March 13, 2008

Ask The Lawyer

Just what is a ‘fiduciary relationship’ and why is it important?

This week's question:
Every once in a while I come across the term “fiduciary duty” or “fiduciary relationship.” This seems to apply to several different situations. What does “fiduciary” mean? Does it really apply to different situations or is this just my imagination?

Jennifer J.
Almaden Valley


Dear Jennifer,
First of all, the easy part. No, it definitely not just your imagination. The term “fiduciary duty” or “fiduciary relationship” arises in a broad variety of situations and legal relationships. You will recognize many of those situations and see right away why they are called “fiduciary relationships.”

For example, let’s assume you are the administrator of your father or mother’s estate. Instead of managing the estate account properly, you take the money to Reno and gamble it away, hoping to double the account for yourself as well as your brother and sister. Stand by for a huge lawsuit for breach of fiduciary duty.

Or let’s assume that as administrator of that estate you found an account that you “forgot” to report to the court and “forgot” to mention to your brother and sister. Instead, you put the money in your pocket. Once again, stand by for a suit for breach of fiduciary duty.

My copy of “Black’s Law Dictionary, Seventh Edition,” a well-regarded treatise in the field of law, has several excellent definitions in this area dealing with a “fiduciary.”

Black’s defines “fiduciary” as “one who owes to another the duties of good faith, trust, confidence and candor. For example, the corporate officer is a fiduciary to the shareholders.”

A fiduciary is one who must exercise a high standard of care in managing another’s money or property. An example of that would be when a beneficiary of a trust sues the fiduciary for investing in speculative securities and wasting all of the trust fund.

A “fiduciary relationship” is defined by “Black’s Law Dictionary” as “a relationship in which one person is under a duty to act for the benefit of the other on matters within the scope of the relationship, such as trustee-beneficiary, guardian-ward, agent-principal and attorney-client.”

Fiduciary relationships usually arise in one of four situations:

1) When one person places trust in the faithful integrity of another, who as a result gains superiority or influence over the first;

2) When one person assumes control and responsibility over another;

3) When one person has a duty to act for or give advice to another on matters falling within the scope of the relationship, or

4) When there is a specific relationship that has traditionally been recognized as involving fiduciary duties, as with a lawyer and a client or a stockbroker and a customer.

“Fiduciary duty” is defined by Black’s as “a duty of utmost good faith, trust, confidence and candor owed by a fiduciary, such as a lawyer or corporate officer, to the beneficiary, such as a lawyer’s client or a shareholder. Also, “a duty to act with the highest degree of honesty and loyalty toward another person and in the best interests of the other person, such as the duty that one partner owes to another.”

The California Family Code in §721 provides for general rules governing fiduciary relationships between a husband and a wife, the same fiduciary rules that control the actions of persons occupying confidential relations with each other. “This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other.”

If, for example, an attorney would breach his or her fiduciary duty to the client, the client could have grounds for a suit called “breach of fiduciary duty.” If that would arise, the judge might instruct the jury as follows, based upon California Jury Instructions CACI #605:

“An attorney has a fiduciary duty to the client. A fiduciary duty is the duty of good faith and undivided loyalty. The plaintiff claims that defendant’s attorney harmed the plaintiff because the attorney breached his/her fiduciary duty of confidentiality [for example]. To establish this claim, the plaintiff must prove all of the following:

- That the attorney breached the fiduciary duty of confidentiality [for example];

- That the plaintiff was harmed; and

- That the attorney’s conduct was a substantial factor in causing plaintiff’s harm.

So, you can see, Jennifer that the word “fiduciary” is a very important concept, and fiduciaries must act with utmost care and the highest of standards. And these principles do in fact apply in a large variety of situations.

Donald J. DeVries
Almaden Valley


Donald J. DeVries is an attorney practicing law in Almaden Valley. If you would like him to answer your question in his next Almaden Times column, you can reach him by e-mail at don@almadenvalleylawyers.com, fax at (408) 268-6502, telephone at (408) 268-9500, or mail at, 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your matters are personal and private, so of course, he will not disclose your identity or any details about your situation. To view Almaden Times columns since 1986 visit www.almadenvalleylawyers.com. DeVries writes this column to provide you with general information about important legal matters affecting California residents—not to give you legal advice about your specific matter. No attorney-client relationship is created by these articles. The law is complex and constantly changing and varies from state to state. So you should consult an attorney before taking any action that would affect your personal or business matters.