Diffendarfer v. Dicks — 8 N.Y. St. Rep. 184

Majority

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Hannah Diffendarfer, App’lt, v. George W. Dicks, Impleaded, etc., Resp’ts.^[1]

(Court of Appeals,

Filed April 19, 1887.)

Headnote

1. Assignment—Fraud—Inadequacy of price.

Mere inadequacy of price, unaccompanied by fraud, is not a ground for rescinding an executed contract, and a party is not to be deprived of the benefit of a good bargain merely because the other party may have acted in ignorance of the value of the thing sold, or of some material fact known to the purchaser, and no undue advantage is taken by the latter, and where there are no special circumstances calling for disclosure.

2. Same—Evidence.

But where a residuary legatee brings an action to set aside an assignment of a claim due his testator’s estate, made by the administrator on the ground of fraud, as having been made for a grossly inadequate consideration, he is entitled to prove the inadequacy of the consideration, and that the estate of the debtor was solvent.

3. Same.

He is also entitled to show what the books of the testator and the debtor contained showing the amount of the account.

Appeal from judgment of the general term, supreme court, first department, affirming a judgment dismissing plaintiff’s complaint at the close of his case.

This action was brought by appellant as sole residuary legatee of Sarah E. Quinn, deceased, against George W. Dicks, assignee of the claim in question; William Apgar, executor of the will of Thorn Walling, deceased; and Coffman James, administrator c. t. a. of Sarah E. Quinn, deceased—to set aside the assignment of a claim of $5,534.30,, due from the estate of Thorn Walling, deceased, to the estate of Sarah E. Quinn, deceased, which Coffman James, Quinn’s administrator, executed on March 10, 1882, to defendant Dicks, for $273; and to restrain Dicks from collect-

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the claim of the estate of Walling, and to restrain Walling’s executor from paying the claim to Dicks, or any person other than plaintiff or Quinn’s administrator, and for other relief on the grounds: (1) That the assigment was made for a grossly inadequate consideration, and in fraud of the rights of plaintiff, the said residuary legatee; (2) mistake of fact as to the actual amounts of said claim; and (3) actual fraud on the part of Quinn’s administrator and Dicks, the assignee.

J. P. Osborne, for app’lt; Chester Wolverton, for resp’t Dicks H. D. Van Orden, for resp’t Apgar.

We concur with the opinion of Judge Davis that evidence was improperly excluded on the trial, bearing upon the question of fraud in the assignment and purchase of the claim in favor of the estate of Quinn, against the estate of Walling. This conclusion does not conflict with the authorities cited in the prevailing opinion, which establish that mere inadequacy of price, unaccompanied by-fraud, is not a ground for rescinding an executed contract, and that a party is not to be deprived of the benefit of a, good bargain merely because the other party may have acted in ignorance of the value of the thing sold, or of some material fact known to the purchaser, and no undue advantage is taken by the latter, and where there are no, special circumstances calling for disclosure. But the jurisdiction of chancery to rescind contracts for fraud, or mutual mistake of material facts, is one of the best settled and most beneficent powers of a court of equity.

The case presented by the evidence was that of the assignment by Quinn’s administrator to the defendant Dicks, for the consideration of $273, of a claim in favor of that estate against the estate of Walling, amounting to more than $5,000, and which, on a reference under the statute, instituted subsequent to the assignment, has been found by the referee to have amounted on June 8, 1883, to $5,534.30. The assignment to Dicks was made March 10, 1882. If the estate of Walling was solvent,' it is the case of an assignment made by an administrator of a claim in favor of the estate he represented, upon a consideration which was grossly inadequate. The inadequacy of the consideration was one of the facts which the plaintiff was entitled to, prove. Whether, standing alone, it word'd support a finding of fraud, is not the question. The trial judge, we think, erroneously excluded evidence offered to show that the estate of Walling was solvent. It was a material fact, bearing upon the question of the adequacy of the consideration. So, also, evidence was excluded as to what the books.

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of Quinn and Walling showed was the amount of the account against Walling. This evidence was also, we think, improperly excluded. If it had appeared from the books of both creditor and debtor that there was an admitted balance of $5,000 due to Quinn’s estate, it would have been a significant circumstance, bearing upon the good faith of the administrators of the respective estates, and also, in view of the other evidence, of the good faith of the defendant Dicks.

The way in which the defendant Dicks came into the transaction is peculiar. Quinn and Walling both died in 1880. In March, 1881, the administrator of Quinn wrote the administrator of Walling that Walling was indebted to Quinn in the sum of $273. In November, 1881, the defendant Dicks sent one Condit to Philadelphia, with $300, to buy the claim; but James, the administrator of Quinn, then declined to sell it. In March, 1882, James came from Philadelphia to New York, and there had an interview with Apgar, Walling’s executor. James informed Apgar that, as near as he could make out, the claim was $273. The executor of Walling did not inform James that the claim was more than $273, or say anything upon the subject of the amount, but said he would pay the claim if James would make a detailed statement of it. James replied that he could not make a detailed statement, but only a statement of what appeared on the books. Apgar replied that this would not do, and that he could not pay it. Thereupon James went to one Egbert, a nephew of Dicks and a son of Walling’s book-keeper, “ of whom Apgar told him,” and the two together went to the place where Dicks was employed as a clerk, and found him, and Dicks offered James $273 for the claim, which offer James accepted, and thereupon Dicks took from his desk an assignment, already prepared, which James signed, and the $273 was paid.

The complaint alleges that, at the time of the assignment, Dicks had knowledge or information of the true amount of \the claim. In his answer he denies knowledge only, but does not deny that he was informed of the amount. On the trial he testified that he did not know the amount until after the assignment, but admitted that he had testified, on the reference under the statute, that he was informed of the amount in October or November, 1881. If the plaintiff had been permitted to show that Dicks knew, or had reason to believe, when he took the assignment, that Walling’s estate was solvent, would not a case have been presented calling for explanation on his part ? He knew that he was dealing with an administrator. If he knew also the amount of the claim, and that Walling’s estate was solvent, must he not have known that the ad

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ministrator of Quinn, in selling a claim of more than $5,000 for $273, was acting either under a mistake, or in reckless disregard of his trust ? If he was acting in collusion, either with the administrator of Quinn or of Walling, the transaction was a fraud. How came he to know that the claim was $273, or how did it happen that he prepared an assignment in advance ? We do not say that this transaction may not have been fair and honest. But the circumstances are suspicious, and it was a case where the fullest inquiry as to the facts should have been permitted, within the rules of evidence.

The judgment should be reversed and a new trial ordered.

All concur.