Court Opinion

ID: 5460088
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:33:00.88032+00
Date Added: 2024-06-11T08:32:50.526808
License: Public Domain

Bacon, P. J.
The facts of this case, so far as they are necessary to be understood to present the question of law arising from them, are very few, and without dispute. They rest in part upon documentary evidence, and in part upon testimony which is unimpeached and uncontradicted. They are embraced substantially in the following brief statement. In January, 1857, the defendant was the owner of a number of shares of the Oswego River Starch Company, and the *284agent df the company in the city of New York for disposing of its manufacture. In an interview at that date between the parties, in New York, after a glowing account by the defendant of the business of the concern, and of which the plaintiff had previously no knowledge whatever, the plaintiff expressed a desiré to purchase some one or two thousand dollars worth of the stock, if any was to be obtained in the market, at a price not exceeding $150 per share. The defendant thereupon undertook to buy some if it could be procured, and if successful, he was to apprise the plaintiff, who resided in the county of Chenango. Accordingly, on the 31st of January, 1857, he addressed a letter to the plaintiff, reiterating his opinion of the value of the investment, stating' that he knew where he could obtain ten shares at $150 per share, and asking the defendant if he would like it. He states further that he does not wish to advise the plaintiff, but if he should conclude to take the stock, he would “ get and send him a certificate” for that amount. The plaintiff answers this letter on the 5th of February, remarking that he liked the statement, and was willing to take that amount, and desiring the defendant to obtain the certificate, when he would at once put him in funds. This letter the defendant acknowledges on the 19th by a brief note, saying that he would write and get the certificate as soon as possible ; and on the 25th of February he writes again, inclosing the plaintiff the scrip for ten shares of the stock, and adding in a postscript, “ If we meet with no mishap, I think our stock will pay well. I could sell quick at $150, if I had any to dispose of.” The plaintiff remitted the $1500, and that closed the transaction.
What occurred subsequently it is unnecessary, in view of the question presented by the case, to allude to. It is only requisite to state that the defendant did not in fact purchase any stock from the company, or from any outside party, but caused 10 shares of his own stock to be transferred jfco the plaintiff ; that he did not communicate this fact to the plaintiff, *285at any time during the negotiation nor subsequently, "and the plaintiff was entirely ignorant of that fact, and never learned it until the month of June in the following year. At the time of this transfer the affairs of the company were in an embarrassed condition, although there is no evidence that the defendant had any knowledge of this; and in the same year; 1857, the concern was wound up, and passed into the hands of a receiver, and a new company was organized upon the ruins of the old association.
Upon the trial, these facts, with others, appeared, and the presiding justice found that the transfer was made in good faith, hy the defendant, believing that the stock was worth the price he received for it, and with no intent to defraud the plaintiff; that upon the facts the plaintiff was not entitled to rescind the sale; and he ordered the complaint to be dismissed, with costs.
It is undoubtedly true that the action in this case is based mainly and prominently upon the theory of an actual fraud perpetrated upon the plaintiff by representations of the value and condition of the stock, made by the defendant, with knowledge of the falsity of such representations. This theory, however, cannot he supported. The evidence wholly fails to connect the defendant with the company in such a way as necessarily to have made him cognizant of its affairs. On the contrary, he had every assurance from the active officers and agents of the concern that they were in a palmy-condition, and I concur entirely in the finding which acquits the defendant of any actual intent to deceive the plaintiff into the purchase of a worthless stock. Granting this, however, the case has another aspect which is clearly stated in the complaint, and sustained by evidence which was received without objection; and upon the case thus made the plaintiff has a right to ask relief, if by the rules of the law he is entitled to it. Upon principles well settled, both here and in England, I think the plaintiff is entitled to call for a rescission of this contract.
