Low v. Woodbury

Hirschberg, P. J.: The plaintiff sues as the assignee of a claim for broker’s commissions on an agreement for the exchange' of real estate. The .brokers acted for both parties to the transaction, viz., the defendant and Andrew J. Larkin. On the exchange of the properties th'e defendant was to pay Larkin the sum of $12,000, the difference in the valuation of the equities, and he was to receive from Larkin as part payment for fire property to be conveyed by him, Larkin’s personal bond for $25,000 secured by a mortgage on that property. A written contract was prepared by the brokers and executed by the parties, hut the defendant refused to fulfill it because he subsequently learned that Larkin was not the owner of the. property which he had contracted to exchange and was not pecuniarily responsible. The defendant’s reason for refusing to carry out the contract was an adequate one, and the evidence leaves little room for doubt- that he would not have executed the agreement if the brokers had acted towards him in entire good faith. He testified that he told them [299] that he wanted a responsible man on the bond, that otherwise he would not make the deal and that they assured him that Larkin was perfectly good for the $25,000. This evidence was not in terms disputed by the brokers. They testified, moreover, that before the execution of the contract they knew that Larkin was not the owner of the property, but merely held title for the convenience of the real owners, and they admitted that they did not inf orm the defendant of the fact. On the contrary, they testified that they told the defendant that Larkin was the owner of the property which so stood in his name. They were acting under an agreement with the real owners of the property in question to receive commissions from them on the exchange and that fact they also concealed from the defendant. It was clearly established that Larkin was not at the time of the transaction the owner of any property, and that his bond for $25,000 was accordingly not good. In view of the undisputed evidence as to the defendant’s inquiry of the brokers on the subject of Larkin’s pecuniary responsibility it cannot be doubted that their concealment of his true relation to the property which he was contracting to convey was an act of bad faith which deprives them of all right to compensation for their services. The concealment by an agent of facts which are material to his principal’s interests, especially after inquiry made, amounts in law to fraud. “ Like other agents, the broker is required to exercise the utmost good faith towards his principal; and if, in the course of his agency, he has committed a fraud on his principal, he is not entitled to his commissions.” (4 Am. & Eng. Ency. of Law [2d ed.], 971; Martin v. Bliss, 57 Hun, 157; Whaples v. Fahys, 87 App. Div. 518; Murray v. Beard, 102 N. Y. 505.) The judgment and order should be reversed. Woodward, Jenks, Rich and Miller, JJ., concurred. Judgment and order of the County Court of Queens county reversed, and new trial ordered, costs to abide the event.* Footnotes [*] Decision of September 29,1905.