Opinion ID: 2614193
Heading Depth: 1
Heading Rank: 5

Heading: appellant's interest in the undisclosed commission

Text: In a case involving a trustee who received a bonus from a third party for placing trust business, we held that when the opportunity to make a profit arises from the position occupied by a fiduciary the profit realized belongs to the principal, at least when the fiduciary has excluded his principal from any chance to enjoy the opportunity coming to the fiduciary in this manner. In re Dean's Trust, 47 Haw. 629, 640, 394 P.2d 432, 438 (1964). Among the authority given in support of this principle, we cited the case of Risvold, etc. v. Gustafson, 209 Minn. 357, 296 N.W. 411 (1941). The Risvold case is uniquely applicable to the case before us for resolve. In Risvold it was held that certain officers and directors of a corporation were liable to the corporation for a secret profit made by them in purchasing property for the corporation. The director-fiduciaries in that case did not disclose that they were to receive a secret commission amounting to a separate interest in the same property the corporation was to receive. The court held that under the doctrine of constructive trusts the defendants were liable to the corporation for the interest they received. Appellees attempt to circumvent the rationale of the cases cited above by arguing that appellant could not lawfully have shared in the selling real estate brokers' commissions because appellant was not a licensed real estate broker. They therefore conclude that appellant was not excluded from enjoying the benefit received by appellees. We need not reach this question. In re Dean's Trust it was pointed out that a line of cases have held that the contention of ultra vires does not lie in the mouth of a corporate officer claiming the profits of a transaction for himself. In re Dean's Trust, supra, 47 Haw. at 638, 394 P.2d at 437. Even if it were decided that appellant itself could not have lawfully received the commissions that would not be determinative. In a case similar to the one at hand, involving a corporate fiduciary who made a secret profit from a seller of land to the corporation, the court said that [i]t appears only reasonable that [the corporation] would have been more anxious to acquire the property at a price less the commission paid [the fiduciary] than they would have been to purchase the property paying the price including the commission. Pryor v. Oak Ridge Development Corp., 97 Fla. 1085, 1092, 119 So. 326, 329 (1928). The same holds true in this case. Had appellant known that one of its directors, Pablo, would be receiving a commission from its purchase, it is reasonable to assume that it would have been more anxious to acquire the property at a price less that commission. Appellees' contention that Pablo's actions were in good faith and resulted in no loss to appellant is of no consequence. Had Pablo disclosed the fact that he anticipated receiving commissions, this case would be different. Then appellant would have had an opportunity to either attempt to obtain the property at a price less the commissions or it could have agreed with Pablo to acquiesce in letting him retain the commissions he received. This was not done. Appellant did not even learn of the commissions until months after their receipt when Pablo was directly questioned about them during a corporate meeting.