Opinion ID: 551885
Heading Depth: 3
Heading Rank: 1

Heading: Fiduciary Duty Law in Kansas

Text: 8 In Denison State Bank v. Madeira, 230 Kan. 684, 691, 640 P.2d 1235, 1241 (1982), the Supreme Court of Kansas summarized the law of fiduciary relationships as follows: 9 It may be said that generally there are two types of fiduciary relationships: (1) those specifically created by contract such as principal and agent, attorney and client, and trustee cestui que trust, for example, and those created by formal legal proceedings such as guardian and/or conservator and ward, and executor and administrator of an estate, among others, and (2) those implied in law due to the factual situation surrounding the involved transactions and the relationship of the parties to each other and to the questioned transactions. 10 Here, as in Denison, it is the second type of fiduciary relationship with which we are concerned. 11 Determination of whether this second type of fiduciary relationship  'exists depends on the facts and circumstances of each individual case. [The Supreme Court of Kansas] has refused, for that reason, to give an exact definition to fiduciary relations.'  Id. (quoting Curtis v. Freden, 224 Kan. 646, 651, 585 P.2d 993, 998 (1978)). Although such fiduciary relationships cannot be defined with precision, the Supreme Court of Kansas has prescribed certain broad principles which should be considered in making the determination of whether a fiduciary relationship exists in any particular factual situation: 12 A fiduciary relationship imparts a position of peculiar confidence placed by one individual in another. A fiduciary is a person with a duty to act primarily for the benefit of another. A fiduciary is in a position to have and exercise, and does have and exercise influence over another. A fiduciary relationship implies a condition of superiority of one of the parties over the other. Generally, in a fiduciary relationship, the property, interest or authority of the other is placed in the charge of the fiduciary. 13 Id. (emphasis in original). 14 The court in Denison made clear that each of the general considerations listed above need not be present in every case in which a fiduciary relationship is alleged. However, the court emphasized that an overriding consideration in the law of fiduciary relationships was that one may not abandon all caution and responsibility for his own protection and unilaterally impose a fiduciary relationship on another without a conscious assumption of such duties by the one sought to be held liable as a fiduciary. Denison, 230 Kan. at 696, 640 P.2d at 1243-44 (emphasis added). The court went on to state that [t]his is particularly true when one ... is fully competent and able to protect his own interests. Id. 15 A fiduciary relationship whereby both parties assume fiduciary obligations to each other or to a common entity similarly requires a conscious assumption of fiduciary obligations by the parties. For example, in Paul v. North, 191 Kan. 163, 380 P.2d 421 (1963), the Supreme Court of Kansas stated that fiduciary relationships 16 may arise out of conduct of the parties evidencing an agreement to engage in a joint enterprise for the mutual benefit of the parties.... But they necessarily spring from an attitude of trust and confidence and are based upon some form of agreement, either expressed or implied, from which it can be said that the minds have met in a manner to create mutual obligations. 17 Id. 191 Kan. at 170, 380 P.2d at 426 (citations omitted) (emphasis added). Although a fiduciary relationship may arise out of an agreement to act together for the mutual benefit of the parties, such a relationship cannot be established by accident or inadvertence. 18 Mere concert of action without more, does not establish a fiduciary relationship.... Undoubtedly, parties may deal at arm's length for their mutual profit. It is only when, by their concerted action, they willingly and knowingly act for one another in a manner to impose mutual trust and confidence that a fiduciary relationship arises. 19 Wolf v. Brungardt, 215 Kan. 272, 285, 524 P.2d 726, 736 (1974) (emphasis added). 20 This court has also recognized that conscious assumption of the alleged fiduciary duty is a mandatory element under Kansas law. See Hotmar v. Lowell H. Listrom & Co., Inc., 808 F.2d 1384, 1387 n. 3 (10th Cir.1987); cf. 36A C.J.S. Fiduciary, 385 (1955) (As a general rule, a fiduciary relationship is established only when it is shown that the confidence reposed by one person was actually accepted by the other, and merely reposing confidence in another may not, of itself, create the relationship) (footnotes omitted). 21 Although the courts of Kansas have suggested that a somewhat more protective approach may be used when one party is under a disability or disadvantage, Cornett v. Roth, 233 Kan. 936, 941, 666 P.2d 1182, 1186 (1983), Wedman v. Home Nat. Bank of Arkansas City, No. 88-1439-K (D.Kan., Jan. 25, 1990) (WESTLAW, 1990 WL 7501), this more protective approach will ordinarily not be utilized as between two or more business people or business entities who each possess the capacity to protect themselves. See Ritchie Enterprises v. Honeywell Bull, Inc., 730 F.Supp. 1041, 1054 (D.Kan.1990) (holding that a seller's superior knowledge of a product does not justify imposition of a fiduciary relationship in the absence of a conscious assumption of fiduciary duties). The Supreme Court of Kansas has cautioned against an approach which would unfairly convert ordinary day-to-day business transactions into fiduciary relationships where none were intended or anticipated. Denison, 230 Kan. at 696, 640 P.2d at 1243. 22