February 11, 2015
Authored by: Luke Lantta
When trustees are put in control of family entities held in trust, it may pay to clearly differentiate the capacity in which the trustee takes an action. Is the trustee taking a trustee-level action or is the trustee taking a corporate/partnership/entity-level action?
When we last looked at Rollins v. Rollins, the Georgia Supreme Court was holding that where, under the terms of a trust, a 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. The Georgia Supreme Court then remanded the case to the Georgia Court of Appeals for further consideration in light of that standard.
In the latest round of Rollins v. Rollins, the Georgia Court of Appeals considered the Georgia Supreme Court’s directives and then sent the case back to the trial court for further consideration. The reason was that, a “necessary precursor to the application of any fiduciary standard” is a determination of whether the person accused of breaching a duty was acting as a director or as a trustee when taking the complained of act. A related precursor is whether the complained of actions were corporate duties and actions as opposed to trustee-level duties and actions.
A trustee charged with dual roles – that of trustee and that of director or corporate manager – should consider ways in which to clearly identify the capacity in which it is acting and the nature of the act it is taking (trustee-level or corporate-level) because it may matter to the standard of care against which that act is judged.