Smith v. Bolles

Citations

132 U.S. 125
10 S. Ct. 39
33 L. Ed. 279
1889 U.S. LEXIS 1849

Syllabus

<p>In an action in the nature of an action on the case to recover from the defendant damages which the plaintiff has suffered by reason of the purchase of stock in a corporation which he was induced to purchase on the faith of false and fraudulent representations made to him by the defendant, the measure of damages is the loss which the plaintiff sustained by . reason of those representations — -such as the money which he paid out and interest, and all outlays legitimately attributable to the defendant’s fraudulent conduct; but it does not include the expected fruits of an unrealized speculation.</p> <p>In applying the general rule that “the damage to be recovered must always be the natural and proximate consequence of the act complained of” those results are to be considered proximate which the wrong-doer, from his position, must have contemplated as the probable consequence of his fraud or breach of contract.</p>

About this case

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1889 United States Supreme Court case

Smith v. Bolles, 132 U.S. 125 (1889) , was an action to recover out-of-pocket damages for alleged fraudulent representations in the sale of shares of mining stock. The plaintiff was denied benefit of the bargain damages. The case is important in contract law, specifically legal remedies and compensating expectancies .

Facts

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Plaintiff, Richard J. Bolles , agreed to buy from defendant Lewis W. Smith four thousand shares of the stock, at $1.50 per share. The contract was completed in March 1880, by the payment of $6,000. Plaintiff then alleged that defendant's representations regarding the stock were false and fraudulent, and that in fact the stock was worthless. Plaintiff claimed furthermore that had the representations been true, the stock would now be worth $10 per share, and so plaintiff claimed that he had sustained damages of $40,000.

Judgment

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Chief Justice Fuller disagreed, saying the measure of damages is not the difference between the contract price and the fair market value if the property had been properly represented. The trial court should not have looked to what the plaintiff might have gained if the representations had been true, but rather what he had lost by being deceived into the purchase. Defendant is "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."[1]

The judgment was reversed, with directions to grant a new trial.