Opinion ID: 1778476
Heading Depth: 1
Heading Rank: 10

Heading: whether there is sufficient proof of the negligence claims.

Text: ¶ 26. Finally, Smith maintains that Franklin Funds was negligent in allowing Bernie III to fraudulently liquidate the Smiths' account without their authorization. Smith argues that Franklin Funds was their broker and as such was in a fiduciary relationship with her and her husband and that it had a duty to properly maintain their mutual fund account. Smith contends that Franklin Funds breached that duty by failing to use reasonable care and allowing Bernie III to embezzle the funds in the account with the use of a forged endorsement of a Redemption Request Form. She argues that Franklin Funds had employed no method of detecting and preventing fraudulent liquidations, that it had no procedures to verify the authenticity of her signature or her husband's signature, and that the signature guarantee utilized by Franklin Funds was fraudulent. Further, she claims that Franklin Funds was negligent in not obtaining their home mailing address which resulted in a failure to forward direct correspondence to the Smiths. ¶ 27. Franklin Funds argues that it is an issuer of stocks rather than a broker. Franklin asserts that as an issuer of stocks it did not owe any fiduciary duty to the Plaintiff. Further, Franklin maintains that the Smiths made no effort to plead or prove that there was a fiduciary duty between themselves and Franklin Funds. The Smiths did in fact plead that Franklin Funds was negligent. However, the Smiths did not have an opportunity to put on evidence of a fiduciary relationship because summary judgement was granted in favor of the defendants. Thus, we find Franklin's second contention to be without merit. ¶ 28. This Court has held that determining the existence of a fiduciary relationship is a question of fact. Peoples Bank & Trust Co. v. Cermack, 658 So.2d 1352, 1358 (Miss.1995). The person asserting that a fiduciary relationship existed has the burden of proving the existence of such a relationship by clear and convincing evidence. Id. ( citing Norris v. Norris, 498 So.2d 809, 813-814 (Miss.1986)). In Cermack we adopted the standard for determining whether a fiduciary relationship arises in a commercial transaction set forth by the Fifth Circuit in Carter Equipment v. John Deere Indus. Equipment, 681 F.2d 386 (5th Cir.1982), which is: ... a fiduciary relationship may arise in a commercial transaction when the circumstances establish that (1) the parties have shared goals in the other's commercial activity, (2) one party justifiably places trust or confidence in the integrity and fidelity of the other, and (3) the trusted party has effective control over the other party. Cermack, 658 So.2d at 1359. ¶ 29. In the case sub judice, Smith cites cases in which brokers were found negligent for breaching fiduciary duties to their clients. Lichtenstein v. Kidder, Peabody & Co., 840 F.Supp. 374 (W.D.Pa.1993); Merrill Lynch Pierce Fenner & Smith, Inc. v. Cheng, 901 F.2d 1124 (D.C.Cir.1990). The facts in the record on this point are sparse; however, it appears that Franklin Funds was an issuer of stock and Bernie III and Raymond James Inc. were the Smiths' brokers. Thus, we find the cases cited by Smith unpersuasive. Nonetheless, we hold that Smith should have been given the opportunity to prove that Franklin Funds was negligent and that a fiduciary relationship existed. Therefore, we remand this case for a trial.