Jensen v. Sidney Stevens Implement Co.

• Decision Date: 04 December 1922
• Citation: 36 Idaho 348,210 P. 1003
• Parties: THOMAS C. JENSEN, Respondent, v. SIDNEY STEVENS IMPLEMENT COMPANY, a Corporation, Appellant
• Court: Idaho Supreme Court

210 P. 1003

36 Idaho 348

THOMAS C. JENSEN, Respondent, v. SIDNEY STEVENS IMPLEMENT COMPANY, a Corporation, Appellant

Supreme Court of Idaho

December 4, 1922

PRINCIPAL AND AGENT-DUTY OF AGENT-BURDEN OF PROOF AS TO GOOD FAITH.

1. It is the duty of an agent to make to his principal a full and complete disclosure of all facts relative to the subject of his agency which it may be material to the principal to know. If an agent makes a profit in the course of his agency because of his failure to inform his principal of facts known to him, or which in the exercise of due diligence he should have ascertained for his principal, the profits of such transaction as a matter of law will belong exclusively to the principal.

2. The law guards the fiduciary relation between principal and agent with jealous care, and seeks to prevent the possibility of a conflict between the agent's duty and his personal interest, and forbids his acting adversely to the interests of his principal, either for himself or others.

APPEAL from the District Court of the Fifth Judicial District, for Bear Lake County. Hon. Robert M. Terrell, Judge.

Action to recover money owing as wages. From judgment for plaintiff defendant appeals. Reversed and remanded for new trial.

Reversed and remanded, with instructions. Costs awarded to appellant.

D. C McDougall, Jones, Pomeroy & Jones and D. C. Kunz, for Appellant.

The law will not permit an agent to act for himself and his principal in the same transaction, as to buy over to himself as agent the property of his principal, unless ratified by him with full knowledge of all the circumstances. Neither is the situation altered ordinarily by the fact that the principal had a fixed price at which he was willing to sell, and the agent buys at that price. (Mechem on Agency, sec. 1199; Porter v. Woodruff, 36 N.J. Eq. 174; Tilleny v Wolverton, 46 Minn. 256, 48 N.W. 908; Merriam v. Johnson, 86 Minn. 61, 90 N.W. 116; Colbert v. Shepherd, 89 Va. 401, 16 S.E. 246; Rich v. Black, 173 Pa. 92, 33 A. 880; McNutt v. Dix, 83 Mich. 328, 47 N.W. 212; Albright v. Phoenix Ins. Co., 72 Kan. 591, 84 P. 383.)

While it is not absolutely prohibited that an agent to sell property may buy it himself, yet the transaction is to be regarded with the closest scrutiny, and when challenged a presumption of invalidity arises, and the burden is upon the agent to make it affirmatively appear that he dealt fairly and in the strictest of good faith disclosed to his principal all of the information concerning the property possessed by him. (Tyler v. Sanborn, 128 Ill. 136, 15 Am. St. 97, 21 N.E. 193, 4 L. R. A. 218; 21 R. C. L. 829, 830.)

When an agent, after receiving instructions to sell property on certain terms, learns that other and more advantageous terms can be obtained, it is his plain duty, and he is under every legal and moral obligation, to communicate the facts to the principal, that he may act advisedly in the premises. (Hegenmyer v. Marks, 37 Minn. 6, 5 Am. St. 808, 32 N.W. 785; Holmes v. Cathcart, 88 Minn. 213, 97 Am. St. 513, 92 N.W. 956, 60 L. R. A. 734.)

An agent cannot, either directly or indirectly, have an interest in the sale of the property of his principal which is within the scope of his agency, without the consent of his principal, freely given, after a full knowledge of every matter known to the agent which might affect the principal. (Frith v. Alliance Investment Co., 49 Can. S.Ct. 384, Ann. Cas. 1914D, 458; Clark v. Delano, 205 Mass. 224, 91 N.E. 299, 29 L. R. A., N. S., 595.)

Budge & Merrill and A. B. Gough, for Respondent.

There is no inhibition upon the purchase by an agent from his principal where the facts are fully disclosed and the agent acts in good faith, taking no advantage of his situation. (Mechem on Agency, 2d ed., sec. 1221; Rochester v. Levering, 104 Ind. 562, 4 N.E. 203; Burke v. Bours, 98 Cal. 171, 32 P. 980; 31 Cyc. 1444.)

Where an agent purchases land from his principal, fully disclosing all facts and acting in good faith, and thereafter sells the land at a substantial advance, he is not liable to account to the principal for the profit realized, the agency being terminated by the sale to the agent. (Rathke v. Tyler, 136 Iowa 284, 111 N.W. 435; Swan v. Davenport, 119 Iowa 46, 93 N.W. 65.)

While a principal has a right to disaffirm a sale to his agent if there is any element of unfairness or bad faith in the transaction, though the purchase price is adequate, price is a very important feature in determining the existence of unfairness or bad faith. (Williams v. Lockwood, 175 Cal. 598, 166 P. 587.)

LEE, J. Rice, C. J., and McCarthy and Dunn, JJ., concur.

OPINION

LEE, J.

Respondent brought this action to recover from appellant a balance on account of wages earned while in its employment. Appellant, by way of answer and cross-complaint, alleged that it was a Utah corporation, qualified to transact business in the state of Idaho, and had for many years maintained a branch establishment at Montpelier in said state, where it was engaged in selling farming implements and other merchandise, in the course of which it acquired the ownership of real property hereafter referred to; that until August, 1919, respondent was in its employment, and his duties were to collect accounts, look after its real estate and find purchasers for the same, collect rents and attend to all of its business matters arising in that locality, subject to the direction of appellant; that in May of that year it was the owner of certain real estate, specifically described, comprising about 120 acres of farm land in Bear Lake county, which it listed for sale with respondent, together with other of its real estate; and that it was at the time winding up its affairs and closing its business at said branch house. It further alleges that respondent was under instructions, and that it was his duty, to obtain the best possible price for said property, and to keep appellant fully informed with respect to all matters affecting the sale of such property, but that respondent failed to do so, but that respondent, while so employed and when occupying such fiduciary relationship, failed to disclose to appellant the true conditions regarding offers made for the farm land in question, and thereby induced appellant to sell said premises to respondent for a much less sum than respondent had been offered for the property by a prospective purchaser, to whom he afterward resold the same for an advance of a thousand dollars. Appellant asked to have the balance claimed for wages set off against the excess obtained by respondent upon the resale of this property, and judgment for the remainder.

Respondent answered said cross-complaint, in effect admitting the relationship of principal and agent as alleged, that the real estate in question had been listed with him for sale, that he had purchased the same from his principal without having disclosed the facts to appellant as to a previous offer from a third party, and that after obtaining a conveyance of the same, he had soon thereafter contracted to resell said premises to the party who had made the offer before he had purchased the premises, for a thousand dollars in excess of the price for which he had purchased the land from his principal, and had subsequently closed such sale for $ 850 in excess of what he had paid his principal for the land.

The cause was tried to a jury, which returned a verdict in favor of respo...