Before SPARKS, MAJOR and MINTON, Circuit Judges.
The appeal in No. 9092 is from a judgment for plaintiff in its suit to recover a secret profit alleged to have been received by defendant as plaintiff's agent. Defendant filed its motion to dismiss the complaint on the ground that it failed to state a recoverable cause of action, and on the specific ground that it failed to show that defendant was under any duty to plaintiff, as fiduciary or otherwise, with respect to any matters concerning the sale of plaintiff's property here in issue, during the time certain alleged offers to purchase it were said to have been made. The court denied this motion, and thereupon defendant filed its verified answer of admissions and denials, and asked that the complaint be dismissed at plaintiff's costs. Plaintiff then filed its motion for summary judgment upon on the pleadings. The court, after finding the facts specially and stating its conclusions of law thereon, sustained plaintiff's motion and [*] judgment for it in the sum of $14,000, with interest at the rate of 5% per annum from and after April 23, 1945, and for costs. From that judgment this appeal is prosecuted.
Both parties and the trial court agreed that there were no material facts controverted before that court. Hence, the questions before us are of a legal and equitable character, and they arise out of the following uncontroverted facts.
Plaintiff is a corporation engaged in the manufacture and sale of meters of various kinds, with its principal office in the city of Pittsburgh, Pennsylvania. Defendant is a corporation engaged in the real estate brokerage business, and at least one of its principal officers is a duly licensed real estate broker. It principal place of business is in Chicago, Illinois.
On February 14, 1945, plaintiff was the owner of the real estate here involved. On that date, plaintiff, being desirous of selling this property, by an instrument in writing, appointed the defendant exclusive broker, for a period of ninety days from that date, to obtain a purchaser for the property at a price of $50,000, naming the lowest price of $40,000, and agreeing to pay defendant an amount equal to 5% of the selling price, in the event defendant procured a buyer or in the event the real estate was sold within the ninety-day period by plaintiff or any other broker. Defendant accepted this exclusive agency.
On March 1, 1945, the defendant offered plaintiff $500 for an exclusive option to buy the property for itself at $35,500. On March 7, 1945, plaintiff accepted this offer, receiving the $500, and in writing granting to defendant an exclusive option to purchase the property. Defendant prepared this option which ran to April 25, 1945. At the time of its execution defendant made a full disclosure to plaintiff of all facts relating to the matter which were then within the defendant's knowledge. Prior to the execution of the option, the property was not advertised for sale by the defendant. This record does not disclose that defendant made any effort whatever to sell the property prior to the execution of the option.
After the option was executed and delivered, defendant promptly advertised the property for sale, and on March 15, 1945, it received from a Mr. Carroll an offer of $45,000 for the property, which it declined. On March 16, Mr. Carroll made a written offer to the defendant of $50,000 for the property.This offer was accepted in writing by the defendant on March 28, 1945, on terms which were mutually agreeable to Mr. Carroll and the defendant.
On March 30, 1945, the defendant exercised its option to buy the property from plaintiff at $35,500. At that time it made no further disclosures other than those made on March 7, 1945. When it exercised its option to purchase, it designated Gertrude H. Hellenthal as nominee to take the title.
On April 2, 1945, Miss Hellenthal deeded the property to the Chicago Title and Trust Company and on the same date the latter company deeded the property to Carroll. Both of the last-named deeds were filed for record in the Recorder's office of Cook County, Illinois, on April 23, 1945.
It is plaintiff's contention that the defendant was in duty bound to disclose all the facts within its knowledge up to and including the time when it exercised its option to buy the property. It is the defendant's contention that it had performed its full duty to plaintiff when it made a full disclosure of all the facts within its knowledge at the time it secured the option. It further contends that the option for a cash consideration then received by the owner of the property from the defendant, operated to revoke the exclusive sales agency appointment of defendant by plaintiff made on February 14, 1945, notwithstanding the fact that such written appointment stated that it would be in force and effect "for ninety (90) days from the date hereof and thereafter, until this Agreement is revoked by us (plaintiff) in writing, by registered mail, ten (10) days in advance, addressed to you (defendant)." This instrument was prepared by defendant on paper carrying its own letterhead. When the option was executed, neither party said one word about revoking the appointment, and we think it did not revoke it, notwithstanding that a consideration was paid for the option. The two instruments dealt with the same subject matter for the purpose of accomplishing the same result, and merely gave defendant alternative methods for accomplishing that result.
There was nothing inconsistent between the agency appointment and the option except as to the method by which both parties sought to accomplish the sale of plaintiff's property. Of course the legal and equitable pursuit of one method to a finality would preclude the pursuit of the other, but the mere taking of an option, for a consideration, to purchase the property, would not preclude defendant from recovering on its agency appointment in case it decided not to exercise or could not exercise the option, and sold the property to another. There was no way of telling which method it would adopt until it exercised the option. It did not do this until after it had bargained to sell the property to Carroll.
If taking the option revoked the agency appointment, as urged by defendant, then defendant had no authority to bargain with Carroll on March 28, for at that time the legal and equitable title was in plaintiff, and defendant had neither, nor was it entitled to either until it had exercised the option by complying with its terms. Nevertheless, defendant delayed the exercise of the option until several days after it had bargained with a purchaser at $50,000 which was the price originally asked by plaintiff in the agency appointment. Without disclosing this fact to plaintiff, it exercised the option by paying plaintiff $35,500, completed the transaction, received $50,000 and pocketed the difference as its profit.
However, we think the option did not revoke the agency, and when defendant bargained with Carroll it bargained as agent for plaintiff, for it had not yet exercised the option. Under such circumstances equity will not permit an agent to profit, from a sale of its principal's property, in excess of the amount fixed by their solemn obligations. If at the time defendant exercised its option, plaintiff had been apprised of defendant's bargain with Carroll, and had refused to execute its deed to defendant or its nominee, we have no doubt that equity would not require such execution, even though defendant had paid a consideration for the option. The fact that defendant concealed from plaintiff the vital information concerning defendant's bargain with Carroll prior to the former's exercise of the option, and thereby secured plaintiff's deed for the property, will not aid it in defeating plaintiff's rights. True, defendant exercised its option before its right to do so had expired. However, when it chose to delay the exercise of its option, we think it took the risk of acquiring information beneficial to itself and quite detrimental to its principal, which it was in duty bound to disclose to its principal before exercising its option. Of course, such requirement would most likely defeat the option, and it should do so. Likewise a valid exercise of the option would abrogate the agency, but until one or the other method of selling the property was abandoned, the choice of methods was open to the defendant. During that time defendant was representing itself and its principal, which the law permits, providing good faith is exercised and a full disclosure is made of all the facts.
It would seem to us, under such circumstances, that the only proper method to pursue, in order to protect both parties, would be for the agent to exercise his option before acquiring such information as would defeat his option unless full disclosure thereof was made to his principal, and this should be true regardless of how long his option ran, for until such option was exercised he was still representing his principal as well as himself, and equity will not permit him to overreach the former in the way of profits to himself, except after full disclosure of the facts to his principal.
No case has been cited, nor have we found one, wherein the facts are precisely the same as they are here. In Rieger v. Brandt, 329 Ill. 21, 160 N.E. 130, 133, the court said: "* * * The rule well established in equity is that the relation existing between a principal and agent for the sale of property is a fiduciary one, and the agent, in the exercise of good faith, is bound to keep his principal informed on all matters that may come to his knowledge pertaining to the subject matter of the agency. He may not purchase his principal's ...