Case ID: ny-super-ct_13/html/0071-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court. Oakley, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John Hall v. Joseph Naylor.
    Upon a credit purchase of goods,the insolvency of the purchaser, and his concealment of the fact, is not of itself sufficient to vacate the purchase for fraud.
    The best inquiry is, did the party purchase the goods with the intention not to pay for them ?
    If actual insolvency is proven, and a transfer of property to pay creditors speedily follows the transaction, evidence may be admitted of representations of solvency made upon other purchases about the same period, from other persons.
    And such evidence may, in that case be given, although no representation of solvency was made in the case before the court.
    (Before Oakley, Ch. J., Hoffman and Slosson, J.J.)
    Heard, May;
    decided, June, 1856.
    Appeal from a judgment, a bill of exceptions being made at the trial.
    The action was to recover the possession or value of a lot of hosiery and embroideries, worth $6293^-, delivered by the plaintiff, an importer in New York, to Adam Kerr and Charles W. Adams, composing the firm of Kerr & Co., retail dry goods merchants, doing business at No. 767 Broadway, on the 25th and 31st days of March, 1854, which they fraudulently pretended to buy on a credit of eight months. Fourteen days afterwards, they made a general assignment of all their goods to the defendant Naylor, in trust for creditors. Under this assignment, Naylor claimed possession of the property in question.
    The plaintiff demanded it of him, and he refused to deliver it. This action was brought April 26, 1854, and requisition made to the sheriff to take possession of the property for the plaintiff. On the 28th of April, (before the sheriff had gotten physical possession of all the property, having yet picked out only those of value, $522frj,) Naylor gave the undertaking for that purpose required by law, and thereby claimed to have all the property mentioned in the complaint returned to him. The undertaking of Naylor, executed by himself, recited that the sheriff had taken all the property. The sheriff thereupon delivered back to Naylor the property he had taken, and made return to the plaintiff’s requisition that he had taken all the property from the defendant, and upon the giving of the defendant’s undertaking, and the justification of sureties, had delivered all the property back to the defendant.
    The complaint averred, among other things, a delivery before suit of all the property mentioned in the complaint to Naylor. The answer of Naylor denied every thing except this delivery of the property in question to him, and denies specially any such delivery only from the plaintiff.
    Upon the trial, the case having been summed up, the defendant’s counsel duly requested the Justice to charge the jury as follows:
    1st. That if no representations were made to the plaintiff by said Adam Kerr & Co., at the time of said purchase of said goods and merchandise, the defendant is entitled to recover.
    2d. That if no representations were made by said Adam Kerr & Co. to the plaintiffs at the time of said purchase, proof of nearly contemporaneous fraudulent representations to other persons does not show that the said purchase was fraudulent.
    3d. That defendant under no circumstances can be held liable for more than the amount of goods and merchandise which actually came into his hands, and that there is no evidence that more than $522.51 worth of goods ever came into his hands.
    4th. That there is no evidence to show that there was a relation of spe.cial confidence or trust between the plaintiff and Kerr & Co., which imposed upon Kerr & Co. the legal obligation to disclose their pecuniary circumstances to the plaintiff, or which made the purchase fraudulent in consequence of the omission.
    5th. That it is not enough for the jury to find that Kerr & Co. had reason to know they were insolvent in order to make the purchase fraudulent. They must find that they actually bought the goods and merchandise with the predetermined intention not to pay for them.
    Thereupon the said Justice charged the jury as requested by defendant’s counsel in his fifth proposition, with the modifications contained in the charge, but declined charging the jury as requested in his first, second, third, and fourth propositions, to which decision upon each of said propositions the counsel for the defendant did then and there duly except.
    Thereupon the said Justice proceeded to charge the jury as follows :
    The question in this case is, whether there was fraud in the purchase of these goods? This is a question for the jury. Did Kerr & Adams, when they bought these goods, buy them with intent not to pay for them ? If so, the purchase was fraudulent and void, and the plaintiff is entitled to recover. In passing upon this question, the jury must look at all the attendant facts and circumstances calculated to throw light upon the motives of Kerr & Adams in procuring the goods in question of the plaintiff. Mere insolvency is not, of itself, conclusive evidence of fraud; the party may not know or believe himself to be insolvent. If he does know it, and conceals the fact from the party with whom he deals, he acts fraudulently. Where a merchant is insolvent, and knows it, and goes into the market and buys of a party who has no reason to suppose that he is not solvent, and makes no disclosure of his real condition, or represents himself to be solvent, it is a fraud, and the presumption is, that the party purchased with an intent not to pay for the goods, especially if such purchase is followed by an immediate assignment. In this case no representations are shown to have been made to the plaintiff. If a man, applying to buy goods under circumstances requiring him to tell the truth, as where he is in fact insolvent, and knows it, and expects to fail, and to be unable to pay for the goods, omits to tell the truth and suppresses it, with fraudulent intent, and the goods are delivered to him in reliance upon his integrity and solvency, he is equally guilty of fraud in procuring the goods as if he made a direct false representation. A suppression of facts, material to be made known by a man applying to another for credit on a sale of goods, is as fraudulent in intent, and as injurious in its consequences, as direct falsehood, and the fraudulent intent may be inferred from the fact of the suppression under such circumstances. If Kerr & Adams knew of their insolvency, and concealed it from the plaintiff to induce him to part with his goods, and thus procured the goods of the plaintiffs with intent not to pay for the same, it was a fraud, and the jury must find for the plaintiff. If the jury find, however, that they procured the goods of the plaintiff without such fraudulent intent not to pay for them, they must find for the defendant.
    If the jury find for the plaintiff, they will find specifically.'
    1st. The value of all the property mentioned in the complaint at the time the suit was brought, April 26th, 1854.
    2d. The value of that portion picked out by the sheriff or the plaintiff’s agents.
    3d. The value of that portion not shown to have been thus identified by the sheriff, or the plaintiff’s agents..
    4th. The damages the plaintiff has sustained by the detention of the goods since suit brought. The interest on the whole value is a proper measure of such damages.
    It was, thereupon, agreed by the counsel for the respective parties, that the property had been consumed, and a redelivery thereof could not be had.
    The jury rendered a verdict for the plaintiff, which is filed and made part of the judgment roll. Whereupon, on due notice, judgment was entered for the plaintiff in conformity therewith.
    The jury also answered the questions specifically, which answers it is not necessary to state.
    
