Hermann v. Hall

MORROW, Circuit Judge (after stating the facts as above). The. plaintiff bases his right to the relief prayed for in his complaint upon the rule, laid down by the text-writers and adhered to in many authoritative decisions, that if an agent in the sale of property of his principal purchases it himself, or any interest therein, either directly or through the instrumentality of a third person, without the knowledge 'or consent of the principal, the sale is voidable, and may be set aside at the option of the principal; that in a transaction of that nature the amount of the consideration, the absence of undue advantage, and similar considerations, are wholly immaterial; and that nothing will defeat the principal’s right to avoid the transaction, save and except his own confirmation after full knowledge of all the facts. Mechem on Agency, §§ 455, 461; Michoud v. Girod, 4 How. 503, 11 L. Ed. 1076; Gardner v. Ogden, 22 N. Y. 327, 78 Am. Dec. 192; Grumley v. Webb, 44 Mo. 444, 100 Am. Dec. 304; Mills v. Goodsell, 5 Conn. 475, 13 Am. Dec. 90; Bain v. Brown, 56 N. Y. 288. But that rule has no application to the facts of this case. The uncontradicted testimony showed that Dora Hermann authorized the defendant to sell the property for $4,000, and that the defendant entered into negotiations with Sengstacken and Smith for the sale of the property in controversy some time in the early part of the month of May, 1905, and on the 17th of that month the sale was consummated and the transaction closed; the defendant, as attorney for the plaintiff and his wife, agreeing to sell the property to Sengstacken and Smith, and the latter agreeing to buy the same, at the price of $4,400, or $400 in excess of the amount Dora Hermann was willing to take for the property.. On that date the purchasers gave to the defendant a promissory note, signed by both of them, for the sum of $100, payable in 10 days after date, to be applied on the purchase price of the property. The testimony also showed that, upon delivery of the promissory note, a receipt therefor was given to the purchasers by the defendant, wherein were set forth a description of the land and the terms of the sale. The receipt was not introduced in evidence, for the reason that it had been lost or misplaced; and could nót be found. Testimony as to the contents of the receipt was then properly admissible, and this testimony showed that the terms of the sale were that one-half of the purchase price should be paid in cash; the remaining half to be paid in one year, to bear interest at the rate of 6 per cent, per annum, and to be evidenced by a note secured by a mortgage on the property. The delivery by the purchasers to the defendant of the promissory note as part payment on the purchase price of the property, and the delivery by the latter to the purchasers of the receipt stating the terms of the sale and containing a description of the property, constituted an actual bona fide sale of the property by the defendant, as attorney, to Sengstacken and Smith — a sale so far completed that it could have been enforced by either the vendor or the vendees. The agency of the defendant theréupon, in all material respects, terminated. No intimation of any nature was made at that time, nor had any been made at any time prior thereto, that the defendant should become the pur [951] chaser of an interest in the property. The property was sold outright to Sengstacken and Smith, without any restrictions or conditions. The court below held that the charge of fraud in the transaction was not sustained, and in this finding we concur. Counsel for the plaintiff seek to draw the inference that there was collusion between the defendant and the purchasers, at the time the latter agreed to purchase the property on May 17, 1905, from the fact that the defendant did not inform Dora Hermann, at the time of the delivery of the deed of August 31, 1905, or thereafter, that he had purchased an interest in the property. But we do not think that the failure of the defendant to so inform his principal furnishes any support for the inference that the defendant was acting in bad faith. The seller was in no degree prejudiced by being kept in ignorance as to who the real purchasers of the land were. She received, not only the price which she herself had put upon the land, but $400 in excess thereof; and the testimony shows beyond all doubt that the sum thus received was at that time the fair value of the land. Who the purchasers were was a matter of indifference to her, so long as the price which she asked was paid in full. Glover v. Layton, 145 Ill. 92, 34 N. E. 53, 55. After Sengstacken and Smith had themselves agreed to purchase the property, they proceeded to interest others in the transaction with a view of forming a syndicate; but that arrangement was one in which the purchasers only were interested. It was in no respect binding upon the defendant or his principal. The first suggestion that the defendant should purchase an interest in the property was made on the 30th day of August, 1905, more than three months after the sale of the property had been made to Sengstacken and Smith. The purchase by the defendant on that date of a cne-twelfth interest in the property was, under such circumstances, in no sense a purchase from his principal. It was a purchase from Sengstacken and Smith, who were obligated as purchasers to pay the purchase price in the event it should be found upon examination of the abstract of title that the title to the land was in Dora Hermann. The true rule applicable to the facts of this case is laid down by the Supreme Court of the United States in the case of Robertson v. Chapman, 152 U. S. 673, 14 Sup. Ct. 741, 38 L. Ed. 592. In that case one Polk had been appointed as agent of the plaintiff, Robertson, for the purpose of selling certain real property to M. O’Donohoe. O’Donohoe was unable to complete the payments under his contract of purchase, and before the deed was delivered to O’Donohoe, and while the same was in the hands of Polk and his partner, Chapman, as agents, to be delivered