Hall v. Paine

• Decision Date: 12 April 1916
• Citation: 112 N.E. 153,224 Mass. 62
• Parties: HALL v. PAINE et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

224 Mass. 62

112 N.E. 153

HALL

v.PAINE et al.

Supreme Judicial Court of Massachusetts, Suffolk.

April 12, 1916.

Report from Superior Court, Suffolk County; John F. Brown, Judge.

Action by Henry C. Hall, as administrator, against William A. Paine and others. On report by the justice of the superior court after verdict directed for the plaintiff for a part only of the amount claimed. New trial ordered.

Whipple, Sears & Ogden, of Boston (Sherman L. Whipple, Alex. Lincoln, and Edwin H. Abbot, Jr., all of Boston, of counsel), for plaintiff.

Robert M. Morse and Wm. P. Evarts, both of Boston, for defendants.

RUGG, C. J.

The plaintiff's intestate was a customer of the defendants, a firm of stock-brokers, who were carrying for him certain stocks on margin. He seeks to recover from them damages alleged to have been sustained arising out of these transactions. For convenience, the plaintiff's intestate hereafter will be referred to as the plaintiff.

1. One ground of action is the breach of an oral contract, whereby the defendants agreed to carry for him shares of Copper Range Consolidated Mining Company stock as long as he desired, regardless of the state of his margin account and of the market, and to deliver them to him on demand. Whether the contract was made, as alleged by the plaintiff, was one of the issues at the trial. There was evidence tending to show that the plaintiff at one time had 1,145 shares of the Copper Range Consolidated stock in the hands of the defendants which they were carrying for him on margin; and that from time to time the defendants sold all these shares, sending him forthwith after each sale notice and an account; and that after the final sale a check was sent him for the balance shown to be due, which the plaintiff kept. The plaintiff seasonably protested against the making of these sales and finally demanded the return of the stock, which the defendants refused. Copper Range Consolidated Mining Company appears from the evidence to have been a stock in which there was active trading on the stock exchange and which, therefore, could readily have been bought in the market day by day.

At the close of the evidence the judge instructed the jury that if they should find the contract to have been made between the plaintiff and defendants as contended by the former, his damages for breach of the contract by sales of the stock would be nominal. In view of that ruling, the plaintiff did not care to go to the jury upon the question whether the contract was made.

The case calls for a statement of the rule of damages to be applied when there is a breach of contract to carry stocks. It is contended by the plaintiff that the governing rule of damages is that known as the highest intermediate value rule, whereby he is entitled to recover on the basis of the highest prices which could have been realized for the stock between the times when the several blocks of stock were sold and the time of trial.

[1] The common rule of damages for the breach of a contract is the actual loss at the time of the breach. Barrie v. Quimby, 206 Mass. 259, 267, 268, 92 N. E. 451, and cases there collected; Cumberland Glass Mfg. Co. v. Wheaton, 208 Mass. 425, 434, 94 N. E. 803;Moffat v. Davitt, 200 Mass. 452, 86 N. E. 929;Tufts v. Bennett, 163 Mass. 398, 40 N. E. 172; Williams Bros. v. Ed. T. Agius, Ltd., [1914] A. C. 510, 520, 523, 530. The foundation for this rule as applied to contracts for sales or purchases is that goods such as are ordinary subjects of commercial transactions have a fixed value in the market, so that they can be replaced or disposed of at any time. Adequate compensation for the breach of any duty touching the purchase, sale, delivery or carrying of such property is measured by its fair market value at the time of the breach. This is a principle which in its broader aspects has illustrations in many departments of the law. It is the usual rule for the determination of damages arising from the conversion of property. The owner is entitled to recover the fair market value of the property at the time of conversion. Fair market value is the established standard by which to gauge the damages for the taking of property under the power of eminent domain. The measure of damage for deceit or breach of warranty in the sale of goods, is the difference between the market value of the thing sold and of that bargained for. The fundamental principal upon which all these rules rest is that, by resort to the test of market value, fair and complete compensation is afforded for the deprivation of the property to which otherwise the injured party would be entitled. Indemnity for such damage is afforded by payment of market value. The theory of the law is that the injured party shall be placed in the same position he would have been in if the duty owed to him had not been violated, so far as compensation can be ascertained by rational methods resting upon a basis of facts. But he is not to be made richer.

