# Smith v. Bolles/Opinion of the Court

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United States Supreme Court
132 U.S. 125
Smith v. Bolles
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, (volume 2, § 256;) and 'the test is,' adds Chief Justice BEASLEY, in Crater v. Binninger, 33 N. J. Law, 513, '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. And see Horne v. Walton, 117 Ill. 130, 141, 7 N. E. Rep. 100, 103; Slingerland v. Bennett, 66 N. Y. 611; Schwabacker v. Riddle, 84 Ill. 517; Fitzsimmons v. Chapman, 37 Mich. 139.
We regard the instructions of the court upon this subject as so erroneous and misleading as to require a reversal of the judgment. The five causes of action covered the purchase of 9,525 shares of stock, for which $16,050 in the aggregate had been paid. The plaintiff did not withdraw either of his five counts, nor request the court to direct the jury to distinguish between them. The verdict was a general one for $8,140, and, while it may be quite probable that the jury did in fact, as counsel for defendant in error contends, a ward to the plaintiff under his first cause of action the sum he had paid for the shares he had purchased himself, and interest, we cannot hold this as matter of law to have been so, nor can we determine what influence the erroneous advice of the learned judge may have had upon the deliberations of the jury.
Other errors are assigned which we think it would subserve no useful purpose to review. They involve rulings, the exceptions to which were not so clearly saved as might have been wished had the disposal of this case turned upon them, and which will not probably, in the care used upon another trial, be repeated precisely as now presented. For the error indicated the judgment is reversed, and the cause remanded, with a direction to grant a new trial.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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