Story Case

James Kellog authorized Frank Keeler, his western agent, to sell a certain lot of corn at fifty cents per bushel. Keeler sold the corn at fifty-two cents, but accounted to Kellog for fifty cents per bushel only. Later Kellog learned of the actual amount for which the corn was sold, and brought suit against Keeler for an accounting. Keeler was an employee on a salary. What should the Court do?

Ruling Court Case. Mckinley Vs. Williams Volume 74, Federal Reports 94

This was a bill in equity filed by Williams asking that McKinley be compelled to account for profits which the latter improperly received while acting as agent for Williams.

Williams stated he was the owner of large tracts of mineral land in the State of Minnesota, and engaged McKinley as an agent to assist in selling leases to the land. It was agreed between the parties that McKinley should sell these leases and receive, as compensation, one-fifth of the revenues derived from the leases which he might sell.

It appears that Williams executed to McKinley a formal lease to the whole property for which no consideration was paid, solely for the convenience of McKinley in selling leases.

Under these circumstances, McKinley pretended to be the real owner of these leases. He sold them, sublet promiscuously, took the money therefor and then refused to pay the plaintiff any part thereof.

Mr. Justice Sanborn delivered the opinion.

He was agent. Therefore, all profits made by his agency must go to his principal. The Court said in part: "The law guards the fiduciary relation with jealous care. It seeks to prevent the possibility of a conflict between the duty and the personal interest of a trustee. It demands that the agent shall work with an eye single to the interest of his principal. It prohibits him from receiving any compensation but his commission, and forbids him from acting adversely to his principal, either for himself or for others. It visits such a breach of duty, not only with the loss of profits he has gained, but with the loss of the compensation which the faithful discharge of his duty would have earned. An agent of a vendor, who speculates in the subject matter of his agency, or intentionally becomes interested in it as a purchaser, or as the agent of a purchaser, violates his contract of agency, and becomes indebted to his principal for the profits he gains by his breach of duty."

Ruling Law. Story Case Answer

It has been heretofore explained that the agent acts in a fiduciary capacity. That is, because of the relation which exists between him and the principal, he is under a duty to act with the utmost good faith, wherever the interests of his principal are involved, Accordingly, if an agent takes advantage of his relation, or of information from his principal's business, or uses property of his principal, and makes thereby a profit for himself, he must account to his principal for such profit. Not only this but he may not even recover the compensation which was promised him for his services.

In the Story Case, Keeler should be compelled by the Court to pay to Kellog fifty-two cents per bushel for the corn he sold; and he should not be allowed to recover any salary or compensation for making the sale.