Case Name: Chalupiak, Appellant, v. Stahlman
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1951-06-27
Citations: 368 Pa. 83
Docket Number: Appeal, No. 74
Parties: Chalupiak, Appellant, v. Stahlman.
Judges: Before Drew, C. J., Stern, Stearns, Jones, Bell, Ladner and Chidsey, JJ.
Reporter: Pennsylvania State Reports
Volume: 368
Pages: 83–102

Head Matter:
Chalupiak, Appellant, v. Stahlman.
Argued March 21, 1951.
Before Drew, C. J., Stern, Stearns, Jones, Bell, Ladner and Chidsey, JJ.
Earl J. Schermerhorn, with him Smith & Schermerhorn, for appellants.
Richard A, McConnel, for appellees.
June 27, 1951:

Opinion:
Opinion by
Mr. Justice Allen M. Stearns,
Was the business relationship between the defendant, H. C. Stahlman and plaintiff, Paul Chalupiak of such a nature and character which required of defendant the duty of loyalty, fidelity and fair dealing and which precluded defendant from acquiring and enforcing an adverse title to real estate against plaintiff? The court below ruled that defendant owed no such duty and dismissed the bill. This appeal followed.
The commissioners of Beaver County purchased at the county treasurer's tax sale a tract of land assessed as "land of James Moore Heirs". There was no description by metes and bounds but eventually it was established that the area consisted of 54.088 acres. Adjoining this land was another tract which was also owned by the county commissioners. Plaintiff was desirous of acquiring the land formerly owned by the "James Moore Heirs" and purchased the same from the commissioners. At the suggestion of the commissioners plaintiff employed a registered engineer to prepare a survey and plan of the tract and he also had the title examined and approved by a lawyer. The survey and plan was inaccurate because it included approximately 30 acres of land not a part of the "Moore tract". Plaintiff, under the mistaken information thus furnished, was of the opinion that he owned 80 acres of land which he proceeded to subdivide into building lots and sold some of them to purchasers by deeds with general warranty of title. Such conveyances included part of the 30 acres of land to which plaintiff had no title.
It is obvious from his testimony that plaintiff is an unlettered man. Defendant, H. C. Stahlman, on the contrary, in addition to his employment in an adjacent factory or mill, was a justice of the peace and also the tax collector. He maintained a business office with a paid assistant. For fees he drew wills, contracts and other papers, took affidavits and acknowledgments and prepared income tax returns. Defendant was obviously a type of country squire, of some education, whom people of the area consulted for many purposes and in whom doubtless his clients reposed a great confidence.
Sometime in 1945, plaintiff called at defendant's office and requested him to prepare a deed for a subdivision of the land which plaintiff had sold to Adam Adamaitas. Plaintiff brought with him a sketch or plan prepared by his engineer. Defendant examined the plan and concluded that the land proposed to be conveyed did not appear to be part of the "Moore Heirs" tract. Defendant asked plaintiff: "Are you sure that you own this ground?" Plaintiff replied that his engineer had drawn the plan and that his attorney informed plaintiff that he had good title. Defendant did not prepare the deed to Adamaitas and plaintiff employed an attorney for that purpose. However, from July 7 to September 15, 1945, defendant prepared four other deeds for such subdivisions, at plaintiff's request, from the engineer's survey. Defendant received $5.00 for each deed except one for which he received $3.00. Title to some of the land purported to be conveyed in these four deeds, as above stated, was then in the commissioners.
In July, 1946 plaintiff brought to defendant a petition to the commissioners to validate title to plaintiff's land for the purpose of acknowledgment. Defendant read to plaintiff the description of the land described in the petition and showed plaintiff on the borough map that the description indicated that plaintiff did not own the land for which he petitioned to have his title validated. As other errors appeared in the petition, it was not then acknowledged. Defendant informed plaintiff that the land to which title was in question was advertised for sale by the Beaver County Commissioners. Subsequently, on November 27, 1946, the acknowledgment to the petition was taken by defendant and filed March 5, 1947. When plaintiff brought his petition to defendant on November 21, 191/6 for acknowledgment, defendant did not inform plaintiff that defendant had already purchased the land in question.
