Ledbetter v. First State Bank

United States Court of Appeals,

Eleventh Circuit.

No. 95-8396.

Frederick D. LEDBETTER, Plaintiff-Appellant,

v.

FIRST STATE BANK & TRUST COMPANY, Trustee, Defendant-Appellee.

June 25, 1996.

Appeal from the United States District Court for the Middle
District of Georgia. (No. 93-124-1-ALB-AMER) Duross Fitzpatrick,
Chief Judge.

Before BIRCH, Circuit Judge, GODBOLD, Senior Circuit Judge, and
O'KELLEY*, District Judge.

GODBOLD, Senior Circuit Judge:

Frederick D. Ledbetter is the beneficiary of a written,

revocable trust, of which he is also the trustor, and First State

Bank and Trust Company is the trustee. The bank, located in

Georgia, is a wholly owned subsidiary of First State Corporation

("FSC"), a two-bank holding company. The bank, as trustee for

plaintiff, owns less than 1/2% of 1% of the outstanding stock of

FSC. Considering other trusts for a number of plaintiff's

relatives, the bank owns nearly 40% of the holding company's

outstanding stock, although it has the power to vote only 6% to 8%.

Plaintiff sued the bank, alleging that as trustee for him it

had numerous conflicts of interest and that in several respects it

violated duties owed to him as trust beneficiary by acting or

failing to act in his interest.

The district court found that the bank had conflicting

*
Honorable William C. O'Kelley, U.S. District Judge for the
Northern District of Georgia, sitting by designation.
interests. Nevertheless it granted summary judgment to the bank.

We reverse.

I. Plaintiff's claims

Plaintiff makes four major claims:

(1) That the bank as trustee failed to "encourage, prompt, and

if necessary join with other shareholders" of FSC to require FSC to

engage in discussions with a bank holding company interested in

merging with or purchasing FSC. The management of the defendant

bank and of FSC—principal officers and directors—is substantially

common. FSC has maintained an anti-merger policy directed at

keeping FSC and its two subsidiary banks independent.

Representatives of First Alabama Bancshares, Inc., a bank holding

company,1 met with Morgan Murphy and Douglas Wren, who are the

senior officers of FSC and the bank, and explored the possible

advantages of a merger or sale between FSC and First Alabama.

First Alabama was told that FSC was not interested. Subsequently

First Alabama confirmed in a letter to Murphy its interest in a

merger and what First Alabama saw as the benefits of a merger. No

formal offer was made by First Alabama.

Plaintiff contended in the district court that the substantial

minority of FSC stock held by the bank in various trusts for

members of his family, including plaintiff, gave the bank as

trustee power to influence the actions of FSC for the benefit of

trust beneficiaries, and that negotiations with First Alabama would

have led to benefits to plaintiff and other trust beneficiaries.

According to plaintiff, the possibilities of sale or merger of FSC

1
Now affiliated with Regions Bank.
were not communicated to, or not fully communicated to, or were

falsely communicated to, the bank and its trust committee. The

trust committee was never consulted or informed of the First

Alabama approach and never considered it. Additionally, though the

bank's principal officers and directors knew of the First Alabama

approach and FSC's rejection, they took no action to have the bank

as trustee consider the matter on behalf of the beneficiaries whose

trusts held FSC stock.

(2) Pursuant to authority of its management, which was

essentially common with that of the bank, FSC made a public

offering of its treasury stock, the effect of which, plaintiff

contends, was to dilute the value of FSC's stock held in

plaintiff's trust and to diminish the voting power of the bank as

trustee of plaintiff's trust. Plaintiff asserts that FSC's

offering of its treasury stock was motivated by a desire to dilute

the interests of trust beneficiaries (and other holders of FSC

stock) and thereby strengthen FSC's anti-merger strategy, and that

the bank as trustee acted disloyally because it made no effort to

stop the FSC offering.

