APPEAL FROM THE SUPERIOR COURT, PROBATE DIVISION, CHERYL M. LONG, J., [719 A2d Page 1235]
Before Farrell and Reid, Associate Judges, and Gallagher,
The opinion of the court was delivered by: Farrell, Associate Judge:
The Superior Court, Probate Division, granted summary judgment to appellee Pacific Employers Insurance Co. (INAPRO), the professional liability insurance carrier for a now-deceased attorney, Mark F. Corriea. Previously, the United States District Court for the District of Columbia had entered an approximately $1.4 million judgment against Corriea for breach of fiduciary duty in his legal representation of appellant Avianca, S.A., and related companies (hereafter Avianca). *fn1 When Avianca sought to enforce the judgment against the estate of Corriea, the estate denied the claim on the basis that there were no assets to satisfy the judgment. Avianca persisted in its claim by asserting that Corriea's professional liability policy with INAPRO was an asset of the estate. The estate filed a third party claim against INAPRO, which, along with Avianca, filed motions for summary judgment.
Interpreting various provisions of the insurance policy, the Superior Court concluded as a matter of law that "there is no policy coverage whatsoever for what Corriea was found [by the District Court] to have done." On this appeal by Avianca, we hold that the Superior Court erred in granting summary judgment to INAPRO and that, save on one critical issue, it should have entered judgment as a matter of law for Avianca. The issue for which summary judgment is unsuitable is whether Corriea's actions fell within the policy exclusion for "any act [or] omission . . . committed by the insured with actual dishonest, fraudulent, criminal or malicious purpose or intent." Contrary to the Superior Court's conclusion, the facts determined by the District Court — and accepted by the parties here — do not establish as a matter of law that Corriea acted with "dishonest . . . intent" in the conduct underlying the judgment for breach of fiduciary duty. That issue must be resolved by a trier of fact before judgment may be entered for either side.
Beginning in 1980, Corriea entered into an attorney-client relationship with Avianca, thereafter representing the company in aircraft leasing, corporate financing, and government relations matters. In 1985, Avianca sued Corriea, his partner, and his law firm in the United States District Court for the District of Columbia alleging breach of fiduciary duty, fraudulent misrepresentation, and violation of the federal RICO statute. All but the breach of fiduciary duty allegations were later withdrawn. In 1989, the District Court (Lamberth, J.) entered summary judgment on liability for Avianca, concluding that in a series of three transactions Corriea had breached his fiduciary obligations in that he had "allowed his professional judgment on behalf of his clients to be adversely affected by acquiring and maintaining interests potentially [719 A2d Page 1236]
or actually in conflict with those of his clients."
The District Court found no issue of material fact in dispute. The Superior Court, in turn, "[took] the judgment" of the District Court "as it [found] it," including the operative facts. The parties on appeal likewise do not dispute the facts as determined by the District Court. As relevant to the present dispute, two transactions formed the basis of the District Court's judgment.
Corriea, as Avianca's attorney, incorporated a company named Norasco in 1980 and agreed to serve as Norasco's president and attorney. Avianca required Corriea to register title to the company in his name, but to endorse the Norasco stock over to Avianca's American subsidiary. From 1980 to 1982, Corriea admitted having withdrawn over $240,000 of Norasco's funds in checks payable to himself, his law firm, or Fund Sources International (FSI), a company wholly owned by him. He often used the funds for personal expenses, typically without Avianca's knowledge or consent, later insisting that as president and sole shareholder of Norasco he was entitled to use the corporate assets as he saw fit and for his own purposes.
