Hosey v. Burgess - 319 Ark. 183, 890 S.W.2d 262 (1995)

Rule:

Self-dealing by a trustee or any fiduciary is always suspect, and it is a universal rule of equity that a trustee shall not deal with trust property to his own advantage without the knowledge or consent of the cestui que trust.

Facts:

Appellant trustees were lessees of farm property that they held in trust for the decedent. Under the trust instrument, the trustees were granted broad discretionary power, but were required to hold, manage, and invest the property for the benefit of the decedent. The trustees subleased the property, remitted certain sums to the decedent, and kept the balance for themselves. After the decedent's death, the executrix brought an action for damages against the trustees. The chancery court entered judgment in favor of the executrix. Appellant trustees sought review. 

Issue:

Under the circumstances, did the trustees violate their fiduciary responsibilities to the decedent by engaging in prohibited self-dealing? 

Answer:

Yes.

Conclusion:

On appeal, the court affirmed the judgment. The court held that the trustees were legally disabled from obtaining any personal benefit, advantage, gain, or profit out of their administration of the trust. Moreover, the court held that the chancery court's finding that the trustees violated their fiduciary responsibilities to the decedent by engaging in prohibited self-dealing, albeit innocent and unintentional, was not clearly erroneous, and that the attorney fee award was permissible for the trustees' breach of trust. The court further held that the prejudgment interest was proper because a method existed for fixing an exact value on the executrix's claim at the time of the occurrence creating the cause of action.