Restatement of the Law (Second) of Torts

Copyright © 1979-2010 by the American Law Institute

Chapter 43. Rules Applicable To Certain Types Of Conduct

§ 874. Violation Of Fiduciary Duty

One standing in a fiduciary relation with another is subject to liability to the

other for harm resulting from a breach of duty imposed by the relation.

Comment:
a. A fiduciary relation exists between two persons when one of them is under a duty to act
for or to give advice for the benefit of another upon matters within the scope of the
relation. (See Restatement, Second, Trusts, § 2).

b. A fiduciary who commits a breach of his duty as a fiduciary is guilty of tortious conduct
to the person for whom he should act. The local rules of procedure, the type of relation
between the parties and the intricacy of the transaction involved, determine whether the
beneficiary is entitled to redress at law or in equity. The remedy of a beneficiary against a
defaulting or negligent trustee is ordinarily in equity; the remedy of a principal against an agent
is ordinarily at law. However, irrespective of this, the beneficiary is entitled to tort damages for
harm caused by the breach of duty arising from the relation, in accordance with the rules stated
in §§ 901-932. In addition to or in substitution for these damages the beneficiary may be entitled
to restitutionary recovery, since not only is he entitled to recover for any harm done to his legally
protected interests by the wrongful conduct of the fiduciary, but ordinarily he is entitled to profits
that result to the fiduciary from his breach of duty and to be the beneficiary of a constructive
trust in the profits. Further, when there is a contract between the parties or when there has been
an assumption of duty by a trustee, guardian or executor, the beneficiary may be entitled to what
the fiduciary should have made in the prosecution of his duties. Special application of these rules
of agents and trustees respectively is made in the Restatement, Second, Agency, §§ 401-407 and
in the Restatement, Second, Trusts, §§ 197-226A. See also Restatement of Restitution, §§ 138
and 190. The same underlying principles apply to the liability of other fiduciaries, such as
administrators and guardians; the liability is not dependent solely upon an agreement or
contractual relation between the fiduciary and the beneficiary but results from the relation.

c. A person who knowingly assists a fiduciary in committing a breach of trust is himself

guilty of tortious conduct and is subject to liability for the harm thereby caused. (See §
876). The measure of his liability, however, may be different from that of the fiduciary
since he is responsible only for harm caused or profits that he himself has made from the
transaction, and he is not necessarily liable for the profits that the fiduciary has made nor
for those that he should have made. Specific applications of the rule are made in the
Restatement, Second, Agency, §§ 312 and 313 and in the Restatement, Second, Trusts, §§ 280-
326. The same principles are applicable when one has colluded with other types of fiduciaries.