338 Ga. App. 308
Ga. Ct. App.2016Background
- Four grandchildren (Plaintiffs) sued their father Gary and uncle Randall (Defendants) over administration of multiple family trusts and related entities (RCT, RHC, LOR, RIF) established by O. Wayne Rollins. Litigation has repeatedly been before Georgia appellate courts.
- The central disputed act is a 1993 amendment to the Rollins Investment Fund (RIF) partnership agreement giving Gary and Randall exclusive managing-partner authority and permitting non-pro rata distributions. Plaintiffs allege the amendment enabled favoritism and diversion of trust assets.
- S-Trusts (grandchildren’s trusts) hold minority partnership interests in RIF; when a beneficiary reaches 45 the S-Trust terminates and the individual becomes a partner. Gary voted for the RIF amendment both as trustee of his children’s S-Trusts and as an individual partner.
- Gary and Randall implemented a conduct-based "code of conduct" governing distributions that applied to grandchildren but not to themselves and made distributions post-amendment that sometimes favored family members other than the Plaintiffs.
- Plaintiffs also challenge (a) transactions shifting marketable trust assets into illiquid, family-controlled entities; (b) shareholder agreements restricting alienation of RHC/LOR stock; and (c) the adequacy of accountings and other equitable remedies. Trial court granted summary judgment for defendants on most claims; appellate courts have remanded portions for further factfinding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity/Effect of 1993 RIF amendment (trustee and partner roles) | Gary breached trustee duties by voting for an amendment that eliminated beneficiaries’ future voting rights and enabled non-pro rata distributions favoring defendants | Amendment served legitimate estate/tax planning purposes; partners had authority to amend and retained expert advice | Summary judgment improper; fact issues (good faith, motive, harm) remain and must be resolved by a jury or further proceedings |
| Code of conduct and non-pro rata distributions | Code unlawfully conditioned access to grandchildren’s trust assets and evidences bad faith/conflict of interest | Code was within managing partners’ discretion; applied to beneficiaries generally; distributions were discretionary | Partnership-level duties apply for distribution decisions; fact issues about bad faith/conflict exist — summary judgment improper |
| Management of corporate entities (RHC/LOR) and dividend reductions | Gary and Randall diverted income, locked up assets, and used partnership structure to reduce pro rata corporate dividends to plaintiffs | Corporate bylaws/articles authorized board to declare dividends; actions were within corporate authority and for family/tax reasons | Decisions about dividend reduction/retained earnings within board authority — no breach on that ground; but applying the conduct code to corporate distributions (where no basis exists) raises triable issues |
| Transfers to family-controlled entities / replacement of marketable securities with illiquid interests | Trustees breached trust by converting liquid RCT assets to illiquid family entities, harming beneficiaries’ present value | Transactions effectuated substantial estate/tax savings for future generations and were authorized by broad trustee powers in the RCT indenture | No triable issue: trustees’ broad indemnified powers and explicit tax-family objectives in RCT indenture defeat breach claim; summary judgment affirmed on this point |
| Shareholder agreements restricting sale of RHC/LOR stock | Gary, as trustee, locked up stock preventing beneficiaries’ post-45 alienability | Agreements protected S-corp status and kept stock in family — legitimate trustee action | Fact question remains whether Gary acted in bad faith; summary judgment improper |
| Accounting and equitable remedies (rescission, removal, receiver) | Plaintiffs seek judicial/third-party accounting and equitable relief for alleged breaches | Trial court discretion over accounting; relief depends on findings of breach and good faith | Trial court’s denial of broader relief vacated/remanded for reconsideration in light of jury findings; accounting remanded for new exercise of discretion |
Key Cases Cited
- Rollins v. Rollins, 298 Ga. 161 (Ga.) (Supreme Court guidance on fiduciary standard and remand)
- Rollins v. Rollins, 294 Ga. 711 (Ga.) (analysis of partner vs. trustee standards)
- Rollins v. Rollins, 321 Ga. App. 140 (Ga. Ct. App.) (earlier Court of Appeals opinion in this litigation)
- Cowart v. Widener, 287 Ga. 622 (Ga.) (standard of review for summary judgment)
- Citizens & Southern Nat. Bank v. Haskins, 254 Ga. 131 (Ga.) (definition of breach of trust)
- AAF-McQuay, Inc. v. Willis, 308 Ga. App. 203 (Ga. Ct. App.) (partners’ duty of utmost good faith and loyalty)
- McPherson v. McPherson, 307 Ga. App. 548 (Ga. Ct. App.) (when court may interfere in trustee discretion for bad faith)
- Enchanted Valley RV Resort, Ltd. v. Weese, 241 Ga. App. 415 (Ga. Ct. App.) (fiduciary duties of corporate directors)
- Comolli v. Comolli, 241 Ga. 471 (Ga.) (fair treatment and good faith by fiduciaries)