Opinion ID: 1506724
Heading Depth: 2
Heading Rank: 1

Heading: Corporate Fiduciaries

Text: Our first concern, one inadequately addressed by the parties, is the question of whether either Armenio or Antonio as a minority shareholder in a corporation acting as if it were a close corporation was a corporate fiduciary. Corporate officers and directors of any corporate enterprise, public or close, have long been recognized as corporate fiduciaries owing a duty of loyalty to the corporation and its shareholders and thereby prohibited from diverting corporate opportunities to themselves. As the Supreme Court of Delaware explained in a leading case: While technically not trustees, they stand in a fiduciary relation to the corporation and its stockholders. A public policy, existing through the years, and derived from a profound knowledge of human characteristics and motives, has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers. Guth, 5 A.2d at 510. This state as well has recognized that corporate officers and directors stand in a fiduciary capacity and are liable for taking corporate opportunities. See Boss v. Boss, 98 R.I. 146, 200 A.2d 231 (1964). Thus in Sladen v. Rowse, 115 R.I. 440, 347 A.2d 409 (1975), we found that a corporate officer and director charged with the responsibility of acquiring stock for the corporation could not, as a fiduciary, acquire the stock for himself without first offering it to the corporation. See id. at 444-45, 347 A.2d at 412-13. We explained, [A] person holding those offices may not divert to himself opportunities which in justice belong to the corporation he serves. Id. at 444, 347 A.2d at 412; see also Long v. Atlantic PBS, Inc., 681 A.2d 249 (R.I.1996). In the instant case, however, Antonio and Armenio were neither corporate officers nor directors. Pursuant to the articles of incorporation there was no board of directors, Custodio held the positions of president, vice-president, treasurer, and secretary, and his own testimony indicated that he acted as the general manager of its liquor store's day-to-day operation. [3] It might therefore be argued that Antonio and Armenio, who were neither directors nor corporate officers, were not fiduciaries to the corporation. We do not believe, however, that the question of who is a corporate fiduciary is subject to such a facile analysis. Officers and directors are naturally the most readily apparent fiduciaries of a corporation because of their unique relation to the corporation itself, its stockholders, and fellow directors or officers and not simply because of their titles. We are of the opinion that the term fiduciary is a broad concept that might correctly be described as anyone in whom another rightfully reposes trust and confidence. Francis X. Conway, The New York Fiduciary Concept in Incorporated Partnerships and Joint Ventures, 30 Fordham L.Rev. 297, 312 (1961). This Court has heretofore recognized that partners in a partnership owe one another a fiduciary duty, see Sullivan v. Hoey, 102 R.I. 487, 488, 231 A.2d 789, 790, (1967), and have additionally recognized that shareholders in a close held family corporation may have a fiduciary duty toward one another. See Estate of Meller v. Adolf Meller Co., 554 A.2d 648, 651-52 (R.I.1989); Fournier v. Fournier, 479 A.2d 708, 712 (R.I.1984); see also Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 328 N.E.2d 505, 515 (1975); but see Dowell v. Bitner, 273 Ill.App.3d 681, 210 Ill.Dec. 396, 403, 652 N.E.2d 1372, 1379 (1995). Today we conclude on the basis of the small number of shareholders in plaintiff corporation, the active participation by these shareholders in management decisions, and their close and intimate working relations, that the shareholders of plaintiff corporation, by acting as if they were partners, thus assumed a fiduciary duty toward one another and their corporation. This is not to say that all shareholders in all close corporations are under such a duty. [4] The shareholders may show by way of evidence that none of them intended such a partnership relationship, as evidenced by a stockholders' agreement or other relevant evidence. The existence of such a fiduciary duty is a fact-intensive inquiry. Where as here, when the shareholders in a less-than-thirty-shareholder corporation act among themselves as partners in a business venture for mutual profit or loss, the law ought to treat them as fiduciaries.