Rowe v. Stevens — 35 N.Y. Super. Ct. 189

Majority

p. 189

JAMES ROWE, Plaintiff and Respondent, v. SALMON S. STEVENS, Defendant and Appellant.

Headnote

The general rule or principle of law which forbids a broker or agent from negotiating as well for the purchaser as for the vendor of property, is founded upon the actual or constructive fraud of an agent, who, by the concealment or the misrepresentation of his employment by one party from the other, wrongfully secures the confidence of each, in the belief that all his (the broker’s) efforts and services are being directed to secure

p. 190

the best bargain for him alone, when, in fact,he is also seeking to advance, or pretending to advance, the interests of the other party to the contract. There is, however, no principle of law which forbids a broker or real estate agent from acting as the agent of both parties, where it is done without concealment or other fraud.

If both vendor and purchaser employ the same agent, knowing that he is employed by, and is acting for, both, his acts should be upheld, and he is entitled to receive compensation from both parties.

Before Barbour, Ch. J., Monell and Freedman, JJ.

Decided January 4, 1873.

Appeal from a judgment.

The plaintiff, a real estate agent, was employed by the defendant to procure a purchaser for certain real estate in the city of New York, then owned by the defendant. The plaintiff, pursuant to such employment, procured Winters & Hunt to purchase such real estate, to whom it was subsequently conveyed by the defendant, they conveying to the defendant, in exchange, certain other real estate in said city then owned by them.

It was proved that the plaintiff had previously been employed by Winters & Hunt, to procure a purchaser of their property, and that upon the exchange being made, he was paid his commission by them. There was also evidence tending to show that the defendant knew, and fully understood, that the plaintiff was acting as the agent of both Winters & Hunt, and of the defendant; and that the defendant, with knowledge that Winters & Hunt had paid their commissions, afterwards promised to pay the plaintiff.

At the close of the evidence, the defendant moved to dismiss the. complaint, on the ground that a broker (i. e. real estate agent) could not take commissions from both parties.

The motion was denied, and the defendant excepted. The court charged the jury as follows :

“As I understand the law to be, as a general rule, a

p. 191

"broker cannot "be employed by "both parties, and collect a fee from each. There may be an exception—there may be circumstances under which two parties would employ a broker to do a joint service, understanding that he would be sufficient for both, as two men may employ a lawyer to draw a contract or agreement, each of them having confidence in him, and they may agree that he shall be paid equally by them. I think a broker can serve both parties, and he can earn and receive compensation from both parties. But, gentlemen, this must be fully understood in the case of a broker. To enable a man to recover, as in this case, it must be understood by all the parties interested. Hunt & Winters, on one side, and Mr. Stevens on the other. They must understand, must be' informed, that he is acting for both, because it is very clear if you employ a broker, you expect he is going to serve you, and not going to serve the other side ; he is going to make the best bargain he can for you. But if you understand he is serving another and yourself, and you agree to it, I think he can recover Ms fee, under such circumstances. That is a fact you have got to find, in addition to finding the defendant employed plaintiff. Ton must find the other additional fact, that Hunt & Winters knew of such employment, and that he was to receive a fee from the defendant for these services. If you find these two facts, you will render a verdict for the plaintiff, for whatever sum you consider he has earned in the exchange of the property.”

The jury rendered a verdict for the plaintiff for $950.

The defendant appealed.

Mr. Ira D. Warren, for appellant.

Mr. C. Shaffer and C. H. Truax, for respondent.

The only question we

p. 192

can examine upon this appeal, arises from the exception to the denial of the motion to dismiss the complaint.

The facts in dispute were settled "by the jury, and are not open to review on this appeal. Nor was there any exception to the charge of the court, which, it must be assumed, was in all things correct.

The question, therefore, is, can a, real estate agent, under such facts and circumstances as are disclosed in this case, claim compensation from each of the parties, to an exchange of property ?

As put to the jury, they were authorized to find, that the defendant knew the plaintiff was acting as the agent of Hunt & Winters ; and that they also knew that he was the acting agent of the defendant. In short, that it was well known that the plaintiff was the agent of both parties, and expected compensation from each.

The general principle which forbids a broker or agent from negotiating, as well for the purchaser as for the vendor of property, is founded on the policy of securing to the principal the best and most faithful services of the agent, which cannot ordinarily be done, if the agent’s efforts are at the same time also directed to making the best bargain for the other party. But the principle has its foundation in the actual or constructive fraud of the agent, who, by concealment or misrepresentation of his other employment, secures the confidence of his principal.

