Fiduciary Duty of the Board of Directors

Vicki Hunsinger

In one of my emails I explained that the Board of Directors for DPOA has a clear fiduciary responsibility to the people who elected them to office, the Diamondhead owners. I thought, after learning of how the contract for the family fun center was handled by the Board, that we should all review this "law definition". I know this seems like a long explanation, taken from Wikipedia, but it is important that the Board understands the significance of their fiduciary responsibility to the Diamondhead owners. I sincerely hope that the Board has upheld their fiduciary responsibility because, as you can see, it is a very serious legal duty. These duties include many things; sharing information with owners; obtaining feedback and input from owners; making sure that the privacy and rights of all owners are protected; making sure that the financial aspects of Diamondhead owners are protected; that the Board protects all rights of the owners over the relationships with other entities; and more......I might add that just because a person is delinquent in his annual dues, does not mean that the Board is released from a fiduciary duty to that person.


Wikipedia:

A fiduciary duty is a legal or ethical relationship of confidence or trust between two or more parties, most commonly a fiduciary and a principal. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one person, in a position of vulnerability, justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.

“ A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.[1] ”

A fiduciary duty[2] is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust.

In English common law the fiduciary relation is arguably the most important concept within the portion of the legal system known as equity. In the United Kingdom, the Judicature Acts merged the courts of equity (historically based in England's Court of Chancery) with the courts of common law, and as a result the concept of fiduciary duty also became usable in common law courts.

When a fiduciary duty is imposed, equity requires a stricter standard of behavior than the comparable tortious duty of care at common law. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from his fiduciary position without express knowledge and consent. A fiduciary cannot have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd"[3] and that "[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty."