Sec. 63. Agent May Not Make Secret Profits

A real estate broker who receives a price in excess of that reported and accounted for to his principal is liable to the principal for the difference.10 And so a real estate agent who induces the owner to fix a net price upon certain property upon the supposition that a sale is to be made to a third party cannot himself purchase the property and by such transaction realize a greater profit than a reasonable commission.11

This doctrine was enforced in the New York courts in Bain v. Brown, 56 N. Y. 285 (1874),'in which an agent authorized to sell real estate of his principal contracted to sell the same for $17,000 and advised his principal of the sale. The next day, other parties applying to purchase the property, he opened negotiations for a sale to them which resulted in his giving his own name as vendor and selling the property for $26,000. He then took an assignment of the first contract, and procured his principal to deed direct to the parties with whom he had contracted, on the representation that the purchaser under the first contract had assigned to them. The price to be paid under the second contract he did not communicate to his principal. He received the $26,000, accounting to his principal only for the $17,000. In an action to recover the balance the Court of Appeals held that, assuming the first sale to have been in good faith, the agent could not rightfully appropriate to himself the advance upon the second sale, but that the principal was entitled to the benefit thereof. The officers of a corporation are its agents, and the rule applies to them.12

9 Clark v. Bird, 66 App. Div. 284 (N. Y. 1901).

10 Babcock v. De Mott, 160 Fed. 882 (1908).

นน Merriam v. Johnson, 86 Minn. 61; 90 N. W. 116 (1902).

Where the broker is to receive for his compensation all in excess of a fixed net price, it has been said that he need not disclose to the vendor the terms of the sale.13

Sec. 64. Broker's Employees Governed By Same Rules

The same principles apply to a clerk of the broker. Whatever duty the broker owes to the seller, the clerk equally owes the same. The disability extends to all persons who being employed or concerned in the affairs of another acquire a knowledge of his property. "The honesty and fairness of transactions between principals and their agents demand a firm adherence to these rules, and to bring within their operation, not only the agent himself but those in his immediate employ, and who are engaged in the transaction of his business, which is, necessarily, the business of the agent's principal."14

12 McCloskey v. Goldman, 62 Misc. 464 (N. Y. 1909). And see Fry v. Piatt, 32 Kans. 62 (1884). where the agent sold to his own partner. Cf. Boqua v. Marshall, 114 S. W. 714 (Ark. 1908).

13 Fulton v. Walters, 216 Pa. St. 56 (1906).

"Gardner v. Ogden, 22 N. Y. 349, 350 (1860); Powers v. Black, 159 Pa. St. 153 (1893).