Cange v. Stotler and Co.

• Court: U.S. Court of Appeals — Seventh Circuit
• Writing for the Court: Before BAUER, Chief Judge, and WOOD, Jr., Circuit Judge, and FAIRCHILD; FAIRCHILD; Leinenweber
• Citation: Cange v. Stotler and Co., 913 F.2d 1204 (7th Cir. 1990)
• Decision Date: 17 September 1990
• Docket Number: 88-2628 and 89-1082,Nos. 88-2382,s. 88-2382
• Parties: Joseph P. CANGE, Plaintiff-Appellee, Cross-Appellant, v. STOTLER AND COMPANY, Defendant-Appellant, Cross-Appellee.

Page 1204

913 F.2d 1204

17 Fed.R.Serv.3d 1295

Joseph P. CANGE, Plaintiff-Appellee, Cross-Appellant, v. STOTLER AND COMPANY, Defendant-Appellant, Cross-Appellee.

Nos. 88-2382, 88-2628 and 89-1082.

United States Court of Appeals Seventh Circuit.

Argued Nov. 29, 1989.

Decided Sept. 17, 1990.

John G. Jacobs, Jonah Orlofsky, Robert Plotkin, Barbara Smith, and Jeffrey G. Brown, Plotkin & Jacobs, Chicago, Ill., for Joseph P. Cange.

Thomas F. Kolter, Jeffrey M. Henderson, and Henry K. Becker, Stotler & Co., Chicago, Ill., for Stotler and Co., Inc., an Illinois limited partnership.

Before BAUER, Chief Judge, and WOOD, Jr., Circuit Judge, and FAIRCHILD, Senior Circuit Judge.

FAIRCHILD, Senior Circuit Judge.

We revisit a dispute between an Alaskan investor, Joseph P. Cange, and a commodities futures merchant headquartered in Chicago, Stotler and Company. Mr. Cange has sued Stotler in an attempt to recover losses he suffered from unauthorized trading on his commodities futures account. His suit was originally dismissed by the district court on a motion to dismiss (treated as a motion for summary judgment), because he did not sue within one year of the unauthorized trades, as required by a clause in his customer agreement with Stotler. The trades were charged to his account in September, 1982 and Mr. Cange sued in November, 1984. Cange v. Stotler and Company Inc., No. 85 C 7664, 1986 WL 5644 (N.D.Ill. May 5, 1986).

Mr. Cange appealed, and this court reversed. We held that the contractual limitation clause did not violate public policy, but that Mr. Cange had demonstrated genuine issues of fact which, if resolved in his favor, would establish that Stotler was estopped from asserting the defense of failure to sue within one year. Cange v. Stotler and Co., Inc., 826 F.2d 581, 583-93 (7th Cir.1987) ("Cange I ").

After a bench trial, Judge Leinenweber found that Stotler was estopped from raising the contractual limitation defense. On the merits, he found Stotler liable, awarding Mr. Cange $43,666.79, representing the remaining unpaid balance of losses from the unauthorized trading in his account, plus costs and attorney's fees. In a later order, he allowed $80,218.35 attorney's fees, with interest through June 23, 1988. ¹

Stotler appealed from the judgment against it. Mr. Cange filed an appeal in order to challenge the denial of punitive damages. Stotler appealed from the order determining the amount of attorney's fees.

THE FACTS ²

In January, 1981, Mr. Cange opened a commodities futures trading account with Stotler. He opened the account and conducted his trading through Mr. Wilson, who was Stotler's commodities broker in Anchorage.

In September, 1982, certain trades of gold and silver futures appeared in Mr. Cange's accounts, without his authorization. Resulting losses totalled $59,150.

On the day the first unauthorized trade was made, Mr. Wilson called Mr. Cange and told him that he would be receiving notice of certain trades that had been mistakenly charged to his account, but that he could ignore these notices because the entries would be reversed.

When Mr. Cange received statements from Stotler showing the trades, he promptly contacted Mr. Wilson. Mr. Wilson again told him the trades had been charged in error, and assured him that he could ignore the statements because Stotler would reverse the entries.

In the months that followed, Mr. Cange regularly called Mr. Wilson about the matter and was given the same assurances. Beginning in the spring of 1983, Mr. Wilson told Mr. Cange that the entries had in fact been reversed, and that Mr. Cange simply didn't know how to read the statements. Mr. Cange, a certified public accountant, thought he was reading the statements correctly, but realized he may have missed a statement, or might actually be reading them wrong.

Mr. Cange continued to trade on his account until June of 1983, although with decreasing frequency because he was losing faith in Mr. Wilson's credibility. Tr. 85.

