CHAPTER 28

THE DUTIES AND LIABILITIES OF THE AGENT TO THE PRINCIPAL

A. The agent's obligation of good faith.

B. Duty to obey instructions, use care and skill, etc.

A. Agent's Obligation of Good Faith.

§ 217. Duty of agent to use good faith, general rule. §218. Agent cannot secretly represent both parties. § 219. Agent cannot buy from, or sell to, self.

§ 220. An agent cannot take secret profits and benefits.

§ 217. (Agency, Sec. 33.) Duty of agent to use good

faith.

Case 217. Keighler et al. v. Savage Mfg. Co., 12 Maryland Reports, 383.

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LE GRAND, CHIEF JUSTICE: Its paramount and vital principal is good faith; without it the relation of principal and agent cannot exist; and so sedulously is this principal guarded that all departures from it are esteemed frauds upon the confidence bestowed.

§ 218. (Agency, Sec. 34.) Agent cannot secretly represent both parties.

Case 218. Gann v. Zettler, 3 Georgia Appeals, 589. Facts: Facts are stated in the second paragraph of the opinion.

Point Involved: Whether it is a breach of duty for an agent without the consent of his principal, to represent

also the other party to the transaction; whether an agent in so acting forfeits his right to his fee.

POWELL, J.: “It is recorded of Him 'who spake as never man spake' that seeing the multitudes, he went up into a mountain; and when he was set his disciples came unto him, and he opened his mouth and taught them, saying 'No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other.' So, also, is our law. Civil Code, secs. 3010, 3011, 3014, 3018. Whosoever, having undertaken the service of his master, counsels with another and agrees also in those same things wherewith he has been trusted, cannot claim the reward promised by his master, unless he makes it plain that he has not acted privily, but that his master was consenting thereto (citing cases).

"In this case a woman owning a house placed it with an agent, instructing him to sell it for her for $1,500. A man desiring to buy the house, but not for cash, hired this agent to become also his agent to buy it of the woman through other means, making known to him that he was willing to give, in exchange for the woman's house, a piece of land which he owned and $1,200 in notes. The agent not telling the woman that he had become the agent of the man, got from her an agreement to take, in exchange for her house, the man's land, and notes for $1,000; and she therewith also consented that if the agent could get the man to give more than this sum, he should have it for his pay. However, before the trade was ended, the woman, having obtained knowledge that the man had already offered to give more than the land and the $1,000 which had not been told her, put the agent aside and dealt directly with the man, to her better advantage. The agent, learning of these things, sued her for $200; and the judge gave judgment in her favor. "Judgment affirmed."

Question 218: What was the agent employed to do in this case? What did he do that was not known to his principal?

Why was that opposed to duties? Did he lose his right to his fee on that account?

Case 219. Rice v. Wood, 113 Mass. 133.

Facts: Suit by plaintiffs as real estate brokers to recover a commission from defendant for disposing of certain stocks in exchange for real estate. The plaintiffs were at the same time employed by certain parties to sell or exchange their real estate. Through the instrumentality of plaintiffs, an exchange was effected. Plaintiffs were to receive a commission from defendants, and also from the owners of the real estate, defendant knowing this at the time, but the real estate owners did not know of it. The defendant contends that plaintiffs cannot recover, because they violated their duties as agents with the other party to the contract, the real estate

owners.

Point Involved: Whether an agent employed by A to sell his property on a commission who without A's knowledge contracts in the same matter with B to represent and receive a fee from B, who has full knowledge of all the facts, can recover his fee from B.

"If this were an action by the plaintiffs against the owner of the real estate, for commissions earned in disposing thereof, the decision of this court in Farnsworth v. Hemmer, 1 Allen, 494, would be conclusive against the claim, upon the ground that the plaintiffs, if such facts should be proved, had entered into a relation inconsistent with the confidence reposed in them by such owner, and, placed themselves in a position antagonistic to his interests. This case presents, however, the question whether, conceding that the plaintiffs could not recover their commissions from the owner of the real estate, they may not recover those they claim to be entitled to from the defendant, as he knew fully, at the time of entering into his contract, the relation in which the plaintiffs stood to the third party.

"It was the duty of the plaintiffs to get the highest price for the real estate that could be obtained for it in the market; while the contract between the plaintiffs and the defendant was an inducement to the plaintiffs to effect a sale to the defendant, even if it was on lower terms than might have been obtained from others, because they thereby secured their commissions from both parties. It was therefore an agreement which placed the plaintiffs under the temptation to deal unjustly with the owner of the real estate. Walker v. Osgood, 98 Mass. 348.

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"Contracts which are opposed to open, upright and fair dealing are opposed to public policy. A contract by which one is placed under a direct inducement to violate the confidence reposed in him by another is of this character. No one can be permitted to found rights upon his own wrong, even against another also in the wrong. A promise made to one in consideration of doing an unlawful act, as to commit an assault or to practice a fraud upon a third person, is void in law; and the law will not only avoid contracts the avowed purpose or express object of which is to an unlawful act, but those made with a view to place, or the necessary effect of which is to place, a person under wrong influence, and offer him a temptation which may injuriously affect the rights of third persons. Nor is it necessary to show that injury to third persons has actually resulted from such a contract, for in many cases where it had occurred this would be impossible to be proved. The contract is avoided on account of its necessarily injurious tendency. Fuller v. Dame, 18 Pick. 472.

Question 219: (1) State the facts, the question presented and the Court's decision in the above case, giving the reasons. (2) A was an expert judge of pianos. B, being about to purchase a piano, requested A as his friend and gratuitously to examine a piano which C was attempting to sell to B. C secretly promised A a fee if the piano was sold to B. A believed the piano a good instrument and he recommended it and B bought it. B has never complained and is entirely satisfied with

the piano. A sues C for the fee promised. Can he recover? (Bollman v. Lewis, 41 Conn. 581.)

§ 219. (Agency, Sec. 35.) Agent cannot buy from or sell to self.

Case 220. Blank v. Aronson, 187 Federal Reports, 241.

Facts: Suit in equity by Aronson against Blank to set aside a conveyance by Aronson. Aronson employed Blank to find a purchaser for a tract of land owned by him in Barnes County, North Dakota. Blank thereupon produced Elmer W. Fish, as a proposed purchaser at the price of $14 per acre, which Blank represented was all that he could get. On December 3, 1906, a contract of sale was entered into between Aronson and Fish for that price, Fish agreeing to pay $2,300 in cash, and $2,000 more on or before December 1, 1907, when the deed was to be given, and to give his notes, secured by mortgage, for the balance. On November 1, 1907, Blank appeared to be Fish's assignee of the right to purchase, and Aronson accordingly made the deed to him. Aronson now charges that when Blank acted as his agent, he had a personal interest in the purchase which was concealed from Aronson.

Point Involved: Whether an agent employed to sell real estate has the right without the consent of the principal, to purchase it himself.

ADAMS, CIRCUIT JUDGE: "#

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If the charge found in the bill is sustained by the proof, the sale ought to be annulled. There is no principle of law, equity or morals more universally recognized than this: that an agent must be faithful to his principal in the discharge of the duty which he undertakes. He cannot purchase for himself that which his duty requires him to sell for his principal. 'Emptor emit quam minimo potest, venditor. vendit quam maximo potest.' His own interest is a constantly acting force inducing him to unfaithfulness in the discharge of the duty