Case Name: Nichols et. al. v. Pinner and Michael
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1858-12
Citations: 18 N.Y. 295
Docket Number: 
Parties: Nichols et. al. v. Pinner and Michael.
Judges: 
Reporter: New York Reports
Volume: 18
Pages: 295–315

Head Matter:
Nichols et. al. v. Pinner and Michael.
The mere omission of a purchaser of goods to disclose his insolvency to the vendor is not a. fraud for which the sale may he avoided.
When no inquiries are made of the vendee on the subject, and he makes no false statements nor resorts to any artifice to mislead the vendor, it is not in general fraudulent in him to remain silent in respect to his pecuniary condition.
An honest though abortive purpose to continue business and pay for the goods is consistent with the vendee’s knowledge of his own insolvency, and the purchase is not fraudulent when made with such intent, though founded in delusive and unreasonable expectations.
Whether, however, the failure of the purchaser to disclose a marked and sudden change in his affairs for the worse, which he has reason to suppose unknown to the vendor, may not he a fraudulent concealment, rendering the sale voidable, quere, per Seldex, J.
Appeal from the Supreme Court. The action was for the recovery of the possession of personal property, consisting of goods and merchandise purchased by the defendant Pinner of the plaintiffs, upon the allegation that he purchased the same fraudulently, with the design not to pay for them. The complaint was for the wrongful detention of the property. Upon the trial at the Erie Circuit, before Mr. Justice Greene and a jury, it was proved that Pinner was a grocery m irchant in the city of Buffalo, and had been for several years in the habit of purchasing goods of the plaintiffs, in the city of New York, on credit.
In April, 1853, he purchased, at several times during the month, bills of goods on his usual credit of six months, and in June thereafter, gave his notes for the ¡same at six months, dated at the time of the several purchases. It appeared that these were larger than his usual purchases, Pinner stating that he was about to open a wholesale store in addition to his retail business. It was also proved, under objection, that he purchased of other merchants a larger amount of goods than usual, and that at the time of such purchases he stated that he was doing well and making money, and was going to increase his business; that he had always made money in business and increased his capital every year.
It appeared that Pinner started a wholesale store in the same spring, in addition to his retail store. It did not appear that the plaintiffs were induced to sell upon any representations on the part of Pinner, but upon their confidence in him growing out of past dealings.
On the 23d day of August, /1853, Pinner made an assign ment to the defendant Michael for the benefit of his creditors, preferring Michael himself for some $17,000. The plaintiff received, on the thirtieth day of August, from Pinner, intelligence of his failure, and immediately sent his clerk to Buffalo, and he had an interview with Pinner and Michael, who did not give very satisfactory reasons for the failure. It appeared, by the statements of Pinner to this clerk, that if his failure was as bad as he represented, he must have been insolvent at the time of the purchases; and from all the testimony on the part of the plaintiffs, there was a proper question of fact, whether the failure was .not a fraudulent one. The plaintiffs proved a demand of the goods from Michael, and the witness thought he offered to return the notes of Pinner to Michael, but he was not certain that he recollected offering to return them. The plaintiffs produced the notes upon the trial, and offered to cancel them.
Upon this testimony, a motion was made for a nonsuit as to each defendant, on the grounds that: 1st. No demand had been made on Pinner before suit; 2d. No offer was made to return his notes; 3d. Pinner had not possession of the goods, 4th. No fraud had been shown sufficient to avoid the sale. The motion was denied and exceptions taken.
The defendants gave proof tending to show that Pinner’s purchases in 1852, of the plaintiffs and others, upon credit, were about as large as in 1853, and that he paid some $10,000 to different individuals at the time of his purchases, in April, 1853, and that he paid, between that time and his failure, some $28,000 more.