(3) After plaintiff filed this suit the bank immediately

transferred to plaintiff all FSC stock held by it in his trust but

continued to hold other assets in his trust. Shortly thereafter it

resigned as trustee. Plaintiff contends that these acts by the

trustee were taken without regard to his interests as beneficiary

and that the resignation was intended to deprive him of standing to

pursue this suit.

(4) Payments made to the bank's principal officers by FSC
violated Georgia law.

We hold that summary judgment was improperly granted on all

four claims.

II. Breach of the duty of undivided loyalty

The foremost duty which a fiduciary owes to its beneficiary

is undivided loyalty. Clark v. Clark, 167 Ga. 1, 144 S.E. 787

(1928); Fulton Nat'l Bank v. Tate, 363 F.2d 562 (5th Cir.1966).

Accord, Comptroller's Handbook for National Trust Examiners, July

1984, p. 1.2 If trustee places itself in a position where its

interests might conflict with the interests of the beneficiary, the

law presumes that the trustee acted disloyally; inquiry into such

matters as whether the transaction was fair is foreclosed and the

burden shifts to the trustee to show it received no benefit. It is

not necessary for the beneficiary to show that the fiduciary acted

in bad faith, gained advantage, fair or unfair, or that the

beneficiary was harmed. Fulton Nat'l Bank, 363 F.2d at 571-72.

The defendant bank's policy manual acknowledges that the bank owes

a duty of undivided loyalty to the beneficiaries of the trusts that

it manages. In Clark v. Clark the Supreme Court of Georgia

discussed the duty of undivided loyalty.

As long as the confidential relation lasts, the trustee owes
an undivided duty to the beneficiary under the trust, and
cannot place himself in a position which would subject himself
to conflicting duties, or expose him to the temptation of
acting contrary to the best interests of the cestui que
trustent. 3 Pomeroy's Equity Jurisprudence, § 1077.
Beneficiaries of a trust are entitled to have it administered
by trustees entirely at the service of the trust and above
suspicion. Crummey v. Murray, 130 Misc.Rep. 378, 224 N.Y.S.

2
Defendant is not a national bank. The Comptroller's
Handbook is, however, a reliable authority in the banking
industry.
 49 [ (1927) ]. The purpose of this rule is to require a
trustee to maintain a position where his every act is above
suspicion, and the trust estate, and it alone, can receive,
not only his best services, but his unbiased and uninfluenced
judgment. Whenever he acts otherwise, or when he has placed
himself in a position that his personal interest has or may
come in conflict with his duties as trustee, or the interests
of the beneficiaries whom he represents, a court of equity
never hesitates to remove him. In such circumstances the
court does not stop to inquire whether the transactions
complained of were fair or unfair; the inquiry stops when
such relation is disclosed.

Clark, 144 S.E. at 789.

The defendant bank was in a position of obvious and pervasive

conflicts of interest. It is a wholly owned subsidiary of FSC. As

trustee it owns nearly 40% of FSC stock. The district court

recognized that a conflict of interest arose from the bank's

holding in trust stock of its parent. The bank's trust department

manual recognizes this conflict. A trustee's ownership of its own

stock, unless consented to or waived, is inconsistent with the rule

of undivided loyalty. The rule of undivided loyalty in this

situation is based upon the possibility that circumstances may

arise in which the trustee and its officers and directors are in a

position when determining whether to sell or retain the stock they

cannot appraise the problem with the same detachment with which

they approach the sale of other securities. IIA Austin W. Scott &

William F. Fratcher, The Law of Trusts § 170.15, p. 369;

Comptroller's Handbook, p. 3. As the district court noted, the

rule is no different when the stock owned is that of an affiliated

corporation. The trustee may be tempted to favor itself or the

affiliate. See Albright v. Jefferson County Nat'l Bank, 292 N.Y.

