Rollins v. Rollins

In the Supreme Court of Georgia

Decided: November 23, 2015

S15G0567. ROLLINS, et al. v. ROLLINS, et al.

BENHAM, Justice.
This dispute over trust management and other related issues has again

come before this Court as a result of our grant of the defendants’ petition for

certiorari. Many details of the trusts and other entities involved in the dispute

have been set forth in the initial opinion of the Court of Appeals, Rollins I;1 the

opinion of this Court upon our initial grant of certiorari review, Rollins II;2 and

the second opinion of the Court of Appeals upon our remand of the case to that

court for further consideration, Rollins III.3 Here, we will attempt to set forth

the facts and procedural posture of the case only as necessary for an

understanding of our holding and, to the extent possible, to clarify and simplify

the complicated structure of the trusts involved in the case and the assets held

in the trusts. Confusion may result when the defendants are referred to simply

1
321 Ga. App. 140 (741 SE2d 251) (2013).
2
294 Ga. 711 (755 SE2d 727) (2014).
3
329 Ga. App. 768 (766 SE2d 162) (2014).
as “trustees,” since there are three defendants, and each of them are not involved

in each allegation of wrongdoing. Moreover, with respect to the various

transactions at issue in the case, one or more of the defendants may have acted

as trustee, partner, or corporate manager. Consequently, in this opinion we use

the term “trustee” or “trustees” only when referring to that actual status and,

otherwise, we refer to the appellants as “defendants.”

Each of the four plaintiffs/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.4

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

4
Each of the other five grandchildren of O. Wayne Rollins is also the beneficiary of an S-
Trust, and their father, Randall Rollins, Wayne’s other son, is the trustee of those S-Trusts, but those
other beneficiaries are not involved in this dispute. Although this Court stated in Rollins II, supra,
294 Ga. at 711, that Gary “is the sole trustee of the S-Trusts,” we hereby clarify that Gary is the
trustee of the four S-Trusts whose beneficiaries (his children) are the plaintiff/appellees in this case.

2
entities to preserve and convey assets to his heirs, Wayne first established the

Rollins Children’s Trust (“RCT”)5, 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.

5
Appellants Gary Rollins and Randall Rollins, along with appellant Henry B. Tippie, are
the trustees of RCT.

3
 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. This

amendment to the partnership agreement is the catalyst around which all the

disputes in this case revolve.

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

4
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.

In their complaint, as amended, the plaintiffs raise claims of breach of

fiduciary duty and breach of trust against the defendants in several

particulars–by allegedly failing to make proper accountings to plaintiffs with

respect to the S-Trusts and the family entities; by making trust investments in

illiquid family-owned entities controlled by Gary and Randall, leaving the

plaintiffs with unmarketable assets when the S-Trust assets are distributed free

of trust to each beneficiary upon reaching the mandated age; by creating a

distribution scheme that imposes a code of conduct upon each beneficiary to

qualify for distributions from trust investments; by creating a conflict of interest

as a result of Gary’s and Wayne’s roles as trustees of the S-Trusts and RCT

while they are simultaneously managers of family entities held by the trusts;

and by failing to maximize income distributions in favor of growing trust

principal. Plaintiffs also assert claims for an accounting; constructive

fraud/recision for failure to disclose and fraudulent misrepresentation regarding

certain transactions for which Gary and Randall allegedly improperly obtained

5
the plaintiffs’ written consent; and for attorney fees. Plaintiffs seek monetary

damages, the removal of the trustees of RCT and the S-Trusts, and other relief.