In August of 1983, Mr. Cange had his accountant, Veronica Montgomery, review the account in connection with the preparation of his income tax returns. Tr. 42-43. She concluded, correctly, that the entries had never been reversed. Mr. Cange mailed a letter August 28, 1983, to Stotler in Chicago complaining that the trades had been charged to his account in error, and asking Stotler to reimburse his account "as soon as possible since the amount is sizable." PX 7. Witnesses for Stotler claimed never to have seen the letter.

On August 30, Mr. Cange's accountant met with Mr. Wilson and confirmed that the account still reflected the losses. Mr. Wilson told her, however, that the trades had in fact been authorized by Mr. Cange. Mr. Cange immediately called him. Mr. Wilson admitted that the trades had not been authorized, and promised that the losses would be repaid by crediting Mr. Cange's account at $5,000 per month.

In early September, Stotler sent Mr. Cange a statement from Chicago confirming a credit of $15,483.21. When the October and November statements came without reflecting the promised $5,000 credits, Mr. Cange insisted on a written repayment agreement. On November 11, Mr. Cange and Mr. Wilson executed the Repayment Agreement, which was the subject of Count VII. See n. 1, above.

CIRCUIT RULE 36

Judge Leinenweber had granted the dismissal which was reversed in Cange I. In that opinion, we directed that "Circuit Rule 36 will apply on remand." This meant on remand the district court was to reassign the case for trial before a judge other than Judge Leinenweber unless all parties requested that he try the case. ³ Our direction was overlooked. We brought this matter to counsel's attention at oral argument. Counsel for Stotler appeared unaware of the direction, and counsel for Mr. Cange said that because he was happy to have the case set for trial so quickly, he did not object.

The purpose of Rule 36 is to avoid, on retrial after reversal, any bias or mindset the judge may have developed during the first trial. The rule does not automatically apply where the judgment reversed has not resulted from a trial, but we apply it in our discretion to avoid the operation of bias or mindset which seems likely to have developed from consideration and decision of motions to dismiss or motions for summary judgment and the like. If the effect of our rule be deemed disqualification of the original judge, it is one which the rule permits the parties to waive. The parties here did not join in a request that Judge Leinenweber try the case, but under the circumstances, the result should be the same.

FINDING OF ESTOPPEL NOT CLEARLY ERRONEOUS

In Cange I we held that the showings made on the motion for summary judgment demonstrated issues for the trier of fact on the question of estoppel.

The trier of fact could find that it is within the customary authority of an FCM's agent handling a customer's account to make statements of the account's correct balance and to promise refunds for losses from unauthorized trades. Thus the plaintiff's reliance on those statements and promises, notwithstanding contrary figures listed on the account statement issued by Stotler and Company, could be found to be reasonable. As such, the plaintiff's failure to bring suit within the one-year limitations period could be found to be attributable to Wilson's statements, and Stotler and Company would be estopped from asserting the bar of the limitations period.

826 F.2d at 591. See also statements concerning the existence of a jury issue on pages 588, 589, 590.

Unless there were material differences between the set of facts presented on the motion for summary judgment, and the facts proved at trial, sufficiency of the evidence to support a finding for plaintiff on these issues would constitute law of the case. No significant differences seem to have appeared.

Judge Leinenweber found that Mr. Wilson had made the promises and assurances already referred to, that they were within the scope of Mr. Wilson's inherent and apparent authority, and that Stotler is bound by them. He also found that Mr. Cange forebore initiating litigation because of those promises and assurances. He did not make findings in terms of reliance and whether reliance was reasonable. Certainly, however, Mr. Cange's reliance on Mr. Wilson's assurances is implied in the finding that the assurances caused his forebearance. In the circumstances of the case, and in light of what was said in Cange I, we think that the findings that Mr. Wilson's assurances were within the scope of his apparent authority, that they caused Mr. Cange's forebearance, and that Stotler was estopped by them, sufficiently implied a finding that reliance was reasonable.

In this connection, we deem it significant that the judge based his findings of estoppel on two combined grounds--Stotler's deliberate failure to provide Mr. Cange with a copy of its Customer's Agreement, as well as Mr. Wilson's conduct.

When Mr. Cange opened his account in January, 1981, he signed Stotler's Customer Agreement. It provided that it did not become effective until executed in Illinois by a Stotler partner. Mr. Wilson did not give Mr. Cange a copy then, nor did Stotler ever send him one. The judge found that Stotler had a policy of not sending copies to its customers. The provision requiring suit within one year after a claim arises was contained in this Customer Agreement, and no other notice of it was given to customers. As Judge Leinenweber found, "The only place where that provision appeared was in the middle of the fourteenth paragraph of the twenty-two paragraph small-print SCA...." The concept of "reliance" by Mr. Cange on Mr. Wilson's promises in deciding not to sue Stotler within a year of the unauthorized charges is somewhat unrealistic, since Mr. Cange's only exposure to the contractually-defined one-year period was when he signed the customer agreement in early 1981. Perhaps this was the...