Pyne v. Jamaica Nutrition Holdings Ltd., No. 82-1634.

• Docket Nº: No. 82-1635.
• Citation: 497 A.2d 118
• Case Date: August 23, 1985
• Court: Court of Appeals of Columbia District

497 A.2d 118 Sedley K. PYNE, Appellant,
v.
JAMAICA NUTRITION HOLDINGS LIMITED, Appellee.
Dexter ROSE, Appellant,
v.
JAMAICA NUTRITION HOLDINGS LIMITED, Appellee. No. 82-1634. No. 82-1635. District of Columbia Court of Appeals. Argued September 13, 1984. Decided August 23, 1985.

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Thomas G. Corcoran, Jr., Washington, D.C., for appellant Pyne.

Joseph F. Cunningham, Washington, D.C., with whom Ashley J. Gardner, Washington, D.C., was on the brief, for appellant Rose.

Jamie L. Whitten, Washington, D.C., for appellee.

Before MACK, TERRY and ROGERS, Associate Judges.

ROGERS, Associate Judge:

Appellants appeal the denial of motions for a new trial and appellant Pyne appeals the denial of a motion for judgment notwithstanding the verdict. A jury returned verdicts against them for fraud and breach of fiduciary duty as employees of appellee. Their principal contentions are (1) that the trial court erred in admitting into evidence (a) a settlement agreement between appellant Rose and appellee and (b) testimony relating to evidence produced by appellant Rose in connection with the settlement agreement, and (2) that without such evidence there was insufficient evidence of fraud and breach of fiduciary duty.¹ We hold that appellants waived any objection

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to admission of the settlement agreement by failing to object to its admission but did not thereby waive their objection to the evidence produced pursuant to the settlement agreement. We further hold that it was error to admit the evidence produced pursuant to the settlement agreement. Nevertheless, because other evidence independently obtained by appellee was sufficient to prove appellants' liability by clear and convincing evidence, we affirm the judgments of liability. Although the independent evidence established that appellants had received secret commissions from shipping companies with whom they contracted on behalf of appellee, the inadmissible evidence affected the amount of damages assessed against appellants by the jury. Accordingly, we reverse and remand for a new trial on damages.

I

Appellee, Jamaica Nutrition Holdings, Ltd. (the company) sued appellants Dexter Rose and Sedley Pyne on February 20, 1980, for fraud and breach of fiduciary duty. The complaint alleged that Rose, assisted by Pyne, had negotiated contracts in the District of Columbia on behalf of the company with shipping companies in 1975, 1976 and 1977 and thereafter had accepted secret commissions from the shipping companies without the company's knowledge or approval. Some of the commissions were allegedly deposited in bank accounts maintained by appellants in the District of Columbia, while others were deposited in the Swiss bank accounts of Young & Wilcox, a Liberian corporation established by Rose, and Structural Redevelopment, Incorporated, another Liberian corporation allegedly established by Pyne. The company sought a judgment against appellants, jointly and severally, for $273,195.00 in actual damages and one million dollars in punitive damages; the actual damages were alleged to be the approximate amount paid in commissions by Agrobulk Shipping Corporation (Agrobulk).

The company, wholly owned by the Government of Jamaica, was established in 1973 to stabilize the cost of basic food items by buying directly and shipping in bulk from foreign suppliers. Dexter Rose became the company's first managing director and chief executive officer on March 1, 1974. He had authority to enter into contracts on behalf of the company, but all shipping contracts were subject to approval by the Board of Directors. Rose hired Sedley Pyne, a boyhood friend, in August 1974 as a procurement and commodities specialist to be in charge of the company's office in Washington, D.C. under Rose's supervision. Both Rose and Pyne were directors of the company. When the company learned of the secret commissions in January 1979, its Chairman and the Permanent Secretary of the Jamaican Ministry of Industry met with Rose and Pyne individually, and within a few days both were dismissed. The company, with the support of the Prime Minister and Cabinet of Jamaica, employed an investigating agency to review the company's books and records. Thereafter, lawsuits were filed against appellants and others.

