General Automotive Manufacturing Co. v. Singer

Supreme Court of Wisconsin · Corporations

Corporationsfiduciary dutyduty of loyaltyagencysecret profitscompetition with employercorporate fiduciarygeneral manager

Facts

Singer was employed as the plaintiff's general manager under a written contract that continued thereafter on the same terms, including duties requiring his full-time service and a promise not to disclose information about the employer's business. As general manager, he solicited machine-shop work for the corporation, but when he concluded certain orders could not be done by the corporation or not at a competitive price, he did not disclose those orders to the corporation and instead arranged for other shops to fill them, keeping the difference as his own profit. He later operated his own business as a manufacturer's agent and consultant while still employed by the corporation and without informing it. The trial court found these activities were secret, directly competitive, and produced profits of $64,088.08.

Issue

Whether a corporation's general manager and fiduciary breaches his duty of loyalty by secretly taking customer orders for his own account, placing them with other shops, and retaining the profits when he believes his employer cannot or should not fill the orders. Also, whether the damages award had to be reduced pursuant to the parties' stipulation granting him a 3% credit.

Rule

A corporate agent and fiduciary with managerial authority must exercise the utmost good faith and loyalty, may not act adversely to the corporation by serving or acquiring a private interest of his own, and must act for the furtherance and advancement of the corporation's interests. When such a fiduciary faces a conflict between personal business and the corporation's business, he must disclose all material facts to the corporation; if he secretly competes, diverts business, or receives undisclosed profits, he must account to the corporation for those profits. This case concerns competition and secret profits, not the narrower doctrine of corporate opportunity involving acquisition of property in opposition to the corporation.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lena Ortiz is the operations manager of Lakefront Tool & Die, a small parts manufacturer in Milwaukee. While still employed, she receives customer requests for custom work that she believes Lakefront cannot complete profitably, sends those jobs to outside shops in Illinois, and keeps the spread between the customer price and the subcontract price without telling Lakefront.

If Lakefront sues Lena for the money she kept, which is the strongest argument for Lakefront?

Explanation. A manager with broad authority is a fiduciary agent who must exercise utmost good faith and loyalty, act for the corporation's advancement, and disclose material facts when personal interests conflict with corporate business. She cannot unilaterally decide the company should not take the work and then treat the orders as her own. This doctrine concerns secret competition and undisclosed profits, not the narrower corporate-opportunity doctrine.