Burnham City Lumber Co. v. Rannie

59 Fla. 179

• Court: Supreme Court of Florida
• Decided: January 15, 1910
• Status: Published

Opinion

Hockek, J.

(After stating the facts.)—The plaintiff in error discusses first in his brief the fifth count of the declaration, the defendant in error follows that order, and we will do the same. It is first contended by the defendant in error that this count 'first assumes that the defendant Rannie was a real estate broker and was acting-in that capacity in his dealings with Turner, and that in the next paragraph this assumption is negatived by the allegation that during the negotiations defendant disclosed to said Turner the existence of an agreement in writing between the owners of. the land and Rannie whereby the former agreed to sell to the latter or his assigns the said timber lands for a price therein named. It is contended by the defendant in error that this clearly shows an option and a vested interest in the property in the defendant; that the relation of vendor and purchaser existed between Turner and Rannie and that they were dealing at arms length with each other. If this were all that the count contains on that feature of the case there would be something in this contention; but it clearly appears that Turner did not buy this contract. He proposed to Rannie to obtain another contract from the owner, differing in some respects from Rannie’s contract, and to give him a large commission if he would procure the owners to sell under this last contract. Rannie accepted this proposition and procured the sale and conveyance to the plaintiff under this last contract. It is plain, we think, that if the written agreement to sell shown by Rannie to Turner was a bona fide agreement of sale, Rannie abandoned it when he procured the owners to sell the lands to the plaintiff under another agreement. The .fifth count taken as a whole clearly alleges, we think, that Rannie was acting as the agent of Turner who was himself acting for the plaintiff, a corporation to be formed for taking over these lands. Under the last contract he was to receive, and did receive, commissions from the plaintiff. If he was merely selling his vested interest, why should he receive commissions for selling his own property? We discover nothing contradictory in this count, which apparently undertakes to state the whole transaction just as it occurred, and we think that the count taken as a whole excludes the idea that Rannie, in consummating this sale was acting for himself alone and not as agent for Turner. The effect of this count is that Rannie represented to Turner that the lands could be bought at a price which was stated in the writing he exhibited, that the price was the lowest price at which they could he bought. Rannie then at Turner’s request undertakes and procures the sale of these lands to the plaintiff at that price for a large commission, at the same time receiving from the owners a large commission for the sale. What was the exact relation between the owners and Rannie is not clearly apparent. It would seem that while he had some sort of written agreement from them to sell him the land, yet he was to get a commission from the owners on the sale to himself. If such was the relation between them it does not in the least relieve him from his duty to Turner for it has the appearance of being a sort of blind to enable him to act as though he had bought the property, while in fact he was simply an agent to sell on a commission. It seems to us that this count alleges that Rannie acted as the agent of Turner in securing the purchase of the lands for the plaintiff; that he received commissions from the plaintiff and at the same time, unknown to the plaintiff, received commissions on the sale from the owners of the land.

It is not disputed that if Rannie had been simply a middle man between Turner and the owners to bring them into communication with each other in order that they might do their own trading, and with nothing more to do than this, he might have legally recovered commissions from both—for the simple reason that no trust of any kind would then have been reposed on him by either. Nor is it disputed if Turner or the plaintiff had known he was to receive commissions from the owners on the sale, that the plaintiff would have had no ground of complaint. The count negatives any such knowledge on the part of either the plaintiff or Turner.

In the case of Skinner Mfg. Co. v. Douville, 57 Fla, 180, 49 South. Rep. 125, this court had occasion to examine the duties of a real estate broker or agent to his principal. It was there stated that “it is the duty of a real estate broker to remain loyal to the interests of his client during the continuance of his agency, to disclose to his principal any fact or circumstance that might naturally tend to influence the latter in the conduct of the transaction, and that would affect his interests. He cannot act adversely to his principal, and if he does so, he forfeits his right to recover compensation for his services.” It is. said in the opinion, p. 185: “It is unquestionably the law that a broker employed to effect a sale or find a purchaser must exercise the utmost good faith towards his principal.” See authorities cited in the opinion.

