Court Opinion

ID: 3598689
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:45:43.656356+00
Date Added: 2024-06-11T13:57:55.483640
License: Public Domain

The judgment about to be rendered by the court impresses me as opposed to the weight of evidence given upon the trial. I do not intend to engage in an extended discussion of the facts, but will allude to enough of the evidence to define my position and, me judice,
justify my vote to reverse the judgment of the General Term and affirm that of the referee. The question presented for decision is *Page 345 
whether Lyman J. Folsom practiced deception in order to induce the plaintiff to part with her property. A careful consideration of all the evidence has convinced me that he deceived her both by the statement of what was false and by the concealment of what was true.
On the 13th of April, 1886, Folsom, offering to buy goods of the plaintiff and stating that he should want more in the future, represented to her that he was solvent and worth $15,000. Three months before he had given a chattel mortgage to Adams for $6,000, and within less than two months before another to Shields and others for $10,000, subject to a third for $1,000, covering most of the personal property that he had and all that he was using in his business. Two other mortgages on his livery stock, one three years old and the other two, amounting to $1,500, remained unpaid at this time. None of these mortgages were filed. His real estate was already mortgaged to its full value, except one parcel, and when the representations were made he had very little property free from incumbrance, or available to pay his unsecured debts amounting to some thousands of dollars. According to the most charitable definition of insolvency he was insolvent, because he had not property enough to pay his debts and, as every man in the absence of proof to the contrary is presumed to know the situation of his own affairs, it must be assumed that he knew he was insolvent, especially as he was a good bookkeeper and a good business man. Having established his credit with the plaintiff he bought goods of her to a small amount, which he subsequently paid. He was then ready to load up and fail, and the eagerness of the plaintiff to sell goods to a man worth $15,000, as she supposed, made her an easy victim. During the month of September, 1886, in order to secure previous indorsements, he gave two bills of sale, one covering his interest in a crop of hops and the other embracing his horses, wagons, sleighs and all the property used in his livery business, and neither of these were filed. Even notes, accounts and all his evidences of debt were included in one of these instruments, as well as cash on hand and estimated profits. *Page 346 
October 11, 1886, he bought of the plaintiff fifty carriages, for which he agreed to pay her $2,250 in eight months, and one month later he gave a bill of sale to the defendant for thirty of said carriages to secure over-drafts and past due paper.
November 20, 1886, he bought of the plaintiff fifty more carriages, for which he agreed to pay $2,500 eight months thereafter. He waited until the last of these carriages was delivered, when, about December 13, 1886, he gave a bill of sale to the defendant covering this lot also, to secure a past indebtedness of $3,500. Neither of these instruments was filed.
December 28, 1886, he gave a chattel mortgage for $1,000, apparently a renewal, that was filed, and January 19, 1887, he mortgaged the rest of his real estate for $6,000 to secure an indorser, and this mortgage was not recorded. On the twenty-fourth of the same month he gave a bill of sale covering forty of the carriages, that he had purchased of the plaintiff, to secure his indorsers upon a note past due and under protest for more than four months, but it was not filed. The omission to file and record might be regarded as a remarkable coincidence if he had not, in several instances, made a request upon the subject to the holder of the security. The property embraced in all of these bills of sale and chattel mortgages remained in his possession, the same as if they had not been given.
Before he purchased said carriages of the plaintiff he had given bills of sale or chattel mortgages covering substantially all his personal property, so that nothing was realized therefrom above the encumbrances. At the same time his real estate was all mortgaged to its full value, except one parcel, and that was likewise fully encumbered within a brief period thereafter. His subsequent transfers were, therefore, necessarily confined to property subsequently acquired and that was mainly obtained from the plaintiff.
From May, 1886, until March, 1887, when he died, he had notes protested repeatedly and the protests were especially numerous during the period when he bought the carriages in *Page 347 
the months of October and November, 1886. He had thousands of dollars in commercial paper under protest, some of it several months past due, each time that he ordered goods of the plaintiff in the fall of 1886. At the date of his death his assets available to pay unsecured debts, amounted to only $1,400, even before the expenses of administration had been deducted, or not enough to pay more than five or ten per cent thereof.
