Appeal from the Circuit Court of Cook County; the Hon. Irving
R. Norman, Judge, presiding.
JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:
Rehearing denied May 7, 1984.
Jordan Tark (plaintiff) brought this action against Shearson/American Express, Inc. (defendant) for negligent misrepresentation. A jury found for plaintiff and awarded him $65,000. Defendant's post-trial motion was denied. Defendant appeals.
Defendant is a securities broker-dealer and commodity futures commission merchant. At all times relevant to this litigation, plaintiff was a trader of securities and commodity futures contracts. Prior to 1976 plaintiff established an account with defendant through which plaintiff traded securities. In 1976 plaintiff also opened a commodities margin account with defendant.
Under the customer agreement contract executed when the commodities account was established, defendant had discretion in determining how much cash plaintiff must keep in the account to secure the commodity futures contracts held therein. Defendant could, and did, increase the cash margin requirements on a daily basis. Defendant based its determination on the daily fluctuation of the price of commodities and its effect on the value of the futures contracts held in plaintiff's account.
In September of 1976, plaintiff began to trade cotton futures contracts through his account with defendant. In consultations with a broker employed by defendant, plaintiff developed a strategy of being "long" on cotton contracts. This was plaintiff's goal or objective. Under such a strategy, plaintiff would buy more cotton contracts than he would sell. This was based on the theory that the long-term price of cotton would rise. By December 31, 1976, plaintiff was long 18 cotton futures contracts in his account with defendant.
From December 1976 through January 1977 the price of cotton exhibited a steep decline. On January 4, 1977, plaintiff instructed his broker, employed by defendant, to sell securities owned by plaintiff and put the proceeds into plaintiff's account to secure his long position in cotton. The securities were sold and the proceeds credited to plaintiff's account on January 5, 1977. Plaintiff testified the broker told him that when he gave the broker an order to sell stock, plaintiff would "get next-day credit for the proceeds of that stock into the commodity account."
Also on January 5, 1977, plaintiff ordered the broker to sell securities which were held in plaintiff's securities account with defendant and to transfer the proceeds into plaintiff's commodities account. Proceeds of this sale were promptly credited to plaintiff's commodities account. Also on January 7, 1977, plaintiff ordered defendant to sell the remaining securities in his securities account and transfer the proceeds to his commodities account.
The price of cotton futures continued to fall. On January 12, 1977, plaintiff's broker informed plaintiff that plaintiff was short of margin. The broker demanded plaintiff deposit $16,000 in his commodities account. To meet this margin call, plaintiff sold six of his "long" cotton contracts, and bought four "short" contracts. Because the price of cotton was then currently in decline, the fact that plaintiff was short on some cotton contracts acted to reduce the cash required to meet defendant's margin call.
On the morning of January 13, 1977, the broker informed plaintiff the liquidated cash value of plaintiff's commodities account was then only about $2,900. Plaintiff had already liquidated all of his securities and did not want to infuse more cash into his commodities account. Plaintiff therefore ordered defendant to liquidate all his contracts in the commodities account.
At about 12:30 p.m. on that same date, the broker informed plaintiff that an additional $16,000 had been "found" in plaintiff's commodities account, apparently from the sale of securities plaintiff had ordered on January 7. The broker attempted to salvage the contracts plaintiff had previously ordered liquidated. However, these long positions were already sold. The agent was only able to salvage plaintiff's four short contracts. Such a position would be advantageous to plaintiff only if the long-term price of cotton would fall.
On that same day, January 13, 1977, plaintiff informed the broker he was upset because defendant's actions resulted in plaintiff being short in the cotton market when his strategy was to be long on cotton. Plaintiff asked the broker what the management was going to do about it. Plaintiff did not specifically ask defendant to reinstate his previous positions in cotton. The broker told plaintiff he did not know what "they" would do about the situation but he said he would inform his superiors. Plaintiff talked to the broker almost every day from January 14, 1977, to January 25, 1977. The broker could not give plaintiff a definitive answer as to defendant's intentions regarding the situation.
On or about January 25, plaintiff met with defendant's regional manager. Plaintiff testified, "I did all the talking." After the meeting, plaintiff was under the impression "absolutely nothing [was] going to be done." Plaintiff wrote and hand delivered a lengthy letter to defendant dated January 25, 1977. Plaintiff informed defendant that plaintiff intended to recoup his losses through litigation. Plaintiff also outlined the trades plaintiff would have made had his positions not been liquidated by defendant on January 12.
Defendant concedes that if the proceeds of the sale of securities which plaintiff ordered sold on January 7 had been properly credited to plaintiff's commodities account, defendant would not have issued the $16,000 margin call of January 12. Defendant also concedes the evidence adduced at trial is sufficient to support a finding that defendant's conduct was negligent. Thus the remaining basic issue is the question ...