Finnerty v. Fritz

• Decision Date: 01 December 1879
• Parties: FINNERTY ET AL. v. FRITZ.
• Court: Colorado Supreme Court

5 Colo. 174

FINNERTY ET AL. v. FRITZ.

Supreme Court of Colorado

December, 1879

Appeal from District Court of Arapahoe County.

THE facts are stated in the opinion. The plaintiff in the court below had judgment.

Messrs H. M. and W. TELLER, and Mr. G. B. REED, for appellants.

Messrs WELLS, SMITH & MACON, for appellee.

BECK J.

The most important questions raised by the assignment of errors in this case involve the subject or agency and the principles which must control the conduct of an agent in transactions between himself and his employer, and in his transactions with third persons in respect to the subject-matter of his agency.

The general principles of law applicable to real estate brokers appear to be well settled, and rules defining their duties have been laid down and sanctioned by a long course of judicial decisions, but difficult questions often arise whether or not a given state of facts bring the agent within a rule which imposes a forfeiture of commissions for misconduct. On such questions some contrariety of opinion exists. The weight of authority favors a stringent application of these rules to all cases falling clearly within their reason; but as to all other cases, whenever it is made to appear that the agent is the procuring cause of the sale, the law leans to that construction which will best secure the payment of his commissions rather than the contrary.

As applicabie to the case under consideration, it may be observed that it is a well settled rule that the same person cannot be both agent of the owner to sell, and agent of the purchaser to buy, for the reason that the interests of buyer and seller necessarily conflict, and the same agent cannot serve both employers with efficiency and fidelity. The interest of the agent conflicts with his duty in such case. His duty to the vendor to sell for the highest price is wholly incompatible with his duty to the purchaser to buy for the lowest price, and these inconsistent relations, if assumed, would expose him to the temptation to sacrifice the interests of one party or the other, in order to secure his double commissions. Wherefore, it is the established policy of the law to remove all such temptations, and to this end every contract whereby an agent is placed under a direct inducement to violate the confidence reposed in him by his principal, is declared to be opposed to public policy, and not capable of being enforced as against any person who has a right to object. The effect of the rule is, that if an agent act for both parties in the same transaction, he cannot recover compensation from either, unless the parties knew and assented to his acting for both. The rule cannot be avoided by proof that no injury has resulted from his double dealing, for the policy of the law is not remedial of actual wrong, but preventive of its possibility.

It is equally well settled that an agent to sell cannot himself become the purshaser without the knowledge and assent of the seller; nor if he be employed to purchase can he be himself the seller. These rules all rest on grounds of public policy. Everhart v. Searle, 71 Pa. St. 256; Rice v. Wood, 113 Miss. 133; Lynch v. Fallon, 11 R. I. 311; Raisen v. Clark, 41 Md. 158; Lloyd v. Colston & Moore, 5 Bush. 587; Kerfoot v. Hyman, 52 Ill. 514; Scribner v. Collar, 40 Mich. 378.

Illustrative of the character of cases not falling within the reason of the foregoing rules, and which constitute exceptions thereto, we note that it is held if an agent or broker act openly for owner and purchaser, with the knowledge and assent of both, each having contracted to pay him a commission, he may recover the stipulated compensation from both parties; so also, if an agent be employed to sell at a stipulated commission, he may offer himself as a purchaser, and if accepted as such under the contract to pay commissions, he may purchase and be entitled to retain from the purchase-money an amount equal to his commissions; or if employed to purchase, the employer stipulating to pay him a given sum for the property, regardless of its cost to the agent, the sum so agreed upon may be recovered.

Again, if the extent of the agency be merely to bring the contracting parties together, and does not involved the duty of negotiating for either, the agent is termed a middleman, and may contract for and recover commissions from both. Stewart v. Mather, 32 Wis. 344; Shepherd v. Hedden, 29 N. J. L. 334; Mullen v. Keetzleb & Lampton, 7 Bush, 253; Herman v. Martineau, 1 Wis. 151; Siegel v. Gould, 7 Lans. 178; Anderson v. Weiser, 24 Iowa, 430; Merriman v. David, 31 Ill. 404.

Appellants insist in this case that the evidence shows Fritz, the plaintiff, to have been guilty of such gross misconduct as forfeits all claims he may have had against them for commissions.

It is shown by the record that on the 28th day of October, 1878, the appellants executed to Davies a bond, conditioned to convey unto him the Little Chief mine at Leadville, provided he paid the sum of $300,000 purchase-money therefor, in thirty days; and containing also a stipulation for an extension of thirty days, on payment of the sum of $25,000 as a forfeit, in the event that the purchase should not be consummated. On the succeeding day Davies and Fritz entered into an agreement in writing, associating themselves together as partners in the business of buying, selling and trading in mining property, and containing the following stipulation concerning the mine in question: 'And it is further expressly agreed that the said Jacob S. Fritz is to have and receive one-third share of the gross net proceeds, free from all cost and expense, that may be received and realized, over and above the respective amounts mentioned in certain bonds for the sale of the Little Chief mine and the Union lode, in California mining district, in said county of Lake, said bond having been made to the said John Davies by the parties therein named respectively, on the 28th day of October, A. D. 1878.'

Subsequently, it becoming evident that the sum named in the bond as forfeit-money would have to be raised, since a sale of the mine could not be effected within the first thirty davs, Davies and Fritz entered into an agreement with Oviatt and Cooper to share with them the profits which might be realized in a sale of the mine, upon condition that the latter parties advance the $25,000 forfeit money. The money was raised under this arrangement, and paid to the appellants on the 26th day of November. The bond was assigned to Oviatt & Cooper, and appellants executed to them a deed of the mine, bearing date the 26th day of November, 1878, and placed the same in escrow, to be delivered on payment of the balance of the purchase-money.

"money. On the 23d day of December, 1878, a sale was effected under the Oviatt & Cooper deed, of three-fifths of the mine for the sum of $300,000, to John V. Farwell and other Chicago parties. On the same day the entire property was conveyed to Wirt Dexter, in trust for all parties interested, the trust deed securing to Davies, Fritz, Oviatt, Cooper and George R. Clark-the latter being a partner of Oviatt & Cooper-two-fifths of the mine in certain proportions, the trust to be executed after the Chicago parties should be reimbursed, the $300,000 purchase-money and expenses, out of the proceeds of the mine.

Davies testified on part of the appellants that an understanding was arrived at between himself and Fritz to procure the bond and share in the profits to be realized upon a sale of the mine, before the bond was executed; and that this understanding or agreement was reduced to writing afterwards; also, that at the time of these transactions he was not aware of the fact that Fritz was expecting to receive commissions from the appellants. Fritz, on the contrary, testified that he told Davies that he expected to be paid commissions, and he further testified that he had no agreement for an interest in the bond, until after the terms and conditions of the contract with Davies were all settled by the execution and delivery of the bond. He also testified to having informed Finnerty subsequently to the giving of the bond, that he expected to acquire a contingent interest in the property. This statement is denied by Finnerty.

We have no hesitation in declaring, as a proposition of law, that if Fritz exerted his influence with appellants to...