2020 Georgia Code
Title 53 - Wills, Trusts, and Administration of Estates
Chapter 12 - Trusts
Article 14 - Trustee Liability
§ 53-12-301. Actions for Breach of Trust

1. If a trustee commits a breach of trust, or threatens to commit a breach of trust, a beneficiary shall have a cause of action to seek:
   1. To recover damages;
   2. To compel the trustee to perform the trustee's duties;
   3. To require an accounting;
   4. To enjoin the trustee from committing a breach of trust;
   5. To compel the trustee to redress a breach of trust by payment of money or otherwise;
   6. To appoint a temporary trustee to take possession of the trust property and administer the trust or to suspend a trustee with or without the appointment of a temporary trustee;
   7. To remove the trustee; and
   8. To reduce or deny compensation of the trustee.
2. When trust assets are misapplied and can be traced in the hands of persons affected with notice of the misapplication, the trust shall attach to such assets. A creditor of a trust may follow assets in the hands of beneficiaries even if they were received without notice.
3. The remedy set forth in subsection (c) of Code Section 53-12-363 shall be the exclusive remedy for an abuse of discretion as provided in Code Sections 53-12-361 and 53-12-362.
4. The provision of remedies for breach of trust shall not prevent resort to any other appropriate remedy provided by statute or common law.

(Code 1981, §53-12-301, enacted by Ga. L. 2010, p. 579, § 1/SB 131.)

- Registration of securities generally, § 10-5-20 et seq.

Effect of purchase by or from one without notice of equity, § 23-1-19.

Liability of the legatees or distributees with respect to an unpaid debt of the estate, § 53-7-43.

ANALYSIS

• General Consideration
• Option of Affirmance or Rejection of Unauthorized Investment
• Notice

General Consideration

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under Act of 1799, former Code 1882, §§ 4184 and 4186, former Code 1895, § 3201, former Civil Code 1910, §§ 3595, 3785, 4521, and 4587, former Code 1933, § 108-424, former O.C.G.A. §§ 53-12-6,53-13-62, and53-13-63, and former O.C.G.A. § 53-12-192 of the 1991 Trust Act are included in the annotations for this Code section.

- When, in a divorce case, the jury clearly intended to create a trust for the purpose of providing support for the minor child during the child's minority and also intended that there be monthly payments from the trust for the use of the child, but the husband failed to take any substantive steps to set up the trust, there was no error in the trial court naming a trustee and effectuating the trust by requiring the husband to make the payments necessary to uphold the husband's share of the debts, encumbrances, and maintenance of the trust property. Aycock v. Aycock, 251 Ga. 104, 303 S.E.2d 456 (1983) (decided under former O.C.G.A. § 53-12-6).

When a bank did not invest all of a decedent's trust's assets in treasury bills, the bank breached the bank's fiduciary duty, under former O.C.G.A. § 53-12-192 (see O.C.G.A. § 53-12-301), to the trust's beneficiaries, and the bank was liable for the difference between the income received and the income that would have been received had the assets been so invested; however, the bank was only liable for the estate taxes on half of the trust's assets because the bank would have been justified in investing half of those assets in short-term, taxable, treasury bills. Wachovia Bank of Ga., N.A. v. Namik, 275 Ga. App. 229, 620 S.E.2d 470 (2005) (decided under former O.C.G.A. § 53-12-192).

- When a bank, with notice that a fund is the sinking fund of a municipality, illegally receives such fund from the municipality in violation of Acts 1910, p. 100 (see O.C.G.A. § 36-38-1) and mingles the fund with the general cash assets of the bank, and shortly thereafter suspends operation and the bank's business is taken in charge by the superintendent of banks (now commissioner of banking and finance) as an insolvent institution, the municipality may trace the trust fund and have restitution from the mingled fund, and any particular property in which the mingled fund may have been invested, but not in other funds of the bank. Town of Douglasville v. Mobley, 169 Ga. 53, 149 S.E. 575 (1929) (decided under former Civil Code 1910, § 4587).

