Case Name: MAUPIN WAREHOUSE COMPANY v. F. S. FLEMING
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1927-04-26
Citations: 121 Or. 531
Docket Number: 
Parties: MAUPIN WAREHOUSE COMPANY v. F. S. FLEMING.
Judges: Burnett, O. J., and Bean and Coshow, JJ., concur.
Reporter: Oregon Reports
Volume: 121
Pages: 531–537

Head Matter:
Argued March 29,
affirmed April 26,
rehearing denied May 17, 1927.
MAUPIN WAREHOUSE COMPANY v. F. S. FLEMING.
(255 Pac. 606.)
For appellant there was a brief over the names of Mr. Harry G. Hoy and Mr. Robert E. Ellenwood, with an oral argument by Mr. Hoy.
For respondent there was a brief and oral argument by Mr. Frcmik G. Dick.

Opinion:
BROWN, J.
The testimony of Irvine Morris, called by the plaintiff, is to the effect that he had purchased 3,300 sacks from the plaintiff Maupin Warehouse Company; that he had filled them with wheat from his 1923 crop and delivered them to the defendant F. S. Fleming, receiving therefor certain promissory notes which had been duly made and executed by Morris and his wife. He testified that he had cropped 650 acres; that the place had yielded 7,800 bushels of grain, which was harvested at an expense of $3.50 per acre. On cross-examination he testified:
"Q. I am not just clear on the testimony you gave about how you intended, to use this note to raise the cash to pay for the sacks at the time you signed the agreement. A. The note was made for 90 days, and during the 90 days I had plenty of time to harvest the crop and haul it and sell it and arrange for my business for the next year.
"Q. What do you say as to the small note that, was signed giving you 60 days? A. The crop was nearly- harvested before I needed the last few sacks, the last 300.
' ' Q. How did you come to fail in your expectations ? A. The hail-storm was the chief cause of it.
"Q. How did the hail-storm affect the situation? A. It cut the crop from one half to one third, reduced the crop yield.
' ' Q. Explain to the jury how it did that. A. When the grain was nearly reaped the hail-storm came up, and when the hail-storm was over about one half or one third of the grain was on the ground. In places it was worse than others.
" Q. 'In other words, the hail beat the grain out of the heads, and it fell on the ground? A. Yes, sir.
"Q. Well, now, can you tell how much wheat or the value of the wheat lost by the hail-storm? A. Well, the entire crop was reduced probably four or five thousand dollars."
A sale may be rescinded and tbe subject of tbe sale recovered Avhen the vendee at the time of purchase was insolvent or in failing circumstances and did not intend to pay for the property, or had no reasonable expectation of doing so and deceitfully concealed or misrepresented the facts: Skinner v. Michigan Hoop Co., 119 Mich. 467 (78 N. W. 547, 75 Am. St. Rep. 413); notes, 8 Ann. Cas. 507. However, it is a frequently stated general rule that, to authorize a vendor of goods to disaffirm the sale and recover against his vendee or a subpurchaser with knowledge, the concurrence of three facts must be shown:
"(1) The purchaser must have been insolvent, or in failing circumstances; (2) he must have had at the time a preconceived intention not to pay for the goods, or no reasonable expectation of being able to do so; (3) there must have been on his part an intentional concealment of these facts, or a fraudulent representation in reference to them." 24 R. C. L., § 580.
See notes, 8 Ann. Cas. 507.
The plaintiff alleged its right to recover on the ground of the vendee's fraudulent representations at the time of the sale. It .folloAvs that, having alleged fraud, the plaintiff must affirmatively prove all the elements necessary to make out a case of fraud: 27 C. J. 47. The law never presumes fraud, but, on the contrary, the presumption is always in favor of honesty: 22 C. J., 146.
In the case of Utah National Bank v. Nelson, 38 Utah, 169, 196 (111 Pac. 907), we find a set of facts very similar to the facts in the case at bar; and the Supreme Court of Utah, in rendering its opinion, made the folloAving declaration:
"Where a transaction is explainable upon either of two different theories, one of which is consistent with good faith and fair dealing and the other involves fraud and deception, the explanation consistent with honesty and legality will he accepted unless the evidence clearly preponderates in favor of the illegal aspect of the transaction."
With this we are in full accord.
The proof shows that, at the time of the hearing, the purchaser was an insolvent, and, at the time of the sale, in failing circumstances. But, granting that he was an insolvent prior to the destruction of one third or one half of his crop of grain by hailstorm, this alone is not sufficient to entitle the vendor to a rescission of the sales contract. The weight of authority is to the contrary. The fact that the purcháser was unable to look into the breast of the future and foresee the coming of a destructive hailstorm, or foretell the decline in the price of wheat, does not brand him as a knave. Where a purchaser has no preconceived intention not to pay, his insolvency alone does not constitute fraud. This is supported by the holding of many courts. In Franklin Sugar Ref. Co. v. Collier, 89 Iowa, 69 (56 N. W. 279), it was said:
"The fact that an insolvent orders goods on credit is not fraudulent, unless coupled with an intent not to pay for them, or unless the natural and probable, if not necessary, result of his act is to defraud the seller."
Again, in Hacker v. Munroe, 56 Ill. App. 532, it was held that, where a vendee was insolvent and was not able to pay at the time of the purchase, but was a good-faith purchaser, intending to pay, the vendor could not rescind the sale on the ground of fraud. To similar effect are Thompson v. Peck, 115 Ind. 512 (18 N. E. 16, 1 L. R. A. 201); Coffin v. Hollister, 27 N. Y. St. Rep. 637 (7 N. Y. Supp. 734); Kelsey v. Harrison, 29 Kan. 143; Ayers v. Farwell, 196 Mass. 349 (82 N. E. 35).
It is urged that the record discloses some evidence sustaining the plaintiff's cause, and, therefore, that the court erred in granting a nonsuit. That contention is answered in Martini v. Oregon-Washington R. & N. Co., 73 Or. 283 (144 Pac. 104), where Mr. Justice Ramsey, speaking for this court, said:
"In order that a verdict may be supported by the evidence, there must be some legal evidence tending to prove every material fact in issue."
See, also, Schneider v. Tapfer, 92 Or. 520 (180 Pac. 107).
The testimony tends to show that the purchaser was hopeful of his ability to pay his note. He had bought this large grain farm, and he expended all he had made and all that he possessed in cultivating the farm in the hope of ultimately paying therefor. He lost all of his possessions, but he at no time became discouraged until his crop was largely destroyed and the price obtainable for the remainder reduced to eighty cents per bushel. Besides, the vendor showed his faith in the truthfulness of the vendee when he called him to the witness-stand. See the case of Chance v. Graham, 76 Or. 199 (148 Pac. 63), where this court, speaking through Mr. Justice Burnett, said:
"The plaintiffs called as their first witness the defendant Marion C. Young, thereby vouching for his credibility."
See, also, Sitton v. Peyree et al., 117 Or. 107 (241 Pac. 62, 242 Pac. 1112).
The court did not err in granting the defendant's motion for an involuntary nonsuit. This case is affirmed. Aeeirmed. Rehearing Denied.
Burnett, O. J., and Bean and Coshow, JJ., concur.