Thompson v. Fuller

Learned, P. J. The action is to recover for goods sold by plaintiffs to defendants Fuller & Co. The ground of the attachment is that defendants Fuller & Co. had assigned property with intent to defraud creditors. The [63] Code of Civil Procedure (section 635) authorizes an attachment in three cases: (1) Breach of contract; (2) conversion of personal property; (3) injury to personal property. This case must come under the first. In an action for fraud the remedy is arrest. Section 549. Whether, therefore, the goods were purchased by fraud is not material. Goldschmidt v. Hershorn, 13 N. Y. St. Rep. 560; Strauss v. Lemson, Id. 740. The only question is as to an assignment with intent to defraud creditors. In both applications the plaintiffs state that there are no counter-claims, thus showing that their action is on the contract. Code, § 636, subd. 1. It is only to an action on the contract that there would be a counter-claim. The affidavit of the plaintiffs avers that they sold goods to the defendants; that they were induced so to do by fraudulent representations; that after said sales of goods the plaintiffs brought a replevin suit to recover such of the goods as remained in defendants’ possession; and that they did recover, and still hold, about $900 in value of such goods. When goods are sold on fraudulent statements by the vendee, the vendor has either of two remedies: He may affirm the sale, and sue for the price, or he may disaffirm the sale, and reclaim the goods; but he cannot do both. “The remedies are not concurrent; and, the choice between them once being made, the right to follow the other is forever gone.” Morris v. Rexford, 18 N. Y. 552. This doctrine was again asserted in Kinney v. Kiernan, 49 N. Y. 164. There it was said that after such rescission of the contract of the vendor on the ground of fraud on the part of the vendee the contract is at an end, and no act of the vendor can revive it. Consequently, after such a rescission an action by the vendor against the vendee is not maintainable. The contract must be rescinded in toto. Wheaton v. Baker, 14 Barb. 594; Stevens v. Hyde, 32 Barb. 171; Matteawan Co. v. Bentley, 13 Barb. 641. In the case of Kinney v. Kiernan the plaintiff had replevied a part of the goods sold, and the court said the action on the contract of sale was gone. The rights of the parties were the same as if there had never been any sale, and the goods had been tortiously taken. The doctrine is again laid down in Moller v Tuska, 87 N. Y. 166, where the plaintiffs brought an action to replevy, on the ground of fraud, goods sold by them. Afterwards they proved their claim in bankruptcy, and received a dividend; but the money paid was subsequently refunded to the assignee. The court held that, as plaintiffs had once elected to disaffirm the sale, they could never afterwards successfully assert a claim against the purchaser on the contract, and that the subsequent transaction with the assignee in bankruptcy had no bearing on the question, because plaintiffs then were bound by their "previous election. See Rodermund v. Clark, 46 N. Y. 354. If a man once determines his election, it shall be determined forever. Com. Dig. “Election,” C. 1, 2. The affidavit alleged sales on the 14th of December, between the 9th and 17th of January, and on the 28th of January; and it alleges a replevin, February 4th, of so many of said goods as remained in defendants’ possession. This language applies to all the sales, and not specifically to any one; for the allegation is that all of said sales were made on fraudulent representations of defendants. The plaintiffs therefore elected, as appears by their own affidavit, to rescind all of the sales,—to treat the goods sold as being still their own property, just as if there had been no sale, but only a tortious taking; for, if they retook the goods, or any part of them, then they asserted that the goods were still their own, and disaffirmed the sales altogether. They have, therefore, no right of action on the alleged contracts of sale. Such contracts do not exist. The plaintiffs, in their action of replevin, could have recovered, and perhaps did recover, damages for the taking of those goods of which they did not recover possession. Code, § 1730. If the defendants took the goods tortiously, such taking was, as to each alleged sale, a single act; and it may be [64] doubted whether the defendants can be subjected to two actions, in regard to the same act, when a full remedy can be given in one. O'Brien v. Mayor, 28 Hun, 250; Secor v. Sturgis, 16 N. Y. 554. It does not aid the plaintiffs to aver that this action is based on the fraud. They state in the affidavit a sale of the goods, and the fraudulent statements' which induced the sale. Now, these were the very circumstances of the cases above cited, (Morris v. Rexford, Kinney v. Kiernan, Moller v. Tuska;) and in those cases the principle was applied which has been stated above. The case of Powers v. Benedict, 88 N. Y. 605, is not in conflict. That was an action of replevin against a third party in which plaintiff had taken part of the goods sold. It was held that it was not a defense that plaintiff had proved against the original party a claim in bankruptcy for the residue of the goods. In the present case the replevin was against the original party. Passing this point, however, we prefer to inquire as to the proof of alleged fraudulent intent; and we consider first the appeal from the order of Mr. Justice Edwards, because both parties were heard before him on their several affidavits, and hence the facts may be thought to appear. The plaintiffs’ allegations are the obtaining of the goods by fraudulent representations of solvency, the executing a mortgage to Morrison, the selling goods at less than the market price, the removing and the concealing of part of the goods. Some of the allegations are based on conversation alleged to have been had by • one of plaintiffs with Morrison.' Morrison, in his affidavit, denies the alleged conversation altogether. He further states that he guarantied to plaintiffs the third bill sold to defendants, which contains the goods afterwards replevied. He denies any intent to defraud, and states that the mortgage was given to secure money actually loaned to the firm by him. The affidavit of Fuller, the purchasing member of the firm, denies making the alleged fraudulent statements, and positively contradicts all plaintiffs’ allegations in that respect. He avers that the money was owing Morrison for which the mortgage was given, and that it