Goodhue Farmers' Warehouse Co. v. Davis

LOVELY, J. The plaintiff was a co-operative association organized under the laws of this state, and by its articles of incorporation authorized to conduct the business of receiving, storing, selling, and forwarding all kinds of grain and flax. The defendant John O. Davis was the general manager, secretary, and a director of this corporation, and defendants Francis Davis and Lewis Johnson were the sureties upon the bond which he was required to give, the conditions of which were that the principal “Should faithfully and to the best of his ability perform the duties of general manager of said plaintiff, to the best interests of its stockholders, according to the by-laws of said plaintiff, and collect all accounts, and pay the same to the treasurer, and truly account for every transaction in its business.” Under the by-laws of the corporation the stockholders were authorized to bring their grain to the warehouse of the plaintiff, to be received, forwarded, and sold, for which they were to pay one cent per bushel to the company, as compensation for such service. John 0. Davis continued to act as general manager from August, 1895, until November 5 of the same year, at a salary of $50 per month; receiving from the stockholders their grain,' and paying for it by orders on the plaintiff’s treasury. During this time the grain so sold and the proceeds were fully accounted for, but after the latter [212] date John O. Davis purchased all the grain received at the elevator for himself, and, having thus become the owner of it, shipped it and sold it for his own profit, which course of dealing continued until April 1, 1896. After allowing on the grain purchased one cent per bushel, he received a profit, which he retained, of $3,538.44. The grain so purchased by the manager was paid for through orders on the treasury. He invested no money in the new enterprise; gave no information thereof to the stockholders and directors; used the name of the corporation, its blanks, credit, and business connections, for the business so conductéd, without the plaintiff’s knowledge or consent, during the whole period referred to. After he had entered upon this enterprise, the proceeds of the first sale furnished the capital for the next, and so on; but the original capital— the money which purchased the first shipment for his own profit— was money in the treasury of the plaintiff, for which he has accounted. These facts were uncontroverted, and the trial court directed the jury to return a verdict in favor of the plaintiff for the full amount of such profits, with interest. In addition to the above claim, it was sought to hold defendant John 0. Davis for orders drawn by him, as general manager, upon the .treasury, payable to himself, for the sum of $1,331.20. Of this sum, it was claimed that $66.50 was used by him in the payment of certain expenses in the plaintiff’s business; and the balance of $1,264.70, he claims to have drawn from the treasury to pay himself, as a stockholder, for his own barley, which he had shipped and sold as agent of defendant. Upon the testimony of the manager at the trial, under proper issues, the question of fact was contested whether this account and explanation of the disposition of the money for expenses and for his own barley was truthful, and, if so, whether he was to have credit for that sum.' The verdict of the jury against all the defendants includes the entire claim,— as well for the profits which were received and appropriated as the sum which John O. Davis claims to have paid himself for expenses and for his own grain. After motion for a new trial, which was denied, the defendants severally appeal. Appellants urge that the manager, Davis, was acting beyond the scope of his authority; that his duties to the corporation included [213] only tbe duty to receive, forward, and sell tbe grain of tbe stockholders, and that by tbe payment of one cent per bushel for all such grain be bad complied with bis duty in that respect; and that neither be nor bis sureties were liable for any profits which be bad received by dealing with tbe grain as purchaser upon bis own account. As tbe salaried agent of tbe plaintiff, tbe manager bad no right to use bis position, and the opportunities afforded by it, or to use its warehouse, business equipment, or its name, credit, or money, for bis personal profit. It is not open to dispute that be did so, and it follows that whatever profits were derived from bis transactions in that respect belonged to tbe plaintiff. Mechera, Ag. § 469. It was tbe theory of tbe manager that inasmuch as bis principal bad received pay for tbe grain at its going price, and tbe charge for storage, be bad a right- to the profits; but the difficulty with this theory is that be was dealing entirely as manager for bis principal, and had no right to use its name, credit, or money for bis private benefit. By doing so be jeopardized its credit; be encountered risks that might have bankrupted the corporation and involved himself in severe penal consequences. It is the legal dangers of this