Case ID: ad_74/html/0581-01.html
Source: Caselaw Access Project
Author: {"author": "McLennan, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Charles W. Arnold, Appellant, v. Arleigh D. Richardson, Respondent.
    
      Statement made to a commercial agency—when false, a vendor of goods, who has acted in reliance upon it, may rescind the sale.
    
    Where the secretary and treasurer of a corporation delivers to a commercial agency, with the intent that it shall be communicated to others, a written . statement purporting to show the true financial condition of the corporation, which statement fails to include among the liabilities of the corporation §379,342.60 of promissory notes made by that corporation for the accommodation of another corporation, a person who, in reliance upon such statement, sells goods to the corporation, is entitled to rescind the salé and to recover the goods or their value from the possession of the corporation or its receiver.
    The statement having purported to state positively a matter within the knowledge of the officers of the corporation, the vendor’s right to recover the goods or their value is not affected by the fact that the officers of the corporation had been informed that the accommodation notes were not valid obligations of the corporation and omitted mentioning them in the statement upon the mistaken assumption that such information was correct.
    Appeal by the plaintiff, Charles W. Arnold, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Herkimer on the 20th day of December, 1901, upon the report of a referee, dismissing the complaint.
    The action was commenced on the 20th day of May, 1898, to recover possession of certain personal property sold and delivered during the month of March, 1898, by the plaintiff to Daniel Green & Co., a domestic corporation organized under the laws of this State, having its principal office and place of business in the village of Dolgeville, N. Y., and which was taken possession of by the defendant as receiver of said corporation, appointed by order of the Supreme Court duly made and entered on the 14th day of April, 1898, upon the ground that said corporation was insolvent when it received said property and obtained the same fraudulently by meaiis of false and fraudulent representations and with intent not to pay for the same.
    The learned referee found that the purchase of the property in question by said corporation was fair and honest; that upon delivery it acquired a good title thereto, and that the defendant, as receiver, upon taking possession of the property became vested with such title.
    The only important question presented for determination by this appeal is whether or not such finding of fact is supported by evidence or is against the weight of the evidence, or perhaps more properly, whether it should not be found as a conclusion of law, from the conceded facts and even as they are found by the referee, that, the corporatioh of Daniel Green & Co., or the defendant claiming under it, never acquired any title to the property in question; and ■that the plaintiff is entitled to recover the same or its value.
    
      C. J. Palmer, for the appellant.
    
      William Kernan, for the respondent.
   McLennan, J.:

Concededly, in March, 1898, when Daniel Green & Co., assumed to purchase the goods from the plaintiff, it was insolvent. Within txvo weeks or a month thereafter an action to dissolve' the corporation on the ground of insolvency was commenced, and the defendant was appointed its temporary receiver. In that action the fact that the corporation then was, and for more than a year previous had been, insolvent was established, final judgment to that effect was rendered therein, and the defendant was made its permanent receiver. It is claimed by the defendant, and found as a fact by the referee, that the insolvency of the corporation .was not known to its officers during that time or when the goods were purchased from the plaintiff, because of the fact that a large amount of its bills receivable, to wit, the sum of $379,342.60, was owing to it by Alfred Dolge & Son, whom the officers of Daniel Green & Co. believed to be entirely solvent and responsible, and that in case such bills were collectible the corporation of Daniel Greén & Co. was solvent and able to pay its debts; that as matter of fact Alfred Dolge & Son was insolvent and unable to pay such indebtedness, and solely on account of that fact, which was unknown to its officers, the corporatian of Daniel Green & Co. was insolvent. During the time this indebtedness was owing by Alfred Dolge & Son to Daniel Green & Co., Daniel Green & Co. was liable upon outstanding promissory notes made by it for the accommodation of Alfred Dolge & Son to the amount of about $400,000, an amount largely in excess of the capital stock of the corporation. This circumstance, when taken in connection with the intimate business relations which existed between the two concerns, and the nature of the transactions between them, as disclosed by the evidence, quite clearly indicates that the officers of Daniel Green & Co. knew, or had reason to know, when the goods in question were purchased and prior to the failure of Alfred Dolge & Son, which occurred in April following, that the indebtedness which was owing to it by Alfred Dolge & Son, which was wholly unsecured, was not collectible, and,- therefore, that Daniel Green & Co. was insolvent; that in the exercise of the most ordinary business prudence that fact was or should have been known. There is, however, evidence tending to support the finding of the referee in that regard, and we are not disposed to hold, as we deem it unnecessary, that such finding is against the weight of the evidence.

