Potter v. Necedah Lumber Co.

105 Wis. 25 | Wis. | 1899

Lead Opinion

The following opinion was filed September 26, 1899:

Marshall, J.

As properly said by the learned counsel for appellant on the trial of this case, the two vital questions on the side of the plaintiff were, "Was the plaintiff induced to sell her ward’s stock by false and fraudulent representations made by the defendants, or any of them? and If so to what extent, if any, was she damaged thereby? Those two elements are still the vital questions to be considered. "While the assignments of error contained in the brief of o counsel present some matters that if reached would be worthy of judicial consideration, the two matters indicated are of such ■controlling importance that the decision of either of them in defendants’ favor would require an affirmance of the judgment, regardless of whether any or all of such assignments of error are good or not. Is there any credible evidence to warrant the jury finding in appellant’s favor, that «he was fraudulently induced to part with the stock as alleged in the complaint? and If so, is there any evidence from which a jury could reasonably decide that she suffered any recoverable loss thereby? Those foundation elements in appellant’s case must first be considered.

It is not deemed advisable to go into any lengthy discussion of the first proposition. It is sufficient to say that the long record, containing some 400 printed pages, has been examined with the result that the contention that there is no evidence to go to the jury on the subject of fraud cannot be sustained. In one view of the evidence there was. nothing shown amounting to fraud in law, the evidence being susceptible of reconciliation with the theory that at most there was only a want of that friendly and unselfish regard in business affairs necessary to satisfy the standard of morals in such affairs between the strong and capable and the weak ■and dependent who have been drawn into close business and social relations in a common interest, by which men ■ordinarily are tested in the sphere of life occupied by the parties concerned; and even on that question probably fair men might reasonably differ. In another view there is some proof of the wrong alleged, met, it is true, by much evidence on the part of defendants, and on the whole evidence bearing on the question the jury found a verdict for them. Whether that conclusion was reached on the ground that no fraud was established or because no damage was shown to have been suffered by plaintiff, or because neither fraud nor loss was satisfactorily established by the evidence, is not. material to the disposition of this appeal, as it must be said that there was room for different minds to come to different conclusions on the question of fraud, and therefore it was. necessarily submitted to a jury, and their finding cannot be disturbed because contrary to the evidence.

Appellant’s second contention brings up for consideration the question of what was the proper measure of damages applicable to the case upon the most favorable view that can be taken of it for appellant. It is conceded that in. case of a defrauded vendee the correct rule is the difference between the value of the thing as represented and the actual value. That differs from the rule in some jurisdictions, but is in accordance with the great weight of authority and has been too long the law of this state, as administered by the courts, to admit of discussion as to whether it is right in-principle or not. Birdsey v. Butterfield, 34 Wis. 52; Kobiter v. Albrecht, 82 Wis. 58; Warner v. Benjamin, 89 Wis. 290. Appellant claims that the reason of that rule, applied to a case where a vendor is induced by fraudulent representations of his vendee as to the real value of the property forming the subject of the transaction to part with it at a price determined on such representations, entitles him to recover the difference between the selling price, taking that as the actual value of the property as represented, and the true value computed on that basis. No judicial authority is produced to support such contention and we have been unable to discover any. Kilgore v. Bruce, 166 Mass. 136, is referred to by appellant, but we fail to see its application to this case. There the purchaser was induced by fraudulent representations to pay more for the property than the seller would otherwise have parted with it for to his vendee; but the fact that he would, had the fraudulent representations not been made, have purchased the property at a more favorable price, was established by positive evidence and found by the jury, which circumstance was said by the court to take the case-out of the general rule.

The foundation principle upon which all rules for determining damages in a case of actionable fraud rests, is that the wronged party is to be compensated for the loss he sustained by the fraud to the extent of the natural and proximate consequences of the wrong, — for such results ‘ as happen in the natural course of things and were to be expected to ensue according to the general experience of mankind.’' Sutherland, Dam. § 1163; Crater v. Binninger, 33 N. J. Law, 513. What is to be considered proximate and what remote-under the rule stated has -led to much confusion in the-books, and it would be idle to try to harmonize the various, holdings on the subject. The difficulty has been that a mere application of the foundation principle indicated has been stated as the rule in one jurisdiction, and a different application of the principle as the rule in another. It is useless to spend time to give illustrations to demonstrate what, is here said, for the situation is familiar to the profession.

