Before Swygert, Cummings and Pell, Circuit Judges.
The defendant, William Leach, appeals from a judgment entered upon a jury verdict for the plaintiff, Shearson Hayden Stone, Inc. (SHS) in the amount of $473,563.32 plus interest. The basis of this action was Leach's breach of a customer agreement entered into with SHS, as broker, for the purpose of commodity futures trading. This agreement provided that all transactions under it "shall be subject to the constitution, rules, regulations, customs and usages" of the involved exchange. It authorized SHS in its discretion and for whatever reason it might deem necessary for its protection to liquidate any open positions in the customer's account, with the customer to remain liable for any deficiency. It further provided that the customer would at all times maintain such margins as SHS would require.
SHS alleged that Leach had open positions in his commodity account in December soybean meal and November soybeans. These open positions became undermargined in early July 1974 at which time SHS allegedly made margin calls, requesting Leach to deposit funds in his account to margin the account properly. SHS introduced evidence that it had notified Leach every business day from July 1 through July 10 and that Leach had promised to forward payment promptly to meet the margin requirement. SHS's evidence further showed that by July 17 it gave Leach an ultimatum despite his repeated requests to maintain his account and not to liquidate it: either meet the margin requirement by the next day or SHS would liquidate the account. Leach did not comply. On July 18 SHS could not liquidate his account because the market went to "limit"*fn1 on both soybean meal and soybeans. SHS finally liquidated his account the next day resulting in the deficit for which SHS sued to recover.
Leach took the position at trial that SHS should have liquidated his account early in July when the market price was lower and that SHS's failure to liquidate sooner violated Chicago Board of Trade (CBOT) rules and SHS's own internal directives. He also disputed the evidence that he repeatedly attempted to forestall SHS from liquidating his account.
In this appeal, Leach raises several issues the most important of which involve allegedly improper jury instructions. He argues that Jury Instruction # 20 constitutes reversible error. That instruction stated that Leach could not assert improper actions of SHS as a defense if he ratified those actions, and that ratification may occur by his "failure to timely object to the broker's unauthorized course of conduct." The instruction concluded that
if you find by a preponderance of the evidence that . . . Leach had full knowledge of Shearson Hayden Stone's decision to delay liquidating the Leach account and he failed to object to such delay or even encouraged the same, then although such decision may have been originally unauthorized or contrary to the rules of the (CBOT), the defendant cannot now assert the wrongful action as a defense . . . .
Leach argues that this instruction withdrew from the jury the question of whether he Intended by his failure to object to SHS's conduct to ratify that conduct. Thus, he argues, the trial court improperly instructed the jury that failure to object, alone, as a matter of law constitutes intent to ratify.
Although failure to object can constitute ratification if the trier of fact draws the inference from such silence that the principal intended to affirm the agent's conduct, silence is not as a matter of law sufficient to constitute ratification. See Bell v. Cunningham, 28 U.S. (3 Pet.) 69, 81-82, 7 L. Ed. 606, 611 (1830); Restatement of Agency Second, § 94, comment a; 3 Am.Jur.2d Agency, § 178. Therefore, we agree with Leach that the trial court erred in giving Instruction # 20.
We also note that in a strict sense, the legal doctrine of ratification does not apply to this case because it applies only when the agent (SHS) takes unauthorized actions which do not bind the principal (Leach) until the principal, who has the power to authorize the actions, later affirms those actions. In the present case, any lack of authority on the part of SHS to delay liquidation could not be cured by approval from Leach. The lack of authority alleged was that resulting from the rules of the CBOT regarding proper margin requirements. If SHS lacked authority to delay liquidation because the CBOT rules required it to maintain certain margin requirements with its customers, Leach could not supply SHS with authority via ratification.
The legal doctrine described in instruction # 20 is more accurately labeled waiver. Although waiver is a flexible concept with no definite and rigid meaning, it is generally defined as an intentional relinquishment of a known right. United States v. Chichester, 312 F.2d 275, 281-82 (9th Cir. 1963). It is basically an equitable principle used by courts to avoid harsh results when a party has conducted itself in such a way as to make those results unfair. L. Orlik Ltd. v. Helme Products Inc., 427 F. Supp. 771, 776 (S.D.N.Y.1977). As applied in the present case, if Leach had knowledge of SHS's decision to delay liquidation and intentionally failed to object, he would have waived his right to raise SHS's conduct as a defense. Characterizing the doctrine as waiver rather than ratification, however, does not cure the error. Intent is also a necessary element of waiver and if not express, may be inferred by the trier of fact. But inferring intent is a jury question and therefore should not have been removed from the jury as the trial court did with Instruction # 20. See Metropolitan Paving Co. v. City of Aurora, Colorado, 449 F.2d 177, 182 (10th Cir. 1971).
Having determined that the trial court erred in giving Jury Instruction # 20, we must now determine whether that error requires reversal of the judgment. Under Rule 51, Fed.R.Civ.P., a party may not assign as error the giving of an instruction unless he objects to the instruction before the jury retires to consider its verdict and unless he states distinctly the matter to which he objects and the grounds of his objection. Leach did not make a specific objection in the trial court to Instruction # 20 on the issue he now raises. His only objection was that ratification, being an affirmative defense, should not have been raised because it had not been pleaded. Although this court has the power to reverse for plain error in an instruction to which no party specifically objected, this power is exercised in only very rare circumstances where necessary to prevent a miscarriage of justice. Appleyard v. Transamerican Press, Inc., 539 F.2d 1026, 1031 (4th Cir. 1976) (concurring opinion), Cert. denied, 429 U.S. 1041, 97 S. Ct. 740, 50 L. Ed. 2d 753 (1977); 9 Wright & Miller, Federal Practice and Procedure, § 2558 at 672 (1971). Those circumstances are not present in the instant case, and thus the erroneous instruction does not constitute reversible error. In the instant case, if Leach had full knowledge of SHS's delay in liquidating, we do not regard it as likely that he would have failed to object unless he intended to approve or encourage that delay or to waive his right to raise it. He knew that a significant amount of money was at stake and, being a sophisticated investor, quite clearly did not remain silent out of inadvertence or lack of concern. As a result, the jury, if given the opportunity, would, it appears clear to us, have drawn the inference of intent from failure to object. Accordingly, we perceive no real miscarriage of justice resulting from the erroneous instruction.
Leach next argues that he is entitled to reversal of the judgment or at least a new trial because of the doctrine of avoidable consequences. This doctrine requires the non-breaching party in a contract case to take reasonable steps to mitigate damages after the breach, and prohibits that party from recovering those damages which it should have acted to prevent. See, e.g., Commodity Credit Corp. v. Rosenberg Bros. & Co., 243 F.2d 504, 511-12 (9th Cir. 1957), Cert. denied, 355 U.S. 837, 78 S. Ct. 62, 2 L. Ed. 2d 48. Leach contends that when he allegedly breached the customer agreement by failing to maintain adequate margins in his commodity account, SHS failed to mitigate damages by its delay in liquidating his account. From the day he went below his margin requirements to the day SHS liquidated his account, approximately 17 days, the price of soybean meal and soybeans rose thereby increasing the damages. If SHS had liquidated earlier, the damages would have been significantly lower.
The jury however, was instructed on the mitigation of damages doctrine. Jury Instruction # 32 stated in part:
Therefore, if you find that William Leach breached the customer agreement that existed between (SHS) and himself, (SHS) still may recover for only that part of the resulting damages, if any, that (SHS) could not reasonably have avoided by the exercise on ...