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forfeits all right to compensation from his principal.80 failure of fidelity on the part of an attorney is treated with exceptional severity and all right to compensation is thereby forfeited.81 The same requirement of fidelity imposed upon agents is imposed also on other analogous fiduciaries. Not only partners but those who undertake a joint adventure not involving a partnership fall within this category. Breach of the duty by one co-adventurer justifies the other in rescinding the contract between them.82

§ 1023. Employee is chargeable as trustee with anything fraudulently acquired.

Not only compensation secretly received from others than his employer for the performance of his duty must be surrendered by the employee, but all secret or fraudulent profit secured by him in any way from the exercise of his employment beyond the compensation to which he is entitled by the terms of his contract, is held by him on a constructive trust for his employer.83 A common illustration of this principle is where an agent in buying or selling property for his principal receives a commission from the other party to the

80 Quinn v. Burton, 195 Mass. 277, 81 N. E. 257; Hobart v. Sherburne, 66 Minn. 171, 68 N. W. 841; Norman v. Roseman, 59 Mo. App. 682; but see Alvord v. Cook, 174 Mass. 120, 54 N. E. 499. There is, however, no objection to an agent for one party agreeing with the adverse principal to surrender to the latter a portion of his commission. Scott v. Lloyd, 19 Colo. 401, 35 Pac. 733; Chase v. Veal, 83 Tex. 333, 18 S. W. 597.

81 Brackett v. Norton, 4 Conn. 517, 10 Am. Dec. 179; Larey v. Baker, 86 Ga. 468, 12 S. E. 684; Hoboken Trust Co. v. Norton (N. J. Eq., 1919), 107 Atl. 67; Andrews v. Tyng, 94 N. Y. 16. See also Kirchoff v. Bernstein (Oreg., 1919), 181 Pac. 746; Fulton Farmers' Assoc. v. Bomberger, 262 Pa. 43, 104 Atl. 805. In Ingersoll v. Coal Co., 117 Tenn. 263, 98 S. W.1 78, 9 L. R. A. (N. S.) 282, 119 Am. St. 1003, 10 Ann.

Cas. 829, recovery of fees was disallowed where the attorney had obtained charge of the suits in question through the solicitation of a "runner," "though no lack of fidelity to the client appeared."

82 Menefee v. Oxnam (Cal.), 183 Pac. 379; Noble v. Fox, 35 Okla. 70, 128 Pac. 102, 43 L. R. A. (N. S.) 933. See also Page v. Parker, 43 N. H. 363, 80 Am. Dec. 172; Kennah v. Huston, 15 Wash. 275, 46 Pac. 236. Cf. Roas v. Burrage, 233 Mass. 439, 124 N. E. 267. 83 Sandoval v. Randolph, 222 U. S. 161, 32 Sup. Ct. 48, 56 L. Ed. 143; Stenian v. Tasjian (Cal.), 174 Pac. 883; Salsbury v. Ware, 183 Ill. 505, 56 N. E. 149; Schick v. Suttle, 94 Minn. 135, 102 N. W. 217; Duryea v. Vosburgh, 138 N. Y. 621, 33 N. E. 932; Graham v. Cummings, 208 Pa. 516, 57 Atl. 943; Kreise v. Cartledge, 262 Pa. 55, 104 Atl. 855.

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transaction. The receipt of such a commission is a breach of duty, and it can be claimed by the employer.84 So, too, an agent whose duty is to buy property for his employer, is chargeable as a trustee if he buy it for himself,85 unless the Statute of Frauds stands in the principal's way. It is immaterial that the title is taken by a third person if the benefit is for the employee.87 And if such an agent brings about a genuine sale to a third person, he will be liable to his principal for the injury. On the same principle an employee who obtains, by virtue of his employment, knowledge that his employer is intending to obtain or continue a lease of property will not be allowed to retain for himself a lease of the property which he obtains with such knowledge.89

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§ 1024. Effect of the Statute of Frauds on agent's duty in regard to real estate.

