In Coleman v. Newborn, 2007 WL 4225408 (Del. Ch., Nov. 27, 2007), read opinion here, the Chancery Court rescinded a transfer of property after finding a fiduciary relationship existed and determining that the transferee could not establish the fairness of the transaction. The case involved a half-sister who transferred property of the relative she was assisting, into her own name. The opinion includes a helpful discussion of situations where the court will find a fiduciary relationship to exist. Here is the money quote:
Even where there is no formal appointment of a power of attorney, it is still possible for a fiduciary relationship to exist that will impose the legal presumption of fraud. [FN11] "The courts have consciously refused to delineate those situations where a fiduciary relationship may exist …. [since] in the ramifications of human activity, it is undesirable to fix a rigid limitation on the application of such a salutory principle." [FN12] Given this doctrine, the finding of a fiduciary relationship is a factual inquiry that requires an examination into whether the "relationship is of such a confidential or dependent nature as to rise to fiduciary status." [FN13]Upon the finding of a fiduciary relationship, the party seeking to sustain the transfer can overcome the presumption of fraud by showing the fairness of the transaction. [FN14]
FN11.See Swain v. Moore, 71 A.2d 264, 267 (Del. Ch.1950).
FN13.White v. Lamborn, 1977 WL 9612, at *4 (Del. Ch. Mar. 15, 1977).
The facts in this case give rise to two sources of a fiduciary relationship that would impose a burden on Newborn to demonstrate that the transfer of the house should be upheld. The first is based on Newborn’s status as Coleman’s attorney-in-fact. The second derives from the personal relationship between Coleman and Newborn. Of course, in a strong sense, these are two aspects of the same reality-the reasons Coleman made Newborn her attorney-in-fact arise out of the long-term relationship of trust between the sisters and, in Coleman’s case, her growing dependency on Newborn.