Sec. 70. Broker May Not Lawfully Combine With Others To Secure Secret Profits

Sometimes others combine with the broker in putting through a deal in which the broker is secretly to share in the profit of a sale to or purchase from his principal.26 Again, at other times, a broker may use a "dummy" to represent either a supposed buyer or seller, as the case may be, in endeavoring to or in actually putting through such a deal.

The principles which govern an action for fraud and deceit are the same, whether the fraud is alleged to have originated in a conspiracy or to have been solely committed by a defendant without aid or co-operation.

24 Citing Rochester v. Levering. 104 Ind. 562 (1886); Stewart v. Mather. 32 Wis. 344 (1873); 1 White & Tudor's Leadg. Cases in Equity, Part 1. p. 219; Burke v. Bours. 98 Cal. 171 (1893); 32 Pac. 980; 1 Clark & Skyles on Agency. Sec. 413; 1 Am. & Eng. Ency. Law (2nd Ed.), 1081.

25 Board of Trustees v. Blair, 45 W. Va. 820 (1899), (citing Walker v. Carrington, 74 111. 446).

26 See, for illustration, Emmons v. Alvord, 177 Mass. 466 (1901). And see Sec. 251-256 infra.

Where fraudulent profits are secured by means of combination, its members are usually sought to be held liable on the ground of conspiracy.

In New York a conspiracy to defraud another out of property by criminal means is a misdemeanor, as is also corrupt influencing of an agent and the acceptance by an agent of a gratuity or a promise to influence his acts towards his principal's business.

The whole matter of fraudulent acts of brokers is considered at length in Part IV of the present work. For a consideration of the liability of the broker and the principal see Part III of the present volume, Chapters XXVI-XXVm infra.

Sec. 71. Person Sharing Benefits Liable Though Unaware Of Fraud

The legal rights and liabilities of parties may be affected by the acts and representations of others of which they had no knowledge, where they have received the benefit of the contracts induced by such acts and representations.27

An agent cannot be interested in the profit of a sale to his principal, and even though a person is not a party to an agreement to share the profit, he becomes liable to account under an allegation that he received and kept a share of the profit.28 The defrauded party's right of recovery does not depend upon any conscious participation of the "dummy" or the gainer in the alleged fraud, nor upon his accepting the fruits of it with knowledge that it was committed. The burden of proof is on the gainer to show the fairness and honesty of the transaction.29

27 Dutton v. Willner. 52 N. T. 317 (1873). See the fuller discussion of this subject in Sec. 254-256. 261 infra.

28 Colonisers Realty Co. v. Shatzkin. 129 App. Div. 609 (N. Y. 1908).

29 Ringler v. Reynolds, 18 N. Y. Suppl. 877; 46 N. Y. St. Rep. 612 (1892); aff'd, without opinion. 139 N. Y. 613 (1893).