Chapter 22 - § 22.4 • THEORIES OF FIDUCIARY LIABILITY AND RECOVERY

• Jurisdiction: Colorado

§ 22.4 • THEORIES OF FIDUCIARY LIABILITY AND RECOVERY

The following is a description of some of the theories that could be alleged when the victim sues the perpetrator of financial abuse.

§ 22.4.1—Breach of Fiduciary Duty

Besides the formal relationship reviewed above, a plaintiff may pursue recovery against a defendant for breach of fiduciary duty. As often happens with caretaker arrangements with elders where one person has practical control over another or is in a confidential relationship with another, that person may be liable for breach of fiduciary duty. Other examples include stockbroker and investor, attorney and client, and a priest acting as a marriage counselor.⁷⁹

§ 22.4.2—Aiding and Abetting Breach of Fiduciary Duty

In Holmes v. Young,⁸⁰ the Colorado Court of Appeals recognized the liability of a person for aiding and abetting a breach of fiduciary duty. In doing so, the court recognized generally that the principle of joint liability of a defendant for the acts of the fiduciary applies also to any tortious act, not just a breach of fiduciary duty.⁸¹ To assert liability, the plaintiff must establish that the defendant knows of the breach of a duty, the breach results in injury to a third party, the defendant is generally aware of the role that he or she plays in the commission of a tort against a third party, and the defendant "knowingly and substantially" assists another in committing the tort. Consequently, the attorney should be alerted to include as defendants those persons who aided the breach of fiduciary duty and who meet the elements of proof set forth in Holmes.

§ 22.4.3—Constructive Trust

The constructive trust is a device to prevent unjust enrichment in cases usually involving a "confidential relationship." The plaintiff may request a court to impose a constructive trust on funds or property already transferred to the alleged perpetrator of the financial abuse. Once the court imposes the trust, the court may prevent further disposition of the property pending a final hearing and order its disposition after trial.

Most transfers in which the court imposes a trust have been the result of undue influence, fraud, or mistake. The court however may also impress a constructive trust on property where the conveyance occurred without intent to make a gift.⁸²

Practice Pointer
If the fiduciary has already transferred the elder's real estate to himself or herself, consider filing a complaint alleging the appropriate theories of recovery and

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