Loewer v. Harris

• Decision Date: 01 August 1893
• Citation: 57 F. 368
• Parties: LOEWER v. HARRIS.
• Court: U.S. Court of Appeals — Second Circuit

57 F. 368

LOEWER v. HARRIS.

United States Court of Appeals, Second Circuit.

August 1, 1893

C. J G. Hall, for plaintiff in error.

Abel E Blackmar, for defendant in error.

Before WALLACE and SHIPMAN, Circuit Judges.

WALLACE Circuit Judge.

This is a writ of error brought by the defendant in the court below to review a judgment for the plaintiff entered upon the verdict of a jury. The action was brought for damages arising from an alleged false representation made by the defendant to the plaintiff respecting the output and profits of the Gambrinus Brewing Company. The defendant had contemplated selling the brewing concern to a corporation to be formed in England for the purpose of acquiring it and carrying on the business, and in this behalf had entered into a contract with one Grant. The contract, in effect, gave Grant an option for a specified time to purchase the concern for $1,100,000 payable partly in money, and partly in the bonds and shares of the corporation; and within that time it was expected that he would organize the corporation, and perfect the transfer to it of the property and business. A prospectus had been prepared in July, 1890, for circulation, to induce subscriptions for shares, setting forth the features of the scheme, and containing statements relative to the past output and profits of the brewery. Among other things, it stated that the business had increased remarkably in volume and profit from year to year; that the output had been 38,357 barrels for the year 1887, 78,314 barrels for the year 1888 95,555 barrels for the year 1889, and for the five months of 1890 (January 1st to June 1st) there had been an increase in the output over the corresponding period of 1889 of 2,732 barrels; that the profits for the last year's business were $128,237; and that these statements were based upon information supplied by the defendant, and contained in the reports of expert accountants who had examined the books and accounts of the brewery for a period from April 1, 1888, to September 30, 1889. After the prospectus was prepared, the accountants reported the results of a recent examination of the business of the brewery made by them covering a period ending August 31, 1890; and this report showed a profit on the year's business of about $140,000. Grant failed to carry through the scheme within the time prescribed by the contract between the defendant and himself. Thereupon the plaintiff, who had to some extent been co-operating with Grant in London, came to New York, with a view of making an arrangement with the defendant for himself.

Evidence was given upon the trial tending to show that early in January, 1891, the plaintiff and defendant had an interview at the city of New York, and at that time substantially reached an understanding by which the plaintiff was to have an option to purchase the property upon the basis of the contract which had previously been made with Grant. He was to pay defendant $5,000 on the day when the contract of sale should be signed, and defendant was to receive all the bonds, shares, and cash on or before September 30, 1891. During that interview a copy of the prospectus of July, 1890, and of the last report of the accountants was produced, and the plaintiff asked the defendant if the brewery was still doing as well, telling him that the capitalization of the corporation would be based on the earning capacity of the business, and, if the profits were not as good as they had been, he would not want anything to do with it. The defendant said the figures of the prospectus and report were correct, and that the business was showing a gradual increase the same as it had done previously. The details of the proposed contracts were not fully adjusted until April 28, 1891, at which time the contract was signed, and plaintiff paid in the $5,000. After the January interview the parties did not meet. Between that time and the signing of the contract, the plaintiff was in London, trying to organize a syndicate to take over the property. He laid before the members the statements of the accountants showing the output and profits of the business to August 31, 1890, and told them that, at his interview with the defendant in New York, he had been informed by him that the profits of the brewery had shown a gradual increase up to that time, and they promised to underwrite the capital of the corporation. Shortly after the contract between the plaintiff and defendant was signed, the plaintiff had a further examination of the books of the brewery made by accountants, in order to obtain a statement of the output and profits from August 31, 1890, to the date of the contract, and their report was transmitted to him about May 20, 1891. This report disclosed that the output and profits of the business during the intervening period had not gradually increased, but, on the contrary, had materially diminished. The plaintiff informed the London syndicate of this report, and thereupon they declined to proceed any further with the enterprise. He then notified the defendant, and demanded the repayment of the $5,000. The evidence at the trial authorized the jury to find that from August 31, 1890, the date to which the last report of the accountants had extended, to January 1, 1891, the output of the brewery was 28,094 barrels only, as against 31,193 barrels for the same period of the previous year; and that the average profits of the business for that four months were $5,430 per month, as against an average of $11,657 per month for the eleven preceding months.

Evidence was also introduced for the plaintiff, and received against the objection of the defendant, showing that, during the three months which elapsed between the interview at which the alleged false representation was made and the signing of the contract, the output was 14,947 barrels, as against 17,128 barrels for the same period of the preceding year, and that there was a greater proportionate decrease in the profits than in the output for that period.

Evidence was also received for the plaintiff, against the objection of the defendant, showing that the underwriting of the syndicate would have cost the plaintiff $82,250; that the promise to underwrite by the syndicate was in substance a promise to subscribe for all the capital of the corporation not contributed by others; that the plaintiff had expended $500 for solicitors' services in respect to the organization of the company, and had paid $1,000 to the accountants for their charges for the examination of the books of the brewery made after the date of the contract with the defendant; and that, if the enterprise had been carried through, the plaintiff would have made a profit out of it, above expenses, of about $93,000.

After the testimony was closed, the defendant moved the court, in substance, to instruct the jury to disregard the evidence of the output and profits or loss for the months of January February, and March, 1891, because they were for a period subsequent to the time at which the...