Case Name: John M. Bruce, Jr., et al., Appellants, v. James S. Davenport et al., Respondents
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1867-06
Citations: 3 Keyes 472
Docket Number: 
Parties: John M. Bruce, Jr., et al., Appellants, v. James S. Davenport et al., Respondents.
Judges: 
Reporter: Keyes' Reports
Volume: 3
Pages: 472–475

Head Matter:
John M. Bruce, Jr., et al., Appellants, v. James S. Davenport et al., Respondents.
It is the duty of a party who proposes to disaffirm as fraudulent a contract entered into by himself, his partner or agent, to do so at once upon discovery of the fraud. It will not do to await a possible beneficial issue from the contract, and to repudiate it only when the danger of loss to himself becomes imminent.
An order granting a new trial cannot be limited by a condition that certain evidehce shall be admitted upon such trial.
The action was brought by the appellants against the respondents, as indorsers of a promissory note for $2,350.62, made by a firm doing business under the name of Beale, Mellick & Dewitt. The defense relied upon was that the note in question was, previous to its maturity, delivered by Thomas Davenport, one of the respondents, to the appellants, to be sold by the latter, who were note brokers, as it was, and that the appellants afterward procured the note to be indorsed in the firm name of “ Davenport Bros.” while Thomas Davenport was absent, by James S. Davenport, another of the respondents, who was ignorant of the instructions which, as is alleged, were given to the appellants by Thomas Davenport, at the time he delivered the note to them, and that such indorsement was procured by an alleged false representation of William A. Odell, one of the appellants, to the effect that Thomas Davenport would indorse the note were he at home, and that he usually did indorse notes of that kind left with the appellants for sale.'
The referee found as facts, that within a few days after the delivery as aforesaid of the note in question to the plaintiffs, Odell (one of the plaintiffs) called at the defendants’ place of business; Thomas-Davenport was then absent. Odell found the defendant, James S. Davenport, there, and requested him to indorse this note in the name of the defendants’ firm. James S. Davenport at first declined to do so, saying that Thomas Davenport attended to this part of the business, and that he knew nothing about. it. Odell then stated to him that Thomas Davenport was in the habit of indorsing'the name of his firm on the paper of those.makers; that he invariably did so; that he would indorse this note if he were at home, and that if James S. Davenport indorsed it he would find it all right when Thomas Davenport returned; that the plaintiffs could sell the note if the defendants indorsed it, but not otherwise. The defendant, James S. Davenport, induced by these statements of Odell, then indorsed the note in the name of the firm. ' ' n In a day or two after James S. Davenport thus indorsed the note, Thomas Davenport returned, and, on being informed by James S. Davenport of the representations and of the indorsement, expressed his dissatisfaction, and said he would not • have indorsed it for five hundred dollars, and James S. Davenport expressed indignation at having been induced to indorse the note by the statements, as above mentioned, of Odell. The defendants did not express dissatisfaction to the plaintiffs as to the indorsement or the means by which it was obtained, until it was ascertained that the makers were insolvent. The referee reported in favor óf the plaintiffs for the balance due on the note, after deducting a payment made by the assignee of the maker, holding that the statements made by Odell were not such false .representations as would invalidate the contract of indorsement, in that they were promissory; in that the statements contained no averment of the condition . or ability of the makers of the note; in that the statement '.was not one that a person of ordinary prudence should have relied upon,; and in that the representations, in a legal sense, caused no damage to the defendants, as they are in no worse position than if they had not sold the note, but had retained it till maturity. . The General Term of the first district reversed the judgment of the referee and ordered a new trial, and directing that the testimony taken on the former trial might be read in evidence on the new trial. The plaintiffs appeal to this court, stipulating that, if the order appealed from be affirmed, judgment absolute may be entered against them.
James C. Carter, for the appellants.
William, W. Niles, for the respondents.

Opinion:
Hunt, J.
We are not at liberty to deny the finding of the referee that the defendants' indorsement of the note in suit was obtained, by the false representations of Odell. The representations were false, but they are not found to be fraudulent. Whether the question of fraud was one of fact which should be found by the referee, or whether it would be held to be a question of law under Bennett v. Judson (21 N. Y. 238), is not, in my view of the case, a material question. - Assuming that the transaction was fraudulent, and that the representations were such as might well have deceived a prudent man, assuming also that a representation to one partner of what his associate would do, if present, comes within the rule on this subject (as to which, see 1 Story Eq. Jur. § 199), there is a further difficulty, which cannot be overcome. This arises from the failure of the defendants promptly to repudiate the indorsement, when informed of the means by which it was obtained. The absent partner returned to his place of business within a few days after the indorsement was obtained, and was informed of the means and representations employed by Hr. Odell to obtain it. Great indignation was expressed by the partners among themselves at his conduct. Ho disaffirmance, however, of the transaction, no offer to' return the money and take back the note, or even a disapproval or complaint Of the means employed, was made to the plaintiffs. The defendants, on the contrary, received and retained the proceeds of the note, and were content to remain as they were for a period of nearly three months. The insolvency of the maker occurred at that period, and for the first time the defendants then communicated to the plaintiffs the complaint that their indorsement had been fraudulently obtained. This will not do. It is the duty of a party who proposes to disaffirm as fraudulent a contract entered into by himself, his partner or agent, to do it at once, upon discovery of the fraud. He must be ready and prompt in such affirmance. It will not do to keep the money in his pocket for three months, to deprive the other party of the opportunity of protecting himself, to await the chances of a successful performance of the fraudulent contract, and only to repudiate when the danger of loss becomes imminent, ¡Neither honesty, good faith, or the principles of law, will justify such a course.
If the defendants deemed themselves injured by the representations of Mr. Odell, it was their duty, upon the return of the absent partner, when the real facts were made known to all of them, at once to have tendered to the plaintiffs the money received from them, and to have demanded a return of the note. For illustrations of these principles, see Minturn v. Main (3 Seld. 220, 227); Saratoga and Schenectady R. R. Co. v. Row (24 Wend. 74); Loyd v. Brewster (4 Paige, 537); Conner v. Henderson (15 Mass. 319); Cutler v. Gilbreth (53 Maine, 176).
Upon this' ground I think the judgment of the referee should be affirmed and that of the General Term reversed.
That portion .of the order directing that the testimony already taken might be. read in evidence on the new trial, was unauthorized and irregular. The new trial, as awarded by the General Term, was his right. He was entitled to it without condition or qualification. A direction that evidence of a certain character should be admitted was not a legal condition.
All the judges concurring,
Judgment accordingly.