      A. Matthews, for the plaintiff.
    
      J. Woodbury, for defendant.
   By the Court. Oakley, Ch. J.

The following propositions involve all the material points raised in the case, and decide the exceptions.

We are of the opinion that it is not enough, in order to avoid a credit purchase of goods, that it turns out the purchaser was insolvent at the time, and had ground to suppose himself insolvent. The proposition that a purchaser upon credit stands in a confidential relation to his creditor, so as to bind him to disclose his sitúation, without any inquiry by the seller, is not sustained by any sufficient authority.

If, at the time of a credit purchase, the party is hopelessly insolvent, and knows it, and such purchase is speedily followed by a transfer of all his property for the payment of his debts, evidence may be admitted of other transactions with, or other declarations to different parties, about the same period, tending to the-conclusion of a general design to defraud creditors by fraudulent purchases.

The test inquiry in such cases is, did the party purchase the goods in question with an intention not to pay for them ? and the seller, after making such a case as is above stated, may introduce evidence of representations of solvency and credit to other persons about the same time.

It makes no difference, in the application of this rule, that no positive representation of solvency was made in the case before the court.

The last two clauses of the charge of the Judge submitted the case to the jury, with the point of law correctly stated. Even if previous parts of the charge admit of a construction not strictly accurate, we are of opinion that such parts are to be controlled by the subsequent clauses.

Applying these principles to the facts of the case, we have no doubt that the judgment should be affirmed.

Order accordingly.