theory which lie behind tbe wrecks of many fortunes and characters. It may be that tbe personal motive of tbe manager was not bad, but tbe rule is one which tbe law, upon the best considerations of public policy, has established, and it cannot be too rigidly enforced. It is not necessary to determine whether tbe corporation bad power to purchase grain and sell it for profit. It may be conceded that it had not, yet tbe agent cannot, while engaged in tbe service of bis employer or principal, act in tbe capacity of both buyer and purchaser, without such principal’s consent; and, as stated by this court (MITCHELL, J.) in Smitz v. Leopold, 51 Minn. 455, 53 N. W. 719, in such cases “all profits made in the course oí an agency belong to tbe principal, whether they are the fruits of tbe performance or of tbe violation of the agent’s duty.” This is tbe general doctrine, and does not seem to be questioned by any authorities to which we have been referred. Thus, profits accruing to the corporation, and belonging to them, should have been paid over and accounted for by tbe defendant John O. Davis; and the appropriation of such [214] profits to himself was a plain violation of the conditions of the bond given by the sureties, and supports the order of the trial court directing a verdict for the sum'so improperly appropriated. It is not, and probably could not be, disputed that the claim of the manager that the money received on orders for expenses and grain furnished by himself, and shipped through the warehouse, if well founded, should not have been recovered against him and his sureties; and, had this issue been fairly'and properly submitted by the trial court to the jury, the verdict upon that issue would be allowed to stand. But in connection with the charge upon the questions above disposed of, in view of the order directing the verdict for a specific amount, the court below instructed the jury as follows: “The law does not absolutely prohibit an agent from dealing with himself, but it looks with suspicion upon all transactions of that character, and requires the agent to prove to the satisfaction of the jury that the transactions actually occurred, and were free from fraud. In such cases the agent is allowed to testify in his own behalf, and it is for the jury to determine whether, under all the circumstances of the case, his testimony is entitled tp credit.” And again: “When an agent bargains or deals with himself, he is often the only witness of the transaction; and, however unfair or fraudulent it may be, it is impossible to contradict the testimony he may .give, by other direct testimony. As the law looks with suspicion upon such transactions by an agent, it likewise looks with suspicion upon the testimony which the agent may give of the transaction. In such cases the mere fact that there is no direct contradiction of the agent’s own testimony does not preclude the jury from considering all the circumstances of the case, and giving to such testimony just as much or just as little weight as they may think it entitled to.” The trial court had already correctly instructed the jury to return a verdict for the plaintiff for the profits realized by its manager. After this instruction, all further instructions as to the duty of Davis as manager, and his liability for profits, were necessarily mere abstract propositions; but the court thereafter proceeded, and gave at the request of the plaintiff’s attorney a series of instructions, covering several pages of printed matter, as to the issue already disposed of by its direction to find a verdict for the plaintiff for the amount of the profits. Such requests and instructions were, [215] not only unnecessary, but were manifestly prejudicial to the defendant upon the remaining issue to be passed upon by the jury; for they singled him out, and charged as to his credibility in a manner tending to discredit him with the jury. His testimony was to be weighed by the jury, in view of all the circumstances of the case, uninfluenced by argument or denunciations from the court, and we regret to say that the instructions quoted above in this respect were decidedly prejudicial. The duty of the court in instructing the jury is to state in a plain and practical way the principles of law, divested, of all feeling and emphasis, if possible, that they may understand the law of the case without prejudice. More than this exceeds the province of the trial court, and deprives a trial by jury of its essential value. Harriott v. Holmes, 77 Minn. 245, 79 N. W. 1003. Since, upon the uncontradicted evidence in this case, the plaintiff is entitled to a verdict for the amount of the profits and the interest thereon, as directed, judgment should be entered for plaintiff for that amount. As to the issues involved in the expenses claimed to have been paid by the defendant John O. Davis, and for the grain for which he claims to have drawn the orders to the amount of $1,264.70, for errors in the instructions of the court a new trial must be ordered. The order is reversed, and a new trial ordered upon the issues indicated.