Huppman v. Tighe

DAVIS, Judge. This is an appeal from a civil jury trial held in the Circuit Court for Baltimore City. On April 11, 1990, Harry V. Tighe (appellee or Tighe), his wife Shirley Tighe, and his daughter ⁶⁵⁸ Patricia Stahler (collectively the “Tighe Family”) filed a complaint in the circuit court against stockbroker L. Reed Huppman and Huppman’s employer, Legg Mason Wood Walker, Inc. (Legg Mason). The complaint sought compensatory and punitive damages for breach of fiduciary duty, misrepresentation, negligence, and negligent supervision.

Each cause of action was alleged to have arisen from Huppman’s unauthorized purchase of two investments in April 1987: (1) a mutual fund on behalf of the Tighe Family and (2) an interest in a real estate limited partnership on behalf of Tighe only. Legg Mason moved to dismiss the entire complaint. On August 2,1990 the court granted Legg Mason’s motion only as to the Tighe Family’s claims for punitive damages. Thereafter Legg Mason and Huppman filed separate answers denying liability and alleging that the purchases were authorized.

Legg Mason unsuccessfully moved for summary judgment on the ground that the unauthorized purchases were ratified. On April 2, 1993, a jury trial commenced; at the conclusion of the Tighe Family’s case, Huppman and Legg Mason moved for judgment on all counts. The court granted the motion only with respect to the breach of fiduciary duty and negligent supervision counts. At the close of all evidence, the court reserved ruling on defendant’s motion for judgment and submitted plaintiffs’ negligence and misrepresentation claims to the jury.

The jury found that both purchases resulted from negligence and misrepresentation by Huppman and Legg Mason. The jury also found that the purchase of the mutual fund was ratified, but that the purchase of the real estate partnership interest was not ratified. As damages for the purchase of the partnership interest, the jury awarded Tighe $234,426.71: $167,426.71 damages plus prejudgment interest of $66,522.71. Huppman and Legg Mason unsuccessfully made a motion for judgment notwithstanding the verdict or alternatively for a new trial and remittitur.

Appellants, Huppman and Legg Mason, present the following issues: ⁶⁵⁹ I. Whether Tighe ratified his agent’s unauthorized purchase of partnership units (a) by retaining the benefits of that purchase, including cash distributions and a beneficial interest in the partnership, or (b) by failing to clearly and unequivocally repudiate the transaction in a timely manner.

II

Whether Tighe’s failure to offer proof of the value of the partnership interest purchased without authority, at the time of the purchase or at any time thereafter, precluded a finding that any damage was proximately caused by his agent’s negligence and misrepresentation.

III

Whether the trial court abused its discretion by denying a new trial on the issue of damages when the jury’s award allowed Tighe to keep the asset purchased without authority and recover all amounts expended to obtain it. FACTS The genesis of this appeal is the opening of two separate accounts with the Baltimore-based investment firm of Legg Mason by Tighe. 1 The first account was opened April 6, 1987 in the name of Tighe, his wife, and his daughter (Joint Account). The next day a separate IRA account was opened in Tighe’s name only. It is agreed that both accounts were non-discretionary accounts requiring customer authorization for all investments.

In early May 1987, Tighe received his monthly statement from Legg Mason, detailing his April account activity, and he realized that unauthorized transactions had been made. Regarding Tighe’s IRA account, it was discovered that Huppman had purchased 8,820 units at $25 per unit—for a total consid ⁶⁶⁰ eration of $220,500—of Mid-Atlantic Centers (MAC), a Maryland limited partnership that was formed in 1986 for the purpose of investing in shopping centers in the mid-Atlantic region. Tighe was incensed and immediately telephoned Huppman and “asked him using a few expletives what right [Huppman] had to purchase that security without [Tighe’s] permission.” Huppman offered to explain the situation at Tighe’s home. When Huppman arrived, Tighe advised him that he did not want the MAC investment; he wanted the $220,500 returned to the account and, if not, he would bring legal action.