The court charged the jury that if" they should find that Pinner procured the possession of the goods from the plaintiffs fraudulently, with the preconceived design not to pay for them, the title did not pass from them, and they would have the right to repudiate the sale, and reclaim the goods by restoring whatever had been received on such sale. The defendants requested the judge, among other things, to charge that, if Pinner had delivered the goods to Michael before the commencement of the suit, the plaintiffs could not recover against him. He was also requested to charge that if the jury should find that the only fraud was Pinner’s concealing his circumstances at the time of the purchase, such concealment was not fraudulent, because he was not bound to disclose his circumstances. The court refused so to charge, and the defendants excepted. The jury found for the plaintiffs. Upon appeal, the judgment was affirmed .at general term in the eighth district, and the defendants appealed to this court.
John L. Talcott, for the appellants. .
John Gamón, for the respondents.

Opinion:
Pratt, J.
That the jury would have been warranted, from the whole evidence in this case, in finding that the assignment was made for the purpose of delaying and de frauding creditors, may perhaps be conceded; The- account which Pinner gave of the causes which led- to his failure were not very satisfactory. He seems to have been, a close buyer of goods, and to have done a good and safe business. The losses proved would scarcely account for so bad a failure.
But the question whether the purchase of the stock of goods, in the preceding April, from the plaintiffs, was frau dulent, was • a very different one. The defendant Pinner had long been a customer of the plaintiffs. He made his purchases at the usual' time. Ho representations were made by him to the plaintiffs,-in regard to his condition, tending to mislead them and: to induce- them to- give him- a credit which they would otherwise have withheld. Some evidence, it is true, had been given, showing that his, purchases were larger that spring than usual; but he explained that at the time, by stating that he designed to open another store and sell by wholesale, which statement is not claimed to have been untrue. So far, therefore, as the evidence discloses, it was the ordinary purchase by a customer with whom the plaintiffs had dealt for several years, and in whom they had the utmost confidence as a merchant and a man of business. The most, therefore, that could be claimed from the evidence-, when the plaintiffs rested and the motion for a nonsuit was made, so far as. it bears upon facts existing at the time of those purchases in April, is, that Pinner was in fact at the time insolvent, and knew that he was so. The motion, therefore, must have been denied, either upon the assumption that it was a fraud upon the plaintiffs for Pinner (knowing himself insolvent, or rather knowing that he was owing more than his assets were worth) to purchase a bill of goods without disclosing the condition of his affairs to the seller, or that the subsequent failure alone was sufficient evidence from which the jury might infer that the purchase was made with the design to cheat and defraud the plain-tiffs out of the goods.
It was not contended, upon the argument, that the fact of known insolvency at the time of the purchase, alone, rendered it incumbent upon Pinner to disclose the fact to the vendors, to escape the imputation of fraud. The authorities, if any were needed, are all the other way. To constitute fraud in such cases, there múst be an intention to cheat; at least, there must be intention to do an act, the necessary result of which will be to cheat and defraud another. But it is clear that such intention, is not necessarily inferable from the- fact that a man in good credit, going on with his regular business, makes his. usual purchases for the purpose of continuing- that business, after he is. made aware that his property is not sufficient to pay his debts. It is not fraudulent in him to make reasonable efforts to retrieve his fortune and to extricate himself from his embarrassment. It is not unnatural that he should cling to the hope that better times would come — that to-morrow should be as this day and much more abundant; and that with this hope, however delusive results may have shown it to be, he should have been impelled to buy more goods, contract new debts, and struggle on until some casualty should precipitate the catastrophe upon him, and he find himself in hopeless bankruptcy. This is an every-day experience in the commercial world; and it would be hard, indeed, if the unfortunate victim of hopes that looked to him at the time as reasonable, must, in his misfortunes, be judged by the actual instead of the possible results. The authorities do not sus. tain any such harsh doctrine, but the reverse. (Lupin v. Marie, 6 Wend., 77; Conyers v. Ennis, 2 Mas., 236; Mitchell v. Worden, 20 Barb., 253 ; Smith v. Smith, Murphy & Co.. 21 Penn., 367.)
Upon the question whether the-purchase, was made with the actual design not to pay for the goods-, but to cheat and defraud the plaintiffs out of their value, it is not necessary in this case to examine whether the simple purchase of goods, with the preconceived design not to pay for them, when there was no artifice or deceit used, is in itself such a fraud as to render the sale void. The important question in this case is, whether there was sufficient evidence of any such intent tó be submitted to the jury. I think there was not.
