Ocrant v. Dean Witter & Co., Inc., 74-1012
| Decision Date | 18 September 1974 |
| Docket Number | No. 74-1012,74-1012 |
| Parties | Fed. Sec. L. Rep. P 94,796 Nancy H. OCRANT, Appellant, v. DEAN WITTER & COMPANY, INC., Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
John W. McKendree, of Hemminger, McKendree, Vamos & Elliott, P.C., Denver, Colo., for appellant.
D. Monte Pascoe, Denver, Colo. (Ireland, Stapleton, Pryor & Holmes, P.C., and William G. Imig, Denver, Colo., with him on the brief), for appellee.
Before HILL, SETH and HOLLOWAY, Circuit Judges.
Nancy H. Ocrant, the plaintiff, appeals from a directed verdict for the defendant in her action premised on allegedly unauthorized transactions in an account maintained in her name with the defendant brokerage house. Her complaint listed several theories upon which she sought to recover.
The plaintiff, during the period with which we are concerned, was married to Lawrence Ocrant, an active investor in the stock market and a licensed broker. He maintained several large accounts with the defendant Dean Witter's Denver office, all of which were managed by Lewis A. Waldbaum, an agent and vice president of the firm. Mr. Ocrant was a daily visitor to the Denver Dean Witter offices, and he and Mr. Waldbaum were close personal friends and their families were together on numerous social occasions. Throughout the period in question Mr. Ocrant actively directed the transactions in his accounts. He was a heavy trader, and the turnover in his accounts was rapid. Many of his securities were held for only a few days before being sold or traded.
On August 13, 1968, Mr. Waldbaum opened account number 68-16409 in the name of Nancy H. Ocrant. The account was ostensibly to be a nondiscretionary, nonmargin account, meaning that only Mrs. Ocrant or her designated attorney in fact could authorize transactions in the account. The subsequent handling of the account, however, belies this status. In contrast to her husband, Mrs. Ocrant was an unsophisticated investor with very little knowledge of the operation of the stock market. As a result she gave virtually no attention to the handling of her account and relied exclusively on her husband's judgment and expertise in this area. Thus, under her husband's direction her account was managed in much the same fashion as the other Ocrant accounts, that is, with heavy trading and rapid turnover. Dean Witter, however, was unable to produce a power of attorney designating either Mr. Ocrant or Mr. Waldbaum with authority to make transactions from the account, and there was no testimony that one was ever executed.
Beginning in October 1969 Mr. Ocrant begin to acquire large blocks of Standard Oil of California shares in both his and his wife's accounts. Mrs. Ocrant does not challenge any of the transactions in her account prior to this point, but rather asserts that with the acquisition of the Standard of California shares the character of her account changed, and that it was her husband's intention to develop her account into a permanent source of income and security for her. Thus, while there is some conflict in the record on this matter, the plaintiff's position is that the Standard shares were being acquired as a permanent, blue-chip investment, and the heavy trading in the account was thereafter to cease. There is evidence in the record that this change in status was communicated to Mr. Waldbaum in a general fashion during various social occasions, and the Standard shares were sometimes thereafter referred to as 'Nancy's nest egg.' As was characteristic of the Ocrant-Waldbaum business transactions, however, nothing was ever set forth in writing. In any event, between October 1969 and January 1970 some 14,400 shares of Standard Oil of California were purchased for Mrs. Ocrant's account.
The disputed transactions occurred in January and February 1970, and are shown in tabular form as follows:
No. of Settlement Purchased
Shares Stock Date or Sold
----------------------------------------------------
2800 Standard Oil Jan. 27, 1970 Sold
1400 Standard Oil Jan. 27, 1970 Sold
900 Standard Oil Jan. 28, 1970 Sold
600 Standard Oil Jan. 30, 1970 Sold
300 Standard Oil Jan. 30, 1970 Sold
800 Standard Oil Jan. 30, 1970 Sold
1000 Standard Oil Feb. 4, 1970 Sold
600 Standard Oil Feb. 5, 1970 Sold
300 Standard Oil Feb. 17, 1970 Sold
1000 Standard Oil Feb. 17, 1970 Sold
4700 Standard Oil Feb. 18, 1970 Sold
2100 Reading & Bates OD Jan. 27, 1970 Purchased
500 Reading & Bates OD Jan. 27, 1970 Purchased
4000 Reading & Bates OD Jan. 27, 1970 Purchased
2300 Reading & Bates OD Feb. 19, 1970 Purchased
100 Reading & Bates OD Jan. 28, 1970 Purchased
1000 Reading & Bates OD Jan. 28, 1970 Sold
100 Reading & Bates OD Feb. 19, 1970 Sold
1400 Reading & Bates OD Feb. 24, 1970 Sold
100 Reading & Bates OD Feb. 24, 1970 Sold
2800 Reading & Bates OD Feb. 24, 1970 Sold
700 Reading & Bates OD Feb. 25, 1970 Sold
2900 Reading & Bates OD Feb. 25, 1970 Sold
The result was that between January 27 and February 18, 1970, all 14,400 shares of Standard Oil of California were sold from the account; 9,000 shares of Reading & Bates OD were acquired on January 27 and 28, 1970, and those shares were subsequently sold between January 19 and 25, 1970. All of these transactions, according to the plaintiff, were accomplished without her knowledge or authorization. There is some dispute in the record whether they were directed or authorized by Mr. Ocrant. It is undisputed, however, that Dean Witter in accordance with its routine procedures mailed transaction confirmation slips as well as monthly account statements to the plaintiff. Mrs. Ocrant acknowledges receipt of these, but maintains it was her practice simply to put such mail on her husband's desk since she had little understanding of it.
Other events of considerable significance also occurred during the same period as the disputed transactions. On January 6, 1970, Mrs. Ocrant negotiated a $403,000 non-purpose loan from Dean Witter, using her Standard Oil shares as collateral. The amount of the loan was approximately one-half the market value of the collateral shares at that time. Furthermore, on January 27, 1970, the settlement date of the first Standard Oil sales, Mrs. Ocrant was issued a check in the amount of $50,000 as proceeds of the sale. Thereafter, the following checks were also issued: $119,000 on February 25; $51,979 on February 25; $4,970 on March 16; and $27.50 on April 16, for total disbursements to Mrs. Ocrant from the account, including the loan, of $628,976.50 between January and May 1970. Each of the checks was promptly endorsed by Lawrence Ocrant and deposited in joint accounts maintained by him and his wife. The loan from Dean Witter was repaid with the proceeds from the sales.
While Mr. Ocrant conceded that he learned of the Standard Oil sales no later than March 1970, when he received the February account statement, Mrs. Ocrant denies having actual knowledge of the transactions until a November 1970 reconciliation meeting with her then estranged husband. She does, however, remember a meeting at the Dean Witter offices in January or February involving herself, her husband, and Mr. Waldbaum, at which her husband expressed concern over the Reading & Bates purchases and was attempting to learn the fund from which the purchases were made. In any event, Mrs. Ocrant's objection to the Standard Oil sales was not made known to Dean Witter until December 1970. In the interim, on July 27, 1970, Mr. Waldbaum, the executive in charge of the Ocrant accounts, committed...
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