Reinhardt University v. Castleberry

734 S.E.2d 117, 318 Ga. App. 416, 2012 Fulton County D. Rep. 3541, 2012 Ga. App. LEXIS 928
CourtCourt of Appeals of Georgia
DecidedNovember 8, 2012
DocketA12A1651
StatusPublished

This text of 734 S.E.2d 117 (Reinhardt University v. Castleberry) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Reinhardt University v. Castleberry, 734 S.E.2d 117, 318 Ga. App. 416, 2012 Fulton County D. Rep. 3541, 2012 Ga. App. LEXIS 928 (Ga. Ct. App. 2012).

Opinion

PHIPPS, Presiding Judge.

Reinhardt University, formerly known as Reinhardt College, appeals the denial of its motion to dismiss (for failure to state a claim) the complaint filed against it by Joan Hasty Castleberry. We affirm.

This lawsuit concerns a $1 million donation made to the school with allegedly misappropriated funds in which Castleberry had an expected interest. In her complaint, Castleberry alleged the following. Castleberry’s father died in 2003, leaving a wife and three children. Pursuant to his will, one or more marital trusts (hereinafter, “trust”) were established for the benefit of his wife, with his son 'William Hasty, Jr., named as the trustee. The trust provided that, after the wife died, the trust remainder would be divided among the three children. While the wife was still alive, Hasty — who was also a trustee of then Reinhardt College—pledged a $ 1.5 million donation to the school. Then, through a series of financial transactions, Hasty effectively transferred approximately $1 million from the trust to the school to partially satisfy the pledge. The wife died thereafter, in 2009.

Castleberry alleged further in the complaint that her brother Hasty, as trustee of the (marital) trust, owed a fiduciary duty of [417]*417utmost good faith and loyalty to her and the other remainder beneficiaries.1 She asserted that he had breached the fiduciary duty and committed breach of trust contemplated by OCGA § 53-12-301;2 she alleged that Hasty had lacked authority to transfer the $1 million as a gift to the University, thereby encroaching upon her remainder share. Therefore, Castleberry claimed, the University could not enjoy the beneficial interest in the $ 1 million without violating principles of equity because it had received the money as a result of Hasty’s unauthorized actions.

Given the foregoing, Castleberry sought to impose upon the $1 million donation (or property traced therefrom) a constructive trust pursuant to OCGA § 53-12-132. That Code section provides: “A constructive trust is a trust implied whenever the circumstances are such that the person holding legal title to property, either from fraud or otherwise, cannot enjoy the beneficial interest in the property without violating some established principle of equity.”3

The University moved to dismiss the action under OCGA § 9-11-12 (b) (6) for failure to state a claim upon which relief could be granted. The University pointed out that although Castleberry had accused Hasty of wrongdoing, she had not alleged any wrongdoing on its part. The University thus characterized Castleberry’s complaint as having “brought only one count against the University: Constructive Trust Pursuant to OCGA § 53-12-132.” The University then cited St. Paul Mercury Ins. Co. v. Meeks4 for the proposition that the imposition of a constructive trust is a remedy, not an independent cause of action.5 The University argued that St. Paul Mercury Ins. Co. and the cited proposition controlled the instant case to an outcome in its favor. Alternatively, the University asserted a policy argument: it should be allowed to keep the money because it relies heavily on donations and a practice of investigating the sources of donated funds would be impractical and would impact charitable giving.

The trial court denied the University’s motion, and this interlocutory appeal ensued.6

[418]*418[A] motion to dismiss for failure to state a claim upon which relief may be granted should not be sustained unless (1) the allegations of the complaint disclose with certainty that the claimant would not be entitled to relief under any state of provable facts asserted in support thereof; and (2) the movant establishes that the claimant could not possibly introduce evidence within the framework of the complaint sufficient to warrant a grant of the relief sought. In deciding a motion to dismiss, all pleadings are to be construed most favorably to the party who filed them, and all doubts regarding such pleadings must be resolved in the filing party’s favor.7

This Court reviews the denial of a motion to dismiss for failure to state a claim upon which relief can be granted de novo.8

The University contends that the trial court erred by denying its motion to dismiss, maintaining its position that Castleberry’s complaint asserted only a claim for constructive trust, and relying on cases such as St. Paul Mercury Ins. Co.9 for the proposition that a constructive trust is a remedy and not an independent cause of action.

However, the denial of the motion to dismiss was correct, as illustrated by Kelly v. Johnston,10 in which the Supreme Court of Georgia allowed a lawsuit seeking the imposition of a constructive trust to proceed based upon circumstances analogous to those here. Like the University here, the defendant in Kelly who held the proceeds at issue was not alleged to have committed any wrongful act.11 And like Castleberry here, the plaintiff in Kelly alleged that the wrongful acts of a third party (who was not a party to that lawsuit) were sufficient to authorize equity to impose a trust upon the proceeds that had come into the hands of the defendant.12

In Kelly, a divorce decree provided that certain real property be sold and the proceeds divided by specified percentages between the [419]*419spouses.13 The husband later remarried, then sold the property, but did not pay any proceeds to his former wife.14 When the husband died, his widow obtained an award of a year’s support.15 The former wife filed an action seeking to impose a constructive trust on those proceeds, alleging that she had been entitled to a percentage of the proceeds from the sale of the real property.16 The widow pointed out that there was no allegation of fraud on her part, took the position that her support award was thus not subject to a constructive trust, and sought summary judgment.17 Determining that the widow was not entitled to summary judgment, the Kelly Court held: “A constructive trust arises with respect to property the title to which was acquired by fraud, or where although acquired originally without fraud, it is against equity that the title should be retained by the one who holds it.”18 The Court explained:

[T]he alleged fraudulent acts of [the husband] are sufficient to authorize equity to impose a trust upon [the former wife’s] share of the proceeds. The constructive trust is still enforceable even when the proceeds have come into the hands of [the widow].

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Scouten v. Amerisave Mortgage Corp.
656 S.E.2d 820 (Supreme Court of Georgia, 2008)
Morrison v. Morrison
663 S.E.2d 714 (Supreme Court of Georgia, 2008)
St. Paul Mercury Insurance v. Meeks
508 S.E.2d 646 (Supreme Court of Georgia, 1998)
Kelly v. Johnston
373 S.E.2d 7 (Supreme Court of Georgia, 1988)
Landmark American Insurance Co. v. Khan
705 S.E.2d 707 (Court of Appeals of Georgia, 2011)

Cite This Page — Counsel Stack

Bluebook (online)
734 S.E.2d 117, 318 Ga. App. 416, 2012 Fulton County D. Rep. 3541, 2012 Ga. App. LEXIS 928, Counsel Stack Legal Research, https://law.counselstack.com/opinion/reinhardt-university-v-castleberry-gactapp-2012.