Rich v. Black & Baird , 173 Pa. 92 ( 1896 )

Opinion by

Mr. Chief Justice Sterrett,

The rule of public policy which avoids, at the instance of the cestui que trust, purchases made by agents for sale is practically absolute in its character. Courts of equity view such transactions with jealous eye; and it is only under special circumstances ' amounting to a dissolution of the trust relation, when the parties have dealt at arms length, that their validity is recognized: Davoue v. Fanning, 2 Johns. Ch. 254. And the reasons are obvious. On the one hand, the : elation which such agents bear is confidential, and disarms the vigilance of their principals; it affords peculiar facilities for obtaining exclusive information in respect of the property intrusted to them for sale; their employment implies that they have superior advantages for making sales, and that they will use every effort and means to obtain the highest price for the benefit of their principal. On the other hand, their individual interest is to purchase at the lowest price, and places them in a position which is inconsistent with the faithful and proper discharge of the duties of the trust. The opportunity will naturally lead to temptation to abuse, and, as was aptly said by Mr. Chancellor Kent in Davoue v. Fanning, supra, be “ poisonous in its consequences. The cestui que trust is not bound to prove nor is the court bound to judge, that the trustee has made a bargain advantageous to himself. The fact may be so and yet the party not have it in his power, distinctly and clearly, to show it. There may be fraud, as Lord Hakdwicke observed, and the party not able to prove it.” Thus an agent by virtue of his trust relation, may discover valuable minerals in the land, and locking the knowledge in his breast, take advantage of it in making a contract with his cestui que trust; if he deny it, how can the court find the fact ? “ The probability is that a trustee who has once conceived such a purpose will never disclose it, and the cestui que trust -will be effectually defrauded: ” Ex parte Lacey, 6 Ves. 627. So he may take advantage of his superior knowledge of the market and skill in manipulation to obtain results beneficial to himself. “It is to guard against this uncertainty and hazard of abuse, and to remove the trustee from temptation that the rule does and will permit the cestui que trust to come, at his own option, and without showing actual injury, and insist upon having the experiment of another sale: ” Davoue v. Fanning, supra; or as was held in our own case of Swisshelm’s App., 56 Pa. 475, treat the purchase as inoperative in respect of the land unsold by the trustee, and compel an account of the proceeds of sale made by him to innocent purchasers for value. “This is a remedy that goes deep, and touches the very root of the matter; ” Davoue v. Fanning, supra; Leisenring v. Black, 5 Watts, 303; Parshall’s App., 65 Pa. 224; Rice v. Davis, 136 Pa. 439; Murphy v. O’Shea, 2 J. & S. 420. The cestui que trust must it is true move within a reasonable time; but what shall amount to a reasonable time will depend on circumstances and lies in the discretion of the court. In the absence of special circumstances, which may lengthen or shorten the time, the analogy of the law is followed: Marshall’s Est., 138 Pa. 285.

These appellants misapprehend the rationale of this rule. They insist that because, as they claim, the sale was satisfactory to Mrs. Rich, the rule has no application. Conceding that in the first instance it was satisfactory, that fact would not take away her option to rescind; for these appellants then and for a long time afterward ostensibly maintained toward her the character of agents for sale, and willfully concealed the fact of their own interest; they maintain their character of inconsistency even now by claiming not only title as purchaser, but commissions as agents for sale. Roll, whom they first reported as the purchaser, confessedly knew nothing of it; the alleged interest of Gillespie and Neeb is more than doubtful, and, if it ever existed, was soon parted with; to all practical intents and purposes these agents were the real purchasers without the knowledge of their cestui que trust: Rosenberger’s App., 26 Pa. 67. However Mrs. Rich may have felt in the first instance in regard to the sale, it is not likely that it would have been satisfactory had she been fully informed of the facts. When she gave her agents a minimum price, it was manifestly intended as a guide to them in negotiating sale, and implied a just expectation on her part, and an engagement on theirs, that they would make an honest endeavor to obtain a higher price. If Roll, Gillespie and Neeb were really intending purchasers, the obvious course was that these agents for sale should take competitive bids; they did not occupy the position of middlemen with equal duty to both; their primary duty was to Mrs. Rich. But, so far as appears, no bona fide effort was made by them to perform this duty; instead, Mrs. Rich was asked to take less, and when this was refused they hastened to avail themselves of the minimum price in their own interest; and had already made large profits before Mrs. Rich’s discovery of the facts. If they could realize profits for themselves, they could and should have done so for their cestui que trust; that was their employment and that their undertaking; and equity will treat that as done which ought to have been done. To sustain the purchase' made in these circumstances would work “actual injury” to Mrs. Rich, tend to encourage breaches of trust and violate a wise rule of public policy.

Having taken action in time, the plaintiff was entitled to the relief which the decree of the court below is intended to secure,

Decree affirmed and appeal dismissed with costs to be paid by appellants, and it is ordered that the record be remitted to the court below for further proceedings.