Webb v. R.O.A. General, Inc.

• Decision Date: 10 January 1991
• Docket Number: Nos. 890164-C,890170-CA,s. 890164-C
• Parties: Roland WEBB, Plaintiff and Appellee, v. R.O.A. GENERAL, INC., a Utah Corporation, William Reagan, Individually, William Adams, Esq., Individually, and Douglas T. Hall, Esq., Individually, Defendants and Appellants.
• Court: Utah Court of Appeals

Page 547

804 P.2d 547

Roland WEBB, Plaintiff and Appellee, v. R.O.A. GENERAL, INC., a Utah Corporation, William Reagan Individually, William Adams, Esq., Individually and Douglas T. Hall, Esq., Individually Defendants and Appellants.

Nos. 890164-CA, 890170-CA.

Court of Appeals of Utah.

Jan. 10, 1991.

Philip R. Fishler (argued), Stephen J. Trayner, Strong & Hanni, Salt Lake City, for defendants and appellants.

Ross C. Anderson (argued), Anderson & Watkins, Salt Lake City, for plaintiff and appellee.

Before BILLINGS, GARFF and GREENWOOD, JJ.

OPINION

GREENWOOD, Judge:

Appellants R.O.A. General, Inc. (R.O.A.) and William Reagan appeal from two partial summary judgments granted in favor of Roland Webb. We affirm.

BACKGROUND

Webb and Reagan were shareholders, directors and officers in R.O.A. since its formation in 1981. R.O.A. resulted from the merger of Reagan Outdoor Advertising, Inc. and Galaxy Outdoor Advertising (Galaxy). Webb had been a director and shareholder in Galaxy. In 1977, Galaxy, through its five-person board of directors, decided to sell both its Wyoming and its Idaho divisions. The Wyoming division was purchased by Eldon Palmer, who had managed the division for Galaxy. Palmer purchased the division through a corporation formed by him, Palmer Outdoor Advertising. Prior to board approval of the sale to Palmer, Webb and Palmer agreed that Webb would assist Palmer in financing the purchase by guaranteeing fifty-one percent of the financing debt and paying part of the cash downpayment, in exchange for which he could obtain fifty-one percent of the stock in Palmer Outdoor Advertising. Galaxy's board of directors approved the sale to Palmer in February 1977.

In 1981, Webb and R.O.A. executed an employment agreement providing that Webb would work for R.O.A. and receive compensation as specified in the agreement, for a five-year term. The compensation was discontinued in 1984, prior to completion of the contract's full term.

Webb filed this action in 1987, alleging breach of the employment agreement and seeking full payment of compensation as provided in the agreement. R.O.A. answered, denying that the written agreement constituted the entire agreement between the parties, and claiming waiver and breach of the agreement by Webb. R.O.A. counterclaimed against Webb for breach of fiduciary duty because of his failure to disclose his agreement with Palmer to the Galaxy board of directors, predecessor in interest to R.O.A. After discovery, Webb filed two motions for partial summary judgment. One sought summary judgment on the claim for enforcement of the employment contract, and the other sought judgment in Webb's favor on the breach of fiduciary duty counterclaim. The trial court granted both motions after separate hearings, and certified each as a final appealable order pursuant to Utah R.Civ.P. 54(b). Appeals followed on both orders. ¹ We consolidate the appeals for purposes of this opinion.

SUMMARY JUDGMENT

Summary judgment is appropriate only if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Transamerica Cash Reserve v. Dixie Power, 789 P.2d 24, 25 (Utah 1990). On appeal of a summary judgment, we view the facts in a light most favorable to the party who lost in the trial court. Blue Cross and Blue Shield v. State, 779 P.2d 634, 636 (Utah 1989). Determining whether the facts justify summary judgment is a question of law, and we give no particular deference to the trial court, but review for correctness only. Id.

BREACH OF FIDUCIARY DUTY

R.O.A. claimed in its counterclaim that Webb usurped a corporate opportunity by not revealing to the Galaxy board the details of his arrangement with Palmer, whereby he was able to obtain fifty-one percent of Palmer Outdoor Advertising's stock. Webb asserts that: (1) the claim was not timely because it was brought more than three years after it arose; and (2) Webb fully disclosed the transaction to the Galaxy board. On appeal, R.O.A. claims the trial court erred in granting summary judgment because there are material issues of fact. We find that the claim was not timely filed and, therefore, do not reach the issue of whether there was full disclosure.

