## Facts

- General Automotive Manufacturing Company, a small Wisconsin machine-shop business, employed John Singer as its general manager under a written contract beginning in 1953 and continuing (after renewals) until he left in 1959.
- Singer was paid a monthly salary plus 3% of Automotive’s gross sales.
- The contract required Singer to devote his full time and attention to Automotive and barred him from engaging in another permanent business during employment; it also restricted use or disclosure of company business information for his own benefit.
- Singer was highly skilled in estimating costs and pricing and was successful in attracting orders for machine-shop work.
- While still employed, Singer secretly took certain customer orders for himself, arranged for a competing machine shop to perform the work, and kept the difference between what he charged customers and what he paid the shop.
- Singer expanded these activities into a separate consulting/representative business that brokered orders for the same types of products Automotive produced, without disclosing it to Automotive.
- Automotive later discovered Singer’s undisclosed profits and sued for an accounting of “secret profits” earned during his employment.
- After a bench trial, the court found Singer liable for $64,088.08; the parties had stipulated that, if profits were recoverable, Singer would receive a credit equal to 3% of the gross sales of his sideline business, yielding a net recovery of $53,905.08.

## Issues

1. Whether a general manager who solicits business for an employer breaches fiduciary and contractual duties of loyalty by secretly competing and diverting orders for personal profit during employment.
2. Whether the employee must account for and disgorge profits made from undisclosed competing transactions involving the employer’s line of business.
3. Whether the judgment should be modified to reflect a stipulated credit tied to the employee’s contractual commission rate.

## Decision

- The court held that Singer, as general manager and fiduciary agent for solicitation of business, breached his fiduciary and contractual duties by secretly competing with Automotive and taking profits from diverted orders.
- The court required Singer to account for and disgorge the secret profits earned from the competing sideline business while he remained employed.
- The court modified the monetary judgment to honor the parties’ stipulation granting Singer a credit equal to 3% of the gross sales of his sideline business, reducing the award to $53,905.08.

## Legal Principles

- A managerial employee who functions as an agent in procuring business owes a fiduciary duty of loyalty and must act for the employer’s benefit in matters within the agency relationship.
- An agent may not, without the principal’s knowledge and consent, compete with the principal in the principal’s line of business or profit from transactions connected to the subject matter of the agency.
- Secret diversion of business opportunities and retention of undisclosed profits constitutes a breach of loyalty, even if the agent believes the employer cannot perform the work competitively; the agent must disclose the opportunity and obtain informed consent before pursuing it personally.
- The appropriate remedy for a loyalty breach involving secret profits is an accounting and disgorgement, subject to any contractually recognized credits the parties have agreed should apply.

## Conclusion

The court imposed fiduciary-accounting liability on a general manager who covertly diverted and brokered orders in competition with his employer, requiring disgorgement of profits earned during employment and reducing the judgment only to reflect the parties’ stipulated commission-based credit.


Gen. Auto. Mfg. Co. v. Singer, 19 Wis. 2d 528, 120 N.W.2d 659 (Wis. 1963)