On August 28, 1946, defendant had purchased part of the property adjoining the "Moore Heirs" property as agent for his sister who resides in Asheville, North Carolina. On February 26, 1947, defendant purchased another portion of adjoining property in the joint names of himself and his sister. It was this land, or a portion of it, which defendant purchased but which plaintiff had mistakenly considered to be his own and had conveyed to the four individuals as stated above. The court below found that any information obtained by defendant: ". . . as to ownership of land in Baden, was not secured by him from plaintiff. [Defendant] had such information before [plaintiff] came to him to prepare deeds. [Defendant] brought this information to the attention of [plaintiff] on several occasions. [Plaintiff], relying on advice of his engineer and counsel, refused to heed the information given by Stahlman [defendant]."
The fact that defendant, through borough plans, had knowledge of the ownership of lands in the borough is not controlling. Such maps or plans were available to all. It is, however, of paramount importance that — accepting such judicial finding of fact — it was plaintiff's request to defendant to draw a deed which caused the defendant, in examining the maps and plans of the borough, to recognize the fact that plaintiff's proposed transfers included land to which he had no title.
In the testimony it appears that defendant also prepared plaintiff's income tax returns. Defendant stated in this connection that "[defendant] wasn't even sure that that land didn't belong to [plaintiff], when [defendant] bought it." The issue upon which this case revolves is the capacity in which defendant acted when he performed services for plaintiff. This in turn depends upon the nature and extent of the services rendered by defendant.
At the outset, it must be conceded that if all that defendant did for plaintiff was to act as a stenographer or clerk to fill in blanks in a deed form, defendant would not assume the duties and liabilities of a conveyancer. It is obvious, however, that defendant was employed as more than a stenographer or typist. While perhaps defendant was not acting as a conveyancer, with all the duties and liabilities of a lawyer in such a field: Ladner's Real Estate Conveyancing VVol. 2, p. 497; LaBrum et al. v. Commonwealth Title Company, 358 Pa. 239, 56 A. 2d 246, yet the testimony is clear that he was more than a mere clerk and stenographer. He was plaintiff's agent and confidential adviser. Ordinarily it is the grantee who is put to the expense of preparing the deed and searching the title, although in some counties the custom is the reverse: Ladner's Real Estate Conveyancing Vol. 2 sec. 204 p. 546 et seq. But in any event the plaintiff, the grantor, in this case undertook to have the deed drawn to his buyer or grantee. It was for this purpose plaintiff employed defendant. This made the defendant the plaintiff's agent. Restatement, Agency, sec. 1, defines an agency relationship as follows: "(1) Agency is the relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Here defendant acted, at plaintiff's request and on plaintiff's behalf, in drawing the deeds in question, subject to plaintiff's control. Because of his knowledge as tax collector and as an agent or conveyancer, lie was aware either that plaintiff had no title whatever to the 30 acres or at least plaintiff's title was doubtful. Defendant secured, during the course of his service to plaintiff, the knowledge that plaintiff was attempting to convey land which plaintiff did not own. It was this knowledge that defendant utilized against the interests of plaintiff. 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. It is manifest that had plaintiff never dealt with defendant the latter would never have been led to purchase the land in question. Defendant was no chance purchaser. True, defendant expressed doubt to plaintiff concerning the validity of his title and also told plaintiff that the property had been exposed for sale by the commissioners.. What defendant failed or omitted to inform plaintiff was that defendant intended to bid at the sale in his own behalf and later to inform him that he had actually purchased the land. It is to be particularly observed that the purchase by defendant, either for himself, as agent for his sister who lived in Asheville, North Carolina, or for himself and his sister, was not a purchase by a bona fide buyer but was for the sole purpose of requiring the plaintiff or his grantees to purchase defendant's interests at a price. Before defendant bought the real estate he ivas fully aware that some of plaintiff's grantees had made valuable improvements upon the land and others had commenced building thereon. It is a transparent attempt by defendant to profit through knowledge obtained from one who had employed him, either as agent, scrivener, conveyancer or combinations thereof. Defendant's action is comparable to what is commonly known in the Orient as a "Squeeze". If title was defective plaintiff would be liable to his buyer upon his warranty in the deed (prepared by defendant) and if plaintiff refused or was unable to comply with Ms warranty, the plaintiff's grantee would be obliged to pay defendant or lose his property by ejectment. Defendant violated the duty of loyalty and fidelity he owed to plaintiff. In Restatement, Agency, sec. 395, it is stated: "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 transaction in which he is then employed, ." 1 I
Comment a reads: ". . . The agent also has a duty not to use information acquired by him as agent or by means of opportunities which he has as agent to acquire it . . . for any purpose likely to cause his principal harm . . . although it is information not connected with the subject matter of his agency.." Cf. Hockenbury v. Carlisle, 5 W. & S. 348; Hill v. Frazier, 22 Pa. 320; Henry v. Raiman, 25 Pa. 354.
