Story Case

On November 15, 1914, George Craft, the president of the Western Car Corporation, represented to George Knight that the stock of that corporation was worth $75 a share, because of certain contracts for automobiles then in possession of the company. In reliance on this statement, Knight agreed to buy one hundred shares and pay for them on January 1, 1915. As a matter of fact, the corporation did not have the automobile contracts at the time Knight agreed to purchase stock, and the stock had been sold as low as fifty dollars a share the day after his purchase. During the month of December, 1914, the Western Car Corporation received an order for one thousand war trucks from the English Government and the company's stock immediately quickened in value and became worth as much as Knight agreed to pay for it.

But he learned how Craft had deceived him into the purchase of the stock, and on January 1,1915, refused to pay for his shares, claiming fraud on the part of Craft. The latter contended there was no fraud since Knight had lost nothing. Is this correct?

Ruling Court Case. Rosser Vs. Bomar, Volume 131 Alabama Reports, Page 215; Volume 31 Southern Reporter, Page 430

D. E. Rosser held a certain patented article. He was attempting to sell interests therein so that he could raise money for the purpose of putting the patent on the market. He offered to sell an interest to R. R. Bomar. To induce him to buy, he represented that Joe Cathron had taken a share, and that Bob Smith was going to do the same. Both men were well known and influential. Bomar, relying upon this statement of Rosser, agreed to buy an interest, and gave his note in payment. When the note became due, he refused to pay it.

He claimed that he was not liable on the note because neither of the men mentioned had taken, nor did they intend to take, a share in the patent. On the other hand, Rosser showed that men of equal prominence and influence had taken shares, and that the representation, although false, had caused no damage whatsoever to Bomar.

Decision

Even though a person may rely upon misrepresentations made by another, unless he suffers some damage by his reliance thereon, he cannot recover anything from the wrong-doer. It is morally wrong to deceive another but, unless the deceived person suffers damage therefrom, it is not a legal wrong. In this case, Bomar was deceived as to the men who would be interested in the patent; but it was not shown that he had or would suffer any damage from the deception. Therefore, he had no right to complain, and Rosser is entitled to recover on the note.

Mr. Justice Tyson said: "Injury or damage must be shown to have resulted from the fraud, if practiced. 'Falsehood and deceit are always subject to moral condemnation, but it is not appointed to human tribunals to sit in judgment upon mere moral delinquencies or abstract wrongs affecting only the conscience. Such tribunals take cognizance of delinquencies and wrongs only where another has been induced by them to do some act to his own injury.'"

Accordingly, judgment was given for Rosser on this note.

Ruling Law. Story Case Answer

Even though a person has been deceived, if the deception has caused him no damage, he cannot complain. Deception is no legal wrong, unless some injury results from the deception, however reprehensible it may be from a moral standpoint. In the Story Case, Craft is correct and Knight cannot plead fraud in refusing to pay, in accordance with his contract.