Without the express consent of the principal after a full knowledge of all the facts, an agent employed to sell may not himself be the purchaser; and an agent to buy may not himself be the seller.
(Orig. Code 1863, § 2164; Code 1868, § 2160; Code 1873, § 2186; Code 1882, § 2186; Civil Code 1895, § 3010; Civil Code 1910, § 3582; Code 1933, § 4-204.)
Law reviews.- For article surveying important general legal principles of municipal and county government purchasing and contracting in Georgia, see 16 Mercer L. Rev. 371 (1965).
JUDICIAL DECISIONSANALYSIS
Principles set forth in section are generally applicable when the agent is acting or should be acting as such for the agent's principal in dealing with third persons. Smith v. Pennington, 192 Ga. 478, 15 S.E.2d 727 (1941).
Sale by agent to self.
- As a general rule, one employed by an owner of property to sell the property as an agent is not authorized to sell the property to himself or herself alone or with others. Mayor of Macon v. Huff, 60 Ga. 133 (1878); Mitchell v. Gifford & Co., 133 Ga. 823, 67 S.E. 197 (1910); Peterson v. Appleby, 31 Ga. App. 286, 120 S.E. 651 (1923).
Transfer option to purchase by agent personally.
- Plaintiffs, a firm of brokers with whom the defendant had listed real estate for sale, were not entitled to recover a commission from the defendant for services in procuring a prospective purchaser, who obtained from the defendant an option for the purchase of the property and transferred the option to one of the plaintiffs. Peterson v. Appleby, 31 Ga. App. 286, 120 S.E. 651 (1923).
Absence of principal's knowledge and consent.
- Agent or attorney employed to sell property cannot directly or indirectly become the purchaser without the principal's knowledge and consent. Reeves v. Callaway, 140 Ga. 101, 78 S.E. 717 (1913).
Agent who has been engaged to sell real estate for the owner may not, either directly or indirectly, purchase the real estate personally, without the express consent of the principal after full knowledge of all the facts. Dolvin Realty Co. v. Holley, 203 Ga. 618, 48 S.E.2d 109 (1948).
Agent employed to sell may not purchase the principal's property without the express consent of the latter after a full disclosure of all the facts. Youngblood v. Mock, 143 Ga. App. 320, 238 S.E.2d 250 (1977).
Sale voidable.
- If an agent for the purpose of selling property of the principal purchases the property personally, either directly or through the instrumentality of a third person, the sale is voidable; it will always be set aside at the option of the principal; the amount of consideration, the absence of undue advantage, and other similar features are wholly immaterial; nothing will defeat the principal's right of remedy except the principal's own confirmation, after full knowledge of all the facts. Fraud on the part of the agent or injury to the principal is therefore unessential. Dolvin Realty Co. v. Holley, 203 Ga. 618, 48 S.E.2d 109 (1948).
Subagents.
- Subagent's duties and obligations to the principal are of the same nature and extent as those of the agent, and a sale of the principal's real estate by the subagent to the subagent, without express consent of the principal with full knowledge of all the facts, will likewise be set aside at the option of the principal. Dolvin Realty Co. v. Holley, 203 Ga. 618, 48 S.E.2d 109 (1948).
Trustees.
- Trustee could not buy at the trustee's own lawful sale. For a stronger reason, the trustee could not buy at a sale brought about by the trustee's own unlawful conduct. Bourquin v. Bourquin, 120 Ga. 115, 47 S.E. 639 (1904).
Sales under which agent assumes all losses and takes all profits.- Agent to sell is not, without the consent of the agent's principal, authorized to make sales in foreign markets under an arrangement whereby the agent should assume all risks and contingencies of loss and take all the profits, as this would amount to a sale by the agent to the agent, and one cannot lawfully do by indirection what one is positively forbidden to do. Atlantic Turpentine & Pine Tar Co. v. Rosin & Turpentine Export Co., 247 F. 618 (S.D. Ga. 1918).
Good faith no defense.
- It is no defense for an agent and the agent's associate to show that the agent acted in good faith in selling to the agent in association with another and that the transaction was in fact for the best interest of the principal; the law does not inquire in such a case whether there is any fraud, but gives the principal the absolute right to repudiate the transaction because the law will not allow an agent to take a position which is so inconsistent with the agent's duty to the agent's principal. Reeves v. Callaway, 140 Ga. 101, 78 S.E. 717 (1913); Smith v. Harvey-Given Co., 182 Ga. 410, 185 S.E. 793 (1936), later appeal, 183 Ga. 783, 190 S.E. 19 (1937).
Agent must account for property purchased and proceeds.