31, 53 N.E.2d 753, 151 A.L.R. 897 (N.Y.1944). The question is not

whether the trustee and the affiliated corporation are separate
legal entities but whether the trustee has placed itself in a

position where its interests, or the interests of its affiliate,

may conflict with its duties to its beneficiaries. The wholly

owned subsidiary-parent relation with common management is the

paradigm of affiliation.

Connection between the bank and FSC reached far beyond

ownership of stock. Management of the two corporations is

overlapping and interlocking. The summary judgment evidence

discloses that the bank and the holding company are tightly bound

together by a web of overlapping duties, responsibilities, and

relationships, by cross-assignment of principal officers and

directors of the bank and of FSC, and of members of the trust

committee of the bank, and by compensation of principal officers.

At times relevant to this case Morgan Murphy was chairman of the

board, president, and chief executive officer of FSC and chairman

of the board and chief executive officer of the bank. Douglas Wren

was president and chief operating officer of the bank and executive

vice president and chief operating officer of FSC. Both served on

FSC's executive committee which also served as the compensation

committee.3 Both served on the bank's trust committee. The head

of the bank's trust department served on the trust committee and

was a director of the bank and of FSC. The other members of the

trust committee were FSC directors. Two members of the trust

committee served on FSC's executive committee. Bank officers,

including Murphy and Wren, were compensated directly by FSC, not by

3
Murphy was a voting member of the compensation committee
but changed to nonvoting status pursuant to a recommendation made
in connection with an offering of stock discussed below.
the bank, and the bank in turn paid FSC a management fee.

Thus, the bank's conflicts of interest that exist because of

these relationships run far more broadly and more pervasively—and

affect the issues in this case to a much greater extent—than

corporate trustee A owning stock in corporation B.

III. The claim arising from the First Alabama approach

The First Alabama approach was not to the bank but to FSC.

It originated with members of plaintiff's family who are

shareholders of FSC. Wishing to see FSC merged with some other

banking entity, they approached First Alabama with the suggestion

for discussion. FSC was committed to a non-merger policy. It

considered this to be in the best interests of stockholders,

employees, and the area of South Georgia in which it operated. On

behalf of FSC, and as a courtesy to the family members who had

approached First Alabama, Murphy and Wren met one time with

representatives of First Alabama. They told First Alabama that FSC

was not interested. First Alabama followed up with a letter to

Murphy, as chief executive officer of FSC, expressing continuing

interest and describing possible benefits of a merger, and stating

the hope of additional meetings.

Murphy reported the First Alabama approach to a meeting of the

FSC board. A director expressed dissatisfaction that the First

Alabama approach had originated with a stockholder rather than the

board. Murphy considered that he had been reprimanded for talking

with First Alabama and told the board he would "stay the course"

with the mandate that FSC remain independent. Later an attorney

for FSC talked with an officer of First Alabama who told him that
First Alabama made no offer, would not make one unless solicited,

and would not be interested without active support from FSC

management. But, if FSC ever wanted to sell, First Alabama would

be interested. There the First Alabama matter ended.

The First Alabama matter was not presented to the bank for its

consideration as trustee, although its principal officers and

directors knew of it since they were officers and board members of

FSC. There is evidence that Murphy did not fully inform the trust

committee of the level of First Alabama's interest. At least some

committee members never saw the First Alabama follow-up letter.

The matter was never presented to the trust committee for its

consideration, though that committee is said to make all

significant decisions concerning trusts and the interests of

beneficiaries of trusts. Indeed, the common management of FSC and

the trustee bank, in testimony and in the bank's contentions on

this appeal, do not understand, or do not recognize their duties

with respect to trust beneficiaries. Rather they assert that there

is such identity of interests that action taken on behalf of FSC

meets trust law requirements of the bank's duty of loyalty to

beneficiaries. Murphy testified—and the bank argues on appeal—that

once officers and directors act, wearing their FSC hats, the matter

is ended. All responsibility to the bank as trustee and to trust

beneficiaries is discharged, so that trust beneficiaries have

suffered no harm. The bank asserts that the interests of a trust

beneficiary whose trust holds FSC stock are identical to the

interests of a non-trust shareholder of FSC. It says that officers

and directors of FSC acted to benefit all shareholders when they
turned aside the First Alabama proposal. As the bank puts it,

since all FSC shareholders had the same interests, beneficiaries of

trusts owning FSC stock have nothing of which to complain.