Both sides filed motions for summary judgment. The trial court ruled in

favor of the defendants as to each of plaintiffs’ claims, with the exception of the

breach of trust claim for the defendants’ failure, at any time prior to the filing

of the lawsuit, to make required periodic accountings to the plaintiffs for the

assets held in the trusts.6

In this case’s first appearance before the Court of Appeals, in Rollins I,

that court identified the following enumerations of error raised by the plaintiffs:

the trial court’s refusal to order an accounting of family entities held within the

trusts; its refusal to find that various actions taken by Gary and Randall at the

entity level, rather than the trust level, amounted to breaches of trust and

fiduciary duty; its grant of the defendants’ motion for summary judgment on the

claim for constructive fraud and rescission with respect to the challenged

6
The trial court denied the request for any further accounting with respect to the trusts,
however, since it found the plaintiffs had obtained adequate relief by disclosures about trust holdings
made during discovery in the case. We note that the complaint also sought to review the books of
the family-controlled corporate entities in which trust assets were invested, LOR, Inc. and RHC, and
of the RIF partnership in which each trust was a partner. The trial court granted summary judgment
to the defendants with respect to the claim for attorney fees except with respect to the breach of trust
claim for failure to make proper accountings.

6
transactions on the ground that the plaintiffs suffered no injury; and, in general,

the grant of summary judgment to the defendants. Rollins I, supra, 321 Ga.

App. at 140. The Court of Appeals reversed the trial court’s ruling denying the

plaintiffs’ request for an accounting of the family-owned entities held in each

plaintiff’s S-Trust and remanded that issue to the trial court. Id. at 146 (1). The

Court of Appeals held that even though the S-Trusts hold only minority interests

in the family-owned entities, under the facts of this case the requested

information is within the control of the S-Trust trustees since Gary and Randall

control these entities and it should be made available to the plaintiffs. Id. at 145

(1). That court also held that Gary and Randall owe trustee-level fiduciary

duties to the plaintiffs even with respect to decisions made at the entity level.

Id. at 150 (2) (a). Applying that standard of care, the Court of Appeals

concluded that issues of fact remain for a jury to determine with respect to the

plaintiffs’ claim that Gary and Randall improperly amended the RIF partnership

agreement in a manner plaintiffs claim damaged them, thereby breaching Gary

and Randall’s fiduciary duty. Id. at 153 (2) (b) (i). Likewise, that court also

concluded a jury issue is created with respect to the plaintiffs’ claim that Gary

and Randall improperly failed to disclose certain facts to them regarding the

7
amended partnership agreement, thereby creating liability for constructive fraud.

Id. at 153-154 (2) (b) (1). Finally, the Court of Appeals concluded a question

of fact exists with respect to the claim that the defendants wrongfully exceeded

their scope of discretion under the trust instruments when they implemented a

code of conduct for each plaintiff’s eligibility for trust distributions and made

allegedly arbitrary distributions amounting to a breach of trust. Id. at 156 (2) (b)

(ii).7

This Court granted the defendants’ petition for certiorari review and

reversed the Court of Appeals on two specific issues in Rollins II. Simply

stated, this Court held the Court of Appeals erred with respect to its ruling that

defendants owe the plaintiffs an accounting of the family entities, concluding

that the Court of Appeals failed to give due deference to the trial court’s

discretion to grant or deny the equitable relief sought in the prayer for an

accounting. 294 Ga. supra at 713 (1). Accordingly, the ruling on this issue was

vacated and the case was remanded to the Court of Appeals for it to reconsider

the accounting issue in light of the trial court’s discretion. Id. at 713-714 (1).

7
The Court of Appeals did not address plaintiffs’ assertion that the trial court erred in failing
to find the defendants breached their fiduciary duties by replacing marketable securities held in the
trusts with illiquid investments in family trust entities, finding review of that issue was not ripe given
its holding that plaintiffs are due an accounting of the family entities.

