Court Opinion

ID: 3578238
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:29:54.284255+00
Date Added: 2024-06-11T13:46:42.270599
License: Public Domain

That Pinner was insolvent when he purchased the goods in question — so utterly insolvent that it can scarcely be believed he was ignorant of the fact — was incontrovertibly established upon the trial. The amount of his purchases, at the time, was between $35,000 and $40,000. This large amount of goods was purchased upon credit. When, four months afterwards, he came to make his assignment, his entire stock amounted to but $22,000 and the debts due him to $6,600. His preferred debts amounted to $24,000, the greater part of which was due to the defendant Michael, his brother-in-law and assignee. According to his own account of his affairs, he must have been insolvent when he made the purchases in April, 1853, to the amount of $30,000, and the effect of these large purchases was to provide the means for paying the large sum he owed his brother-in-law, and other confidential debts, leaving nothing for the creditors from whom he had obtained the goods. Upon such a state of facts, it *Page 306 
might well be expected that the jury, when called upon to pronounce upon the intent with which the April purchases were made, would declare it to be fraudulent. It would be difficult to reach any other conclusion.
It is not pretended that Pinner, when he obtained the goods in controversy, made any representations, one way or the other, in relation to his pecuniary condition. He was undoubtedly insolvent. He probably knew he was insolvent. But mere insolvency, even though the fact is known and not disclosed, is not sufficient to avoid a sale. The goods might have been purchased with the honest purpose of continuing business and paying for them. If so, however much he might have deceived himself, the plaintiffs could not rescind the sale. The vitiating element would be wanting in such a transaction. But, on the other hand, if the purchase was made with the dishonest purpose of subjecting the goods to the payment of other debts, and thus defrauding the plaintiffs, the sale was voidable, even though the purchaser was able to effect his purpose without resorting to any fraudulent artifice or device. It thus becomes a question of motive. If the goods were obtained for a fraudulent purpose, the sale may be avoided. But if the purchaser acted in good faith, intending no wrong, however much he may have misjudged, the sale cannot be avoided. The motive, whether honest or dishonest, is to be ascertained from the facts and circumstances attending the transaction, and is a question for the jury. "A deduction of fraud," says KENT, "may be made, not only from deceptive assertions and false representations, but from facts, incidents and circumstances, which may be trivial in themselves, but decisive evidence, in the given case, of a fraudulent design." (2Kent's Com., 484.) And, in Durell v. Haley (1 Paige,
492), Chancellor WALWORTH says: "If a purchaser who is insolvent conceals the fact from the vendor, and thus obtains goods without intending to pay for them, it is a fraud, and the property is not changed in the hands of the *Page 307 
vendee." The same doctrine is asserted in Ash v. Putnam (1Hill, 302), The Earl of Bristol v. Wilsmore (1 B.  C.,
514) and Ferguson v. Carrington (9 B.  C., 59). In the latter case, goods had been purchased on credit and were paid for by the acceptances of the purchaser. Immediately after receiving the goods, the purchaser sold them at reduced prices. In an action brought against the vendee before his acceptances had become due, Lord TENTERDEN, Ch. J., said that if the defendant had obtained the goods with a preconceived design of not paying for them, no property passed to him by the contract of sale, and it was competent for the plaintiffs to bring trover and treat the contract as a nullity, and consider the defendant not as a purchaser, but as a person who had tortiously obtained possession of the goods.
Buckley v. Archer, 21 Barb., 585; Irving v. Motley, 7Bing., 543.)
In Cross v. Peters (1 Greenl., 376), cited by defendants' counsel, it was held that the mere insolvency of the vendee and the liability of the goods to immediate attachment by his creditors, though well known to himself and not revealed to the vendor, was not of itself sufficient to avoid the sale. The decision, in that case, was put upon the ground that the credit was in fact obtained without any fraudulent intent, and the validity of the sale made to depend upon the decision of the question whether there was fraud in fact. (2 Kent's Com., 514;Powell v. Bradlee, 9 Gill  John., 220, referred to byParsons as an excellent case, 2 Parsons on Cont., 270, noteW.)
