LAW OF THE LAND: Breach of fiduciary duty — elements of a claim

William L. Martin III
William Martin

As an attorney, I have a fiduciary duty to my clients. But what exactly is a “fiduciary duty.” Not surprisingly, like many areas of the law, the term “fiduciary” is sometimes a bit squishy. But, there is one area that is clear — a lawyer, or any other fiduciary, must avoid “self-dealing” or “conflicts of interest” where the potential benefit to the fiduciary is in conflict with what is best for the client — in other words, abusing the relationship.

Fiduciaries can include business advisors, attorneys, guardians, estate executors, bankers, real estate agents, title companies, stock brokers, husbands, wives, or anyone who accepts your complete confidence and trust. A fiduciary duty can be either express or implied from the “specific factual situation surrounding the transaction and the relationship of the parties.”

"An implied fiduciary relationship will lie when there is a degree of dependency on one side and an undertaking on the other side to protect and/or benefit the dependent party." The relation and correlative duties need not be legal but may be moral, social, domestic or merely personal."

What if you think a fiduciary has breached his or her duties to you? If you took it to court, you would have to prove: (1) the existence of a duty, (2) breach of that duty, and (3) damages flowing from the breach. Often, the existence of the duty is the crucial element. I performed a brief survey of Florida caselaw and came up with two situations where a judge or jury found the existence of a fiduciary relationship related to real estate transactions:

A real estate agent held himself out as a real estate agent experienced in luxury riverfront properties and brought his friend investment proposals that he represented were excellent investment opportunities. The agent told her he would take care of her, that she would "never lose a dime," and that she could trust him.

A corporation’s president arranged for a secret profit as part of a real estate transaction at the expense of and without the knowledge of the corporation.

Conversely, a real estate agent was able to convince a judge that a fiduciary duty did not exist because a contractual disclaimer advised the buyer of a business that “the Purchaser retains sole responsibility for all decisions or action required for” making the decision.

Normally a bank or lender owes no fiduciary duties to a real estate borrower, but in certain very narrow circumstances, a fiduciary duty may arise when the bank knows or has reason to know that the customer is placing trust and confidence in the bank and is relying on the bank for counsel and information.  Additionally, special circumstances may impose a fiduciary duty where the lender performs extra services for a customer, receives extra economic benefit than from a typical transaction, or exercises extensive control.

Bill Martin is a former B-52 and B-1 pilot and senior attorney for the Federal Deposit Insurance Corporation and is admitted to the U.S. Tax Court. He is currently a partner in the law firm of Keefe, Anchors & Gordon in Fort Walton Beach, Fla.