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Legal Memorandum: Standards Applicable to a Trustee's Actions

Issue: Under New York law, what are the standards applicable to the trustee’s actions when it is arguable that the trustee has obstructed and delayed necessary trust-related decisions for the purpose of forcing the beneficiary to sell their property to the trustee at a discount?

Area of Law: Uncategorized
Keywords: Trustees fiduciary relationship; Breach of trust; Removal of the trustee
Jurisdiction:  New York
Cited Cases: 789 N.Y.S.2d 123; 581 N.Y.S.2d 165; 269 N.Y.S.2d 989; 183 A.D.2d 684; 686 N.Y.S.2d 573
Cited Statutes: Restatement (Second) Trusts § 201
Date: 07/01/2009

A trustee, a fiduciary, is held to the very highest standard of conduct.  Thus, the Court of Appeals “describe[s] a fiduciary’s duty as requiring not honesty alone, but the punctilio of an honor the most sensitive.”  Mercury Bay Boating Club, Inc. v. San Diego Yacht Club, 76 N.Y.2d 256, 557 N.Y.S.2d 851, 859 (1990).  Another New York court described the standard thus:  “A fiduciary must be as a watchman in the night, ever vigilant, and always dedicated to the best interest of the cestui que trust.”  In re Estate of Saxton, 179 Misc. 2d 681, 686 N.Y.S.2d 573, 581 (Surr. Ct. 1998).  Because of this high standard, if challenged, the trustee’s transactions are examined with special scrutiny:

[W]here a fiduciary relationship exists between parties, transactions between them are scrutinized with extreme vigilance, and clear evidence is required that the transaction was understood, and that there was no fraud, mistake or undue influence.  Where those relations exist there must be clear proof of the integrity and fairness of the transaction, or any instrument thus obtained will be set aside, or held invalid between the parties.

 

Gordon v. Bialystoker Ctr. & Bikur Cholim, Inc., 45 N.Y.2d 692, 412 N.Y.S.2d 593, 596-97 (1978).

The high standard to which a trustee is held is based, in part, on the common law duties imposed on a trustee that have long been found to inhere in the fiduciary relationship.  A leading treatise indicates that a trustee […]

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