Rice v. (bair

• Decision Date: 27 June 1946
• Docket Number: No. 4901.,4901.
• Citation: 171 P.2d 318,50 N.M. 99
• Parties: RICEv.FIRST NAT. BANK IN ALBUQUERQUE (BAIR, Intervener).
• Court: New Mexico Supreme Court

50 N.M. 99

171 P.2d 318

RICE

v.FIRST NAT. BANK IN ALBUQUERQUE (BAIR, Intervener).

No. 4901.

Supreme Court of New Mexico.

June 27, 1946.

Appeal from District Court, Bernalillo County; Luis E. Armijo, Special Judge.

Action by C. T. Rice against Eirst National Bank in Albuquerque for damages for defendant's alleged negligence as an escrow holder in failing to stop the recording of a deed after grantee of deed had stopped payment of a check, wherein Kenneth H. Bair, grantee, intervened. From a judgment for defendant and for intervener, plaintiff appeals.

Affirmed and remanded.

Principal was not limited to the inadequate remedy of rescission when real estate agent, using principal's money, purchased land in agent's own name at certain price and upon transferring the land to principal represented falsely that the price was considerably higher, thereby attempting to realize a large secret profit, and principal, upon discovery of the fraud, was entitled to stop the payment on the check and at the same time procure recordation of deed from agent.

[171 P.2d 319 , 50 N.M. 101]

Iden, Adams & Johnson, of Albuquerque, for appellant.

Rodey, Dickason & Sloan, and Frank M. Mims, all of Albuquerque, for defendant appellee. Dailey & Rogers, and Jethro S. Vaught, Jr., both of Albuquerque, for intervener appellee.

HUDSPETH, Justice.

The plaintiff sued The First National Bank in Albuquerque for damages alleging negligence as escrow holder in failing to stop the recording of a deed, after the payment of a check of Kenneth H. Bair, the grantee in the deed, drawn on the escrow agent in favor of plaintiff had been stopped. Kenneth H. Bair intervened and defended on the ground that plaintiff was his agent, used his money in the purchase of the land, and was guilty of fraud. By stipulation it was agreed that plaintiff's rights under a written contract and the check given pursuant thereto as against the intervener should also be determined in this case. The findings and judgment were for the defendant bank and the intervener. Plaintiff has appealed.

Intervener proved to the satisfaction of the court that on the 15th of September, 1943, the plaintiff, a real estate broker, orally agreed to act as his agent in acquiring the Jerome Eddy Place in Valencia County, New Mexico, and stated that if he was authorized to go as high as $13,500 he would buy the place for intervener as cheaply as he could. He immediately communicated with the owner and his broker by telephone and telegraph and on the following day the owner telegraphed that he would accept $9,500 net to him. On the 17th of September plaintiff received intervener's check for $6,500, and, using the check to secure the escrow deposit required by the owner, arranged to buy the place in his own name. On the same day he told the intervener that he had been able to get the place cheaper and had saved him $100; that he was getting it for $13,400; that the owner would not deal with a third party and that he would have to take title in his own name. On the following day by these and other false representations he induced the intervener to enter into a written contract with him for the purchase of the place for the sum of $13,400, conditioned upon plaintiff acquiring title from the owner.

The first point argued by plaintiff is: ‘The written contract between appellant and intervener, dated September 18, 1943, was at all times valid and binding, there being no substantial evidence of an agency contract between them or of any fraud on appellant's part.’

Some of the states have statutes regulating real estate brokers and requiring contracts of employment to be in writing; and many of the reported cases where an agent has taken title in his own name turn on an interpretation of the statute of frauds-not involved here-upon which there is hopeless conflict. However, it is universally held that where the principal furnishes the purchase money at or before the time of the purchase by the agent that a trust results in favor of the principal. It is of little moment whether an agreement of agency is made with fraudulent intent, or the agent succumbs to covetousness after he enters upon his duties, upon learning of the large profit which may be made by abandoning his trust. Nebraska Power Company v. Koening, 93 Neb. 68, 139 N.W. 839, 842.

The general rule is that he who undertakes to act for another in any matter of trust or confidence shall not in the same matter act for himself against the interest of the one relying upon his integrity. Canfield v. With, 35 N.M. 420, 299 P. 351; Craig et al. v. Parsons et al., 22 N.M. 293, 161 P. 1117; Duncan v. Holder et al., 15 N.M. 323, 107 P. 685; Foster et al. v. Zapf et al., 35 N.M. 319, 296 P. 800; McBride v. Campredon, 24 N.M. 323, 171 P. 140, L.R.A.1918D, 407; A.L.I. Restatement of Agency, Vol. 2, Sec. 387.