The English and most American Statutes of Frauds forbid the creation of trusts in real estate without a writing.90 This does not preclude resulting trusts arising by operation of law, but relying on an early English decision,1 Lord St.

84 Lister v. Stubbs, 45 Ch. Div. 1; Hovenden v. Millhoff, 83 L. T. 41; Cohen v. Kuschke, 16 T. L. R. 489, United States v. Carter, 217 U. S. 286, 54 L. Ed. 769; Reid v. Shaffer, 249 Fed. 553, 161 C. C. A. 479; Wells v. Cochran, 84 Neb. 278, 120 N. W. 1123; see also cases in the last note to the preceding section. Cf. Powell v. Jones, [1905] 1 K. B. 11; Struve v. Tatge, 285 Ill. 103, 120 N. E. 549; Wade v. William Barr Dry Goods Co., 155 Mo. App. 405, 134 S. W. 1084; Loos v. Geo. Walter Brewing Co., 145 Wis. 1, 129 N. W. 645.

85 Trice v. Comstock, 121 Fed. 620, 57 C. C. A. 646; American Circular Loom Co. v. Wilson, 198 Mass. 182, 84 N. E. 133, 126 Am. St. Rep. 409; Kert v. Endelman (Mich.), 168 N. W. 423; Kraemer v. Deustermann, 37 Minn. 469, 35 N. W. 276; Harrison v. Craven, 188 Mo. 590, 87 S. W. 962; Seacoast Co. v. Wood, 65 N. J. Eq.

530, 56 Atl. 337; Reitz v. Reitz, 80 N. Y. 538; Odegard v. Haugland (N. Dak.), 169 N. W. 170; Gashe v. Young, 51 Oh. St. 376, 38 N. E. 20; Wolford v. Herrington, 74 Pa. 311, 15 Am. Rep. 548.

86 See the following section.

87 Kruse v. Steffens, 47 II. 112; Cameron v. Lewis, 56 Miss. 76; Forbes v. Halsey, 26 N. Y. 53.

88 Boston v. Simmons, 150 Mass. 461, 23 N. E. 210, 6 L. R. A. 629, 15 Am. St. Rep. 230.

89 Gower v. Andrew, 59 Cal. 119, 43 Am. Rep. 242; Davis v. Hamlin, 108 Ill. 39, 48 Am. Rep. 541; Essex Trust Co. v. Enwright, 214 Mass. 507, 102 N. E. 441, 47 L. R. A. (N. S.) 567; Prebble v. Reeves, [1910] Vict. L. R. 88.

90 See Ames's Cas. Trusts (2d. Ed.). 176.

91 Bartlett v. Pickersgill, 1 Eden, 515, S. C. 1 Cox, 15, 4 East, 577, n.

Leonards said: 92 "Where a man employs another person by parol, as an agent to buy an estate, who buys it for himself, and denies the trust, and no part of the purchase money is paid by the principal, and there is no written agreement, he cannot compel the agent to convey the estate to him, as that would be directly in the teeth of the Statute of Frauds." And this statement has been followed in some of the United States.93 It has, however, been overruled in England:94 and the current of later American authority supports the view that a trust is enforceable against the agent in the case supposed, in spite of the statute.95 Though the decisions are thus in conflict, the principle to be applied is well settled. A mere breach of promise to hold property in trust for another is unenforceable unless in writing.96 On the other hand, where the acquisition or retention of property involves fraud, equity will enforce a trust, which is imposed by operation of law ex maleficio, and is therefore not within the statute.97 The crucial question then is: Is an agent who repudiates his agency and buys land for himself which he has undertaken

92 Vendors and Purchasers (14th Eng. Ed.), 703.

93 Perry v. McHenry, 13 Ill. 227 (see also Heaton v. Gaines, 198 Ill. 479, 487, 64 N. E. 1081); Burden v. Sheridan, 36 Ia. 125, 14 Am. Rep. 505 (but see Havner Land Co. v. MacGregor, 169 Ia. 5, 149 N. W. 617); Tourtillotte v. Tourtillotte, 205 Mass. 547, 91 N. E. 909; Kennerson v. Nash, 208 Mass. 393, 94 N. E. 475; Allen v. Richard, 83sMo. 55 (but see Harrison v. Craven, 188 Mo. 590, 609, 87 S. W. 962); Watson v. Erb, 33 Oh. St. 35.

