§ 7.5

• Jurisdiction: Arizona

§ 7.5 Defenses to Breach of Fiduciary and Other Special Duties

Defenses to breaches of fiduciary duties include ratification,²¹⁵⁵ waiver,²¹⁵⁶estoppel,²¹⁵⁷ election of remedies,²¹⁵⁸ unclean hands,²¹⁵⁹ and laches.²¹⁶⁰ Comparative-fault rules may also reduce the plaintiff's recovery.²¹⁶¹

Fiduciary law creates a tapestry of duties and corresponding wrongs. Because of the variation, different limitation periods may apply. A party may breach fiduciary duties by negligently investing money entrusted to the party's care.²¹⁶² In that setting and most other fiduciary-breach cases, the two-year statute of limitations for negligence logically applies.²¹⁶³ But fiduciary duties may also be breached by intentional deception, and if so, the three-year statute of limitations for fraud should govern.²¹⁶⁴ Other limitation periods are also possible.²¹⁶⁵

--------

Notes:

^[2155] See Tovrea Land & Cattle Co. v. Linsenmeyer, 100 Ariz. 107, 124, 412 P.2d 47, 59 (1966); cf. Restatement (Second) of Contracts § 173 (1981) (providing that contracts between fiduciaries and beneficially interested parties are voidable unless (a) the terms are fair and (b) all relevant facts are disclosed).

^[2156] See Kadish v. Phx.-Scotts. Sports Co., 11 Ariz. App. 575, 578-79, 466 P.2d 794, 797-98 (1970).

^[2157] See Tucson Title Ins. Co. v. D'Ascoli, 94 Ariz. 230, 236, 383 P.2d 119, 122-23 (1963); Smith v. Connor, 87 Ariz. 6, 20, 347 P.2d 568, 578 (1959) ("To apply the doctrine of estoppel to cases in which courts find a constructive trust . . . would lead to an anomaly.").

^[2158] See Rhue v. Dawson, 173 Ariz. 220, 231-32, 841 P.2d 215, 226-27 (Ct. App. 1992) (rejecting claim that defrauded partner elected rescission rather than damages).

^[2159] The clean-hands doctrine may be a defense to equitable remedies. See Barr v. Petzhold, 77 Ariz. 399, 406-08, 273 P.2d 161, 165-66 (1954) (discussing laches and clean hands as defenses to action to impose constructive trust...