Case Name: John S. Forgotston and Etta Forgotston, Respondents, v. Irving F. Cragin, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1901
Citations: 62 A.D. 243
Docket Number: 
Parties: John S. Forgotston and Etta Forgotston, Respondents, v. Irving F. Cragin, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 62
Pages: 243–249

Head Matter:
John S. Forgotston and Etta Forgotston, Respondents, v. Irving F. Cragin, Appellant.
Implied warranty on the sale of goods—plea, of a failure of consideration arising out of a failure of title.
In every sale of goods or other property, even though the contract be in writing, there is an implied warranty of title unless it is otherwise expressly stipulated, and the recovery of the goods from the purchaser, by the true owner in a judicial proceeding, constitutes a failure of title and of consideration which is a good defense to an action for the purchase price.
The complaint in an action brought upon an agreement- under seal entered into between the plaintiffs, composing the firm of J. S. Forgotston & Co., and the defendant, Irving F; Cragin, recited the making of an agreement between the Silver Metal Company and J. S, Forgotston & Co. relative to the manufac- . ture and the making of advances on merchandise^ and that, pursuant to such agreement, J. S. Forgotston & Co. had made advances and that goods had been delivered to Irving F. Cragin. It further recited that, in consideration Of one dollar by each to the other in hand paid, the parties agreed that “the said goods are to be in the absolute control of said Cragin, and the said J. S. Forgets ton & Company transfer to said Cragin all their right, title and interest therein, and the proceeds thereof, and in consideration thereof said Cragin agrees to pay to said J. S. Forgotston & Company the sum of §175.00 within ninety days from the date hereof.”
The answer set forth the contract between J. S. Forgotston & Co. and the Silver Metal Company, and alleged that Cragin purchased the merchandise in question of the Silver Metal Company upon its representation that it had a perfect title thereto; that J. S. Forgotston & Co. subsequently represented to him that they had the title to said merchandise, and that the agreement upon which the action was brought was executed by the defendant upon the faith of these representations. The answer further alleged that the merchandise in question - was not owned by either the plaintiffs or by the Silver Metal Company,, but by a third party, who, prior to the commencement of the action, had recovered possession thereof in an action of replevin.
Held, that the answer sufficiently set up the defense of failure of consideration.
O’Brien, J., dissented.
Appeal by the defendant, Irving F. Cragin, from a judgment of the Supreme Court in favor of the plaintiffs^ entered in the office of the clerk of the county of Few York on the 23d day of February, 1900, upon the verdict of a jury rendered by direction of the court upon the pleadings, and without the introduction of any evidence.
The action is brought by the plaintiffs,. composing the firm of J. S. Forgotston & Co., to recover the sum of $775 on a contract of which the following is a copy:
“ Whereas, A certain agreement was entered into between the Silver Metal Company and J. S'. Forgotston & Company, dated March 5th, 1897, a copy' of which is in possession of Irving F. Cragin ; and
“ Whereas, In pursuance of the terms of said agreement ce’rtain merchandise has been delivered to the said Irving F. Cragin, and certain drafts have been drawn upon the said Irving F. Cragin by the said Silver Metal Company, amounting in the aggregate to the sum of $899.00 ; and
“ Whereas, J. S. Forgotston & Company have actually advanced under said agreement the sum of $688.00 and having incurred certain expenses in relation thereto, amounting to the sum of dollars; and
“ Whereas, It has been agreed that said merchandise shall be turned over to said Cragin to be absolutely at his disposal free from any claims of the said J. S. Forgotston & Company,'
Now This Agreement Witnesseth : That in consideration of the sum of one dollar by each to the other in hand paid, said J. S. Forgotston & Company and said Irving F. Cragin have agreed with each other as follows :
“ The said goods are to be in the absolute control of said Cragin, and the said J. S. Forgotston & Company transfer to said Cragin all their right, title and interest therein, and the proceeds thereof, and in consideration thereof said Cragin agrees to pay to said J. S. Forgotston & Company the sum of $775.00 within ninety days from the date hereof.
“In witness whereof, the parties hereunto have set their hands and seals this 21st day of May, 1897.
“IRVING F. CRAGIN . [seal]
“ J. S. FORGOTSTON & CO. - [seal]
“ In Presence of
“ Jas. C. De La Mare.”
The amended answer sets forth, in full, the contract between the plaintiffs and the Silver Metal Company referred to in the agreement on which the action is founded. The substance of the contract between plaintiffs and the Silver Metal Company, a Colorado corporation, is that the company agreed to procure orders for the manufacture of goods (it does not appear what kind of goods) which should be satisfactory to and approved by plaintiffs ; plaintiffs agreed to advance to the company the cost of manufacturing the goods and incidental expenses, including the rent of an office and wages of an office boy ; after the goods were delivered, the company agreed to deliver to plaintiffs drafts upon the purchasers for the purchase price, and plaintiffs agreed to collect the drafts, and after deducting the expenses of collection and the advances made by them, to divide the balance equally with the company.
