Opinion
November 17, 1927.
Appeal from Supreme Court of Schenectady County.
Leary Fullerton [ James A. Leary of counsel], for the plaintiff.
Blodgett Smith [ H.E. Blodgett of counsel], for both defendants.
In view of the testimony of the plaintiff it is unnecessary to determine the relationship between the parties which the said contract established. The plaintiff testified that three days before the contract was signed he, as a real estate broker, had entered into an oral agreement with the defendants whereby if he sold the property for them for $43,000 he was to be paid a commission of three per cent, and that if he procured a purchaser for more than that amount he was to receive in addition one-half of the excess. Therefore, when he made the written contract on which this action is brought he was the agent of the defendants and was bound to disclose to them all facts within his knowledge which might have influenced them in making the contract which is the subject of this action. "The general rule is well settled that a broker must act with entire good faith towards his principal, and he is bound to disclose to his principal all facts within his knowledge which are or may be material to the matter in which he is employed, or which might influence the principal in his action; and if he has failed to come up to this standard of duty he cannot recover." ( Veasey v. Carson, 177 Mass. 117, 120; Howard v. McCredie, 198 App. Div. 49, 53; Wendt v. Fischer, 215 id. 196, 199; 4 R.C.L. 272, 273; Dickinson v. Tysen, 209 N.Y. 395, 400; 2 C.J. § 363.) When the plaintiff made the written contract with the defendants he had procured a purchaser for $45,000 and had in his possession the check of the latter for $500 on account of the purchase price. It goes without saying that if the defendants had known this fact there would have been no motive or inducement for them to make the written contract. The plaintiff well knew this else he would not have phrased the contract in such a manner as to keep them in the dark. His duty as agent clearly prevented him from entering into a new contract with his principals for his own benefit concerning the subject-matter of his agency without a complete disclosure of all material facts. It may be argued that the written contract did not vary materially from the former oral one and that the defendants were no worse off with the former than without it. The fact remains, however, that the plaintiff procured the written contract solely for his own benefit. In no aspect of the case could the defendants be benefited thereby. In Wendt v. Fischer ( 243 N.Y. 439), an action by real estate brokers, it is said (at p. 443): "If dual interests are to be served, the disclosure to be effective must lay bare the truth, without ambiguity or reservation, in all its stark significance. * * * We are told that the brokers acted in good faith, that the terms procured were the best obtainable at the moment, and that the wrong, if any, was unaccompanied by damage. This is no sufficient answer by a trustee forgetful of his duty. The law `does not stop to inquire whether the contract or transaction was fair or unfair. It stops the inquiry when the relation is disclosed, and sets aside the transaction or refuses to enforce it, at the instance of the party whom the fiduciary undertook to represent, without undertaking to deal with the question of abstract justice in the particular case.'" The court cites Munson v. Syracuse, Geneva Corning R.R. Co. ( 103 N.Y. 58, 73), where the court speaks of "the great rule of law which invalidates all contracts made by a trustee or fiduciary, in which he is personally interested, at the election of the party he represents." Moreover, by the terms of the written contract the payment of $500 was deferred for five days and it was provided that said contract should be "null and void unless the first party offers performance thereof on his part on or before January 19th, 1924," although plaintiff when he made the contract had in his possession the purchaser's check for $500 and might have delivered it immediately. So also the contract carefully concealed the fact that the purchaser had already agreed to pay $45,000, but specified the purchase price as $43,000 with a provision that if more was received the defendants should have only one-half of the excess. As agent of defendants, plaintiff owed the duty of a frank disclosure of every material fact when he set about procuring a contract solely for his own benefit. Instead of disclosure there was suppression and concealment.
This is not a case where an oral contract is reduced to writing pursuant to an understanding between the parties to that effect. The oral contract had already been substantially performed by the plaintiff. There was no understanding or intention to have it reduced to writing. Had plaintiff not found a purchaser it would not have been made. Contrary to the allegation of his complaint that the written contract was made before the purchaser was found, plaintiff testified as follows: "Q. Why did it take three days to prepare this agreement? A. I did not want to have any papers signed until I found a purchaser. Q. Why did not want to have any papers signed until you found a purchaser? A. Yes, sir. Q. At the time you had that paper signed you had found a purchaser? A. Yes, sir. * * * Q. You had a bargain with him [the purchaser] at $45,000? A. Yes, sir. Q. You had the check in your pocket? A. No, sir, I had it in my office. Q. Made payable to you for $500? A. Yes, sir." Under the circumstances here appearing we think the written contract was not the formal expression of the oral contract, but that having been made as the plaintiff admits after substantial performance of the oral contract on his part and not pursuant to any intention to reduce the latter to writing, it must be considered an independent contract unrelated to the prior oral one. Moreover the latter contract was not a reproduction in form of the former one. Plaintiff brings his action on this written contract and must accept it with whatever infirmities it possesses. As we have already stated, the relationship between the parties which it established is immaterial. Whatever the relationship the contract was clearly procured as the result of suppression of material facts by an agent of the defendants and is, therefore, unenforcible by such agent.
For the reasons stated the plaintiff failed to establish as against either defendant the cause of action alleged. As stated by the trial justice the plaintiff also failed to prove that the defendant Annie Reinhard authorized or ratified the contract on which the action is brought.
The judgment and order should be reversed on the law and the complaint dismissed as to the defendant Samuel Reinhard and affirmed as to the defendant Annie Reinhard, with one bill of costs of this appeal to the defendants.
VAN KIRK, HINMAN, DAVIS and WHITMYER, JJ., concur.
Judgment reversed on the law and complaint dismissed as to the defendant Samuel Reinhard and affirmed as to the defendant Annie Reinhard, with one bill of costs of this appeal to the defendants.