In March, 1897, Mr. White, the secretary and treasurer of Daniel Green & Co., made a statement in writing to the commercial agency of R. G. Dun & Co., which purported to give the true financial condition and standing of that corporation for the purpose and, as found by the referee, with the intent that the statement furnished should be communicated to persons interested in ascertaining the pecuniary responsibility of Daniel Green & Go.” In the statement so made the bills payable were stated to be $74,482.22, when, in. fact, it should have been stated that they were $453,824.82, the correct amount of such bills. At least $379,342.60 of promissory notes made by Daniel Green & Co. for the accommodation of Alfred Dolge & Son, and then outstanding, were not included in the amount of the bills payable. • It also appears that the accounts receivable were stated to be $110,587.62, whereas there should have been added to that amount the sum of $379,342.60, the amount which was due and owing from Alfred Dolge & Son to said corporation. The statement furnished to the commercial agency by the secretary and treasurer of Daniel Green & Co. for and on its behalf, and for the purpose and with the intent that such statement should ■ be communicated by R. G. Dun & Co. to persons interested in ascertaining - the pecuniary responsibility of the corporation, was false and untrue in those two important particulars.

It is uncontradicted that when Daniel Green & Co. made applicatian for' the purchase of the goods in question from the plaintiff, he inquired of R. Go Dun & Co* as to the financial condition and standing of the corporation, and was given an exact, copy of the statement furnished, by such corporation to the commercial agency, which was duly signed by its corporate name. It is also uncontradicted, and the fact is found by the referee, that the plaintiff sold the goods in question to the corporation relying solely upon the information so obtained. The referee, however, found that when such-statement was made, signed and delivered to R. G. Dun &Oo. the corporation did not know that the outstanding promissory notes made by it for the accommodation of Alfred Dolge & Son constituted valid and existing obligations against it; that its officers had been so informed-by their legal adviser and by others, and that, relying upon such information and advice they believed that the statement made by them was in all respects true, and that they made it, honestly and in good faith.

The statement was unqualified. It purported to state a matter which was within the knowledge of the officers of the corporation, to wit, the exact amount of its indebtedness. It is self-evident that a correct statement of the indebtedness of the corporation was material and essential to enable any person dealing with it to form a correct judgment as to its financial condition. Under such circumstances it is entirely immaterial whether the officers of Daniel Green & Go. knew or did not know that the outstanding promissory • notes, made by it, and aggregating nearly half a million dollars, were obligations against the corporation. In the statement the corporation’s secretary and treasurer asserted that the bills payable of the' corporation only amounted to $74,482.22, when in truth and in fact .they amounted to $453,824.82. He affirmed positive knowledge of ■ that which he did not know positively. He asserted the existence of a material fact to his personal knowledge, when, according to the' findings of the referee, he did not know whether it existed or not. When a statement so made turns out to be untrue, and is relied upon to the damage of another, it constitutes actionable fraud, and whether the statement so made was believed by the party making it to be true or not is entirely immaterial.

The rule is stated in Kountze v. Kennedy (147 N. Y. 124) as follows:. One who falsely asserts a material fact, susceptible of accurate knowledge, to be true of his own knowledge, and thereby induces another to act upon the fact represented to his prejudice, commits a fraud which will sustain an action for deceit.”

In Hadcook v. Osmer (153 N. Y. 608) the court said: “ But while there must be a furtive intent, it may exist when one asserts, a thing to be true which he does not know to be true, as it is a. fraud to affirm positive knowledge of that which one does not positively know. Where a party represents a material fact to be true to his personal knowledge, as distinguished from belief or opinion, when he does not know whether it is true or not, and it is actually untrue, he is guilty of falsehood even if he believes it to be true, and if the statement is thus made with the intention that it shall be acted upon by another, who does so act upon it to his injury, the result is actionable fraud.”

We think the facts of the case at bar bring it precisely within the rule thus stated, and that Daniel Green & Co, having obtained possession of plaintiff’s property under those circumstances the title to it did not pass, and that the plaintiff was entitled to recover possession of the same or its value in this action.

It follows that the judgment appealed from should be reversed and a new trial granted before another referee, with costs to the aj>pellant to abide event.

Adams, P. J., Spring, Williams and Hiscock, JJ., concurred.

Judgment reversed and new trial ordered before another referee, with costs to the appellant to abide event.