It is not of controlling importance that defendant utilized information which related to defect in title. True, defendant was not employed to search title but to prepare or draw a deed. However, this Court, speaking through Justice Sharswood, stated in Smith et al. v. Brotherline, 62 Pa. 461, 469, that "The relation between him and his client is confidential, and whether he acts upon information derived from him or from any other source, he is affected with a trust." See Restatement, Agency, sec. 395, supra, where it is stated that an agent cannot use information acquired by him during the course of his agency to the injury of the principal ". . . although such information does not relate to the transaction in which he is then employed." It is important that a full disclosure of information to the conveyancer or agent be required.
Defendant, seeking to avoid the consequences of Ms acts, maintains that since he fully warned plaintiff that his title was doubtful and fully informed plaintiff of the tax sale where defendant purchased the land in question, he is therefore relieved of his fiduciary obligations to plaintiff. We do not agree. It would defeat the very purpose of the rule to permit defendant, having learned during his service to plaintiff of a defect in plaintiff's title, to give plaintiff full warning that Tie was going to take advantage of the defect. It could easily be that even though plaintiff or his grantee were present at the commissioners' sale, that defendant could bid up the price to a point where plaintiff would be required to settle upon defendant's terms. Galbraith v. Elder, 8 Watts 81, announces the rule which, although speaking concerning an attorney-client relationship, is also here applicable. The court held that an attorney could not purchase an outstanding title to that of his client, p. 100: ". . . because public policy and the preservation of a sound state of morals, as well as of the inviolable confidence which the law is ever solicitous to maintain between counsel and client, all combine in prohibiting counsel, after he has been consulted in respect to a claim which his client may have to land, or anything else, be it good or bad, from purchasing an outstanding title to it, either from the state or any other person, without the express consent of his client." (Emphasis supplied) The fact that plaintiff was told by defendant that the disputed lands were advertised for sale by the county commissioners does not constitute express consent on the part of plaintiff. Had defendant informed plaintiff that he, the defendant, intended to go to the sale to purchase this property and then plaintiff indicated his consent, of course, defendant would have then prevailed. But this was not the case.
It is true that in Galbraith v. Elder, supra, the court stated that if it were possible for counsel to purchase an outstanding title in opposition to that of his client, that the burden would be upon counsel to show he notified his client of the defect and gave him time to protect it, but the court also stated that it is not possible for counsel to so act.
Even if we did not attribute to defendant any conscious effort to defraud or take undue advantage of plaintiff, such a transaction cannot stand. It is said in Cleavinger v. Reimar, 3 W. & S. 486, it is not on the ground of fraud, but upon the principles of public policy that, transactions similar to the present are prohibited.
. Katherine Chalupiak, wife of Paul Chalupiak, is necessarily a party plaintiff, and Helen S. Wright, sister of H. C. Stahlman, .is likewise a necessary defendant in the facts of this case.
Decree reversed with direction to the court below to enter a decree in accordance with the prayer of the bill.