94 Heard v. Piller, L. R. 4 Ch. 548; Rochefoucauld v. Boustead, [1897] 1 Ch. 196. In view of the latter decision, the case of James v. Smith, [1891] 1 Ch. 384, which followed the early English law must be regarded as overruled.

95 Boswell v. Cunningham, 32 Fla. 277, 13 So. 354, 21 L. R. A. 54; Havner Land Co. v. MacGregor, 169 Ia. 5, 12, 149 N. W. 617; Rose v. Hayden, 35

Kans. 106, 10 Pac. 554, 57 Am. Rep. 145; Wakeman v. Dodd, 27 N. J. Eq. 564; Brookings Land & Trust Co. v. Bertness, 17 S. Dak. 293, 96 N. W. 97. See also Cameron v. Lewis, 56 Miss. 76; Wood v. Rabe, 96 N. Y. 414, 48 Am. Rep. 640; Wellford v. Chancellor, 5 Gratt. 39.

96 Howland v. Blake, 97 U. S. 624, 24 L. Ed. 1027; Heaton v. Gaines, 198 Ill. 479, 487, 64 N. E. 1081; Pomeroy's Eq. Jur. (3d Ed.), § 1056. In the former case the court said (p. 628), "It is a naked promise by one to buy lands in his own name, pay for them with his own money, and hold them for the benefit of another. It cannot be enforced in equity and is void." Levy v. Brush, 45 N. Y. 589; Richardson v. Johnson, 41 Wis. 100, 22 Am. Rep. 712; Payne v. Patterson, 77 Pa. 134; Bander v. Snyder, 5 Barb. 63; Lathrop v. Hoyt, 7 id. 59; Story, Eq. Jur., Sec. 1201 a, (11th Ed.)"

97 Pomeroy, Eq. Jur. (3d Ed.), § 1055.

to buy for his principal guilty of a mere breach of contract, or does he commit what equity regards as a fraud? The confidential and fiduciary character of the relation of an agent to his principal, which has been recognized in numerous decisions, seems to justify the acceptance of the latter alternative.

§ 1025. Employee's duty in regard to information acquired by him.

The employee must inform his employer of material facts coming to the employee's knowledge in relation to the matter of his employment.98 Knowledge acquired by the employee during his employment cannot be used for his own advantage to the injury of the employer or in competition with him, during the employment; and even after the employment has ceased, the employee remains subject to a duty not to disclose or to use for his own advantage secret information confidentially intrusted to him.99 A former employee has on this ground been enjoined from using medical recipes,1 from using other trade secrets,' from using lists of customers obtained from his former employer's books, from multiply

98 Calmon v. Sarraille, 142 Cal. 638, 76 Pac. 486; Prince v. Depuy, 163 Ill. 417, 45 N. E. 298; Leonard v. Omstead, 141 Iowa, 485, 119 N. W. 973; Emmons v. Alvord, 177 Mass. 466, 59 N. E. 126; Holmes v. Cathcart, 88 Minn. 213, 92 N. W. 956, 60 L. R. A. 734, 97 Am. St. Rep. 513; Humbird v. Davis, 210 Pa. 311, 59 Atl. 1082.

99 Merryweather v. Moore, [1892] 2 Ch. 518 (compiling and retaining a table of measurements of the employer's engines two days before leaving the employment was held a breach of duty). In the following cases the competitive use by a former employee, or of those associated with him of knowledge of secret processes obtained while in the complainant's employ was enjoined. Philadelphia Extracting Co. v. Keystone Extracting Co., 176 Fed. 830; O. & W. Thum Co. v. Tloczynski,

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114 Mich. 149, 72 N. W. 140, 38 L. R. A. 200, 68 Am. St. Rep. 469; Sanitas Nut Food Co. v. Cemer, 134 Mich. 370, 96 N. W. 454; Vulcan Detinning Co. v. American Can Co., 72 N. J. Eq. 387, 67 Atl. 339, 12 L. R. A. (N. S.) 102. See also cases of leases cited supra, § 1023, ad fin.

