## Facts

- Hawaiian International Finances, Inc. authorized its president, Pastor A. Pablo, to help investigate and acquire California real estate investments for the corporation through a board-appointed subcommittee.
- Pablo negotiated purchase agreements on the corporation’s behalf for two California parcels; the sellers were represented by California real estate brokers.
- After closing, the selling brokers shared portions of their commissions with Pablo and/or Pastor Pablo Realty, Inc., a separate real estate company associated with Pablo.
- Pablo did not disclose to the corporation, before the purchases were made, that he expected or might receive commissions connected to the transactions.
- The corporation learned of the commissions months later at a corporate meeting.
- The trial court found no fiduciary breach and entered judgment for Pablo, Mrs. Pablo, and Pablo Realty; the corporation appealed.

## Issues

1. Whether a corporate officer/director who acts for the corporation in acquiring property may retain an undisclosed commission paid by third-party brokers because of the corporate transaction.
2. Whether the absence of out-of-pocket loss to the corporation, and the fact that the commission was paid from the sellers’ side, defeats liability for breach of fiduciary duty.
3. Whether Mrs. Pablo could be held liable on the record presented.

## Decision

- The Supreme Court of Hawaii reversed the judgment as to Pablo and Pablo Realty and held they must account to the corporation for the undisclosed commissions.
- The court rejected defenses based on lack of corporate harm, third-party source of payment, and claimed entitlement to compensation absent corporate authorization.
- The court affirmed the judgment in favor of Mrs. Pablo due to insufficient evidence that she received the commissions or otherwise participated in the wrongful receipt of them.
- The case was remanded for proceedings consistent with the ruling that the corporation could recover the commissions from Pablo and Pablo Realty.

## Legal Principles

- Corporate officers and directors owe a duty of loyalty and must act in utmost good faith toward the corporation.
- A fiduciary may not retain secret profits or commissions arising from corporate transactions conducted in a fiduciary capacity without full disclosure and informed corporate consent.
- Liability to account does not depend on proof that the corporation suffered an economic loss, nor on whether the payment came from a third party rather than corporate funds.
- Officers and directors are not entitled to compensation for fiduciary services absent agreement or corporate authorization; self-payment through undisclosed third-party commissions breaches the duty of loyalty.

## Conclusion

A corporate president who negotiated acquisitions for the corporation breached the duty of loyalty by keeping undisclosed commissions obtained through those transactions and was required to disgorge them to the corporation, even without proof of corporate loss; judgment for the officer and his realty company was reversed, while judgment for the officer’s wife was affirmed for lack of evidence of her participation or receipt.


Hawaiian Int'l Finances, Inc. v. Pablo, 53 Haw. 149, 488 P.2d 1172 (Haw. 1971)