29 N.Y.S. 593 | The Superior Court of the City of New York and Buffalo | 1894
The plaintiffs, wool dealers at St. Louis, Mo., in September, 1890, sold to a corporation known as the “Rittenhouse Manufacturing Company,” located at Passaic, N. J., a quantity of wool, aggregating in value about $34,888.17. The transaction on the part of the Rittenhouse Company was conducted by Mr. Gardner, its manager, through a firm of wool brokers, known as “Salter Bros.” Mr. Ammidown, one of the defendants, was president of the Rittenhouse Manufacturing Company, and at the same time senior member of the firm of Ammidown & Smith, composed of the defendants. Ammidown owned about 90 per cent, of the stock of the Rittenhouse Company, and had an interest to the extent of 60 per cent, in the firm of Ammidown & Smith. About the time the wool reached Passaic, Mr. Ammidown told Gardner that the wool must be sent to New York, and placed in warehouses; that times Avere hard, ready money tight and difficult to get; that the notes of the corporation could not be sold, and he would have to borroAv money on the wool for present use. For these reasons the wool was • not taken from the cars, but brought to New York, divided into three parcels, stored, and warehouse certificates procured in the name of the Rittenhouse Manufacturing Company. These three Avarehouse receipts were thereupon taken to the Bank of America and two other similar institutions, where the notes of the Rittenhouse Company, guarantied by Ammidown, and secured by these warehouse receipts, were discounted. The proceeds of the Bank of America discount, amounting to $9,200, were represented in a check drawn by that bank, indorsed first by Ammidown, then by his firm of Ammidown & Smith, and passed to their credit in their bank. Plaintiffs claim that their property was obtained by the Rittenhouse Manufacturing Company by means of a fraud, to which Ammidown was a party, and that, in consequence, they have the right to follow the proceeds of the $9,200 draft, representing part of their property, into the hands of the defendants. That the property was obtained by fraud may be safely inferred from the evidence. The Rittenhouse Company, at the time it bought the wool, was a corporation created by the laws of New Jersey, having a' capital of $200,000. Three months before the wool was purchased, the books of the corporation showed a deficiency of $329,000, and on December 2, 1890, it was behind to the extent of $555,000; so that it was hopelessly insolvent, without the slightest prospect of continuing business or
In Durell v. Haley, 1 Paige, 492, Chancellor Walworth said: “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 vendee.” The same doctrine is asserted in Ash v. Putnam, 1 Hill, 302; Buckley v. Artcher, 21 Barb. 585; Morrison v. Garner, 7 Abb. Pr. 425; De Voe v. Brandt, 53 N. Y. 462; Johnson v. Monell, 2 Abb. Dec. 470, 41 N. Y. 655; Wright v. Brown, 67 N. Y. 1; Anon., Id. 53S. It is sufficient if the intent exist at the time the goods are received, though subsequent to the sale. Whitten v. Fitzwater, 129 N. Y. 626, 29 N. E. 298. The combination of events is to be considered in determining the question. See Beardsley v. Duntley, 69 N. Y. 581; Hedges v. Payne (Sup.) 17 N. Y. Supp. 809; Abegg v. Schwab (Sup.) 9 N. Y. Supp. 681; White v. Benjamin, 3 Misc. Rep. 505, 506, 23 N. Y. Supp. 981. It is not necessary for the evidence to show beyond a reasonable doubt that a party is guilty of fraud; nothing more is required than that the evidence shall be sufficient to satisfy the conscience of a common man, although the evidence does not amount to absolute certainty. Bigelow, Frauds, 474, 475.
