Opinion ID: 2037629
Heading Depth: 1
Heading Rank: 2

Heading: Intervening Third Parties

Text: Kane offered Drs. Dietz and Carlson the opportunity to purchase the building. After they refused to exercise their option, Kane sold the building to Employees. Kane now contends that this intervening third party terminates Coldwell's right to a commission. As noted earlier, a brokerage contract creates an employment or agency relationship between the two parties. Kruger, supra . Agency is the relationship which results where one person, the principal, authorizes another, the agent, to act for them in dealing with a third person. NDCC § 3-01-01. This relationship is differentiated from other relationships by its characteristic fiduciary qualities. 2A C.J.S. Agency, § 4 (1972); Restatement (Second) of Agency, § 1 (1957); cf. Gillmore v. Morelli, 472 N.W.2d 738 (N.D.1991) [brokers duty to employer is essentially the same fiduciary duty that an agent owes principal]. As principalthe party for whom action is to be takenKane's duties and liabilities to his agent, Coldwell, rest primarily upon the terms of the agency (employment) contract and upon his obligation to use good faith with his agent. 3 C.J.S. Agency, § 318 (1973). As a result of this good faith requirement, the principal is under a duty not to prevent the fulfillment of a condition on which compensation is based by unwarranted conduct. Id. at § 346. See generally, Restatement (Second) of Agency, §§ 432 et seq. (1957). In this case, it was shown to the trial court that Kane actively pursued, sought, negotiated, and had a vested interest in the sale of the building from Employees to Drs. Dietz and Carlson. Kane negotiated the financial terms, sale price, interest rates, and mortgage amounts as well as negotiating the timing of the sale. Because Kane was still obligated under his contract with Coldwell, these unilateral actions by Kane effectively shut Coldwell out of the sale process, thus depriving it of its contractual right to a commission. Kane's alleged ignorance of the contract and his duties from it are no defense, for one is generally presumed to know of what one contracts. Similarly, Kane cannot rely on the theory that an innocent seller is not liable to a broker for a commission when the seller acts in good faith and without knowledge that the purchaser is the secret representative or an agent of the customer procured by the broker. 12 C.J.S. Brokers, § 174 (1980); Zetlin v. Scher, 217 A.2d 266 (Md. 1966); Ritch v. Robertson, 93 Conn. 459, 106 A. 509 (1919). Whether or not Employees was an agent of the doctors is beside the point. Kane's actions in facilitating, negotiating and even encouraging the sale of the building from Employees to the doctors remove these activities from the realm of good faith and without knowledge. Kane knew of the relationship he established between Employees and the doctors and cannot now claim innocence. The nature of this transaction in these circumstancesKane's active involvement in negotiating, Kane's knowledge of the future sale to Drs. Dietz and Carlson, the transfer from Employees to the doctors on the same day, as well as the underlying principles of good faith required by Kane and a broker's contractual right to a commission all support the trial courts view that the sale to Employees was a mere financing mechanism. Kane's actions cannot deprive Coldwell of its contractual right to a commission. The judgment of the trial court is affirmed. ERICKSTAD, C.J., MESCHKE and LEVINE, JJ., and VERNON R. PEDERSON, Surrogate Judge, concur. VERNON R. PEDERSON, Surrogate Judge, sitting in place of JOHNSON, J., disqualified.