Court Opinion

ID: 6962177
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:47:26.986517+00
Date Added: 2024-06-11T16:08:28.746213
License: Public Domain

Mr. Chief Justice Sheldon delivered the opinion of the Court: Under the facts in this case the only question arising is, whether Hamlin, by reason of Davis’ agency and confidential relation to him, is entitled to the benefit of the lease executed by Borden to Davis. In the employment of an agent the principal bargains for the disinterested skill, diligence and zeal of the agent for his own exclusive benefit. Upon entering into the employ of Hamlin, there rested upon Davis the duty of fidelity to his employer’s interest, and of acting for the furtherance and advancement of the business in which he was engaged, and not in its injury. We view the whole conduct of Davis in regard to the lease in question as violative of the duty of the relation in which he stood toward Hamlin. His first offer to rent the premises from Borden, about December, 1881, was an act hostile to the interest of his employer. He offered Borden a rent which was nearly $5000 in excess of the rent which Hamlin was then paying. Borden knew that this was an offer made upon an exact knowledge of the profits of the business, which Davis, from his employment, had peculiar means of knowing, and the natural effect would be to cause Hamlin to pay an enhanced rent when he should come to ask for a renewal of his lease. Davis violated the duty of his relation in concealing from Hamlin that he was attempting to get the lease. Davis excuses 1ns denial to Hamlin of such attempt by saying that this was on January 17, and that it was true that at that time he was not making such an attempt, but had given it over, not up to that time having received any response from Borden to Davis’ offer to rent,- made on December 1, and that he was then, on January 17, making, or had made, preparations to go into another business. Taking this to be so, we find Davis only two days later, January 19, in the act of negotiation for the lease, and making an offer to Borden for the lease, which the latter took time to consider. Now, Davis knew that it was of vital importance to the interest of Hamlin that the latter should get a renewal of his lease; that Hamlin was most anxious to ascertain whether Davis—who alone, with Hamlin, had exact knowledge of the profits of the business—was in competition for the lease; and from Davis, only two days before, denying that he was competing for the lease, Davis knew, on January 19, that the belief was resting on Hamlin’s mind, from what Davis had told him two days before, that Davis was not a competitor for the lease. Under these circumstances Davis ought to have disabused the mind of Hamlin of the impression, which Davis had caused, that the latter was not attempting to get the lease, and have informed Hamlin of what the fact was, to give to the latter the opportunity to act accordingly, and Davis’ not doing so was a breach of good faith toward his employer. The obtaining of the lease by Davis amounted to a virtual destruction of his employer’s whole business at the termination of the old lease, under which the latter was holding. By some ten years of labor Hamlin had built up a business of a very profitable character. There was a good will attached to it, which was valuable. Hamlin was intending to make it a lifetime business. Sustaining this lease to Davis, at the end of Hamlin’s lease, April 16, 1S83, all this business would come to an end, and pass, good will and all, from Hamlin, the employer, into the hands of Davis, the employe. And this would have been accomplished by the means of a renewal lease obtained by a confidential agent, in violation of the duty of his relation, and acquired, presumably, because of peculiar means of knowledge of the profitableness of the business, afforded him by the confidential position in which he was employed. A personal benefit thus obtained by an agent, equity will hold to inure for the benefit of the principal. Public policy, we think, must condemn such a transaction J as that in question. To sanction it would hold out a temptation to the agent to speculate off from his principal to the latter’s detriment. Davis very well knew that his employer would be willing to pay a much higher rent than that at which S he obtained the lease, and that he could dispose of the lease to Hamlin at a large profit to himself, and sudwneans^of knowledge^was-derived from his position as agent. If a manager of a business were allowed to obtain such a lease for himself, there would be laid before him the inducement to produce in the mind of his principal an under-estimate of the value of the lease, and to that end, may be, to mismanage so as to reduce profits, in order that he might more easily acquire the lease for himself. It is contended by appellant’s counsel that the rule we apply, which holds an agent to be a trustee for his principal, has no application to the case at bar, because Davis was not an agent to obtain a renewal of the lease, and was not charged with any duty in regard thereto; that his was but the specific employment to engage amusements for the theatre, and that he was an agent only within the scope of that employment; that Hamlin having a lease which would expire April 16, 1883, had no right’or interest in the property thereafter, and that Davis, in negotiating for the lease, did not deal with any property wherein Hamlin had any interest, and that such property was not the subject matter of any trust between them. Although there was here no right of renewal of the lease in the tenant, he had a reasonable expectation of its renewal, which courts of equity have recognized as an interest of value, secretly to interfere with which, and disappoint, by an agent in the management of the lessee’s business, we regard as inconsistent with the fidelity which the agent owes to the business of his principal. There was the good will of the business, which belonged to the business as a portion of it, and this the agent got for himself. It is further argued that the relation here between Hamlin and Davis was that of master and servant, or employer and employe, and that the rule has never been applied to that relation as a class, and that the classes coming within that doctrine are embraced within the list of defined confidential relations, such as trustee and beneficiary, guardian and.ward, etc. The subject is not comprehended within any such narrowness of view as is presented on appellant’s part. In applying the rule, it is the nature of the relation which is to be regarded, and not thifTI§Signation of the one 'filling the relation. Of this principle Bispham says: “The rule under discussion applies not only to persons standing in a direct fiduciary relation towards others, such as trustees, executors, attorneys and agents, but also to those who occupy any position out of which a similar duty ought, in equity and good morals, to arise.” (Bispham’s Equity, sec. 93.) In Greenlaw v. King, 5 Jur. 19, Lord Chancellor Cottenham, speaking of this doctrine, says: “The rule was one of universal application, affecting all-persons who came within its principle, which was, that no party could be permitted to purchase an interest when he had a duty to perform which was inconsistent with the character of a purchaser.” “It is the duty of a trustee, ” said Lord Brougham, in Hamilton v. Wright, 9 Cl. & Fin. 111, “to do nothing for the impairing or destruction of the trust, nor to place himself in a position inconsistent wfith the interests of the trust. ” And on page 124: “Nor is it only on account of the conflict between his interests and his duty to the trust that such transactions are forbidden. The knowledge which he acquires as trustee is, of itself, sufficient ground of disqualification, and of requiring that such knowledge shall not be capable of being used for his own benefit to injure the trust.” Although this was said of a trustee, we think it may be equally said here with respect to Davis and the business which he was employed to manage. The rule we apply, as to its broadness in extent, is aptly expressed in the American note to Keech v. Sandford, 1 Lead. Cases in Eq. 53, as follows: “Wherever one person is placed in such relation to another, by the act or consent of that other, or the act of a third person, or of the law, that he becomes interested for him, or interested with him, in any subject of property or business, he is prohibited from acquiring rights in that subject antagonistic to the person with whose interests he has become associated. ” The views which we have above expressed we believe to be in accordance with the well established principles of equitable jurisprudence. See Devall v. Burbridge, 4 Watts & S. 305; Hill v. Frazier, 22 Pa. St. 320; Fairman v. Bavin, 29 Ill. 75; Gilman, Clinton and Springfield R. R. Co. v. Kelly, 77 id. 426.; Bennett v. Vansyckle, 4 Duer, 462; Gillenwaters v. Miller, 49 Miss. 150; Grumley v. Webb, 44 Mo. 446. The judgment of the Appellate Court must be affirmed. Judgment affirmed.