was not given with intent to defraud. He denies the statements that goods were sold at less than market price. He says that the goods were sold to pay defendants’ debts. The defendants’ affidavit is simply the affidavit of the person to whom they are alleged to have been sold by other affidavits. The plaintiffs used opposing affidavits. In regard to selling below market price the affidavits are statements of hearsay. Some affidavits are given of the poor quality of collars made by defendants. Now, the argument of plaintiffs is that, as the defendants remained in possession after execution of the mortgage, it was presumptively fraudulent, under 2 Rev. St. marg. p. 136, § 5. This is a mere legal presumption', overcome by proof of good faith and absence "of intent to defraud; and the question of fraudulent intent is one of fact, not of law. 2 Rev. St. 137, § 4. No reason or excuse for not delivering is necessary. The only question is that of good faith. Whether an attachment could properly be issued, based merely on this presumption, we need not say. Governor v. Sickle, 13 N. Y. St. Rep. 566, where it is said that, if an act is capable of an innocent construction as well as a fraudulent one, courts were bound, in such applications, to assume the former. “The Code requires an actual, personal intent to defraud.” Milliken v. Dart, 26 Hun, 26; Morris v. Talcott, 96 N. Y. 100, at 107; Nichols v. Michael, 23 N. Y. 266; Von Moppes v. Leimbach, 22 Wkly. Dig. 337. But the plaintiff urges that, according to Southard v. Benner, 72 N. Y. 424, it is - fraudulent for the mortgagor to remain in possession, and dispose of the mortgaged property for his own benefit, under agreement with the mortgagee. The difficulty is that it is not shown in this case that there was any such agreement, or that the avails of sales were applied to defendants’ use. The mortgage was executed January 30th. The affidavit for the first attachment was made February 19th, and for the second, March„2d. The sales to Bailey & Co. were before the execution of the mortgage. The goods received by the An [65] drew M. Church Company were received by the mortgagee himself, and by him sold to that company. Theplaintiff replevied goods February 5th, and attached February 26th. How, it is undoubtedly true that such an agreement between mortgagor and mortgagee may be proved by circumstances, (Potts v. Hart, 99 N. Y. 168, 1 N. E. Rep. 605;) and the decision of a trial court on such an agreement will not be reversed, if circumstances justify it. But in that case it was affirmath elv proved that the mortgagor had sold two-thirds of the property, with the knowledge of the mortgagee, and had never paid him anything. But in this case there is no such proof. On this point, too, we have the decision of the learned justice whose order is appealed from; and he finds that every essential fact on which the attachment was granted has been successfully controverted. He must, therefore, have found that the mortgage was not fraudulent in fact. To avoid a chattel mortgage on account of an oral agreement, outside of it, that the mortgagor may sell the mortgaged property and use the proceeds, the agreement must be proved. Brackett v. Harvey, 91 N. Y. 214. It appears that after the first attachment had been vacated, and before the second bad been issued, Morrison desired to get payment of his debt. The defendants therefore sold and delivered to him enough personal property to pay his debt, and he removed at once the goods so sold. It has been shown that' he was a bona fide creditor. As such, it was lawful for him to obtain payment of his debt; just as lawful as it was for the plaintiffs. The delivery and sale to him of the goods could not be unlawful. The plaintiffs had endeavored to obtain a preference by their first attachment. They lost this when the attachment was set aside. Before the second attachment was obtained the defendants paid Morrison by the sale and delivery to him of personal property. The plaintiffs claim that the transaction was hasty, and that defendants did not explain what they were doing. But one may be hasty in paying an honest debt, and he is not bound to tell his employes that he owes a large debt. The great question is, was the debt an honest one, and was there one transaction intended to pay it? Among the plaintiffs’ papers is a paper prepared to be sworn to by one Ametrano, to which he refused to swear. We do not think that any weight should be given to such a paper, even though another affidavit states that Ametrano said it was true. There is power to compel a person to make a needed affidavit; and, when that power is not resorted to, such second-hand answer statements should not be considered. On the whole, after examining all the evidence, of wliich we have referred only to a part, we see no reason to reverse the conclusion of the learned justice. We think that he properly held that all essential facts had been successfully controverted. Much of what is said above applies to the appeal from the order of Judge Fursman vacating the attachment granted by him. That affidavit states nothing to show that the debt to Morrison was not owing honestly. The only allegation reaching the invalidity of the mortgage is that defendants remain in possession, “to all appearance, managing, controlling, and selling in the same manner as before.” There is no statement that they have sold any goods,—only that they appear to have sold them; and there is no statement that they are selling for their own use, or by consent of the mortgagee. As has been often stated, the affidavit must show facts: Von Moppes v. Leimbach, supra. We think, therefore, that the order of Judge Fursman was correct, and should be affirmed. Beaching the above conclusion in regard to the appeal from Mr. Justice Edwards’ order, it seems to be of no use to consider the appeal from the order of Justice Ingalls. If the attachment is set aside, by the affirmance of the order of Justice Edwards, on affidavits from both parties, it is of no consequence whether the plaintiffs’ affidavits were sufficient to support the sec66 and attachment, if not opposed by counter-affidavits. Wethink it best, however, to reverse that order, as a matter of form, lest an affirmance might lead to some complication. Order vacating first attachment affirmed, with $10 costs, and printing disbursements. Order refusing to vacate second attachment reversed, without costs to either party. Order vacating second attachment on opposing affidavits affirmed, with $10 costs, and printing disbursements. Putnam, J., concurs.