Flower v. Farwell

McAllister, J. In the leading cases of Pasley v. Freeman, 3 Term R. 51, and Haycraft v. Creasy, 2 East, 92, the doctrine was clearly enunciated that in order to recover damages on the ground of fraud, mere legal fraud was not sufficient; that moral fraud or dishonest intention was indispensable. But it seems that after those decisions some of the English courts drifted away from their principles and they were lost sight of or obscured by various theories respecting what constituted frauds in the sense that it would invalidate sales of goods or afford the basis of an action for damages, so that mere fraud in law, without moral fraud, had come to be regarded as sufficient for either purpose. But both the Exchequer Chamber and Queen’s Bench have at length gone back and anchored upon the principles of the above cases, and it is now settled that mere legal fraud will not afford ground for invalidating contracts for the sale of goods, or for maintaining an action for damages; that there must be moral fraud or dishonest intention. Collins v. Evans, 5 Adol. & El. (N. S.) 820; Bailey v. Waiford, 9 Id. 197; Ormund v. Huth, 14 Mees. & Welsb. 651; 2 Smith’s Leading Cases, 105-6. Mr. Benjamin, in speaking of the remedies of vendors of goods, says: “ JSText, it is now settled that there can be no fraud without dishonest intention—no such fraud as was formerly termed a legal fraud” Benj. on Sales, 2d Am. Ed. § 429. So far as the doctrine has received full consideration and may be deemed settled in this State, it is entirely in harmony with that view. The case of Henshaw v. Bryant, 4 Scam. 106, was the first of that class. It is there stated to be this: “When a person who knows himself to be insolvent, by means of fraudulent pretenses or representations, obtains possession of goods under a pretense of purchase, with the intention not to pay for them but with the design to cheat the vendor out of them, a court of chancery will set aside the sale and order a return of the goods if they have not passed into the hands of a tona fide purchaser, or the vendor may bring replevin or trover for them.” That statement of the law was expressly re-affirmed in Patton v. Campbell, 70 Ill. 75. We may readily concede that this statement of the law by our Supreme Court embraces one element as a necessary requisite, which is held by a preponderance of the authorities outside this State not to be necessary, viz., that in addition to the intention not to pay for the goods and design to cheat the vendor, there should be fraudulent representations by the buyer. But the necessity of such false representations, or some trick or artifice capable of proof, is held by several courts to be imperative. Smith v. Smith, 21 Penn. 367; Backentoss v. Speicher, 31 Id. 324; Bell v. Ellis, 33 Cal. 620; per Sheldon, J., in Nichols v. Piner, 18 N. Y. 295. As opposed to that view, see Shipman v. Seymour, 40 Mich. 283; Stewart v. Emerson, 52 N. H. 301; Donaldson v. Farwell, 93 U. S. 631. These cases go upon the theory that a preconceived design never to pay, which involves a positive design to cheat and defraud, or known insolvency, with the intention not to pay for the goods, and the fraudulent concealment of that intention from the seller, are sufficient; and we agree with that conclusion. But eliminating that element from the statement of the law, in Henshaw v. Bryant, and Patton v. Campbell, supra, then the rule is, that when a person obtains goods, under the pretense of a purchase, with the intention not to pay for them, but with the design to cheat the vendor out of them, this would be such a fraud as would invalidate the sale, and lay the foundation for an action at law. That is precisely what the plaintiffs below have averred in the first count of their declaration. The second count is upon fraudulent representations; but there was no evidence tending to support it, sufficient to be submitted to the jury. Although there was some slight evidence tending to support the first count, yet it was so slight and unsatisfactory, that any inaccuracy in plaintiffs’ instructions, calculated to mislead the jury, will be regarded as fatal. One of their instructions was, that “ If a merchant buys goods on credit without intending to pay for them, this is a fraud upon the seller and will entitle him to avoid the contract of sale and sue for the value of the goods, in an action based on such 'fraud ; that if the jury believe from the evidence that defendant obtained such goods upon credit without intending to pay for them, then their verdict should be for plaintiffs.” It will be perceived that this instruction makes no reference to the question whether the purchase was made with the intention