180 Conn. 199 | Conn. | 1980
This case concerns the relationship between a small corporation and one of its directors and officers. James J. Ferris, the plaintiff, brought an action to recover moneys lent as advances to and for the defendant, Polycast Technology Corporation. The defendant filed an answer denying liability and a counterclaim seeking damages for misuse of insider information, breach of fiduciary duty and misappropriation of corporate opportunity. After a trial to the court, Saden, J., the issues on both the complaint and the counterclaim were found for the plaintiff, and judgment was rendered accordingly. The defendant has appealed.
The issues on this appeal are threefold: (1) did the plaintiff establish the amount of the defendant’s outstanding indebtedness to the plaintiff, (2) did the defendant establish any of the various counts
The underlying facts of the relationship between the plaintiff Perris and the defendant Polycast Technology Corporation (hereinafter Polycast) are not in serious dispute. Polycast is a manufacturing corporation which became involved in bankruptcy proceedings in the late 1960s. Perris, an engineer, first became affiliated with Polyeast while it was in bankruptcy, as a representative of and then as an employee of the trustee in bankruptcy. In 1968, the corporation was successfully reorganized and Perris became an officer and a shareholder, purchasing 76,500 shares at a cash price of thirty cents per share and contributing as well machinery and equipment and other rights. Later that year, he purchased 5000 additional shares at one dollar per share, pursuant to a stock option. Shortly thereafter he transferred 35,000 shares to his wife, leaving him with ownership of the remaining 46,500 shares.
The indebtedness that gave rise to the ease in chief arose in 1971, when Perris lent money to Poly-cast and, at Polycast’s request, paid moneys to creditors of Polycast. Sums totaling $112,889 were advanced to or on behalf of Polyeast, and a substantial part of the outstanding indebtedness and interest was repaid by Polycast.
The first issue on this appeal challenges the sufficiency of the evidence to support the trial court’s finding that the outstanding balance of the loans owed to Perris was $42,150. This finding, and the correlative finding that the defendant had agreed to repay these loans with interest at 9 percent per annum, led the court to enter judgment in the principal amount of $42,150 and $24,782.64 for interest to December 31, 1977, plus interest at 9 percent on $42,150 from January 1, 1974, to the date of judgment. Only the amount of the outstanding balance on the principal has been contested.
The defendant’s attack on the court’s finding is not sustainable. The plaintiff established the amount of his claim by four different sources. The plaintiff himself testified about the amount of the loans that had not been repaid. Kenneth J. Doyle, a certified public accountant in the firm of Price Waterhouse & Company, which audited the defendant’s books for 1970 and 1971, confirmed the same amount. The plaintiff’s attorney at the time of the transaction testified to the receipt of a letter acknowledging the same amount of the indebtedness, a letter that purported to be signed by Henry P. Von Keyserling, then Polycast vice-president of finance, on what purported to be Polycast stationery. The defendant’s current treasurer, Richard Schneider, produced Polycast ledger sheets which were admitted into evidence and which substantiated the plaintiff’s claim.
The defendant challenges the admissibility of this documentary evidence, the Yon Keyserling letter
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The second issue on this appeal concerns the trial court’s determination that the defendant failed to prove by competent evidence the various allegations contained in its three-part counterclaim. Having found the evidence insufficient, the court made no findings of fact relating thereto and concluded only
The counterclaim’s allegations of breach of fiduciary duty were supported by evidence which could have established the following facts. The plaintiff, while an officer and a director of the defendant corporation, sold his stock holdings in the corporation for a nominal cash gain of $525,000. At the time of the sale, to which the corporation formally consented, the plaintiff had actual knowledge that the corporation was in financial difficulties. The moneys received from the sale of the stock were in large part used to provide short term working capital for, to make loans to, and to pay creditors of, the defendant corporation. A subsequent audit of the corporate financial records of this time period by Price Waterhouse & Company concluded that the records were inadequately maintained. The plaintiff, as the defendant’s director, secretary, and vice-president of engineering, might have insisted upon access to the financial records, but in fact relied upon others to supervise financial planning and record-keeping.
The first count in the defendant’s counterclaim relates to insider trading. We have recognized, in Katz Corporation v. T.H. Canty & Co., 168 Conn. 201, 210-11, 362 A.2d 975 (1975), that “inside trading by a corporate fiduciary may be a violation of the common-law duty which he owes to his corporation.” That principle is not at issue. The question is only whether the defendant proved that the plaintiff improperly profited from material, undisclosed information obtained in his position as officer or director. The plaintiff’s alleged wrongful
The third count of the defendant’s counterclaim charges the plaintiff with impropriety in his transactions with the defendant corporation. This count focuses on the loans between the plaintiff and the defendant and alleges that they constitute a misuse of corporate opportunity. Once again, the underlying legal principles are not in doubt. A director has the burden of showing that any personal dealing between him and his corporation is consistent with good faith, fairness, and is for adequate consideration. General Statutes § 33-323 (a);
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The defendant’s final argument on this appeal is that it is entitled to a new trial because the trial court’s conduct of the trial violated the basic requirements of due process. The defendant claims that its failure to make the proper evidentiary showing to support its defense and especially its counterclaim was attributable to unjustifiable interference by the trial court. This is a serious charge. We have carefully reviewed not only the specific evidentiary rulings reprinted in the record and in the briefs but also the transcript as a whole. We find the charge groundless. The trial court’s interventions, designed to foster orderly presentation of the case and to avoid repetitious argument, were entirely within the scope of its discretion “over matters occurring in the conduct of the trial.” Wooster v. Wm. G. A. Fischer Plumbing & Heating Co., 153 Conn. 700, 702, 220 A.2d 449 (1966); Doran v. Wolk, 170 Conn. 226, 232, 365 A.2d 1190 (1976); Robinson v. Faulkner, 163 Conn. 365, 371, 306 A.2d 857 (1972). The trial court’s rulings dealt even
There is no error.
In this opinion the other judges concurred.
It was stipulated at trial that Polycast is a publicly held corporation that had, at the relevant time, approximately one million shares issued and outstanding.
Although, it is possible that these ledgers might have qualified as business entries, they were neither offered nor admitted as such.
Cf. General Statutes § 33-313 (d), enacted subsequent to the proceedings herein.
Section 33-323 of the General Statutes entitled “Corporate transactions with directors and others” provides, in relevant part: “(a) A contract or transaction between a corporation and a director thereof . . . shall not be voidable, and such director shall not incur any liability, merely because such director is a party thereto or because of such family relationship or interest, if: (1) Such family relationship or such interest, if it is a substantial interest, is fully disclosed, and the contract or transaction is not unfair as to the corporation and is authorized by (i) directors or other persons who have no substantial interest in such contract or transaction in such a manner as to be effective without the vote, assent or presence of the director concerned or (ii) the written consent of all of the directors who have no substantial interest in such contract or transaction, whether or not such directors constitute a quorum of the board of directors ... or (4) the contract or transaction is fair as to the corporation.”
Section 33-323 (d) (3) of the General Statutes provides: “(d) For the purposes of this section . . . (3) any contract or transaction between a corporation and a person, corporation, firm or other organization made in the ordinary course of business at standard prices or on terms not less favorable to the corporation than those offered by the person, corporation, firm or other organization to others, shall be prima facie fair.”