The Bittenhouse Company and Ammidown knew that the plaintiffs were supplying the wool, believing that it was to be used at the company’s mills; that it was needed there; and that they were doing, and likely to continue to do, a prosperous and paying business, and all intimation to the contrary was carefFilly suppressed. It must have been known that if the plaintiffs had the faintest idea of the hopeless insolvency of the Bittenhouse Company, or of Ammidown, they would not have parted with over $34,000 of their property; particularly if it had been suspected that, instead of using the wools at their mills for manufacturing purposes, in the usual course of business, the vendees intended, as soon as they received the wools, to put them in storage, with the sole object of raising their value in money for the benefit of others,—a course which destroyed all possibility of payment of the vendors. If the plan which was carried out. successfully was not preconceived, the result and consequences to the vendors were just the same; and, as between them and the vendees, the former might have rescinded the sale and reclaimed the property. Nichols v. Michael, 23 N. Y. at page 266. "Vide cases before cited. A bona fide purchaser from a fraudulent vendee will be protected, however. Ball v. Shell, 21 Wend. 222; Mowrey v. Walsh, 8 Cow. 238; Keyser v. Harbeck, 3 Duer, 373; Fassett v. Smith, 23 N. Y. 252; Paddon v. Taylor, 44 N. Y. 371. But it devolves upon the latter to establish that he is a bona fide purchaser, and that he has parted with value without notice of the fraudulent title of the person from whom he got the - property.
The Bank of America, in good faith and without notice, advanced upon the warehouse receipts $9,200, and to that extent acquired a valid lien thereon; and the question is whether the defendants herein acquired, as against the plaintiffs, any right to retain the proceeds, which went into their hands in the form of a check drawn by the bank, which was indorsed, first, by Ammidown, next, by his firm, and deposited to their credit in the Importers’ & Traders’' Bank. Up to the time the check was in Ammidown’s hands, as president of the Bittenhouse Company, and so long as it remained there, the proceeds could have been recovered from him by the plaintiffs. If the title of the firm of Ammidown & Smith is affected in like manner, there is no defense, and the decision of this question depends to a large extent upon whether the knowledge of Ammidown is to be imputed to his copartner Smith, and so to the firm of which he was a member; for, if it is, it becomes evident that that firm cannot receive the protection accorded to bona fide transferees of property. In this connection it must be conceded that where a party occupies a dual position, or numerous positions, such as president of one company, treasurer of another, secretary of a third, and member of a firm, the knowledge acquired in one capacity is not, as a rule4 imputable to the-other concerns to which such knowledge does not, by the position occupied, rightfully belong. Therefore, the knowledge that Ammidown acquired while acting as president of the Bittenhouse Manufacturing Company did not necessarily charge Smith, Ms copartner, who was in a legal sense a stranger to the Bittenhouse Manufacturing Company, and not bound to know the facts connected with its business. Ammidown was under no obligation to make these facts known to Smith, and it will not
The application of the doctrine of imputed notice is all-important in this case, because the check of the bank, being negotiable like money, was passed to the credit of the Rittenhouse Company as payment pro tanto of its indebtedness; and if so applied in good faith, without notice or anything to put the firm as such on inquiry, that act alone was sufficient to vest title to the money in the defendants. Stephens v. Board, 79 N. Y. 183; Justh v. Bank, 56 N. Y. 478. And see Southwick v. Bank, 84 N. Y. 420; Hewhall v. Wyatt, 139 N. Y. 452, 34 N. E. 1045. And this upon the ground that money is currency,—has no ear marks; that its possession vests title in the holder, as to third persons dealing with him, and receiving it in due course of business and in good faith, even in payment of a precedent account. The defendants go further than the making of the ordinary bookkeeping entries, and show that the firm not only kept the usual ledger account with the Rittenhouse Company, on which the draft was credited to it, but had added thereto a system of entries in what is called the “advance book,” which was kept for the information of the Rittenhouse Manufacturing Company, that it might know to what extent it could draw against the firm of Ammidown & Smith. It had been arranged before this that, after drawing the 75 per cent, of the market value of the goods consigned to Ammidown & Smith, the other 25 per cent, was to go in reduction of the debt of that company to the firm. Smith claims that, when the proceeds of these drafts were received, they were put on the advance book in the form of a credit to the Rittenhouse Company, and that the company drew upon Ammidown & Smith, not only for the 75 per cent., which they were allowed to draw under the agreement, but for the proceeds of these discounts as well; that in this manner the proceeds were turned over to the company before any notice of the plaintiffs’ claim; and that, by such turning-over, Smith, as a member of the firm, and Ammidown & Smith, as a firm, derived no benefit or profit whatever from the proceeds of the discounts, and are therefore not chargeable in respect thereto.. While there is force in this circumstance,—sufficient almost to warrant a finding of good faith on the part of the firm as a firm,—it