Opinion ID: 1765435
Heading Depth: 1
Heading Rank: 1

Heading: did danny hill breach a fiduciary duty?

Text: Hill occupied the position of general manager of Southeastern and was not just a mere employee. He was responsible for the day to day operations of the business and had full authority to do what he felt was best for the business. The general manager of a corporation has general charge, direction, and control of the affairs of the company for the carrying on of which it was incorporated. As the general manager, Hill was an officer of Southeastern. 19 C.J.S. Corporations §§ 468-471 (1990). Directors and officers have a fiduciary relationship to the corporation. Fought v. Morris, 543 So.2d 167, 171 (Miss. 1989). It is undisputed that Hill was in a fiduciary relationship with Southeastern. Hill owed to Southeastern the duty to exercise the utmost good faith and loyalty. Fought v. Morris, 543 So.2d at 171; Gibson v. Manuel, 534 So.2d 199, 201 (Miss. 1988). One of the ways that the duty of good faith and loyalty may be breached is through the doctrine of corporate opportunity. This doctrine is defined as follows: [t]he doctrine of corporate opportunity prohibits directors or officers from appropriating to themselves business opportunities which in fairness should belong to the corporation. If there is presented to a corporate director or officer a business opportunity which the corporation is financially able to undertake, is, from its nature, in the line of the corporation's business and is of practical advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and if embracing the opportunity will bring the self-interest of the director or officer into conflict with that of the corporation, the director or officer may not seize the opportunity for himself. On the other hand, directors or officers may avail themselves of all opportunities lying outside the field of their duties as directors or officers. When a business opportunity comes to a corporate director or officer in an individual capacity, rather than in an official capacity, and the opportunity is not essential to the corporation, and is one in which it has no interest or expectancy, the opportunity is that of the director or officer, and not of the corporation, provided the director or officer has not wrongfully embarked the corporation's resources therein. Even if the opportunity is a corporate one, the director or officer may acquire it if the acquisition conforms to ethical standards of what is fair and equitable under the circumstances. The particular facts and circumstances of each case must be examined to determine whether the opportunity belonged to the corporation or was one personal to the individual ... 19 C.J.S. Corporations § 513 (1990). A complaining party must show by a preponderance of the evidence that under all the facts and circumstances the business opportunity was logically related to the corporation's existing or prospective activities. It must also establish that (1) the corporation was able to take advantage of the opportunity by showing that the corporation was not insolvent at the relevant times, or (2) financially disabled as a result of nonpayment of debts or breach of a fiduciary duty. This establishes a prima facie case of business opportunity and shifts the burden to the fiduciary to rebut the prima facie case. Ellzey v. Fyr-Pruf, Inc., 376 So.2d 1328, 1335 (Miss. 1979). Factors to be considered in determining whether or not the opportunity is in line with the corporation's business are the relationship of the opportunity to the corporation's business purposes and current activities, whether essential, necessary, or merely desirable to its reasonable needs and aspirations; whether or not the opportunity embraces areas adaptable to the corporation's business and into which it might easily, naturally, or logically expand; the competitive nature of the opportunity, whether or not prospectively harmful or unfair; whether or not the opportunity includes activities as to which the corporation has fundamental knowledge, practical experience, facilities, equipment, personnel, and the ability to pursue; and whether or not the acquisition by the director or officer would defeat plans and purposes of the corporation in carrying on or developing the legitimate business for which it was created. 19 C.J.S. Corporation § 513(d) (1990); Ellzey v. Fyr-Pruf, Inc., 376 So.2d at 1333, quoting Miller v. Miller, 301 Minn. 207, 222 N.W.2d 71, 81 (1974). In this case it is reasonable to conclude that the Chata job was logically related to the activities in which Southeastern was involved. Southeastern often sub-contracted its jobs out. Southern Interiors was one of Southeastern's subcontractors. Southeastern could have easily adapted its operation to the asbestos portion of the Chata job by subcontracting that part of the job to Southern Interiors. Southeastern could have easily, naturally, and logically expanded its operation to include the asbestos encapsulation portion of the Chata job. But did Southeastern have the ability to take advantage of the opportunity? The facts show that Southeastern did not actually have the ability to do asbestos encapsulation, as it lacked a license from the Environmental Protection Agency to do asbestos work. It is equally clear, however, that Southeastern often used subcontractors to do the labor on its jobs. Furthermore, Southeastern frequently used Southern Interiors, which was certified to do asbestos work, as one of its subcontractors. Therefore, it is reasonable that Southeastern could have used Southern Interiors to perform the asbestos encapsulation. A factor weighing heavily in favor of usurpation of a corporate opportunity is that Danny Hill also did not have the ability to do asbestos encapsulation, but he took for himself, individually, steps that he could have taken on behalf of Southeastern. Hill associated himself with Southern Interiors in order to get the Chata job and made $90,000.00 profit from it. Hill used Southern Interior's license to do asbestos work to make a profit for himself and not Southeastern. Hill learned about the Chata job through his position with Southeastern. He bid on the asbestos portion of the job for Southeastern, but later withdrew the bid and resubmitted it through Southern Interiors for himself. The chancellor did not believe that Hill had informed Crowe about the Chata job, and we cannot say that finding is manifestly wrong. There is substantial evidence to support the finding that Hill breached his fiduciary duty to Southeastern.