Maxims: No Self-Dealing

October 21, 2013 § 4 Comments

“No person bound to act for another can act for himself.”

This maxim is the essence of the law of fiduciaries that binds executors, administrators, guardians, conservators, and all persons charged by the court to carry out some responsibility for the benefit of another. No self-dealing.

Here is how Judge Griffith said it (with paragraphing added):

This is a principle as old as the first among laws, and it has an especially wide application in the processes and proceedings in chancery as a court of conscience. Under it, for instance, no next friend, no guardian, no guardian ad litem, and no commissioner of the court can purchase at any sale wherein there is being sold any property of his ward or any of those for whom he has a duty to perform in the cause.

The disability and disqualification imposed by the maxim runs through all the procedure and includes trustees, fiduciaries, and in a large measure all those in confidential relations, so that no officer, agent or fiduciary shall be permitted in any respect to have such connection or acquire any such interest as may come in conflict with those for whom in any substantial respect he is or may be required to act as to any portion of the matter at hand. Griffith, ¶ 47, pp. 49-50.

The principle behind this maxim is so ingrained in the law of our state that it can be found in dozens of cases. Our law will not tolerate anyone in a fiduciary or confidential relationship profiting at the expense of the beneficiary.

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§ 4 Responses to Maxims: No Self-Dealing

  • Bob Wolford says:

    The Bankruptcy Code provides protection for wards that have been defrauded by their fiduciaries (bankruptcy code calls this “defalcation of duty”) If proven the fiduciary cannot discharge through bankruptcy a monetary award for such misconduct. So if a fraudulent fiduciary runs to bankruptcy court to avoid a lawsuit or judgment against him or her, there’s a remedy in bankruptcy court, but it is not self-executing. The defrauded ward must come into the bankruptcy court and prove the defalcation of duty to be awarded a judgment of nondischargability.

    • Larry says:

      But if the fiduciary has been unfaithful, who will step up to protect the ward?

      • Bob Wolford says:

        If the bankruptcy trustee and/or the Court knows that the debtor in bankruptcy is potentially an unfaithful fiduciary, then they would have the power (I think) to bring order to chaos in this event and protect the interests of the injured ward. But of course they would have to know what’s going on and that goes to your point. Bankruptcy courts are more closely aligned with the chancery courts than courts of law, and are therefore more tuned in with traditional notions of equity and fair play. Even if an unfaithful fiduciary is able to skate through bankruptcy and avoid an obligation to an injured ward, I would sincerely think that the ward still has a remedy in the form of a motion to set aside or relief from order down the road. Bankruptcy courts are really averse to fraud committed upon a creditor and especially an injured ward, so I’m pretty sure there’s a remedy there in some form or another.

        Your question brings to mind an excellent point, one that I will keep in mind going forward if I encounter this situation down the road.

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