## Facts

- Steve C. Tate served as executor of the S. C. Tate Estate while separately negotiating with Georgia Marble Company for his own personal land transaction.
- Georgia Marble desired to extend or secure a lease involving estate property and simultaneously negotiated with Tate over a conveyance of approximately 6,100 acres to Tate individually.
- After substantial agreement on Tate’s personal deal, Georgia Marble refused to close unless a lease of the estate property was also agreed upon, and both transactions closed the same day.
- Fulton National Bank, acting for estate beneficiaries, alleged the personal conveyance was conditioned on Tate’s fiduciary act of leasing estate property, creating a conflict between Tate’s personal interests and his duties to beneficiaries.
- The Bank sought to impose a constructive trust on the 6,100 acres acquired by Tate individually, asserting the land was obtained through a breach of the executor’s duty of undivided loyalty.
- A special master found no breach of fiduciary duty; the district court adopted that view and refused to impose a constructive trust.

## Issues

1. Whether, under Georgia fiduciary law, proof that an executor’s personal transaction was conditioned on his agreement (as executor) to lease estate property establishes a substantial conflict of interest.
2. If such a conflict is shown, whether the burden shifts to the executor (or his estate) to prove the estate lease was entirely fair or that the executor received no personal profit from the intertwined transactions.

## Decision

- The Fifth Circuit reversed and remanded.
- The court held that the beneficiaries’ showing of contemporaneous dealings with the same third party—where the executor’s personal benefit was contingent on his fiduciary action—established a substantial conflict of interest.
- Once that conflict was shown, Georgia law required shifting the burden to the executor (or those standing in his place) to prove the estate transaction was fair in all respects or that he received no personal profit.
- The district court erred by keeping the burden on the beneficiaries after the conflict was demonstrated.

## Legal Principles

- An executor owes a duty of undivided loyalty and must not place personal interests in substantial conflict with beneficiaries’ interests.
- When beneficiaries prove a substantial conflict of interest in a fiduciary’s dealings—particularly where the fiduciary’s personal gain is tied to the fiduciary’s exercise of authority—the burden shifts to the fiduciary to prove:
  - the estate transaction was fair in all respects, or
  - the fiduciary received no personal profit from the transactions.
- In a federal diversity posture, state substantive fiduciary rules govern the allocation of burdens concerning conflicts of interest.

## Conclusion

Because the executor’s personal land acquisition was shown to be contingent on his agreement to lease estate property to the same counterparty, Georgia law required burden shifting to the executor’s estate to prove complete fairness or no personal profit; the contrary allocation of proof required reversal and remand.


Fulton Nat'l Bank v. Tate, 363 F.2d 562 (5th Cir. 1966)