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JOHN P. SINNA AND ANOTHER v. SPERRY REALTY & INVESTMENT COMPANY

Minnesota Supreme Court1930-08-15No. No. 27,518
181 Minn. 183

Summary

Holding. The trial court's judgment for the plaintiffs was affirmed. The defendant, having committed fraud against the plaintiffs by concealing the boot money and acting in bad faith as their agent, must forfeit both the $950 boot money it retained and any claim to the $200 commission.

The plaintiffs hired the defendant real estate company to arrange an exchange of their 40-acre farm for a St. Paul lot owned by the Sellys. The parties agreed to an even trade if the defendant would waive its $200 commission. During negotiations, the Sellys obtained a vendor's contract worth approximately $1,600, which they offered to sell at a discount. The defendant accepted this contract from the Sellys but retained the approximately $950 in boot money that should have gone to the plaintiffs, without informing them of its existence. The trial court found this conduct constituted fraud.

The defendant argued it was entitled to keep the boot money and collect its commission, but the court rejected both claims. Because the defendant breached its duty of loyalty by acting deceptively toward the plaintiffs—its clients—it forfeited both the $950 and the $200 commission it had agreed to waive. The court emphasized that an agent who acts in bad faith and fails to disclose material facts to its principal cannot recover compensation for services rendered.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether an agent's fraudulent concealment of funds from its principal constitutes grounds for forfeiture of compensation
  • Whether an agent acting in bad faith can recover a commission for facilitating a transaction
  • Fiduciary duties of real estate agents to disclose material facts to principals

Procedural posture

The plaintiffs brought suit to recover boot money the defendant retained from a land exchange transaction; the trial court entered findings for the plaintiffs, and the defendant appealed from the denial of its motion for a new trial.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Dibell, J.

This is an action to recover of the defendant, alleged to be the agent of the plaintiffs in procuring an exchange of lands, an amount received by it from the other party to the exchange to be applied as boot money on the exchange, which the defendant retained for its own use. There were findings for the plaintiffs, and the defendant appeals from the order denying its motion for a new trial.

In November, 1926, the plaintiffs were the owners of a 40-acre farm in Ramsey county, subject to a mortgage, in which they claimed their equity was $6,000. One Mary Selly, of whom A. J. Selly was the husband, was the owner of a lot in St. Paul, subject to a mortgage, in which they claimed the equity was $5,050.

The plaintiffs employed the defendant to procure a purchaser for the 40-acre tract or to secure town property in St. Paul in exchange for it. The defendant advertised, and in response A. ,T. Selly appeared and negotiations commenced. They were conducted through one Shircliff, a representative of the defendant, for whose acts it was liable.

The plaintiffs were willing to exchange the 40 for the lot upon payment of $950 boot money. The Sellys were willing to trade but had no money. The court found on sufficient evidence that Shircliff importuned the plaintiffs to make the exchange without a differential and represented that the Sellys would give no more. The plaintiffs finally agreed to an even exchange if they were relieved of the payment of a $200 commission. The Sellys told Shircliff that they had a vendor’s contract for something like $1,600 which they would sell at a ten per cent discount and suggested in effect that the trade might be carried out by using it. The Sperry company entered into a contract by which the Sellys were to trans fer the vendor’s contract and convey the town lot to the defendant or to whomsoever it directed. The exchange was made, deeds passed back and forth between the Sinnas and the Sellys, and all now have the property they wanted and now want. But the Sinnas did not receive the $950 boot money. The defendant has it. The Sinnas were not told about it. The facts found by the court constituted a fraud upon the Sinnas. Robyn v. White, 153 Minn. 76, 189 N. W. 577; Pegors v. Huff, 153 Minn. 253, 190 N. W. 43. It is unnecessary to analyze the basis of it — clearly it was a fraud. We do not discuss the facts as the defendant claims them to be. The court did not find them in accordance with the defendant’s claim, and the finding which is made is sustained.

The defendant cannot recover or keep the agreed commission of $200. If it had carried out the contract in good faith it would be entitled to it. Under the finding of the court it was disloyal and unfaithful to the plaintiffs and cannot have compensation. Davis v. Swedish-Am. Nat. Bank, 78 Minn. 408, 80 N. W. 953, 81 N. W. 210, 79 A. S. R. 400; Church v. Odell, 100 Minn. 98, 110 N. W. 346; Blackey v. Alexander, 156 Minn. 478, 195 N. W. 455; In re Disbarment of Buck, 171 Minn. 352, 214 N. W. 662; Faber v. Enkema, 180 Minn. 493, 231 N. W. 410, and cases cited; 1 Dunnell, Minn. Dig. (2 ed.) § 700; 6 C. J. 722, § 290.

Some of the facts recited are involved in Selly v. Sperry R. & I. Co. 181 Minn. 186, 232 N. W. 6.

Order affirmed.