45 Neb. 424 | Neb. | 1895
On and for three years prior to January, 1890, John Y. Farwell & Co. (hereinafter called “Farwell & Co.”) were wholesale merchants domiciled and doing business in the city of Chicago, in the state of Illinois, and W. H. Cline was a retail merchant resident and doing business in the city of Broken Bow, Nebraska. Farwell & Co. brought this suit in equity in the district court of Custer county against Charles Kloman, the assignee of said Cline. Far-well & Co., in their petition, alleged that for three years prior to January, 1890, they had been in the habit of selling goods on credit to Cline; that on January 31, 1890, Cline made a statement in writing to them, Farwell & Co., setting forth his assets and liabilities, representing to them that he was at that time possessed of property beyond all his debts of the value of $16,000; that Farwell & Co., believing this statement to be true, and relying thereon, on the 27th of June, 1890, and at divers times between that date and November 20,1890, sold and delivered merchandise on credit to Cline to the extent of $8,500; that on the 10th of January, 1891, Cline made an assignment, under the statute of Nebraska, for the benefit of his creditors; that said Charles Kloman was the assignee of said Cline; that the inventoried value of the estate turned over by said Cline to his said assignee was $29,000; that said assets consisted of merchandise, real estate, notes, and book accounts, and
The case amounts to this: A vendor of merchandise parts with the title and possession of his goods on credit to his vendee, induced to do so by the fraud of the latter. The vendee disposes of the fraudulently acquired property for money and other property, but no particular' property remaining in the hands of the vendee can be identified as having been purchased with the property fraudulently acquired. The vendee makes a general assignment for the benefit of his creditors. The vendor discovers the fraud practiced upon him by the vendee, rescinds the contract of sale, and asks a court of equity to decree that the property which the vendee fraudulently acquired and its proceeds is a trust fund in his hands, of which the vendor is the beneficiary, though the identical property fraudulently acquired has been by the vendee disposed of, and the identity of the property acquired by the vendee with the fraudulently acquired property or its proceeds cannot be ascertained, and that the vendor be given a first lien upon the entire estate of his vendee to secure the amount due for the property fraudulently parted with. It is not doubted that where goods are sold upon credit induced by the fraudulent representations of the vendee, the vendor may rescind the sale upon the discovery of the fraud and replevy the goods. (Tootle v. First Nat. Bank of Chadron, 34 Neb., 863; McKinney v. First Nat. Bank of Chadron, 36 Neb., 629.) And if the identical property cannot be found by the officer, the action will proceed as one for damages, and a judgment for the value of the goods fraudulently obtained would be rendered in favor of the vendor. But this doctrine does not proceed upon the theory that the original contract of sale, although induced by fraud, was absolutely void, but merely voidable at the election of the vendor within a reasonable time after discovering the fraud. In
Counsel for Earwell & Co., in their argument here, say : “ The contention of plaintiffs is that by-reason of the facts recited in the petition, all of Cline’s property, including his stock in trade, notes, and book accounts, became impressed with a trust in favor of plaintiffs for the value of the goods thus fraudulently obtained; that the assignee took them subject to that trust, and that plaintiffs are entitled to a preferential lien upon the whole fund for the amount of such value.” To support this contention counsel have furnished us an able and ingenious argument and cited us to a large number of authorities. These authorities we do not regard as in point; and if any authority cited supports the contention of counsel, with all due respect, we decline to follow it. Among the authorities is Sherwood v. Central Michigan Savings Bank, 61 N. W. Rep., 352, in which the supreme court of Michigan held, where a mortgagee, who was also a depositor in a bank, gives the bank a mortgage for collection with instructions not to place the amount collected to his credit but to notify him of the collections, as he has a place for it, the money, when collected, belongs to the mortgagee and is held for him in trust by the bank. It is the duty of the bank
In 2 Story, Equity Jurisprudence [13th ed.], 1259, it is said: “The right [to follow the trust fund] ceases only when means of ascertainment fail; which of course is the case when the subject-matter is turned into money and mixed and confounded in a general mass of property of the same description.” A great part of the argument of counsel for Earwell & Co. here is devoted to a vehement assault upon this rule. For our part we think the rule a sound one. To overthrow it and adopt the contention contended for by the learned counsel would lead to endless litigation and confusion and work injury and injustice to the innocent. But the rule assailed has received the sanction of this court. In Wilson v. Coburn, 35 Neb., 530, Coburn was the assignee of the Bank of Omaha, which had made an assignment, under the statute, for the benefit of its creditors. Wilson filed a petition in the county court, alleging that he had deposited with said bank a sum of money prior to the bank’s making an assignment; that at the time he made such deposit the bank was insolvent; to the knowledge of its officers, and that such deposit was received with the intention of cheating and defrauding him. He prayed for a judgment declaring him a preferred creditor, and for the payment of his claim in full out of the assets of the insolvent bank. Post, J., speaking for the court, said: “Under the allegations of the petition, is the claimant entitled to preference over other creditors of the insolvent bank, or, in other words, does the petition state a cause of action? We think not. * * * The fact that a bank is insolvent within the knowledge of its officers, and receives the money of a depositor under circumstances which amount to a fraud upon him, is not of itself sufficient to entitle the latter to preference from
Affirmed.