Court Opinion

ID: 3543487
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:55:01.142168+00
Date Added: 2024-06-11T13:38:44.192055
License: Public Domain

This action was brought by plaintiff, Julia Doyle, against the Union Bank  Trust Company for damages sustained by her in the purchase of an Insull Utilities Investment Company $1,000 par value debenture from the defendant bank. She purchaser the debenture in November, 1929, for $910. By its terms it became due January 1, 1949, with an annual interest at 5 per cent. The Insull Company defaulted in its interest payments in February, 1932, went into a receivership in April, 1932, and at the time of the trial it appeared that the debenture had a par value of $1,000, but could be sold for $1.75, or at most not over $20.
The complaint charges that Schuyler, the manager of the bond department of the defendant bank, induced Mrs. Doyle to purchase the debenture by making false representations and warranties as to its character and value. It was admitted in the pleadings that the bank had for many years represented to the public that it was able and willing to advise its customers respecting investment problems. Mr. Schuyler admitted that he understood Mrs. Doyle was purchasing the debenture for an investment, that she was a long time customer of the bank and reposed great confidence in the bank. It is conceded that *Page 579 
there was ample proof to show that Mrs. Doyle was induced to purchase the debenture in reliance upon the representations and assurances of Schuyler, shown to be false and fraudulent.
The jury was instructed that the measure of damages in the case was as follows: "Instruction No. 17. You are instructed that if you find for the plaintiff, then your verdict should be for the amount that would compenstate her for the difference between the value of the debenture she obtained and what the value of that debenture would have been, had it been as represented."
I cannot subscribe to the opinion of the majority that there was not sufficient evidence in the record to support the finding of the jury that the debenture was in fact worthless at the time Mrs. Doyle bought it. Subsequent developments have proven that the debenture in this case is worthless, or practically so, as an investment for which purpose she expressly purchased it, and the jury had a right to infer the debenture had no greater value when it was sold to Mrs. Doyle. As the court said in Hotaling v.A.B. Leach  Co., 247 N.Y. 84, 159 N.E. 870, 871, 57 A.L.R. 1138, 1141: "The only question we are asked to consider is whether the correct measure of damages was applied. The damages awarded must represent the loss which the plaintiff sustained through the purchase and continued ownership of the bond. In return for the bond he gave up the sum of $980. He bought for investment, not speculation. * * * Subsequent increase or decrease of value might bring profit or loss to the buyer, but such profit or loss would be the result of subsequent events and of choice by the buyer whether to hold or sell. It would not be the direct result of the seller's wrong nor increase or diminish his liability. * * * The loss proximately caused by the defendant's fraud is the difference between the price he paid and the value of what he received when put to the use contemplated by the parties. In this case that value must be determined in the light of subsequent events. As long as the fraud continued to operate and to induce the continued holding of the *Page 580 
bond, all loss flowing naturally from that fraud may be regarded as its proximate result. Change of conditions may have been a subsidiary cause; it was not an independent cause. The loss sustained is directly traceable to the original misrepresentation of the character of the investment the plaintiff was induced to make."