The parties portray in severe contrast the events that immediately followed the telephone conversation. Appellants suggest that Tighe was persuaded to hold the MAC investment; in essence, Tighe was waiting to see how well the investment performed. Tighe, on the other hand, contended at trial that he clearly repudiated the MAC purchase and that he was forced by Huppman to wait until the MAC units were marketable before he could secure the full return of his money plus fair interest for the opportunity cost of his funds. Moreover, Tighe contends that he accepted the dividend checks from MAC because he viewed that money as the beginning of Huppman’s restoration of his account with fair interest.

We provide the pertinent portion of Tighe’s trial testimony: [By Michael B. Mann, counsel for Appellees]: Q. Okay. And what happened when he came to your house? A. Uh—we went downstairs to discuss the statement and I told .him ... that under no circumstances will I accept that and that I wanted the money returned to my account. Q. What was his response to that?

A He said to please calm down and that it was a good investment and that ... I should hold on to it. Uh—that it was the flagship of the Legg Mason investment fleet. From his description, it was gold-plated.

I told him I did ⁶⁶¹ not care. I did not want the investment. I wanted the money restored to my account. Q. And what did he say to that?

A. Well, I—when I said the money restored to my account the second time I said, and if this does not happen, I will take legal action and he said, “well look. Before you take legal action, will you please consider the fact that Legg Mason is in the process of having this fund ... presented on a unit basis with a market value,”— Q. What did that— A. —and that they expected it to be marketable and [it] was certainly going to be valuable. Q. What did that mean to you, presented on a unit basis and have market value? A. It meant that instead of being a—an investment that you were tied up with and could do nothing with, it would be an investment that could be marketed— Q. Okay.

What— A. And your money could—could be gotten out of it. Q. What was your understanding or what did he tell you about whether you could sell that investment right then and there ... A. He assured me—he guaranteed me— Q. What ... did he tell you about whether you could sell that investment right at that time? A. He ... didn’t—he knew it couldn’t be sold then.

He was .. trying to get me to consider holding off legal action until I gave Legg Mason a chance to put this security on a unit basis and create a market value. Regarding the Joint Account, Tighe testified that, upon reviewing a separate monthly statement, he learned that on April 14, 1987 Huppman had purchased 15,399 shares of MFS Lifetime Capital Growth Fund (MFS). Tighe confronted Huppman about the MFS purchase at the same time they discussed the MAC investment. The record indicates that the ⁶⁶² money was not restored to Tighe’s account, and that Tighe sold MFS at a loss in February 1989.

During the period Tighe held MFS, he received and retained dividends and capital gains distributions from MFS totalling $2,399. The jury concluded that Tighe ratified the MFS purchase. The jury’s findings regarding the MFS purchase were not appealed. Despite the unauthorized purchases, Tighe did not close his accounts at Legg Mason but, rather, continued to purchase securities through Huppman for nearly two years.

After learning about Huppman’s transgressions, there is no record that Tighe spoke to Huppman’s superiors. Tighe did, however, testify that he was told by an unidentified person to speak only with Huppman. In addition, Tighe contacted MAC directly in August 1987 “to get a schedule of expected income and capital distributions by quarters” and “to try to find out how [he] could get his money back and when.” This information would allegedly “enter into [his] decision to make a legal ... suit sooner than later.” Tighe acknowledged having received the MAC prospectus on or about August 14, 1987. Although it is uncertain as to how much of the prospectus Tighe read, the cover reads, inter alia: There currently is no public market for the Units, and there can be no assurance that the Units will be listed or, if listed, that a public market will develop, particularly in view of the size of the minimum offering.

In May 1989 Tighe called Legg Mason to speak with a compliance officer. Tighe followed up with a letter recapping the substance of his conversation with the compliance officer. In the letter Tighe repeatedly complained about the unauthorized purchase of MAC and the lack of any market for its sale. Nonetheless, Tighe did not state outright that he wanted MAC removed from his account and replaced with his original funds and fair interest.

