New York’s Fourth Department Appellate Division has laid down the marker for a trustee’s fiduciary responsibility in Capital Heat, Inc. v. Michael R. Blatner Family Trust reported at 882 N.Y.S.2d 632. This matter involved a life insurance agreement made by the plaintiff with the defendant trust when the trustee was also a shareholder and an employee of the plaintiff. In reversing a motion for summary judgment granted by the lower court against the trust for the value of the policy premium, the court ruled that "a fiduciary’s duty requires ‘not honesty alone but the punctilio of an honor the most sensitive’" with ‘ "undivided and undiluted loyalty to those whose interests the fiduciary is to protect’ ".
Your lawblogger has reported on this case because it sets forth the obligation of a trustee in a nutshell. Not even the slightest hint of self-dealing is tolerable in the relationship between a fiduciary and those whose interests he or she is to protect. Although this is a "bright line" distinction, it is sometimes difficult for a fiduciary to recognize a problem when it occurs. Keep in mind that the obligation of a fiduciary is unforgiving and — in the absence of either a duly executed release or a court order– without end. It is therefore important for trustees to carefully review their financial decisions with counsel in order to insure that they are acting appropriately.