Opinion ID: 2252946
Heading Depth: 1
Heading Rank: 5

Heading: Whether Plaintiff Class Failed to Prove Relevant Factors

Text: Heinold first argues that plaintiffs failed to prove relevant factors from which the court could find an exception to the general rule that no fiduciary duty exists at the time an agent's compensation is negotiated prior to the existence of the agency relationship. Heinold argues: A fiduciary relationship exists where there is special confidence reposed in one who, in equity and good conscience, is bound to act in good faith and with due regard to the interests of the one reposing the confidence. It exists where confidence is reposed on one side and resulting superiority and influence is found on the other. [Citations.] The relationship may exist as a matter of law between attorney and client, guardian and ward, principal and agent, and the like, or it may be moral, social, domestic, or even personal. Where the relationship does not exist as a matter of law or is sought to be established by parol evidence, the proof must be clear, convincing, and so strong, unequivocal, and unmistakable as to lead to but one conclusion. ( Kolze v. Fordtran (1952), 412 Ill. 461, 468, 107 N.E.2d 686.) Heinold further notes the factors to be considered when determining whether a fiduciary relationship exists where one does not exist as a matter of law: When a confidential or fiduciary relationship does not exist as a matter of law, it must be proved by clear and convincing evidence in order to establish a basis for raising a constructive trust. Factors to be taken into consideration are degree of kinship, if any, disparity in age, health, mental condition, education and business experience between the parties, and the extent to which the allegedly servient party entrusted the handling of his business and financial affairs to the other and reposed faith and confidence in him. [Citation.] ( Cunningham v. Cunningham (1960), 20 Ill.2d 500, 504, 170 N.E.2d 547.) Heinold argues that none of the factors pertinent to a showing of fiduciary duty were shown by the plaintiffs. While Heinold correctly cites the law applicable in instances where no fiduciary relationship exists as a matter of law and must be proven by facts, it does not focus on the law applicable here, where a future principal and agent are discussing terms of the agency, specifically compensation, for a relationship that will be fiduciary as a matter of law. Restatement (Second) of Agency, section 390, comment e, adopted by this court in the previous appeal, addresses this specific factual situation and provides: If    the creation of the relation involves peculiar trust and confidence, with reliance by the principal upon fair dealing by the agent, it may be found that a fiduciary relation exists prior to the employment and, if so, the agent is under a duty to deal fairly with the principal in arranging the terms of the employment. (Restatement (Second) of Agency § 390, Comment e (1958).) We find this to be a different inquiry than the factual inquiry on which Heinold relies. While the general inquiry determines whether a fiduciary relationship exists at all, the inquiry here determines at what time that relationship attached concerning the agent's disclosures about his compensation. Thus, while Heinold argues that the inquiry must include a determination as to the parties' relationship, that relationship is already known: future principal and agent discussing the agent's compensation. And, while Heinold argues that the evidence did not show that it accepted the trust and confidence plaintiffs placed in it, this inquiry is not required under comment e. All that is required is that the creation of the agency relationship involve peculiar trust and confidence, with reliance by the principal on the fair dealing by the agent. This is a factual determination to be made by the trial court. The trial court found peculiar trust and confidence to exist here, and we cannot say that the court's finding was manifestly erroneous. Findings of fact will not be overturned on appeal unless they are palpably against the weight of the evidence, even though we might be inclined to find otherwise. Kolze, 412 Ill. at 468-69, 107 N.E.2d 686. Plaintiffs' evidence demonstrated that few, if any, investors at the time could understand the complexities of LCO transactions, including the mechanics involved in the purchase and trading of such commodities. Because of this, the trial court found that plaintiffs could not have known what expenses a broker would incur in the overseas transactions and subsequently pass on to the investors. As the trial court found, plaintiffs were at the mercy of the broker to learn what the expenses charged in London were, and had to rely upon the broker to state very clearly what the compensation to the broker was. Moreover, plaintiffs could not determine this information from other brokers because brokers used different terminology for their fees. Thus, plaintiffs had a peculiar trust and confidence in Heinold during these negotiations and relied on Heinold to deal fairly. It should also be noted that Heinold failed to present any evidence to contradict plaintiffs' evidence on this point. Heinold relies heavily on Apple v. Apple (1950), 407 Ill. 464, 95 N.E.2d 334, where the issue was whether a fiduciary relationship existed prior to one party's granting another party the power of attorney, which resulted in a fiduciary relationship as a matter of law. We note, however, that Apple is not controlling here because: (1) Apple did not involve negotiations for compensation prior to an agency relationship, and (2) this court had not yet adopted comment e to section 390 of the Restatement.