It is a general principle of law, because it is a rule of fair dealing, that when one is deprived of the fruits of a contract, he must use the efforts of a reasonably prudent man to put himself in as good a position as he would have been if the contract had not been abrogated. He cannot lie idly by and expect to recover all losses which such inaction may entail as damages for breach of the contract. He must be reasonably active and diligent to recoup his loss. Maynard v. Royal Worcester Corset Co., 200 Mass. 1, 6, 85 N. E. 877; Jamal v. Moolla Dawood Sons & Co., 1916 A. C. 175, 179. The same rule obtains in actions of tort. Gray v. Boston Elev. Ry., 215 Mass. 143, 147, 102 N. E. 71;Texas & Pac. Ry. v. Hill, 237 U. S. 208, 215, 35 Sup. Ct. 575, 59 L. Ed. 918. The plaintiff could have purchased shares of stock to replace those sold by the defendants within a reasonable time after such sales at substantially the same prices as those for which the sales were made. That principle applied to the case at bar would enable the plaintiff to recover only nominal damages.

[3] The common rule as to the assessment of damages has been applied frequently in this commonwealth in actions for breach of contract for sale, and for delivery, and for conversion of stock. The early case of Gray v. Portland Bank, 3 Mass. 364, 3 Am. Dec. 156, was an action for the refusal to let the plaintiff subscribe for and take shares of stock in a corporation according to the terms of his contract. In discussing the rule of damages, reference there was made (pages 390, 391 of 3 Mass., 3 Am. Dec. 156) to the English rule of highest intermediate value, but it was held that the same rule applied to stocks as to other kinds of personal property, and that the time when the stock should have been delivered was the time as of which its value should be ascertained for purposes of determining the damages, and not the time of trial or any intervening time. In Sargent v. Franklin Ins. Co., 8 Pick. 90, 100,19 Am. Dec. 306, the same principle was followed. The rule of intermediate highest value up to the time of trial, recognized as prevailing in New York at that time, was repudiated. The court there followed, in determining the rule of damages to be applied in stock transactions, the rule applicable to the conversion of goods, viz., their value at the time of conversion. To the same effect are Hussey v. Manufacturers & Mechanics' Bank, 10 Pick. 415, 423;Wyman v. American Powder Co., 8 Cush. 168, 182;Fay v. Gray, 124 Mass. 500; and Greenfield Savs. Bank v. Simons, 133 Mass. 415. All these are cases relating to damages for detention of stock, where the rule is followed without discussion. See, also, Greenfield Bank v. Leavitt, 17 Pick. 1,28 Am. Dec. 268, and Stewart v. Joyce, 205 Mass. 371, 91 N. E. 555. A case very like that at bar was Parsons v. Martin, 11 Gray, 111, where a broker, having been intrusted with stock for a definite purpose, used it for another purpose, and where at page 116 of 11 Gray it was said:

‘And having thus violated his duty, by making a disposition of the stock which was unauthorized and unjustifiable, he became immediately responsible for the value of the property with which he had been intrusted. It was in effect a conversion of it to his own use; and the well established rule in reference to compensation to be made or damages recovered in such cases is the market value of the property at the time of its conversion.’

This rule was discussed by Chief Justice Shaw with his customary thoroughness and conclusiveness of result in Parks v. Boston, 15 Pick. 198, 206, 207. He there treats actions as to stocks as standing on no other or different basis than any other commodity in respect of damages for breaches of contract as to delivery or sale or for conversion. He adverts to the specious plausibility of a rule which stops the mouth of a wrongdoer to deny that ‘the plaintiff if he had had his stock, might not have kept it for the highest price to which it has at any time arisen,’ especially since the defendant by keeping the stock or money, perhaps practically has deprived the plaintiff of the opportunity of buying ‘an equal quantity at the market price of the day.’ The fallacy of this argument there is demonstrated by reference to the rule that damages for the detention of money universally are held to be measured by interest. His conclusion in favor of the rule of market value and against that highest intermediate value is stated in these words at pages 207, 208, of 15 Pick.:

‘But the other rule has found favor, not because it will, in all cases, do justice; for no general rule will do this; but because it is more equal, it is certain and simple and practical, and will do justice in the greatest number of cases. The rule contended for is not equal, because, if the goods or stock have fallen, between the time of the non-delivery and the time of the trial, the defendant is not to have the benefit of it. This, no doubt, results from...