- When the principal executes, without reading them, written instruments which have been prepared by the agent in which the agent is named grantee, and the agent thereafter conveys to a third person a part of the property so conveyed to the agent and claims the rest of the property as purchaser under deeds executed by the principal, a court of equity will decree an implied trust upon the proceeds derived from the sale of the property to the third person and upon the property remaining in the agent and will enforce an accounting between the parties. Smith v. Harvey-Given Co., 182 Ga. 410, 185 S.E. 793 (1936), later appeal, 183 Ga. 783, 190 S.E. 19 (1937).
First duty of an agent is that of loyalty to the trust; the agent must not be in relations which are antagonistic to that of the agent's principal; the agent's duty and interest must not be allowed to conflict; the agent cannot deal in the business within the scope of the agent's agency for the agent's own benefit, nor is the agent permitted to compromise the agent's responsibilities by attempting to serve two masters having a contrary interest, unless it be that such contracts of dual agency are known to each of the principals. Arthur v. Georgia Cotton Co., 22 Ga. App. 431, 96 S.E. 232 (1918); Clyde Chester Realty Co. v. Stansell, 151 Ga. App. 357, 259 S.E.2d 639 (1979).
Agent cannot have any interest nor do any act adverse to the interest of the agent's principal or incompatible with the application of the agent's best skill, zeal, and diligence to the promotion of that interest. Franco v. Stein Steel & Supply Co., 227 Ga. 92, 179 S.E.2d 88 (1970), cert. denied, 402 U.S. 973, 91 S. Ct. 1661, 29 L. Ed. 2d 137 (1971); Clyde Chester Realty Co. v. Stansell, 151 Ga. App. 357, 259 S.E.2d 639 (1979).
It is contrary to public policy for an agent, without the full knowledge and consent of a principal, to do any act or make any contract in carrying out the business of the agency, the effect of which will be to bring the personal interests of the agent in antagonism with those of the principal. Smith v. Harvey-Given Co., 182 Ga. 410, 185 S.E. 793 (1936), later appeal, 183 Ga. 783, 190 S.E. 19 (1937).
No man can serve two masters.
- Former Civil Code 1895, §§ 3010, 3011 and 3014 followed the rule that "no man can serve two masters; for either he will hate the one, and love the other; or else he will hold to the one, and despise the other." Gann v. Zettler, 3 Ga. App. 589, 60 S.E. 283 (1908).
Personal and representative interests must not conflict.
- Underlying thought is that an agent should not unite an agent's personal and representative characters in the same transaction; and equity will not permit an agent to be exposed to the temptation or brought into a situation where the agent's own personal interests conflict with the interests of the agent's principal and with the duties which the agent owes to the principal. Dolvin Realty Co. v. Holley, 203 Ga. 618, 48 S.E.2d 109 (1948).
Principal can rely on agent's representations.
- When the relation of principal and agent arises, the utmost fidelity is imposed upon the agent; the principal can in law rely upon the agent's statements and representations without the necessity of establishing their genuineness. Smith v. Harvey-Given Co., 182 Ga. 410, 185 S.E. 793 (1936), later appeal, 183 Ga. 783, 190 S.E. 19 (1937).
Right to presume papers tendered by agent will not give agent adverse interest.
- Principal has a right to presume that all papers tendered to the principal are as represented by the agent and not contracts under which the agent can derive an interest in opposition to the principal's own. Smith v. Harvey-Given Co., 182 Ga. 410, 185 S.E. 793 (1936), later appeal, 183 Ga. 783, 190 S.E. 19 (1937).
Decisions requiring party to read unless prevented by fraud are inapplicable.
- Cases holding to the effect that a party who can read must read and fraud which will relieve a party who can read must be such as prevents the party from reading have no application when a confidential and fiduciary relationship of principal and agent is involved. Youngblood v. Mock, 143 Ga. App. 320, 238 S.E.2d 250 (1977) (action by principal against agent for breach of fiduciary duty).
Cited in Johnson v. Sherrer, 197 Ga. 392, 29 S.E.2d 581 (1944); Denham v. Shellman Grain Elevator, Inc., 123 Ga. App. 569, 181 S.E.2d 894 (1971); Smith v. Blackshear, 125 Ga. App. 775, 189 S.E.2d 99 (1972); Associates Fin. Servs. Co. v. Johnson, 128 Ga. App. 712, 197 S.E.2d 764 (1973); Mynatt v. Tom Washburn & Assocs., 161 Ga. App. 168, 288 S.E.2d 122 (1982); Vinson v. E.W. Buschman Co., 172 Ga. App. 306, 323 S.E.2d 204 (1984); Doxie v. Ford Motor Credit Co., 603 F. Supp. 624 (S.D. Ga. 1984); Ledbetter v. Ledbetter, 222 Ga. App. 858, 476 S.E.2d 626 (1996).
Application
Agent making sale to corporation.