upon payment of the balance of the purchase price of the land, Polk took over O’Donohoe’s contract and completed title in himself. Robertson subsequently brought suit against the agents to set aside the transaction, on the theory that Polk could not properly have taken title to the property. Mr. Justice Harlan, delivering the opinion of the Supreme Court, said: “If an agent to sell effects a sale to himself, under the cover of the name of another person, he becomes, in respect to the property, a trustee for the principal, and at the election of the latter, seasonably made, will be compelled to surrender it, or, if he has disposed of it to a bona fide purchaser, to ac [952] count, not only for its real value, but for any profit realized, by him on such resale. And this will be done upon the demand of the principal, although it may not appear that the property, at the time the agent fraudulently acquired it, was worth more than he paid for it. The law will not, in such case, impose upon the principal the burden of proving that he was in fact injured, and will only inquire whether the agent has been unfaithful in the discharge of his duty.r While his agency continues he must act, in the matter of such agency, solely with reference to the interests of his principal. The law will not permit him, without the knowledge or assent of his principal, to occupy a position in which he will be tempted not to do the best he may for the principal. It is earnestly contended that the evidence brings the present ease within the operation of these principles. In this view of the facts we do not concur. The charge against Polk of dereliction of duty is not sustained. While there is some evidence tending to show that he desired, from the outset, to acquire an interest in this property, it does not appear that he intended to practice any deception upon the plaintiff. At any rate, he was not in fact interested in the offer made by O’Donohoe. The latter purchased on his own account,' exclusively, and without any understanding that Polk was to become interested with him, or should take his place in the purchase. Polk had no expectation, when O’Donohóe’s offer was accepted, of becoming the owner of the property. “The only circumstance in the case indicating a want of frankness, on the part of Polk, in his letters to the plaintiff, was a statement in the letter of January 22, 1886, implying that he had actually collected the cash payment of $1,000. His explanation of this statement is that he had not been as diligent as he should have been in concluding the business, and he did not suppose it was of any consequence to the plaintiff whether the $1,000 came from him or from O’Donohoe. It would have been more consistent with the truth if he had then stated that he had agreed, or would agree, with O’Donohoe, to take the property, and therefore, as between himself and O’Donohoe, he was bound to make good the latter’s obligations to the plaintiff. But the failure of Polk to notify the plaintiff of his agreement with O’Donohoe, immediately upon its being made, cannot affect any right acquired by him under that agreement. The sale to O’Donohoe was so far consummated that neither'party was at liberty to undo what had been done. O’Donohoe executed his notes for the deferred payments, and, his wife uniting with him, gave a mortgage to secure them. The notes and mortgage were delivered to, and accepted by, the plaintiff, who executed a deed to O’Donohoe, and placed it in the hands of Polk, to be delivered to O’Donohoe whenever a decree for the sale of the property was obtained, and upon the payment of the $1,000 stipulated to be paid in cash; so that, at the time Polk took the property from O’Donohoe, it was not in the power either of the plaintiff or of O’Donohoe to rescind the contract between themselves, and Polk’s agency for the sale of the property had, in every material sense, terminated. Nothing then stood in the way either of O’Donohoe agreeing that Polk should take the property, or of Polk becoming a purchaser from him. If the sale to O’Donohoe was an actual sale, in good faith, so far as Polk had any agency in effecting it — if the contract between the plaintiff and O’Donohoe had been so far executed, at the time Polk took O’Donohoe’s place in the purchase, that it could not be rescinded by either party to it — then Polk’s agency in selling the property did not prevent him from purchasing from O’Donehoe; and his failure to give notice of his purchase, immediately upon its being made, cannot be regarded as a fraud upon the rights of the plaintiff. A real bona fide sale of the property, through the agency of Polk, and upon the terms prescribed by the plaintiff, and which sale was substantially completed between vendor and vendee, intervened between Polk’s acceptance of the position of agent and his purchase of the property from the plaintiff’s vendee. Upon this ground, the decree below can be sustained without impairing in any degree the.rule that an agent will not be permitted to become the purchaser, without the knowledge or consent of his principal, of property committed to him for sale.” It may also be stated, as a general rule, that in all cases of the nature of the one now under consideration the decision depends upon [953] the application to the particular facts of the rule of disqualification. In those cases where a conflict between duty and self-interest has been shown, the purchase has been held voidable, regardless of the manner in which or by whom the sale was made. Marquam v. Ross, 47 Or. 374, 405, 78 Pac. 698, 83 Pac. 852, 86 Pac. 1. In the present case no such conflict is ma.de to appear. The defendant secured purchasers for the property, not, indeed, at the price at which he had been authorized to sell, but at a price in excess thereof. Upon the consummation of the sale his duty to his principals ceased.' The sale was consummated, as we have shown, on the 17th of May, 1905, and nothing then stood in the way of his agreeing three months thereafter to purchase an interest in the property. The judgment of the court below is affirmed.