Passante v. Mcwilliam

Facts

Upper Deck was a baseball card company that used holograms to protect the cards from counterfeiting. Passante was a director at the company and the personal attorney of another director, Korbel and the company’s attorney and secretary. McWilliam had the responsibility of obtaining start up financing for the company. Passante made no investment in the company and owned no stock. Upper Deck needed $100,000 to put on deposit with an Italian paper company by August 1, 1988. Without the paper, the company risked losing its license with major league baseball. As of July 26, 1988, the company had not obtained the needed financing. McWilliam was also demanding more stock for the financing he was supposed to obtain. Board members instructed Passante to demand the return of McWilliam’s 11 percent stock if he would not change his demands. Passante discovered that McWilliam would not be able to obtain the money and Passante and others believed that there was no hope for the company. Andy Prendiville, Passante’s law partner, asked if he should contact his brother, a doctor, for a $100,000 loan. Both Prendiville and Passante talked with Korbel and told him the loan funds from Andy’s brother were available. Korbel then requested that Passante come to a special board meeting to discuss the guarantee on the loan. Andy’s brother wired the money to an account controlled by Korbel prior to the board meeting and Passante was under the understanding that if the board did not approve the loan, it was still not going to be made. The board agreed to take the money and Korbel also brought up the idea that the board should consider giving Passante some ownership interest for getting the loan. There was a general agreement that if Passante could get the money, he should get 3 percent of the company. Passante agreed as well. A note was drafted by Passante, and at Korbel’s insistence, an extra $10,000 was paid to Andy’s brother for the 90-day loan. Upper Deck made its paper commitment. The board then determined to cut up McWilliam's interest by giving 3 points to Passante and 8 points to Korbel. Passante’s 3 points were to be held by Korbel until McWilliam returned the stock certificates and when a new investor was brought in, and new certificates were issued Passante would get his. Upper Deck needed financing and failed in efforts to get it and then determined that maybe the better deal was to bring McWilliam back into the company. McWilliam was upset over what happened with the $100,000 loan and stated that he would only invest in Upper Deck if Passante not participate as an owner of the company. Korbel told Passante that in order to get the company going, he would hold Passante’s interest and wouldn’t tell McWilliam or other shareholders about the arrangement and that when things were more quiet, he would get the 3 points or profit distributions from Korbel. McWilliam returned and brought with him Kughn, an investor. The company shares were redistributed and Korbel, McWilliam, and Kughn each got 26 points. Passante was fired as corporate attorney because Kughn wanted representation by a big law firm. Korbel assured Passante around early 1989 that he need not be concerned about the 3 points. In November 1990, Korbel told Passante that he was not going to get his 3 points. Passante sued along with his partner Andy because Passante agreed to give him half of whatever he got in the process of getting the loan for Upper Deck. The stock at the time of trial was worth $33 million. The jury found for Passante and awarded him $32 million against Upper Deck and $1 million against Korbel. Upper Deck then moved for judgment notwithstanding the verdict or a new trial and the trial court granted both. The trial judge also determined that Passante’s claim against Korbel was equitable in nature and gave judgment to Korbel finding that there was no transaction between Passante and Korbel which could serve as a basis for a constructive trust. P appealed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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