Thompson v. Monetary Management Corp.

44 Pa. D. & C.4th 401, 2000 Pa. Dist. & Cnty. Dec. LEXIS 354
CourtPennsylvania Court of Common Pleas, Delaware County
DecidedMarch 15, 2000
Docketno. 94-8987
StatusPublished
Cited by1 cases

This text of 44 Pa. D. & C.4th 401 (Thompson v. Monetary Management Corp.) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Delaware County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Thompson v. Monetary Management Corp., 44 Pa. D. & C.4th 401, 2000 Pa. Dist. & Cnty. Dec. LEXIS 354 (Pa. Super. Ct. 2000).

Opinion

BURR II, J.,

— The plaintiffs, Thomas C. Thompson Jr., John Petillo, William Thompson, RMH Enterprises Inc. and Quik-Tax Dollars Inc., as well as the defendants, Monetary Management Corp. and QTV Holdings Inc., have appealed from this court’s order of September 30,1999 denying the plaintiffs’ post-trial motions, denying the defendants’ post-trial motions, denying plaintiffs’ motion to mold the verdict, and plaintiffs’ supplemental motion to mold the verdict.1

A verdict in the above-captioned matter was returned by a jury May 14, 1999, after four days of trial, finding that the defendants breached a fiduciary duty to plaintiffs, causing them harm, and the jury awarded plaintiffs $410,363. The jury also found that defendants breached a provision of a joint venture agreement entered into between the defendants and plaintiff corporations (exhibit MMC-41), but that such was not a legal cause of any harm to plaintiffs’ corporations. The jury found that defendants were not grossly negligent.

A joint venture agreement was entered into by defendant, QTV Holdings Inc., and plaintiffs, Quik-Tax Dollars Inc. and RMH Enterprises Inc., on January 13,1993. Defendants were engaged in the business of preparing and electronically filing income tax returns and granting refund anticipation loans. The joint venture was entered into for the purpose of marketing, expanding and operating the plaintiff’s, Quik-Tax Dollars Inc., business. The parties agreed that the individual plaintiffs, Thomas C. [404]*404Thompson Jr., John Petillo and William Thompson, had no direct claim against defendants. When the joint venture agreement was entered into, Richard M. Hersch, president of RMH Enterprises Inc., became the president of Quilc-Tax Dollars Inc. He began committing fraud in the processing of tax returns, generating false checks and cashing them. Mr. Hersch was indicted and pled guilty in the United States District Court of Massachusetts to various crimes arising from his fraudulent activities. The misconduct of Mr. Hersch ultimately led to investigation by the Internal Revenue Service and the issuance of a search warrant for execution upon the premises of Quik-Tax Dollars Inc. The parties to the joint venture agreement then entered into a termination agreement on or about March 13, 1993. (Exhibit MMC-49.)

Plaintiffs contend that defendant, Monetary Management Corp., was aware of Mr. Hersch’s fraudulent activities and breached their fiduciary duty to disclose that to plaintiffs before entering into the termination agreement. The latter termination agreement contained a release by plaintiffs of all claims arising from the operation of the joint venture as they might exist against Monetary Management Corp. It was agreed by all counsel that QTV Holdings Inc. and Monetary Management Corp. were the same for .purposes of this trial.

Following trial, the jury entered the verdict herein-above set forth and the parties filed post-trial motions, which were ruled upon as indicated at the outset of this opinion.

MONETARY MANAGEMENT CORP.’S APPEAL

Defendants, Monetary Management Corp. and QTV Holdings Inc., have raised but one issue on appeal, contending that this court, as a matter of law, should have [405]*405found that Monetary breached no fiduciary duty to plaintiffs. Defendants’ argument suggests that there is no legal authority to support this court’s submission to the jury of the issue of determining whether or not the said defendant owed any fiduciary duty to plaintiffs. Plaintiffs contend that defendant breached that fiduciary duty when it failed to communicate to plaintiffs its knowledge of the criminal conduct of Richard M. Hersch, which occurred during the joint venture.

Monetary contends that there is no legally cognizable fiduciary duty and that Richard M. Hersch’s knowledge of his own fraudulent and criminal conduct should be imputed to RMH Enterprises Inc., plaintiff. Plaintiffs contend that they are entitled to the full benefit of the jury’s verdict, that Mr. Hersch’s misconduct cannot be imputed under Pennsylvania law to RMH Enterprises Inc., and that the evidence established that defendants in fact benefited from the nondisclosure of Mr. Hersch’s criminal and fraudulent conduct.

The record clearly establishes, especially in light of this jury’s verdict, that Mr. Hersch was acting by and for himself and his own benefit and was not acting for the good of any of the corporations, plaintiffs or defendants. Indeed, his conduct ultimately caused serious damage to the plaintiff corporations. Normally, knowledge of fraud by a corporate officer is imputed to the corporation when the officer’s conduct was committed in the course of his employment and where the officer was acting for the benefit of that corporation. In re Phar-Mor, etc., 900 F.Supp. 784 (W.D. Pa. 1995); Rochez Bros. Inc. v. Rhoades, 527 F.2d 880 (3d Cir. 1975), cert. denied, 425 U.S. 993, 96 S.Ct. 2205, 48 L.Ed.2d 817 (1976). The corporation “is of course a creature of legal fiction.” Lokay v. Lehigh Valley Cooperative Farmers Inc., 342 Pa. Super. 89, 492 [406]*406A.2d 405 (1985). It is, therefore, obvious and logical that the knowledge of a corporate officer, when acting within the officer’s scope of employment and for the benefit of the corporation, is and should be imputed to the corporation. However, there is a well-established exception providing that “knowledge of an agent in a transaction in which the agent secretly is acting adversely to the [corporation] and entirely for his own or another’s purposes” is not imputed to the corporation. F.D.I.C. v. Shrader & York, 777 F. Supp. 533; 991 F.2d 216 (1993), reh. denied, 999 F.2d 1581 (5th Cir. 1993), cert. denied, 512 U.S. 1219, 114 S.Ct. 2704, 129 L.Ed.2d 832 (1994); Restatement (Second) of Agency §282(1). Where the misdeeds of the corporate officer worked to the benefit of one or a group, other than the corporation, then obviously the foregoing presumption loses its logic and validity.2 A principal is not presumed to have had knowledge or information of an agent’s fraudulent conduct. Todd v. Skelly, 384 Pa. 423, 120 A.2d 906 (1956); Littler v. Dunbar, 365 Pa. 277, 74 A.2d 650 (1950); Thees v. Prudential Insurance Co. of North America, 325 Pa. 465, 190 A. 895 (1937); First National Bank of Bangor v. Bangor Trust Co., 297 Pa. 115, 146 A. 595 (1929).

It is clear from this jury’s verdict and from the lack of any dispute that Mr. Hersch acted entirely in his own interests and not for the benefit of any party to this litigation. Further, Mr. Hersch was not in the course of his employment since there is no suggestion that he was retained to submit fraudulent income tax returns. The evidence was clear in the case at bar that plaintiffs, RMH Enterprises Inc. and Quik-Tax Dollars Inc., were adversely impacted by Mr. Hersch’s fraudulent conduct. [407]*407Therefore, the knowledge of Mr. Hersch, even though an officer of the plaintiff corporations, cannot be imputed to plaintiff corporations. Indeed, the evidence in this trial confirmed that plaintiffs did not have knowledge of Mr.

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44 Pa. D. & C.4th 401, 2000 Pa. Dist. & Cnty. Dec. LEXIS 354, Counsel Stack Legal Research, https://law.counselstack.com/opinion/thompson-v-monetary-management-corp-pactcompldelawa-2000.