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Tarnowski v. Resop - 236 Minn. 33, 51 N.W.2d 801 (1952)

Rule:

All profits made by an agent in the course of an agency belong to the principal, whether they are the fruits of performance or the violation of an agent's duty. It matters not that the principal has suffered no damage or even that the transaction has been profitable to him.

Facts:

After plaintiff Roland J. Tarnowski employed defendant F. James Resop as his agent to investigate and negotiate the purchase of a business, Tarnowski made an investment. Subsequently, Tarnowski discovered that Resop's representations concerning the business were false and obtained a judgment against the sellers for rescission. Tarnowski then brought actions against Resop in Minnesota state court seeking to recover an alleged secret commission that was obtained by Resop and to recover damages arising out of the prior judgment. After ytriual, a jury rendered a verdict Tarnowski and awarded him $ 5,200. The trial court entered judgment on the verdict. Resop appealed, contending that Tarnowski’s recovery in his action against the sellers was a bar to the actions against him. 

Issue:

Did Tarnowski have an absolute right to any commission received by Resop?

Answer:

Yes.

Conclusion:

The state supreme court affirmed the trial court's judgment. The court held that Tarnowski had an absolute right to any commission received by Resop, irrespective of any recovery resulting from the action against the sellers for rescission. The court noted that all profits made by an agent in the course of an agency belong to the principal, whether they were the fruits of performance or of a violation of an agent's duty. In addition, the court ruled, the settlement and dismissal of the actions against the sellers were not a bar to the action against Resop, although their individual torts might have been based on the same fraud. The court observed that, where, because of an agent's violation of his duty to his principal, it became necessary for the principal to sue a third party to recover what he had parted with as a result of a fraud, the principal may recover of the agent his attorneys' fees and expenses of his suit against the third party and such other losses and expenses as were the direct consequence of the agent's wrongful conduct.

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