Mr. Justice Story says (Story on Ag. § 31), “ It would be a fraud in a broker to act for both parties, concealing his agency for one from the other, in a case where he was entrusted by both with a discretion as to buying and selling.” And again, “it is plain, that if this mutual agency is concealed, it might operate as a complete surprise upon the confidence of both parties.”

But I am unaware of any principle which forbids a broker or real estate agent from acting as the agent of

p. 193

both parties, where it is done without concealment or other fraud. If, therefore, both vendor and purchaser employ the same agent, knowing that he is employed by, and is acting for, both, I can see no reason why his acts should not be upheld, and be entitled to be compensated by both.

In Cassard v. Hinman ( 6 Bosw. 8 ), the contract of the defendant, which he had made through a broker, was repudiated on the ground, that, while the broker persuaded the defendant to employ him as his agent, he was “the secret and fraudulent agent of the other party, to induce the defendant to make the contract.”

But there cannot be a fraud, if all the parties are acting openly, in good faith, and without concealment.

In Dunlap v. Richards, 2 E. D. Smith, 181, which was an action by an agent who had been employed by-both vendor and purchaser, to recover compensation from one, the ground upon which the law rejects such dual employment is stated to be the secrecy of the employment, and the concealment of it from one and the other.

And in Pugsley v. Murray (4 E. D. Smith, 245), it is held, that compensation may be taken from both parties, if, where with full knowledge of the facts that the broker was employed by both and expected pay from both, the party actually promised to pay.

Although there was some evidence of a promise to pay mad e by the defendant, with a full knowledge of the facts, the case was not put to the jury on that ground. But the promise might be available as showing a ratification of the acts-of the plaintiff, after a full knowledge of all the circumstances, and such ratification would render the original employment obligatory upon the defendant (Story on Agency, § 210).

Upon the question submitted to the jury under the charge of the court, they have found, that it was mutually understood that the plaintiff was acting as

Concurrence

p. 194

agent for the defendant, and for Hunt & Winters, and expected pay from each ; and in considering the question raised by the motion to dismiss the complaint, we must assume the facts to be as found by the jury; and those facts disclose a fair and open transaction, which the law will sanction and uphold.

The evidence relating to the title to the lots, which was objected to by the defendant, was probably immaterial to the issues between the parties. But we cannot see that it could, or did, work any injury to the defendant.

The judgment should be affirmed.

Although I concur in the general reasoning and conclusion of my brother Monell, I prefer to put my decision in the case upon the following grounds:

The class of persons in this city who are employed by owners of lands to find a purchaser for them, or by those desirous of purchasing to procure a vendor for them, as is shown by the evidence to have been done in this case, are not in any legal or proper sense brokers, nor are they employed to act as such, although they are usually called by others, and style themselves so, and are in the habit of charging a percentage or broker’s commission for their services. For, while a broker is one who makes a bargain for another, and receives a commission for so doing (6 Bing. 702, 706), an agent, employed among merchants and others to make contracts between them, for a compensation commonly called brokerage (Russell on Factors, 3, 4 ; Story on Agency, § 22), no bargain or contract whatever is made by those who act as middle-men or intermediaries between vendors and purchasers of lands, nor, as the business is usually conducted, are they employed by either party to make a. bargain or contract. They are employed for the mere purpose of finding a person who will buy the

p. 195

land of their principal, or sell to him such land as he may want, and their compensation is earned whenever their principal purchases the land from, or sells it to, the person so "brought to him. The rule, therefore, which makes it unlawful for a "broker to act as the agent of both parties in making the same purchase and sale, does not apply to this class of intermediaries, nor does its reason. An employment by a proposed vendor to find a purchaser of his land, is not in any manner inconsistent with a like employment by another to procure a vendor who will sell land to him. ITo harm can result to either, because of such double employment, nor from the fact that the person so employed receives a compensation from each; but, on the contrary, it may well be supposed that the services of a man who has the names of both purchasers and vendors upon his list of customers or principals, are the more valuable, because of that fact; and where that is the case, and he is the procuring cause of- a sale and purchase between them, there can be no good reason why he should not have from each such a reasonable compensation as he would be entitled to demand from either, if the sale or purchase by a customer was made to or from a stranger. It follows, that the fact that the plaintiff was employed by both the purchaser and seller in this case, as an intermediary to bring them together, does not constitute a bar to his recovery against the defendant.

Note.—This case was before the court in May, 1872, on an appeal from an order setting aside the verdict, and granting a new trial. See Vol. 84, page 486.—Reporters.

Cases cited

Cassard v. Hinman 6 Bosw. 8 N.Y. Super. Ct. 1860-01-07 p. 193