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Trust Opportunities, Trustee Breach of Loyalty

Corporate directors/officers and trustees are similar in that they are both fiduciaries and owe others (i.e., shareholders or beneficiaries, respectively) a duty of loyalty. As part of the duty of loyalty, the “corporate opportunity doctrine” forbids a corporate director from acquiring for his or her own benefit an opportunity that would have been valuable and germane to the corporation’s business, unless the opportunity is first offered to the corporation. Chemical Dynamics, Inc. v. Newfeld, 728 S.W.2d 590, 593 (Mo. Ct. App. 1987). The duty applies to an opportunity which is “in the line of the corporation’s business and is of practical advantage to it, [or] is one in which the corporation has an interest or a reasonable expectancy.” Id. The reasoning for this rule is that a director’s personal interests should be subordinate to his/her duties to the company; put differently, the director must determine if the business opportunity can first go to the corporation rather than to him/her personally.

The Missouri Trust Code has essentially the same “opportunity rule” for trustees. Section 456.8-802.5, RSMo provides that “[a] transaction not concerning trust property in which the trustee engages in the trustee’s individual capacity involves a conflict between personal and fiduciary interests if the transaction concerns an opportunity properly belonging to the trust.” In analyzing whether an opportunity belongs to the trust, it is necessary to determine the nature and purpose of the trust. A trust involving real estate purchases and speculation will be treated differently than a trust involving the distribution of cash and cash equivalents quickly to heirs. 

Failure of a director or trustee to observe the opportunity doctrine may be considered a breach of fiduciary duty or breach of trust. The consequences of such a breach could include, among other things, removal or money damages.