Exceptions overruled.
SMITH v. BOLLES
Supreme Court of the United States, November 11, 1889.
Reported in 132 United States Reports, 125.
Error to the United States Circuit Court for the Northern District of Ohio.
Action to recover damages for fraudulent representations in the sale of shares of mining stock.
The amended petition alleged (inter alia) that plaintiff was induced by defendant’s fraudulent representations to buy of defendant four thousand shares of mining stock at $1.50 per share, amounting to $6000; that “said stock and mining property was then, and still is, wholly worthless; and that had the same been as represented by defendant it would have been worth at least ten dollars per share; and so plaintiff says that by reason of the premises he has sustained damages to the amount of forty thousand dollars.”
Answer, denying plaintiff’s material allegations. Trial by jury. The instructions given as to damages are stated in the opinion. Verdict for plaintiff. Motion for new trial overruled. Judgment for plaintiff. Defendant brought error.[[359]]
Fuller, C. J. The bill of exceptions states that the court charged the jury “as to the law by which the jury were to be governed in the assessment of damages under the issues made in the case,” that “the measure of recovery is generally the difference between the contract price and the reasonable market value, if the property had been as represented to be, or in case the property or stock is entirely worthless, then its value is what it would have been worth if it had been as represented by the defendant, and as may be shown in the evidence before you.”
In this there was error. The measure of damages was not the difference between the contract price and the reasonable market value if the property had been as represented to be, even if the stock had been worth the price paid for it; nor if the stock were worthless, could the plaintiff have recovered the value it would have had if the property had been equal to the representations. What the plaintiff might have gained is not the question, but what he had lost by being deceived into the purchase. The suit was not brought for breach of contract. The gist of the action was that the plaintiff was fraudulently induced by the defendant to purchase stock upon the faith of certain false and fraudulent representations, and so as to the other persons on whose claims the plaintiff sought to recover. If the jury believed from the evidence that the defendant was guilty of the fraudulent and false representations alleged, and that the purchase of stock had been made in reliance thereon, then the defendant was liable to respond in such damages as naturally and proximately resulted from the fraud. He was bound to make good the loss sustained, such as the moneys the plaintiff had paid out and interest, and any other outlay legitimately attributable to defendant’s fraudulent conduct; but this liability did not include the expected fruits of an unrealized speculation. The reasonable market value, if the property had been as represented, afforded, therefore, no proper element of recovery.
Nor had the contract price the bearing given to it by the court. What the plaintiff paid for the stock was properly put in evidence, not as the basis of the application of the rule in relation to the difference between the contract price and the market or actual value, but as establishing the loss he had sustained in that particular. If the stock had a value in fact, that would necessarily be applied in reduction of the damages. “The damage to be recovered must always be the natural and proximate consequence of the act complained of,” says Mr. Greenleaf, vol. ii, § 256; and “the test is,” adds Chief Justice Beasley in Crater v. Binninger, 33 N. J. Law (4 Vroom), 513, 518, “that those results are proximate which the wrong-doer from his position must have contemplated as the probable consequence of his fraud or breach of contract.” In that case, the plaintiff had been induced by the deceit of the defendant to enter into an oil speculation, and the defendant was held responsible for the moneys put into the scheme by the plaintiff in the ordinary course of the business, which moneys were lost, less the value of the interest which the plaintiff retained in the property held by those associated in the speculation.
[Remainder of opinion omitted.]