Harris v. Dunn

• Decision Date: 09 August 1951
• Docket Number: No. 5342,5342
• Parties: , 27 A.L.R.2d 1277 HARRIS et al. v. DUNN et al.
• Court: New Mexico Supreme Court

Page 821

234 P.2d 821

55 N.M. 434, 27 A.L.R.2d 1277

HARRIS et al. v. DUNN et al.

No. 5342.

Supreme Court of New Mexico.

Aug. 9, 1951.

Frank L. Horan, Perry S. Key, Albuquerque, for appellants.

Rueckhaus & Watkins, Albuquerque, for appellees.

SADLER, Justice.

The question for decision is whether 1941 Comp. Sec. 75-143, L.1949, c. 19, declaring void, unless in writing, all agreements made subsequent to July 1, 1949, employing an agent to purchase or sell real estate for a commission or compensation bars equitable relief against one agreeing to purchase certain land for another but in violation of his promise and understanding purchases it for himself, taking title in the name of others in an effort to conceal the fraudulent breach of his agreement.

The defendants, appellees here, being J. R. Dunn, doing business as Dunn Realty, and Wilburn G. Moore and Ingeborg Moore, in whose names title to the real estate involved had fraudulently been taken in consummation of the fraud, as alleged in the amended complaint, although answering by way of general denial, all joined in a motion to dismiss the complaint alleging facts as set forth in the first paragraph hereof. The grounds of the motion were that the defendant, Dunn, being a duly licensed real estate broker, the provisions of the act in question, cited above, were applicable and required that any employment of him, to purchase lands for the plaintiffs, must be evidenced by a written instrument.

The motion was duly argued before the trial court and at the conclusion of the argument it was sustained and the complaint dismissed. The plaintiffs prosecute this appeal for the revision and correction of such judgment. Although numerous errors are assigned, all will be resolved by a determination of the single question whether the trial court correctly held the relief here sought was properly denied under the act in question, viz., 1941 Comp. Sec. 75-143, L.1949, c. 19, Sec. 1.

This act so far as material reads, as follows: 'Section 1. Any agreement entered into subsequent to the first day of July, 1949, authorizing or employing an agent or broker to purchase or sell lands, tenements or hereditaments or any interest in or concerning them, for a commission or other compensation, shall be void unless the agreement, or some memorandum or note thereof shall be in writing and signed by the person to be charged therewith, or some other person thereunto by him lawfully authorized. No such agreement or employment shall be considered exclusive unless specifically so stated therein.'

In our opinion this case is ruled by our decision in Mitchell v. Allison, 51 N.M. 315, 183 P.2d 847, 848. See, also, same case reported on second appeal under title, Mitchell v. Allison, 54 N.M. 56, 213 P.2d 231, and Rice v. First National Bank, 50 N.M. 99, 171 P.2d 318. The facts in Mitchell v. Allison are almost on all fours with the facts of this case and after exhaustive research and thorough consideration of the first appeal, we held:

'There is a conflict of authority as to whether an agent verbally employed to buy specific real estate, who purchases it for himself or a third person with the agent's own funds, may be compelled to deliver title to his principal or respond in damages for his breach of the agreement. The authorities are collected in annotations in 42 A.L.R. 10; 54 A.L.R. 1195, and 135 A.L.R. 232.

'While courts are divided on the question; the weight of authority, and the trend of recent decisions, are to the effect that such agreements are not within the statute of frauds. This is the conclusion of such outstanding authorities as Williston, Pomeroy, Scott and the Restatement.

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'The theory of the rule we follow is that such agreements create a relation of trust and confidence to which the statute of frauds does not apply.

'The cases on the question, pro and con, are so numerous (see Annotations in A.L.R. cited) that we content ourselves with citing the following which support the rule adopted: Harrop v. Cole, 85 N.J.Eq. 32, 95 A. 378, affirmed in 86 N.J.Eq. 250, 98 A. 1085; Quinn v. Phipps, 93 Fla. 805, 113 So. 419, 54 A.L.R. 1173; Lamb v. Sandall, 135 Neb. 300, 281 N.W. 37.'

