Court Opinion

ID: 5236774
Source: CourtListenerOpinion
Date Created: 2022-01-06 17:11:03.847203+00
Date Added: 2024-06-11T08:27:44.722808
License: Public Domain

McLaughlin, J. (dissenting):
I am unable to agree with a majority of the court that the judgment appealed from should be reversed and judgment directed in favor of the plaintiff; on the contrary, I think the judgment should be affirmed.
Under the contract, and its several modifications, which the plaintiff had with the defendant exploration company, he was absolutely prohibited, without the written consent of such company, signed by its president or vice-president, from acquiring, when he did, an interest in the option taken by Perry to purchase claims 89-104 Below .Discovery, Bonanza Creek. After the execution of the contract and the several modifications, the plaintiff, while in the employ of the exploration company, acquired from time to time various mining *875interests, and in each instance — except the one under consideration— asked for and received the company’s consent. An intimation is made in the prevailing opinion that such consent was not required in the instance under consideration by reason of the amendment of February 26, 1903. I do not think the contract is susceptible of this construction. It is not the construction put upon it by the plaintiff himself, because when he acquired the interest, according to his own testimony, he was very careful to have it understood if the company did object, then the amount of money advanced to Perry was to be considered as a loan. It is not the construction put upon it by plaintiff’s counsel on the appeal, because he concedes in the brief presented “that the terms of the contract between the plaintiff and the defendant company restrained him [plaintiff] from entering into the arrangement made with Perry; ” and in this connection he urges that the consent was subsequently given. The trial court found it was not given, and I think there is sufficient evidence to sustain the finding. It certainly cannot be said to be against the weight of evidence. Viewing the evidence in the most favorable light to the plaintiff, all that can be claimed from it is that Hammond, the general superintendent, and Daniel Guggenheim, the president of the company, knew that after the settlement was made with Perry he was going to let the plaintiff have a portion of his stock and option. The evidence does not show, as I read the record, that the company, or any of its officers or directors, knew that the plaintiff was interested with Perry in the enterprise other than as above indicated.
Nearly a year after the plaintiff acquired his interest with Perry he suggested, by reason of the fact that he had made a loan to Perry which enabled him to acquire options on the claims, that he was entitled to some recognition by the company. The suggestion was acted upon and the company permitted him to purchase 180 shares of its stock at a price which enabled him to make a profit of about $20,000. This was upon the theory that he had made simply a loan to Perry and was not otherwise personally interested in the enterprise. It is quite improbable that had the company known at the time he was interested with Perry, and when a settlement was made *876with him plaintiff would receive, by virtue of his interest, the large amount of profits he is here seeking to recover, it would then, in effect, have made him a present of $20,000.
When Perry came to settle with the company the terms agreed upon were largely in excess of what he would otherwise have demanded and been satisfied with were it not for the fact that he had, under his arrangement with plaintiff, agreed to let him have a large proportion of what he received. Perry so testified. This fact, prior to the settlement, was not communicated to the company, any of its .officers, or Hammond. In this connection Hammond’s testimony is quite significant. He stated that had he known of that fact he would have suggested that both the plaintiff and Perry be “fired out of the office.”
It is suggested, not by counsel, that the fact that Perry demanded and received more than he would have been satisfied with had the plaintiff not been interested with him is of no importance, since Perry and the company dealt at arm’s length. I am unable to appreciate the suggestion. Honesty and fair dealing require a different standard. Perry was entitled to receive from the company a fair compensation for the services rendered by him, and this is all to which he was entitled. This is what the company supposed it was paying him when the settlement was made, but he knew such was not the case. That he was subsequently to let plaintiff have some of the interest received is a different proposition from his fixing his compensation, because of that fact, at an amount largely in. excess of what he knew he was entitled to. He could, of course, after the stock or option to purchase had been given to him, if he had received only that to which he was entitled — he being under no contract with the company — sell it to the plaintiff or give it to him if he so desired. A fair consideration of the entire testimony of Daniel Guggenheim shows this is what he had in mind when he testified, referring to a conversation with Hammond: “ He said to me at one time that Hr. Beatty wants to get some of the stock or wishes to get some of the stock that was allotted to Hr. Perry and whether I would have any objection to his getting any of that stock. I told Hr. Hammond that I did not object.”
*877The plaintiff violated his contract when he entered into the agreement with Perry to advance $35,000 and share in the profits realized. Such violation precluded him from receiving any of such profits. This conclusion is not changed simply because he told Hammond that he had an interest in Perry’s claim, or that Perry was going to let him have some of the stock and option allotted to him, and Hammond, in turn, told the same to the president of the exploration company. As stated by Sir George Jessel in Dunne v. English (L. R. 18 Eq. 524): “It is not enough for the agent to tell the principal that he is going to have an interest in the purchase, or to have a part in the purchase. He must tell him all the material facts. He must make a full disclosure.” (See, also, McKinley v. Williams, 74 Fed. Rep. 94; Liquidators of Imperial Mercantile Credit Assn. v. Coleman, L. R. 6 H. L. 189; 2 Pom. Eq. Juris. [3d ed.] §§ 956, 957, 959.)
The plaintiff has been awarded by the judgment appealed from a recovery for the amount of money advanced to Perry, less what has since been paid thereon, together with interest. This is all to which I think he is entitled. The company was entitled to his services, uninfluenced by the expectation of any reward other than that furnished by the contract. He was obligated under the contract, before he acquired any interest in the arrangement with Perry, to make a full disclosure to his principal and obtain its consent .to his receiving what he claimed. To permit the plaintiff to recover in this action, outside of what he had been awarded, is, it seems to me, to destroy one of the most salutary rules which has been adopted to prevent an agent making a secret profit out of his position. “ It is,” said Lord Justice Williams in Costa Rica Ry. Co. v. Forwood (L. R. [1901] 1 Ch. Div. 760), referring to Aberdeen R. R. Co. v. Blaikie (1 Macq. 461; 9 Scots Revised Rep. [H. L.] 365), “a rule of universal application that no trustee shall be allowed to enter into engagements in which he has, or can nave, a personal interest, conflicting, or which may possibly conflict, with the interest of those whom he is bound by fiduciary duty to protect. So strictly is this principle adhered to, that no question is allowed to be raised as to the fairness, or unfairness, of the transaction; for it is enough that the *878parties interested object.” (See, also, Goodell v. Hurlbut, 5 App. Div. 77.)
After a careful consideration of the record I am unable to reach any conclusion other than that the plaintiff deliberately violated his contract when he entered into the agreement with Perry; that the exploration company never knew that he had an interest in that agreement, and never consented, with knowledge of that fact, that he should receive a portion of the compensation paid to Perry.
The judgment should be affirmed.
Ingraham, P. J., concurred.