Plaintiff's expert witness Ken C. Coker, an experienced former

trust officer, described this viewpoint of the bank as "grossly

improper."

The bank makes a second contention based upon identity of

personnel, i.e., it was unnecessary for the trust committee of the

bank to consider the First Alabama proposal because FSC and the

bank have common directors, and trust committee members are FSC

directors, so it would have been fruitless for them as committee

members to reconsider what they had already rejected as directors

of FSC. The necessity for independent consideration, as an

implementation of undivided loyalty, is brushed off by the

defendant as "smoke and mirrors."

Also, there is evidence that some of the officers and

directors of the bank are unfamiliar with the obligations placed

upon them by trust law in general and conflicts of interest in

particular, and by the bank's own policies concerning trusts as

reflected in its manual. Some were unaware of a trustee's duty of

undivided loyalty. Murphy had never seen the trust department's

manual of policies and procedures and did not know of any written

procedures addressing conflicts between the interests of trusts and

the interests of FSC. It appears that, in the bank's transactions

with FSC, the trust committee never independently examined the

interests of beneficiaries of trusts holding FSC stock.

Expert witness Coker testified that a merger could jeopardize
the positions and salaries of Murphy and Wren. In Clark v. Clark

trustees voted stock held by them in trust to elect them as

corporate officers and to pay themselves handsome salaries. The

stock depreciated in value and the beneficiaries sued to charge

them with the loss. The Georgia Supreme Court held:

They are not in a position to impartially consider and decide
this question [whether to sell the stock and reinvest]. Their
duties as trustees and their individual interests conflict.
If this stock were sold, the defendants would or might lose
their offices in this corporation and the emoluments thereof,
which are considerable and substantial. The retention of this
stock by the defendants is their only means by which the
defendant Clark can be secure of his position of president of
the Sutherland Manufacturing Company, and its prerequisites.
These defendants may be possessed of sufficient ability to
postpone interest to duty, but by the imperative interdict of
the law they are forbidden to incur the hazard of the
temptation. Elias v. Schweyer, 17 Misc.Rep. 707, 40 N.Y.S.
906, 908 [ (1896) ]. The defendants, by electing themselves
to these offices in this company, and by accepting salaries as
such, have placed themselves in a position whereby their
personal interests may come directly in conflict with, and, to
a certain extent, antagonistic to their duties as trustees.
It is not necessary to determine that they have acted in bad
faith, or that they have received from the corporation sums in
excess of what their services were reasonably worth.

Clark, 144 S.E. at 790. With particular respect to the First

Alabama approach, Coker testified that the bank's trust committee

should have obtained legal independent counsel and advice on behalf

of the interests of beneficiaries of trusts holding FSC stock. FSC

knew there was shareholder interest favoring a merger. Murphy

testified that he would not consider permitting the trust committee

to obtain independent advice with respect to a transaction that

might involve a conflict between the bank as trustee and FSC. And,

in this appeal, the bank scoffs at obtaining outside counsel to

consider the interests of beneficiaries as a waste of shareholders'

money.
 We have considered whether as a matter of law the trustee

breached its duty of loyalty by failing to "encourage, prompt, and

if necessary join with other stockholders" of FSC to require FSC to

engage in discussion with First Alabama. Plaintiff does not

contend in this suit that there must be a merger with First

Alabama. What he does assert is that the bank breached its

fiduciary duty by not encouraging, prompting or joining with others

to require FSC, which maintained a no-merger policy, to negotiate

with First Alabama.