In this case that value must be determined in the light of subsequent events. In Smith v. Duffy, 57 N.J.L. 679, 690,32 A. 371, 372, the court said: "In cases of this character the true rule of damages is that the wrongdoer must answer for those results, injurious to the other party, which should be presumed to have been within his contemplation at the time of the commission of the fraud. (Crater v. Binninger, 33 N.J.L. [4 Vroom] 513 [97 Am. Dec. 737]; Smith v. Bolles, 132 U.S. 125,10 Sup. Ct. 39 [33 L. Ed. 279].) We think it clear, in the present case, that the defendant must have expected, when he made his fraudulent representation, that the plaintiff would probably retain the stock so long as he believed the representation to be true. The plaintiff did so retain it until the company failed, and during all that time the deceit practiced upon him was effective in controlling his conduct. The loss, therefore, actually resulting from the fraud, and which must be presumed to have been within the contemplation of the defendant, was the difference between the plaintiff's investment and the value of the stock after the fraud ceased to be operative; that is, after the failure of the company. In the ascertainment of this difference the market price of the stock at the time of the sale, or during the year succeeding, or at any time before the failure, was of no importance." The facts in this case were almost identical with the facts in the New York case, wherein United States Supreme Court Justice Cardozo, then a member of the New York court, concurred in the decision written by Governor Lehman of New York. It is the duty of a court to endeavor to do justice and equity between the parties. *Page 581 
Now, the law has heretofore never been declared in Montana as to the proof of damages necessary to sustain a verdict where one expressly warrants the bond is secured by a mortgage when it is not, but no less an authority than Oliver Wendell Holmes, later a much respected Associate Justice of the Supreme Court of the United States, when he was Justice of the supreme court of the state of Massachusetts, said in the case of Whiting v. Price,172 Mass. 240, 51 N.E. 1084, 70 Am. St. Rep. 262, in effect, that the mere fact that a stock is selling at a certain price before the public knows the true facts about it, does not make that the true value, for it may be merely an illusory value, and that subsequent disclosures may be taken into account in arriving at the true value at the time of sale.
Now, this notorious Insull stock, so far as this record is concerned, became practically valueless. Mr. Gunn, the attorney for the defendant, admitted at the trial and before this court that the books showed that a "thousand dollar bond of this issue was worth only $1.75." It is admitted in the record that the plaintiff, Mrs. Doyle, bought the so-called bond as a permanent investment, that so far as a permanent investment is concerned, it was valueless. Why, then, because it had the trifling value of $1.75 a thousand and the jury did not make that deduction should the plaintiff be deprived of her hardearned money? The record shows that she depended on Mr. Schuyler for advice. "He took care of my business"; that she was a cook in a section house; that her husband was a cripple, and that she supported the family; that she was busy, and unable to judge of the true value of the bond can be properly inferred from all the testimony. The jury by its verdict found that Mr. Schuyler misrepresented the bond in the following particulars: (a) That the debenture was a secured bond; (b) that it was just as good as a thousand dollar bill; (c) that the owner thereof had a first mortgage on all of the utilities and power companies in Chicago; (d) that the security was the same as if the holder thereof had a first mortgage upon all of *Page 582 
the property of the Montana Power Company; (e) that the bond was secured by property in the value four or five times the value of the debentures outstanding; (f) that the debenture was a safe investment.
The defendant in its brief says: "While we believe that the trial court committed several errors in its rulings on objections to the evidence and in the matter of instructions, we are notrelying upon any of such errors to present, for the consideration of this court the single proposition that the verdict is wholly unsupported by the evidence for the reason that there is no evidence that the plaintiff has suffered any damagefor which the defendant is liable." The uncontradicted proof shows that the plaintiff invested $910 cash in a comparatively worthless Insull bond which belonged to the defendant Union Bond Trust Company. The uncontradicted proof shows that Mr. Schuyler, of the defendant bank, persuaded her to sell her Great Northern bond and with the proceeds thereof to buy this worthless Insull bond belonging to the bank — not a bond ordered by them for her but their own bond. In other words, the bank got rid of a worthless bond that it owned. The jury found that Mr. Schuyler misrepresented the bond as set forth above, and Mr. Gunn admits that for the purposes of this appeal misrepresentations were made by Schuyler, so that the matter needs no further discussion here.
