Mees v. Grewer

• Decision Date: 23 August 1932
• Docket Number: 6041
• Court: North Dakota Supreme Court

245 N.W. 813

63 N.D. 74

FRED MEES, Respondent, v. MATT. GREWER, Appellant

No. 6041

Supreme Court of North Dakota

August 23, 1932

Rehearing Denied December 24, 1932.

Appeal from District Court of Morton County, Pugh, J Action to recover commissions. From a judgment in favor of plaintiff, defendant appeals.

Reversed and ordered dismissed.

Kelsch & Higgins, for appellant.

All acts of an agent which tend to violate his fiduciary duty are regarded as frauds upon the confidence bestowed, and are not only invalid as to the principal, but are also against public policy. 2 C.J. (Agency) 693.

In every contract of service there is an implied agreement on the part of the employee that he will serve his employer honestly and faithfully. 29 C.J. (Master and Servant) 159.

All contracts are illegal if their object or tendency is to cause unfaithful conduct by a fiduciary. Hoge v. George, 18 L.R.A. 469; Woodstock Iron Co. v. Richmond, 129 U.S. 657, 32 L. ed. 825, 9 S.Ct. 402; Kennedy v Lonabaugh, 117 P. 1079; McMullen v. Hoffman, 174 U.S. 639, 43 L. ed. 1117, 19 S.Ct. 839.

The law avoids contracts and promises made with a view to place one under wrong influences; those which offer him a temptation to do that which may affect injuriously the rights and interests of third persons. Smith v. David B. Crockett Co. (Conn.) 39 L.R.A.(N.S.) 1148; Kimble v. Independence Gas Co. (Kan.) 169 P. 1063; Ward v. Allen (Mass.) 53 Am. Dec. 387; Maryland Casualty Co. v. Fidelity Casualty Co. 236 P. 210.

The paramount and vital principle of all agencies is good faith. Morris v. Bradley, 20 N.D. 646, 128 N.W. 118.

An agent will not be allowed to put himself in a position antagonistic to that of his principal, or to speculate in the subject of agency. Ibid.

Contracts which are prohibited by positive law either statutory or common are illegal. Jarski v. Farmers & Merchants State Bank, 53 N.D. 470, 206 N.W. 773; Emanuel v. Engst, 54 N.D. 141, 208 N.W. 840.

The law will not aid either party to an illegal agreement and leaves the parties where it finds them, whether the contract is executory or executed. 13 C.J. (Contracts) 492; 6 R.C.L. § 215; McManus v. Fulton, 278 P. 131.

An agreement void as against public policy cannot be rendered valid by invoking the doctrine of estoppel. 13 C.J. 306, § 453.

Jacobsen & Murray, for respondent.

The master may permit his servant to keep and retain earnings from third parties. 39 C.J. 125.

The master may permit the servant to perform services for third persons, in addition to the service due the employer. 39 C.J. 124.

Under contracts which are absolutely illegal the party in possession of the profits of an illegal transaction cannot withhold the other party's share where the transaction is completed. Union P.R. Co. v. Durant, 95 U.S. 576, 24 L. ed. 391; Richardson v. Welsh (Mich.) 11 N.W. 172.

Contracts which are unauthorized but involve no moral turpitude may be enforced by the courts if justice plainly requires it. Moss v. Cohen, 158 N.Y. 240, 53 N.E. 8; Warren v. Bouvier, 124 N.Y.S. 41.

Where a contract is mala prohibita, and the illegality does not arise from any elements of moral turpitude, a recovery may be had of money or property parted with thereunder. Logan County Nat. Bank v. Townsend, 139 U.S. 67, 35 L. ed. 107, 11 S.Ct. 496; Central Transp. Co. v. Pullman Palace Car Co. 139 U.S. 24, 35 L. ed. 55, 11 S.Ct. 478; U.S. Title Guaranty Co. v. Brown, 166 A.D. 688, 152 N.Y.S. 470, 111 N.E. 828; Hill Co. v. Shaw, 225 F. 475, 140 C.C. A. 523.

An act or contract which has been declared void by statute for the protection or benefit of a certain party or class of parties is voidable, and is capable of ratification by the acts or silence of the beneficiary or beneficiaries. Westerman v. Black Bear Co. 203 F. 599; Norbeck Bank Co. v. State, 32 S.D. 189, 142 N.W. 847.

Englert, Dist. J. Christianson, Ch. J., and Birdzell, Nuessle and Burr, JJ., concur. Burke, J., did not participate. Hon. M. J. Englert, Judge of the First Judicial District, sitting in his stead.