8
This Court also concluded the Court of Appeals erred in holding that Gary’s and

Randall’s management of family entities should be scrutinized under the

heightened trustee-level fiduciary standard. Id. at 715 (2). We held that, in this

case, the application of a heightened trustee-level fiduciary standard was

inappropriate given the intent of the settlor and the fact that the trusts hold only

a minority interest in the family entities. Id. at 714 (2). This Court stated:

Looking to the intention of the settlor, we find that he took great
pains to ensure that the trustees could not take actions at the family
entity level solely to benefit plaintiffs as S-trust
beneficiaries–unless those actions were also in the interests of the
other shareholders. The settlor accomplished this by making Gary
Rollins the sole trustee of the [plaintiffs’] S-trusts, but giving him
shared control of LOR, RHC and RIF with his brother Randall, who
has no obligations to the [plaintiffs] as a trustee of the [plaintiffs’]
S-trusts. . . .[T]he only reasonable conclusion with regard to the
settlor’s intention is that he did not intend for the trustees to be held
to trustee level fiduciary standards when performing their corporate
duties.

Id. at 714-715 (2), citing In re Estate of Schnur, 242 N.Y.S.2d 126, 132

(N.Y.Sur.Ct. 1963). Accordingly, we held that the defendants should be held

to “a corporate level fiduciary standard when acting as directors.” Id. at 715 (2).

We instructed the Court of Appeals, on remand, “to apply a corporate fiduciary

standard when considering the [defendants’] conduct with regard to their

9
management of the corporate family entities held within the trusts.” Id. at 716

(2).

Upon remand, the Court of Appeals again found fact issues remain for

jury determination with respect to whether the defendants breached their

fiduciary duty or committed a breach of trust for actions they took at the family

entity level. Rollins III, supra, 329 Ga. App. at 770 (1) (a). That court

concluded preliminary issues of fact were created by the record which remain

to be resolved with respect to the capacity in which Gary and Randall were

acting (whether as trustee, corporate manager, or managing partner) at the time

of the alleged wrongful acts.8 Specifically, the Court of Appeals concluded

issues of fact remain as to the capacity in which Gary and Randall were acting

(1) when they approved the RIF partnership amendment, and (2) when they

created a code of conduct for the third generation heirs (which includes these

plaintiffs) and then made non-pro rata distributions to the RIF partners based

8
We reject plaintiffs’ assertion that certain Court of Appeals rulings in Rollins I were
unaffected by this Court’s opinion in Rollins II and are now “law of the case.” Pursuant to Shadix
v. Carroll County, 274 Ga. 560, 563 (1) (554 SE2d 465) (2001), when, on certiorari review, this
Court reverses a portion of a Court of Appeals decision but does not address a division of that
opinion, “we leave it to the Court of Appeals to determine what impact, if any, our reversal has upon
that particular division.” It is apparent from Rollins III that the Court of Appeals chose to reconsider
its previous opinion in its entirety upon remand.

10
upon compliance with the code of conduct. Accordingly, the Court of Appeals

concluded that an analysis of which fiduciary standard applies to each alleged

wrongful act is precluded until the case is remanded for a jury to determine what

role Gary and Randall were assuming with respect to each such act, which

would then dictate which fiduciary duty applied. Id. at 781 (3) (a) (ii). For this

reason, the Court of Appeals also remanded to the trial court the issue of

whether the defendants owed the plaintiffs an accounting of the family entities

held as trust assets so the trial court could reconsider its decision and exercise

its discretion in light of the Court of Appeals’ opinion. Id. at 782 (4).

Again, this Court granted the defendants’ petition for certiorari. We

directed the parties to address the question of whether a jury must determine

which fiduciary duty applies to the various decisions and transactions made by

the defendants.9

1. The Court of Appeals concluded it could not comply with this Court’s

direction to apply the more deferential corporate-level fiduciary standard with

9
Pursuant to Supreme Court Rule 45, when a petition for certiorari is granted, “appellant
and appellee shall file briefs only in response to the question or questions posed by the Court in its
order granting certiorari.” Although the parties here have briefed additional issues, including
whether the trial court erred in granting summary judgment to the trustees, we will, pursuant to Rule
45, address only the issues related to the question posed in the order granting certiorari.

11
respect to the defendants’ management of the family entities without a jury’s

first determining the role in which the defendants were acting at the time of the

complained-of conduct. Even the plaintiffs agree, however, that the facts of this

case do not require a jury to determine which fiduciary standard applies to each

challenged transaction because no material dispute of fact exists as to the

capacity in which Gary and Randall acted in these transactions.

