Case ID: misc_32/html/0141-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Per Curiam.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Frederick Southack et al., Respondents, v. J. Henry Lane, Appellant.
    (Supreme Court, Appellate Term,
    July, 1900.)
    Principal and agent — Middlemen distinguished from brokers — Brokers cannot act for both sides — Complaint.
    Real estate brokers are distinguished from middlemen by the fact that the former must be faithful to their principal and have a fixed rate of compensation, while the latter may act for both sides and their compensation is dependent upon agreement.
    Although brokers have been paid nothing by the other side, they cannot recover of their principal where, without the latter’s knowledge, they have acted for both sides.
    Where brokers sue upon a complaint containing the allegations usual in pleading brokers’ services, they cannot recover thereunder as middlemen.
    Appeal from a judgment of the General Term of the City Court, affirming a judgment of the Trial Term, entered on the verdict of a jury, in favor of the plaintiffs and against the defendant.
    Hornblower, Byrne, Taylor & Miller (Howard A. Taylor and Albert S. Bard, of counsel), for appellant.
    Cardozo & Nathan (Edgar J. Nathan, of counsel), for respondents.
   Per Curiam.

The complaint sets forth that the plaintiffs are real estate brokers, that the defendant desired to sell certain real estate and gave the plaintiffs an option or refusal for the purchase of said premises at the price of $180,000, and further agreed to pay the plaintiffs a commission for their services if they should effect a sale thereof, that the plaintiffs did procure one Rose as a purchaser, and introduced him to the defendant, and that thereafter, and in pursuance of such negotiations, a contract for the sale of the premises to said Rose was made by the defendant at the price of $176,000, that the defendant expressly promised and agreed to pay to the plaintiffs, for their services in negotiating the sale of the premises, the sum of $875, and the further sum of $1,000, provided it could be arranged that he would not have to pay the sum of $1,000 to one Hall to surrender a lease of a portion of the premises, that the plaintiffs did procure such surrender, as stipulated, and that a deed of the premises was made and delivered to the said purchaser, that the defendant, by reason of these facts, became indebted to the plaintiffs in the sum of $1,875, and thereafter paid $1,000 of such sum, but refuses to pay the balance of $875. The answer' admits the option, and admits the agreement to pay a commission, provided they procured a purchaser at $180,000, but not at a less price, although it is subsequently admitted that the agreement was made; it admits that Rose was introduced by plaintiffs to defendant, and also admits the sale to Rose for $176,000. The answer, however, denies that such introduction, negotiation, contract of sale, or subsequent conveyance to Rose constituted performance by the plaintiffs of the duties undertaken by them, as defendant’s exclusive agents, or entitled them to a: commission, or to payment for services; and the answer alleges that the plaintiffs were faithless to the defendant in suppressing certain important facts within their knowledge, and in acting as agents for Rosé, and in his interests, without the knowledge of the defendant; the answer admits that defendant expressly agreed to pay to the plaintiffs, for their services in negotiating the sale of the premises, the sum of $875; but alleges that, by reason of the false representations of the plaintiffs, that they could obtain no higher price for said property than $176,000, the defendant was induced to sell the premises for less than might have been obtained for the same. In view of the testimony and the ultimate contentions of the parties, it is unnecessary to state the further allegations of the pleadings.

The only question that requires discussion is the one raised by the denial of the motion to dismiss the complaint, at the close of the testimony. The few exceptions taken upon the admission or exclusion of evidence are not of sufficient weight to demand consideration.

Three grounds are assigned for the dismissal of the complaint, as follows, viz.:

First. Under the complaint itself, the plaintiffs have sued as brokers for a commission arising through negotiations undertaken by them, and have in no way sued as middlemen or introducers; and, under this allegation of the complaint, it would be improper for them to sustain their claim to this commission, on the ground that they were merely introducers.

Second. From the uncontradicted evidence, it appears that they were ordinary real estate brokers, who had undertaken to negotiate a sale of this property for the defendant; that, in the course of these negotiations, they became aware of pertinent facts bearing upon the value of that property at that particular time, and that they failed entirely to disclose those facts.

Third. At the time when the contract was signed, and prior thereto, during the course of these negotiations, while holding themselves out as the agents of the defendant, the plaintiffs were in fact all the time acting as agents on the other side, and were endeavoring to secure the best price for the purchaser, at the same time that they pretended to be the agents of the defendant.

