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

Heading: Corporate Opportunities

Text: Having concluded that in this case the five shareholders were corporate fiduciaries, we must next examine the question of whether there was a breach of that fiduciary role in this case. The defendants maintain that they have not deprived plaintiff of a corporate opportunity. There has been a great deal of judicial and scholarly debate on exactly what constitutes a forbidden corporate opportunity. Judges have formulated the line of business test, the interest or expectancy test, and the fairness test in order to assist in divining when a fiduciary may avail him or herself of a business opportunity and when it rightfully belongs to their corporation. See Knepper & Bailey, Liability of Corporate Officers & Directors, § 4-12 at 154 (5th ed. 1993). As the Supreme Court of Maine has recognized, these different formulations rest on the single notion that a corporate fiduciary should not serve both corporate and personal interests at the same time. Northeast Harbor Golf Club, Inc. v. Harris, 661 A.2d 1146, 1150 (Me.1995). The facts here show that plaintiff corporation was engaged in the operation of a retail liquor store in Cumberland, Rhode Island, and that by vote of the shareholders, Custodio, the corporation's president, was authorized to attempt to negotiate the purchase of Mendon Liquors, a nearby retail liquor store. Clearly Mendon Liquors was a business in the same line of business as plaintiff, and plaintiff had a corporate interest in acquiring that business. However, whether the opportunity for plaintiff ever to accomplish its purchase of Mendon Liquors did actually exist was not considered by the trial justice when passing upon defendants' motion for directed verdict. In this case the facts demonstrate that defendant Antonio never acquired any interest in Act, Inc., or Mendon Liquors. Although we have determined that he was a corporate fiduciary of plaintiff and that Mendon Liquors represented a potential corporate opportunity, the fact that he acquired no interest whatever in Mendon Liquors belies the trial court's judgment that he deprived plaintiff of a corporate opportunity. In this case Antonio did not divert any corporate opportunity in Mendon Liquors to himself and thus could not in law have been found to have breached his fiduciary duty to plaintiff. The denial of his motion for a directed verdict was therefore error. With respect to Armenio, however, the trial evidence reveals that he did acquire a financial interest in Act, Inc. The trial evidence, however, lacked the probative proof recognized as required by the trial justice in her later instruction to the jury that Mendon Liquors was a corporate opportunity that was in fact realistically available to plaintiff corporation or that the corporation was financially able to purchase Mendon Liquors. We conclude from the facts reported in the trial record before us that Armenio, although owing a fiduciary duty to his fellow shareholders in plaintiff corporation, did not breach that duty because plaintiff corporation was financially unable to avail itself of the opportunity of purchasing Mendon Liquors. Armenio then, as anyone, was able to participate in its acquisition by Act, Inc., without accountability to plaintiff corporation. See Northwestern Terra Cotta Corp. v. Wilson, 74 Ill.App.2d 38, 219 N.E.2d 860, 864 (1966) (an opportunity may be embraced    without accountability to the corporation if the corporation sought without success to obtain it); Robinson v. Brier, 412 Pa. 255, 194 A.2d 204, 206 (1963) (where the corporation is unable to avail itself of the business opportunity, there can be no usurpation of a corporate opportunity).