B. The Twin Otter Transaction
In 1981, Helicol, a partly owned subsidiary of Avianca, S.A., was negotiating the purchase of a Twin Otter aircraft from a Canadian aircraft company, DeHavilland. Andres Cornelissen, then an executive of Avianca, S.A., verified that Corriea could arrange lease financing for Helicol and instructed Helicol's general counsel to contact Corriea for help in obtaining the Twin Otter aircraft. Corriea, acting as the president of FSI, sent Helicol a proposal for lease of a Twin Otter and later, again acting as president of FSI, sought financing through a Canadian investment firm. By 1982, when he was still unable to obtain the financing, Helicol told him that it intended to buy the aircraft directly from DeHavilland. Corriea replied by telex that FSI would not accept Helicol's withdrawal and would consider it a violation of their agreement, subjecting Helicol to liability for FSI's losses. That same day, unknown to Helicol or Avianca, Cornelissen wired $247,000 into FSI's Chase Manhattan account. Corriea admitted using $130,000 of this loan to secure financing for the transaction, whereby FSI obtained two Twin Otter aircraft and leased them to Norasco for sublease to Helicol. Corriea admitted having represented both FSI and Norasco in the transaction.
C. The District Court's Conclusion and Damage Award
The District Court determined as a matter of law
that defendant Corriea breached his common law fiduciary duties *fn2 owed [the Avianca] plaintiffs by virtue of his on-going, continuous attorney-client relationship with plaintiffs in the following particulars: First, in the purchase and lease of two Twin Otter aircraft, Corriea breached his fiduciary duty of undivided loyalty by failing to make an affirmative disclosure to plaintiffs of all material facts, legal implications, and potential conflicts, or gaining the informed consent of plaintiffs prior to acquiring and maintaining interests affecting the business of plaintiffs, entering into a business transaction with plaintiffs in which [Corriea] stood to gain profit, and acting as attorney for plaintiffs where [Corriea's] financial, business, property, or personal interests were or reasonably could have impaired the exercise of Corriea's independent, professional judgment for the protection and benefit of the plaintiffs. Specifically, the Court finds that defendant Corriea had an affirmative duty to make full disclosure to the plaintiffs in [719 A2d Page 1237]
their corporate capacities, and not merely to selected officers of the corporation. Thus, disclosure to Andres Cornelissen, then Executive Vice President of Avianca, S.A., was insufficient to meet the duty of full disclosure. Further, Corriea had a continuing affirmative duty to disclose all material facts, including not only the fact that he was the president of [FSI], but also that financing for the aircraft was supplied by an unsecured, personal loan or grant from Andres Cornelissen; that Corriea and Cornelissen had financial, business, property, and personal interests in common, and that Cornelissen's selection of [FSI], to complete the Twin Otter transaction was therefor[e] not impartial; that Corriea's representation of plaintiffs in the Twin Otter transaction could be adversely affected by his financial, business, and property interests in his corporation, FSI; that other corporations may have been more established and financially able to carry out the complex financing arrangements than the newly created FSI; and that FSI obtained substantial loans used to complete the transaction from competitors of plaintiffs, which could similarly adversely impact Corriea's professional judgment on behalf of plaintiffs.
Corriea, again without making an affirmative, full disclosure or gaining the informed consent of plaintiffs, improperly commingled and appropriated to his own use funds and property of plaintiffs that were entrusted to him in his professional fiduciary capacity. Specifically, the Court finds that Corriea misappropriated for his own use $240,000.00 in Norasco funds.
After a bench trial on damages, the District Court ordered the estate of Corriea *fn3 to disgorge to Avianca net profits amounting to $1,415,075 from the Twin Otter transaction and to repay $34,461 from the unauthorized Norasco withdrawals for which reimbursement had not already been made. The court found disgorgement to be "an appropriate remedy," stating that "there is a pressing need for remedies in fiduciary duty cases . . . that will serve to deter violations," and that "the power of the court to enforce the fiduciary duties attorneys owe to their clients gives the court broad powers to ensure that Mr. Corriea in no way profits from his breach."
D. The Insurance Policy Provisions and the Superior Court's Ruling
As related above, Avianca sought to enforce the District Court judgment against Corriea's estate in Superior Court, and the issue ultimately became the scope of coverage of Corriea's professional liability insurance policy with INAPRO. The relevant policy ...