King v. King: Georgia Court Defines Fiduciary Duty in Trust Dispute

The case of King v. King involved a dispute over the handling of a wrongful death settlement that had been set aside for the benefit of a minor. The case arose when Elkin King sued his former stepfather, Forrest King, Jr., alleging that Forrest had concealed, misused, and converted settlement funds that were meant for Elkin's benefit. The Supreme Court of Georgia answered a certified question from the Eleventh Circuit, clarifying the legal standard for breach of fiduciary duty claims based on a failure to disclose.

Background and Legal Issues

In 1985, Elkin King’s father died in a plane crash, and a wrongful death settlement provided at least $200,000 for Elkin’s benefit. The settlement funds were placed in an account at Charles Schwab, titled “Elkin’s Account with Custodian of Forrest King.” Forrest, acting as the custodian, maintained control over the funds, and the account was used for Elkin’s benefit while he was a minor. Approximately $150,000 was spent before Elkin turned 18.

Elkin alleged that after turning 18 in 1996, he was never informed of the remaining funds, which were later used by his mother, Peggy Fulford, to purchase a condominium. Elkin claimed he did not learn of the funds until 2017 and subsequently sued Forrest in federal court for breach of fiduciary duty and conversion. The district court granted summary judgment in favor of Forrest, ruling that there was no evidence he used the funds improperly.

On appeal, the Eleventh Circuit upheld the ruling on conversion but questioned whether the failure to disclose the funds constituted a breach of fiduciary duty. It certified three questions to the Georgia Supreme Court:

1. Can a breach of the duty to disclose in a confidential relationship support a breach-of-fiduciary-duty tort claim?
2. If so, can an adult fiduciary fulfill the duty to disclose by informing the minor’s parents or guardians instead of the minor directly?
3. If direct disclosure is required, when must the fiduciary make this disclosure?

Court’s Analysis and Findings

The Supreme Court of Georgia answered the first certified question affirmatively. The court held that when a confidential relationship is also a fiduciary relationship, a fiduciary’s fraudulent breach of the duty to disclose can support a breach-of-fiduciary-duty claim. The court emphasized that fiduciaries have a duty to act with “the utmost good faith.” If a fiduciary conceals or suppresses material facts when they have a duty to disclose, it may amount to actual fraud.

However, the court declined to answer the second and third questions, stating that they involved fact-specific determinations that could be resolved under existing Georgia law. The ruling clarified that whether a fiduciary has failed to act in good faith in a given situation is a factual question rather than a legal one.

Conclusion and Ruling

The Supreme Court of Georgia held that a breach of the duty to disclose in a fiduciary relationship can support a breach-of-fiduciary-duty tort claim. The case now returns to the Eleventh Circuit for further proceedings to determine whether Forrest’s actions constituted a failure to act in good faith and whether Elkin’s claim should proceed.

Legal Guidance for Businesses

Understanding fiduciary duties and disclosure obligations is critical in financial and custodial relationships. Our team at Whitcomb, Selinsky, PC provides expert legal counsel on fiduciary responsibilities, trust management, and litigation involving financial disputes.