Morrison v. Ogdensburgh & Lake Champlain Railroad

By the Court, James, J. The nonsuit was put upon the ground that'Morrison, while in the railroad company’s employ could accept no employment hostile to the interest of his employer, and that having done so, and received remuneration therefor, it afforded good and sufficient ground for Ma diacharge. And the verdict in the other case was based — 179 — on the same principle, that being the agent of the railroad company, he could not take a- commission from the vendor of property purchased upon, his advice, by his principal, and hold it as against said principal. There was no question of fact for the jury in 'either case; nor was there any dispute about the character of the plaintiff’s employment. It was to make purchases of wood, lumber, ties, &e. for the use of the corporation along the whole length of its road, and this included every purchase which ¿would tend towards supplying that want of the corporation. It is true Morrison was not, in terms, authorized to buy or bargain for land, simply as land, and yet purchasing timber land for the lumber and wood upon it was within the spirit and scope of his employment. But whether it was or not, he was in the company’s employ, and was, by its officers, consulted as to the value of said land as timber land, and the propriety of its purchase. The basis of all dealings is good faith. Mo man can serve two masters. He that is intrusted with the business of others cannot be allowed to make that business an object of interest to himself ; for the frailty of nature will not admit of impartiality when a, person is both judge and party, or sustains' the two characters of seller and buyer. Paley on Agency, lays it down as a fundamental rule applicable to both sales and purchases, that an agent employed to sell cannot make himself the purchaser; nor if employed to purchase, can he himself be the seller. The expediency and justice of this rule are too obvious to require explanation; for with whatever fairness ■ he may deal between himself and his employer, yet he is no longer that which his service requires and his principal supposes and retains him to be; he acts not as an agent but as an umpire. (Duer’s Paley on Agency, 33.) The undertaking of an agent on a salary, to purchase for the use of his principal, is to buy in the most beneficial manner for him, and therefore it is declared to he contrary — 180 — to the duty and trust of a person in that situation to be himself the seller, unless it be so understood by plain and express consent. (Id. 16, 37.) In the case of Massey v. Davies, (2 Ves. Jr. 317,) the court of chancery in England held that an agent employed to furnish timber for a . colliery, at a certain stipulated salary, was bound to -account for profits made by selling his own timber to his principals under the name of another person with whom he had clandestinely engaged in partnership. The doctrine on this subject is ably enforced and elucidated in two recent cases decided by two eminent equity judges in England. (Gillette v. Peppercorne, 3 Beav. 78, and Benson v. Hawthorne, 1 Young & Collyer, 326.) In the first case the plaintiff employed the defendant, a stock broker, to purchase some canal shares; the defendant apparently bought them from a third party as ostensible owner, who it afterwards turned out was the mere trustee of the defendant. The court, after a lapse of several years, and without entering into the question of the fairness of the price, held that the transaction was void on grounds of public policy and set it aside, with costs. In the second case, the defendant being a director of a joint stock company, established for the building, purchasing, hiring and employment of steam vessels, purchase a vessel for ¿£1340, and after-wards sold it to the company, as from a stranger, for ¿£1500, charging the company with a commission of one per cent. It was held that such a transaction could not stand, in a court of equity, but the defendant must be considered as having purchased the ship at ¿£1340 as agent on behalf of the company, and that he was not entitled to any commission on such purchase. The learned vice chancellor said: “It is obvious that a person so circumstanced as the defendant, was under an obligation to the shareholders at large to use his best endeavor in all matters which related to the affairs of the company for the welfare of the concern thus entrusted (not gratuitously) — 181 — to his charge ; that without any special provision for the purpose it was by law an implied and inherent term in the engagement that he should not make any other profit to himself of that trust or employment, and should not acquire to himself, while he remained a director, an interest adverse to his duty. The master of the rolls, in Gillette v. Peppercorne, above cited, said: “ When a man employs another as his agent it is on the faith that such agent will act in the matter purely and disinterestedly for the benefit of his employer, and assuredly not with the notion that the person whose assistance is required as agent has himself, in the very transaction, an interest directly opposed to that of his principal.” The same rule has governed the equity courts of this state ever since their organization. (Reed v. Warner, 5 Paige, 650.) In all this class of cases, the question is not whether the agent has acted from good motives, and without fraud, or whether the property purchased is worth the price paid, but whether the agent has done his' duty to his principal, and acted according to the trust reposed in him. If he has not, but through default or concealment, in either particular, has obtained a profit or advantage to himself, he cannot retain it; it belongs to his principal, and affords good grounds for terminating such agent’s employment. (Story’s Eq. §§ 323, 207.) It does not follow from this that an agent may not sell his property to his own principal, if he do so openly, above board, and in good faith, but he must not conceal any facts within his knowledge which might influence the judgment of his principal as to the price or value. If he does, the contract will be set aside. The facts communicated to the superintendent of the railroad company in this case did not relieve Morrison from the penalty of the foregoing obligations. It did not appear that the superintendent was engaged in the purchase of lands, wood, lumber or land for the corporation, or that he had authority to give assent for Morrison to — 182 — ' speculate, through the advantages of his position, out of transactions of the corporation, and at its expense. It appeared that the directors were the persons to decide upon the purchase of lands for the company. This Morrison knew. He was called upon by one of them in his capacity as agent, for consultation and advice, as to such purchase. If he desired or intended to act fairly with the company, it was to this director that he should have communicated the fact that he was to have a commission from the vendor if a sale was effected. Even then he might not have been able to retain the commission, but he would have exonerated himself from the suspicion that now attaches to his action. But he did not do so; he accompanied that officer in the examinátion of the property, and permitted the officer to consult him and take his opinion as agent, and to act upon that opinion, without any knowledge by the officer of the secret agreement between said agent and the owner of the land. In this particular the agent failed to do his whole duty. It was not error to exclude proof of the fraud. The case does not turn upon actual fraud, but upon a different theory, which is this : an agent cannot act in the.business of his agency, for himself and his principal at the same time, in the same transaction. Had Morrison done his duty as agent, the corporation would have got the land at least $1000 less than it paid. That sum went into Morrison’s pocket, secured by that neglect. In equity that money belongs to the railroad company. Such neglect of duty also constituted a breach of any contract of employment, and justified the agent’s discharge. But independent of these considerations, there is another ground on which the nonsuit can be sustained. There was no proof of any contract for a specified time between Morrison and the Ogdensburgh and Lake Champlain Railroad Company. The contract proved was with certain trustees of said railroad. The present corporation did not — 183 — come into existence until after such contract, and there was no evidence that in taking possession of said road it assumed the contracts of said trustees. So far as appears, they merely continued Morrison as an employee of the road, in the same business, under an implied contract to pay, but without any agreement as to time. He could therefore be discharged at any time, by the railroad company, without liability for further employment. [St. Lawrence General Term, October 6, 1868. The judgment entered on the nonsuit must be affirmed. Judgment must be directed for the railroad company for the verdict directed by the court, with costs. James, Bosehrans, Potter and Boches, Justices.]