In the case of Carter v. Owens, 58 Fla. 204, 50 South. Rep. 641, it is held: “A real estate broker employed to sell or to find a purchaser for land is bound to disclose to his principal any facts known to him material to the transaction; and if the broker takes part in the negotiation he is bound to exert his skill for the benefit of his principal. Any concealment from the principal of material facts, known to the agent, or any collusion by the latter with the purchaser, will forfeit the, right of the agent to compensation for his services. These cases in a general way set forth the duties of a real estate broker to his principal.

In the case of Farnsworth v. Hemmer, 1 Allen (Mass.) 494, it is held: “A broker who has acted for both parties in negotiating an exchange of real estate between them without informing either that he was employed by the other, is not legally entitled to commissions for his services ; and evidence in his behalf to show a custom among brokers to charge a commission to both parties in such cases is admissible.” The court in its opinion holds that an agent cannot be permitted to act for both vendor and purchaser without their authority or consent and luminously sets forth the reasons why he should not be permitted to assume relations so essentially inconsistent and repugnant to each other.

In the case of Berlin v. Farwell, (Cal.) 31 Pac. Rep. 527, it was held that a person could not act as the agent of both the vendor and purchaser in the same transaction, and where he sued under a contract with the defendant to find a purchaser, and was employed by the purchaser without defendant’s knowledge to buy the land from the defendant at a price which would suit the views of the purchaser he could not recover commissions from the defendant.

In the case of McKinley v. Williams, 74 Fed. Rep. 94, it is held that an agent of a vendor who speculates in the subject-matter of his agency or intentionally becomes interested in it as a purchaser, or as the agent of a purchaser, violates his contract of agency, betrays his trust, forfeits his commissions as agent and becomes indebted to his principal for the profits he gains by his breach of duty.

In the case of Cannell v. Smith, 142 Pa. St. 25, 21 Atl. Rep. 793, 12 L. R. A. 395, it is held that money paid to a broker tor effecting a sale of real estate in ignorance of the fact that he is also the agent of the purchaser may be recovered back, even if the sale is an advantageous one.

In Rice v. Wood, 113 Mass. 133, it is held that a broker acting for both parties in effecting an exchange of property can recover compensation for neither, unless his double employment was known and assented to by both. To the same effect see Green v. Southern States Lumber Co., 141 Ala. 680, 37 South. Rep. 670; Murray v. Beard, 102 N. Y. 505, 7 N. E. Rep. 553; Bunn v. Keach, 214 Ill. 259, 73 N. E. Rep. 419; Boswell v. Cunningham, 32 Fla. 277, 13 South. Rep. 354; Phinney v. Hall, 101 Mich. 451, 59 N. W. Rep. 814; Walker v. Osgood, 98 Mass. 348; Henderson v. Vincent, 84 Ala. 99, 4 South. Rep. 180.

In Hanna v. Haynes, 42 Wash. 284, 84 Pac. Rep. 861, it is held that a broker employed to purchase land who conceals from the purchaser the fact that the vendor will pay the broker a commission on making a sale, has the burden of proving perfect fairness in the transaction, and in the absence of satisfactory proof equity will treat him as guilty of constructive fraud.

In the case of Palmer v. Pirson, 24 N. Y. Supp. 333, 4 Misc. Rep. 455, it was held that where the commissions for the sale of property are paid in ignorance of fraud on the part of the agent, in consequence of which he was not entitled to recover such commissions the amount so paid may be recovered. This judgment was affirmed in 144 N. Y. 654, 39 N. E. Rep. 494.

