Opinion ID: 1825740
Heading Depth: 1
Heading Rank: 13

Heading: Transfer of Alesch, Inc. stock to Le Mars.

Text: The trial court decree directed Iowa Mutual by proper corporate resolution to transfer all of the outstanding stock of Alesch, Inc. to Le Mars. This, of course, is the stock whose purchase triggered this litigation. We quote from the decree: The failure to offer Alesch Agency to Le Mars Mutual was a breach of fiduciary duty by John H. Alesch in which Iowa Mutual and the above-indicated defendants joined and participated. Accordingly, Iowa Mutual shall, by appropriate corporate resolution, cause the entire outstanding stock of Alesch Agency to be conveyed to Le Mars Mutual forthwith. Plaintiffs had pled and argued the doctrine of corporate opportunity. Perhaps the leading case on corporate opportunity is Guth v. Loft, Inc., 23 Del.Ch. 255, 5 A.2d 503 (1939). It announced the rule that one holding a corporate fiduciary position may not appropriate for himself a business opportunity which in fairness belongs to the corporation. We have adopted this rule. Schildberg Rock Products Co. v. Brooks, 258 Iowa 759, 766-67, 140 N.W.2d 132, 137 (1966). In Schildberg we quoted the following from the Guth case with approval:    [I]f there is presented to a corporate officer or director 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 by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of his corporation, the law will not permit him to seize the opportunity for himself. And, if, in such circumstances, the interests of the corporation are betrayed, the corporation may elect to claim all of the benefits of the transaction for itself, and the law will impress a trust in favor of the corporation upon the property, interests and profits so acquired. The authorities universally hold the corporate opportunity rule is simply one phase of a director's duty of loyalty. Schildberg Rock Products Co. v. Brooks, 258 Iowa at 768, 140 N.W.2d at 137; Miller v. Miller, 301 Minn. 207, 222 N.W.2d 71, 78 (Minn.1974); Kerrigan v. Unity Savings Ass'n, 11 Ill.App.3d 766, 297 N.E.2d 699, 704-05 (1973), modified, 58 Ill.2d 20, 317 N.E.2d 39 (1974); Raines v. Toney, 313 S.W.2d at 808-09; General Automotive Manufacturing Co. v. Singer, 19 Wis.2d 528, 120 N.W.2d 659, 663 (1963); 19 Am.Jur.2d Corporations § 1311, at 717 (1965); 26 Fordham Law Review 528 (1957); J. Slaughter, The Corporate Opportunity Doctrine, 18 Southwestern Law Journal 96 (1964); D. Walker, Legal Handles Used to Open or Close the Corporate Opportunity Door, 56 Northwestern Law Review 608 (1961). This case does not fit the usual pattern of corporate opportunity cases. Invariably they involve the wrongful acquisition of a business or other property which rightfully belongs to the corporation. Here we have a sale by a director of a business which the corporation had a right to expect would be offered to it. Apparently plaintiffs recognized this because they argue the corporate opportunity arose as early as 1950, when Alesch first acquired an interest in the agency. We reject that theory. The trial court, too, was reluctant to apply the corporate opportunity doctrine to this transaction, preferring to rely on the general rule of loyalty and fidelity which a director owes his corporation. Like the trial court we decline to rely on the doctrine of corporate opportunity as a separate basis for the result we reach. We do, however, say that the studied and deliberate refusal to afford Le Mars an opportunity to acquire Alesch, Inc. was an act of disloyalty and a violation of John H. Alesch's fiduciary duty. It can be explained only by his intention to achieve personal financial gain by the bold sale of corporate directorships. We have already discussed this in Division IX and need add nothing more. We agree with the trial court that the sale of Alesch, Inc. to Iowa Mutual cannot stand. It must be set aside in favor of Le Mars. We affirm that part of the decree which directs Iowa Mutual to transfer all of the outstanding stock of Alesch, Inc. to Le Mars. However, Le Mars should pay Iowa Mutual the actual value of the stock, which we have fixed in Division XII at $92,500.00. In the adjustment of the accounts to be made by the special master, Iowa Mutual shall be given credit for $92,500.00 upon transfer of the stock to Le Mars. See Gabriel Industries, Inc. v. Defiance Industries, Inc., 22 N.Y.2d 405, 293 N.Y.S.2d 65, 66, 239 N.E.2d 706, 707 (1968).