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Peterson v. Peterson

Supreme Court of Georgia

March 5, 2018

PETERSON
v.
PETERSON

          HINES, CHIEF JUSTICE.

         In consolidated actions in superior court, appellants Alex and David Peterson, who are brothers, claimed, among other things, that their mother, appellee Mary Peterson, and their brother, appellee Calhoun Peterson, had breached their duties as executors of the will of Mary's husband, Charles Hugh Peterson, and as trustees of a bypass trust created by that will.[1] This appeal stems from the superior court's grant of a motion for summary judgment filed by Mary.[2] For the reasons that follow, we reverse the judgment of the superior court.

         Charles Hugh Peterson died testate in 1994. Item 5 of his will created a marital trust for Mary, while Item 6 created a bypass trust for Mary and their three sons. Mary and her three sons were all named as co-executors and co-trustees of the will and trusts. While all four were first appointed co-executors, David later resigned as an executor. Other than some specific personal property, all the real and personal property of the estate was to be placed in either the marital trust or the bypass trust, and the bypass trust was designed to have a value of $600, 000. The estate consisted largely of stock in various private companies, including Montgomery County Bank and Vidalia Naval Store (VNS) (also referred to as Vidalia Gum Turpentine), as well as substantial real estate holdings. Also, at the time of his death, the testator owned several financially distressed family companies, including Metter Manufacturing Company, Embassy Enterprises, Inc., and Firecracker, Inc. The Montgomery Bank and VNS stock were assigned to the bypass trust, and had values of $106, 000 and $208, 000, respectively, in 1998. The 16, 000 shares of VNS stock had a value of $13 per share in 1998 and sold for $122 per share in May 2015.

         Item 5 of the will provides that all of the income from the marital trust goes to Mary for her life and that Mary has "the power at any time and from time to time . . . to direct the Trustees to turn over any part of the property in this trust to my said wife or to or among such of my descendants or spouses of such descendants." At Mary's death, in the event that she has not disposed of the trust property in her will or by her power of appointment, it will become part of the bypass trust if it is still in existence. If it is not, the property is to be divided between Alex, David, and Calhoun or their descendants.

         The bypass trust provides that Mary is entitled to the income from the bypass trust for life and that the trustees have discretion to encroach upon the principal of the trust "to provide for the support in reasonable comfort of my wife and to provide for the proper support and education of my descendants taking into account and consideration any other means of support they or any of them may have to the knowledge of the Trustees." The bypass trust also provides that, after any descendant has completed his education, the trustees "shall not be required to make any payment for the support of such descendant" unless the trustees think there is "ample property to support my wife and educate my descendants or unless such descendant is unable to support himself." The bypass trust further says that the testator's "primary desire is that my wife be supported in reasonable comfort during her lifetime and that my children be supported in reasonable comfort during their lives; my secondary desire is that the principal of this trust be preserved as well as possible consonant with the consummation of my primary objective." Under this trust, Mary may direct the trustees to turn over any trust property to any descendant of her choice, but may not appoint the property to herself. At Mary's death, in the event that she has not disposed of the trust property by her power of appointment, it is to be divided between Alex, David, and Calhoun or their descendants.

         Finally, Item 21 (a) of the will provides that "[i]n all matters relating to my estate or to any trust, the decision of a majority of the Executors or Trustees then acting shall control, provided such majority shall include my wife is [sic] she is then acting."

         In their complaints, Alex and David alleged that Mary and Calhoun have made all the decisions under the will and trusts without consulting them and that Alex and David had communicated their objections regarding the handling of the trusts to Mary and Calhoun. Alex and David also alleged that Mary and Calhoun had breached their fiduciary duties as executors and trustees by not properly funding the bypass trust, by converting estate assets for their own benefit, by wasting estate assets by using them to continue the operations of several financially distressed businesses owned by the testator at his death, by improperly encroaching upon the principal of the bypass trust for Mary's benefit, and by disregarding one of the testator's primary desires, with regard to the bypass trust, that "my children be supported in reasonable comfort during their lives." Alex and David sought support from the bypass trust, an accounting, the appointment of a receiver, the removal of Mary and Calhoun as executors and trustees, and the appointment of one of them or an independent party as sole executor and trustee.

         In May 2016, Mary moved for summary judgment on all these claims. In November 2016, the superior court granted summary judgment to Mary, and Alex and David have appealed that ruling.

         1. "To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. OCGA § 9-11-56 (c)." Hardin v. Hardin, 301 Ga. 532, 536 (801 S.E.2d 774) (2017) (citation and quotation marks omitted). "A defendant may do this by either presenting evidence negating an essential element of the plaintiff's claims or establishing from the record an absence of evidence to support such claims." Cowart v. Widener, 287 Ga. 622, 623 (697 S.E.2d 779) (2010) (citation and quotation marks omitted). Here, Mary, as the defendant, did not put in any evidence, and she did not attempt to point to the absence of evidence in the record to support Alex's and David's claims. Instead, in a brief one and a half page motion, she argued that the will was a "law unto itself, " Bratton v. Trust Co. of Georgia, 191 Ga. 49, 56 (11 S.E.2d 204) (1940), and granted her the power to do all the acts supporting Alex's and David's claims. The trial court agreed and granted her motion.

         2. Of the many allegations of the complaints, the superior court specifically addressed two of them. One was Alex's and David's allegation that Mary and Calhoun, as trustees, had not properly considered the testator's stated intention "to provide for the proper support and education of my descendants taking into account and consideration any other means of support they or any of them may have to the knowledge of the Trustees." With regard to this issue, the superior court ruled against Alex and David for two reasons.

         First, the court concluded that, because Item 21 of the will provided that a decision of the majority of the trustees would be controlling only so long as Mary was one of the majority, Alex and David would be entitled to income under the bypass trust only if Mary approved it.[3] Second, the court concluded that, because of the requirement that Mary be a part of the majority of executors or trustees for one of their decisions to control, because of the benefits granted to Mary under the trusts, and because of her power to appoint trust property, the primary purpose of the trusts was to support Mary, and there was thus "no requirement that income be provided to either [Alex or David]." These conclusions of the superior court, however, did not warrant the grant of summary judgment to Mary.

         To begin, we note that "the cardinal rule in trust law is that the intention of the settlor is to be followed." Rollins v. Rollins, 294 Ga. 711, 714 (755 S.E.2d 727) (2014). Moreover,

[a] trustee has a duty to administer a trust in accordance with its terms and purposes. OCGA § 53-12-241; see also Restatement (Third) of Trusts § 76 (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."); Restatement (Third) of Trusts § 73, comment (c) (2007) ("A fundamental duty of the trustee is to carry out the directions of the testator or settlor as expressed in the terms of the trust"), ...

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