Rollins v. Rollins

• Decision Date: 19 November 2014
• Docket Number: No. A12A2516.,A12A2516.
• Citation: 329 Ga.App. 768,766 S.E.2d 162
• Court: Georgia Court of Appeals
• Parties: ROLLINS et al. v. ROLLINS et al.

329 Ga.App. 768

766 S.E.2d 162

ROLLINS et al.

v.ROLLINS et al.

No. A12A2516.

Court of Appeals of Georgia.

Nov. 19, 2014.

Bondurant, Mixson & Elmore, H. Lamar Mixson, Timothy Scot Rigsbee, Lisa Rosenblum Strauss, Atlanta, for Appellants.

Troutman & Sanders, John J. Dalton, Alan William Bakowski, James Andrew Lamberth, Katie Lamb Balthrop, Atlanta, Summerville Moore, Sidney Leighton Moore III, Lynette Eaddy Smith, for Appellees.

Rogers & Hardin, John K. Larkins III, amicus curiae.

Opinion

RAY, Judge.

This case returns to us from the Supreme Court of Georgia. It is an appeal from the trial court's ruling on cross-motions for summary judgment in a case alleging, inter alia, breach of trust and breach of fiduciary duty. The suit was brought by four siblings in the Rollins family,¹ who are the beneficiaries of several trusts (the “Beneficiaries”), against their father, Gary W. Rollins, and their uncle, R. Randall Rollins, individually and as trustees of the trusts at issue, as well as a family friend, Henry B. Tippee, in his capacity as a trustee of the trusts at issue (collectively, the “Appellees”). The case presents two overarching questions to be viewed through the lens established by our Supreme Court: (1) whether the Beneficiaries are entitled to receive an accounting of various corporations and partnerships (the “Family Entities”) held within the trusts, and (2) whether actions taken by the Appellees in their capacity as corporate entity managers—rather than in their capacity as trustees per se—amounted to breaches of trust and fiduciary duty.

1. Procedural History.

(a) Fiduciary standard for actions taken at the Family Entity level.

The trial court granted the Appellees' motion for summary judgment and denied the Beneficiaries' motion for partial summary judgment on the issue of whether the Appellees had breached their fiduciary duties and duties of trust in their management of the Family Entities. The trial court determined, inter alia, that the Appellees' actions were consistent with the trust agreements and the settlor's intent. Specifically, the trial court found that when decisions were made at the Family Entity level, rather than at the trust level, the Beneficiaries “should not be treated any differently than individual interest holders” in the Family Entity at issue.

On appeal, this Court determined that the Appellees would be “held to trustee-level fiduciary standards of care as to their actions related to the Family Entities, which they control, and which are held within the trusts at issue.” (Footnote omitted.) Rollins v. Rollins, 321 Ga.App. 140, 150(2)(a), 741 S.E.2d 251 (2013) (Rollins I ). The Supreme Court reversed in part, vacated in part, and remanded the case to us with direction. Rollins v. Rollins, 294 Ga. 711, 755 S.E.2d 727 (2014) (Rollins II ). We therefore vacate our prior opinion to the extent the Supreme Court determined that we applied an incorrect fiduciary standard, and we now consider the case as directed.

In Rollins II, the high court found that although our holding “may be appropriate as a general rule,² it is inappropriate in this case both because the cardinal rule in trust law is that the intention of the settlor is to be followed, and because the trusts hold only a minority interest in the family entities.” (Citations and footnote omitted.) Id. at 714(2), 755 S.E.2d 727. The Supreme Court determined 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 or actions.” Id. at 716(2), 755 S.E.2d 727.

On remand, we analyzed the issues presented in light of the fiduciary standard as delineated by the Supreme Court, and we again find fact questions requiring that we reverse the trial court's grant of the Appellees' motion for summary judgment and its denial of the Beneficiaries' motion for partial summary judgment, and remand the case for the trial court's further consideration.

(b) Accounting.

The trial court, inter alia, granted the Beneficiaries' partial motion for summary judgment regarding breaches of trust and fiduciary duty premised on the Appellees' failure to provide an accounting of trust assets, but it denied all further relief on this issue. It also granted the Appellees' motion for summary judgment as to the Beneficiaries' further claims for relief related to the accounting claim. Those further claims, inter alia, sought an order requiring an accounting and also requested a “third-party master or receiver” to review the books of the Family Entities held within the trusts.