(a) Plaintiffs seek damages for the manner in which they have allegedly

been impacted by certain corporate management decisions Gary and Randall

have made in their role as managers of certain family entities, specifically RHC

and LOR10, such as the transfer of stock owned by LOR to a new partnership

that Gary and Randall control and the decision to retain allegedly excessive

earnings in LOR. Plaintiffs contend these actions effectively locked up control

of the trust assets. The record shows, however, that Gary, Randall, and plaintiffs

are not the only shareholders of these companies and, as we noted in Rollins II,

plaintiffs’ S-Trusts hold only minority interests in these family entities. Id. at

715 (2). For reasons set forth in Rollins II, this Court expressly held that where,

10
Gary and Randall were always the managing shareholders of these family entities, and now
their controlling interests in these entities are held in the form of voting trusts.

12
as here, “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

and actions.” Id. at 716 (2). Further, we directed the Court of Appeals “to apply

a corporate fiduciary standard when considering the [defendants’] conduct with

regard to their management of the corporate family entities held within the

trusts.” Id. The record evidence demonstrates that the corporate decisions

complained of by the plaintiffs could only have been made by Gary and Randall

in their capacity as managers of the family entities and are precisely the type of

conduct we directed the Court of Appeals to review in accordance with a

corporate fiduciary standard. It is not necessary for a jury to determine the role

Gary and Randall were playing at the time these corporate decisions were made.

On remand, as before, the Court of Appeals is directed to apply a corporate

fiduciary standard to these decisions.

(b) This does not preclude the Court of Appeals (or the trier of fact, if

summary judgment is reversed) from applying a trustee-level fiduciary standard

to decisions the defendants made as trustees of the trusts.

(i) Plaintiffs’ claims for actions taken on behalf of RCT. For example,

13
plaintiffs assert the trustees of RCT breached their applicable duties when they

invested trust assets in entities controlled by Gary and Randall. The trustees of

RCT are Gary, Randall, and Henry B. Tippee. Although Wayne originally

funded RCT with marketable assets, the plaintiffs claim the trustees later

exchanged these assets for illiquid and non-marketable shares of family entities

controlled by Gary and Randall for the purpose of permitting Gary and Randall

to retain control of RCT assets even after they are to be distributed to the

beneficiaries free of trust in certain stated proportions on their respective

twenty-fifth and thirtieth birthdays (and upon the eventual termination of the

RCT trust). Plaintiffs claim these transactions violated the terms of the RCT

trust indenture and constitute a breach of trust. They also claim that

conditioning distributions from RCT upon a code of conduct is a breach of

fiduciary duty.

No issue is created for the jury to determine with respect to the role the

defendants were playing at the time they took the complained-of actions on

behalf of RCT. They were acting as trustees governed by the terms of the trust

instrument. The indenture of trust that established the RCT grants the trustees

the discretion to pay income in a non-pro rata manner or to make no payments

14
at all to any beneficiary. The trustees are granted the authority to dispose of and

exchange trust assets in any manner the trustees deem proper “and to do any and

all things in connection with such transactions as could be done by the [t]rustees

as if they owned the trust property in their own right and for their own benefit.”

The trust indenture expressly stipulates that the trustees “shall be liable only for

the use of ordinary care in execution of the trust . . . .” As this Court noted in

Rollins II, “the cardinal rule in trust law is that the intention of the settlor is to

be followed.” 294 Ga. at 714 (2) (citing Griffith v. First Nat. Bank & Trust Co.,

249 Ga. 143, 146 (287 SE2d 526) (1982)). A trustee is required to administer

the trust “in good faith, in accordance with its provisions and purposes.” OCGA

§ 53-12-240 (b). See also OCGA § 53-12-241 (“[T]he trustee shall exercise the

judgment and care of a prudent person acting in a like capacity and familiar with

such matters, considering the purposes, provisions, distribution requirements,

and other circumstances of the trust.”); Restatement (Third) of Trusts § 76 (1)

(2007) (“The trustee has a duty to administer the trust, diligently and in good

faith, in accordance with the terms of the trust and applicable law”). On remand

the Court of Appeals is directed to consider whether these actions were

consistent with the authority granted to the trustees by the RTC trust instrument

15
and the standard of liability imposed by it when it determines whether the trial

court erred in granting summary judgment to defendants with respect to their

RCT management decisions.