The defendants seek to deny Mitchell v. Allison force as a precedent by pointing out that at the time it was decided and, hence, at the time of the events out of which the suit arose, the statute here involved and relied upon by them had not been enacted. The attempted distinction is not persuasive. True enough, the events adjudged in Mitchell v. Allison took place before the statute was adopted while those here before us occurred subsequently. But after admitting this, the distinction between the two cases ends and the analogy begins. Both deal with the effect of a statute calling for a writing, the one relied on in Mitchell v. Allison being the Statute of Frauds, whereas that here involved is the so-called Real Estate Brokers' Act, dealing with agreements for compensation or commission on the sale or purchase of real estate procured through an agent. Just why the Statute of Frauds should be less effective to void a contract in the one case than the Brokers' Statute in the other, counsel for defendants have been unable to point out. And, yet, the former statute was held not to bar the remedy sought in Mitchell v. Allison. There are no valid grounds of distinction between the two cases.

Indeed, the Act relied upon by defendants does not purport to render void every agreement respecting the sale or purchase of real estate in which an agent has had a part, unless in writing. It seems clear enough that what the legislature intended to nullify was oral agreements to pay a commission. As said by the Supreme Court of Wisconsin in Krzysko v. Gaudynski, 207 Wis. 608, 242 N.W. 186, 189, in dealing with a statute of that state similar to ours: 'The purpose of the statute was not to relieve real estate agents from their obligations as agents, but to protect the public against frauds perpetrated by dishonest agents through falsely claiming oral contracts of agency when another agent effected a sale by which the landowner was subjected to claims for commission by two or more agents, and by falsely claiming agency and claiming a commission for procuring a purchaser when no bona fide purchaser was in fact procured. One may become an agent without compensation. Absence of compensation is immaterial.'

See also Stephenson v. Golden, 279 Mich. 710, 276 N.W. 849, and cases cited in annotations of subject generally in 42 A.L.R. 10; 54 A.L.R. 1195 and 135 A.L.R. 232.

Counsel for defendants place great reliance on the case of Carkonen v. Alberts, 196 Wash. 575, 83 P.2d 899, 917, 135 A.L.R. 209. There, in construing a statute like ours, the court declined to hold an agent was a constructive trustee who purchased for himself real property he was commissioned to purchase for his principal. It is a sufficient answer to say that the division of authority pointed out by us in Mitchell v. Allison and treated at length in the A.L.R. annotations there cited places Washington on the side of the fundamental question at issue which we deliberately declined to follow in that case. See, Annotation in 42 A.L.R. 10(29). In other words, if we had been persuaded to adopt the line of authority defendants urge upon us, citing Carkonen v. Alberts as an example, we would have decided Mitchell v. Allison the other way. The Washington court sees in actions of an agent such as those here disclosed and present in the case before it in Carkonen v. Alberts only moral wrong, not legal fraud. So viewing the matter, it reached the conclusions announced touching the effect of a statute similar to ours. In a strong dissent Chief Justice Steinert said of the majority view:

'My consideration of the majority opinion, in its entirety, convinces me that it is wrong. I think that the case falls squarely within the principle expressed by the majority in the following language: 'The authorities uniformly hold that the agent purchasing the land will not be permitted to keep the property he has obtained where circumstances, apart from a mere breach of an oral agreement to convey to another, render it inequitable that he should do so. The same rule, of course, is applicable to the proceeds received by the agent from his sale of the land.'

'This case does not present 'a mere breach of an oral agreement to convey to (or purchase for) another.' If the allegations of the complaint be true, as the demurrer admits, then, in my opinion, it is a case of arrant fraud, and the 'circumstances * * * render it inequitable' that the agent should 'be permitted to keep the property' or retain 'the proceeds received by the agent from his sale of the land.' According to the complaint, respondent Alberts, under agreement to act as broker on commission to be paid by appellant, straightway proceeded to have himself engaged as broker for the owner of the land upon a commission to be paid by him. Then, false to both parties, he bought the property for himself, under an assumed name, at a price of two thousand dollars less than the amount which he was commissioned to pay for it and then sold it for two thousand dollars more than the initial principal's authorized price, thus inflicting a loss of two thousand dollars upon each of his principals and appropriating a neat profit of four thousand dollars plus a commission to himself. If that be not rank fraud, then I am unable to assign a word for it. A host of the authorities cited in the majority opinion sustain my view.'

It is suggested that certain California cases, namely, Heyn v. Philips, 37 Cal. 529, and McCarthy v. Loupe, 62 Cal. 299, one decided before and the other after enactment of Cal.Civ.Code, Sec. 1624(5), similar to the statute before us, are precedents against the conclusion we have reached. The Heyn case merely holds that a contract employing an agent to sell certain land of the owner at an...