What Are the Remedies for Breach of Fiduciary Duty by an Administrator?
Full Question:
Answer:
The person designated to be the administrator assumes certain responsibilities. The agent is obligated to act in the estate's best interest. Administrators are "fiduciaries," which means that the administrator must act with the highest degree of good faith in behalf of the estate. The administrator must keep his money separate from the estate's; keep detailed records concerning all transactions he engages in on the estate's behalf; not stand to profit by any transaction where the administrator represents the estate's interests; and not make a gift or otherwise transfer any of the estate's money, personal property, or real estate to himself unless the will or court order explicitly states he can do so.
Various remedies may be available if a fiduciary duty was breached. Common actions for an abuse of a fiduciary duty, among others, include a petition for an accounting, claim of breach of fiduciary duty, theft, conversion, or a fraud charge.
Fiduciaries owe two main duties to their clients: a duty of loyalty and a duty of care. The duty of loyalty requires that fiduciaries act solely in the interest of their clients, rather than in their own interest. Thus fiduciaries must not derive any direct or indirect profit from their position, and must avoid potential conflicts of interest. The duty of care requires that fiduciaries perform their functions with a high level of competence and thoroughness, in accordance with industry standards.
The elements of a cause of action for breach of fiduciary duty are:
(1) Plaintiff and Defendant share a relationship whereby:
(a) Plaintiff reposes trust and confidence in Defendant, and
(b) Defendant undertakes such trust and assumes a duty to advise, counsel and/or
protect Plaintiff;
(2) Defendant breaches its duties to Plaintiff; and
(3) Plaintiff suffers damages.
The elements of a claim for breach of fiduciary duty are not fixed as the claim may arise from virtually any case where one party accepts the trust and assumes the duty to protect a weaker party.
Affirmative defenses to a claim for breach of fiduciary duty can include, but are not limited to:
(1) The passing of the statute of limitations for filing the claim.
(2) Lack of fiduciary relationship (for example, when the parties did not enter a fiduciary relationship, but rather conducted business in an arm’s length transaction there is no duty to protect the other party or disclose facts which the other party could have discovered by its own diligence.)
(3)Lack of standing
(4) Approval (for example, if the alleged actions followed full disclosure to and the consent of the Plaintiff)
(5) Business judgment rule (ex. that the corporate fiduciary's actions were motivated by a bona fide interest in the well being of the corporation where shareholders are the ones owed the fiduciary duty)
(6) Due diligence was exercised
Please see the following PA statutes:
20 Pa.C.S.A. § 3391. Proceeding against personal representative
Any proceeding may be brought against a personal representative
or the surety on his bond in the county where his letters have
been granted, and if the personal representative or surety does
not reside in that county, process may be served on either of
them personally, or as follows:
(1) When resident of another county. By a duly deputized
sheriff of any other county of the Commonwealth in which he
shall be found.
(2) When a nonresident of the Commonwealth. By the sheriff
of the county where letters have been granted sending, by
registered mail, return receipt requested, a true and
attested copy of the process to the Department of State,
accompanied by the fee prescribed by law, and to the personal
representative or surety at his last known address, with an
endorsement thereon showing that service has been so made
upon the Department of State.
20 Pa.C.S.A. § 3331. Liability of personal representative on contracts
Unless he expressly contracts otherwise, in writing, a personal
representative shall not be personally liable on any written
contract which is within his authority as personal representative
and discloses that he is contracting as personal representative
of a named estate. Any action on such a contract shall be brought
against the personal representative in his fiduciary capacity
only, or against his successor in such capacity, and execution
upon any judgment obtained therein shall be had only against
property of the estate.
20 Pa.C.S.A. § 3544. Liability of personal representative for interest
A personal representative who has committed a breach of duty
with respect to estate assets shall, in the discretion of the
court, be liable for interest, not exceeding the legal rate on
such assets.
20 Pa.C.S.A. § 3182. Grounds for removal
The court shall have exclusive power to remove a personal
representative when he:
(1) is wasting or mismanaging the estate, is or is likely to become
insolvent, or has failed to perform any duty imposed by law; or
(2) Deleted. 1992, April 16, P.L. 108, No. 24, § 4, effective
in 60 days.
(3) has become incapacitated to discharge the duties of his office
because of sickness or physical or mental incapacity and his incapacity
is likely to continue to the injury of the estate; or
(4) has removed from the Commonwealth or has ceased to have a known
place of residence therein, without furnishing such security or additional
security as the court shall direct; or
(4.1) has been charged with voluntary manslaughter or homicide, except
homicide by vehicle, as set forth in sections 3155 (relating to persons
entitled) and 3156 (relating to persons not qualified), provided that the
removal shall not occur on these grounds if the charge has been
dismissed, withdrawn or terminated by a verdict of not guilty; or
(5) when, for any other reason, the interests of the estate are likely
to be jeopardized by his continuance in office.
20 Pa.C.S.A. § 3183. Procedure for and effect of removal
The court on its own motion may, and on the petition of any
party in interest alleging adequate grounds for removal shall,
order the personal representative to appear and show cause why he
should not be removed, or, when necessary to protect the rights
of creditors or parties in interest, may summarily remove him.
Upon removal, the court may direct the grant of new letters
testamentary or of administration by the register to the person
entitled and may, by summary attachment of the person or other
appropriate orders, provide for the security and delivery of the
assets of the estate, together with all books, accounts and
papers relating thereto. Any personal representative summarily
removed under the provisions of this section may apply, by
petition, to have the decree of removal vacated and to be
reinstated, and, if the court shall vacate the decree of removal
and reinstate him, it shall thereupon make any orders which may
be appropriate to accomplish the reinstatement.