Friday, October 12, 2012

Tarnowski v. Resop case brief

Tarnowski v. Resop

-Tarnowski, the plaintiff, engaged Resop, defendant, as his agent to investigate and negotiate for the purchase of a route of coin-operated music machines.
-On 6/2/1947, relying on D's advice and investigation, P purchased such a business.
-The D alleged that there were 75 locations in the operation with one or more machines at each location, that the equipment was not more than 6 month old and that the gross income from all locations was more than $3,000 per month.
-P was to pay $30,620. He paid $11,000 down.
-In 6 weeks from purchase, P discovered that D's representations were false. There were no more than 47 locations and some of them had no machines. Those that did had machines older than 6 months. Moreover, gross income was much lower than described.
-Upon discovery, P rescinded the sale. He offered to return what he received, but seller refused to give him the money back.
-P brought a suit which resulted in a verdict of $10,000 for the P. The seller paid $9,500 and the action was dismissed.
-In this action, P alleges that D, who acting as his agent received a secret commission, which P wants to recover. He also seeks to recover: (1) losses suffered in operating the route; (2) loss of time devoted; (3) expenses for rescission and investigation; (4) nontaxable expanses in connection with prosecution of the suit against the seller; and (5) attorney's fees.
-P recovered a verdict of $5200 and this is an appeal to that case.

ISSUE: Is a disloyal agent liable for secret profits and consequential damages?

-Yes. An agent who violates his duty of loyalty is liable to the principal for any secret profit earned, as well as the principal’s consequential damages, including attorney fees.
-Case law universally holds that any profit made by agents during their agency belongs to their principals, even if earned in violation of that agency, and even if the principal is unharmed.

-An agent who violates his duty of loyalty is liable to the principal for any secret profit earned, as well as his principal’s consequential damages, including attorney fees.

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