#### Irving Rafsky, Plaintiff, *v.*Frederick A. Smith Company, Inc., and Motor Finance Company, Defendants.

(Supreme Court, New York Special Term,

February, 1913.)

Sales — contracts — negotiable instruments — rescission for false representations— when plaintiff entitled to judgment — fraud.

Where, after the making of an agreement for the purchase of an auto car truck, which provided that all parts were to be perfect and the car to carry at least a ton, the president of the seller, upon calling with the purchaser on defendant finance company to take care of the sale, informed one of its officers of said agreement and repeated the representations made to the purchaser who subsequently gave notes for a part of the purchase-price secured by a chattel mortgage; and, in an action to rescind the sale, it appears that the seller’s representations as to the car, by which plaintiff was induced to purchase it, were false and untrue to the knowledge of the finance company, plaintiff is entitled to judgment.

The finance company was bound to show not only that it acted in good faith but had no knowledge of the fraud from the inception of the contract; the mere fact that it paid a valuable consideration for the notes was not sufficient.

Action to rescind a contract of purchase.

Deutsch & Peyser, for plaintiff.

*354Wm. A. Schumacher, for defendant .Smith Company.

J. Lester Fierman, for defendant Motor Finance Co.

Newberger, J.

Plaintiff purchased from the defendant Smith Company an auto car truck for $1,100. ' The agreement provided that the plaintiff should pay the same as follows: $400 in cash and the balance of $700 in monthly instalments of $100. The’agreement further provided that all parts of the car were to be perfect and to carry at least one ton. After signing the agreement, Smith, the president of the company, stated to plantiff that he could not finance the matter, and that he would have to call with him on the defendant Motor Finance Company to take care of the matter, to which the plaintiff replied: *“*If it will help you I will go; it makes no difference to whom I pay the notes.” Thereupon the parties called at the office of the finance- company, informed Mr. Black, an officer of the company, of the agreement between plaintiff and the Smith Company, repeating the representation that Smith had made to the plaintiff, and showing Mr. Black the agreement. Subsequently all the parties met in the office of the Motor Finance Company, and the notes and the chattel mortgage were signed by the plaintiff. The plaintiff and his witnesses testified that the car was of a certain model, which is borne out by the chattel mortgage prepared by the finance company. It also appears that Smith paid the finance company a bonus of 10 per cent., and that the sum of $700, the amount of the notes, was paid by the Motor Finance Company to the Smith Company, and no "part thereof to the plaintiff. The representations made by Smith as to the car were undoubtedly false and untrue, and that the Motor Finance Company had knowledge that such representations were made and were false there can be no question. The mere fact that the motor company claims to have paid a valuable consideration for the notes is not sufficient. It must not only show it has acted in good faith, but that it had no knowledge of the fraud from the inception of the transaction. See Canajoharie Nat. Bank v. Diefendorf, 123 N. Y. 191; Lawrence Bros. v. Heylman, *355111 App. Div. 848; affd. 189 N. Y. 573. I therefore find that the plaintiff was induced to purchase the car through the fraudulent representation of the defendant Smith Company, and that the Motor Finance Company had knowledge of said fraudulent representation.

Judgment for plaintiff.