to cheat the plaintiffs out of their goods, which is expressly averred in their declaration, or to the insolvency of the defendant, and knowing it, the purchase with intention not to pay, and the fraudulent concealment of that intention from the plaintiffs. There is nothing of the kind; but the mere absence of any intention is, by it, declared to be a fraud as matter of law. If this instruction should receive the sanction of the courts, then it would be available in supplying the want of evidence tending to prove a fraudulent intent, at the time of a purchase, and enable the sellers of goods upon credit, where the buyers have failed, to turn nearly every action for the collection of such debts into an action on the case for fraud, and thereby defeat the beneficent purposes of that provision of the constitution which abolishes imprisonment fur debt. In Catlin v. Warren, 16 Bradwell, 418, we held just such an instruction bad. At the time that case was heard, that of Hanchett v. Mansfield, Id. 407, was also submitted. The counsel for appellees in this present case were counsel in both those cases. " In the latter they were on the other side of the question involved here, and cited the case of Burrill v. Stevens, 73 Maine, 395, to sustain the proposition that there must be a positive design on the part of the buyer, at the time of the sale, not to pay for the goods. We adopted that view, citing Burrill v. Stevens, and decided the case in their favor. But they also cited the same case in Catlin v. Warren, where they were endeavoring to support an instruction given at their instance, the same as that in this present case. We followed Burrill v. Stevens, and other cases, and decided Catlin v. Warren, against them. The counsel now quarrel with that decision, and speaking of the case from 73 Maine, they say : “ It is sufficient to say that it has been expressly and repeatedly repudiated by courts of the highest authority.” If the learned counsel had succeeded in making that statement good by citations, and shown that they had found out about tha.t repudiation since they urged it upon our attention in the cases referred to, we frankly say that while we would have been surprised at the discovery, it would have materially added to the high respect we already entertained for them. But they failed to find and cite any case which expressly or indirectly refers to that of Burrill v. Stevens, or any which are in any material degree in conflict with it. They take the position that a positive intention never to pay is not necessary ; and to sustain the instruction they must take that position ; and that a dishonest intention, in fact, is not essential. In the cases cited by them they seem to have wholly overlooked the distinction between the evidence to prove and the ultimate legal fact.to be proven. For instance, to show that no actual or positive intention on the part of the buyer to cheat is necessary, they cite Talcott v. Henderson, 31 Ohio St. 162. The court sums up its views by these words: “ While, therefore, a purchase of goods by an insolvent vendee, who conceals his insolvency with intent to injure the vendor, is fraudulent and voidable, yet a purchase under like circumstances, save only that suck, intent is absent, is not in law, fraudulent.” Johnson v. Morrell, 2 Keyes, 665, is another case cited by them to prove that no actual or positive intent to injure or defraud is necessary. Peckam, J., says: “To avoid tho sale as fraudulent, the jury must be satisfied byproof that the purchaser intended by the purchase, to defraud the vendor ; that he never intended to pay for the goods.” The case of Allen v. Hartfield, 76 Ill. 358, is cited to sustain the instructions. That case is so plainly distinguishable upon its facts, from this, that it is not deemed our duty to go into an analysis of it. There is a principle involved in this case so important that it should not he permitted to he obscured or overthrown by the loose dicta of any judges, however eminent. We are of opinion that the instruction was erroneous and misleading; and also that the court erred in admitting in evidence, against the defendant’s objections, the letter of defendant to Brombach. If there, had been evidence tending to show that he had defrauded both Brombach and the plaintiffs, and that the two acts or transactions were in pursuance of a common scheme embracing both, then the letter, if it was proposed to follow it up, by showing that defendant thereby defrauded Brombach, would have been admissible. But the case is entirely wanting in any such proof, so the letter was not admissible. Jordon v. Osgood, 109 Mass. 457. The judgment will be reversed and the cause remanded. Judgment reversed.