The doctrine of corporate opportunity forbids a corporate director from "acquiring for his own benefit an opportunity that would have been valuable and germane to the corporation's business, unless that opportunity is first offered to the corporation and declined...." Nicholson v. Evans, 642 P.2d 727, 730 (Utah 1982). The parties agree that the applicable statute of limitations is Utah Code Ann. § 78-12-27 (1987), which states as follows:

Actions against directors or stockholders of a corporation to recover a penalty or forfeiture imposed, or to enforce a liability created, by law must be brought within three years after the discovery, by the aggrieved party, of the facts upon which the penalty or forfeiture attached, or the liability accrued, ...

See Grosjean v. Ross, 572 P.2d 1383, 1384 (Utah 1977). The statute begins to run when the aggrieved party "discovers, or in the exercise of reasonable care should discover, that there is a wrong to be complained of; ..." Stewart v. K & S Co., Inc., 591 P.2d 433, 435 (Utah 1979). A party is charged with a duty to discover "when he was apprised of such facts and circumstances with respect thereto as would put a person of ordinary intelligence and prudence upon inquiry." Jones Mining Co. v. Cardiff Mining & Milling Co., 56 Utah 449, 191 P. 426, 429 (1920).

We first set forth the evidence that the trial court had before it in considering the motion for partial summary judgment. Webb stated in his deposition that he could not recall telling the Galaxy board about his agreement with Palmer prior to the 1977 board approval. Webb testified he told two board members, Blaine Glassman and George Hatch, about the transaction in 1981 in a board meeting, and also told Reagan about it in 1981. In a subsequent affidavit, Webb stated that he had a conversation with George Hatch and his son, Jeff Hatch, after his deposition. He said that George Hatch reminded him that he had disclosed the proposed transaction with Palmer to the board prior to the February 1977 board meeting. Hatch also reminded him that no board member had any interest in retaining any ownership interest in the Wyoming division.

George Hatch testified in his deposition, that Galaxy had received two bids for the Wyoming division in addition to Palmer's, and that Palmer's was the highest. Webb asked if he could participate in the purchase of the Wyoming division. Hatch said he did not get very involved in the details, but was under the impression that Webb was helping Palmer with financing the purchase and believed it perhaps included guaranteeing a loan. Hatch's main focus was on how much was going to be paid for the division, and not on ownership details of the buyer. When Webb asked him if he objected to Webb's participating in the purchase, Hatch said he did not. Hatch also told the other directors what Webb had told him, particularly that Webb was helping Palmer with financing. Hatch said that Webb's interest in Palmer was also discussed in 1981, when the board was discussing the possible sale and merger into R.O.A. Blaine Glassman was present at the 1981 meeting. In an affidavit, Hatch stated that, prior to approving the sale to Palmer,

Roland Webb informed me and the other members of the Board of Directors of Galaxy that he could structure a personally beneficial transaction with Eldon Palmer that would allow Roland Webb to acquire, without any cash payment by Roland, an interest in Palmer Outdoor Advertising, Inc., ... in exchange for Roland's future assumption or guarantee of the indebtedness of Palmer.

He further stated that the board was satisfied with the disclosure and told Webb they were not interested themselves and allowed Webb to take personal advantage of the opportunity.

Richard B. Paxman, an R.O.A. employee, provided an affidavit stating that he attended a meeting in 1981 with George Hatch and Jeff Hatch. George Hatch, in Paxman's opinion, had seemed "put out" about the fact that Webb had an interest in Palmer, and was surprised to learn about that interest. William Reagan's affidavit also states that in June 1981, Jeff Hatch stated that the Galaxy board found out about the Palmer transaction for the first time from Glassman's son, and that Webb had obtained the fifty-one percent equity interest surreptitiously.

While there is contrary evidence about whether Webb disclosed his agreement with Palmer in 1977, it is clear that the statute of limitations commenced to run by at least 1981, more than three years prior to the counterclaim. The testimony of Webb and Hatch is that Webb's interest in Palmer was discussed in 1981. The affidavits of Paxman and Reagan do not refute that evidence, and, in fact, support it. They both testified they knew of the transaction in 1981, as did George Hatch and Glassman's son. Therefore, it is undisputed that Galaxy's board and its successor, through William Reagan, knew of the arrangement with Palmer by at least 1981. It is not necessary that they then learned all the details of that transaction, but only that they had enough information to be on notice of a possible wrong. We conclude, therefore, that the court did not err in granting summary judgment to Webb because of the untimeliness of the breach of fiduciary duty claim.

BREACH OF EMPLOYMENT CONTRACT

The employment agreement states that it is executed and effective August 1, 1981, and will remain in effect until August 1, 1986. It provides that Webb will serve as R.O.A.'s chairman of the board and vice president, that Webb "agrees to provide such other duties as may be assigned to him by the Board of Directors," and that Webb will use his "best efforts, skill and experience" in his employment with R.O.A. His compensation is set at $100,000...