(ii) Plaintiffs’ claims for actions taken on behalf of the S-Trusts.

Similarly, plaintiffs assert Gary breached his duty as trustee of their S-Trusts by

causing assets of these trusts to be placed into entities controlled by Gary and

Randall so they could, allegedly, control the assets in perpetuity contrary to the

terms of the instrument creating the S-Trusts, which requires distribution of all

assets “free of trust” when each S-Trust beneficiary reaches age 45. No

preliminary issue for jury determination is created with respect to the role Gary

was playing in the complained-of decisions or the fiduciary duty that should be

applied to them. These alleged actions could only have been taken in Gary’s

capacity as a trustee and must be examined in accordance with the fiduciary and

other duties imposed by the trust. The S-Trust instrument grants broad

discretion to the trustee in management of the trusts, authorizing the trustee:

[T]o do all things . . . as may be deemed necessary and proper,
including . . . [t]o retain and carry on any business in which the trust
acquires an interest, . . . to join with other owners in adopting any
form of management for any business or property in which the trust
may have an interest, [and] to become or remain a partner, general

16
 or limited, in regard to any such business or property . . . .

Again, the trustee’s duty is to administer the trust in accordance with its terms

and purposes. Hasty v. Castleberry, 293 Ga. 727, 733 (3) (749 SE2d 676)

(2013). On remand, the Court of Appeals is directed to apply to these trust

decisions a trustee-level fiduciary standard consistent with the authority granted

by the trust instrument when determining whether the trial court erred in

granting summary judgment to Gary on these claims.

Plaintiffs also assert Gary and Randall breached fiduciary duties owed to

them when Gary and Randall executed an RHC shareholder agreement that

prohibits shareholders from selling or otherwise disposing of their shares to

anyone other than another of Wayne’s descendants without the consent of the

company. The record evidence shows a trustee-level fiduciary duty applies to

Gary’s decision to execute this shareholder agreement on behalf of plaintiffs’

S-Trusts. That standard of fiduciary duty would not be applied, however, with

respect to Gary’s and Randall’s execution of the agreement on behalf of

themselves individually or on behalf of their own trusts, as shareholders11, or to

11
Controlling shareholders like Gary and Randall owe a duty of fair dealing in some
circumstances to minority shareholders. See Monterrey Mexican Restaurant of Wise, Inc. v. Leon,
282 Ga. App. 439, 448 (4) (638 SE2d 879) (2006); see also Mon Ami Intern., Inc. v. Gale, 264 Ga.
App. 739 (3) (592 SE2d 83) (2004). We do not decide, however, whether they owed such a duty to

17
Randall’s execution as president of RHC.

(c) The next issue addressed by the Court of Appeals in Rollins III was

the capacity in which Gary and Randall acted, and thus the duty they owed to

the plaintiffs, when they executed the amendment to the partnership agreement

about which the plaintiffs complain. Both were RIF general partners under the

original agreement, and the record demonstrates they voted their own

partnership interests in favor of the amendment. They also voted the shares of

the Estate of O. Wayne Rollins as executors. Additionally, Gary, acting as

trustee of his four children’s S-Trusts, voted those S-Trusts’ interests; Randall,

acting as trustee of his five children’s S-Trusts, voted his children’s S-Trusts’

interests; and thus the vote to amend the partnership agreement was unanimous,

as required by the original agreement. The Court of Appeals was correct that

different duties apply to the different roles Gary and Randall played at the time

they executed the partnership agreement amendment. But the roles and duties

are not difficult to parse and do not require the submission of those issues to a

jury. Contrary to the conclusion of the Court of Appeals, the trier of fact is not

the S-Trusts in connection with their execution of the shareholder agreement on behalf of themselves
as the parties have not briefed that question.