We reversed in Rollins I, supra at 146(1), 741 S.E.2d 251, finding that the Beneficiaries were entitled to an accounting of the trustee-controlled Family Entities held as assets in the trusts, and we remanded the case on this issue. Our Supreme Court in Rollins II, supra at 713–714(1), 755 S.E.2d 727, vacated our judgment on the issue of an accounting and remanded the case to us with direction. We therefore vacate our earlier decision on this point and proceed, according to the Supreme Court's instruction, to consider whether the trial court properly exercised its equitable discretion in denying the accounting.

In sum, we again reverse the trial court's grant of summary judgment to the Appellees and its denial of partial summary judgment to the Beneficiaries on the issue of an accounting of the Family Entities that are within the Trustees' control and held as assets within the trusts. We further remand this issue to the trial court so that it may reconsider its ruling in light of our determination in Division 3.

2. Facts.

The facts of this case are set out in detail in Rollins I, supra at 140–142, 741 S.E.2d 251. In summary, O. Wayne Rollins (the “Settlor”) established a number of trusts, including the five at issue in this litigation. In 1968, he established the irrevocable Rollins Childrens Trust (“RCT”) for the benefit of his grandchildren and great-grandchildren. The Beneficiaries in the instant case are four of the nine grandchildren who benefit from the RCT. The Settlor's sons, Gary and Randall, as well as the Settlor's friend, Tippie, are the trustees. The RCT originally was funded primarily with Rollins, Inc. stock. In the 1970s and 1980s, in a bid to limit tax liability, the Settlor created several entities to hold assets within the trust structure of the RCT: ROL, Inc., LOR, Inc., the Rollins Grandchildren's Partnership (“RGP”), and the Rollins Holding Company (“RHC”) (collectively, the “Family Entities”).

In 1986, again to limit tax liability, the Settlor established nine irrevocable Subchapter S–Trusts for the benefit of his grandchildren, including the four Beneficiaries here. Gary is the sole trustee of the S–Trusts at issue. The original assets in the S–Trusts were interests in LOR, Inc. In 1988, the Settlor created another family entity called the Rollins Investment Fund (“RIF”), a partnership that is held within the S–Trusts, again to minimize tax consequences.

In 2010, the four Beneficiaries sued the Appellees alleging breach of trust and breach of fiduciary duty and seeking, inter alia, an accounting of the Family Entities. In general, they alleged that after the Settlor's death, Gary and Randall changed the structure, leadership, holdings, and distribution methods used within the Family Entities held within the S–Trusts and the RCT. They argued that Gary and Randall shifted power from the Beneficiaries to themselves, made the Beneficiaries' interests in the Family Entities illiquid and nontransferable, established non pro rata distribution systems in contravention of the Settlor's intent, and refused to provide a further accounting of Family Entities held within the trusts.³

3. Management of the Family Entities held with the trusts.

The Supreme Court determined that where, as here, “under the terms of a trust, the trustee is put in control⁴ 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.” (Emphasis supplied.) Rollins II, supra at 716(2), 755 S.E.2d 727. The Supreme Court found that its holding that the Appellees may act in a dual role as entity managers and as trustees was “buttressed by the legislature's 2010 amendment to the Trust Code,” and cited OCGA § 53–12–246(b). Rollins II, supra at 716(1), 755 S.E.2d 727. OCGA § 53–12–246(b) provides in its entirety:

This Code section shall not preclude the following transactions, if fair to the beneficiaries: (1) An agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee; (2) Payment of reasonable compensation to the trustee; or (3) Performing and receiving reasonable compensation for performing services of a managerial, executive, or business advisory nature for a corporation or other business enterprise, where the trust estate owns an interest in the corporation or other business enterprise.

(a) Breach of fiduciary duty and breach of trust for actions taken at the entity level. The parties dispute whether Gary and Randall exceeded their authority, and whether they breached fiduciary duties as well as duties of trust, in administering the Family Entities held in trust and in distributing income and principal. They debate, among other things: the propriety of non pro rata distributions; establishment of a code of conduct that conditions distributions on the Beneficiaries' behavior; and an amendment that shifts management and control of the trust assets away from the Beneficiaries and to the Appellees.

The Supreme Court found that “in this case,” the Appellees should be allowed to “act in the interest of all the shareholders and to require that they be held to a corporate-level fiduciary standard when acting as directors. ” (Citations omitted; emphasis supplied.) Rollins II, ...