The answer further alleges that the agreement between the defendant and plaintiffs was without consideration; that prior to the execution thereof defendant purchased of the Silver Metal Company certain merchandise, the company representing that it had good and perfect title thereto; that the purchase price agreed to'be paid was $775, for which amount drafts were drawn by the company to the order of plaintiffs on defendant which he refused to honor; that plaintiffs subsequently - represented to defendant that they had acquired the title of the company in and to the merchandise so sold and in and to the purchase price thereof, and also represented that the company had a good and perfect title to said merchandise and the right to sell the same to him; that the agreement upon which the action was brought was made by defendant upon the faith of these representations, he believing them to be true; that the merchandise in question was not owned by either the plaintiffs or by the Silver Metal Company, but by one Henry P. Parrott of Bridgeport, Conn., who prior to the commencement of this action, in a replevin action in the Supreme Court of this State, recovered the possession thereof from defendant. The allegation in the answer concerning the bringing of an action by Parrott and the taking of the property' therein, is followed by this allegation, “ all of which this defendant •duly notified the said plaintiffs.” The answer contains the following allegation immediately preceding the prayer for judgment, “ that by reason of the facts herein set forth said agreement was given without any consideration and is unenforcible against this defendant.”
Vernon dole, for the appellant.
James d. De La Mare, for the respondents.

Opinion:
Laughxikt, J.:
Three considerations might be inferred from the complaint for the execution of the contract therein set forth: (1) .One dollar; (2) the transfer of plaintiffs' right, title and interest in the merchandise and proceeds, and (3) that implied from the seal. The seal and nominal consideration expressed merely raise a presumption and casts the bur den upon the defendant of showing want of consideration. If the consideration were a compromise of a disputed claim with reference to the title of the property, that would he a good consideration, but the allegations of this pleading are insufficient for that purpose. (Dolcher v. Fry, 37 Barb. 152; Seaman v. Seaman, 12 Wend. 381.) Plaintiffs, by pleading their agreement with the Silver Metal Company, recognize the fact that their contract with defendant related thereto and resulted therefrom. The agreement between plaintiffs and defendant recognizes the relation existing between plaintiffs and the Silver Metal Company by virtue of the agreement between them and the plaintiffs' right under that agreement to collect the purchase price of the material sold. The only consideration for defendant's promise was the original sale and delivery of the goods. The answer shows that plaintiffs neither had any title to or interest in the goods or lien thereon or right to the purchase price thereof. According to the allegations of the answer plaintiffs had no claim that was enforcible against this defendant at the time of the execution of the alleged agreement. Their claim i against defendant Was merely that of undisclosed principals or as equitable assignees of the account for the goods sold and delivered. The most that can be claimed for the contract between plaintiffs and the defendant is that it transferred plaintiffs' claim from the original account to a new promise quite like an account stated, based on the goods sold and delivered as the consideration.
In every sale of goods or other property, even though the contract be in writing, unless expressly stipulated otherwise, there is an implied warranty of title. The recovery of the goods from the purchaser by the true owner, in a judicial proceeding, constituted a failure of title and of consideration, which is a good defense in an action for the purchase price. (Bordwell v. Collie, 45 N. Y. 494; Ledwich v. McKim, 53 id. 307; Flandrow v. Hammond, 148 id. 129 ; Carleton v. Lombard, Ayres & Co., 149 id. 137,146 ; McGiffin v. Baird, 62 id. 329.)
If plaintiffs be deemed creditors of the company and assignees of the account owing to it by defendant, they hold the claim subject to any defense that might be pleaded against their assignor; If they are to be considered principals and the company their agent or employee to manufacture and sell, manifestly they cannot claim the purchase price of property they never owned. The same is true if plaintiffs and the company were partners or joint owers: If the contract were susceptible of the construction that it was executed in settlement of a Iona fide dispute between plaintiffs and defendant as to the right of the former to collect for the goods sold by the Silver Metal Company, the defendant would then be foreclosed from asserting any defense to the matters that were in dispute, but he would not be barred from interposing a defense of a failure of consideration based upon an implied warranty of title. According to the answer the purchase price of the goods was $775, and that was the total amount of the drafts drawn upon defendant by the Silver Metal Company to the order of plaintiffs. ' This is the same amount as that "which defendant agreed to pay plaintiffs. The legitimate inference, therefore, to be drawn from the complaint is, that the contract was made for the purpose "of having the defendant recognize the right of plaintiffs, instead of their assignor, to collect the -purchase price, of the goods. It is not to be presumed that defendant would have executed the' contract, promising to pay the full value of the goods, if there was at that time any real controversy with reference to the title he acquired from the Silver Metal Company. The account for the goods sold, doubtless, passed to plaintiffs with the drafts by equitable assignment. (Bates v. Salt Springs National Bank, 157 N. Y. 322; Lauer v. Dunn, 115 id. 405; Brill v. Tuttle, 81 id. 454.)
The defendant's contract recognized this, and he agreed to pay the account to plaintiffs, but it is evident that the sale and delivery of the goods was the consideration therefor. The answer shows that there Was no debt to be assigned and that 'there was a failure of consideration. This will constitute a good defense if established on the trial. (Wells v. Wells, 8 App. Div. 422 ; Flandrow v. Hammond, 148 N. Y. 129; Mayer v. Mayor, 63 id. 455; 1 Pars. Cont. 462.)
Probably defendant would not be permitted, without showing fraud or mistake, to prove that there was no consideration for the contract (Fuller v. Artman, 69 Hun, 546), but although the answer is inartistically drawn in connection with alleging that there was no consideration, it also alleges the facts constituting a failure of consideration. On a motion for judgment on the pleading the answer should be construed liberally, and so construed it sufficiently sets up the defense of failure of consideration.
These views lead to a reversal of the judgment, and it becomes unnecessary to determine whether the allegations of the answer are sufficient to admit proof of fraud or mistake in the exeution of the contract.
Judgment reversed and new trial granted, with costs to appellant to abide the event.
Ingraham, McLaughlin and Hatch, JJ., concurred; O'Brien, J., dissented.
Judgment reversed, new trial granted, costs to appellant to abide event.