Lead Opinion
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *266
Whenever property is obtained from another upon credit, with the preconceived design on the part of the purchaser to cheat and defraud the vendor out of the same, the vendor, upon the discovery of the fraud, may avoid the contract and retake the property, unless it has passed to the possession of a bona fide
holder for value. Such, I understand, was the conclusion of the court when this case was formerly before it. (
When the plaintiffs rested their case, they had given evidence showing that Pinner was insolvent when he purchased the goods in question; that before and at the time of his purchases, he represented that his business had been successful, that he intended to enlarge it and carry it more into wholesale, and keep it in such a position that he could come to New York in the fall to do business there; that he had an actual cash capital of over $30,000; that his purchases at the time in the city of New York were over $40,000; and having failed within four months thereafter, his assets were only $29,000, and he owed, exclusive of what was due his New York creditors, about $24,000. The evidence on this trial was the same as on the former trial, with the addition of that of Townsend, which proved the representations of Pinner at the time of the purchase. This was very material, and made a case proper for the jury. *267
It is true, as a general rule, that a party who would disaffirm a contract must return, or offer to return, whatever he has received upon it. But in cases of fraud, when nothing is parted with by the fraudulent vendor but his own promissory notes, such a return or offer to return is not necessary before action brought; it is enough, if the notes are produced on the trial ready to be canceled. In a sale procured by fraud, no title passes; the vendor still retains his legal right to the goods, and rescinding the contract of sale, rescinds the contract of payment, and hence the notes fall with the contract. A note negotiable, whilst it remains in the hand of the vendor of the goods, stands upon the same footing in respect to tender prior to the commencement of an action, as one not negotiable. (Thurston
v. Blanchard,
As to Michael, a tender of the note and demand of the goods were made before action brought. As he was the general assignee of Pinner, to collect and receive all his dues and manage his assets, no good reason can be assigned why, if a tender to him were necessary, this was not sufficient for both. A surrender to Michael in that character would as effectually extinguish the notes as a delivery to Pinner.
Michael having the goods in possession was not only a proper but a necessary party defendant. But it was insisted that Pinner was improperly made a party, and that under the Code the action for the recovery of the possession of personal property can only be maintained against one who had in fact or in law the possession, control or title at the time of its commencement. *268
Formerly, the action of detinue was the proper action where there was a wrongful detainer (2 Saund., 84). There are somedicta in the books, that this action would not lie unless the defendant was in possession (Bul. N.P., 51; 1 Selw. N.P., 546): but that was not so. The defendant was liable in the action, though he had delivered possession to another before action, brought. (Comyn's Dig., A.; Jones v. Dowle, 9 M. W., 19;Garth v. Howard, 5 C. P., 346.) In Jones v. Dowle,
PARKE, B., stated the rule to be "that detinue does not lie" against one who never had possession of the chattel, but does against him who once had, but has improperly parted with it. And Chitty says, "if he wrongfully delivered the goods to another he is liable; and I think the true rule was, that detinue would lie wherever the defendant had been in possession, whether he retained it or had wrongfully parted with it." In this State the action of detinue was abolished by the Revised Statutes, and that of replevin extended so as to serve all the purposes of both actions, and under that statute the action of replevin would lie, although the defendant had parted with the property. (2 R.S., 522, §§ 11, 19;
The 2d chapter of title 7, part 2 of the Code, sections 206, 207, c., entitled "claim and delivery of personal property," is a substitute for the action of replevin as given by the Revised Statutes, and such an action may now be brought in all the cases where replevin would formerly lic. Some conflict has existed in the courts on the question, whether an action under the Code could be maintained, to recover the possession of personal property when the defendant had not the possession either in law or fact at its commencement. It was held in Roberts v. Randal
(
The charge of the judge as to the degree of false representations was in accordance with the rule announced by this court in its former disposition of the case. The judge was also right in his refusal to charge as requested. That rule has no application where (as in this case) there was evidence of false representations at the time of making the purchases. It has application only when there is no proof of affirmative acts or representations, but rests wholly on the non-disclosure of insolvency.
That part of the charge which stated "that sufficient false representations in this case to avoid the sale, need not be such a false representation as would be indictable under the statute against false pretenses," was also correct. If goods are obtained by fraud, the vendor may rescind the sale and follow his goods, whether such fraud be indictable or not. The right to rescind does not depend upon the provisions of the law for punishing the offender criminally. If there be fraud in the purchase, the sale is voidable at the option of the vendee. (Cary v. Hotailing,
I have been unable to discover any error which calls for a reversal of this case, and the judgment should therefore be affirmed, with costs.
Concurrence Opinion
There was no doubt sufficient evidence to justify the submission of this cause to the jury, upon the question of fraudulent misrepresentation and concealment on the part of Pinner, when he purchased the goods: and as the defendant Michael advanced nothing upon the faith of Pinner's title, he is in no better situation than Pinner himself. If the case was made out as to Pinner, the title of Michael under the assignment must of course fail, and he had no right to refuse to deliver the goods upon demand.