With regard to the alleged suppression of pertinent facts by the plaintiffs, it appears that these pertinent facts consisted of an intention of Rose and of his associates to purchase the defendant’s property as part of a large plot of grounds, on which Rose and his associates proposed to erect an immense establishment, and of the fact that Rose or his associates had already contracted to buy five lots, neighboring to the three sought to be purchased of the defendant. These “ pertinent facts,” however, appear to have been known to the defendant, for, during the negotiations which he appears to have personally carried on with Rose, after the latter had been presented to him by the plaintiffs, he said to Rose: “ Ton must have this property; you are buying other property in the neighborhood; you bought one next door.” The defendant demanded $18.0,000 for the property, but Rose told him that he would give only $175,000. The defendant personally negotiated with Rose, and it was finally agreed between them that Rose should give $176,000. Again the defendant said to Rose, “You will need this property, because you are getting other property in the neighborhood; I understand a stable in our rear has'been sold, and' I have heard it rumored that the American Lithographic Press wanted a large piece of property in this neighborhood — is that your customer? ” But Rose refused to tell him whom he was acting for. Rose, moreover, denies that he told his purpose for buying that property to the plaintiffs. One of the plaintiffs says that he had done his best to get $180,000 for the property and told' defendant so, and then concluded to bring the parties together and let them make their own bargain.

The learned trial justice gave the jury a substantially correct instruction with, regard to middlemen and agents, as follows, viz.: The middleman is employed to bring two or more parties together, the parties, when' they meet, to do their own negotiating and make their own bargains. He sustains no confidential relations with either party, and his fees are always fixed by contract or .stipulation, as the law does not regulate them; and, in that respect, he differs from an agent, for there the law fixes the compensation, if he acts as an agent, and he is entitled to recover as such for the services performed. * * * The law is, that an agent, sustaining the confidential relations of principal and agent, and having property for sale, must act in absolute good faith, and, in employing such agent, his principal also retains in his interest such agent’s knowledge, skill, honesty and best efforts; and if, by any act or by the suppression of any information that affects such interests, the principal is injured, then the agent is not entitled to compensation.” See Knauss v. Gottfried Krueger Brewing Co., 142 N. Y. 70; Haviland v. Price, 6 Misc. Rep. 372; Pollatschek v. Goodwin, 17 id. 587; Siegel v. Gould, 7 Lans. 177; Story Agency (9th ed.), § 38; Chatfield v. Simonson, 92 N. Y. 209; Wadsworth v. Adams, 138 U. S. 380; Abel v. Disbrow, 15 App. Div. 536; Murray v. Beard, 102 N. Y. 505.

The learned trial justice submitted the issues to the jury as follows, viz.: “ If you find that the plaintiffs were the defendant’s agents, and that, while so acting for him in the sale of this property, they suppressed information that would have benefited him, or that they did any other act to his injury, or in violation of this relation of principal and agent, then I charge you, that they are not entitled to recover in this case, as they can only recover if they have rendered honest, fair and impartial services. If, however, you find that they were simply employed as middlemen to bring the parties together — there being no dispute as to the agreement to pay the $875—then the plaintiffs are entitled to recover the $875. If, on the other hand, you find that they were agents, but did all they ought to do, under the rules as I have laid them down for your guidance, and that they did not act in bad faith, or suppress any information that should have been disclosed by them, you may find a verdict in their favor for $875.” By their verdict, the jury have found one of two things, viz.: either that the plaintiffs were middlemen, or that they were agents who had faithfully performed their duties as such. The defendant claims that under the allegations of the complaint itself, they were not middlemen, but agents; and that, by reason of their own admission in the testimony, they had not faithfully performed their duties as such agents.

The defendant’s counsel requested the court to further charge the jury that the plaintiffs “ admit that up to the moment when Lane entered the office of Rose & Putzel, they had been acting as his agent, and they claim that thereafter they were acting as middlemen — and now we claim that the jury must find that Lane was distinctly informed of, and consented to, this change of relationship; and no longer relied in any way upon the assistance or advice of the plaintiffs; ” which request the court charged. It is clear, therefore, that the jury must have understood what requirements the plaintiffs had to establish before they could find that plaintiffs were merely middlemen. It seems to us from the uncontradicted testimony, that plaintiffs cannot recover as agents, for they were clearly in the employment of Rose for the purchase of this property, at the same time that they were negotiating a sale for the defendant, and this without the knowledge of defendant. A real estate broker, by attempting to act for both sides, without the knowledge of the parties, loses his claim for commissions, and can enforce payment from neither party. Baer v. Koch, 2 Misc. Rep. 334. If, however, they were middlemen only, they were entitled to the verdict, for the rule, that a broker employed to buy or sell real estate, loses his right to compensation if he agrees to act in a similar capacity for the other party, does not apply to one employed simply to bring the parties together. There is no violation of duty in such a case on the part of the broker in agreeing for commissions from each party, or in failing to notify the one of his employment by the other. Knauss v. Brewing Co., 142 N. Y. 70.

