When Does a Bank Owe a Fiduciary Duty to a Customer?

A bank typically does not owe fiduciary duties to a depositor, as fiduciary relationships require something behind a debtor-creditor relationship. There must be something approximating business agency, a professional relationship, or a family tie. Rhoads v. Harvey Publications, 145 Ariz. 142, 149, 700 P.2d 840, 847, 1984 Ariz. App. LEXIS 632 (Ariz. Ct. App. 1984).

When a lender acts as a borrower’s financial advisors for many years, it may lead to a fiduciary relationship between the parties. Stewart v. Phoenix Nat’l Bank, 64 P.2d 101, 49 Ariz. 34, 1937 Ariz. LEXIS 214 (Ariz. 1937). In Stewart, the customer had been told repeatedly by the lenders of their friendship with him, and he relied upon that advice, and by that reason he believed that they would not take financial advantage of him. The lender convinced the borrower to convert an unsecured loan into a secured loan, with the promise that he would not foreclose on his property. The lender then foreclosed on the property.

Stewart represents a situation close to a financial advisor relationship than a typical creditor-debtor relationship. In it the only case where the Arizona Supreme Court has implied a fiduciary duty between a bank and its customer, and it required a decades-long relationship as a financial advisor.

Debtors may seek to have a fiduciary duty implied in order to support a constructive fraud claim, which requires the existence of a fiduciary duty, along with a failure to disclose all material facts. Pain v. Prof’l Mortg. Assocs., 2012 U.S. Dist. LEXIS 191792 (D. Ariz. Sept. 6, 2012). The intent to deceive is not required to establish a constructive fraud claim.

There will need to be a showing that a bank went fair beyond the typical creditor-debtor relationship in order to support a finding of a fiduciary duty. The mere fact that a person was a bank’s customer for ten years will not support a finding of a confidential relationship. Even occasionally offering financial advice will be insufficient. There will have to be a longstanding relationship of some sort, and a showing that the person was treated differently than any other customer.

Chernoff Law handles business matters, including breach of fiduciary duty claims. Call us at 480-719-7307 to discuss your case with one of our business lawyers.