When a clerk of a county treasurer transferred property purchased with embezzled funds to sureties on the treasurer's bond to save them harmless on account of the clerk's embezzlement, and the county, with notice of the pertinent facts, caused an execution to be levied on the property as the property of the sureties, the county's action constituted an election to affirm the legal title of the clerk and prevented the county from asserting a right to trace the stolen funds into the property. U.S. Fid. & Guar. Co. v. Richmond County, 174 Ga. 599, 163 S.E. 482 (1932), later appeal, United States Fid. & Guar. Co. v. Clarke, 182 Ga. 755, 187 S.E. 420 (1936) (decided under former Civil Code 1910, § 3785).

While it is the rule that a bona fide purchaser of property in which trust funds have been invested is protected, the beneficiary of a trust estate may at the beneficiary's option, within a reasonable time, "affirm or reject an unauthorized investment by the trustee," and equity will aid the beneficiary in recovering the funds or property, or enforcing a lien for the wrongfully used funds, provided that the assets can be traced and remain in the hands of a person "affected with notice of the misapplication." Tattnall Bank v. Harvey, 186 Ga. 752, 198 S.E. 724 (1938) (decided under former Code 1933, § 108-424).

Mere fact that purchaser might have had some knowledge of a mingling by the purchaser's vendor of trust funds with the purchaser's own is not sufficient to charge the vendee with notice that trust funds had been diverted in the purchase of a particular piece of land. Tattnall Bank v. Harvey, 186 Ga. 752, 198 S.E. 724 (1938) (decided under former Code 1933, § 108-424).

- Property left by K at K's death constituted a fund which K's children, to the extent of their interest therein, had the right to follow wherever the property could be traced. Dodd & Co. v. Bond, 88 Ga. 355, 14 S.E. 581 (1892) (decided under former Civil Code 1910, § 3152).

- When trustee deposits money in bank, bank has the right to assume that the money so deposited will be applied by the trustee to proper purposes under the trust; and, acting under this assumption, the bank may lawfully pay the checks drawn by the person depositing the money, whether signed in the person's representative capacity or not. Georgia R.R. Bank & Trust Co. v. Liberty Nat'l Bank & Trust Co., 180 Ga. 4, 177 S.E. 803 (1934) (decided under former Civil Code 1910, § 3595).

Creditor's right of attachment in this connection is to have assets of estate in hands of legatee applied in satisfaction of debt, if the assets be sufficient for that purpose. Trustees of Jesse Parker Williams Hosp. v. Nisbet, 191 Ga. 821, 14 S.E.2d 64 (1941) (decided under former law).

- Person injured may join in one action the person occupying the fiduciary relationship and one who aids and assists one in applying assets. Adams v. McGehee, 211 Ga. 498, 86 S.E.2d 525 (1955) (decided under former Code 1933, §§ 108-423 and 108-425).

As regards establishment of debt due by estate, defendant legatees stand in place of executor. Thus, the action is not governed by the limitations in reference to actions for money had and received or unjust enrichment, but by the limitations to actions on the character of the claim against the estate. Trustees of Jesse Parker Williams Hosp. v. Nisbet, 191 Ga. 821, 14 S.E.2d 64 (1941) (decided under former Code 1933, § 108-425).

When person dies owing debt, the person's creditor may in equity follow assets left by such person in hands of distributee, and when the assets received by the distributee are sufficient to pay the debt, the creditors may obtain a personal judgment against the distributee for the amount of debt. Caldwell v. Montgomery, 8 Ga. 106 (1850) (decided under former law); Morrison v. Fidelity & Deposit Co., 150 Ga. 54, 102 S.E. 354 (1920);(decided under former Civil Code 1910, § 3785).

Creditor can follow assets into the hands of a distributee, with proper pleadings for that purpose, as well in a court of law as in a court of equity, but if the creditor elects to proceed in the former court, the creditor must allege and prove the same substantial facts as would be required to entitle the creditor to relief in the latter. As to requisite facts, see Scranton v. Demere, 6 Ga. 92 (1849) (decided under former law); Caldwell v. Montgomery, 8 Ga. 106 (1850); Johnson v. Lewis, 8 Ga. 460 (1850) (decided under former law); Justices of Inferior Court v. Moreland, 20 Ga. 145 (1856); Jones v. Parker, 55 Ga. 11 (1875);(decided under former law);(decided under former law).

Statute applies to distributees whether the distributees had notice of debt or not and a creditor of the estate may collect the debt out of the distributees. Chamblee v. Atlanta Brewing & Ice Co., 131 Ga. 554, 62 S.E. 1032 (1908) (decided under former Code 1895, § 3201).

Disposition of trust property by will, by testator who was trustee, is conversion of property, but it may be followed by cestui que trust into the hands of the executor. Arline v. Miller, 22 Ga. 330 (1857) (decided under the Act of 1799).

When deed refers to representative fiduciary relationship expressly, the deed is sufficient notice. Inman, Swann & Co. v. Foster, 69 Ga. 385 (1882) (decided under former law).

If trustee invests trust funds in own name, remaindermen may follow the funds as in other cases of trust. Cunningham v. Schley, 41 Ga. 426 (1870) (decided under former law).

- Trial court properly denied a university's motion to dismiss for failure to state a claim in a breach of fiduciary suit because the trust trustee had authorized the transfer of $ 1 million from the trust to the university and such funds were subject to a constructive trust since the funds were held by the university. Reinhardt Univ. v. Castleberry, 318 Ga. App. 416, 734 S.E.2d 117 (2012).

Cited in Miller & Co. v. Gibbs, 161 Ga. 698, 132 S.E. 626 (1926); Wall v. Wall, 176 Ga. 757, 168 S.E. 893 (1933); Castleberry v. Wells, 183 Ga. 328, 188 S.E. 349 (1936); Wilson v. Aldenderfer, 183 Ga. 760, 189 S.E. 907 (1937); Parker v. Harling, 187 Ga. 419, 200 S.E. 800 (1939); Ross v. Rambo, 195 Ga. 100, 23 S.E.2d 687 (1942); Malcolm v. Webb, 211 Ga. 449, 86 S.E.2d 489 (1955); Hodges v. Hodges, 221 Ga. 587, 146 S.E.2d 313 (1965); Allan v. Allan, 236 Ga. 199, 223 S.E.2d 445 (1976); Aetna Life Ins. Co. v. Weekes, 241 Ga. 169, 244 S.E.2d 46 (1978); Babb v. Potts, 183 Ga. App. 785, 360 S.E.2d 44 (1987).

Option of Affirmance or Rejection of Unauthorized Investment

Option of affirmance or rejection of unauthorized investment generally.

- While it is the rule that a bona fide purchaser of property in which trust funds have been invested is protected, the beneficiary of a trust estate may at the beneficiary's option, within a reasonable time, "affirm or reject an unauthorized investment by the trustee," and equity will aid the beneficiary in recovering the funds or property, or enforcing a lien for the wrongfully used funds, provided that the assets can be traced and remain in the hands of a person "affected with notice of the misapplication." Tattnall Bank v. Harvey, 186 Ga. 752, 198 S.E. 724 (1938) (decided under former Code 1933, §§ 108-424 and 108-425).

If it be true, as alleged, that H conveyed to M H's interest in a railroad company to enable the latter to build a railroad, and if instead of building the railroad its entire franchise and all its holdings were conveyed by a void contract to another corporation, it is optional with H to proceed against M for the breach of their undertaking, or to pursue and attempt the recaption of the property itself. Hamilton v. Savannah, F. & W. Ry., 49 F. 412 (S.D. Ga. 1892) (decided under former law).

Property left by K at K's death constituted a fund which K's children, to the extent of their interest therein, had the right to follow wherever it could be traced. When the widow bought the land in question with the money of her children, taking the title in her own name, the beneficial interest in the property at once vested in them, and she held as their trustee, though as one who has so wrongfully. Dodd & Co. v. Bond, 88 Ga. 355, 14 S.E. 581 (1892) (decided under former law).

To follow trust funds, it must be possible to identify the funds, to show that the funds have gone into property sought to be subjected. Vason v. Bell, 53 Ga. 416 (1874) (decided under former law).

