Warren v. Burt, 177.

• Decision Date: 18 September 1893
• Docket Number: 177.
• Citation: 58 F. 101
• Parties: WARREN v. BURT et al.
• Court: U.S. Court of Appeals — Eighth Circuit

58 F. 101

WARREN v. BURT et al.

No. 177.

United States Court of Appeals, Eighth Circuit.

September 18, 1893

Statement by SANBORN, Circuit Judge:

This is an appeal from a decree against Thomas H. Warren, a real-estate agent, directing him to pay back to his principals certain profits he derived from the purchase of property of theirs he was selling as their agent, and canceling a certain contract he took from them in payment of his commission. Robert F. Burt, one of the appellees, brought the bill for this relief against Warren, and Frank G Flanagan, Benjamin F. Hammett, Charles Hewitt, and Benjamin F. Webster, who were alleged to be associates of Warren in the purchase, and he joined as a defendant Charles Scudder the public administrator of the estate of Robert H. Gardner the other principal, who had died. The suit arose from these facts:

On October 13, 1882, Burt and Gardner owned a farm of 285 acres situated in Madison county, Ill., a few miles from the city of St. Louis, Mo. They resided in Columbus, Ohio, and had employed the appellant, Warren, who resided in St. Louis Mo., to negotiate a sale or exchange of their farm, and had agreed to pay him a commission of 5 per cent. on the price at which such sale or exchange should be effected. A few days before October 13, 1882, they came to St. Louis. Warren took them to see a tract of land 32 acres in extent, situated in the city of St. Louis, which was then owned by Mrs. Fanny Deaver, told them that it was worth at least $32,000, and persuaded and assisted them to negotiate and make a contract with one William J. Haynes, a straw man who was furnished by the defendant Flanagan, and who had no title or interest in the land, whereby they agreed to convey to him their farm, which they estimated in the trade at the value of $18,000, and to pay him $3,500 in cash for the Deaver tract, subject to a trust deed for $5,000; that is to say, he persuaded them to agree to give their farm and $8,500 for the Deaver tract. Before this contract was made, the defendant Flanagan, accompanied by the defendant Hewitt, had obtained an option from the agent of Mrs. Deaver to purchase this land for $9,500 dollars, and, immediately after it was made, Flanagan bought it for that sum, and then conveyed it to Burt and Gardner in pretended fulfillment of the Haynes contract, and received from them a conveyance of their farm to himself. In August, 1883, the defendant Warren traded off this farm for Flanagan and his associates on such terms that they made a profit of about $8,000 on their trades in it. When the latter trade was consummated, Warren received $1,050, which was found by the court to be his share of the profits, and was alleged by him to be his commission on the latter sale. The contract of Burt and Gardner with Haynes was made October 13, 1882. On the same day, to facilitate the negotiations, Warren waived his right to his commission of 5 per cent. in cash, and took from Burt and Gardner, in lien thereof, a written contract whereby they agreed that he should have one-half of the remaining proceeds arising from the sale of the Deaver tract after the expenses of selling it should be paid, and they should have received $28,500, and interest at 6 per cent. from the date of the contract. He placed this contract on record, and at the commencement of this suit claimed an interest in this land under it. The complainant brought his bill for a cancellation of this contract, and an accounting of the profits which Warren and his associates made out of their trades in the Madison county farm, on the ground that, while Warren was pretending to act as agent of the complainant and Gardner, he was in fact a partner with the defendants Flanagan, Hammett, Hewitt, and Webster in the purchase of the Deaver tract for $9,500 and its transfer to Burt and Gardner for their farm, and that he assisted to make and shared in the profits of the disposition of the farm made by Flanagan and his associates in August, 1883. The defendant Warren denied any knowledge of, or participation in, the purchase of the 32 acres, denied that he ever had any interest in the farm or the profits of the trades in it, and insisted that he had discharged his duty to his clients faithfully. The court below found that after Warren had learned on what terms his clients would exchange their farm for the Deaver tract he had entered into an arrangement with the defendants Hammett, Flanagan, Webster, and Hewitt to the effect that Flanagan should buy the 32 acres at the lowest possible price, that it should then be exchanged for the farm on the terms Burt and Gardner had assented to, and that whatever profits were made should be so divided that Flanagan, Webster, and Hewitt should have one-half, to be divided among them as they chose, and Hammett and Warren should have the other half, to be divided between them as they might agree, and that this arrangement was carried out. The case was then referred to a master to take an account of the profits Warren had received. He reported the amount to be $1,050, the report was confirmed, and a final decree rendered, canceling the contract of October 13, 1882, between Warren and Burt and Gardner, and adjudging that the complainant Burt and the administrator of the estate of Gardner recover of the defendant Warren the $1,050 profits he received, with interest and costs. From this decree, Warren appeals. The bill was dismissed against the other defendants because it was not alleged and proved that they were the agents of, or occupied any fiduciary relation to, Burt and Gardner.

John R. Christian, (Frederick A. Wind, on the brief,) for appellant.

William B. Thompson, (P. R. Flitcraft, Willi Brown, and Henry E. Mills, on the brief,) for appellees.

Before BREWER, Circuit Justice, and SANBORN, Circuit Judge.

SANBORN Circuit Judge, after stating the facts as above, .

The law guards the fiduciary relations with jealous care. It aims to prohibit the possibility of a conflict between the duty of a trustee and his personal interest. It demands that he look solely to the interest of his cestui que trust; that the agent work with an eye single to the welfare of his principal. It prohibits the agent from all speculation or profit in the subject-matter of his agency, and visits such a breach of duty, not only with loss of the profits gained, but with loss of the compensation which a faithful discharge of duty would have earned. The interests of vendor and purchaser are diametrically opposed. To the vendor the highest price to the purchaser the lowest price, is the greatest good. For the agent of a seller to permit himself to become interested in a purchase from his principal is to inaugurate so dangerous a conflict between duty and self-interest that this has long been wisely and strictly forbidden. No man, whether he be principal or agent, can be a vendor and a purchaser at the same time, and an agent of a vendor who intentionally becomes interested as a purchaser in the subject-matter of his agency violates his contract of agency, betrays his trust, forfeits his commission as agent, and is liable to his principal for all the profits he makes by his purchase. Michoud v. Girod, 4 How. 503, 554, 555; Crump v. Ingersoll, 44 Minn. 84, 46 N.W. 141; Hegenmyer v. Marks, 37 Minn. 6, 32 N.W. 785; ...