*286It is clear that the defendant was intrusted with a commission to purchase in the market, for the plaintiff, so many shares of the stock of the company in question, and to that extent and for that purpose he was the agent of the plaintiff. This required of him to use his best judgment in making the purchase, and to obtain the stock on the most advantageous terms upon which it could be procured from an outside party. " He was not at liberty to sell his own stock, for this would place him in the unauthorized position, substantially, of both a purchaser and a seller of the same commodity. Certainly he could occupy no such position without fully apprising the plaintiff of the facts and then submitting it to his judgment, whether he would or would not take the .stock thus offered, to his acceptance. It is quite possible that the plaintiff would have been willing to receive a transfer of the defendant’s stock on precisely the same terms, and for the same price, that he had reason to believe he was paying upon an actual purchase by his agent from another source; and still it is quite as possible that the communication of such a fact might have induced him to question the propriety of the purchase. At all events he was entitled to be put in possession of the actual facts; and the suppression of them, without imputing any improper design to the defendant, which I do not believe existed, was in law. a constructive fraud which, equally with actual fraud, entitles the plaintiff to relief.
The principle I have alluded to as applicable to this case is as well settled upon authority, as it is consonant with the elementary principles of fair and ingenuous dealing among men. In The Utica Insurance Co. v. Toledo Insurance Co., (17 Barb. 132,) this court held that a person cannot act as the agent of both parties in the making of a contract, when he is invested with a discretion, and is bound to exercise his skill and judgment in behalf of each.
It is a fundamental principle, says Justice Allen, applicable to both sales^and purchases, that an agent employed to sell cannot make himself the purchaser, nor if employed to *287purchase can he be himself the seller. The validity of such" a contract does not depend upon the question whether he derives any advantage from the transaction, but the policy of the law, without inquiring into the possible benefit, or into the actual good faith of the agent, declares the act void. The same question arose'in The N. York Central Ins. Co. v. The Notional Prot. Ins. Co., (20 Barb. 468,) and was decided in the same way, and upon appeal to the court of appeals the judgment was affirmed. (See 14 N. Y. Rep. 85.) In the opinion Judge Denio reaffirms the doctrine contained in the 17th Barbour, and says that it is not necessary to relief from such a transaction to show that any improper advantage has been obtained. It is at the option of the party seeking relief to affirm or repudiate the transaction, irrespective of any proof of actual fraud, and so are all the cases.
The English decisions are uniformly to the same effect, especially in reference to transactions between trustees and their cesiuis que trust, and in respect to all employments of a fiduciary character, and, where a special agency is created, the courts exercise a most jealous scrutiny. The case of Gillette v. Peppercorne, (3 Beav. 78,) may be taken as illustrative of the extent of the rule, and as presenting features strikingly analogous to the case at bar. The plaintiff employed the defendant, who was a stockbroker, to buy some canal shares. He apparently bought them of a third party who was the ostensible owner, but who it afterwards turned out held them in trust for the defendant. The court, after tjhe lapse of several years, and without entering into the question of the fairness of the price, held the transaction void upon grounds of public policy. It was insisted in that case that the defendant was not acting in his capacity of broker, or as an agent in any sense, but gratuitously, and as the friend of the defendant; but the master of the rolls said that if that were so, and the act was gratuitous, it made no difference as to the result of the transaction.
Where an agent is employed, he remarked, it is in the *288faith that he will act for the benefit of his employer, and not with the idea that he has himself an interest in the very transaction, which may be opposed to his principal. It is not nefiessary to show fraud, or even ultimate loss, but the transaction is avoided on the ground that the defendant was in a situation of trust which did not allow him to deal with his own property, when his principal had reason to believe he was dealing with another. The same remark, in substance, is made by Vice Chancellor Shad well, in Beekman v. Rothschild, (3 Sim. 216,) where he says, one has a right to complain if his agent does not do that which he is employed to do, and represents that he has done as he was directed, but in truth has done quite a different thing.
These cases, and the reasons and principles upon which they are founded, are decisive as to the rule which must govern in disposing of the rights of these parties. Without passing upon, or even lo'oking into' the question of actual fraud, the transaction complained of is one that cannot be upheld in the light of the simple and plain duty that every agent, however limited and circumscribed may be his employment, and irrespective of all question of benefit or advantage to himself, owes to his principal.
The judgment must be reversed, and a new trial granted, with costs to abide the event.
Mullin and Morgan, Justices, concurred.