Glynn v. Atlantic Seaboard Corp.

• Decision Date: 08 April 1999
• Citation: 728 A.2d 117,1999 ME 53
• Parties: Kevin J. GLYNN v. ATLANTIC SEABOARD CORP.
• Court: Maine Supreme Court

728 A.2d 117

1999 ME 53

Kevin J. GLYNN v. ATLANTIC SEABOARD CORP.

Supreme Judicial Court of Maine.

Argued February 1, 1999.

Decided April 8, 1999.

John E. Geary, (orally), Falmouth, for plaintiff.

Leonard I. Sharon, (orally), Sharon, Leary & DeTroy, Auburn, for Atlantic Seaboard.

Peter B. LaFond, (orally), Berne & LaFond, Portland, for Quirino Lucarelli.

Before WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, ALEXANDER, and CALKINS, JJ.

DANA, J.

[¶ 1] Atlantic Seaboard Corporation (ASC) appeals from the judgments entered in the Superior Court (Cumberland County, Brennan, J.) on Kevin J. Glynn's claim against ASC for unpaid wages due pursuant to 26 M.R.S.A. § 626 (1988 & Supp.1998) and on ASC's claims against Glynn and Quirino Lucarelli for, inter alia, fraud and breach of a fiduciary duty. The court granted a summary judgment in favor of Lucarelli based on a release executed by ASC. After a jury trial, the court entered a judgment on a verdict substantially in favor of Glynn. With regard to the summary judgment, ASC contends that the release did not shield Lucarelli from liability because it was a product of Lucarelli's fraudulent misrepresentations. Because there is a genuine issue of material fact as to whether the release was a product of fraud, we vacate the summary judgment. With regard to the jury verdict, ASC contends that the trial court erred in excluding prior out-of-court statements by a former ASC employee. We conclude that the court did not commit reversible error by excluding the statements.

I. BACKGROUND

[¶ 2] In February 1993, Lucarelli and James Michalec formed ASC. Michalec received 51% of ASC's shares and served as the corporation's treasurer. Lucarelli became president and manager of the corporation and, in exchange for approximately $64,000, received the remaining 49% of ASC's shares. As the manager, Lucarelli was responsible for hiring and paying ASC employees. Glynn performed bookkeeping services for ASC.

[¶ 3] Lucarelli and Michalec agreed to pay ASC employees in cash. In furtherance of this agreement, ASC issued checks to Lucarelli and to Michalec during May and June 1993. Michalec cashed his checks and gave the cash to Lucarelli so that Lucarelli could pay the employees. In one instance Michalec gave the cash to Glynn. Lucarelli reported to Michalec that he had distributed the cash to the employees.

[¶ 4] When ASC failed to make a profit, Lucarelli and Michalec agreed to terminate operations. On June 25, 1993, Michalec bought Lucarelli's share in ASC for $64,385, and Lucarelli resigned as president. As part of the buy-out, ASC, Michalec, and Lucarelli, among others, executed a release in which ASC

expressly release[d] Lucarelli ... of and from any and all claims, damages and/or causes of action, both at law and in equity now existing or which may result from the existing state of things, which the Atlantic parties ever had, now have, or will have against Lucarelli....

[¶ 5] Within a month of the closing, several former ASC employees claimed that Lucarelli had in fact not paid them. Counsel for Lucarelli later stated in a letter that Lucarelli acknowledged receiving funds from ASC but that Lucarelli did not consider those funds to be wages. At the insistence of the Maine Department of Labor, ASC settled these claims for unpaid wages. The settlement, however, did not include Glynn's claims.

[¶ 6] In 1994, Glynn filed a complaint against ASC claiming that pursuant to 26 M.R.S.A. § 626 ASC owed him $4,722.50 in unpaid wages and an additional $9,445 in statutory damages. ASC filed a counterclaim against Glynn and a third-party complaint against Lucarelli claiming that the two defendants had converted corporate funds to their own use.¹ Lucarelli sought a summary judgment on all counts, contending that the release shielded him from liability.² ASC responded by arguing that the release was void as a product of Lucarelli's misrepresentations that he had paid the ASC employees. The court granted Lucarelli's motion for a summary judgment based on the release.

[¶ 7] Glynn's claims and ASC's counterclaims against Glynn proceeded to trial before a jury. The jury found that ASC failed to pay Glynn $40 in wages and awarded an additional $80 in statutory damages. With regard to ASC's counterclaims, the jury found in favor of Glynn on all counts except for breach of a fiduciary duty, for which the jury awarded ASC no damages.

