delivered the opinion of the Court.
We must decide whether a branch manager of an automobile finance company, whose employment terminated during the year, forfeited his right to a bonus payable after the end of the year because he breached his duties and obligations to his employer.
Maryland Credit Finance Corporation is engaged in financing automobile sales, both wholesale and retail, through various branch offices in Pennsylvania, New Jersey, Delaware and Maryland. In the retail financing, Maryland purchases conditional sales contracts between the dealer and the customer, wherein title to the vehicle is reserved to the dealer, and assigned to Maryland. In the wholesale financ
In 1949, Hagerty, the appellee, was promoted to manager of Maryland’s Wilmington, Delaware, branch where he dealt with some twenty automobile dealers in parts of Pennsylvania, New Jersey, Delaware, and Cecil County, Maryland. Hagerty had full charge of the branch, with the power to hire and fire subordinates. He had direct responsibility for the purchase of conditional sales contracts in the retail financing operations and the duty of approving the terms and amounts of each contract, after taking into account the credit standing of the dealer and the customer and the amount of the down payment. When he approved a contract, he purchased it from the dealer and forwarded it, with the title certificate for the automobile, to the home office. Thereafter, he was called on to collect, or attempt to collect, the monthly installments due by the customer and, if necessary, to repossess the automobiles.
Hagerty’s duties, in regard to the wholesale financing, included regular and periodic checks of the dealers to see that none exceeded the maximum limitation on advances, the determining whether any automobile was “out of trust”, that is, to make sure that a car was not delivered to a customer ■until the dealer had paid Maryland its advance against the •car, and a continual survey of the financial status of the dealers.
Through wholly-owned subsidiary corporations, Maryland ■engaged in the insurance business. The branch managers sold this insurance and were required to collect all premiums. If the premium was not collected within thirty days, they could, and were supposed to, cancel the policy. If cancellation were made late, Maryland was required to pay the premium even if it had not been collected from the customer.
Hagerty was employed under a customary oral contract
Between May, 1951, and November 16, 1951, when Hagerty’s employment was terminated, Maryland advanced him eleven payments of $50.00 each and one of $100.00, totalling $650.00, because he complained of the increased cost of living. These payments were to be credited against any bonus to which he might have been entitled for 1951.
During the late spring or early summer of 1951, Maryland’s officers began to notice that delinquencies and repossessions were running abnormally high at the Wilmington branch, that contracts and automobile titles were not being forwarded within the proper time, and that Hagerty was not filing reports or answering home office correspondence. Maryland made unsuccessful efforts to have Hagerty correct these deficiencies. P'inally, in October, 1951, Maryland’s executive vice-president assumed general supervision of the Wilmington branch. On November 16, 1951, Maryland’s president and its executive vice-president met with Hagerty and told him that they must insist on correction of unsatisfactory conditions. One requirement was that Hagerty dismiss his wife as office manager and another was that a home office crew be placed in the branch until its operations were back on a sound footing. After some discussion, Hagerty agreed to dismiss his wife but he refused to accept the home office crew, since this, in effect, would take the responsibility for the management of the branch from him. Hagerty asked if he would receive his bonus if he resigned, and the president promised him that when the bonus was payable the company
After Hagerty’s resignation, but before the end of 1951, Maryland learned for the first time that earlier in that year he had entered into partnership with J. Ewing Lort (who did business as Elkton Motor Sales), from whom Maryland’s Wilmington branch purchased conditional sales contracts and whom it financed under a floor plan. Hagerty had agreed to supervise the automobile business and to oversee the activities of one Lennon, whom he had produced to operate the partnership while Lort was ill. Hagerty, Lort and Lennon were each to receive one-third of the monthly profits. Hagerty devoted several days a week to supervising Elkton Motor Sales during the months of July and August, 1951, and perhaps in June and September also. He received several hundred dollars and an undated promissory note for $400.00 as his share of the profits. During the time that Hagerty was in partnership with Lort, the Wilmington branch’s purchases of contracts from Lort rose sharply, although such an increase in business was abnormal for that time of year, and Lort was allowed to exceed his floor plan wholesale financing limitation. In the fall of 1951, Hagerty severed his connection with Lort because he felt Lort and Lennon were adopting unwise practices and that the business was financially unsound. Maryland knew nothing of Hagerty’s relations with Lort until after November, 1951. The trial court found that Maryland had lost some $1,000 on Elkton Motor Sales contracts and that Hagerty was directly responsible for 25% of this loss.
After November 16, 1951, Maryland made another discovery. It found out that in the-summer of that year Hagerty
During the summer and fall of 1951, Elkton Motor Sales and the Williams Motor Company were among Maryland’s worst accounts with respect to delinquencies, repossessions and missing title certificates, and Williams was, by far, the largest debtor in the list of overdue insurance accounts.