In Powell v. Bradlee, the purchasers of the goods in question were insolvent. The jury were instructed that by the sale and delivery of the goods the title vested in the purchasers, notwithstanding they were insolvent at the time of such sale and delivery, and knew that they were so insolvent, unless the jury should also find that at the time of such sale and delivery they knew that they were not able to pay for the goods and that they would not be *Page 308 
able to pay for them, and neither intended nor expected to pay for them, and made the purchase and obtained the delivery with such knowledge, expectation and intention. The Court of Appeals regarded these instructions as calculated to "bewilder, embarrass and mislead the jury," and, therefore, erroneous, and held that it was sufficient for the jury to find that the purchasers knew themselves to be insolvent and had no reasonable expectation of paying for the goods.
Smith v. Smith, Murphy  Company (21 Penn., 367) was much relied upon by the defendants' counsel. The case, in its principal features, bears a close resemblance to that now in hand. Goods had been purchased upon credit, and a note given by the purchaser. Before the term of credit had expired, the goods were subjected to executions issued upon judgments confessed by the purchaser in favor of preferred creditors. The vendors, before the sheriff sold, claimed the goods, on the ground that the sale was fraudulent and vested no title in the defendant in the executions. The sheriff having refused to surrender the goods, the action was brought against him. Upon the trial, the court charged the jury in substance, as the jury were charged in the case now under consideration, that a purchase of goods vests a voidable title in the vendee, if at the time of the purchase he knew, and did not reveal the fact, that he was unable to pay, and intended not to pay, even though he made use of no deceptive assertions or false or fraudulent representations to induce the sale. In other and fewer words, the jury were instructed that an intention not to pay, and conscious and unrevealed insolvency, rendered a purchase fraudulent. Upon error, it was held by a majority of the court that, to avoid a sale in such a case, some overt act of fraud, practiced upon the vendor and fitted and intended to deceive him, must be established. The argument of the learned judge who delivered the opinion of the court is bold and original; but it is equally specious and unsound. He sets out with a proposition to which few will yield their *Page 309 
assent. It is, that a purchase of goods, with intent not to pay for them, though dishonest, is not fraudulent. The fallacy of his entire argument is the result of this groundless distinction. I say groundless, for I do not understand that, when applied to a transaction like that under consideration, any such distinction exists. So long as the dishonest purpose remains unexecuted, the law takes no cognizance of it. But when executed, and it results in injury to another, the law pronounces the transaction fraudulent, and offers its remedies for the redress of the injured party. Whether the dishonest end is effected by what is called, in the opinion to which I am referring, an overt fraudulent act, as false representations or artifice, or by the mere suppression or concealment of the real purpose with which the act is committed, it is alike fraudulent. The dishonest intention, executed, constitutes fraud. So that, whether the dishonest purchaser is able to deprive his victim of his property by means of an unconscientious advantage of the confidence he has already secured, or is obliged to resort to further devices before he can obtain such confidence, the transaction is regarded in the same light, in law as well as in morals. In either case, the party who has been deprived of his property may have it restored to him, by establishing the fact that it has been obtained from him with a design to defraud him. Where there is no "overt act of fraud," it may be more difficult to prove the dishonest purpose; but when proved, it is equally fatal to the validity of the transaction. In such cases, instead of proving false representations or other fraudulent practices, it is necessary, as in a thousand other cases, to resort to the various incidents and circumstances which evince, sometimes with unerring certainty, the hidden purposes of the mind. In asserting that there must have been actual artifice, intended and fitted to deceive, before a vendor can reclaim his property on the ground that he has been defrauded, the case cited stands alone. It is equally unsupported by principle. *Page 310 
In the case now in hand, the jury were told that the plaintiffs could not recover, unless they found, from the evidence, that Pinner had procured the possession of the goods fraudulently, with the preconceived design of not paying for them. This charge is unobjectionable. It is almost precisely in the language of ABBOTT, Ch. J., in Bristol v. Wilsmore (1 Barn.  Cress.,
521), where it was said, under similar circumstances, that whether the defendant obtained possession of the goods with such a preconceived design, was a question of fact to be left to the jury.