On March 18, 1980, in the District of Columbia, Rose and the company executed a Memorandum of Agreement (Memorandum) which outlined the conditions under which the dispute between them could be settled. The company agreed not to seek Rose's extradition from the United States,² to grant, upon his request, immunity from any prosecution the Jamaican Government may institute, and to hold in abeyance any legal proceedings pending against him. Rose, in turn, agreed to "make full restitution of all sums of money claimed against

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him [in the instant lawsuit] and any other moneys and/or property which may have come into his possession improperly or in error in respect of contracts negotiated . . . [by] the [company]." He agreed to make immediate restitution of the sums claimed as actual damages in the instant lawsuit which were "[then] in his possession and [to] give a full and accurate account within 30 days of execution of the agreement, of all amounts which have been expended," and otherwise to cooperate fully with the company in investigating the matter. The parties were to agree to the method and time of repayment of expended amounts within seven days after Rose completed his accounting, and the instant lawsuit was to be held in abeyance for the period that Rose was given to comply with the agreement. The Memorandum was prepared by the company and signed by Rose, who was represented by counsel, and by the president of the company, the Jamaican Minister of Justice, and the Director of Public Prosecutions of Jamaica.

Thereafter, for seven days in March and April 1980, company investigators and various Jamaican government officials interviewed Rose about financial and contractual transactions during his tenure as managing director. The Jamaican Government later advised Rose, by letter of June 3, 1980, that he had breached the Memorandum by failing, within sixty days of its execution, to turn over the money in his Swiss and Chase Manhattan bank accounts. By letter of June 12, 1980, Rose's attorney objected to what he characterized as the unilateral attempt to abrogate' the Memorandum and noted that although the Jamaican Government had failed to meet some of its obligations under the Memorandum, Rose had made every effort to cooperate and remained committed to cooperating fully. The Jamaican Government did not respond, but pursued the instant lawsuit.

At trial, the company's current managing director testified about the company's purpose, the contracts at issue as well as appellants' duties and employment contracts, which, in accordance with Jamaican law, prohibited the receipt of commissions. In testifying about the company's discovery of the secret commissions, he described the subsequent interviews with appellants by the company's Board of Directors: Rose had admitted receiving the commissions, owning Young & Wilcox and having an overseas bank account, but denied he had done anything wrong and claimed he used the corporation and bank account in connection with private consulting work. Pyne denied any wrongdoing and any connection with Young & Wilcox and Structural Redevelopment, Incorporated and claimed that the only money had had received from Rose was a personal loan. The Company's managing director also referred to a report from its shipping manager which concluded that the shipping companies were overcharging the company, and testified that once the secret commissions were discovered, the company ceased to do business with the shipping companies. Finally, he also testified that it is standard business practice for a shipper to pay a commission to the shipping agent responsible for chartering a vessel, and that the commission is not an additional payment, but is included in the price of using the vessel.

Also at trial, two investigators hired by the company testified about their activities and the information Rose had provided during the March and April 1980 interviews regarding the circumstances surrounding his receipt from 1975 to 1979 of $293,000 in secret commissions.³ The Memorandum

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was admitted into evidence without objection. Documents the company had obtained from the Jamaican Government showed Rose's bank account activity at the Chase Manhattan Bank and the American Security Bank and were introduced without objection. Over Rose's objection, one investigator testified that the company had lost $3.7 million as a result of the secret commissions paid by Agrobulk. An accounting, in the form of an unsworn and unsigned affidavit, which the company obtained from the attorney for Agrobulk's shipping agent, see supra note 3, was also admitted into evidence over Rose's objection. It showed that between 1975 and 1977 Agrobulk had paid commissions of $239,162.03 to Rose and Young & Wilcox and $14,533.01 to Structural Redevelopment, Incorporated. The trial court ruled that Rose's confirmation of the accuracy of the affidavit, with the exception of the payments to Structural Redevelopment, Incorporated constituted an admission, and instructed the jury that the proposed affidavit was admissible only against Rose and inadmissible hearsay for any other purpose.⁴

The investigators recounted, over Pyne's objection, that Rose had told them that he had discussed the commission arrangement with Pyne and had agreed to give Pyne approximately fifty percent of the commissions.⁵ The trial court instructed the jury that Rose's statements were admissible only against Rose. The investigators testified that when Pyne was interviewed, he acknowledged that he had received $10,500 from Rose, but claimed that it was a personal...