However, plaintiff strenously argues that there is no substantial evidence of agency and points to the admitted fact that there was no agreement as to plaintiff's compensation; that the words ‘broker’ or ‘agent’ were not used by either plaintiff or intervener and that intervener requested and was given a warranty deed, although it was not provided for in the written contract of September 18, 1943.

Plaintiff also points out that he had to pay commissions, taxes and the interest on a $3500 mortgage, which he gave as a part of the purchase price of the tract, and dilates upon the inconsistencies of the testimony of the intervener, citing 24 Am.Jur. 188, et seq.

Other reviewing courts have considered similar cases. The Supreme Court of California in the case of Stromerson et al. v. Averill, 22 Cal.2d 808, 141 P.2d 732, 736, said:

‘Inconsistencies only affect the credibility of the witness or reduce the weight of his testimony and it was for the trier of the fact to weigh the evidence and determine his credibility. 10 Cal.Jur. p. 1146, § 364. Furthermore, it is the duty of the court in support of a judgment on appeal to harmonize apparent inconsistencies wherever possible. 2 Cal.Jur. p. 938, § 551. It might also be noted that the testimony of Averill was supported by many circumstances and corroborated in important particulars by Davis, Lincoln and others. In our opinion there was substantial evidence to sustain the finding that Stromerson was acting as Averill's agent in the purchase of the 562 acres of land.

‘It is contended, however, that since the judgment is based upon constructive fraud the facts which are relied upon to establish the fraud must be proved by clear, satisfactory and convincing evidence. The sufficiency of evidence to establish a given fact, where the law requires proof of the fact to be clear and convincing, is primarily a question for the trial court to determine, and if there is substantial evidence to support its conclusion, the determination is not open to review on appeal. Steiner v. Amsel, 18 Cal.2d 48, 53, 54, 112 P.2d 635; Steinberger v. Young, 175 Cal. 81, 84, 85, 165 P. 432; Couts v. Winston, 153 Cal. 686, 688, 689, 96 P. 357.’

In an earlier decision of this case reported in 133 P.2d 617, on page 622:

‘There can be no doubt that a fiduciary relationship exists between an agent and his principal. Civ.Code, §§ 2322, 2228-2239; 1 Cal.Jur. 788. It should be equally clear that where an agent is employed to purchase real property and purchases it in his own name and denies the trust, he holds it as a constructive trustee, even though the principal advanced none of the purchase price. That principal follows from the rule that the breach on the part of the agent of his fiduciary duty constitutes constructive fraud. Such a trust is not banned by the statute of frauds. Civ.Code, § 2224; Restatement, Agency, § 414; Restatement, Restitution, § 194; Williston on Contracts, Rev.Ed., vol. 4, § 1024; and cases collected [Kimmons v. Barnes & Metcalfe, 205 Ky. 502, 266 S.W. 891], 42 A.L.R. 10; [Quinn v. Phipps, 93 Fla. 805, 113 So. 419], 54 A.L.R. 1195; [Carkonen v. Alberts, 196 Wash. 573, 83 P.2d 889], 135 A.L.R. 232. * * * The breach of the fiduciary relation is even more pronounced because by having the agent take the property in his own name shows a greater degree of trust and confidence existing between the principal and the agent. The only difference is that the breach of the fiduciary relation comes with the repudiation by the agent of his duty to hold the property for his principal when he repudiates his trust, rather than a breach in the inception when he acquires property in his name for himself when he should have acquired it for the principal and in the latter's name.’

The Supreme Court of Florida in the case of Quinn et al. v. Phipps, 93 Fla. 805, 113 So. 419, 421, 54 A.L.R. 1173, discusses the evidence in a case somewhat similar to the one under consideration; from which we quote:

‘Now let us inspect the record and see what it reveals to establish a relation of trust and confidence between Quinn and Phipps. It is shown that Quinn was a real estate broker doing business in West Palm Beach; that McDonald was the agent of Phipps; that Quinn on his own initiative approached McDonald and told him that he had a price on Mrs. Watson's property and requested him (McDonald) to assist him in finding a purchaser for it; that McDonald immediately communicated this information to Phipps, who authorized him (McDonald) to submit to Mrs. Watson through Quinn a cash offer of $500,000 for the property. It is further shown that McDonald urged Quinn to submit the offer to Mrs. Watson by long-distance telephone, but Quinn refused, agreeing instead to go to Boston in person to negotiate the purchase for Phipps. Quinn proceeded at once to Boston in compliance with his agreement with McDonald, but, after interviewing Mrs. Watson, instead of purchasing for Phipps, he purchased the property for himself at $45,000, and made no mention of Phipps' offer. The testimony of McDonald is positive as to all these facts, and his testimony...