Chapter 16: Confidential Relationship

§16.1 Abuse or Breach of Confidential Relationship

The Case: Givens v. Mullikin , 75 S.W.3d 383 (Tenn. 2002).

The Basic Facts: Plaintiff initially brought suit against Defendant after she was injured in an automobile accident. The Defendant's insurance company then hired an attorney to defend the Defendant. This attorney engaged in substantial discovery, but was eventually fired and replaced by a new law firm. The new firm then engaged in extensive discovery of its own. Plaintiff then brought a separate action on a theory of vicarious liability for the defense attorneys' alleged abuse of process, inducement to breach express and implied contracts of confidentiality, inducement to breach a confidential relationship, and invasion of privacy during discovery.

The Bottom Line:

  • "[P]rior cases make it clear that a confidential relationship is not one merely exhibiting mutual trust and confidence. Rather, the relationship is more accurately described as one in which ''confidence is placed by one in the other and the recipient of that confidence is the dominant personality, with ability, because of that confidence, to influence and exercise dominion and control over the weaker or dominated party.'' Mitchell v. Smith, 779 S.W.2d 384, 389 (Tenn. Ct. App. 1989) (quoting Iacometti v. Frassinelli, 494 S.W.2d 496, 499 (Tenn. Ct. App. 1973))." 75 S.W.3d at 410.
  • "This Court has long recognized that an abuse or breach of a confidential relationship to gain a benefit or advantage will give rise to an action for damages. See Leake v. Gray, Shillinglaw & Co., [226 S.W.2d 298, 305 (Tenn. 1949)]. As we stated in Turner v. Leathers, 232 S.W.2d 269, 271 (Tenn. 1950)],
    Whenever two persons stand in such a relation that, while it continues, confidence is necessarily reposed by one, and the influence which naturally grows out of that confidence is possessed by the other, and this confidence is abused, or the influence is exerted to obtain an advantage at the expense of the confiding party, the person so availing himself of his position will not be permitted to retain the advantage, although the transaction could not have been impeached if no confidential relation had existed.
    (internal quotations omitted). To be clear, then, a plaintiff may recover damages from an abuse or breach of a confidential relationship only by showing that (1) the defendant was in a position to influence or control the plaintiff; (2) the defendant used the confidences given to him or her to obtain some benefit from, or advantage over, the plaintiff; and (3) the plaintiff, as the dominated party in the relationship, suffered some detriment at the hands of the defendant. See Mahunda v. Thomas, [402 S.W.2d 485, 489 (Tenn. Ct. App. 1965)] (citing Peoples Bank v. Baxter, [298 S.W.2d 732, 737 (Tenn. Ct. App. 1956)]); see also Kelly v. Allen, 558 S.W.2d 845, 848 (Tenn. 1977) (stating that "there must be a showing that there were present the elements of dominion and control by the stronger over the weaker")." Id.
  • "In reviewing the complaint in this case, we find that the plaintiff has not stated a claim for inducement to breach a confidential relationship. While the physician-patient relationship can constitute such a relationship, see Shadrick v. Coker, 963 S.W.2d 726, 735-36 (Tenn. 1998); Turner, [232 S.W.2d at 271], the plaintiff has not alleged that her physician used the trust or confidences given to him either to obtain an advantage over her or to extract some benefit from her." Id. at 410-11.
§16.2 Difference Between Fiduciary Relationships and Confidential Relationships

The Case: Foster Business Park, LLC. v. Winfree , No. M2006-02340-COA-R3-CV, 2009 WL 113242 (Tenn. Ct. App. Jan. 15, 2009).

The Basic Facts: Surti, an owner of the Plaintiff Foster Business Park, LLC, alleged that defendant bank officer Winfree breached fiduciary and other duties to Surti, Foster Business Park and others.

The Bottom Line:

