Hemenway v. Keeler — 68 N.Y. St. Rep. 819

Majority

p. 819

William D. Hemenway, Resp’t, v. John S. Keeler, Impleaded, etc., App’lt.

(Supreme Court, General Term, Fourth Department,

Filed July 5, 1895.)

Headnote

Fraud — Essentials.

A purchaser, in order to avoid, on the ground of false representations, his agreement to pay the indebtedness of the mercantile business which he assumed upon his purchase, must show not only that the representations were made, but also that they were made with knowledge that they were false, and for the purpose of deceiving him, and that they had that effect.

Appeal from a judgment, rendered in favor of plaintiff.

Thompson & Chapman, for app’lt; Elon B. Brown, for resp’t.

— From May, 1890, until about February 1,1891, the plaintiff was engaged in a mercantile business in the village of Alexandria Bay, and had in the business contracted debts, four of which, to the amount of $271.83, are the subject of this controversy. On the 1st February, 1891, he sold an undivided one-half interest in the business to the defendant Russell, who took it subject to the indebtedness, and upon the agreement (which was part of the consideration of the transfer) that the new firm, at that time formed of Hemenway and Russell, should become liable for the debts referred to. The business was continued by the firm of Hemenway. & Russell to July 22, 1891, at which date the plaintiff sold his interest to the defendant Keeler, with consent of Russell, and thereafter the business was conducted by the defendants under the firm name of Keeler & Russell. At the time of this transfer, and as a part of its consideration, it was mutually agreed between plaintiff and Keeler, with the assent of Russell, that Keeler should take the place of Russell in the partnership, and that the new firm of Keeler and Russell should assume and pay all the debts and liabilities which the partnership of Hemenway & Russell had incurred, or for which they were liable. Thereafter the business was continued by the firm of Keeler & Russell, until March, 1892, when Keeler bought out Russell. The debts in question were not paid, and in January, 1892, the plaintiff was compelled to and did pay them, taking assignments thereof to himself. This action was commenced April 12," 1892,

p. 820

to recover of the firm of Keeler & Russell the amount so paid, and the plaintiff has succeeded before the referee. Russell does not defend. The defendant Keeler, in his answer, after denying some of the allegations in the complaint, sets up as a defense that at the time of the transfer to him, in July, 1891, the plaintiff, with the intent to cheat and defraud him, and for the purpose of inducing him to purchase the interest of plaintiff, falsely and fraudulently represented to him that the debts of the firm did not exceed $500, when, in fact, they exceeded $2,000; and that Keeler, relying on these representations, purchased plaintiff’s interest in the stock and business, and gave in exchange or payment therefor, the stage route or line between Alexandria Bay and Redwood, and a number of horses, wagons, sleighs, harnesses, and a United States mail contract, and assumed and agreed to pay $250, and no more, of the debts of the firm ; and that he has already paid more than that amount. The same facts are set up as a counterclaim, together with the allegation that he has paid $818.25 of the debts of the firm in excess of the amount assumed. The main question at the trial was over this defense and counterclaim, and the referee in effect found that they were not sustained by the proof. The appellant claims that this conclusion is against the weight of the evidence.

The burden was on the defendant to establish the fraud. It was necessary for him not only to show that the representations were made, but also that they were made with a knowledge that they were false and for the purpose of deceiving the defendant, and that they had that effect. Pryor v. Foster, 130 N. Y. 171 ; 41 St. Rep. 320 . The proof on the subject w&i conflicting. There were surrounding circumstances, the bearing and force of which were important to be considered, and we are not, after a careful consideration of the evidence, prepared to say that the conclusion of the referee that the fraud was not established was not correct.

Our attention is called to several exceptions to rulings on evidence, but we find in them no sufficient ground for reversal. What the defendant had paid for a part of the stage property, without a specification of what part, or of the time he had purchased it, was not important; nor was it material what the general character of the goods in the store was in August, 1891. Changes had occurred since the transfer. The only fraudulent representations alleged were as to the amount of the debts at the time defendant purchased. The value of the stage property or of the stock, if involved at all, was only collateral. The defendant was allowed to show the value of the stage property and of the stock of goods at the time of the transaction.

Judgment affirmed, with costs.

All concur.

Cases cited

Pryor v. Foster 130 N. Y. 171 N.Y. 1891-12-01 p. 820