Fraud must be proved affirmatively. The presumption is always in favor of innocence and not of guift. " Odiosa et inhonesta non sunt in lege prasumenda." The evidence should, therefore, be direct and • strong, which would authorize the repudiation of a contract on the ground of fraud; especially in the case of an executed contract of sale, where the goods have been delivered and become mingled with the mass of the purchaser's other property. It should be upon no doubtful testimony, upon no equivocal circumstances, that the vendor in such a case should be allowed to repudiate the sale and reclaim the goods, thus gaining a preference over other creditors equally meritorious.
I have not been able to find that kind of evidence in this case. As I have before suggested, I find nothing in the circumstances attending the purchase of the goods that should be deemed, to indicate a fraudulent design not to pay for them—nothing which should be submitted to a jury upon that point. If, therefore, there was any evidence at all which ought to be submitted to establish the allegation of fraud in the purchase, it must be found in the fact of the assignment and the circumstances attending it. The plaintiffs showed that the defendants did not agree in regard to the amount of indebtedness from Pinner to Michael and the consideration for such indebtedness, and that Pinner did not explain in the most satisfactory manner the causes of his failure. This is about all the evidence given tending to cast any suspicion upon the assignment itself. It was all relevant upon the question whether the assignment itself was honest or dishonest—whether it was an honest appropriation by Pinner of his property, for the purpose of paying his debts, or whether it was a device for the purpose of delaying and defrauding creditors. And if there had been an issue in the case involving these questions, there was perhaps evidence enough to submit to a jury upon such issue; but it seems to me they did not alone, unconnected with other circumstances of suspicion at the time, by any natural or necessary inference, bear at all upon the question whether the goods that were bought some four months previously were bought with the fraudulent design of not paying for them. The inferences by which the two transactions are sought to be connected are not natural, but forced. There is no natural inference, because an assignment was made in August, that the party intended, the previous April, to assign. And if we may infer from the fact of insolvency, in August, that Pinner was insolvent in the.previous April, and upon this also infer that he knew it, it by no means follows that he knew that he should be unable to continue his business and should be compelled to assign. And if it be assumed that the assignment was fraudulent (and unless that be assumed there is nothing at all in the plaintiffs' case), there is no necessary or natural inference that the fraudulent design was formed some four months previous to carrying it into execution. The natural inference would be that the fraudulent design was formed, if at all, about the time that it received outward expression in the form of an assignment. It should require something more than the fraudulent transaction itself, something pointing to a preconceived design," to authorize the ante-dating such design so long before. There should be some affirmative proof of such anterior fraudulent design on the part of the purchaser, before the vendors should be allowed to thus repudiate the sale and gain a preference over other creditors. And as I have been unable to find any such evidence in the case, I think the learned justice erred in refusing to grant the motion for a nonsuit, and that the defendants' exception was well taken.
I think the court also erred in refusing to charge that the omission of Pinner to disclose his circumstances was not sufficient alone to render the purchase fraudulent.
As the case stood, especially after the defendants had proved that Pinner had paid some $28,000 of debts between April and the time of making the assignment, it was difficult to perceive upon what ground fraud in the purchases could be predicated, unless it was upon the assumption that he was bound to disclose his circumstances. It was perfectly proper, therefore, for the counsel for the defendants to re quire a ruling from the court, one way or the other, upon that proposition, and the judge should have responded to that request.
Other exceptions were taken which were argued; but the conclusion at which we have arrived, upon those already considered, makes it unnecessary to examine them.
The judgment must be reversed and a new trial granted.
Selden, J.
The judge charged the jury, in this case, that if the defendant Pinner "procured the possession of the goods fraudulently, with the preconceived design of not paying for them," then the title to the goods never passed to Pinner, and the plaintiffs could redeem them, and to this the counsel excepted.