18
required first to determine which fiduciary duty applies to each defendant’s

decision to execute the partnership amendment before it can reach a finding

about whether the duty was breached.

First, we note that the Court of Appeals concluded it could not determine

as a matter of law whether Gary and Randall were acting in their respective

capacities as trustees of the S-Trusts or as “managing partners” of the

partnership, or both, when they executed the RIF partnership agreement

amendment. Rollins III, supra, 329 Ga. App. at 775 (3) (a) (i). As clearly

established by the record, however, Gary and Randall could not have been

acting as managing partners at the time they executed the amended partnership

agreement because, at that time, no such category of partners existed. The

record shows Gary and Randall each executed the original RIF partnership

agreement, created during Wayne’s life, as well as the amendment adopted after

Wayne’s death, in his individual capacity as an RIF general partner and also in

his capacity as trustee of the S-Trusts belonging to his respective children,

which trusts were also partners in RIF. The original partnership agreement

states it may be amended “with the consent of all [p]artners.” Consequently, we

conclude no issue of fact is created as to the capacity in which Gary and Randall

19
were acting at the time the amendment was approved. They were acting in two

different capacities. When each man cast his own vote he was acting as a

general partner; and when Gary cast the votes on behalf of plaintiffs’ S-Trusts

he was acting as the trustee of those trusts. The Court of Appeals erroneously

concluded that the trier of fact could find that the decision to amend the

partnership agreement was made in Gary’s and Randall’s capacity as managing

partners. Id. at 776 (a) (i).

(i) Plaintiffs’ claims for Gary’s decision to vote the S-Trust partnership

interests. It follows that the answer to the question posed on certiorari, as it

relates to Gary’s decision to vote the S-Trusts’ partnership interests in favor of

amending the partnership agreement (because amendment required unanimous

consent), is that no jury issue is created as to which fiduciary duty applies to this

transaction. The applicable duty is the one owed by a trustee to its beneficiary

when viewed in light of the terms of this trust instrument and the intent of the

settlor. See Hasty v. Castleberry, supra. Plaintiffs contend, in essence, that an

issue of fact is created as to whether Gary breached his fiduciary duty to them

as the trustee of their S-Trusts when, armed with the information he possessed

about the terms of the amendment, he voted on behalf of the trusts to amend the

20
partnership agreement. Even though Randall was not the trustee of these S-

Trusts, the plaintiffs contend that a jury could find he, also, is liable to the

plaintiffs for any loss caused by Gary’s alleged breach of trust as a participant

to that breach, as set forth in Restatement (Second) of Trusts § 326 (1959).12

Upon remand, the Court of Appeals is directed to evaluate the question of

whether summary judgment was properly granted with respect to Gary’s alleged

breach of the trustee-level duty owed to the plaintiffs when he voted their S-

Trust partnership interests in favor of the amendment (and also with respect to

Randall’s alleged liability as a participant in that breach).

(ii) Plaintiffs’ claims against Gary and Randall as individual partners.

Pursuant to this Court’s opinion in Rollins II, a different standard is to be

applied, however, with respect to the claim that both Gary and Randall, as

individual partners of RIF, breached the duties owed by a partner to their other

partners when the partnership agreement was amended. Rollins II, supra, 294

Ga. at 714-716 (2). As a preliminary matter, we note that the Court of Appeals’

opinion is based upon the erroneous conclusion that the beneficiaries of the

12
Section 326 states: “A third person who, although not a transferee of trust property, has
notice that the trustee is committing a breach of trust and participates therein is liable to the
beneficiary for any loss caused by the breach of trust.”

