Sweeney & Moore, Inc. v. Chapman

• Decision Date: 13 November 1940
• Docket Number: No. 8.,8.
• Citation: 294 N.W. 711,295 Mich. 360
• Court: Michigan Supreme Court
• Parties: SWEENEY & MOORE, Inc., v. CHAPMAN.

295 Mich. 360

294 N.W. 711

SWEENEY & MOORE, Inc.,

v.CHAPMAN.

No. 8.

Supreme Court of Michigan.

Nov. 13, 1940.

Action by Sweeney & Moore, Inc., against Everett L. Chapman for breach of contract. Judgment for plaintiff, and defendant appeals.

Judgment reversed, and partial new trial granted.Appeal from Circuit Court, Wayne County; Guy A. Miller, judge.

Argued before the Entire Bench.

Chapman & Kosel, of Highland Park, for appellant.

Lewis & Watkins, of Detroit (John R. Watkins, of Detroit, of counsel), for appellee.

BUSHNELL, Chief Justice.

Plaintiff corporation sued defendant on his written agreement to pay $687.50 for services in connection with the purchase of residential property in the city of Detroit. Plaintiff's employe, Paul Schoeffel, arranged for the purchase of this property from Mrs. Mary A. Pfleiger. She had given an exclusive listing to Alfred P. Adamo whose agency agreement expired November 22, 1937. Prior to this date Mrs. Pfleiger agreed with Schoeffel to sell the property to defendant. After the transaction was consummated defendant refused to pay plaintiff for its services, claiming that Schoeffel and Adamo had made an agreement to divide commissions and that Schoeffel had misrepresented the amount of taxes annually assessed against the property.

The court refused to permit the jury to consider the matter of split commissions and submitted the question of misrepresentation. The jury returned a verdict for plaintiff in the full amount claimed. Defendant appeals from the judgment entered upon the verdict.

Misrepresentation in this case was a question of fact which was properly submitted to the jury.

Did the court err in refusing to submit to the jury the question of the claimed oral agreement to split commissions?

The general rule is that a broker forfeit his right to compensation by misconduct, breach of duty, or wilful disregard, in a material respect, of an obligation imposed upon him by the law of agency. A corollary of this rule is that ‘the law will not permit an agent to act in a dual capacity in which his interest conflicts with his duty, without a full disclosure of the facts to his principal.’ Hogle v. Meyering, 161 Mich. 472, syllabus, 126 N.W. 1063. An agreement between real estate brokers, representing different principals, to pool or divide their commissions, is a breach of good faith toward their principals and void as against public policy. Such an agreement deprives the brokers of their right to compensation unless both principals consent thereto. This rule applies, even though the principals themselves finally conclude the sale. Corder v. O'Neill, 207 Mo. 632, 106 S.W. 10 (reviewing many cases); Quinn v. Burton, 195 Mass. 277, 81 N.E. 257;Tracey v. Blake, 229 Mass. 57, 118 N.E. 271;Devine v. Hudgins, 131 Me. 353, 163 A. 83; also see cases collected in the annotation in 14 A.L.R. 464, at page 471; 12 C.J.S., Brokers, § 72, and 1 Mechem on Agency, p. 1191.

In Levy v. Spencer, 18 Colo. 532, 33 P. 415, 417,36 Am.St.Rep. 303, the court said: ‘In our judgment, this agreement comes clearly within that class of contracts that are inhibited by public policy, and consequently void. By its terms each agent was to share in the commissions paid by both principals. The compensation to be jointly shared was contingent upon the consummation of the trade or sale, and this would have a tendency to induce them to disregard, if not to sacrifice, the interests of their principals, if necessary to effect that result. The fact that a sale price was fixed by the principals upon their respective properties does not answer this objection. Each was entitled to the benefit of the unbiased judgment of his agent as to the value to be placed upon the other's property, and to a reasonable effort on the part of such agent to obtain a reduction of the value to be allowed therefor in the exchange. Their pecuniary interest might have prevented such disinterested action on the part of these agents; * * *.'

While no Michigan cases involving the splitting of brokers' commissions have been found, this court held a tacit agreement between two doctors for division of fees void as against public policy, and barred recovery against the patient. McNair v. Parr, 177 Mich. 327, 143 N.W. 42. An agent was denied the right to commission from his principal where he did not disclose the fact that a corporation in which he was interested as a stockholder and director was the real purchaser. Humphrey v. Eddy Transportation Co., 107 Mich. 163, 65 N.W. 13, 14. This court said in the latter case: ‘This is one...