The trial court found that the Wilmington branch had a net profit of $18,655.00 for the year 1951 although it suffered a net loss in each of the months of October, November and December and there were an unusual number of repossessions in December. Hagerty’s successor attempted to clean up the situation. Despite these efforts, the branch was required to charge off $12,500.00 in losses in 1952. In January, 1952 Hagerty wrote Maryland, demanding his 1951 bonus. His demand was ignored and in April he filed suit. The trial judge limited recovery to a maximum of 10j^-12ths of the net profit for 1951, or $3,264.00, and against this charged various advances and losses, finding a balance due of $1,128.50, for which Hagerty was given judgment. Maryland appealed. Hagerty did not cross appeal or make any appearance or argument in this Court.
Maryland contends that the contract of employment provided for a non-severable or non-apportionable bonus payable to Hagerty only if he was in the company’s employ at the end of the year 1951 and that he gave up his right to any part of such bonus when he voluntarily quit his job during the year, and, in the alternative, that Hagerty’s dealings with Lort and Williams created a conflict of interest that constituted wilful, material and deliberate breaches of his duty of loyalty and good faith to Maryland, and that these breaches prevent recovery of any part of the bonus, regardless of whether they caused Maryland demonstrable loss.
We think that Maryland may not prevail on its first contention. We may assume, without deciding, that the general
The decisive question is whether Maryland is correct in the second contention. We think that it is. It is an elementary principle that fundamental duties of an agent are loyalty to the interest of his principal and the need to avoid any conflict between that interest and his own self-interest. The rule was well stated in
De Crette v. Mohler, 147
Md. 108, 115: “Experience has taught us that no man can serve two masters, and for this reason it has long been an established rule of law that an agent cannot recover from his principal in any transaction in which the agent’s interest was antagonistic to that of the principal, unless such interest was fully and fairly disclosed to the principal. * * * In accordance with this rule it has been held that, without full disclosure, an agent cannot buy from, or sell to, his principal, that he cannot represent two principals having antagonistic interests, and that he cannot make a secret profit out of any transaction With its principal. * * * The foregoing rule is applied whether or not the interest or profit of the agent causes any loss to the principal.” In 4
Williston, Contracts,
Rev. Ed., Sec. 1022, the learned author says: “The duty of fidelity to his employment imposes on the employee not simply the positive duty of reasonably skillful performance of the work intrusted to him, but the negative duty of refraining from deception and from entering into relations giving him an interest inconsistent with that of the employer. Thus, deceptive and fraudulent statements or conduct not only renders the employee liable, but justifies his discharge. Generally such conduct involves damage to the employer but it may be ground for discharge, though no damage is involved. * * * The employee’s duty of fidelity forbids
The first two cases just cited make it clear that the duty of loyalty and of avoiding conflicting interests are as applicable to a servant of a corporation whose managerial duties are as extensive and important as those of Hagerty as to any other agent. See also
Restatement, Agency,
Sec. 429;
Cumberland Coal & Iron Co. v. Parish,
It is plain that the relationships entered into by Hagerty with Lort and Williams were such as to put him in the position of having to serve two masters. He became directly interested as a profit-sharing partner in the financial success of Lort’s business. At the same time, on Maryland’s behalf, he had the obligation to scrutinize with care Lort’s contracts of sale and to check on his wholesale financing. He was buying for his employer, Maryland, automobile paper in which he had an interest and, so, directly violating a duty. By borrowing money payable on demand from Williams, he made it completely untenable for him to exercise with respect to Williams’ paper and insurance the independent judgment his duty as Maryland’s manager required, or to police credit standing or delinquencies. Significant is it that during the time Hagerty was a partner in the business that Lort exceeded his wholesale financing limits and Maryland’s purchases of paper from him increased sharply and contra-seasonally, as it is that, with the exception of Lort, Williams was the Wilmington branch’s worst account with respect to repossessions and missing certificates of title, and was the largest debtor of delinquent insurance premiums, while Hagerty owed him $1,500.00
The president of Maryland, who had spent many years in the finance business for Maryland and for other companies,
We think that if Maryland had known in November, 1951, what it found out shortly thereafter, as to Hagerty’s conduct with Lort and Williams, it would have been justified in summarily dismissing him from its employ and that this justifiable discharge would have relieved it of the obligation to pay his bonus at the end of the year when it otherwise would have become payable. We think the record leaves no room for any finding except that the bonus was not to be apportioned and that the right to its receipt was to depend upon the employee being in the service of the company at the end of the year.
Where the breach of duty by the employee was wilful and material, as we find it to have been in the case before us, the Courts have held consistently that the employee has forfeited at least compensation which has not already been earned. The rule was recognized, although found inapplicable on the facts, in
Shipley v. Meadowbrook Club,
We think that the trial court was clearly wrong in deciding that Hagerty’s conduct did not constitute disloyalty or bad faith and that because no actual loss was demonstrated, his right of recovery was not prejudiced. We find the record to demonstrate that his conduct was wilfully and materially disloyal to and in conflict with the interests of his employer, and that it caused him to forfeit his right to the unapportionable bonus he otherwise would have been entitled to receive.
Judgment reversed, with costs.