Chalupiak v. Stahlman case brief summary

Chalupiak v. Stahlman case brief summary  (Penn. 1951)
 

o   Facts

§  Stahlman secured, during the course of his service to plaintiff, the knowledge that Chalupiak was attempting to convey land which he did not own.

§  Defendant, on the basis of this knowledge, went to a commissioners’ sale and purchased the land which he knew or suspected that plaintiff mistakenly thought he had already validly conveyed to others.

§  Stahlman did tell Chalupiak before the commissioner’s sale that it was going on and expressed doubt as to Chalupiak’s title in the land (HOWEVER, he did NOT say that he was going to purchase said land on his own behalf)

o   Issue

§  Whether the business relationship between Stahlman and Chalupiak of such a nature and character which required of Stahlman the duty of loyalty, fidelity and fair dealing and which precluded him from acquiring and enforcing an adverse title to real estate against Chalupiak.

o   Holding

§  Yes. It was the knowledge he acquired during his agency that he utilized against the plaintiff’s interests.

·         It is manifest that had plaintiff never dealt with defendant the latter would never have been led to purchase the land in question.

§  FULL DISCLOSURE + CONSENT were required here

·         b/c he could rent-seek from the principal and demand extreme price for land

o   Reasoning

§  Unless otherwise agreed, an agent is subject to a duty to the principal not to use information acquired by him during the course of or on account of his agency to the injury of the principal, on his own account although such information does not relate to the transactions in which he is then employed. Restatement of Agency § 395

·         The Current Fiduciary Standards for Registered Investment Advisers and Brokers

o   Investments

§  Registered Investment Advisers

·         Advisers should disclose how much they’re getting paid to sell one fund over another. They must offer investments in clients’ best interests.

§  Brokers

·         Brokers recommend suitable funds. They generally aren’t required to tell you if they stand to gain personally

o   Disclosure

§  Registered Investment Advisers

·         Advisers should provide information to the client about their fees and background, including disciplinary actions.

§  Brokers

·         Brokers generally aren’t required to proactively disclose past disciplinary actions to clients

o   Testimonials

§  Registered Investment Advisers

·         Advisers are generally prohibited from using testimonials from clients, celebrities or sports figures in their advertising

§  Brokers

·         Brokers aren’t subject to such a prohibition, although rules govern their advertising practices