Seaboard Industries, Inc. v. Joachim

45 Pa. D. & C.2d 780, 1968 Pa. Dist. & Cnty. Dec. LEXIS 277
CourtPennsylvania Court of Common Pleas, Philadelphia County
DecidedAugust 14, 1968
Docketno. 646; no. 1884; no. 2471
StatusPublished
Cited by1 cases

This text of 45 Pa. D. & C.2d 780 (Seaboard Industries, Inc. v. Joachim) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Philadelphia County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Seaboard Industries, Inc. v. Joachim, 45 Pa. D. & C.2d 780, 1968 Pa. Dist. & Cnty. Dec. LEXIS 277 (Pa. Super. Ct. 1968).

Opinion

Griffiths, J.,

These three actions, consolidated for trial, are by a Pennsylvania business corporation, Seaboard Industries, Inc., against one of its shareholders, Walter F. Joachim, a corporation organized by him, known as Joachim, Inc., and against Albert B. Monaco, Esq., sometime counsel and secretary of plaintiff corporation, and by the Estate of Andrew J. Breslin against Seaboard and W. F. Joachim.

The facts are set forth in the

Findings of Fact

1. The court finds as facts those averments from plaintiff, Seaboard Industries, Inc.’s original and amended complaint against Walter F. Joachim and Joachim, Inc., (and of the answer where indicated), plaintiff’s reply to defendant’s new matter, and plaintiff’s petition for further or additional preliminary equitable relief, as agreed to by the parties, as more fully set forth in the notes of testimony, pages 132 to 166, and the court incorporates the same herein by reference.

2. The court finds as facts those averments from plaintiff, Seaboard Industries, Inc.’s complaint against [782]*782Albert B. Monaco (and of the answer where indicated), other pleading admissions, as indicated, and exhibits as agreed to by the parties, as more fully set forth in the notes of testimony, pages 181 to 219, and the court incorporates the same herein by reference.

3. The court adopts as its own plaintiff Seaboard’s requests for findings of fact nos. 2 to 42, inclusive, except that the amount set forth in no. 42 is $75,000, not $7,500; and the court further adopts said requests nos. 43 to 98, inclusive; 101 to 119, inclusive; 122 to 171, inclusive; 178 to 180, inclusive; 188 to 190, inclusive; 196, 198, 199 and 201.

The court finds, in addition:

202. The business opportunities and interest, the subject matters of this suit, were, in fact, within the scope of the corporate plaintiff’s normal business activities.

203. Plaintiff corporation was in position to avail itself of such opportunities.

204. Information utilized by defendant Joachim in acquiring the interests, the subject matters of this suit, came to him by reason of his official position with plaintiff corporation.

205. Acquisition of the said interests by defendant Joachim was preceded by negotiations which said defendant made in behalf of plaintiff corporation.

206. The fair and reasonable counsel fee, properly allowable to plaintiff corporation against defendants Joachim and Monaco, under the circumstances of this case, is $25,000.

207. The fair and reasonable costs and expenses properly allowable to plaintiff corporation against defendants Joachim and Monaco, is $7,800.

208. No punitive damages should be assessed against either of said defendants.

The court adopts as its own defendants’ requests for [783]*783findings of fact nos. 1 to 6, inclusive; 12,13,16,18, 21, 36, 43, 44 and 45.

The court adopts as its own plaintiff Breslin’s request for finding of fact no. 4.

Discussion

Re Corporate Opportunity

This is a classic case of a director and corporate officer diverting for himself a business opportunity within the scope of his corporation’s normal activities. Seaboard Industries, Inc.’s normal business activities certainly encompassed the interests which Walter F. Joachim diverted for himself or his controlled corporation, Joachim, Inc.

Such activity by a director is not condoned by the law.

Officers and directors of business corporations stand in a fiduciary relation to the corporation: 15 PS §1408, Business Corporation Code.

