Opinion ID: 1260692
Heading Depth: 1
Heading Rank: 1

Heading: Count ONE: Breach of fiduciary duty.

Text: We have said that there is a fiduciary relationship when special confidence has been reposed in one who in equity and good conscience is bound to act in good faith and with due regard for the interests of the one reposing the confidence. H-B Partnership v. Wimmer, 220 Va. 176, 179, 257 S.E.2d 770, 773 (1979). Incident to the relationship, the fiduciary must tell his principal about anything which might affect the principal's decision whether or how to act. Owen v. Shelton, 221 Va. 1051, 1054, 277 S.E.2d 189, 191 (1981). In Owen, the sellers' real estate agent violated his fiduciary duty by closing a sale without disclosing to the sellers that the buyers reserved the right to litigate the sellers' entitlement to interest. Although we have not passed on the question, there is no reason that, depending on the facts, an accountant may not be held to be a fiduciary, and courts in other jurisdictions have so held. In Cafritz v. Corporation Audit Co., 60 F.Supp. 627 (D.D.C. 1945), plaintiff hired an accounting firm, of which one Robins was general manager and executive officer. The firm failed to deposit certain of plaintiff's checks in the bank, Robins being actively involved in this failure. Plaintiff brought an action for discovery and accounting against the firm and against Robins's wife individually and as administratrix of his estate. The court held, inter alia, that the accounting firm and Robins were fiduciaries as to plaintiff. Id. at 634. In so holding, the court stated that the existence of a fiduciary relationship is a question of fact, and that an accounting party may be a fiduciary because of money or property intrusted to him. Id. at 631. See also Squyres v. Christian, 242 S.W.2d 786 (Tex.Civ.App. 1951); cf. Franklin Supply Co. v. Tolman, 454 F.2d 1059 (9th Cir.1971). Allen's amended motion for judgment was sufficient to raise a question of fact as to whether Holbert occupied a fiduciary relationship to Allen and breached his fiduciary duty. Allen alleged that Rawlings was employed to act through Holbert to assist in Allen's liquidation, which involved the sale of Allen's real estate, and that Allen relied on Holbert to inform it of any outstanding offers before the liquidation. It was not necessary, as the trial court apparently believed, for Allen to allege that Rawlings was specifically employed to receive and transmit offers to purchase the corporate real estate. It was sufficient for Allen to allege that Rawlings, acting through Holbert, was employed to assist in liquidating the real estate, from which a reasonable inference could be drawn that acquisition of knowledge of offers and discussion of the offers would be a routine part of the employment. The allegation was sufficient, therefore, to state a cause of action against Holbert and the trial court erred in sustaining his demurrer. The amended motion for judgment did not specifically allege that Rawlings directly breached its fiduciary duty. Allen sought to hold Rawlings responsible for Holbert's acts on the theory that those acts were incident to the scope of Holbert's employment and within his apparent authority. Two of our cases are relevant to this theory. In Jefferson Standard Life Insurance Co. v. Hedrick, 181 Va. 824, 27 S.E.2d 198 (1943), defendant's agent falsely told plaintiff that he had sent plaintiff's loan application to defendant's home office. Affirming a judgment against defendant, we held that a principal is liable to third persons for wrongful acts an agent commits within the scope of his employment, even if the principal does not approve or know of the misconduct, for the principal holds his agent out as trustworthy. Id. at 834, 27 S.E.2d at 202. In the other relevant case, Dudley v. Estate Life Insurance Co., 220 Va. 343, 257 S.E.2d 871 (1979), we considered the question of scope of authority in respect to a fraud perpetrated by an agent. Defendant's agent lured plaintiffs into a fraudulent insurance sales scheme, then absconded with their money. At the conclusion of plaintiffs' evidence, the trial court granted defendant's motion to strike the evidence and entered summary judgment for defendant. On appeal, we rejected defendant's contention that since the agent committed the fraud solely for his personal gain, he acted beyond the scope of his authority. We held that plaintiffs had made a prima facie case. Approving principles set forth in Restatement (Second) of Agency, §§ 261 and 262, as being in accord with principles already established in Virginia, we explained that defendant had put the agent in a position that facilitated the fraud by giving him credentials indicating to the public that he was a legitimate agent. Id. at 349-52, 257 S.E.2d at 875-76. We could not say as a matter of law that plaintiffs had notice that the agent was acting for his own purposes. Id. at 351, 257 S.E.2d at 876. We pointed out that an agent is not ipso facto acting outside his authority merely because he is acting fraudulently for his own benefit. Id. at 353, 257 S.E.2d at 877. See also In Matter of F.W. Koenecke & Sons, Inc., 605 F.2d 310 (7th Cir. 1979). Allen's allegation was sufficient to charge that Holbert acted within the scope of his employment, as Rawlings held him out as trustworthy and put him in a position to conceal the Authority's offers from Allen. The trial court erred, therefore, in sustaining the demurrer of Rawlings.