If the term "fraudulently," as here used,' is to have its full and unrestricted meaning, the legal. soundness of the proposition laid down by the judge cannot be disputed No one will deny that fraud would vitiate and avoid the sale. The only objection to the charge in that aspect is, that in a case which turned upon a somewhat nice inquiry as to what would constitute fraud, the language thus understood would not tend very greatly to enlighten the jury. This, however, is not an objection which is available on exception. The defendants' counsel should have called upon the judge to state, in view of the evidence, what facts would be sufficient to charge the purchaser with fraud. His omission to do so probably arose from his understanding the words, " with the preconceived design of not paying for them," as a specification of the particular fraud which the judge had in his mind and which the evidence tended to show, and' hence interpreting the charge as embracing simply the proposition that such a design would be sufficient to avoid the sale.
If we were at liberty thus to construe the charge, I should regard it as clearly erroneous. The law takes no cognizance of a naked design which is demonstrated by no act. If one does only that which is lawful, and violates in action no positive duty, his intentions cannot be reached. An intent to overthrow the government is not treason without an overt act. An intent to commit murder or any lesser crime is never punishable, and an intent to commit a fraud is governed by the same rule. The intention may exist at one moment and be changed the next. The party is in loco penitential until he does some act in furtherance of the intent. The purchase of goods is a lawful act, and the validity of the purchase cannot be affected by the mere mental state of the purchaser.
But although it seems not unlikely, in view of the testimony given upon the trial, that the judge may have intended to say that the preconceived design not to pay would amount to a fraud, yet this is not the literal meaning of his language; and of two interpretations this court always adopts that which will sustain rather than one which will overthrow a charge. If, therefore, this were the only point in the case, I should not think it presented any error for which the iudgment should be reversed..
But the judge was requested, by the counsel for the defendants, to charge that "if the jury should find the only fraud was Pinner's concealing his circumstances at the time of the purchase, that such concealment was not fraudulent, because he was not bound to disclose his circumstances," and the judge having declined so to charge the counsel excepted.
To this exception two answers are given. First, it is said that the proposition was an abstraction, that there was nothing in the case upon which the request could with propriety be predicated. The case itself, however, does not, I think, sustain this position. • The request is to be viewed in connection with that part of the charge already noticed. We-have construed the term " fraudulently," used by the judge, as not necessarily limited in its scope by the clause which follows it; and on that ground we overrule the defendants' exception. On looking into the case we find some foundation for the inference that Pinner was insolvent when he made the purchase, and that he must have known it. It was entirely proper, therefore, for the counsel to ask the judge to instruct the jury that that inference alone would not justify them in' finding the purcháse to have been fraudulent.
Another answer to the exception under consideration is, that the word " concealing," as used in the request, meant something more than a mere omission to disclose; that it implied some act or contrivance on the part of Pinner to cover uf his insolvency, and that there was evidence in the case tending to show such contrivance. But the sense in which the wordconceal" was intended to be used is shown by the last clause of the request, viz., " because he was not bound to disclose," &c. In the sentence, taken as a whole, concealment stands opposed to the obligation to disclose; and the obvious antithesis must control the interpretation. I understand the request, therefore, as calling upon the judge to instruct the jury that if they should find no other fraud in the case except the mere omission by Pinner to disclose the fact of his insolvency, this would not be sufficient to avoid the sale ; thus presenting a point which, it seems to me, might very fairly arise upon the evidence in the case.
In declining to give this instruction to the jury I think the judge erred. It has never, that I am aware of, been held that a purchaser of property is bound, when no questions are put to him in regard to it, to disclose his own pecuniary condition and means of payment. If he makes no false statement and resorts to no arts or contrivances for the purpose of misleading the vendor, it is not, I think, a fraud to say nothing on the subject. There may be circumstances under which the concealment of a marked and sudden change in the pecuniary affairs of a purchaser, which he had reason to suppose unknown to the vendor, might amount to a fraud, but this does not appear to me to be such a case. To require of a purchaser, as a general rule, that he should volunteer a statement of his pecuniary affairs, if he knows or has reason to suppose himself insolvent, would lead to' great embarrassment and inconvenience in the transaction of business and would prove a most fruitful source of unprofitable litigation.
For the error of the judge, in declining to charge as requested upon this point, the judgment should, I think, be reversed, and there should be a new trial, with costs to abide the event.