It cannot be said that the matter of whether the parent should

consider a proposed merger was not a matter of interest to

beneficiaries of the bank as trustee. Murphy conceded in his

testimony that the bank as trustee should make a determination of

whether a proposed merger would be in the best interests of a trust

beneficiary, and if the bank thought it was not in the

beneficiary's best interest it should voice opposition to it and

vote against it. The district court recognized that a trustee

authorized to retain stock may be required to dispose of it in

consequence of a merger.

Trustees who are directed or authorized by the terms of
their trusts to retain existing investments in corporate stock
may be under a duty to dispose of these investments if, as a
consequence of mergers or acquisitions, the essences of the
underlying enterprises are transformed. 76 Am.Jr.2d, Trusts
§ 510. When evaluating whether the shares of a new enterprise
are equivalent to the original investment one should compare,
inter alia, the old and new corporations' spheres of activity
and capital structures. Hirsh v. Hirsh, 209 Va. 630, 634, 166
S.E.2d 286, 288-89 (1969).

Ledbetter v. First State Bank & Trust Co., No. CA-93-124-1-

ALB/AMER(DF), at 4 (M.D.Ga. March 14, 1995).

In the present case there is no proposed merger, only proposed
negotiations and a rebuff by a parent maintaining a no-merger

policy. We cannot say as a matter of law that the bank did or did

not violate its fiduciary duty. Whether it acted properly in

maintaining a no-merger policy and rebuffing First Alabama as an

implementation of that policy, and whether the bank should have

acted to consider the interests of trust beneficiaries, are matters

for a factfinder. Among the considerations implicated are

conditions in the industry and in the community that might make

no-merger the best policy for the bank, or an acceptable policy, or

catastrophic; asserted reasons for the policy and for the decision

not to negotiate; the definite versus inchoate nature of the First

Alabama approach; the possible motivation of officers and

directors who might wish to maintain their salaries and positions.

As with other issues, discussed below, the burden was upon the

trustee having adverse interests to prove that it did not act in

bad faith, or for improper motives, and that it did not obtain

benefits.

We turn to presumptions and burden of proof. The district

court considered that paragraph 10 of the trust agreement required

only that the defendant not act unreasonably and that the burden of

proving unreasonableness was upon plaintiff. Paragraph 10

provides:

(10) Without in any way limiting the authority vested in
TRUSTEE with respect to the handling and management of trust
property, it is, nevertheless, TRUSTOR'S preference and it is
hereby expressed to be his personal preference that the
TRUSTEE retain any corporate stock, partnership interest or
other interest which forms a part of the trust property in
which other descendants of TRUSTOR'S grandfather, W.B. Haley,
or any one or more of them, own a controlling or a substantial
amount of stock or interest. If notwithstanding the
foregoing, TRUSTEE determines that it should sell any part or
 all of such stock or interest, then it is very likely that the
best market for such stock or interest may be any one or more
of the other descendants of W.B. Haley or affiliates thereof.

Revocable Trust of Frederick D. Ledbetter at 4-5. Paragraph (9)

provides that the trustee may not sell any asset having a fair

market value exceeding $5,000 without prior written approval of the

trustor.

The bank contends that paragraph 10 is a plenary waiver of the

trustee's duty of undivided loyalty. That position cannot be

sustained. When plaintiff and the bank were negotiating a trust

agreement the bank's draft included these plenary provisions:

Trustor has the utmost confidence in the First State Bank and
Trust Company and its affiliates, and he expressly relieves
Trustee from any and all restrictions or claims of
self-dealing or undivided loyalty that may arise hereunder.

* * * * * *

In carrying out the foregoing, TRUSTOR expressly relieves
TRUSTEE from any liability in connection therewith and
expressly waives any requirements or restrictions relative to
self-dealing or undivided loyalty.

