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Niehuss v. Merrill Lynch

OPINION FILED APRIL 18, 1986.

FERN NIEHUSS, PLAINTIFF-APPELLEE,

v.

MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County; the Hon. Charles E. Freeman, Judge, presiding.

PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:

Rehearing denied June 9, 1986.

This appeal is from judgment entered on a $25,000 jury verdict for plaintiff in her action to recover profits lost as a result of defendant's failure to execute her order to purchase four contracts in silver futures. Defendant contends that: (1) evidence of a settlement offer was erroneously admitted; and (2) the damage award was excessive because the trial court: (a) gave instructions as to damages which were improper and confusing; (b) refused to admit evidence of the sale by plaintiff of her substitute silver contracts; and (c) refused defendant's evidence as to mitigation of damages and its instruction thereon.

It appears that plaintiff was a sophisticated investor familiar with the intricacies of commodity trading when, on September 2, 1980, she went to an office of defendant to open a commodity trading account because she wanted to purchase contracts in silver futures. She spoke to Patrick Gorkis, an account executive, who told her that she would have to make a margin deposit of $4,000 for each of the four 1,000-ounce February 1981 silver futures contracts she wished to purchase. Plaintiff did have sufficient funds in a ready asset *fn1 account she had with defendant to cover the margin requirement and Gorkis ordered $16,000 transferred therefrom to the commodity trading account. Although plaintiff's monthly statement indicated that the transfer was made on September 2, Gorkis did not order the silver contracts for plaintiff on that date.

The only dispute with respect to liability is whether plaintiff placed a definite order with defendant. Plaintiff claims that she ordered the four contracts on September 2, while defendant asserts that she did not place a definite order until September 8, when she decided to purchase only two contracts. Since the parties presented conflicting testimony with respect to the events which took place between September 2 and September 8, we will summarize that testimony in more detail later in this opinion. It is undisputed, however, that the price of silver was $17.37 per ounce *fn2 on September 2 and that silver traded "up the limit" *fn3 from September 3 to September 8. On September 9 plaintiff asked Gorkis to close her commodity account and transfer her funds back to her ready asset account. (She also talked to Wilfred Fritz, the Merrill Lynch office manager, who spoke to Gorkis about the transaction.) On September 11, plaintiff opened a commodity account at E.F. Hutton. She purchased one silver contract as $21.30 per ounce on September 11 and another contract at $22.30 per ounce on September 12. The silver market reached a high of $24.25 per ounce on September 25, but plaintiff did not sell her contracts until December 1980 when she sold at $18 per ounce. Defendant was not allowed to introduce evidence of the December sale at trial.

With respect to the placement of the order, plaintiff testified that during her visit to defendant's office on September 2 she told Gorkis that she wanted to purchase four 1,000-ounce contracts in February 1981 silver. She initially told him that her son-in-law might want to purchase the silver contracts with her, but when Gorkis told her that he could not do so because he had not signed the forms, plaintiff said she would take the silver herself and settle with her son-in-law later. Although she did take additional forms home for her son-in-law, she filled out the forms for her individual account in defendant's offices and told Gorkis that she had sufficient funds in her Merrill Lynch ready asset account to cover the $16,000 margin requirement for the four silver contracts. Gorkis called her account executive to verify the amount in her account, and, when plaintiff asked whether she had to sign any papers to transfer the funds, Gorkis told her that the transfer had already been made. When plaintiff left the office on September 2 Gorkis said that he was going to order the silver immediately. She then told him that she would call him from home to find out exactly what she had to pay for it. She never reached him on September 2, so she went down to defendant's offices the next day to find out what was going on. When she asked Gorkis what she had to pay for the silver, he told her that he didn't buy it because their expert told him that silver was going to drop even further. She said that she thought it was going to go up and she wanted him to buy her 4,000 ounces immediately. She tried to call Gorkis several times after she left the Merrill Lynch office but was unable to reach him. She spoke to him again on September 4 at which time he told her that he could not place her order because silver was trading "up the limit." When she expressed disappointment that he had not bought the silver on the 2d or 3d as she had requested, he gave her a different excuse, telling her that he couldn't buy it on September 2 because it takes a day to transfer money from one account to another. She told him that she still wanted the four contracts but on Friday, September 5, silver was still trading up limit and she reduced her order to two contracts as a result of the higher silver prices. When the silver market was still up limit on Monday, September 8, she cancelled her order and called Gorkis on September 9 to tell him to transfer the $16,000 back to her ready asset account. She also called Fritz (the vice-president and manager of defendant's commodity office in Chicago) and told him about her problems with Gorkis. Fritz called her after talking to Gorkis and said that the latter had not ordered the silver because it takes a day to transfer money from one account to another. Although Fritz initially told her that defendant would buy the silver, then split the difference between the price on September 2 and the current price, he withdrew the offer and told her that defendant was denying all liability after she told him that she did not think the offer was fair. Plaintiff eventually withdrew all of her money from her ready asset account with defendant, and when she went to the office to pick up her check, she asked Kathleen Thompson whether it was necessary to wait a day before transferring money from one defendant account to another. Ms. Thompson replied in the negative. She also testified that a September 2 entry on her monthly account statement listed the $16,000 transfer to her commodities account.