It is true it might be said that the debenture has an insignificant value of from $1.75 to not exceeding $20. The jury did not determine or deduct this value from the amount of the award, probably on the theory that she bought it as a permanent investment and it was worthless as such, interest payments having ceased. This court has, however, repeatedly held that where the amount in which a verdict is excessive is readily ascertainable, this court may grant a new trial unless the plaintiff consents to a reduction in the amount shown to be excessive. In the case ofThornton v. Wallace, 85 Mont. 27, 30, 277 P. 417, 418, the court says: "Under the circumstances the trial court might properly have given the plaintiffs *Page 583 
the option of remitting the excess, and, if they did so, have permitted the verdict to stand for the residue, instead of granting a new trial (Chicago Title  Trust Co. v. O'Marr,25 Mont. 242, 64 P. 506 [508]; Lewis v. Northern Pacific Ry.Co., 36 Mont. 207, 92 P. 469), and where, as in the case before us, it is clear from the pleadings and proof that the plaintiffs are entitled to some relief, and the amount thereof is readily ascertainable from the record, the judgment should not be reversed on account of the error committed not affecting the substantial rights of the defendant, but should be sustained to the extent of the relief to which plaintiffs are shown to be clearly entitled. (Sec. 9751, Rev. Codes 1921; State v.Smart, 81 Mont. 145, 262 P. 158; Degenhart v. Cartier,58 Mont. 245, 192 P. 259; Helena  Livingston S.  R. Co. v.Lynch, 25 Mont. 497, 65 P. 919.)" I believe this principle of practice should govern the judgment of this court in this case.
It is decisions such as the majority members of this court are rendering in this action that make the layman lose confidence in courts. Where the wrong done to another is so obvious, for this court to say that there is no remedy brings about a miscarriage of justice. It in effect holds that regardless of the fact that false and fraudulent representations are made by a bank in the sale of bonds and no matter how striking the fraud admitted, if the bonds theretofore having an illusory value at the time of the sale on the market even though the stock is valueless as an investment at the time, still the fraud on the plaintiff is held to be remediless.
I cannot subscribe to such a monstrous doctrine. The question is of such far-reaching importance the bald statement in the majority opinion "that no values are shown by the proof" warrants me in extending the argument to quote from the record of the trial of this case, the testimony of Ford Johnson, vice-president of the First National Bank of Helena. The record shows that Mr. Rankin, attorney for the plaintiff, made the statement that "counsel have agreed that the financial *Page 584 
reports of Fitch  Moody may be used as authority in this matter." There was no objection to this statement; therefore we may conclude the defendant agreed to accept Fitch  Moody as authority.
"The Witness: My name is Ford Johnson and I am vice-president of the First National Bank  Trust Company. I was formerly vice-president of the American National Bank. A.C. Johnson, the president of that bank was my father.
"Mr. Rankin: Counsel have agreed that Fitch  Moody may be used as authority in this matter.
"The Witness: You ask me to tell you what the valuation of the Insull Utility Investment Company debentures, Series A. bearing interest at 5% is. I don't know as they quote any value. They quote what somebody might have paid for them.
"Q. That is what I mean. For instance on June 26, 1931, what was the high value given?
"Mr. Gunn: I just want to put in the objection it is incompetent, irrelevant and immaterial.
"The Court: The objection is overruled.
"The Witness: Just quoting from Fitch's bond book, 1932, the price ranged, from January 1, 1929, to January 1, 1932, apparently, quoting from this book, from a high of 97 to a low of 38. That means 38 a hundred or $380, and 97 means $970. For 1932 I have this book here [indicating] as a record of Fitch or Moody, that will show what the high was in 1932. This is Fitch's stock and bond manual. This book shows nothing more than newspaper quotations throughout 1932. The high was 27 and low 1/2 point.
"Mr. Gunn: May it be understood that —
"Mr. Rankin: You may have the same objection to all of this.
"The Witness: That is $270 on the thousand dollar bond was the high and a half a point on the dollar or $5 — no, a thousand dollar bond would be worth $50. It would be 50 cents a hundred or $5 a thousand. For 1935, you ask what the high was. Here is the current Fitch book, May 23, 1935. *Page 585 
Well, the high of 1935, according to this book was 1 3/4. That means $1.75 a hundred or $17.50 for the thousand dollar bond, I think so. The low apparently was 1/8. I would say that was 12 1/2 cents a hundred or $1.25 for the thousand dollar bond."
In the testimony of Walter Brusch, a witness called by the defendant bank, he testified that he was secretary, assistant trust officer and auditor of the First National Bank of Helena. The following appears in cross-examination by Mr. Rankin:
"A. It is true that Insull Utilities bonds are comparatively valueless, you would get $15 or $20 back for the $900 bond. No one would consider that a good investment.