The judge, at the trial, was requested to charge the jury that if they should find that "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." I think there was no error in refusing so to charge. The judge had already submitted the case to the jury upon the single question whether the goods had been procured with a preconceived design not to pay for them, informing them that if they were thus procured the transaction was fraudulent and the title never passed from the plaintiffs to Pinner. No question had been submitted in relation to the insolvency of Pinner. Nothing had been said to the jury on that subject. It was certainly competent for them, in determining the question upon which, according to the charge, their verdict was to turn, to take into consideration the circumstances of Pinner when he obtained the goods. It was not claimed that the mere fact of his insolvency, or the further fact that he omitted to disclose such insolvency, was sufficient to avoid the sale. If the judge had been requested to instruct the jury that insolvency, with a knowledge of such insolvency and an omission to disclose the fact, would not, of themselves, render the purchase fraudulent, perhaps it would have been his duty to comply with such request. But the proposition which the defendants' counsel asked to have submitted to the jury was very different. It was, in *Page 311 
short, that though Pinner was insolvent at the time of his purchase, and knew it, yet it was not fraudulent for him to conceal that fact from the plaintiffs. The proposition itself is not tenable. It has been conceded that known insolvency, though undisclosed, would not be sufficient to avoid the sale, if the purchase was made with an honest intention. But the proposition now before us involves another element. It speaks of concealment. The very term implies something fraudulent — a willful withholding of some fact — an intentional suppression of the truth — aliud est celare, aliud tacere. A man may be innocently silent; but when he intentionally withholds the truth, that he may take advantage of another's ignorance, he acts dishonestly. Such a suppression of the truth is fraud. "If a buyer conceals
a fact that is vital to the contract," says STORY, J., inConyers v. Ennis (2 Mason, 236), "knowing that the other party acts upon the presumption that no such fact exists, is it not as much a fraud as if the existence of such fact were expressly denied or the reverse of it expressly stated?" (Id.,
6 Cow., 116; Lupin v. Marie, 2 Paige, 172.)
The judge at the circuit, therefore, was not called upon to charge the jury that it was not fraudulent for Pinner to conceal from the plaintiffs a knowledge of his circumstances.
Upon the purchase of the goods by Pinner, he gave the plaintiffs his own negotiable notes for the amount. The judge charged the jury that before they could render their verdict for the plaintiffs, they must be satisfied that prior to the commencement of this action the notes had been tendered to the defendant Michael. The notes were produced upon the trial, and the plaintiffs' counsel offered to cancel them. It is now insisted that it was not enough that the plaintiffs produced the notes and offered to cancel them, or even that they were tendered to Michael before the commencement of the suit; but that, to effect a complete rescission of the sale, it was necessary to tender the notes to Pinner himself before bringing the action. I do not *Page 312 
understand that this was required. Indeed, I think the judge, at the trial, went too far in requiring the plaintiffs to satisfy the jury that the notes had been tendered to the assignee Michael; all that was necessary was, that the notes should be produced to be surrendered upon the trial.
It is true that, when a vendor exercises his right to rescind a sale on the ground of fraud, he must do what he can to restore the parties to their original position. He cannot rescind it in part and affirm it in part. If he has received anything of value on account of the sale, whether it be money or other property, or the negotiable security of a third person, he must restore it before he is entitled to have back his own property. (Kimball
v. Cunningham, 4 Mass., 502; Masson v. Bovet, 1 Denio,
69; Baker v. Robbins, 2 Denio, 136; Wheaton v. Baker,
14 Barb., 594; Fisher v. Fredenhall, 21 Barb., 82; TheMatteawan Company v. Bentley, 13 Barb., 641.)
But this rule has never been applied to the case of a note given by the fraudulent vendee, not negotiated. This was the only question before the court in Thurston v. Blanchard (22Pick., 18). It was there held that a note though payable to order, whilst it remains in the hands of the promisee, the vendor of the goods, is nothing more than an express promise to pay for the goods, and would be avoided with the sale.
It is necessary to produce such a note at the trial, to be surrendered, to rebut the presumption which might otherwise arise, that it had been negotiated; but such surrender has never been held to be a condition precedent to the right to maintain an action. The same question was decided in the same way inStevens v. Austin (1 Metc., 557), Ladd v. Moore (3Sand. S.C.R., 589) and Nellis v. Bradley (1 1 d., 560). The case is quite analogous to that of an action for goods sold and delivered, after a note given upon the sale has been dishonored. It is necessary to produce the note upon the trial, to rebut the presumption that it is outstanding against *Page 313 
the purchaser. This being done, there is nothing in the way of a recovery in such an action.