* * * * * *

[W]ithout limitation, the Trustee shall have all the powers
that it may choose, in its sole discretion, to exercise,
notwithstanding statutory or legal restrictions applicable to
fiduciaries to the contrary ... all of which powers may be
exercised without any order from or permission of any court.

R 3-76-5. Plaintiff rejected these provisions, and paragraph 10

appeared in the executed agreement.

A trustee may not hold in trust its own stock (or stock of an

affiliate) unless given authority to do so. The principles

applicable to the trustee's retention of its own stock apply to

retention of holding parent company stock. A beneficiary may,

however, authorize the trustee to retain as an investment its own
stock (or the stock of an affiliate) received from the trustor.

Without authority to retain ownership the trustee must sell within

a reasonable time. IIA Scott, § 170.15, at p. 371. Paragraph 10

is a waiver of the rule of undivided loyalty with respect to

retaining as an investment FSC stock received from plaintiff as

trustor. It is not a plenary waiver of the duty of undivided

loyalty as that duty relates to future events and occurrences that

are beyond the scope of mere authorized retention. Retain title to

stock received from the grantor the trustee may do. Misuse or

abuse its ownership the trustee may not do. Plaintiff does not

complain of the trustee's retaining ownership but of alleged wrongs

committed by the trustee as authorized holder of title. A trustee

given authority to retain stock received from the trustor must not

act in bad faith or abuse its discretion.

Even where the trustee has discretion, however, the court will
not permit him to abuse the discretion. This ordinarily means
that so long as he acts not only in good faith and from proper
motives, but also within the bounds of a reasonable judgment,
the court will not interfere; but the court will interfere
when he acts outside the bounds of a reasonable judgment.

III Scott, § 187, at p. 14. No matter how broad the language of

the trust instrument may be in conferring discretion upon the

trustee, he will never be permitted to act dishonestly or in bad

faith. Id. § 187.4, at p. 44. Even if the trustee does not act in

bad faith the court will interfere where he acts from an improper

motive. Id. § 187.5, at p. 46. The fact that the trustee has an

interest conflicting with that of the beneficiary is a circumstance

that the court may properly consider in determining whether the

trustee is acting from an improper motive in the exercise of a

discretionary power. Id. § 187.5, at p. 47.
 Additionally, the district court erred in construing paragraph

10 to require the bank to act "reasonably," which is not the

standard of duty for a trustee having an adverse interest, and it

incorrectly placed the burden of proof upon plaintiff. The burden

was upon the bank to show that it did not act dishonorably or in

bad faith or for improper motives and that it did not benefit from

its actions and inactions.

These principles preclude the entry of summary judgment for

defendant on the First Alabama claim.

IV. The sale of FSC treasury stock

FSC proposed to sell about 88,000 shares of its stock held in

trusts for which the bank was trustee, including plaintiff's trust.

Some, if not all, of the shares were to be purchased by officers

and directors of the bank and of FSC. Plaintiff and others

consented but withdrew their consent after securing legal counsel,

and the proposal was cancelled. Quickly thereafter FSC sold

100,000 shares of its treasury stock in a public offering. The

bank asserts that the objects of the offering were to broaden

ownership of its stock, increase public trading, and to serve as a

"mandate" to rebuff potential purchasers of FSC. Plaintiff

contends that there was no legitimate purpose, that the motive to

chill any possible purchase or merger was improper, that the sale

diluted his interest as represented by the shares in his trust,

that his interests had to be considered, and that the bank failed

to make any effort to stop the offering.

Murphy testified that FSC did not consider the interests of

trust beneficiaries in the sale of FSC treasury stock but rather
was "taking stock public" to enhance the value to all shareholders.

He could not say whether the trust committee of the bank—of which

he was a member—ever discussed or considered the matter.

For the reasons we have discussed we hold, with respect to the

sale of treasury stock, that the failure of the bank to consider

and assert the interests of beneficiaries of trusts owning FSC

stock was a breach of the bank's fiduciary duty as a matter of law.

