Gelfand v. Horizon Corp.

Horizon Corporation (Horizon) (defendant) employed Bernard Gelfand (plaintiff) for 13 years, first as a real estate sales agent and then as a sales manager. During the period relevant to the litigation, Gelfand was paid a salary plus commissions and overrides based on sales in his district. Horizon terminated Gelfand’s employment, and a dispute arose as to the amount Gelfand was owed for certain transactions. On one of those transactions, Horizon alleged that Gelfand had breached fiduciary duties he owed as Horizon’s employee and agent because the purchaser was a corporation in which Gelfand’s wife owned a one-third interest. The corporation, B & C Enterprises (B & C), was created just before the sale and stopped doing business after it. On Horizon’s behalf, Gelfand sold B & C an option to purchase certain land. The price of the option was $2,500, which Gelfand’s wife advanced. Shortly thereafter, B & C sold the option for $60,000 to a third party, who then exercised it and paid Horizon the $165,000 price Horizon had set for the real estate. Mrs. Gelfand received one-third of B & C’s profit. Horizon was unaware of the conflict of interest at the time of the sale and would not have approved the transaction had it known. However, Horizon’s vice president of sales signed the B & C purchase agreement. Horizon also did not have an official policy requiring disclosure in this type of situation and did not bar employees from purchasing land from the company. Employees were even eligible for a 20 percent discount on purchases of unimproved land. Gelfand sued Horizon, claiming to be owed compensation on 12 deals. Following a bench trial, the court found that Gelfand was entitled to commission on 11 of the deals. For the B & C sale, the district court decided that Gelfand should not receive a commission, and the court offset his total earnings by the amount of profit his wife collected. Horizon appealed, arguing that the offset should have been the full amount of B & C’s profit.