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Law School Case Brief

Smith v. Bolles - 132 U.S. 125, 10 S. Ct. 39 (1889)

Rule:

The damage to be recovered must always be the natural and proximate consequence of the act complained of. The test is 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.

Facts:

Richard J. Bolles was fraudulently induced to buy mining stock from Lewis W. Smith, who had represented various facts as existing with respect to the mine that made it of great value. Smith also made similar and fraudulent representations to others, who transferred their claims to Bolles. Bolles filed suit, alleging fraudulent representations, and he averred that the aggregate of the damages amounted to $60,500. The cause was tried by a jury. The judge instructed the jury that the measure of recovery was generally the difference between the contract price and the reasonable market value if the property had been as represented to be. The jury returned a verdict favoring plaintiff Bolles, assessing his damages at the sum of $8,140. Bolles’ motion for new trial was overruled, and he brought the cause to the Court on a writ of error.

Issue:

Was the instruction of the judge to the jury regarding the measure of damages erroneous and misleading?

Answer:

Yes.

Conclusion:

The Court held that the instructions upon the subject of the measure of the damages was erroneous and misleading. The Court asserted that 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. The Court ruled that the damage to be recovered must always be the natural and proximate consequence of the act complained of. The test was those results are proximate which the wrongdoer from his position must have contemplated as the probable consequence of his fraud or breach of contract. The Court reversed the circuit court's judgment and remanded the case with a direction to grant a new trial.

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