OPINION

ENGLERT

This action is brought in equity for an accounting. The plaintiff claims to recover $ 4,552.34, and a half interest in a half section of land, as his share of commissions in the sale of farm machinery. He alleges that those commissions were earned by him under an agreement with the defendant for the years 1923 and 1924. During those years, the plaintiff was in the employ of the Minneapolis Threshing Machine Company, as block salesman, with headquarters at Mandan, North Dakota. His territory covered all that part of the state west of the Missouri River, and east of the river "down on two branches, out of Bismarck, south." He was being paid by the said company the sum of $ 150.00 per month, and all expenses while away from headquarters, for the year 1923; and the sum of $ 175.00 per month for the year 1924, and all expenses while away from headquarters. He was employed to devote his entire time, talents and energy to the service of the said company, to make sales, write contracts, help local dealers make collections for said company, and to generally represent it in furtherance of its said business.

During the same years, 1923 and 1924, the defendant, Matthias Grewer, was the distributing agent of the said Minneapolis Threshing Machine Company, at Mandan, North Dakota, for the purpose of handling and distributing its machinery in the Mandan vicinity and territory allotted to him for that purpose. His territory was much smaller than that required to be covered by the plaintiff. Under this distributing contract, the said company agreed to pay the defendant a commission of 25% of the list price of machinery sold by him, and in case of cash sales, after deducting the 25%, he was being paid an additional 10% on the remainder.

The agreement between the plaintiff and the defendant covering the commissions here sought to be recovered, can be best described by quoting from the plaintiff's own testimony. "Mr. Grewer said, I have this distributor's contract which is more favorable than the regular contract, and you are the blockman on the territory, you write the contracts on the territory. He says, I know you are hard up and you need some additional money. I'll give you a chance to make some money for both you and myself. If you will get out here and write subdealers who will deal through me, then all the commission that is my share of the subdealers I will split with you 50-50. With the understanding, of course, that sales I make directly adjacent to Mandan or his own territory direct I wasn't to have any commissions on those deals."

Under that agreement, the subdealers were to receive 50% of the total commission, and the remaining 50% was to be divided equally between the plaintiff and the defendant. The plaintiff was to have a commission not only on sales made by him, but on whatever sales or deals were made in the subdealers' territory. In keeping with that agreement, the plaintiff proceeded to place subdealers, make sales, take second-hand machinery in trade, accept payment and make collections for and on behalf of the defendant.

The nature and character of the deals made, on which commissions are claimed, can be clearly explained by citing one example from the plaintiff's testimony. "Q. Now, coming back where I asked you a minute ago, tell us now the deals you negotiated for Grewer thru the dealers under this contract. Give us the names and, if you can, the amount of the total commission derived from such sales which went to you and Grewer for each deal. A. John Kahovec, New Salem. Q. Just briefly what you sold. A. 17-30 tractor and a separator, 24-42 separator with attachments, complete outfit. Q. Did Kahovec pay the purchase price of that machinery? A. He did. Q. Now, what was the total commission which Grewer received on that deal? A. The total commission is based on the resale of a steam rig that we took in trade from Kahovec and resold to John Stass and another party at Blue Grass. Q. What was the total commission? A. $ 1,177.80. Q. Was that commission for the dealer and you fellows combined? A. That was the total commission. Q. Your share of that and Grewer's combined? A. Mr. Blank received $ 588.90, and Mr. Grewer received $ 588.90. Q. So then your commission on that deal would be half of the $ 588.90? A. Yes, sir."

At the conclusion of the trial in the court below, the defendant moved for a dismissal of the case because the agreement was in breach of duty, against good morals, contrary to statute, and a violation of public policy. The motion was denied, and judgment was entered in favor of the plaintiff. From this judgment, the defendant appealed to this court.

The sole question for determination is whether the plaintiff can enforce the contract, and recover for his share of the commissions. In approaching that subject, we are mindful of the rule that a contract should not be declared to be in contravention of public policy unless it is apparent that it violates some statute, is against good morals, or that its tendency is to interfere with the public welfare or safety. No exact definition of public policy has ever been given. The one most generally quoted and accepted is that principle of the law which holds that no person can lawfully do that which has a tendency to be injurious to the public or is against the public good, which may be termed the "policy of the law," or "public policy in relation to the administration of the law."

Our statute, § 5922, Comp. Laws 1913, makes contracts unlawful that are: "1. Contrary to an express provision of law. 2. Contrary to the policy of express law though not expressly prohibited; or, 3. Otherwise contrary to good morals." The relation of an agent to his principal...