Mcshane v. Quillin

• Decision Date: 30 April 1929
• Docket Number: 5068
• Court: Idaho Supreme Court
• Parties: MARGARET MCSHANE, Respondent, v. P. J. QUILLIN and M. B. QUILLIN, His Wife, Doing Business as P. J. QUILLIN & COMPANY, Appellants

277 P. 554

47 Idaho 542

MARGARET MCSHANE, Respondent, v. P. J. QUILLIN and M. B. QUILLIN, His Wife, Doing Business as P. J. QUILLIN & COMPANY, Appellants

No. 5068

Supreme Court of Idaho

April 30, 1929

BROKERS-FRAUD-CONTRACTS-INVALIDITY-RECOVERY OF MONEY PAID-LIMITATION OF ACTIONS-HUSBAND AND WIFE-PARTIES TO ACTION.

1. Husband ratifying wife's acts and participating in benefits accruing therefrom, with knowledge of alleged fraudulent representations by her to one for whom they acted as agents in renting and disposing of realty, would be equally liable with her for alleged fraud.

2. In absence of good faith, a real estate broker is not entitled to recover anything from his client for his services.

3. Retention of commission, fairly earned in good faith by real estate brokers without license required by Laws 1921, chap 184, is not inequitable, and they are under no quasi-contractual obligation to return it.

4. Where an illegal contract has been executed, and benefit conferred on one party was due in justice and good faith, the other cannot recover the consideration paid.

5. Cause of action against plaintiff's agents for fraudulently retained rents and profits held properly joined with actions for rental value of plaintiff's property exceeding amount for which rented by defendants, unpaid balance of proceeds of loan secured by them, and amount paid on commissions claimed for negotiating sale thereof, all such actions being against defendants as agents or trustees for plaintiff, within C. S., sec. 6688, subd. 4.

6. Where complaint shows on its face that cause of action is barred by statute of limitations, such defense may be taken by demurrer, and otherwise by answer.

7. Cause of action against plaintiff's agents for fraudulently retained rents and profits held barred by statute of limitations as to moneys received prior to period of limitation before suit or reasonable time thereafter.

8. Under C. S., sec. 6637, husband is proper party to action affecting wife's separate property, though not a necessary party as under the common law.

9. In action for amount paid on commissions for negotiating sale of realty, testimony as to real estate values in city, with particular reference to property in vicinity of that sold held admissible to contradict statements, claimed to have been fraudulently made by defendants, as to sale price of such property to induce plaintiff to sell it for less than its true value.

10. In action for amount paid on commission for negotiating sale of realty, purchaser's testimony that he would have been willing to pay more for property was admissible as throwing some light on defendant's diligence and good faith in protecting plaintiff's interest.

11. Brokers' failure to secure the best possible rental for property entrusted to them is not conclusive evidence of their bad faith. [Copyrighted Material Omitted] [Copyrighted Material Omitted]

APPEAL from the District Court of the Eighth Judicial District, for Kootenai County. Hon. Charles L. Heitman, Judge.

Action to recover money received for the benefit of the plaintiff and fraudulently retained. Judgment for the plaintiff. Reversed and remanded for a new trial.

Judgment reversed with instructions. Costs awarded to appellants. Petition for rehearing denied.

James F. Ailshie and James F. Ailshie, Jr., for Appellants.

Where commissions are paid to one not licensed under 1921 Sess. Laws, chap. 184, p. 379, as a real estate broker for services rendered as such, an action will not lie for their recovery. (Roller v. Murray, 112 Va. 780, Ann. Cas. 1913B, 1089, 72 S.E. 665, 38 L. R. A., N. S., 1202; Clarke v. Dutcher, 9 Cow. (N. Y.) 674; Kirkpatrick v. Clark, 132 Ill. 342, 22 Am. St. 531, 24 N.E. 71, 8 L. R. A. 511; 6 R. C. L. 825, 826; Deaton v. Lawson, 40 Wash. 486, 111 Am. St. 922, 82 P. 879, 2 L. R. A., N. S., 392.)

An action for money had and received may not be joined with an action for damages for fraudulent misrepresentation. (C. S., sec. 6888.)

Apparently the leading case in this country on the principle of law involved here is that of Clarke v. Dutcher, 9 Cow. (N. Y.) 674, wherein Justice Sutherland said:

"Although there are a few dicta of eminent judges to the contrary, I consider the current and weight of authorities as clearly establishing the position that where money is paid with a full knowledge of all the facts and circumstances upon which it is demanded, or with the means of such knowledge, it cannot be recovered back upon the ground that the party supposed he was bound in law to pay it, when in truth he was not. (1) He shall not be permitted to allege his ignorance of law; (2) and it shall be considered a voluntary payment." (Kirkpatrick v. Clark, supra; Deaton v. Lawson, supra.)