The only question yet to be considered is, whether the action can be maintained against the defendant Pinner, he having, before the suit was commenced, transferred the property to Michael, by assignment. The complaint is for the wrongful detention of the goods. At the common law, the form of the action would have beendetinue. The foundation of the action was the wrongfuldetainer. It could not be supported against a person who never had possession of the goods, but it could be maintained against one who, having had possession, had wrongfully delivered them to another. (1 Chitty's Pl., title "Detinue.") In Garth v.Howard and Fleming (5 Carr.  Payne, 346), detinue was brought to recover a quantity of the plate which had been deposited with Howard, as bailee, and which he had pledged to the other defendant as security upon a loan of money. Upon the trial, it was insisted that, to sustain the action against Howard, it must be shown that, at the time the action was brought, the plate was potentially in his possession; but TINDAL, Ch. J., said: "The question is, whether Howard has wrongfully pledged the plate. If he has, he is answerable." So, in Jones v. Dowle (9 Mees. W., 19), a recovery in the action of detinue against a defendant who, at the time the suit was brought, had neither the possession nor the control of the property, was sustained. (Drake v.Wakefield, 11 How. Pr. R., 106; Brockway v. Burnap, 16Barb., 309, and cases there cited.)
In the revision of the statutes of this state, in 1830, the revisors declared it to be their purpose so to extend the action of replevin as to make it a substitute for detinue, and a concurrent remedy in all cases of the unlawful caption or detention of personal property, with trespass and trover. (3dvol. Revisors' Reports, p. 122.) From the time the Revised Statutes went into effect until the adoption of the Code, it was generally understood that this object was accomplished *Page 314 
by the first section of the title of the Revised Statutes relating to replevin. (2 R.S., 522.) In numerous cases, the action was sustained against parties who had parted with the possession of the property, by sale or otherwise, before the action was brought. Some of these cases are cited by HAND, J., inBrockway v. Burnap (16 Barb, 309). I am not aware that it was ever doubted that replevin in the detinue would lie whenever the common law action of detinue might have been sustained.
The Code does not undertake to define the cases in which the action of replevin, or, as its framers saw fit to call it, the action to recover the possession of personal property, might be brought. It simply prescribes the mode of proceeding in such actions. The provision of the Revised Statutes which declares that replevin may be brought for the recovery of any goods or chattels which shall have been wrongfully distrained or otherwise wrongfully taken, or shall be wrongfully detained, is still in force and operative. The action may be maintained now in the same cases in which it could be maintained before the adoption of the Code.
Various provisions are contained, both in the Revised Statutes and in the Code, in respect to the possession of the property which is the subject of the action pendente lite. In some cases, the plaintiff may hold the property pending the action. In other cases, the defendant may hold it. In some cases, where the property cannot be found, the defendant may be arrested and required to give certain security. Provision is also made for the recovery of the value of the property by the successful party, where the property itself cannot be obtained. Some distinguished judges, who have bestowed much attention upon the question, have supposed that these provisions, collateral as they are to the main object of the action, furnish evidence of an intention on the part of the legislature to restrict the action to cases in which, at the commencement of the suit, the defendant is "potentially *Page 315 
in the possession of the property." The late Mr. Justice SANDFORD, in a very able opinion, in which the court of which he was an ornament concurred, has attempted to show that such was the legislative intent, and that the action to recover personal property cannot be maintained where the defendant has not, in fact or in law, the possession or control of the property claimed. (Roberts v. Randel, 5 How. Pr. R., 327; S.C., 3Sand., 707; Brockway v. Burnap, 12 Barb., 347.) I have myself been inclined to adopt the argument and yield to the doctrine of these cases. But upon more mature consideration, I am convinced that the boundaries of the action of replevin, as they were established upon the revision of the statutes in 1830, remain unchanged, and that now, as heretofore, the action will lie for the wrongful detention of property in every case in which, at common law, detinue would have been the proper form of action. The defendant Pinner having, according to the verdict of the jury, obtained the goods fraudulently, cannot protect himself from liability by showing that he has wrongfully transferred them to his co-defendant. I am of opinion that the judgment of the Supreme Court should be affirmed.
ROOSEVELT, J., concurred in this opinion; all the other judges were for reversing the judgment upon the ground that the judge at circuit erred in refusing to charge as requested by the defendants.
Judgment reversed and new trial ordered.