On August 17, 1987, after Tighe received the MAC prospectus, MAC began making quarterly distributions of partnership cash flow to its limited partners. Between August 1987 and ⁶⁶³ the date of Tighe’s May 1989 letter to Legg Mason, Tighe received four cash distributions totalling $14,670.60. In total, Tighe received fourteen separate cash distributions totalling $52,596.60 before MAC ceased making distributions to its limited partners. At Tighe’s request, all of these distributions were deposited into Tighe’s money market account at Legg Mason.

Tighe testified that he retained the distributions because he believed “they were part of the return of capital that [he] had requested,” presumably the return on his $220,-500 used to purchase the MAC units plus a “fair rate of return.” LEGAL ANALYSIS Appellants ask this Court to overturn a jury verdict concluding that Tighe repudiated and did not ratify Huppman’s unauthorized purchase of the MAC investment. The jury’s finding that the purchase was not authorized is not challenged. A motion for judgment notwithstanding the verdict (j.n.o.v.) is reviewed under the same standard as a judgment granted on motion during trial. The appellate court assumes the truth of all credible evidence and all inferences of fact reasonably deducible from the evidence supporting the party opposing the motion.

If there exists any legally competent evidence, however slight, from which the jury could have found as they did, a j.n.o.v. would be improper. Impala Platinum Ltd. v. Impala Sales (U.S.A.), Inc., 283 Md. 296, 327 , 389 A.2d 887 (1978); Lakewood Eng’g. & Mfg. v. Quinn, 91 Md.App. 375, 381 , 604 A.2d 535 (1992); DiLeo v. Nugent, 88 Md.App. 59, 75 , 592 A.2d 1126 , cert. granted, 325 Md. 18 , 599 A.2d 90 (1991). I In the case sub judice, appellants suggest that there was no legally competent evidence to support the jury’s finding that Tighe (a) repudiated the unauthorized purchase and (b) did not ratify the unauthorized purchase. ⁶⁶⁴ a Maryland law is clear that “a repudiation is not effected by a statement that the sale [or purchase] was unauthorized or by a claim of what the customer felt himself justly entitled to.” Hathcock v. Mackubin, 166 Md. 70, 81 , 170 A. 573 (1934) (internal citations removed); see also Smith v. Merritt Sav. & Loan, 266 Md. 526, 536-37 , 295 A.2d 474 (1972). A repudiation must be made timely, id., and in a definite, positive, and unequivocal manner.

Shapiro v. Bache & Co., Inc., 116 Ariz. 325 , 569 P.2d 267, 271 (Ariz.Ct.App. 1977). See also 3 C.J.S. Agency § 402(C) (1973). The sufficiency of a repudiation is generally a question of fact that must be determined from the surrounding circumstances. Smith, 266 Md. at 538 , 295 A.2d 474 ; 3 C.J.S. Agency § 402(c).

It is only where the “case is so clear that reasonable [minds] could come to but one conclusion” that repudiation may be determined as a matter of law. Restatement (Second) of Agency § 94 cmt. a (1957). Based on the foregoing principles, we affirm the trial court’s decision not to grant a j.rno.v. as to the issue of repudiation. Tighe’s testimony amounts to legally competent evidence sufficient for the jury to conclude that Tighe repudiated the unauthorized MAC purchase.

We restate the pertinent portion of Tighe’s testimony: Q. Okay. And what happened when he came to your house? A. Uh—we went downstairs to discuss the statement ... I told him ... that under no circumstances will I accept that and that I wanted the money returned to my account.

Q. What was his response to that? A. He said to please calm down and that it was a good investment and that ... I told him I did not care. I did not want the investment.

I wanted the money restored to my account. ⁶⁶⁵ This testimony constitutes evidence sufficient for a jury to conclude, drawing all inferences in Tighe’s favor, that he made a definite, positive, and unequivocal repudiation. b Having ruled that the trial court did not err with respect to the determination that Tighe repudiated the MAC purchase, we next consider whether the trial court should have held that Tighe ratified the MAC purchase as a matter of law. A principal will be bound by the unauthorized acts of his agent if the transaction is ratified in whole or in part. Smith, 266 Md. at 536-37 , 295 A.2d 474 . The burden is on the broker to prove ratification.

Richardson