- When a trustee invests trust funds in property in the trustee's own name, the cestui que trust may elect to follow the corpus, and as against a judgment creditor of the trustee, the title of the cestui que trust has the preference, especially if the debt of the creditor be in existence at the time of the purchase of the property by the trustee with the trust funds. Gray v. Perry, 51 Ga. 180 (1874) (decided under former law).

- When a guardian has loaned the ward's funds with the guardian's own, in the ward's name individually, the ward may reclaim the ward's due share of the common fund in the hands of an agent or attorney of the guardian, or even of a creditor of the guardian who has acquired the funds with notice of the ward's title. Alspaugh v. Adams, 80 Ga. 345, 5 S.E. 496 (1887) (decided under former Code 1882, §§ 4184 and 4186).

Option to affirm or reject unauthorized investment by trustee does not apply in case where trust has reference to sinking fund of municipality and is transferred by the treasurer of the municipality in violation of Acts 1910, p. 100 (see O.C.G.A. § 36-38-1). The statute prohibiting any disposition of the sinking fund except as therein provided, the municipality cannot by ratification validate a contract which the municipality had no power to make. Town of Douglasville v. Mobley, 169 Ga. 53, 149 S.E. 575 (1929) (decided under former Civil Code 1910, § 3768).

If trustee changes investment, with consent of cestui que trust, who is of legal age, the trustee is not liable for loss growing out of such new investment. Campbell v. Miller, 38 Ga. 304, 95 Am. Dec. 389 (1868) (decided under former law).

Notice

Notice generally.

- If a bank actively aids the trustee in misappropriating the fund, and especially if the bank participates in the misappropriation and receives the fruits of such misappropriation by obtaining payment of a debt due the bank by the trustee in one's individual capacity, the bank would be liable to the true owners of the fund for the amount thus wrongfully appropriated by the bank to the bank's own uses. Georgia R.R. Bank & Trust Co. v. Liberty Nat'l Bank & Trust Co., 180 Ga. 4, 177 S.E. 803 (1934) (decided under former Civil Code 1910, §§ 3595 and 4521).

When a trustee deposits money in a bank, the bank has a right to assume that the money so deposited will be applied by the trustee to the proper purposes under the trust; and, acting under this assumption, the bank may lawfully pay the checks drawn by the person depositing the money, whether signed in one's representative capacity or not. Georgia R.R. Bank & Trust Co. v. Liberty Nat'l Bank & Trust Co., 180 Ga. 4, 177 S.E. 803 (1934) (decided under former Civil Code 1910, §§ 3595 and 4521).

When the absolute title to property is apparently in a vendor or mortgagor, the vendee or mortgagee is protected, unless the one seeking to set up a lien or trust against the property can show that the vendee or mortgagee had notice of trust funds having gone into the property. Tattnall Bank v. Harvey, 186 Ga. 752, 198 S.E. 724 (1938) (decided under former Code 1933, §§ 108-424 and 108-425).

Mere fact that purchaser might have had some knowledge of a mingling by one's vendor of trust funds with one's own is not sufficient to charge the vendee with notice that trust funds had been diverted in the purchase of a particular piece of land. Tattnall Bank v. Harvey, 186 Ga. 752, 198 S.E. 724 (1938) (decided under former Code 1933, §§ 108-424 and 108-425).

RESEARCH REFERENCES

ALR.

- Following trust funds deposited in mixed bank account of trustee, 26 A.L.R. 3; 35 A.L.R. 747; 55 A.L.R. 1275; 102 A.L.R. 372.

Following or identifying trust funds in assets of insolvent bank, 82 A.L.R. 46.

Effect of beneficiary's consent to, acquiescence in, or ratification of, improper investments or loans (including failure to invest) by trustee or other fiduciary, 128 A.L.R. 4

Distribution of funds where funds of more than one trust have been commingled by trustee and balance is insufficient to satisfy all trust claims, 17 A.L.R.3d 937.

Imposition of constructive trust in property bought with stolen or embezzled funds, 38 A.L.R.3d 1354.