In the absence of some special circumstance, as in the-Massachusetts case, to establish some exceptional standard from which to measure the damages suffered by the defrauded party in the sale of property, as within the scope of the natural and proximate results of the fraud, whether-such defrauded party be the vendor or the vendee, it is difficult to see how'any other standard can be adopted than that of the actual value of the thing falsely represented, without-going into the realms of speculation and conjecture. The cases found in the books where defrauded vendors have sought compensation for their wrongs are few in number, as the failure of the able counsel on both sides of this case to produce authority on the subject amply demonstrates, and as is further demonstrated by the failure here in the same field. Nowhere has the rule contended for by appellant’s counsel been adopted. The rule of difference between the value as represented and the actual value is not universal. In many jurisdictions, as conceded by counsel, a less rigorous rule prevails. It can only be defended on the ther ory that both values are determinable to a reasonable certainty and that the difference between them is attributable to the natural and proximate result of the fraud. When we try to determine the actual value of property, taking as the standard to measure from some fictitious value, it would seem that we at once begin to wander beyond the realms of natural and proximate result and to establish a new rule difficult of application and not necessary or practical in the administration of justice.

The result is, we hold the general rule applies, that, where an actionable fraud is committed by false representations to effect the sale of property, the damages to the wronged party, whether he be the vendor or vendee, are limited to the difference between the real value of the subject of the sale at the time of such sale and what the value would have been had the representations been true, with interest in a proper case. We venture the assertion that such will be found to be the rule applied generally in cases brought by defrauded vendors for compensation for their loss. Burns v. Mahannah, 39 Kan. 87; Bench v. Sheldon, 14 Barb. 66. Notwithstanding the dearth of authority applicable to the particular situation before us, when we keep in mind the principle upon which all rules for damages must be based, the reason why the general rule stated should apply to vendors as well as vendees seems plain.

We do not understand that appellant’s counsel contend that any damage was shown in regard to sale of the stock, — ■ except on the theory that the actual value of the corporate property for the purposes of this case is to be taken as that which would have made the stock worth $110 per share had such property been as represented, plus an amount sufficient to measure the other elements of value of the corporate property which in fact existed, — that is, unless the court tabes a fictitious instead of the actual value as a standard to measure from, thereby giving to plaintiff compensation for something that she did not have, therefore could not have been defrauded out of. The record appears to be barren of evidence to support any theory that the property was actually worth more than was measured by the stock of the corporation at the price plaintiff obtained for it. On the trial it clearly appeared affirmatively, as respondents’ counsel contend, that the book value of the stock, made up in accordance with the inventory of the property at its fair value, was somewhat less than what plaintiff obtained. So the. situation is that if she was induced to part with her stock as alleged, she received its full value and suffered no pecuniary loss from the transaction, therefore has no legal ground for complaint. Pecuniary loss is the test of actionable fraud when damages are sought, and that must be so without reference to whether the vendor or vendee is the defrauded party. Lost profits come within that rule when there is a definite standard from which to determine such profits (Bergeron v. Miles, 88 Wis. 397; Shepard v. Milwaukee G. L. Co. 15 Wis. 318; Shadbolt & B. I. Co. v. Topliff, 85 Wis. 513; Guetzkow Bros. Co. v. A. H. Andrews & Co. 92 Wis. 214), but otherwise. they are regarded as too remote.

