Remediation Services, Inc. sued Georgia-Pacific Corporation for amounts claimed due for dredging services seeking to recover under breach of contract or on quantum meruit. Remediation appeals from the grant of summary judgment in favor of Georgia-Pacific.
1. Georgia-Pacific moved for summary judgment on the contract claim based on the defense that it was entitled to declare the dredging contract void because it was defrauded by one of its own employees, who without the knowledge of Georgia-Pacific, represented both Remediation and Georgia-Pacific as a dual agent in the dredging contract transaction. 1 The facts establish that Ronnie Presley was employed as an environmental engineer for Georgia-Pacific, and was regarded as the company’s expert on dredging projects like the one at issue. In that capacity, Presley determined the scope of the dredging project at issue, suggested bidders for the project, and recommended Remediation as the bidder most qualified to do the work. Remediation was eventually awarded the dredging contract in August 1990 for the sum of $827,106.43. During the course of the contract, Presley assisted in reviewing progress on the dredging, and recommended additional amounts in excess of $100,000 paid to Remediation under a provision in the contract for dredging of material added to the original contract specifications.
After the suit was filed, Georgia-Pacific discovered that since Remediation was formed in 1987, Presley has owned 50 percent of the outstanding shares of the corporation, and has been listed as its Chief Executive Officer in corporate documents filed with the Secretary of State. The trial court was authorized to conclude that affidavits filed by Remediation in opposition to summary judgment did not create an issue of fact as to Presley’s ownership of 50 percent of the stock of the corporation. In sworn responses to interrogatories, Remediation stated that Presley owns 50 percent of the outstanding stock, and that the company had solicited the return of his stock on several occasions. The subsequent affidavits admitted Presley obtained 50 percent of the outstanding shares when the corporation was formed in 1987, and that the shares remained in Presley’s possession, but denied Presley owned the stock claiming there was an agreement prior to the present contract for Presley to surrender the shares for no payment. In the absence of any reasonable explanation for this contradiction, the trial court was authorized under the contradictory testimony rule to eliminate the testimony favorable to Remediation, and conclude that Presley has owned 50 percent of the shares of Remediation since 1987.
Prophecy Corp. v. Charles Rossignol, Inc.,
Evidence also showed that the other two stockholders and officers of Remediation knew Presley was employed by Georgia-Pacific when Remediation entered into the contract at issue. However, affidavits filed on behalf of Remediation also stated that Presley had no involvement in the operation or management of Remediation since 1987, and had not received any compensation from Remediation, di
The following principles apply to the defense raised by Georgia-Pacific to the contract claim:
“The law imposes upon every agent the obligation to exercise, for and in behalf of his principal, skill, loyalty, and absolute good faith. It is of the essence of the contract of the agent that he will use his best skill and judgment to promote the interest of his employer. This the agent can not do if he is the agent for both parties. To represent both parties as their agent is to undertake inconsistent duties. A mutual agency requires the consent of both principals to the mutuality of the agency. An agent can not use his best skill and judgment to promote the interest of his employer where he acts for two persons whose interests are essentially adverse. Such a situation places the agent under a temptation to deal unjustly with one or both of his principals. He thus commits a fraud on his principals in undertaking, without their consent or knowledge, to act as their mutual agent. . . . Where the agent of the vendor is also the agent of the purchaser, the effect of the dual agency would be to authorize the vendor to repudiate the transaction, if he acts promptly after discovery of the situation. Where an agent without the full knowledge and consent of his principal represents the adverse party in a transaction, his contracts relating thereto are voidable at the option of the principal. It follows that the purchaser could equally repudiate the transaction. ... [In the case of a contract] executed in whole or in part [such defrauded principal] may by acting promptly and before the rights of innocent parties have intervened, upon restoration of any benefit which he has received, rescind the contract and recover back the property or rights with which he has parted under it. It makes no difference that the principal was not in fact injured, or that the agent intended no wrong, or that the other party acted in good faith. This doctrine is based upon the ground that the double agency is a fraud upon the principal,
It is undisputed that Georgia-Pacific had no knowledge of Presley’s interest in Remediation until after the contract was terminated. Accordingly, we must determine whether the facts establish as a matter of law that Presley acted in the capacity of a dual agent for Georgia-Pacific and Remediation. “The relation of principal and agent arises wherever one person, expressly or by implication, authorizes another to act for him or subsequently ratifies the acts of another in his behalf.” OCGA § 10-6-1. “At times and in some contexts we have tended to equate servant with agent, but the relationships are very different. At common law, and in all of the jurisdictions of this country . . . the difference in concept is fundamental and substantial. Generally the servant performs work or labor for the master, sometimes skilled and sometimes not, while the agent, within the ambit of his authority, represents his principal in some business dealing. He is vested with authority, real or ostensible, to create obligations on behalf of his principal bringing third parties into contractual relations with him. Perhaps it is oversimplification, but it has been generally said that agency relates to business transactions, while the work of a servant relates to manual service. The agent may, at times serve both as servant and agent, doing labor and exercising a given authority, but the servant rarely does. An agent thus is some person authorized to act for another arising when, expressly or impliedly, there has been a delegation with more or less discretionary power to act, to manage an affair, and to render an account.” (Citations and punctuation omitted.)
