Gelfand v. Horizon Corp. - 675 F.2d 1108 (10th Cir. 1982)

Rule:

The trial court is not obligated to compel a fiduciary to reimburse the beneficiary for third party profits. The authorization for such a remedy is not a mandatory one. Rather, it partakes of a discretionary equitable character. The flexibility and concern for doing justice that are central to equity are another factor. It requires a case by case evaluation of all relevant circumstances whenever restitution of third party profits is sought.

Facts:

Plaintiff Bernard Gelfand was a real estate agent for the defendant Horizon Corporation, an entity engaged in the owning and marketing of real estate around the country. Plaintiff was paid a salary plus commissions and overrides based on real estate sales in the plaintiff’s district. In 1979, plaintiff was terminated because defendant’s management felt that plaintiff’s success was benefitting him more than the company. Subsequently, plaintiff brought suit to recover the unpaid commissions and overrides. In one transaction, plaintiff admitted that a corporation was formed, in which his family owned a one-third interest, to purchase an option contract from the defendant on a piece of property owned by the defendant. The option contact sold the option and made a substantial profit. The district court found for the plaintiff and offset the plaintiff’s recovery by the amount the plaintiff’s family profited by the sale of the option, but did not offset the profit by the third parties. On appeal, defendant argued that as a result of the breach of the fiduciary relationship, defendant was entitled to an offset not only for profits accruing directly to plaintiff, but also for profits which accrued to third parties allied with the plaintiff.

Issue:

Was the defendant entitled to offset for profits which accrued to third parties allied with the plaintiff, thereby rendering the judgment of the trial court an error?

Answer:

No.

Conclusion:

On appeal, the court affirmed the decision of the trial court because the court was not obligated to compel the plaintiff employee to reimburse the defendant employer for third party profits. According to the court, the remedy was not mandatory and was within the equitable discretion of the trial court. The district court's award of overrides to the employee based on the contract was not clearly erroneous.