Two transactions other than the sale of the stock heretofore mentioned are instanced as having been fraudulent and to plaintiff’s injury. One is the issue of 179 shares of stock for eighty-five per cent, of its par value, the difference being charged up as a loss; and the other is the transaction of inducing plaintiff to surrender at par a percentage of her stock on the same basis with all other stockholders. Uo good ground is perceived to claim that plaintiff suffered pecuniary loss by either of such transactions; There is no dispute in the evidence but that the issue of the 119 shares of stock was made in good faith, and that whatever element of value there was in the stock in excess of what the corporation received was considered at the time to be counted as compensation for necessary services to be rendered to the corporation by those who received the stock. The recipients of that stock were necessary employees of the corporation, and in order to retain their services they were given the opportunity to take the stock at eighty-five per cent, of its par value. Whether the issue of the stock was strictly legal or not is not the question here, but whether plaintiff was injured by it, and on that there is a failure of proof. If the certificates of stock were void, as confidently urged, it would not follow that the money paid for the stock belonged to the corporation for the benefit of the other stockholders, and the stock was lost by the certificate holders, but on the contrary the ' stock belonged to such holders just the same, unless it constituted an illegal increase of stock, in which case the consideration paid for it was recoverable by the payees, since there was nothing to impeach the good faith of the transaction.

In regard to the surrender and cancellation of stock, it is sufficient to mention that all the stockholders of the corporation surrendered stock for cancellation in the same proportion as did the plaintiff. Therefore if the stock was actually worth more than the amount received by the stockholders, the difference remained in the corporation for the benefit of all the stockholders.

As before indicated, we are unable to discover any basis in the evidence for a legal -claim for pecuniary loss to the plaintiff; the judgment must be affirmed irrespective of the assignments of error called to our attention which have not been discussed.

By the Court.— The judgment is affirmed.

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Rehearing

The following opinion was filed December 15, 1899:

MaRshall, J.

The appellant’s counsel insists, as’a ground for a rehearing, that the court, in deciding the case, adopted their theory as to the proper rule of damages but failed to give effect to it. True, the court held, and now affirms, that where actionable fraud is committed by false representations to effect the sale of property, whether the wronged party be the vendee or vendor, recoverable loss is limited to the difference between the real value of the subject of the sale at the time of such sale and what the property would have been worth had the representations been true, with interest in a proper case. But it was said in the same connection, and the learned counsel must have observed it if they read the opinion with the care that should be observed before applying for a rehearing, that such rule must always be applied in the light of the familiar principle upon which all rules for measuring recoverable damages are based, that only loss caused to the deceived party as the natural and proximate consequence of the deceit, is to be compensated for. So, where a sale price is fixed and paid on a represented situation and character of the subject of the sale, which is a full equivalent therefor, but in excess of what the property would be worth were it in fact as represented, the seller suffers no loss, therefore neither the rule mentioned, nor any other for measuring recoverable loss, can be invoked in his favor. In the case of a deceived vendee, in that the property is worth more than it would be if its character and quality were as represented, and upon which the sale price was made, it would hardly be claimed that, notwithstanding the beneficial character of the bargain to him, the rule would still apply that he is entitled to recover the difference between the value of the thing as represented and the actual value. That would be exceedingly absurd, as will be freely admitted upon a moment’s consideration. It is an absolute essential to the application of the rule that the deceit shall result in loss to the deceived party, and that is so whether such party be vendee or vendor. If the difference between the two values represent a gain to the alleged defrauded party, instead of a loss, clearly, there is no room for the application of any rule .of damages upon which a recovery can rest. Counsel for appellant do not distinguish between a difference in represented and actual value in favor of a party and a difference against him. They seek to apply the rule designed to measure loss, regardless of whether there is any loss or not.

It is said that a second claim made by appellant’s counsel as to the rule of damages was overlooked. At this point again counsel seem to have overlooked the elementary principle to which reference was made in the opinion, that no matter what the deception, if it does not result in loss to the alleged wronged party, and as the natural and proximate result of the deception, such party is not in any position to invoke any rule of damages against the alleged wrongdoer. The court having pointed out in the decision that appellant was so circumstanced, there was no need for considering the counsel’s suggestions in regard to each of the two rules of damages mentioned by them. What would be the proper rule for measuring recoverable loss, if there were any, having been stated, and a conclusion reached that plaintiff had failed to show a cause of action within the rule, there was no need for discussing counsel’s “ alternative theory,” so called.

The foregoing covers all the suggestions made in support of the motion for rehearing.

£y the Gowrt.— The motion is denied.