Headrick v. Fordham,
Nevertheless, we have refused to limit application of the dual agency rule to render a contract voidable based on technical distinctions between an agent authorized to contract for the principal, and a broker who may not have authority to bind the principal, but is involved in the contract negotiations. Spratlin, supra at 182. Like an agent, a broker has a duty to act in good faith, and may not act for persons having interests adverse to his employer without the employer’s consent. Id. at 183. “A broker is simply a middleman, . . . [and under an exception to the rule prohibiting dual agencies], when he has no duty to perform but to bring the parties together, leaving them to negotiate and to come to an agreement themselves, without any aid from him. If he takes, or contracts to take, any part in the negotiations, however, he cannot be regarded as a mere middleman, no matter how slight a part it may be.” (Citations and punctuation omitted.) Id. at 183.
Remediation argues that Presley was not an agent, but merely an employee of Georgia-Pacific, and, therefore, the contract was not voidable under the dual agency rule. The relationship of employer-employee is generally that of arms-length bargaining, and not one from which the law necessarily implies the confidentiality of principal and agent.
Cochran v. Murrah,
Thus, the facts of a particular case may demonstrate an employee has a confidential relationship with his employer with respect to a business transaction related to his employment, which places upon him obligations similar to the fiduciary obligations of an agent to his
In this case, the facts establish as a matter of law that, in his employment for Georgia-Pacific, Presley was intimately involved in the negotiations leading to and the continuing administration of the contract with Remediation. Moreover, Presley engaged in this conduct while holding a 50 percent ownership interest in Remediation. Even though there may be a jury question as to whether Presley acted as an agent for Remediation, it is not necessary under the present facts that an agency relationship be established. Presley’s 50 percent ownership interest in Remediation, unknown to Georgia-Pacific, is sufficient to make the dredging contract voidable at the election of Georgia-Pacific. “Thus, an agent who is appointed to sell or to give advice concerning sales violates his duty if, without the principal’s knowledge, he sells to himself or purchases from the principal through the medium of a ‘straw,’ or induces his principal to sell to a corporation in which he has a large concealed interest. See the Restatement of Trusts, § 170. The agent’s failure to reveal that he has an interest in the transaction is sometimes spoken of as fraudulent. If the agent intends to take advantage of the principal, the epithet, with its implication of immorality, is justified. But, irrespective of the words used to characterize the agent’s conduct, such a transaction can be rescinded by the principal although the agent acts in good faith and without consciousness of wrong doing.” Restatement 2d, Agency, § 389, Comment a. i
Remediation further argues that summary judgment should have been denied because Georgia-Pacific was not entitled to rescind the contract for fraud without restoring or offering to restore the value of Remediation’s services under the contract, which Remediation claims is the sum of $1,734,240. Generally, where one claims he was defrauded by an undisclosed dual agent, and invokes the right to repudiate the contract, he must offer to return the other party to the status quo.
Reeves v. Callaway,
No tender is required where the party seeking to rescind has received nothing of value, or where any amount received under the contract may be less than the amount due to the party seeking to rescind.
Metter Banking Co. v. Millen Lumber &c. Co.,
Accordingly, the trial court properly granted summary judgment in favor of Georgia-Pacific on the breach of contract claim.
2. The trial court álso granted summary judgment to Georgia-Pacific on Remediation’s alternative quantum meruit claim. The court reasoned that if the contract was voided because Presley defrauded Georgia-Pacific as a dual agent, Remediation has unclean hands, and may not seek relief on the basis of quantum meruit.
Although “one is estopped to recover on quantum meruit where there exists an express agreement”
(Willis v. Kemp,
The trial court erred in granting summary judgment in favor of
Judgment affirmed in part and reversed in part.
Notes
Georgia-Pacific also contended that it was not the proper defendant in this suit because Remediation had initiated the dredging contract with Nekoosa Papers, Inc., a wholly-owned subsidiary of Georgia-Pacific. In granting summary judgment, the trial court did not reach this issue, nor does this opinion.