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Keywords

lawsuitdefendantattorneyfiduciarytrustcorporationlegal counselfiduciary dutyconstructive trust

plaintiffdefendantattorneylawyerappealfiduciaryobjectionfiduciary duty

Related Cases

Opdyke v. Kent Liquor Mart, Inc., 40 Del.Ch. 316, 181 A.2d 579

Facts

In 1959, Milton R. Opdyke and George M. Smith discussed starting a liquor business and incorporated Kent Liquor Mart, Inc. with attorney Herman C. Brown. The corporation struggled financially, and tensions arose among the stockholders. After a series of meetings and transactions, Brown purchased shares from the majority stockholders without informing Opdyke, who believed he had a claim to those shares. Opdyke subsequently filed a lawsuit against the defendants, claiming Brown had violated his fiduciary duty.

In the summer of 1959 Milton R. Opdyke, the plaintiff, and George M. Smith, one of the defendants, discussed a possible venture into the liquor business.

Issue

Did attorney Herman C. Brown breach his fiduciary duty to minority stockholder Milton R. Opdyke by purchasing shares of Kent Liquor Mart, Inc. that were subject to Opdyke's claim?

Opdyke's third point raises a very serious question. He asserts that Brown, as a lawyer, owed him a fiduciary duty; and that when Brown acquired Richter's stock he violated that duty.

Rule

An attorney owes a fiduciary duty to their clients, and acquiring an interest adverse to a client without their consent constitutes a breach of that duty.

It is said that after learning of Brown's purchase Opdyke voiced no objection and had no criticism of Brown. His failure to assert his legal rights is of no moment.

Analysis

The court analyzed the relationship between Brown and the stockholders, concluding that Brown acted as the attorney for all three men, not just the corporation. By purchasing shares from the majority stockholders, Brown acquired an interest adverse to Opdyke, who had a claim to those shares. The court emphasized that Brown's actions violated the fiduciary obligations inherent in his role as legal counsel.

But in determining the existence or nonexistence of the important relationship of attorney and client a broader approach is required. The question is, What in fact was the relationship between Brown and the three men?

Conclusion

The court reversed the lower court's judgment, declaring Brown a constructive trustee for Opdyke regarding the shares he purchased. The case was remanded for further proceedings consistent with this opinion.

The result must be that the Vice Chancellor's judgment dismissing the complaint must be reversed.

Who won?

Milton R. Opdyke prevailed in part, as the court recognized his claim against Brown and declared Brown a constructive trustee for the shares.

Opdyke appeals. In this court he raises three of the questions raised below.

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