Levy & Surrick v. Surrick
1987 Pa. Super. LEXIS 7789, 524 A.2d 993, 362 Pa. Super. 510 (1987)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An agent's duty not to compete with the principal or profit from transactions extends only to matters within the scope of their agency, and a corporate officer's broader fiduciary duty under the corporate opportunity doctrine prohibits taking advantage of business opportunities that fall within the corporation's scope of activities or present a potential advantage to it.
Facts:
- In 1978, Robert B. Surrick (Mr. Surrick) sold a piece of his personal real estate to Haverford 2 Associates, a partnership consisting of Vincent and Thomas Spano.
- The Spanos owned commercial real estate known as the 'Wallingford Mini-mall' and advertised it for sale to the general public, with Thomas Spano approaching Mr. Surrick as a potential purchaser, leading to sporadic negotiations.
- In February 1979, American Cablevision of Pennsylvania, Inc. (ACP), a client of Levy and Surrick (the corporation), began to rent space in the Mini-mall from the Spanos.
- As an employee of the corporation, Mr. Surrick represented ACP in numerous legal matters, including drafting the lease agreement between ACP and the Spanos.
- In July 1979, ACP extended their Mini-mall lease for a period of 10 years.
- In August 1979, Mr. Surrick purchased the Mini-mall from the Spanos by assuming the Spanos’ mortgage and by canceling the balance of the debt that Haverford 2 Associates had incurred when it purchased Mr. Surrick’s real estate in 1978.
- As part of this transaction, the Spanos assigned the 10-year ACP lease to Mr. Surrick, who purchased the Mini-mall and acquired the ACP lease on his own behalf, not on behalf of Levy and Surrick.
- Arthur Levy, the other 50-percent shareholder, testified that Mr. Surrick did not disclose his potential interest in the Mini-mall until the day of settlement in August 1979, while Mr. Surrick testified he had disclosed his interest early in 1979.
Procedural Posture:
- Levy and Surrick, a professional corporation, brought an action against its former president and 50-percent shareholder, Robert B. Surrick, in the Court of Common Pleas of Delaware County (trial court), alleging, among other things, that he usurped a business opportunity belonging to the corporation.
- The jury returned a verdict in favor of Mr. Surrick.
- The trial court denied the corporation’s motions for post-trial relief.
- Levy and Surrick (appellant) appealed the entry of judgment to the Pennsylvania Superior Court (intermediate appellate court).
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Did the trial court err by refusing to instruct the jury on the law of agency, in addition to the corporate opportunity doctrine, regarding a corporate officer's acquisition of real estate where the acquisition was outside the scope of the corporation's business and the officer's agency?
Opinions:
Majority - Montemuro, Judge
No, the trial court did not err by refusing to instruct the jury on the law of agency, as the charge to the jury already included an adequate explanation of the law through the corporate opportunity doctrine. The court reasoned that an agent's duty not to compete or profit from their principal is limited to matters within the field of their agency, allowing them to act freely on their own account in unrelated matters not antagonistic to the principal's interests. The record did not indicate that acquisition of the Mini-mall fell within the scope of the agency relationship between the law firm and Mr. Surrick, nor was the corporation engaged in real estate acquisition. The corporation failed to establish a connection between Mr. Surrick's income from the Mini-mall and the 'business of the agency.' Furthermore, the court emphasized that the corporate opportunity doctrine imposes a broader duty of loyalty on corporate officers and directors, prohibiting them from competing with the corporation in any way, even in unrelated areas, for opportunities that fall within the 'scope of activities' or constitute a 'present or potential advantage' to the corporation. Since the trial court thoroughly charged the jury on this broader corporate opportunity doctrine, which encompasses and exceeds the duties of an agent in this context, the lack of a specific agency instruction could not have prejudiced the corporation and would only have confused the jury. If Mr. Surrick's actions did not breach his duty as an officer, they certainly did not breach his narrower duty as an agent.
Analysis:
This case clarifies the distinction between the duty of loyalty owed by an agent to a principal and the broader fiduciary duty owed by a corporate officer to the corporation, particularly concerning business opportunities. It establishes that an agent's duty is circumscribed by the scope of their agency, requiring a direct connection between the alleged profit and the 'business of the agency' for liability. In contrast, the corporate opportunity doctrine imposes a more expansive duty on officers and directors, making them liable for opportunities within the corporation's general scope or potential advantage, regardless of their specific agency role. The ruling highlights that a court's refusal to provide a specific jury instruction is not reversible error if a broader, more comprehensive instruction sufficiently covers the relevant legal principles and prevents prejudice to the appellant. This limits the ability of a principal (especially a professional corporation) to claim profits from a former agent/officer's personal dealings that are outside the core business of the principal.
