Meacham v. Collignon

Joseph F. Daly, J. I have seldom known the verdict of a jury upon a question of fraud in a mercantile transaction to be Avithout good legal evidence as well as sound legal inferences to sustain it. The shreAvd common sense of the men in the jury box can hardly lead to wrong conclusions in a matter so wisely left by law to their determination. The present case is no exception to the rule that jurors are the best judges of the facts—especially Avhere, as in nearly every case of fraud, these facts are to be gathered from a variety of circumstances and are seldom susceptible of direct proof. Campbell was a dealer in apples and produce in the basement of No. 298 Washington street, Avhere he had been in business some three years. In November, 1875, he was indebted to his uncle, Collignon, to the amount of about $2,000. Along about the latter part of November or first of December, 1875, he went to his uncle and said he would like to — 404 — ship apples to Europe, and asked if his uncle would make advances on the bills of lading if he would turn the bills over him, ship the apples in his name, and allow his carts to' do the shipping at the usual market rate; Collignon said he would do so and put the apples on ship and make an advance on each shipment; each shipment to cover advances made on it specifically and to secure or cover losses on account of advances made on prior shipments; the advances were to be about the New York prices and to be made sometimes on delivery of the goods and sometimes in ten days. At the outset, this arrangement and the circumstances surrounding it support the conclusion that Collignon knew that his nephew must obtain the apples to ship on credit, and must pay for them out of the advances, which, for the purpose of enabling such payment, were to be “about New York prices; ” also, that Collignon was aware that he and Campbell were thus engaging in a speculation with property obtained on credit, and that whenever it became necessary under their agreement that he should hold a shipment to cover losses on prior shipments, he was simply making himself secure on his own speculation with property obtained on trust and on a credit fostered by his own acts. With provision thus made against the future and possible loss in the business, by a reserve of other people’s goods, active operations were commenced and continued until Campbell “failed” about March 6th, 1876, a period of about four months. During this period, beginning with 50 barrels of apples on December 14th, 1875, and ending with 175 barrels on March 3, 1876, Campbell turned over to Collignon 3,175 barrels, on which there were advanced to him: cash, $5,559 28; in merchandise, $2,680 80 ; cartage charges, etc., $251 95; making a total of $8,492 03. The net proceeds of the apples was $9,564 94, leaving a balance of $1,072 91, which Collignon has applied on the old indebtedness of $2,000 existing from Campbell to him before these transactions began. Notwithstanding the balance thus left in . Campbell’s favor and applied by Collignon on the old debt, it must not be supposed that the apple venture was a sue — 405 — cess; in fact there was a dead loss of $2,447 28, the net cost of the 3,175 barrels being $11,756 66, and the net proceeds, as we have seen, but $9,564 94. The explanation of Collignon’s coming out of the transactions with his advances paid up and a balance to apply on the old debt is found in the fact that on the last four shipments, amounting to 875 barrels, he made no advances at all, but applied their proceeds to cover losses on the prior shipments under the provision of the agreement between Campbell and himself to that effect. The plaintiffs in this action find themselves, to the amount of 200 barrels, among the victims selected to make up Collignon’s deficiency when it became necessary for him and Campbell to protect him from loss. His last advance was made on February 15th, on 200 barrels; he received on the 18th, 200 barrels more; on the 22d, 200 barrels ; on the 26th, 300 barrels, and on March 3d, 175 barrels. These were made up from purchases by Campbell from the plaintiffs on February 18th and 25th,—100 barrels on each date,—and from purchases of 963 barrels more at various dates from February 16th to March 3d, and from eleven different vendors. These purchases were all for cash and have not been paid for. There was, besides, at the time Campbell obtained them, no means or próspeet of paying for them, except from advances which Collignon might make upon them. If they were purchased by Campbell with the intention of merely turning them over to Collignon. to make the latter safe on his general account for advances, and therefore with the knowledge that he could not and would not pay for them, they were procured by fraud; and if Collignon received them with notice or knowledge of that intention and design on Campbell’s part, or received them in pursuance of a scheme involving the perpetration of just such a fraud, he is not a bona fide purchaser and acquired no title to them. On March 6th, three days after the last shipment, Campbell announced to such of his creditors as sought him to demand payment, that he had not