The interest on one of the mortgages on the house in which he lived had not been paid for nearly six years. He had even assigned as collateral security the accounts due him as sheriff and the insurance upon his life.
I do not mention other dispositions of his property and other circumstances having an incidental bearing upon the question of fraudulent intent, as I rely upon the main facts of known insolvency, deliberate misrepresentation and active concealment, to demonstrate a furtive intent in obtaining the property.
The referee found that Folsom made the false representations for the purpose of obtaining credit at the time and further credit in the future; that he had then executed secret transfers of substantially all his personal property and fraudulently concealed them from the plaintiff and his other creditors; that when he bought the goods in question of her and for some time prior his checks and commercial paper had been protested and remained dishonored in the three banks of Malone, including that of the defendant; that at the same time, while remaining in the possession of a large amount of personal property, including a stock of goods that he was selling in the usual course of business, he had made secret transfers of the same by mortgages that were not filed, but which were fraudulently concealed; that subsequently he made other secret transfers and fraudulently concealed them from the plaintiff; that he was insolvent and knew it when he purchased the property in question and fraudulently concealed the fact from her; that he purchased and received the goods with the preconceived design not to pay for them; that as fast as the carriages *Page 348 
were received he transferred the most of them to secure precedent debts, requesting that the transfers be kept secret, and that he knew he could not continue in business or pay for the property. He refused to find, upon defendant's request, that the plaintiff did not rely upon the representations in selling the property in question and he is presumed, in support of his other findings, to have found the converse of that proposition, and that the sales in the fall were induced by the representations in the spring. (Gardiner v.Schwab, 110 N.Y. 650.)
It seems to me that the weight of evidence supports the findings of the referee and demonstrates that Folsom was guilty of fraud by false representation, as well as by fraudulent concealment. Even if the false representations did not induce the credit, they have a material bearing upon the intent of the purchaser. Where a man purchases goods on credit when he is insolvent and knows it, very little further evidence is needed to establish fraud and the intentional misrepresentation is ample for that purpose. Mortgaging the property so promptly after its purchase and stripping himself of all means of making any payment or continuing in business, except by the forbearance of his mortgage creditors, is also sufficient. The simple request not to file the mortgages is of great significance, under the circumstances, for this man, apparently doing a prosperous business and in the possession of a large amount of property, knew that he would be compelled to fail if those liens were filed. The fact that all of the mortgages for year after year were kept from the files, a part of them at least through his agency, threw the burden upon the defendant of proving that the non-filing of the remainder was not owing to him. While concealment by mere silence may not be enough, add to it the effort to divert suspicion and prevent inquiry by a system of concealment and it is enough. Simple silence ordinarily has the protection of the law, but an active effort to suppress the truth should receive the condemnation of the law. This is not a case of accidental or careless omission to make disclosures required by the plain rules of common *Page 349 
honesty, but a course of deceptive conduct, preceded by deliberate misrepresentation.
Folsom knew when he bought the goods that he was on the verge of financial disaster and that his failure could be caused at any time by the lawful, and even probable action of persons over whom he had no control. The discrepancy between his assets and liabilities was so great that he had no reason to believe that he could retrieve his affairs and he had no right to make his creditors take the risk of a hopeless effort in that direction. While, owing to his popularity and official position he may have thought that he might be able to pay for these goods, he had no reasonable expectation that he could do so, unless it was by shifting the debt upon the shoulders of others by "borrowing of Peter to pay Paul," which would not do away with the furtive intent.
It is well established that either suggestio falsi orsuppresio veri is sufficient to establish fraud. Here we have both. Folsom took advantage of the plaintiff's confidence in his financial ability, induced by wilful concealment and false statements on his part, and was thus guilty of actionable fraud, that vitiated his title to the goods in question. As the defendant was not abona fide purchaser, it took no better title than he had and hence the plaintiff had the right to rescind the contract and reclaim her own.
For these reasons I am compelled to dissent from the judgment of my associates, which I regard as establishing an unfortunate precedent that will long be relied upon by the dishonest and fraudulent to justify acts opposed to commercial integrity.
All concur with BROWN, J., except VANN, J., dissenting.
Order affirmed and judgment absolute for defendant on stipulation. *Page 350