No exception was taken to the charge, except as to the instruction that the compensation of an agent is fixed by law, and that of a middleman by contract. This instruction was thereupon modified as follows: “ The rule is that the agent is entitled to one per cent., in the absence of any other agreement.”

"We have not failed to notice that the plaintiff, Ball, swears that his firm was never paid anything by Rose & Putzel, or anyone on their behalf, for this negotiation and transaction. Nevertheless, he admits his relations with Rose, for he says: “He (Rose) told me at the outset, on the subject of the price,' that I must see the best I could do and submit it to him; that I should get a uniform, price on the property and submit it. Q. And when he said he, wanted you to do the best you could about the price, he being the. proposed purchaser, you knew he meant to get the prices as. low as possible to submit to him? A. I take it that he meant to bring the properties together and the prices too. Q. When Rose and Putzel told you that you were to do the best you could about the price, and they were proposing to buy this property, did not you. understand that your object was to secure as low a price as possible to be named to them? A. Yes. Q. And this was prior to the option with Lane, and the signing of the contract? A. Yes. Q. Did you thereupon undertake to fulfill the commission of Rose? A. Yes.” We think that the plaintiffs are shown by the undisputed testimony to have been acting for both parties, unknown to the defendant, and could not recover as brokers.

We will now examine the pleadings and proof as to their acting as middlemen. The complaint alleges (1), that the plaintiffs were real estate brokers; (2), that defendant, well knowing this fact, gave plaintiffs an option or refusal for the purchase of said premises at the price of $180,000; and further agreed to pay the plaintiffs a commission for their services, if they should effect a sale thereof; ” (3), that the plaintiffs did procure Rose as purchaser, and introduced him to the defendant, and, in pursuance of the negotiations so initiated by the plaintiffs, a contract for the sale of said premises to Rose was made at the price of $176,000; (4), that defendant expressly promised and agreed to pay to plaintiffs for their services in negotiating the sale of said premises as aforesaid, the sum of $875.” There is nothing in the complaint to indicate that the plaintiffs regarded themselves as middlemen, but, on the other hand, they appear to base their cause of action on the theory that they were brokers employed by the defendant to effect the sale of this property. The testimony, taken in the light most favorable to the plaintiffs, is not convincing that they were middlemen. The plaintiff Ball swears that, being unable to secure the $180,000, he sent his employee Deane to the defendant. “ Q. And your sending him to see Lane was in your efforts to secure these lots for Rose? A. Yes.” He goes on to say that he telephoned Deane to bring the defendant to meet, Rose, and then met the defendant at Rose’s office, and told him he could not get $180,000. He adds, my understanding was that Lane refused to do better than his price of $180,000, and Rose would not do anything better than $170,000, and we wanted to bring the principals together and let them settle the matter themselves.” “ Q. You submitted various propositions back and forth? A. Yes.” He says that, up to the time of the final interview between the defendant and Rose, the plaintiffs considered it their duty to advise the defendant. He also says that at that interview the defendant wanted Rose to pay all the commissions or fees of the plaintiffs, which Rose declined to do, and that the defendant finally agreed to pay the fees, and $1,000 to the plaintiffs, provided the latter secured the surrender of the Hall lease. The $1,000 was paid. The defendant swears that he was in ignorance of the fact that the plaintiffs were also working for Rose, in bringing about the sale, when this agreement was made. The plaintiff, Ball, does not deny that, before the contract of sale was made, he knew of the other purchases by Rose, but failed to communicate the information to the defendant. He attempts to explain this by saying that he thought when the defendant came to Rose’s office, as above described, that the plaintiffs’ duties to the defendant ceased, and that the defendant could take care of himself — in other words, that, having brought the parties together before they had agreed upon a-price, his duties as agent ceased, and that he. became a mere middleman. While confessing that he knew of Rose’s various purchases of surrounding property, he “ presumed ” that a large establishment was to be erected thereon, but he made no disclosures in this respect to defendant.

Upon a careful review of the whole case, it seems to us, that the testimony of the plaintiffs themselves preclude a recovery by them as brokers; while, under the pleadings the plaintiffs cannot maintain the action as middlemen. The judgment, must, therefore, be reversed, and a new trial ordered, with costs to the appellants to abide the event.

Present: Beekman, P. J., Gildersleeve and Giegerich, JJ.

Judgment reversed and new trial ordered, with costs to appellant to abide event.