Dahlgren v. Story, 39 App. D.C. 29

Dahlgren v. Story

39 App. D.C. 29 | D.C. Cir. | 1912

Mr. Justice Van Orsdel

delivered the opinion of the Court:

Defendants each admitted that they acted as agents for plaintiffs in making the sale, and their counsel also testified that he recognized the fact of their agency. In fact, on the face of the record, the relation of principal and agent between these parties is conclusively established. Hence, the case must turn upon the question of good faith on the part of defendants in acting as the agents of plaintiffs. The relation of agent and principal did not cease with the execution of the contract of sale, but extended continuously from the date of the submission of the original proposition, in April, until the execution and delivery of the deed and the payment of the consideration therefor, in October. This being true, the defendants will be held to the strictest accountability during the time the fiduciary relation existed, or prior thereto, for all acts connected with or affecting their agency.

It is contended by counsel for defendants that the instrument of April 26th was only a guaranty by the defendant Cobb to secure Lehr against loss in the event of his purchasing the property. We think the instrument, in the light of the subsequent transactions, in addition to the guaranty feature, must be construed as an agreement between the parties to purchase the property jointly, Cobb to secure Lehr against loss to the extent of the money he should invest, with 5 per cent interest, or to sell his interest to Lehr for the amount he invested, with 5 per cent interest. Defendants being copartners, and Story having subsequently shared in the profits of the transaction and taken part in it, he is equally bound with Cobb to the conditions of this instrument. The agreement, therefore, between Cobb and Lehr, thus construed, places defendants in the position of purchasers of the property for which they were at the same time agents. Such a relation has been universally condemned, and will not *34be upheld either on principles of justice or public policy. Assuming, however, that the agreement was a mere guaranty, it created a relation between defendants and Lehr antagonistic to the interest of plaintiffs, in that defendants would naturally seek to secure the property at the lowest possible figure, in order to minimize the probability of their becoming liable to Lehr. The antagonistic position of defendants to the interest of plaintiffs, established by the joint arrangement with Lehr, is emphasized by the subsequent assignment from Lehr to defendants of one half of the profits to be derived from the resale of the property; the furnishing of one half of the cash deposit; the advancement by personal check of a.portion of the purchase price, and the' admission that they received one half of the profits in addition to the commission charged plaintiffs.

The fiduciary relation established between the parties charged the defendants with a sacred trust, which demanded of them a complete, open, and frank disclosure to plaintiffs of every step taken in the transaction from the date of the creation of the agency until the transaction was finally closed. During that period defendants owed a duty to plaintiffs which forbade the placing of themselves in any attitude, however profitable, that would even appear to be antagonistic to the interests of plaintiffs, without first having secured their consent after a full disclosure. The practice of real estate agents in concealing from their principals the conditions upon which contracts of sale are procured cannot be too severely condemned. The name of the actual vendee, the true consideration, and every detail employed by the agent in bringing the parties together, should be promptly disclosed by the agent to his principal, and for failure to do so the courts will uphold the principal, not only in repudiating the transaction, but in recovering loss sustained by him or profit secured'by the agent.

In a case of this sort the issue of fraud is eliminated. Where an agent voluntarily places himself in a position antagonistic to the interest of his principal, the court will not stop to consider whether any fraud in fact existed or was even intended, or whether the principal suffered loss. The principal has at his *35disposal the option of repudiating the entire transaction, or of demanding and enforcing reparation for loss sustained, including commissions paid. The rule of law applicable to the state of facts here presented is well stated by Mr. Justice Harlan in Robertson v. Chapman, 152 U. S. 673, 681, 38 L. ed. 592, 595, 14 Sup. Ct. Rep. 741: “He [the agent] was precluded by the position voluntarily assumed by him from taking advantage of his principal, or from dealing’ with the property committed to his care in any other capacity than as an agent, who was bound to subordinate his own interests to those of his principal. He could not, directly or indirectly, become the purchaser and maintain any title thus acquired as against his principal; for, in so purchasing, his duty and his interest would come in conflict. If an agent to sell effects a sale to himself, under the cover of the name of another person, he becomes, in respect to the property, a trustee for the principal, and, at the election of the latter, seasonably made, will be compelled to surrender it, or, if he has disposed of it to a bona fide purchaser, to account not only for its real value, but for any profit realized by him on such resale. And this will be done upon the demand of the principal, although it may not appear that the property, at the- time the agent fraudulently acquired it, was worth more than he paid for it. The law will not, in such case, impose upon the principal the burden of proving that he was in fact injured, and will only inquire whether the agent has been unfaithful in the discharge of his duty. While his agency continues, he must act, in the matter of such agency, solely with reference to the interests of his principal. The law will not permit him, without the knowledge or assent of his principal, to occupy a position in which he will be tempted not to do the best he may for the principal.” The rule is also well stated and applied in Pomeroy’s Eq. Jur. sec. 959; Clark & S. Agency, sec. 407; Godfrey v. Dutton, 16 App. D. C. 117; Harten v. Loffler, 31 App. D. C. 362; Rawlings v. Collins, 36 App. D. C. 72.

There are certain issues of fact presented in the record, which we have carefully examined, but do not think of sufficient importance to consider at length. The burden cast upon defend*36ants by the transactions reviewed in this opinion has not been discharged.

The decree therefore is reversed, with costs, and the court is directed to enter a decree for plaintiffs, as prayed for in the hill,. Reversed.