Court Opinion

ID: 3306437
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:21:08.854765+00
Date Added: 2024-06-11T12:33:23.541216
License: Public Domain

I dissent. This is not strictly an action upon the express contract for the sale of the machinery, but is in form and substance an action in assumpsit on an implied contract to pay for the value of goods sold and delivered, and is based upon the claim that the plaintiffs had a right under the circumstances to rescind the stipulation for a credit of sixty days. There is abundant authority for the proposition that one who has sold goods or loaned money on a credit fraudulently obtained may, upon discovery of the fraud, sue in assumpsit before the credit has expired. There is no doubt authority to the contrary, one of the most noted cases being Galloway v. Holmes, 1 Doug. (Mich.) 330. But, on the other hand, the doctrine is sustained *Page 362 
by the highest courts of New York, Massachusetts, Alabama, and perhaps other states, and it commends itself to me as a just and reasonable doctrine. It is founded upon the right of rescission. When a party has been induced to enter into a contract by fraud, he is entitled to rescind that contract by his own act, and if upon such rescission he has a legal claim against the other party he may proceed to enforce it by any appropriate action. The foundation of the doctrine being the right of rescission, it should be applied to any case where the right exists. In New York it has been extended to a case in which after the sale of the goods the purchaser made a transfer of his property in fraud of his creditors. (Arnold v. Shapiro, 29 Hun, 478.) In that case the court said: When a "fraudulent disposition of the property has taken place at the time of the making of the contract, the fact itself would also avoid credit obtained by means of its concealment in incurring the liability. In principle the sameeffect should also follow such a disposition of the debtor'sproperty, after he has contracted the debt and secured thecredit, for it is always implied in such transactions that thedebtor will make no disposition of his property which willoperate as a fraud upon his creditor." I have italicized that part of the opinion which states the principle governing cases of this character, which principle, in my opinion, clearly embraces the present case, for here, according to the facts found by the court, the debtor, after obtaining the credit, did make a disposition of his property which would "operate a fraud" upon the creditor. He represented in purchasing the engine that it was to be employed in logging. Instead of putting it to work where it would earn money and enable him to meet his obligation to pay for it at the expiration of the term of credit, he shipped it back to San Francisco, in violation of his contract and at the cost of the plaintiffs, obliging them to pay the freight to prevent its being sold to pay charges, and when it was attached by them they were compelled, of course, to discharge the lien of the carrier. The case is the same in all respects as that of a mechanic who buys a kit of tools on credit, representing that he is going to work at his trade, and who, instead of going to work, pawns the tools and pays another creditor with the money so obtained. I say the two cases are the same because there *Page 363 
is nothing in this record to show that the defendant had any means of meeting his obligation, except the proceeds of the business in which he represented the machinery was to be employed. He certainly impaired, by his own fault, his means of paying his debt as represented to the plaintiffs, and if what he did gave them the right to rescind, I cannot see why, in view of the principle of the cases referred to, they could not maintain this action. Did they, then, have a right to rescind? I think they had under subdivision 2 of section 1689 of the Civil Code.
In asking and obtaining a credit, a purchaser of goods always represents himself as having, or being able to provide, the means of discharging his obligation at maturity, and whatever representation he makes affecting his prospective ability to pay constitutes the basis upon which the credit is accorded. If, then, he materially impairs his ability to meet his obligation, and by an inexcusable breach of the contract renders the security of his creditor worthless or precarious, there is at least a partial failure of consideration for the credit, and it will be noticed that one authority cited in the main opinion (24 Am. 
Eng. Ency. of Law, 2d ed., p. 1122) includes among the exceptions to the rule stated the case in which there has been a failure of consideration for the credit. It may be said that the reasoning upon which I hold this action to have been well brought is technical. I concede it, but I call attention to the fact that the main opinion rests its conclusion upon purely technical grounds. The right of plaintiffs to sue at the time they did is conceded, but their action is defeated because, as it is held, they have sued on the contract, instead of in tort. If we are to be technical, I think we should give the preference to a technicality that results in upholding a just claim against one who has, as appears by the findings of the superior court, wantonly violated his contract, to the serious injury of innocent parties. There may not be any precise precedent to sustain this action; but if I have succeeded in showing that the right of rescission is the basis of the rule which allows a creditor to sue in assumpsit regardless of an unexpired credit expressly stipulated, I have shown that this case is within a principle sustained by abundant precedent, and, the principle applying, a court constituted like this should not be afraid to make a *Page 364 
precedent which in all like cases would tend only to the promotion of justice.
Van Dyke, J., concurred in the foregoing.
Rehearing denied.