In re K. Marks & Co.

COXE, Circuit Judge. [1] The law is well settled that when a party, being insolvent, induces another to sell him goods on credit which he does not intend to pay for, the court may order the contract disaffirm-ed and restore the property. [2] The special master points out the three propositions which the claimant must establish before he can rescind the contract and recover the goods: First. The insolvency of the bankrupts at the time the purchase was made. Second. The concealment from the claimant of the fact of insolvency. Third. Intention on the part of the bankrupts, at ■the time of the sale, not to pay for the goods. [3] As to the first proposition there can be no dispute. The bankrupts were hopelessly insolvent and they knew it. The second proposition is established with almost equal certainty. The bankrupts did not, in so many words, say that they were solvent and intended to pay for the flour. Their conduct was such, however, as to induce the milling company to believe that it could rely implicitly upon the high financial standing and good faith of the bankrupts. [455] In reply to questions as to their ability to pay, a member of the firm, over the telephone, said, “Well, look us up,” knowing that Dun’s Agency had reported them “first class” on the strength of statements made a year previous which they had not corrected, although they had made large losses in the meantime. It was tantamount to saying, “Rook us up in the commercial agencies and you will find that we have good credit and are amply responsible for all our obligations.” This is what the bankrupts did say in substance and it was the reliance upon the truth of this statement that induced petitioner to sell its goods. The special master had the advantage of seeing and healing the witnesses and his finding upon the facts should not be disturbed. The evidence brings the case within the doctrine of the following authorities: Donaldson, Assignee, v. Farwell, 93 U. S. 631, 23 L. Ed. 993; In re Sol Aarons & Co., 193 Fed. 646, 113 C. C. A. 514. The order is affirmed with costs.