Accountant/Friend Did Not Owe Fiduciary Duties To Decedent When Named A Beneficiary Of Various Accounts

by Winstead PC
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In a suit by an administrator for funds in joint accounts, the court held that an accountant and beneficiary of the accounts did not owe fiduciary duties to the decedent where there was no evidence that the decedent was accustomed to being guided by the accountant’s judgment and advice in legal, financial, and accounting matters. In the Estate of Warren Norris Abernethy, Achor was a certified public accountant who met Abernethy in 1998 and prepared tax returns for Abernethy from then until Abernethy's death in 2008. No. 08-11-00020-CV, No. 08-11-00020-CV, 2012 Tex. App. LEXIS 4272 (Tex. App.—El Paso May 30, 2012, no pet. history). Not only did Abernethy and Achor enjoy a business relationship, they enjoyed a social one. Achor visited Abernethy in her home and sent her cards and notes, and likewise, Abernethy sent notes and cards to Achor, expressing Abernethy's gratitude to Achor for being her best friend and so intimately involved in her life.

Abernethy designated Achor as the beneficiary of an IRA and several joint multi party bank accounts with right of survivorship. After Abernethy's death, the funds in the bank accounts and IRA passed to Achor, who received approximately $1.2 million. The independent administrator of Abernethy's estate sued Achor, alleging that Achor's relationship with Abernethy created a fiduciary relationship between them and that Achor breached that duty when she became the beneficiary of Abernethy’s accounts.

In the trial court, Achor moved for summary judgment, and the administrator responded attaching several exhibits, including depositions of witnesses and financial documents. After sustaining many objections to the adequacy of the response in evidence, the trial court granted Achor's motion for summary judgment, and the administrator appealed.

The court of appeals addressed whether Achor owed fiduciary duties to Abernethy. The court stated that the term "fiduciary" refers to a person owing a duty of integrity and fidelity, and it applies to any person who occupies a position of peculiar confidence towards another. According to the court, there are two types of fiduciary relationships: formal fiduciary relationships that arise as a matter of law, such as attorney client, partnership, trustee, and principal agent relationships, and informal fiduciary relationships or "confidential relationships" that may arise from moral, social, domestic, or personal relationships.

The court stated that the accountant client relationship does not always involve a fiduciary duty. Whether a fiduciary duty exists in an informal relationship is to be determined from the actualities of the relationships between the persons involved. The mere fact that one party subjectively trusts another party does not alone indicate that confidence is placed in another in a sense demanded by fiduciary relationships because something apart from the transaction between the parties is required. Rather, a fiduciary relationship may arise if the dealings between the parties have continued for such a period of time and a party is justified in relying on another to act in his best interest. A party is justified in placing confidence in the belief that another party will act in his or her best interest only where he or she is accustomed to being guided by the judgment or advice of the other party, and there exists a long association in a business relationship as well as personal friendship.

The court found that while it was fairly obvious that Achor and Abernethy had a close personal friendship, the administrator failed to produce summary judgment evidence that they had a fiduciary relationship, informal or otherwise. The administrator produced no evidence that Abernethy was accustomed to being guided by Achor's judgment and advice in legal, financial, and accounting matters. In the absence of any such evidence, the existence of a lengthy, cordial, and close relationship between Achor and Abernethy, standing alone, did not establish a confidential relationship arising to the level of a fiduciary relationship. The court acknowledged that the evidence that Abernethy designated Achor as a beneficiary of the IRA and established the joint accounts was sufficient to show that Abernethy placed some degree of subjective trust in Achor; however, that evidence did not show the level of trust and reliance necessary to establish the existence of a fiduciary relationship. The court of appeals affirmed the judgment in favor of Achor.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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