1 Yovatt v. Winyard, 1 Jac. & W. 394; Morison v. Moat, 9 Hare, 241.

2 Merryweather v. Moore, [1892] 2 Ch. 518; Aronson v. Orlov, 228 Mass. 1, 116 N. E. 651, cert. denied; 245 U. S. 662, 62 L. Ed. 536, 38 Sup. Ct. 61; Field v. Ashley, 79 Mich. 231, 44 N. W. 602; O. & W. Thum Co. v. Tloczynski, 114 Mich. 149, 72 N. W. 140; Coddington v. Bispham, 32 N. J. Eq. (9 Stew.) 574. See also Kirchner v. Gruban, [1909] 1 Ch. 413, 422.

Helmore v. Smith, 35 Ch. D. 449; Robb v. Green, [1895] 2 Q. B. 1.

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ing copies of pictures or photographs, which he had been employed to make. But the experience and information acquired in the course of the employment, except so far as confidentially communicated or acquired, may be turned by the employee to his own advantage after the termination of the employment. And, in the absence of special agreement to the contrary, an invention and a patent secured for it belong to the inventor, even though the invention was made while he was employed by another, and the invention relates to the matter in which the inventor was employed. It was held in an early case that an employee who planned to leave his employment might solicit, while still engaged in the employment, the future custom of his employer's customers.' Such a decision cannot be accepted, however. After an employment has ceased, an employee in the absence of covenants to the contrary, may compete with his former employer and may solicit the business of his customers; but while the employment continues, such conduct cannot be reconciled with the obligation of fidelity.

§ 1026. Employee's right to indemnity.

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An employee whether an agent or a servant is entitled to be reimbursed for all necessary expenses incurred in his employment; but not for expenses incurred improperly or

Tuck v. Priester, 19 Q. B. D. 629; Pollard v. Photographic Co., 40 Ch. D. 345.

Proctor & Collier Co. v. Mahin, 93 Fed. 875; New Era, etc., Appliance Co. v. Shannon, 44 Ill. App. 477.

Agawam Co. v. Jordan, 7 Wall. 583, 19 L. Ed. 177; Solomons v. United States, 137 U. S. 342, 34 L. Ed. 667, 11 Sup. Ct. 88; Dalzell v. Dueber Mfg. Co., 149 U. S. 315, 13 Sup. Ct. 886, 37 L. Ed. 749; Gill v. United States, 160 U. S. 426, 40 L. Ed. 480, 16 Sup. Ct. 322; Pressed Steel Car Co. v. Hansen, 137 Fed. 403, 71 C. C. A. 207, 2 L. R. A. (N. S.) 1172; Joliet Mfg. Co. v. Dice, 105 Ill. 649; Westervelt v. National Paper &c. Co., 154

Ind. 673, 57 N. E. 552; American Circular Loom Co. v. Wilson, 198 Mass. 182, 84 N. E. 133, 126 Am. St. Rep. 409; American Stay Co. v. Delaney, 211 Mass. 229, 97 N. E. 911, Ann. Cas. 1913 B. 509; and see note in 52 Am. St. Rep. 821. Cf. Bayan v. Scurlock (Ia.), 168 N. W. 144.

7 Nichol v. Martyn, 2 Esp. 732. 8 Re Irish, 40 Ch. D. 49; Proctor & Collier Co. v. Mahin, 93 Fed. 875; Lichtenhein v. Fisher, 87 Hun, 397, 34 N. Y. S. 304. But see supra, n. 99. As to the validity of contracts restraining the employee from competition, see infra, § 1643.

'Hayley v. Wilkins, 7 C. B. 886; Ellis v. Pond, [1898] 1 Q. B. 426; Bibb

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