  • "Under Tennessee common law, there are two principal types of fiduciary status.FN16 The first category of common law fiduciary status consists of relationships that are fiduciary per se, sometimes referred to as legal fiduciary, such as between a guardian and ward, an attorney and client, or conservator and incompetent. See Kelly v. Allen, 558 S.W.2d 845, 848 (Tenn. 1977); Mitchell v. Smith, 779 S.W.2d 384, 389 (Tenn. Ct. App. 1989); Parham v. Walker, 568 S.W.2d 622, 625 (Tenn. Ct. App. 1978). The second category consists of relationships that are not per se fiduciary in nature, but arise in situations where one party exercised 'dominion and control over another.'Kelley v.. Johns, 96 S.W.3d 189, 197 (Tenn. Ct. App. 2002); Matlock v. Simpson, 902 S.W.2d 384, 385-86 (Tenn. 1995); Kelly v. Allen, 558 S.W.2d at 848. This relationship, often called a 'confidential relationship,' 'is not merely a relationship of mutual trust and confidence, but rather it is one ''where confidence is placed by one in the other and the recipient of that confidence is the dominant personality, with ability, because of that confidence, to influence and exercise dominion and control over the weaker or dominated party.'' Kelley v. Johns, 96 S.W.3d at 197 (citing Iacometti v. Frassinelli, 494 S.W.2d 496, 499 (Tenn. Ct. App. 1973)). The person upon whom the trust and confidence is imposed is under a duty to act for and to give advice for the benefit of the other person on matters within the scope of the relationship. McRedmond v. Estate of Marianelli, 46 S.W.3d 730, 738 (Tenn. Ct. App. 2000); [Restatement (Second) of Torts] § 874 cmt. a (1979).
    FN16 All fiduciary relationships are confidential relationships, but not all confidential relationships are fiduciary relationships. A fiduciary relationship connotes a legal relationship, a confidential relationship includes not only fiduciary relationships but also every other relationship in which confidence is rightly reposed and exercised. Steven W. Feldman, Tennessee Practice: Contract Law and Practice § 6.13, at 504 (2006) ("Tennessee Practice: Contract Law and Practice")."
    2009 WL 113242 at *12.
  • "Relationships that are not fiduciary per se 'require proof of the elements of dominion and control in order to establish the existence of a confidential relationship.' Kelley v. Johns, 96 S.W.3d at 197 (citing Matlock v. Simpson, 902 S.W.2d at 385-86; Kelly v. Allen, 558 S.W.2d at 848. Moreover, a confidential relationship cannot be unilateral, rather both parties must understand that a special trust or confidence has been reposed. See Craggett v. Adell Ins. Agency, 635 N.E.2d 1326, 1331-32 (Ohio Ct. App. 1993);Westlake Vinyls, Inc. v. Goodrich Corp., 518 F.Supp.2d 902, 917-18 (W. D. Ky. 2007); Quinn v. Phipps, 113 So. 419, 421 (Fla. 1927); Steele v. Victory Sav. Bank, 368 S.E.2d 91, 94 (S.C. Ct. App. 1988)." Id.

  • "The relationship between a lender and his customer, as in the present case, falls within the latter category. 'Although fiduciary relationships may arise whenever confidence is reposed by one party in another who exercises dominion and influence, the dealings between a lender and borrower are not inherently fiduciary absent special facts and circumstances.' Oak Ridge Precision Industries, Inc. v. First Tennessee Bank Nat. Ass'n, 835 S.W.2d 25, 30 (Tenn. Ct. App. 1992) (no fiduciary relationship where plaintiff/debtor represented itself as an entity that had become too large and sophisticated to rely on small banks, such as the defendant, for its needs and described its relationship with the defendant/lender as one in deterioration). Because confidential relationships can assume a variety of forms, the courts have been hesitant to define precisely what a confidential relationship is and the court must look to the particular facts and circumstances of the case to determine whether one party exercised dominion and control over another, weaker party. See e.g., Roberts v. Roberts, 827 S.W.2d 788 (Tenn. Ct. App. 1991) (the fact that the defendant, deceased's brother, transported deceased on local trips and on one occasion arranged the renewal of a certificate of deposit for deceased is not sufficient to establish a confidential relationship); Kelley v. Johns, 96 S.W.3d at 197 (evidence that two persons are members of the same family, without more is insufficient to prove confidential relationship); see also Warren v. Percy Wilson Mtge. & Fin. Corp., 472 N.E.2d 364 (Ohio 1984) (no fiduciary status arising from advice given in routine business relationship between debtor and creditor) ; Umbaugh Pole Bldg. Co. v. Scott, 390 N.E.2d 320 (Ohio 1979) (creditor's provision of advice and counseling to debtor in a congenial atmosphere not enough to create a confidential or fiduciary relationship); Blon v. Bank One, 519 N.E.2d 363 (Ohio 1988) (no fiduciary status conferred in arm's-length business transaction)." Id. at *13.

  • "[W]e conclude that there is nothing in the record to show that Mr. Winfree had, at any time relevant to this case, a confidential relationship with Mr. Surti in which he exercised any dominion or control over Mr. Surti or any of his companies. Mr. Surti was an experienced businessman who owned multi-million dollar commercial real estate and had managed several companies over more than twenty years and clearly understood the nature of his relationship with Mr. Winfree as his lender, i.e., that Mr. Winfree, when employed by TBON and First State, represented his employer's interests and not those of Mr. Surti or any of his companies. Moreover, Mr. Surti confirmed in his deposition that neither he nor his companies were ever under the dominion or control of Mr. Winfree. Mr. Surti never rehabilitated his deposition statements nor produced new evidence showing that Mr. Winfree had either a legal or per se fiduciary relationship or that Mr. Surti placed confidence in Mr. Winfree who was then able to influence and exercise dominion and control over Mr. Surti or his companies. Since Mr. Winfree was able to negate an essential element of the breach of fiduciary duty claim - that Mr. Winfree owed no duty to Mr. Surti because there was neither a legal, or per se, fiduciary relationship nor was there a confidential relationship - we affirm the trial court's summary judgment dismissing the breach of fiduciary duty claim against Mr. Winfree." Id. at *15.

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The foregoing is an excerpt from Day on Torts: Leading Cases in Tennessee Tort Law, published by John A. Day, Civil Trial Specialist, Fellow in the American College of Trial Lawyers, recipient of Best Lawyers in America recognition, Martindale-Hubbell AV® Preeminent™ rated attorney, and Top 100 Tennessee Mid-South Super Lawyers designee. Read John’s full bio here.

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