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Rice v. Price, 340 Mass. 502, 164 N.E.2d 891

Facts

The plaintiffs, Baldwin and Rice, were officers of Baldwin-Rice Corporation, which was formed to distribute electric heaters manufactured by Acme Electric Heating Company and sold by Lincoln Park Corporation. Price, a registered engineer, made several false representations about the heaters' efficiency and performance to induce Baldwin and Rice to undertake the distributorship. The auditor found that these representations were misleading and that the plaintiffs suffered significant financial losses as a result, leading to the failure of Baldwin-Rice Corporation.

Findings of the following facts were warranted. Acme and Lincoln Park ‘were closely affiliated and Price * * * managed and controlled both corporations' and had a dominating influence over their officers, employees, and affairs.

Issue

Did the trial court err in denying the defendants' motion to exclude the auditor's findings of damages and for a new trial?

The bill of exceptions presents the questions whether the judge properly denied this motion and a motion for a new trial.

Rule

The applicable measure of damages in deceit is the difference in actual value between what the plaintiff received and what they would have received if the representations had been true.

The trial judge stated, as the applicable measure of damages in deceit, ‘the difference in actual value between that which the plaintiff[s] in fact got and that which they would have received if the representations had been true.’

Analysis

The court applied the benefit of the bargain rule, concluding that the plaintiffs' losses were directly caused by the defendants' misrepresentations. The auditor's findings indicated that the heaters did not perform as represented, leading to the plaintiffs' business failure. The trial judge's decision to adopt the auditor's findings was supported by ample evidence of the misrepresentations and their impact on the plaintiffs' financial situation.

The trial judge was warranted in concluding that the whole business disaster and all the losses were caused by the failure of the heaters to come up to the standards stated in the representations.

Conclusion

The court affirmed the trial judge's decision, ruling that the damages awarded were appropriate and that the defendants were liable for the losses incurred by the plaintiffs due to their misrepresentations.

Exceptions overruled.

Who won?

The plaintiffs, Baldwin and Baldwin-Rice Corporation, prevailed because the court found that the defendants made false representations that induced the plaintiffs to enter into a business arrangement, resulting in significant financial losses.

The testimony before the court indicates that where the auditor refers to an input of 1,000 watts he is referring to an input of one kilowatt hour (one KWH).

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