This was a firm and defined transaction, and the responsibility to

beneficiaries was clear. The trustee's obligation of undivided

loyalty to plaintiff was not eliminated by the fact that dilution

of his interests, measured statistically, was not great, or that

the decision may have been a reasonable pursuit of FSC's desire for

self-preservation, or the argument that after the treasury stock

was sold the market value of plaintiff's stock increased.

V. The resignation by the trustee

Plaintiff has not asked that the bank should be removed as

trustee. Rather he says that he wants the bank to continue as

trustee and to comply with its fiduciary obligations. For example,

he says that other members of his family own FSC stock, and should

a merger be proposed that is in the interests of trust

beneficiaries, the bank, as his trustee, can join with other

family-member shareholders to support the merger (and possibly to

control a decision). Also, he asserts that the value of his FSC

stock was enhanced when held in conjunction with FSC shares owned

by other trusts.

Four days after plaintiff filed this suit the trust officer,

in a knee-jerk reaction, sent him a certificate for the FSC stock
held in his trust and invited him to consider revoking the trust.

Instead plaintiff promptly amended his complaint to charge that

returning the stock was a breach of trust and was intended to

prevent him from asserting the claims that had been made in his

original complaint by depriving him of standing. The bank then

resigned as trustee.

The complaint was not amended to allege that the bank breached

its obligations by resigning. However, we consider this issue

because it was tried by consent—presented by the parties in the

district court and decided by it, and presented to us on appeal.

Coker testified that the return of the stock and the resignation

violated the trust agreement, the bank's policy manual, and

commonly accepted principles in the industry. The district court

held that the resignation was not inappropriate, because the trust

agreement authorized the bank to resign or revoke the trust on 30

days notice, and the trustee, accused of acting disloyally, had

acted appropriately to relieve the situation. And, the court

added, in view of the differences between the parties, if asked, it

would have permitted the bank to resign.

A trustee may not relieve itself of its role or its duties

merely because it wishes to. It may resign with permission of a

proper court, or with the consent of the beneficiaries, or in

accordance with the terms of the trust agreement. II Scott, § 106,

at p. 96.

The power to resign, like other discretionary powers

possessed by a trustee with conflicts of interest, must be

exercised in good faith, for proper motives, and within the bounds
of proper business judgment, and the burden of proof rests on the

trustee. The bank could have sought permission of a court to

resign pursuant to O.C.G.A. § 53-12-175, citing disagreement

between the beneficiary and the trustee, but it did not do so. A

petition to the court would have to be served on the beneficiary,

and it would have to be shown, presumably after an opportunity by

the beneficiary to be heard, that the resignation would not be

disadvantageous to the trust. O.C.G.A. § 53-12-175(a)(3)(F).

Plaintiff's claim that the trustee resigned for improper

motives and without regard to his interests could not be disposed

of by summary judgment.

VI. Compensation to bank officers

The salaries of Murphy and Wren and two other principal

officers of the bank are paid by FSC. The bank pays FSC a

management fee. This is explained on the ground that the officers

provide service for the bank and FSC (and thus for the other

subsidiary bank). So that all entities can fairly share in the

compensation of those officers they are paid by FSC, and the

subsidiaries pay management fees to FSC, which in turn pays the

officers.

Plaintiff contends these payments by FSC to the bank officers

violate O.C.G.A. § 53-6-151, which we set out in the margin.4

4
53-6-151. Compensation of resident executor or trustee by
corporation or business enterprise for rendition of certain
services; execution and approval of contract.