A director owes a duty of loyalty to his corporation, and, in the words of former Mr. Chief Justice, then Mr. Justice, Stern, the law does not “permit a fiduciary to place himself in a position which invites conflict between self-interest and integrity”: Bailey v. Jacobs, 325 Pa. 187, 194 (1937).

The preceding findings of fact, all of which we find credible and believable, clearly show that Joachim was torn between this conflict, and he chose the former of the two alternatives.

Here, negotiations for acquisition by the corporation, made by Joachim himself, had preceded his own acquisition of the interests. As was said in Luther-land, Inc. v. Dahlen, 357 Pa. 143,151:

“If there is presented to . . . [a director] a business opportunity which is within the scope of [the corporation’s] own activities and of present or potential advantage to it, the law will not permit him to seize the opportunity for himself; if he does so, the corporation [784]*784may elect to claim all of the benefits of the transaction”.

Also, in Vulcanized Rubber & Plastics Company v. Scheckter, 400 Pa. 405 (1960), the court stated:

“There is no doubt that the relationship between a corporation and its officers and directors, as well as its lawyers and accountants, is such that these ‘fiduciaries’ cannot act contrary to or compete with the interests of the corporation. Predominantly for the protection of shareholders, there has developed in corporate law, a doctrine of ‘Corporate opportunity’ under which a corporation has the right to legal redress where one of its fiduciaries has in some way usurped some advantageous opportunity in which the corporation had an existing interest or where the opportunity is necessary for corporate existence or prosperity”.

See also in our circuit Higgins v. Shenango Pottery Company, 256 F. 2d 504 (1958), where it was held a prima facie case had been made out, and, after trial, at 279 F. 2d 46 (1960), the court directed judgment against additional defendants who had been exonerated by the trial court, certiorari denied 364 U. S. 899, 81 S. Ct. 232, 5 L. Ed. 2d 193.

Defendant, Joachim, the acquirer, being the very director, as president, designated as the corporation’s representative to bargain for the property, has violated his duty of loyalty and good faith. See Kelly v. 74 & 76 West Tremont Ave. Corp., 4 Misc. 2d 533, 151 N. Y. S. 2d 900 (Sup. Ct., 1956), modified Procario v. 74 & 76 West Tremont Ave. Corp., 3 A. D. 2d 821, 160 N. Y. S. 2d 932 (1957), reargument denied 3 A. D. 2d 894, 163 N. Y. S. 2d 362 (1957), affirmed 3 N. Y. 2d 973, 169 N. Y. S. 2d 39, 146 N. E. 2d 795 (1957); Trayer v. Bristol Parking, Inc., 198 Va. 595, 95 S. E. 2d 224 (1956).

[785]*785The case of Robinson v. Brier, 412 Pa. 255 (1963), relied on by defendants, is easily distinguishable. There, the corporation rejected the opportunity to acquire the asset, the asset not being appropriate for its corporate existence. Further, the corporation knew the officer was making the profits, which is contrary to our findings of fact in this ease.

An oft-cited case in this area of law is Guth v. Loft, Inc., 23 Del. Ch. 255 (Supreme Ct., 1939), affirming 23 Del. Ch. 138, (Ch., 1938), involving Loft, Inc. (a manufacturer and distributor of soft drinks), Guth being its president, and Pepsi-Cola Company. There, Guth used Loft’s money to buy the controlling shares of Pepsi-Cola, and thereby acquire its secret formula. The product was then sold to Loft, at cost plus 10 percent. The court treated Guth as a constructive trustee and ordered him to transfer the shares to Loft, their value having then increased a thousand times.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Seaboard Industries, Inc. v. Monaco
276 A.2d 305 (Supreme Court of Pennsylvania, 1971)

Cite This Page — Counsel Stack

Bluebook (online)
45 Pa. D. & C.2d 780, 1968 Pa. Dist. & Cnty. Dec. LEXIS 277, Counsel Stack Legal Research, https://law.counselstack.com/opinion/seaboard-industries-inc-v-joachim-pactcomplphilad-1968.