Northeast Harbor Golf Club, Inc. v. Harris
61 A.2d 11146 (1995)
Facts. Nancy Harris was president of the plaintiff corporation, Northeast Harbor Golf Club, Inc. from 1971 to 1990 when she was forced to resign. Over time, Nancy purchased parcels of land surrounding the golf course in her name and informed the directors and other officers at the annual meetings. In 1988, Harris began the process of obtaining a five-lot subdivision and NE brought a suit for breach of fiduciary duty to act in the best interest of the corporation. Main Issue: Corporate Opportunity. NE sought an injunction to prevent development and also to impose a constructive trust on the property for the benefit of the Club. The DC found Harris had not usurped the corporate opportunity b/c her good faith acquisition of real estate was not in the Club’s line of business and that the club lacked financial ability to purchase that real estate.
Issue. Did the DC err in finding that Harris did not breach her fiduciary duty as president of the Club by purchasing and developing the property around the golf course?
Held. Yes, the trial court’s “line of business test” was erroneous and should’ve followed ALI §5.05 standards, so it was vacated and remanded. Harris should’ve fully disclosed to the board and the club must have rejected it properly. Because Harris failed to offer the opportunity at all, she couldn’t’ defend her case.
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