21
trusts are partners of RIF to whom Gary and Randall owe the fiduciary duty that

is owed by one partner to another, and its assumption that the beneficiaries are

partners for purposes of plaintiffs’ allegation that Gary and Randall are liable

for wrongfully amending the partnership agreement without their knowledge or

participation. Rollins III, supra, 329 Ga. App. at 776 (3) (a) (I) and n. 7. The

partnership agreement identifies the S-Trusts as partners, not the individual

beneficiaries of those trusts. This is an important distinction because since each

S-Trust, and not its beneficiary, was an RIF partner at the time the amendment

was executed, the trustee and not the beneficiary was authorized to vote on the

amendment to the partnership agreement. Similarly, even though the Court of

Appeals in Rollins III purported to apply the statutory duty of a partner to

disclose material information to his or her other partners13, that court failed to

recognize that any duty owed by Gary and Randall to disclose the terms and

consequences of the amendment to the other RIF partners was owed to the S-

Trusts and not the beneficiaries themselves.14 Since Gary is the trustee of each

of his children’s S-Trusts he would have owed this partnership duty of

13
See OCGA § 14-8-20.
14
At that point, none of the S-Trusts had terminated as a result of the beneficiary’s age, so
no individuals other than Gary and Randall were RIF partners.

22
disclosure to himself as the representative authorized to act and make decisions

on behalf of each of these S-Trust partners. This fact will also be relevant to the

Court of Appeals’ analysis of whether Gary and Randall are entitled to summary

judgment on plaintiffs’ claim for constructive fraud as a result of their

suppression of a material fact they allegedly had a duty to disclose, pursuant to

OCGA § 23-2-53, as partners of RIF.15

Again, however, with respect to the claim that Gary and Randall breached

the duties owed by a partner to their other partners when they, individually,

voted to amend the partnership agreement, no jury issue is created as to which

fiduciary duty applies. The applicable duty is the general duty of good faith and

fair dealing owed by one partner to other partners, when viewed in light of the

terms of the original partnership agreement.16 See Westminster Properties, Inc.

15
Constructive fraud requires proof of “intention to induce the plaintiff to act or refrain from
acting.” (Citation and punctuation omitted.) Eason Publications, Inc. v. NationsBank, 217 Ga. App.
726, 730 (3) (458 SE2d 899) (1995). Here, a preliminary legal question, and not a question for a
jury, will be whether, under the circumstances of this case, partners Gary and Randall were required
as partners to seek the beneficiaries’ approval to amend the partnership agreement given they were
acting as the trustees of the S-Trusts when they voted those trust interests, and whether there could
have been any intention to induce the plaintiffs to act or refrain from acting when Gary was acting
for them.
16
In making a determination of whether summary judgment was properly granted on this
issue, the Court of Appeals must also look to the terms of the original partnership agreement to
determine what duties were owed by the partners. See OCGA § 14-8-18 (“The rights and duties of
the partners in relation to the partnership shall be . . . subject to any agreement between them . . . .”)
That instrument grants the partners broad discretion to manage the partnership and “to take any

23
v. Atlanta Assoc., 250 Ga. 841, 842 (1) (301 SE2d 636) (1983) (the intent

reflected in the partnership agreement is the true test of the duty of care owed

by partners to each other); Hendry v. Wells, 286 Ga. App. 774, 783 (2) (a) (650

SE2d 338) (2007) (an agreement between the partners “governs their behavior

so long as it does not violate other law”).

2. The Court of Appeals also held that preliminary issues for the jury

were created with respect to the capacity in which Gary and Randall were acting

when they adopted a set of conduct-based criteria for distributions to the

plaintiffs and the other Rollins grandchildren of income derived from the family

entities, and then proceeded to use those criteria to make non-pro rata

distributions to the grandchildren. The record reflects the conduct-based criteria

were applied by Gary and Randall to distributions made, or not, out of each

plaintiff’s partnership capital account.17 These accounts are an asset of each

plaintiff’s S-Trust if he or she has not yet reached the age of 45. Nevertheless,

actions . . . that the Partners deem reasonably appropriate to carry out the objectives of the
Partnership.” That agreement further states that the partners shall not be liable to the “Partnership”
for any act performed within the scope of authority conferred upon the partners by the agreement,
“except for their own acts of malfeasance, gross negligence or intentional misrepresentation.” But,
in contrast to the terms of the amended agreement, the original agreement does not define or limit
the duty of partners to other partners.
17
No claim is made that the RIF managing partners improperly credited plaintiffs’
partnership capital accounts in amounts that were not in accordance with their partnership interests.