- Conveyance by an agent authorized to sell, being made to a corporation of which the agent is president and a stockholder, may be treated as void by the principal. Whitley v. James, 121 Ga. 521, 49 S.E. 600 (1904); Smith v. Harvey-Given Co., 182 Ga. 410, 185 S.E. 793 (1936), later appeal, 183 Ga. 783, 190 S.E. 19 (1937).
Partner of agent.
- When realtor was acting as agent in the sale of property, neither the agent nor the agent's partner could become the purchaser of the property without the express consent of the plaintiffs after full knowledge of all the facts. Kellett v. Boynton, 87 Ga. App. 692, 75 S.E.2d 292 (1953).
Listing of property at fixed or minimum price.
- Rule forbidding an agent or subagent from purchasing the principal's property, without the express consent and knowledge of the principal, is not made inapplicable because the property was listed for sale with the agency at a fixed or minimum price. Dolvin Realty Co. v. Holley, 203 Ga. 618, 48 S.E.2d 109 (1948).
Indirect purchase through father-in-law.
- Testimony and documents relating to a sales contract wherein an agent's father-in-law was named as the purchaser was admissible to show the initiation by the agent of an undisclosed effort on the agent's part to earn a secret personal profit on the eventual resale of the property by first attempting to purchase the property indirectly through the agent's father-in-law. Johnson Realty, Inc. v. Hand, 189 Ga. App. 706, 377 S.E.2d 176 (1988), cert. denied, 189 Ga. App. 912, 377 S.E.2d 176 (1989).
Mayor may not rent from city.
- Mayor of a city while in office cannot contract with the city council to rent a city park. Mayor of Macon v. Huff, 60 Ga. 221 (1878).
Court-approved investment in stock of trustee-bank.
- Money invested in the capital stock of a bank under order of court, when the bank was acting as trustee, was legal as this was in no sense such a case as provided against in this section, and the principal had full knowledge of all the facts, and the sale had the specific authority of judicial sanction. Haddock v. Planters' Bank, 66 Ga. 496 (1881).
Contractual power of sale in security deed authorizing purchase by grantee.
- When a deed to secure a debt provides that the grantee may sell the property upon default and may bid and purchase at such sale, the power of sale is a power coupled with an interest and is absolute for the purposes therein mentioned, without any element of personal confidence in the grantee or limitation as to discretion. The power, being of such character by contract of the parties, is not inhibited by this section. Smith v. Bukofzer, 180 Ga. 209, 178 S.E. 641 (1935).
Scope of attorney-client relationship.
- Relationship of attorney and client is fiduciary in character, but this does not extend beyond the subject matter for which the services of the lawyer have been retained. Jerry Lipps, Inc. v. Postell, 139 Ga. App. 595, 229 S.E.2d 78 (1976) (no breach of duty by attorneys).
Insurance agent may not represent company and property owner.
- Agent of a fire insurance company, authorized to contract for insurance in its behalf, cannot, without the company's consent, become in the agent's individual character the agent of a property owner who desires to obtain insurance in that company. Ramspeck v. Pattillo, 104 Ga. 772, 30 S.E. 962, 69 Am. St. R. 197, 42 L.R.A. 197 (1898).
Real estate agent may not collect commissions from both parties.
- Agent who secretly undertakes to represent both parties to a transaction is not permitted to recover commissions from either of them. This rule applies to real estate agents as well as others. Williams v. Moore-Gaunt Co., 3 Ga. App. 756, 60 S.E. 372 (1908).
Real estate agent may collect commissions from both parties if all have so agreed.- When it is clearly understood by all the parties that one who is paid commissions to sell cotton is also to charge commissions from the buyer, the transaction is not illegal. Talcott v. Chew, 27 F. 273 (S.D. Ga. 1885).
OPINIONS OF THE ATTORNEY GENERALReal estate broker may not retain the amount received above the net listing, in excess of the broker's usual commission, unless the broker's contract with the seller so provides, and may not conceal from the seller the amount received from the purchaser. 1945-47 Op. Att'y Gen. p. 510.
RESEARCH REFERENCES
Am. Jur. 2d.
- 3 Am. Jur. 2d, Agency, §§ 198 et seq., 208.
C.J.S.- 2A C.J.S., Agency, § 288 et seq.
ALR.
- Rights and remedies of principal where agent professes to sell principal's property without disclosing that he is the purchaser, 62 A.L.R. 63.
Duty and liability of former employee to former employer in respect of transactions or matters pending and uncompleted at termination of employment, 100 A.L.R. 684.
Rights and obligations of real estate broker employed to sell property as affected by option to purchase for himself, 164 A.L.R. 1378.
Rights and remedies where broker or agent, employed to purchase personal property, buys it for himself, 20 A.L.R.2d 1140.
Liability of vendor's real estate broker or agent to purchaser or prospect for misrepresenting or concealing offer or acceptance, 55 A.L.R.2d 342.