“Just as we have dislodged the encrusted concepts of the ancient doctrine of caveat emptor ... this court has rejected the old predatory philosophies of business relationships. Our decisions have enhanced the obligation of agents and fiduciaries, functioning in positions of trust and confidence, to perform their duties in complete candor, honesty, loyalty and good faith.” (citations omitted)
How later courts described this case
- “Just as we have dislodged the encrusted concepts of the ancient doctrine of caveat emptor ... this court has rejected the old predatory philosophies of business relationships. Our decisions have enhanced the obligation of agents and fiduciaries, functioning in positions of trust and confidence, to perform their duties in complete candor, honesty, loyalty and good faith.” (citations omitted)
Written by the judges who cited it.
The opinion
UHLENHOPP, Justice
(dissenting).
I differ with the court in two respects involving the facts and the law.
Facts. This case was tried by ordinary proceedings. Hence two rules govern our review. One is that the trial court’s fact findings are conclusive if they are supported by substantial evidence. Iowa R.App.P. 14(f)(1). The other is that we view the evidence in the light most favorable to the judgment. Long v. Glidden Mutual Insurance Association, 215 N.W.2d 271, 272 (Iowa 1974).
Miller’s efforts were undoubtedly the producing cause of the sale of the Berkoskis’ farm to Harsh.’ The controlling issue is whether Miller acted in bad faith in this sale. For example, the Berkoskis have argued throughout the litigation that Miller and Harsh were in this enterprise together from the start to develop two commissions for Miller and a profit for Harsh. Miller has argued to the contrary; he does admit that he temporarily lent Harsh money on collateral to apply on the down payment. The trial court did not find the facts in accordance with the Berkoskis’ argument, and did not find bad faith by Miller. If the facts on the controlling issue of bona fides as found by this court are placed beside the facts as found by the trial court, we have two entirely different cases. Both cases have substantial evidentiary support in circumstances and direct testimony.
Had the trial court found the facts as this court finds them, I too would hold for the Berkoskis. But the trial court on substantial evidence did not so find the facts and did not find bad faith. Hence the trial court gave judgment for Miller, applying the rule in Murphy v. Brown, 252 Iowa 764, 770 , 108 N.W.2d 353, 356 (1961). In Murphy the realtor, without knowledge by the vendor, advanced $1000 to the prospective purchasers out of his commission to apply toward earnest money of $1500. There as here the trial court did not find bad faith. In allowing the realtor to have his commission, this court stated:
*343 It is true that unless otherwise agreed, an agent is subject to a duty to his principal not to act on behalf of an adverse party in a transaction connected with his agency without the principal’s knowledge. Was this such an act on behalf of an adverse party? . . .
It is hard to see where the plaintiff’s acts herein were inconsistent with his duties to the principal. He was to find a financially responsible buyer, able to pay down $6000 and assume the balance of the obligation. The trial court found as a matter of fact that this type of business is known to favor a very practical approach to its problems, that furnishing a part of the down payment from the broker’s commission “did not under the law or the ethics of the real estate profession disclose such bad faith or gross misconduct on their part as to warrant forfeiture of their right to commission.” We agree, and conclude there is nothing in the record to justify a finding of bad faith or gross misconduct as a matter of law. Neither the business policy nor the understanding of the parties prohibited that act by the plaintiff. Actually it may be said that by this sacrifice of a part of his commission he was furthering his principal’s interest in obtaining a sale for him under the exact terms he desired .... If, then, we assume the principal desired to sell on the terms listed, these terms were met without prejudice to the principal and without gain to the agent. Although it is true this advancement or gift of commission to the buyer was not disclosed to the seller, it is hard to see how he thereby suffered any detriment, and there is not the slightest inference of fraud or deceit in this record to justify a denial of plaintiff’s right to his commission. The conclusion must be that $1000 of the agreed commission could be included in the amount of the down payment of the buyer under these circumstances.
This is not the situation where the agent is shown to act in his own interest, or to obtain compensation from both parties, or to do acts detrimental to his principal, or where he attempts to bind his principal to an unauthorized agreement.
Id. at 770 71, 108 N.W.2d at 356-57 (citations omitted). See also Restatement (Second) of Agency § 391, Comment b (1958):
An agent can properly deal with the other party to a transaction if such dealing is not inconsistent with his duties to the principal. Thus, an agent employed to sell can properly lend money to the buyer to complete the purchase or he may “split” his commission with the buyer, unless because of business policy or otherwise it is understood that he is not to do so.
This court has actually reviewed the present case de novo, and it has viewed the evidence in the light most unfavorable to the judgment. The rules directing us to proceed in a contrary manner are sound ones. The trial court saw and heard Miller in person as well as Berkoski and the other witnesses, and was in a better position than we are to ascertain the truth.
I would thus adhere to the facts as found by the trial court.
Law. I agree with this court’s quotations from the authorities about an agent’s duties, and I agree with the decisions which disallow a realtor his commission if he acts in bad faith toward his principal. I disagree, however, with the court’s overruling Murphy . I do not understand Murphy to apply where an agent acts in bad faith. But where a realtor acts in good faith, as under the trial court’s findings on substantial evidence, then I agree with the Murphy rule that the realtor does not, by lending money to the purchaser, forfeit his commission.
Law should be realistic. A couple looking for a home go to a realtor. They can arrange long term financing but do not have the down payment. The realtor in good faith arranges the down payment for them from an institution he deals with, or from his own funds, or even out of his commission, and sells them one of the homes he has listed. I see no objection to *344 this when the realtor acts in good faith. In Murphy the court unanimously approved the statement that “this type of business is known to favor a very practical approach to its problems.” 252 Iowa at 770 , 108 N.W.2d at 356 .
Like a jury, the trial court could accept the testimony it found credible and reject the testimony it found incredible, and it could draw the inferences it found reasonable from the circumstances and refuse to draw those it found unreasonable. The weight and value of the evidence was for the trial court. I would follow the trial court’s findings, apply Murphy as the trial court did, and affirm the judgment.
LeGRAND and ALLBEE, JJ., join in this dissent.