Napier v. Adams

• Decision Date: 13 April 1928
• Docket Number: 6410.
• Citation: 143 S.E. 566,166 Ga. 403
• Parties: NAPIER v. ADAMS.
• Court: Georgia Supreme Court

143 S.E. 566

166 Ga. 403

NAPIER v. ADAMS.

No. 6410.

Supreme Court of Georgia

April 13, 1928

Rehearing Denied June 13, 1928.

Syllabus by the Court.

The law imposes upon every agent the obligation to exercise for and in behalf of his principal skill, loyalty, and absolute good faith. The principal bargains for the exercise of the disinterested skill, diligence, and zeal of the agent for his exclusive benefit. This the agent cannot do if he is the agent for both parties, for the reason that the agent undertakes inconsistent duties. Such a situation places the agent under a temptation to deal unfairly with one or both of his principals.

A mutual agency requires the consent of both principals to the mutuality of the agency, and without such mutual consent the agent commits a fraud on his principals in undertaking without their consent or knowledge, to act as their mutual agent.

In all cases, where, without the assent of the principal, the agent has assumed to act in such double capacity, the principal may avoid the transaction at his election, if he acts promptly and it makes no difference that the principal was not in fact injured, or that the agent intended no wrong, or that the other party acted in good faith. This doctrine is based upon the ground that the double agency is a fraud upon the principal, and that by reason of such fraud he is not bound by any transaction entered into with the other party.

So where the agent of the seller entered into the service of the purchaser of real estate for the purpose of securing for the latter advantageous bargains, without the knowledge of or assent to the dual agency, by the purchaser, and conducted for the purchaser the negotiations which led up to the consummation of the trade by the execution by the parties of the necessary papers to complete the trade, the purchaser, as between him and seller, can repudiate such sale notwithstanding the fact that the seller was ignorant of the fact that the agent was acting in the transaction for the purchaser.

The court below erred in sustaining the demurrer.

Error from Superior Court, Bibb County; H. A. Mathews, Judge.

Suit by J. B. Adams against E. T. Napier. Judgment for plaintiff, and defendant brings error. Reversed.

Brock, Sparks & Russell, of Macon, for plaintiff in error.

Harris, Harris & Popper, of Macon, for defendant in error.

HINES J.

Adams purchased certain real estate in Miami, Fla., from Thatcher, under an executory contract of sale, Adams listed this property for sale with Callaway. Napier, being a nonresident of Florida, and being unfamiliar with real estate in Miami, and knowing nothing of the value and prospects of Miami property, employed Callaway to select and recommend to him for purchase such real estate as he might buy in the city of Miami, informing Callaway that he would have to rely upon him to select such real estate as he might purchase, to negotiate for its purchase, and generally to represent him in acquiring title to such real estate, and that he would not buy any real estate unless recommended by Callaway. Callaway accepted such employment. Callaway showed this real estate to Napier and recommended its purchase by him. Upon this recommendation Napier bought the property from Adams. The written instruments by which the trade was consummated were prepared by or under instructions from Callaway, but the same were executed by the principals in their own names. When Napier employed Callaway as a real estate agent to represent him in the purchase of real estate in Miami, and at all times during the negotiations which led up to the consummation of the purchase of this real estate by Napier from Adams, Napier did not know that Callaway was the agent of Adams in making such sale. Whether Adams knew before or at the time when the trade was consummated that Callaway was the agent of Napier in this transaction does not appear from the record. In these circumstances, can the purchaser repudiate the sale at his option? The purchaser insists that this question should be answered in the affirmative. The seller contends that it should be answered in the negative. This is the nut which we have to crack.

