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Fiduciary Responsibility

Fiduciary responsibility is the legal obligation that a person has when he or she is managing property that belongs to someone else.  For example, if an elderly parent asks a son or daugther to manage the parent's investments, the son or daughter has a fiduciary responsibility to manage that property in the best interests of the parent.  That is, the son or daughter cannot manage the property to produce a favorable financial outcome of himself or herself but that leaves the parent without any income.  Nor can the son or daughter invest the assets in a risky venture, one that the parent would not select, nor that the the son or daughter would select when deciding where to invest their own assets.

A person with a fiduciary responsibility must manage the property owned by another person

• in a way that maximizes the benefit for the owner of the property,
• as a prudent investor would manage the property (prudent investor rule),
• so not to personally benefit from the management of the property (other than to receive a fee for their management services),
• so not buy or sell to him- or herself any of the property that is part of the fiduciary responsibility (rule against self-dealing).  Also see BN & Santa Fe Railway v. Burlington Resources Oil & Gas, 1999 ND 39, 590 N.W.2d 433 -- "The prohibition against self dealing lies at the heart of the fiduciary relationship"

Other examples of when fiduciary responsibilities arise:   a personal representative managing the estate of a deceased individual, a partner managing property of the partnership (see Estate of Thomas, 532 N.W.2d 676 (N.D. 1995)), a trustee managing property owned by the trust, a government employee who uses or oversees public property, and whenever an individual has entrusted their property to another person expecting to have the property returned to him- or herself sometime in the future.

Snortland v. State ex rel. Dep't of Public Instruction, 2000 ND 162, 615 N.W.2d 574 -- "[¶16] A fiduciary relationship "generally arises when there is an unequal relationship between the parties." ...  The "party reposing the confidence must be in a position of inequality, dependence, weakness, or lack of knowledge."

L.C. v. R.P., 1997 ND 96, 563 N.W.2d 799 -- "A fiduciary relationship exists when one is under a duty to act or give advice for the benefit of another upon matters within the scope of the relationship. ... (fiduciary relationship ordinarily does not exist when business persons deal at arm's length).  In creating a fiduciary relationship, the superior party must assume a duty to act in the dependent party's best interest."

North Dakota statutes relating to fiduciary responsibility can be found in North Dakota Century Code, chapters 59-01 and 59-02.

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