintiffs argued that in 1993, Gary and Randall executed a “unilateral” amendment to the RIF partnership agreement, which, as noted above, allowed non pro rata redemptions from partners' capital accounts, named Gary and Randall as managing partners, and gave them exclusive authority to manage the partnership and make distribution decisions. As the Supreme Court noted, “[t]his amendment to the partnership agreement is the catalyst around which all the disputes in this case revolve.” Id. at 163, 780 S.E.2d 328.

(a) Gary's actions as trustee of his children's S–Trusts . The Supreme Court held that in voting for the amendment as a trustee for the Plaintiffs' S–Trusts, Gary is to be held to the applicable duty a trustee owes to beneficiaries, in light of the terms of the trust instrument and the Settlor's intent. Rollins IV , supra at 171–172 (1) (c) (i), 780 S.E.2d 328 Because fact questions remain, we find that the trial court erred in granting summary judgment on this point.

Georgia trust law requires trustees to “administer the trust[s] solely in the interests of the...