The relation between a principal and an agent is one of a fiduciary character. Civil Code, § 4628. The law imposes upon every agent the obligation to exercise for and in behalf of his principal, skill, loyalty, and absolute good faith. It is of the essence of the contract of the agent that he will use his best skill and judgment to promote the interest of his employer. Ramspeck v. Pattillo, 104 Ga. 772, 775, 30 S.E. 962, 42 L.R.A. 197, 69 Am.St.Rep. 197; Phoenix Insurance Co. v. Hamilton, 110 Ga. 14, 17, 35 S.E. 305; Sessions v. Payne, 113 Ga. 955, 956, 39 S.E. 325; Manis v. Pruden, 145 Ga. 239, 88 S.E. 967; Murphy Hardware Co. v. Rhode Island Insurance Co., 153 Ga. 273, 111 S.E. 808; Reserve Loan, etc., Co. v. Phillips, 156 Ga. 372, 377, 119 S.E. 315. This the agent cannot do if he is the agent for both parties. To represent both parties as their agent is to undertake inconsistent duties. "A mutual agency requires the consent of both principals to the mutuality of the agency." Croghan v. New York Underwriters' Agency, 53 Ga. 109. An agent cannot use his best skill and judgment to promote the interest of his employer where he acts for two persons whose interests are essentially adverse. Such a situation places the agent under a temptation to deal unjustly with one or both of his principals. Walker v. Osgood, 98 Mass. 348, 93 Am.Dec. 168. He thus commits a fraud on his principals in undertaking, without their consent or knowledge, to act as their mutual agent. Farnsworth v. Hemmer, 1 Allen (Mass.) 494, 79 Am.Dec. 756. "The law of agency is, that the principal bargains for the exercise of 'the disinterested skill, diligence and zeal of the agent for his exclusive benefit.' He can have no interest and do no act adverse to the interest of his employer, or incompatible with the application of his best skill, zeal and diligence to the promotion of that interest." Harrison v. McHenry, 9 Ga. 164, 166, 52 Am.

Dec. 435 . Where the agent of the vendor is also the agent of the purchaser, the effect of the dual agency would authorize the vendor to repudiate the transaction, if he acts promptly after discovery of the situation. Whitley v. James, 121 Ga. 521, 49 S.E. 600. "Where an agent without the full knowledge and consent of his principal represents the adverse party in a transaction, his contracts relating thereto are voidable at the option of the principal." 2 C.J. 838, § 520(b). It follows that the purchaser could equally repudiate the transaction. To allow the agent of the vendor to become interested as the agent of the purchaser, or vice versa, in the subject-matter of the agency, raises such a dangerous conflict between duty and self-interest that the law wisely and peremptorily prohibits it. McKinley v. Williams (C.C.A.) 74 F. 94, 95; Donovan v. Campion (C.C.A.) 85 F. 71. "An agent cannot make a valid contract where, in the same transaction, he acts as agent for both parties." 1 Am. & Eng. Enc. L. (1st Ed.) 380. "In all cases, where, without the assent of the principal, the agent has assumed to act in such double capacity, the principal may avoid the transaction, at his election." 21 R.C.L. 827, § 11. So an agent who is employed and relied upon to exercise in behalf of the principal his skill, judgment, knowledge, or influence in the purchase of real estate, will not be permitted, without his principal's full knowledge and consent, to represent the seller in the sale. Such conduct is a palpable fraud upon his principal. In such circumstances the agent will not be entitled to compensation for services so rendered the purchaser. Moreover, the contract or dealings made or had by the agent so acting also for the other party without the knowledge or consent of his principal are not binding upon the latter. As long as they remain executory the principal may repudiate them on that ground. If they have been executed in whole or in part he may by acting promptly and before the rights of innocent parties have intervened, upon restoration of any benefit which he has received, rescind the contract and recover back the property or rights with which he has parted under it. It makes no difference that the principal was not in fact injured, or that the agent intended no wrong, or that the other party acted in good faith. This doctrine is based upon the ground that the double agency is a fraud upon the principal, and that by reason of such fraud he is not bound by any transaction entered into with the other party. Mechem states the doctrine thus:

"If my agent enters into your employment without your knowledge of and consent to the double agency, you may repudiate, because you were entitled to have a free and unprejudiced agent. Similarly, if your agent enters into my employment without my knowledge of the double relation, I may repudiate. If my agent enters into your employment with your knowledge and consent, but without mine, I may repudiate, because you have practically seduced and corrupted my agent. You are an accomplice. If your agent enters my employment, with my knowledge and consent but without yours, you may repudiate for the same reason.

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