Wilfred Fritz, vice-president and manager of the Chicago commodity office of defendant at the time of this transaction, testified that Gorkis, as an agent, was not allowed to exercise discretion in entering orders. His obligation was to place the order when he received it if an approved client had money in her account. On September 9, he had a conversation with Gorkis regarding his dealings with plaintiff on September 2. He testified as follows:

"[Plaintiff's Attorney]: And did Pat Gorkis tell you that Fern Niehuss wanted to place a silver order for four contracts for February, '81 silver, 4000 ounces; that there was some confusion with the stockbroker not being able to determine the exact amount of the money, and that the order was not placed; did he say that?

[Mr. Fritz]: That is essentially correct."

Patrick Gorkis, the commodity futures account executive of defendant with whom plaintiff dealt in September 1980, testified that she wanted to purchase a total of four silver contracts but considered doing so in a joint account with her son-in-law. He gave her the forms for a joint account, but since she could not open a joint account without her son-in-law's signature on the forms, she decided to open an individual account immediately and took the other forms home with her. Gorkis also contacted plaintiff's stockbroker with defendant to determine whether she had sufficient funds in that account to cover her margin requirements on the silver purchase. He did not tell her that there were sufficient funds to purchase the silver but instead told her at the end of their meeting that he would continue his attempts to determine the exact balance in her account. She did not give him an order for silver contracts on that day. On September 3, plaintiff called him before the silver markets had opened for the day and he told her that, based on information from their research office, he expected the markets to trade even lower than the previous day. Plaintiff personally brought the joint account forms to the office later that day and, after discussing the market and making sure that the forms were filled out properly, he introduced her to Fritz. Plaintiff did not place an order on that day because she decided to wait for a lower price, nor did she place an order when she called later that afternoon and found out that silver had closed down 17 cents. It would have been possible for Gorkis to enter an order for her on September 3 if she decided to place one. Plaintiff called him on September 4, and he told her that, although silver started trading even lower, the market reacted to a news item and was trading up limit by the close of trading. When he spoke to plaintiff about this, he told her that their research department believed that the price increase could be a temporary overreaction to an unconfirmed news article and that, if this were the case, the price of silver could go down the following day. She called him the next day when silver was again trading up the limit but she did not place an order. On Monday, September 8, with silver again trading up limit, she told him that she thought it was unfortunate that the price rose so quickly and she instructed him to enter an order for two contracts. He identified the order ticket of defendant that he entered at that time, which was date-stamped as September 8. He entered the order through the wire room and the wire reply he received stated that "order number 73 is unable, limit bid." He told plaintiff later that day that silver was trading at the daily allowable limit and that they were unable to fill her order because there were more buy orders than sell orders in the market at the limit price. She told him that she was disappointed but would call him the following day. The next day, September 9, she told him that she was disappointed that he had not filled the contracts and told him to transfer the money in her commodity trading account back to her ready asset account. On cross-examination, he stated that he did not tell Fritz that plaintiff had placed an order on September 2. He also stated that the money was not transferred from plaintiff's ready asset account on September 2, but after he was shown a copy of the statement from the ready asset account, he admitted that the entry on September 2 indicated that $16,000 was transferred to plaintiff's commodity account.

OPINION

I

• 1 Defendant first contends that the trial court erred in admitting evidence of an offer of compromise and that such error was compounded by the closing argument which referred to such evidence. Defendant correctly states that it is well established in Illinois that offers of compromise or settlement are inadmissible. (Sawicki v. Kim (1983), 112 Ill. App.3d 641, 445 N.E.2d 63; see also E. Cleary & M. Graham, Handbook of Illinois Evidence sec. 408 (4th ed. 1984).) Admissions of fact are not excluded simply because they are made in the course of such negotiations, however (Khatib v. McDonald (1980), 87 Ill. App.3d 1087, 410 N.E.2d 266; see also E. Cleary & M. Graham, Handbook of Illinois Evidence sec. 408, at 184-85 (4th ed. 1984)), and a "`statement, written or not, made by a party or in his behalf which is inconsistent with his present position may be introduced in evidence against him.'" (Lipschultz v. So-Jess Management Corp. (1967), 89 Ill. App.2d 192, 200, 232 N.E.2d 485, 489, quoting Nelson v. Union Wire Rope Corp. (1964), 31 Ill.2d 69, 115, 199 N.E.2d 769, 794.) It appears here that Fritz, the manager of defendant's commodity office, made an offer of compromise which was almost immediately ...


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