"Q. Isn't it worth about $1.75 on the $1,000?
"Mr. Gunn: We will agree the books show that."
Surely, this testimony is some proof of value in 1932, the time Mrs. Doyle discovered the fraud. She bought the bond as a safe investment, not as a speculation, relying upon the representations of Schuyler now admitted to be fraudulent. (SeeHealy v. Ginoff, 69 Mont. 116, 220 P. 539, cited by defendant.)
The measure of damages in this case, where plaintiff relied on defendant's representations thereto, is the difference between the purchase price and the value when the fraud was discovered. Perhaps the term "market value" should be used, although I see little difference as applied to debentures of the type herein. The difference between the value of the assets and the liabilities of the company would furnish some grounds of estimate of value, but these elements were taken into account by the purchaser on the market, with the facts then partially known of the proposed management of the assets, and many other speculative elements that would affect the final disbursements to the debenture holder. The price of the debentures of like issue on the market was the best evidence available for the determination of the actual value.
I make one other observation respecting the majority opinion that strikes a tender spot in my heart. Their opinion states *Page 586 
that Judge Padbury in trying the case in the district court erred in refusing to instruct the jury to bring in a verdict for the defendant bank. The jurymen did not intrude themselves into this case; they came there by order of the court; they listened attentively to the testimony that they might correctly determine the facts. If the judge had ordered them to bring in a verdict for the bank, the verdict would have expressed a lie. It was not their verdict. Such order of the court would have been a cowardly attempt to remove the responsibility of determining the facts which was fixed upon the jury — not the court, by the Constitution. The court under the command of the Constitution invited the jury to determine these facts upon the testimony. The law commanded the court to instruct the jury on the questions of law involved, which it did. It allowed only such testimony as the law permitted. If Judge Padbury had then said to the jury, "You bring in my verdict regardless of what your conclusions may be," I hold that it would have been an insult to the intelligence and honesty of every man on that jury. The jury did bring in a verdict in favor of the plaintiff and in effect found that the bank did abuse her confidence and take her money without right. The bank now refuses to even pay her and seeks to escape upon the flimsy ground that she was unable to prove the actual value of this worthless bond which they induced her to purchase at a price of $910. They now refuse to even pay her a penny and seek to escape upon the flimsy ground that she was unable to prove theactual value of this worthless bond at the exact time she bought it, a bond that by false representation they induced her to buy and in order to effect a sale they induced her at the same time to sell a secured Great Northern Railway bond, that the proceeds might be used to pay for this worthless bond.
The statute of Montana, section 9364, Revised Codes 1921, provides: "Where, upon the trial of an issue by a jury, the case presents only questions of law, the judge may direct the jury to render a verdict in favor of the party entitled thereto." The citations following this section in the statute clearly and *Page 587 
indisputably show that a directed verdict should be orderedonly where questions of law are presented. No further citations on this point are needed.
Judge Padbury correctly found that there was an issue of fact to be tried by the jury, and he correctly refused to instruct the jury to bring in a verdict in direct conflict with the undisputed and admitted evidence to the contrary. Accordingly, I especially dissent to this part of the majority opinion which suggests that the district court should have directed a verdict for the bank. One question of fact, the fraud of Schuyler, was saved by Judge Padbury's refusal to direct the jury. It is now admitted by defendant, and is an important fact, that most certainly was correctly submitted to the jury.
Incidentally I suggest that the practice of directing a verdict is a wholly unnecessary and undiplomatic method of deciding a case. The district judge (if he deems the testimony wholly insufficient to support a verdict) can just as well discharge the jury by informing them that there are no facts in controversy for them to determine and then order the case dismissed for failure of plaintiff to prove his case. The self-respect of the jury is then maintained and the same result proposed by the court accomplished. The majority opinion of the court magnifies the technicalities at the expense of justice.
For the foregoing reasons, I most respectfully and emphatically dissent from the opinion of the majority.