been able to obtain advances on the shipments because of heavy losses on prior shipments. At how early a date Collignon knew there were — 406 — heavy losses on prior shipments does not directly appear. He knew it when the last shipment was made to him (March 3d), because he then, according to Campbell’s testimony, refused advances on the last four shipments, on the ground of “ heavy losses on the last four shipments.” He-probably knew it on March 2d, for on that day Campbell' gave him a check for $175, thus exhausting his bank account-except a balance of less than two dollars. It is probable that he knew-it before, if the evidence is not conclusive on that point, for his own accounts show that out of the fifteen shipments from December 14th to February 12th there was a loss on thirteen of them, amounting to $1,601 24, and a. profit on but two, amounting to $71 18. Up to the February 5th shipment there had been but one profitable venture, netting $56 46, and a loss on all the others amounting to $905 97. There was enough in this account to justify the jury in finding that according to the course of commercial transactions Collignon knew on February 18th that he was largely behind on his ventures, and that a considerable amount of goods must be procured to save hito, from ultimate loss. Between the 18th and the ensuing '3d of March, therefore, we find him receiving 875 barrels of apples, taken by his own carts direct from the vendors, having been procured for him on and between those dates by Campbell, and shipped without any advances. These shipments, at cost, in New York» amounted to $3,857 88; sales of them show a net loss of $370 37,- thus yielding him sufficient to balance his account for advances and to credit, in addition, a balance of $1,072 9L on his nephew’s old indebtedness. On these facts I deem the conclusion reached by the jury a sound one, and think their verdict should not have been disturbed, because it was manifest that Campbell bought the goods from plaintiffs with the. preconceived intention of not paying for them but of putting them into Collignon’shands to cover prior losses; and Collignon had distinct, notice of the fact when he got them. Not being a purchaser in good faith nor for a valuable-consideration, but a transferee with full knowledge of the. — 407 — ■fraud, Collignon cannot hold the goods for prior advances, no matter how reasonable and usual (in fair cases) such an agreement as he made with Campbell to that effect might be ; nor is he entitled to any credit for cartage and other expenses, but is bound to return the goods or their value to the wronged vendors rescinding the sale, without any deductions or credits to him whatever. A naked demand of him was proper without any tender and without setting forth grounds for the demand or giving notice of rescission. These requirements or formalities are necessary only in cases where there is no pretence that the transferee of the fraudulent purchaser has guilty knowledge. (Bliss et al. v. Cottle, 32 Barb. 322; Keyset v. Harbeck, 3 Duer, 373.) The action was properly brought for the wrongful detention of plaintiff’s goods, and for the recovery of the goods or their value. Plaintiffs were not bound to know that Collignon had shipped the apples before suit was brought; they saw them taken by his carts, and the fact that he shows a parting with the possession to others before demand will not defeat the action. The authority quoted by defendant’s counsel on this point (Roberts v. Randel, 3 Sand. 707) refers to a complaint in which it is distinctly averred that defendant had parted with the goods several months before suit was •brought; and yet the specific property was claimed, a requisition issued for it, an order of arrest issued for “ concealing or disposing of it so that it could not be found by the sheriff,” which order was set aside. In this case the possession of the goods was alleged to be in defendant; if he show they are not, he is still liable for the value if possession cannot be restored. Defendant raises a last question on the well known rule of law that a party defrauded must rescind at the earliest practicable moment; and insists that the delay of 30 days by plaintiffs before making demand is fatal. The rule as to prompt notice of rescission is only applicable where the party electing to disaffirm has received some benefit or advantage under the contract, which he enjoys as long as he pleases and then attempts to throw up in the hope of obtain — 408 — ing greater advantages (Masson v. Bovet, 1 Denio, 69; Bruce v. Davenport, 1 Abb. Ct. App. Dec. 233), or where the position of the parties has so changed during the delay.of the person entitled to rescind as to make it inequitable to permit his final election to disaffirm. This case presents no such features. Plaintiffs got nothing by the contract they were induced to enter into by the fraud of Campbell; and Collignon, if he had sold the apples during the 30 days’ delay of plaintiffs to demand them, still had the proceeds. Oil all the points I am in favor of reversing the order for a new trial, with costs. Charles P. Daly, Ch. J., concurred. Order granting new trial reversed, with costs.