Appeal from the Circuit Court of Cook county; the Hon. C.J.
HARRINGTON, Judge, presiding. Reversed and remanded with
JUDGE FEINBERG DELIVERED THE OPINION OF THE COURT.
Rehearing denied May 24, 1956.
Plaintiff's complaint is for accounting against defendant, arising out of certain stock transactions between plaintiff and defendant, as a broker. The action as to Hovey E. Slayton was dismissed. The cause was referred to a master, who heard the evidence, reported his findings of fact and conclusions of law, and recommended that the complaint be dismissed for want of equity. Upon a hearing of plaintiff's exceptions to the master's report, a decree was entered overruling the exceptions and dismissing the complaint for want of equity. The appeal is from this decree.
The pertinent facts out of which the controversy arose are: that plaintiff, during the year 1940, commenced dealings in securities with William A. Schuberth, then a licensed security salesman for Joseph Dixon & Company, a brokerage firm dealing in the stocks and securities; that he acted as her agent and representative from 1940 until August 1943, when Schuberth's employment with Dixon terminated (for what reason is not disclosed). He entered the employment of defendant company in September 1943, and brought with him to the defendant the account and securities he handled for plaintiff.
It appears that in the account of plaintiff taken by Schuberth to defendant were so-called "Group Securities." These securities were sold by defendant, and the proceeds, amounting to $5295, were invested in "Managed Funds, Inc." In addition to the sum realized from the sale of the "Group Securities," defendant also received from plaintiff further sums aggregating $2327.55, making a total of $7622.55. There must be added to this amount $1245.89, interest paid to defendant on loans made, or an admitted total outlay by her of $8868.44. From time to time during her dealings with defendant through Schuberth, securities were purchased for plaintiff's account, and loans were made against them, and with such loans additional securities were purchased for plaintiff's account.
It further appears, and the master so found, that "Managed Funds, Inc." is a corporation which was organized in 1946 by defendant and owned and managed by the defendant company. Thus, when plaintiff's "Group Securities," which had been paying dividends, were converted by defendant into "Managed Funds, Inc.," it was a conversion into securities owned, controlled, managed and dealt in by defendant in "Managed Funds, Inc."
It also appears that each time defendant purchased securities in "Managed Funds, Inc." for plaintiff, they charged her 9% commission. The master also found that plaintiff has suffered some substantial losses in her investments in "Managed Funds, Inc." The details of these losses appear in the master's finding No. 17.
It appears that "Managed Funds, Inc." had no record of performance or payment of dividends at the time they converted plaintiff's "Group Securities" into "Managed Funds, Inc." The master also made the following finding:
"There can be no doubt that the plaintiff had a great degree of trust and confidence in Schuberth; not only did she make no records of the monies which she put into his hands (despite the fact that her job as a bookkeeper should have made her cognizant of the value of records) but, according to her testimony, she took Schuberth's word as to what to sign, what to buy, what to sell and what to do with her financial matters. Schuberth was even entrusted with the task of making out the plaintiff's income tax returns (Defendant's Exhibit `19') which were forwarded to the proper government officials without the plaintiff's having any accurate knowledge of their content. In her testimony, the plaintiff revealed that she did not have a basic understanding of financial matters and it is entirely credible that she would have sought the aid of such a person as Schuberth, in whom she could repose her confidence and who had the experience and knowledge to render her professional services in order to guide her financial affairs."
These findings of the master, having been approved by the court and not excepted to by defendant, are controlling against defendant. We think there is ample support in the record for these findings.
When Schuberth brought plaintiff's account to defendant, together with the securities in her account, against which some loans were outstanding, it was incumbent upon defendant to ascertain what the relationship was between Schuberth and the plaintiff, and the nature of his transactions with her. Having taken over her account and allowed Schuberth to continue to act for her as he did when he was connected with Dixon, defendant was responsible for leading plaintiff to believe that her trust and confidence in Schuberth, and the fiduciary relationship existing, continued in her dealings with defendant through Schuberth. Zegarski v. Ashland Savings & Loan Ass'n, 4 Ill. App.2d 118, 122.
Defendant upon this appeal admits: "These transactions, until his resignation in June, 1948, were handled for her by Schuberth on behalf of Slayton & Company. He had gained her complete confidence while with Dixon & Co., and continued to enjoy that confidence until a short time before his death." Schuberth died April 30, 1949, prior to the commencement of this action. His testimony was not available, and conversations between plaintiff and Schuberth, while he was connected with defendant, were not competent.
We think the record justifies the conclusion that defendant cloaked Schuberth with sufficient apparent scope of authority to continue the fiduciary ...