It is insisted that an action to recover possession will not lie against Pinner, because he was not in possession at the time *271 of the commencement of the suit; and because his previous possession was rightful, no attempt having been made by the plaintiffs to rescind until after the assignment and delivery to Michael; and that at all events there can be no recovery against Pinner and Michael, jointly. These objections are, I think, sufficiently answered by the cases of Garth v. Howard et al. (5 Car. Pa., 346), and Jones v. Dowle (9 Mees. Wels., 19). In the first of these cases, the defendant Howard, being lawfully in possession of certain plate belonging to the plaintiff, had, without authority from the plaintiff, pledged it, with the other defendant Fletcher for £ 200. The plaintiff demanded the plate of the latter, and then brought detinue against both. It was objected there, as it is here, that Howard had no possession at the time of the commencement of the suit, and hence the action would not lie against him. The court held, that the action would lie against both. TINDAL, Ch. J., said: "The verdict must pass against both defendants, as one could not stand in a better situation than the other." The decision in this case was put partly upon the ground that the defendant Howard had not assumed to part with the whole interest in the property, but retained some control over it by virtue of the right of redemption. But the Chief Justice also says: "The question is, whether Howard has wrongfully pledged. If he has done so, he is answerable." The other case, viz.: Jones v. Dowle, fully sustains the latter ground. There the plaintiff had bought a picture at an auction, at which the defendant acted as auctioneer. The latter, by mistake, entered the name of one Clift as the purchaser, and delivered the picture to him. The plaintiff demanded the picture of Clift, who refused to deliver it, and then brought detinue against the auctioneer. The counsel for the defendant insisted that the plaintiff was bound to show that the picture was in the possession or custody of the defendant, or of an agent over whom he could exercise control, at the time of bringing the action. But the court overruled the objection. PARKE, B., said: "Detinue does not lie against him who neverhad possession of the chattel; but it does against him who once had, but has improperly parted with the possession of it." *272
The theory upon which these cases proceed is perfectly sound, and applies directly to the present case. It is, that where a person is in possession of goods belonging to another, which he is bound to deliver upon demand, if he, without authority from the owner, parts with that possession to one who refuses to deliver them, he is responsible in detinue equally with the party refusing. He contributes to the detention. It is the consequence of his own wrongful delivery. The action in such cases may properly be brought against both; because the acts of both unite in producing the detention.
It does not affect the principle, that Pinner in this case came to the possession of the goods by delivery, and under the former purchase, and not as a trespasser. If they were fraudulently obtained, he had no right to retain possession for one moment as against the plaintiffs, and could transfer no such right to his assignee. The action proceeds, not upon the ground of a tortious taking, but of a wrongful detention; and to this, Pinner has contributed by placing the goods in the possession of the defendant Michael, who refused to deliver them. The case cannot be distinguished in principle from the two English cases, to which I have referred.
But it is further insisted, that the plaintiffs should have been nonsuited; because they did not restore or offer to restore the notes of Pinner before commencing the suit. There is no doubt of the general rule, that where one party to a contract elects to rescind it for fraud, it is an indispensable preliminary that he surrender all that he has received from the other party upon the contract; and, if he has disabled himself from doing this, it is too late to rescind. It has been held in several cases, that this principle applies when the party seeking to rescind has received the promissory note of a third person, as the consideration of the contract on his part. He must, in such cases, restore or offer to restore the note before bringing the suit. (Masson v.Bovet,
The remaining questions arise upon the charge of the judge. He instructed the jury, that if the defendant Pinner was insolvent and concealed the fact of his insolvency, with the design of procuring the goods and not paying for them, it was a fraud, which would avoid the sale at the option of the plaintiffs. It seems to have been supposed by the counsel in this case, if not by the court below, that this instruction is in conflict with *274
something said by myself, when this cause was here upon a former occasion. (
The principles I intended to assert were: 1. That a mere intention of a vendee not to pay for the goods he purchases, unaccompanied by any misrepresentation or concealment, is not such a fraud as will vitiate the sale; and 2. That the bare omission of a purchaser to disclose his insolvency at the time of the purchase, not accompanied by any intent to defraud, is in like manner insufficient to destroy the contract. But I did not say that when the two are combined, that is, when the concealment of the fact of insolvency is accompanied by an actual intent to cheat, there is no fraud. That question was not presented by the case. The difficulty with the case at that time was, that the judge had not in his charge connected the two circumstances together, viz., the intent and the insolvency, but, on the contrary, by his refusal to charge as requested, authorized the jury to infer, that if they should find that Pinner was insolvent and omitted to disclose the fact, although without any fraudulent intent, their verdict should be for the plaintiff. This was a manifest error, and for that the judgment was reversed.
The judge, upon one construction of a portion of his charge, appeared to have instructed the jury, that although Pinner was not insolvent, and was guilty of no misrepresentation or concealment of any preexisting fact, yet if, when he made the purchase he intended to avoid paying for the goods, this would be such a fraud as would vitiate the sale. What was said in regard to the effect of a naked intent not to pay for goods purchased was designed to meet this view of the charge. There can, I apprehend, be no doubt of the correctness of the doctrine then advanced upon this subject. *275
The jury were further instructed, that, in order to avoid a sale for fraud, the false representation need not be such as would be indictable under the statute against false pretenses; and to this the counsel excepted. This exception is clearly untenable. The only case which appears to afford any countenance to the doctrine contended for, is that of Cross v. Peters. (1 Greenl., 378.) Such a position was not necessary to the decision of that case, and the reasoning in its support is, I think, unsatisfactory. The judgment should be affirmed.
All the judges concurring,
Judgment affirmed.