(a) Any executor of a decedent resident of this state
and any trustee resident in this state may receive
compensation for services, as specified in this subsection,
from a corporation or other business enterprise, where the
estate of the decedent or the trust estate owns an interest
 Subsection (d) points out that the statute was enacted to

permit extra compensation to be paid to a trustee for "business

management and advisory services" without having to apply to the

in the corporation or other business enterprise, provided
that:

(1) The services provided by the fiduciary to the
corporation or other business enterprise are of a
managerial, executive, or business advisory nature;

(2) The compensation received for the services is
reasonable; and

(3) The services are performed and the fiduciary
is paid pursuant to a contract executed by the
fiduciary and the corporation or business enterprise,
which contract is approved by a majority of those
members of the board of directors or other similar
governing authority of the corporation or business
enterprise who are not officers or employees of the
fiduciary and are not related to the fiduciary and
provided the contract is approved by the judge of the
probate court of the county in which the administration
proceeding is pending or which is the situs of the
trust.

(b) Any executor receiving compensation from a
corporation or other business enterprise for services to it
as described in subsection (a) of this Code section shall
not receive extra compensation in respect to such services
for extraordinary service as provided in Code Section 53-6-
150; provided, however, that nothing contained in this Code
section shall prohibit the receipt by the fiduciary of extra
compensation for extraordinary services rendered in respect
to other assets or matters involving the estate or trust.

(c) Nothing in this Code section shall prohibit the
receipt by executors and trustees of normal commissions and
compensation for the usual services performed by executors
and trustees pursuant to law or pursuant to any fee
agreement executed by the testator or settlor.

(d) The purpose of this Code section is to enable
additional compensation to be paid to executors and trustees
for business management and advisory services to
corporations and business enterprises pursuant to contract,
without the necessity of making application for extra
compensation for extraordinary services rendered pursuant to
Code Section 53-6-150.
probate court for approval of extra compensation for extraordinary

services as otherwise would be required by § 53-6-150.

The position of the bank is, first, that this claim is a

"nonsensical" attack on ordinary salaries paid to bank officers and

on a bank's power to set the salaries of its officers. To the

contrary, the claim questions salaries paid to officers of a

trustee bank by a corporate affiliate whose stock the trustee holds

in trust. Second, the bank says that the compensation paid by FSC

is paid to the individual officers of the corporate trustee, not to

the trustee itself. But this argument runs afoul of the corporate

veil. Are the officers of the bank to be considered as the bank?

Does the benefit to the trustee of being relieved from having to

pay salary to its officers, a benefit conferred by the affiliate,

violate common law trust principles? Third, the bank says that §

53-6-151 does not apply because the corporate trustee performs no

service to FSC of a management, executive, or business advisory

nature. Again, this encounters the corporate veil issue. Does the

bank perform services for FSC when its principal officers and

directors do—indeed they are FSC's senior management. Or, putting

it another way, in this case does the difference matter?

Additionally, the bank says that these officers had no duties

relating to plaintiff's trust. Even if this is relevant, it is

wrong. Both are members of the trust committee.

The bank's position exposes it to an additional question. If

the compensation paid by FSC to the bank's officers is not "extra

payment" required to be authorized pursuant to § 53-6-151 is it

payment for "non-extra" managerial services performed in violation
of common law trust principles that, because of conflict of

interest, a trustee may not serve as an officer of, or receive

compensation from, a corporation whose stock the trustee holds?

Murphy testified that he had no understanding one way or the

other whether a trustee could receive compensation from a

corporation in which the trust owns stock. The trust committee

never considered whether bank officers could properly receive

compensation from the holding company.

The compensation issue could not be disposed of by summary

judgment.

VII. Remedies

The question of remedy for any claim found to have merit is

for the district court. By statute Georgia specifically provides

for numerous alternative causes of action and remedies, statutory

and common law, for breaches of trust. O.C.G.A. §§ 53-12-191, 53-

12-192, 53-12-193. We do not hold or imply that plaintiff can

prove compensatory damages or that he is entitled to punitive

damages or to any particular remedy or form of relief. These are

district court issues. We do hold, however, that uncertainties of

proving damages are not elements in determining whether a breach of

trust has been committed.

REVERSED and REMANDED.