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Suing for Breach of Trust and Breach of Fiduciary Duty

A breach of trust occurs when you have a special relationship with another that is imbued with a high degree of trust and confidence, and the person who owes you that duty, called a fiduciary, violates your confidence. A breach of trust is usually referred to by lawyers as a breach of fiduciary duty.

If you are looking for an attorney to sue for breach of trust, we at the Law Offices of Albert Goodwin are here for you. You can call us at 718-509-9774 or send us an email at attorneyalbertgoodwin@gmail.com.

Existence of fiduciary relationship

The first step in determining whether trust has been breached is to check the relationship between the parties. The courts have declared a trust relationship to exist between attorneys and clients, real estate brokers and clients, a corporate officer or director to the shareholders, partners with each other, an agent to the principal, an accountant with his customer, an executor or trustee to the estate and beneficiaries, and majority shareholder to a minority shareholder in a closed corporation. Although this is not an exhaustive list, these are the usual relationships that are involved in a breach of trust litigation.

You might think that a close friend has breached your trust if you lend him money and he does not pay you back. This, however, is not the type of trust relationship that a court would consider as a breach of trust or breach of fiduciary duty. Your friend, no matter how close, does not owe you a high degree of standard of care, and you cannot sue him for breach of trust or fiduciary duty in the absence of any special legal relationship.

If your partner in a business partnership, however, learned of a profitable business opportunity, and instead diverted it for his own interest, your partner can be liable for breach of fiduciary duty. For example, in a real estate partnership where you buy, renovate, and sell real estate for a profit, if your business partner learns of an opportunity to purchase real estate where the partnership could profit from it, and instead, diverted that opportunity to his spouse, who then bought the real estate, renovated, and sold it for a profit, that partner can be liable for breach of fiduciary duty.

Misconduct of fiduciary

The second step in determining breach of trust is to prove misconduct of the one who owes you the trust. In proving misconduct, one must first know the types of duties that a fiduciary owes. The three basic duties are the duties of care, loyalty, and honesty. A trustee also owes the duty to inform and account and to prudently invest trust assets.

The duty of care requires a fiduciary to employ a standard of care that a reasonably prudent person would exercise in the same position. In the context of a corporate director or officer, the duty of care is measured on whether the fiduciary executed a reasonably informed, good faith, rational judgment without conflict of interest. It does not require the fiduciary to make the best or most profitable decision. It is enough that the fiduciary acted in a professional and informed manner, free from conflict and consistent with what a reasonably prudent person with the same skills and expertise would do, even if that action translates to losses.

The duty of honesty requires the fiduciary to disclose all material information that may harm the entity or person owed the duty. The duty of loyalty requires the fiduciary to put the interests of the party owed the duty ahead of his own personal or anyone else’s interests.

This high degree of care expected from fiduciaries prevents them, not only from acting against the interests of the person owed that duty but also, from acting in a manner that would give the appearance of a conflict of interest.

For example, a trustee is prohibited from selling trust assets to himself, even if he sold it at market value or even at a price higher than market value. The trustee’s mere sale of trust assets to himself is considered self-dealing, and the courts will immediately void the sale at the request of the beneficiaries without further inquiring on whether the sale involved fair and reasonable terms and conditions (the “no further inquiry rule”).

Damages caused by the misconduct

The last step in determining breach of trust is establishing the causation of the breach of trust with the amount of damages one sustained. In the above case of your business partner in a real estate partnership diverting a business opportunity to his spouse, compensatory damages would include the profit the spouse received when the spouse undertook the purchase, renovation, and eventual sale of the property on her own.

Breach of trust actions also entitle the person violated to ask for punitive damages. Punitive damages are imposed in addition to compensatory damages and used to punish grossly negligent or intentional misconduct and deter others from committing similar acts. Punitive damages, because they are not based on actual damages, substantially increase one’s claim and are usually used as leverage in litigation and negotiations for settlements.

A breach of trust is a harmful and hurtful violation of trust and confidence reposed on another. If you have suffered a breach of trust from a fiduciary or are being charged with breach of trust, a skilled attorney can help you craft a strong case or defense depending on the circumstances of your case.

If you are looking for an attorney to sue for breach of trust, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at attorneyalbertgoodwin@gmail.com.