In Clark and Skyles on Law of Agency, Yol. 1, paragraph 364, it is said: “When a person is employed to act as agent for another in dealing with a third person, and the nature of the employment is such that he is required to exercise judgment, discretion or personal influence in the execution of the agency, he cannot act also as agent of the third party in the transaction without the knowledge and consent of his principal, for he would thus occupy a position inconsistent with the trust reposed in him by his principal. If, therefore, a person employed to act as agent of another in dealing with a third person involving the exercise of judgment, discretion or personal influence, acts also as agent of such third person, without the knowledge of either, he cannot recover compensation from either; and if he so acts with the knowledge and consent of one only, he cannot recover compensation from the other. If compensation is paid to an agent by his principal in such a case in ignorance of the fact that he was acting for both parties it may be recovered back. Some cases go further than this and hold that an agent acting for two principals at the same time, and in the same transaction, can recover no compensation from either of them unless his double agency is known and assented to by both parties.” It is further stated in section 405 Id. that an agent will not be allowed to assume any position which is inconsistent with his duty to be loyal to his principal, or to place himself in an attitude of antagonism to the interests of his principal. He not only will not be allowed to acquire any personal interest or advantage by an actual violation of his duty, but he also will not be allowed to take a position without his principal’s knowledge and consent which will have a tendency to cause him to violate such duty; and to act in his own interest rather than that of Ms principal. If he does so the principal may compel Mm to account, or set the transaction aside according to circumstances, and no local custom or usage can be shown to avoid this rule.

Upon this question of the duty of an agent to be loyal to his principal it would be useless to add more authority. The law is all one way.

The next contention by the defendant in error in support of the ruling below, is that the fifth count of the declaration shows no privity between the plaintiff and the defendant that the transaction between Turner and defendant took place in January, 1906, and the plaintiff corporation was not incorporated until nearly six months afterwards; that the action of this case is based on an alleged tort practiced by Rannie on Turner and could not be assigned at common law, and cannot be assigned in Florida. This contention ignores the allegation of the declaration that Turner negotiated with Rannie for the sale of certain timber lands to a corporation to be organized by Turner and his associates, which corporation was afterwards organized and that to it the rights and liabilities of Turner were assigned; that the lands were.conveyed to it by the owners and that the plaintiff corporation, relying on the representations of Rannie that the price paid by it was the lowest price at which the lands could be bought, paid him the commissions of $50,000.00. The count shows that the transaction inaugurated by Turner with Rannie was completed with the latter.

In the case of The Scholfield Gear and Pulley Company v. Scholfield, 71 Conn. 1, 40 Atl. Rep. 1046, the defendant made false representations to individuals as to the value of a patent. These individuals organized the plaintiff corporation to take over the patent and work it, and this was carried out, the corporation paying the defendant $5,000.00 for the patent. It was also alleged that the false representations were made to the directors of the corporation after its organization. The action was brought to recover the $5,000.00, and other damages^ It was held that proof of either set of false representations —those made to the individuals or those made to the directors would sustain the action. In a very lucid opinion the court demonstrates that it is immaterial whether the false representations were made to the promoters of the corporation before it was formed, or to the directors after it was formed, since the corporation was formed for the purpose of acting on those representations. So in the instant case the count alleges that the defendant Rannie negotiated with Turner for the sale of certain timber lands to a corporation to be organized by Turner and his associates. These negotiations resulted in the lands being conveyed to the corporation and the commissions being paid by it to Rannie. To the like effect see Iowa Economic Heater Co. v. American Economic Heater Co., 32 Fed. Rep. 735, and In Re Canadian Oil Works Corporation—Hays Case—L. R. 10 Chan. App. Cas. 593.

It seems to us that the fifth count of the declaration substantially charges that the defendant undertook to obtain from the owners of the land a contract embracing terms demanded by Turner, that he represented to Turner the land could not be bought for a less price than that which he named, when in fact that price, unknown to Turner of the plaintiff, covered commissions which Rannie was to receive from the owners, and which on the. completion of the transaction were actually paid by the owners to Rannie, that Rannie was trusted by Turner- and by the plaintiff, that his conduct was inconsistent with that open fair course of dealing which the law requires of an agent, and that the fifth count substantially states a cause of action, and was not demurrable.

What we have said of the fifth count applies also to the first, second and-third counts. The fourth count is abandoned by the plaintiff in error.

We think the court below erred in sustaining the demurrers to these counts, and, therefore, said judgment is reversed, and the case remanded.

Taylor and Parkhill, J. J., concur. ' Whitfield, O. J., and Shackleford and Cockrell, J. J., concur in the opinion.