II. RELEASE

[¶ 8] In reviewing a summary judgment, we view the evidence in the light most favorable to the nonprevailing party. Gorham Sav. Bank v. Baizley, 1998 ME 9, ¶ 6, 704 A.2d 398, 400, and will affirm a summary judgment "when there is no genuine issue of material fact and the movant is entitled to a judgment as a matter of law," Salvation Army v. Town of Standish, 1998 ME 75, ¶ 4, 709 A.2d 727, 728. As an extreme remedy, a summary judgment should be granted in favor of the defendant "only when the facts before the court so conclusively preclude recovery by the plaintiff that a judgment in favor of the defendant is the only possible result as a matter of law." Binette v. Dyer Library Ass'n, 688 A.2d 898, 901 (Me.1996).

[¶ 9] ASC argues that there is a genuine issue of material fact as to whether the release was a product of fraud. Specifically, ASC contends that because Lucarelli was an officer of ASC his false representations concerning his payments to the ASC employees coupled with his failure to disclose those falsehoods at the signing of the release constituted fraud.

[¶ 10] Although "a valid release will extinguish a cause of action, the release will nevertheless be set aside if shown to be the product of fraud, misrepresentation, or overreaching." LeClair v. Wells, 395 A.2d 452, 453 (Me.1978) (citations omitted); see also Harriman v. Maddocks, 518 A.2d 1027, 1030 (Me.1986)

. Traditionally, a party commits fraud if he "(1) makes a false representation (2) of a material fact (3) with knowledge of its falsity or in reckless disregard of whether it is true or false (4) for the purpose of inducing another to act or to refrain from acting in reliance on it, and (5) the [other] justifiably relies on the representation as true and acts upon it to his damage." Letellier v. Small, 400 A.2d 371, 376 (Me.1979).

[¶ 11] The court applied this definition of fraud to the facts and found that although there was ample evidence to establish that "Lucarelli knowingly made a false representation of a material fact that was relied upon by ASC to its detriment," there was no competent evidence that Lucarelli made the false representation for the purpose of inducing ASC to grant him a release. In other words, the court assumed that ASC was required to establish that Lucarelli lied to Michalec for the purpose of inducing ASC to grant him a release. Assuming, without deciding, that this nexus is required, we nevertheless vacate the order because the court's conclusion does not recognize that because Lucarelli was a corporate officer, any failure on his part to disclose at the closing that he did not pay ASC employees would constitute a fraudulent act.

[¶ 12] Where a fiduciary relationship exists between the parties, "omission by silence may constitute the supplying of false information." Binette, 688 A.2d at 903 (holding that silence constitutes supplying false information when silence is a breach of statutory duty); Brae Asset Fund, L.P. v. Adam, 661 A.2d 1137, 1140 (Me.1995) ("absent a fiduciary or confidential relationship, there is no duty to disclose information"); see also W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 106, at 738 (5th ed.1984). A fiduciary relationship exists between a corporate officer and the corporation he serves, and the officer "must disclose and not withhold relevant information concerning any potential conflict of interest with the corporation." Northeast Harbor Golf Club, Inc. v. Harris, 661 A.2d 1146, 1148 (Me.1995). Given that Lucarelli was a corporate officer of ASC, any failure to disclose a material fact would constitute a false representation. See Binette, 688 A.2d at 903

. Substituting nondisclosure for false representation, a party with a fiduciary duty to another commits fraud when he (1) intentionally does not disclose; (2) a material fact to the other; (3) for the purpose of inducing the other to act or refrain from acting in reliance on the failure to disclose; and (4) the other justifiably relies on the nondisclosure and acts upon it to his or her damage. See Fitzgerald v. Gamester, 658 A.2d 1065, 1069 (Me.1995).

[¶ 13] The evidence, viewed in the light most favorable to ASC, establishes that Lucarelli told Michalec that he had paid the ASC employees; that Lucarelli had not paid the employees, but converted the funds to his own use; that at the closing—less than a month from the false representation—Lucarelli did not disclose the existence of the outstanding debt to the employees; and that Michalec relied on this nondisclosure and signed the release. The trier of fact could infer from these facts that the nondisclosure was intentional and for the purpose of inducing ASC to grant the release because it occurred at the signing of the release and only weeks earlier Lucarelli had affirmatively misrepresented to Michalec that he had paid the employees. See Fitzgerald, 658 A.2d at 1069

; see also Manning v. Dial, 271 S.C. 79, 245 S.E.2d 120, 122 (1978) (holding that evidence created an inference of fraud where officer of corporation failed to disclose all relevant facts before signing an agreement for the sale of stock which contained a release). Ther...