Case Name: The Boston National Bank, Resp't, v. Paul J. Armour and Charles W. Armour, App'lts
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1889-05-24
Citations: 23 N.Y. St. Rep. 832
Docket Number: 
Parties: The Boston National Bank, Resp’t, v. Paul J. Armour and Charles W. Armour, App’lts.
Judges: 
Reporter: New York State Reporter
Volume: 23
Pages: 832–833

Head Matter:
The Boston National Bank, Resp’t, v. Paul J. Armour and Charles W. Armour, App’lts.
(Supreme Court, General Term, First Department
Filed May 24, 1889.)
. Fraud—Sale of worthless commercial paper—Vendor of, guilty of FRAUD.
Where the vendor of a note knows that it has become worthless, by reason of the insolvency of the makers and indorsers, and remains silent on the subject when he sells such paper to a purchaser ignorant of such fact, he is guilty of fraud.
Appeal from interlocutory judgment overruling a demurrer to the complaint.
C. Bainbridge Smith, for app’lts; Hamilton Odell, for resp’t.

Opinion:
Bartlett, J.
The reasons given by the learned judge who heard this case at special term are amply sufficient to sustain the conclusion that the complaint states facts sufficient to constitute a cause of action; and we deem it necessary to add very little to what he has said on the subject. The case of The People's Bank v. Bogart (81 N. Y., 101) does not decide, as seems to be supposed by the counsel for the appellant, that upon the sale of a promissory note there is never any implied warranty as to the' solvency of the maker. In that case Andrews, J., says : " The law on the sale of commercial paper implies a warranty, on the part of the vendor, of title, and that the instrument is gen-nine, and also, as stated by Judge Story, " that the vendor has no knowledge of any facts Avhich prove the instrument, if originally valid, to be worthless, either by failure of the maker, or by its being already paid, or otherwise to have become void or defunct." But wholly irrespective of any question of implied warranty, we think the action is maintainable on the ground of fraud.
If the vendors of these notes knew that they had become worthless by reason of the insolvency of the makers and indorsers, and remained silent on the subject when they sold the paper to purchasers who were ignorant of the fact, they were guilty of a fraud ; just as it would be a fraud knowingly to pay for purchased goods, with a bill upon a broken bank, without divulging the true character of the instrument proffered in payment. The obligation in the case supposed would be perfectly valid in form, but the purchaser who had paid for goods with such a bill, knowing it to be worthless, would unquestionably be liable to an action sounding in tort, at the instance of the vendor, to recover damages arising out of the fraudulent concealment.
The judgment appealed from should be affirmed, with •costs.
Van Brunt, Oh. J., and Daniels, J., concur.