Lynn W. Culp and R. H. Elder, for Respondent.

"If a broker has an individual interest in the transaction he is employed to negotiate, and conceals it from, or fails to disclose it to, the principal, it ordinarily constitutes a fraud which deprives him of the right to compensation for his services." (9 C. J., p. 570, sec. 69.)

Citing the following cases, all of which seem to uphold the rule: Allen v. Pierpont, 22 F. 582, 23 Blatchf. 33; Lomita Land etc. Co. v. Robinson, 154 Cal. 36, 97 P. 10, 18 L. R. A., N. S., 1106; Collins v. McClurg, 1 Colo. App. 348, 29 P. 299; Schleifenbaum v. Rundbaken, 81 Conn. 623, 71 A. 899 (here the party derived secret profits); and adding to the rules the following:

"And the principal may recover commissions paid without knowledge of such fraud." (Guidetti v. Tuoti, 52 Misc. 657, 102 N.Y.S. 499; Texas Brokerage Co. v. John Barkley & Co., 60 Tex. Civ. App. 466, 128 S.W. 431.)

And in cases where the agent is employed to represent one party and attempts to serve both, without the knowledge and consent of the one employing him, the same authority has this to say: "On discovering the double agency, the principal may recover from his broker commissions received by the latter from the opposite party." (Kuntz v. Tonnele, 80 N.J. Eq. 373, 84 A. 627; Easterly v. Mills, 54 Wash. 356, 103 P. 475, 28 L. R. A., N. S., 952, and note.) To which rule is added the following: "And notwithstanding he has done so, he may also recover back commissions which he himself has paid to the broker before his discovery of the fraud." (9 C. J., p. 578, sec. 76.)

GIVENS, J. Budge, C. J., Wm. E. Lee, J., and Hartson, D. J., concur.

OPINION

GIVENS, J.

Respondent recovered judgment against appellants, sued as her agents in the management, rental and disposition of her real property on four causes of action. The first was brought to recover $ 5,000 because, as alleged, appellants, as respondent's agents, had fraudulently rented over a period of fifty months to their unlawful gain, the property in question for that much less than its true rental value.

The second cause of action was for $ 2,221.32, the unaccounted for and unpaid balance of the proceeds of a loan secured by appellants for respondent on her property.

In the third cause of action, respondent seeks to recover $ 1,000 paid appellants as a part payment on commissions which they claimed to be due for negotiating the sale of the premises in question.

The fourth cause of action was based on alleged fraudulently retained rents and profits of $ 2,052.09.

The first and second causes, as against a general demurrer, sufficiently alleged fraud and that respondent did not learn of the fraud until within three years, the statutory period, of the time suit was brought.

Appellants demurred to the third cause of action on the same grounds, in general, as to the first and second, and appellant, P. J. Quillin, in addition, on the ground that he was improperly joined, the complaint failing to show that he was implicated in the fraudulent representations therein alleged to have been made by Mrs. Quillin, the other appellant. There is no merit in this last contention. If P. J. Quillin had knowledge of these alleged fraudulent representations made by the other appellant and if with this knowledge he ratified her acts and participated in any benefits that may have accrued from them, he would be equally liable with Mrs. Quillin for the alleged fraud. (27 C. J. 11.)

It is the further contention of appellants that this third cause did not state sufficient facts to constitute a cause of action. It alleged, in substance, that Mrs. Quillin, as agent for Hyman, went to the home of respondent in California and so misrepresented the value of the property in question that respondent agreed to sell it for $ 7,000 less than its true value; and secondly, that after the sale, respondent, believing herself liable for the five per cent commission on the sale price of $ 28,000, paid $ 1,000 to appellants on account.

While the cause of action could perhaps be couched in more explicit terms, recovery seems to be sought on two grounds; first, because of the breach of trust and lack of good faith on the part of appellants, and secondly, because, even assuming their good faith, they were not entitled to any commission, not holding a broker's license as required by 1921 Sess. Laws, chap. 184, p. 378.

That the allegations going to the first point, if sustained, would state a cause of action can hardly be questioned. There is a fiduciary relationship between a real estate broker and his client which requires the utmost good faith (Clopton v. Meeves, 24 Idaho 293, 133 P. 907), and in the absence of good faith the broker is not entitled to recover anything for his services. (Clopton v. Meeves, supra; Jeffries v. Robbins, 66 Kan. 427, 71 P. 852; 9 C. J. 568-570.)

A consideration of the second point raises the question of the rights of the parties to an illegal contract. No principle in law, perhaps, is...