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even with respect to a plaintiff whose partnership interest is still held in trust,

or was so held at any time such a distribution was made, it is clear from the

record evidence that the decision to pay, or not, a distribution from any given

capital account would be a decision made by Gary and Randall in their

respective capacities as managing partners under the amended partnership

agreement. It would not be a decision made by Gary in his capacity as trustee

of the plaintiffs’ S-Trusts. Accordingly, a jury is not required first to decide the

capacity in which Gary and Randall were acting before they can decide which

duty of care was owed to plaintiffs with respect to these decisions and whether

it was breached.

The facts dictate the conclusion that the decisions to adopt the conduct-

based criteria and to grant, or not, distributions to each plaintiff out of his or her

partnership account were made in Gary and Randall’s capacity as managing

partners of RIF. Consequently, whether they breached a duty owed to plaintiffs

for these decisions must be determined by applying the duty owed by these

partners to their other partners as a matter of law and according to the terms of

the amended partnership agreement. That agreement grants sole and absolute

discretion to the managing partners with respect to distribution decisions and

25
imposes liability upon a managing partner only for willful misconduct, gross

negligence, or bad faith. Gary’s and Randall’s decisions regarding non-pro rata

distributions are to be judged by the terms of the amended partnership

agreement with respect to claims of breach of the duty owed to plaintiffs or their

S-Trusts as RIF partners. But as noted above, Gary’s initial decision to vote

plaintiffs’ S-Trusts partnership interests to amend the partnership agreement is

to be judged by his trustee-level fiduciary duty to the beneficiaries.

Accordingly, consistent with this opinion, the Court of Appeals could find Gary

and Randall are entitled to summary judgment for alleged breach of their

partnership duties (or, a jury may find no liability in the event summary

judgment is reversed) even though it may find Gary is not entitled to summary

judgment for alleged breach of his duty as trustee to the beneficiaries.

3. In sum, in Rollins III, the Court of Appeals concluded it was unable to

render an opinion as to whether the trial court correctly granted summary

judgment on the claims arising from Gary and Randall’s approval of the RIF

partnership agreement amendment and from Gary and Randall’s creation of a

code of conduct and application of it to distributions made from the plaintiffs’

partnership capital accounts, because preliminary issues were created for

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determination by a jury. Likewise, the Court of Appeals concluded it could not

render an opinion as to whether the trial court correctly granted summary

judgment to the trustees on plaintiffs’ demand for an accounting of the family

entities held in the S-Trusts and RCT. The opinion of the Court of Appeals is

vacated and that court is directed on remand to follow the rulings set forth in

Divisions 1 and 2 in its evaluation of the trial court’s grant of summary

judgment on these claims.

The Court of Appeals reached no other issues raised in the plaintiffs’

appeal of the order granting partial summary judgment to the trustees. For

example, the Court of Appeals did not examine the grant of summary judgment

on the claims arising out of family entity management. We direct the Court of

Appeals, if possible, to determine as a matter of law from the record evidence

the role defendants were playing at the time of the remaining conduct at issue

in this case and thus the appropriate fiduciary duty to be applied to that conduct,

as guided by the conclusions reached in this opinion. Then, the Court of

Appeals is directed to apply that fiduciary duty to reach a decision on plaintiffs’

appeal of the remaining portions of the trial court’s grant of partial summary

judgment to the defendants.

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 Judgment vacated and case remanded with direction. Thompson, C.J.,

Hines, P.J., Hunstein, Nahmias, and Blackwell, JJ., and Judge Robert D.

Leonard II concur. Melton, J., not participating.

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