August 22, 2019

Colorado Court of Appeals: No Fiduciary Duty Owed by Party to Real Estate Transaction so Attorney Fee Award Inappropriate

The Colorado Court of Appeals issued its opinion in In the Interest of Delluomo v. Cedarblade on Thursday, April 10, 2014.

Revocable Living Trust—Trustee—Beneficiary—Breach of Fiduciary Duty—Undue Influence—Attorney Fees—Breach of Trust Exception.

Respondent Phillip Delluomo created a revocable living trust. He named himself trustee and Wells Fargo Bank as co-trustee. The beneficiaries of the trust were his niece, appellant Brenda Cedarblade, and his nephew, Timothy Corcoran. A few months after the creation of the trust, Delluomo transferred five parcels of real property from the trust to Cedarblade.

The court thereafter appointed Janice Eder as Delluomo’s conservator. Eder initiated an action on Delluomo’s behalf to quiet title, seeking to set aside the real property transactions involving Cedarblade on the basis of undue influence and breach of fiduciary duty. A jury found that Cedarblade had exerted undue influence on Delluomo with regard to the conveyances of property into joint tenancy. Thus, the court set aside the property transfers to Cedarblade and awarded attorney fees to plaintiffs.

Cedarblade argued on appeal that the court erred in awarding attorney fees to plaintiffs. Cedarblade was not a trustee or custodian of funds (or other trust assets). Although she breached her duty as an individual, she did not breach any duty owed based on a relationship to manage property.

Because the circumstances of this case did not fit within the breach of trust exception to the general rule that parties in a lawsuit must pay their own legal expenses, the Court of Appeals ruled that the district court erred when it denied Cedarblade’s motion for directed verdict and allowed the jury to award attorney fees to plaintiffs. The portion of the judgment awarding attorney fees was vacated.

Summary and full case available here.

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