Majority
p. 101Danforth & Edwards, respondents, v. Dart and Vandervoort, Executors, &c., of Peter H. Schenck, deceased, Appellants. (Before Boswobth, Hoffman, and Slosson, J.J.) Nov. 10; Dec. 2, 1854.
Headnote
It is sufficient to impeach the bona fieles of a purchase of chattels from a fraudulent vendee, that the purchaser had notice of such facts and circumstances, as would naturally excite the suspicion of a man of ordinary prudence and caution. If he has such notice, and forbears to make inquiry, he is not a purchaser in good faith, within the meaning of the rule, that a bona fide purchaser from such a vendee, in the ordinary course of business, for value, will acquire a valid title as against the defrauded vendor.The plaintiffs, Danforth <& Co., in August, 1851, sold on credit to the defendants, C. and E. Schenck, of Ansonia, Connecticut, machinery, of the value of about $2,800. It was sold, as the jury has found, on such misrepresentations and fraudulent concealment, by them, of their pecuniary condition, as in law made the sale voidable, as between them and the plaintiffs. C. and E. Schenck, composing the firm'of Courtney Schenck & Brother, were engaged in the manufacturing business, and the goods in question were delivered to them, partly in August, and partly in September, 1851. They were charged in the complaint, with having represented themselves to be very good — that they were doing a safe and prosperous business — that said business was exclusively for cash, and was highly prosperous. It was also alleged, that a house, to which they referred for information as to their means, represented them to be worth from $12,000 to $14,000. From the time of this purchase, to about the first of October, they purchased new machinery and put it in their manu-factory, amounting to some $25,000. On the 25th of October, 1851, they failed, owing about $70,000. On that day, they sold and transferred to their father, Peter H. Schenck, who resided in Dutchess County, in this state, all their property, including the goods in question, for about $25,700; the greater part of which sum they owed him at the time. The plaintiffs, on discovering the fraud, demanded severally of Courtney Schenck & Brother,
p. 102
and of P. H. Schenck, a return of the property, and offered to give up a note, they had taken for the contract price of the goods. The demand not having been complied with, an action for the conversion of the goods, was, brought against the three, as defendants. The complaint, among other things, charged, that Peter H. Schenck, before and at the time of the transfer to him, knew of the sale in question, and that it was made on credit, and that the goods had not been paid for, and of the fraudulent representations and concealments, on which possession of the goods had been obtained; and that the transfer to Peter H. Schenck, was for an antecedent debt. The jury .found a verdict against all'the defendants for $8,580.66. The defendants, Courtney Schenck, & Brother, submitted tcT the verdict. The executors of P. H. Schenck, appeal from an order, denying as to him, a new trial, which was moved for, on the ground that the verdict, as against him, was contrary to the evidence. Soon after the application was made to the plaintiffs to sell on credit, but before any sale was made, the- plaintiffs wrote to P. H. Schenck, and received a reply, which letter and reply are as follows:
“ Paterson, July, 80, 1851.
“ Peter H. Schenck, Esq.,
“Dear SiR, — The object of this is to make inquiry in relation to the standing of Messrs. Courtney Schenck & Brother. They have ordered from us abouT$2,800 worth of machinery, on eight and nine months, through their superintendent, Mr. Thomas C. Servoss, who represents them as very good; but we deem it prudent to make ourselves better acquainted with their means, and take the liberty to address you, thinking that you can give us the desired information. Your reply by an early mail will greatly oblige - “Your most ob’t Serv’ts,
“ Chas. Daneoeth & Co.”
“ Matteawan, 5th August, .1851.
“ Messrs. Charles Daneoeth & Co.,
“ Gentlemen, — Your letter of. the 30th July, owing to my absence from home, was not received till yesterday. You inquire the standing of Courtney Schenck & Brother. . I started them in business with a very handsome capital, which would.be depend-
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ant on tbeix business. They say to me that they are doing a very good business, and a good prospect of its continuance; and, I presume they will be able to pay whatever they undertake. Since tbe fall of cotton, they appear to be much flattered by an increase of profits on their business. Remain, Gentlemen,
“Yours, respectfully, “Peter H. ScheNCK.”
Robert Willetts, a witness for the plaintiffs,
testified as follows: In the latter part of August, 1851, I met Mr. Peter H. Schenck, in Matteawan, at the east end of a bridge there, and passed the compliments of the day with him; he inquired of me in reference to a carder for the mill at Ansonia; I told him that Mr. Danforth had stated .to me, that he had written to him in relation to the pecuniary standing of his .sons; he told me that he had received a letter from Mr. Danforth which he had written to him; he said that he had started his sons in business with a very handsome capital, which he had given to them. I stated to him that Mr. Danforth had some apprehensions, as he had'supposed he had let his sons have money, but. did not know on what conditions. He said they were doing a good business, and that he need have no apprehensions, that he never expected to get the principal or interest on the capital he had given them. He told me that he had written a letter to Mr. Danforth, and had written as favorable a letter as he could, and not make himself liable; that he did not like to do. I had long known Mr. Schenck. Mr. Danforth is a relative of mine, a brother-in-law;. I am distantly related to Schenck.
Extracts from the books of Peter H. Schenck were given in evidence, by the plaintiffs, as follows:
Page 3. “ Property at Ansonia, Connecticut, purchases from Courtney Schenck and Edward Schenck, 25th Oct., 1851.”
REAL ESTATE.
Two-story brick house, Ansonia, occupied by T. GL
Servoss, (mortgage, $1,000.) ....... $1,500 00
3 double wood tenant houses, . . . . $4,000 00 Due builders,'about, ". ... . . 2,000 00
—- 2,000 00
$3,500 00
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COTTON MACHINERY.
Picker Boom.
Items given, $651 75
Carding Room.
12 36-ineb cards and clothing, $2.75. . . $33 00
3 railway drawing frame-heads and troughs, 480 ■ 00
1 grinding machine for small rolls, ... 95 00
And other articles amounting in all to . . 6,135 00
Miscellaneous articles,.313 49
6,648 49
Spinning room, (particulars,) 6,483 72
Eilling room,. 4,703 24
Weaving room, .... 5,135 00
Dressing room, .... 567 92
$24,191 02
Carpenter’s shop, blacksmith’s office, belting, shafting, &c. Particulars given amounting to . . 3,000 28
So as to make total,.$27,191 50
Stock (in several rooms) estimated value, .... 1,902 09
“ The foregoing is inventoried by the agent of every article in detail in the mill. The real value is not over half, but $25,700 in demands against 0. & Br. was given up for the machinery and real estate and stock, as per deeds of sale.”
Page 7. “ Sundry accounts Dr. to sundry accounts.' — For the purchase (by compulsion) of the machinery, stock, &c., in the cotton mill at Ansonia, belonging to and leased from the Colburn Manufacturing Co., and some real estate, as per the inventory of sale from Courtney and Edward Schenck, on the 25th October, 1851, to secure me for the bonds, notes, and demands I had against them.”
The amount paid for the real estate was .... $4,000
Machinery, gearing, &c.,. 19,700
Amount of stock, as.found, was about ..... 2,000
$25,700
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To bills receivable—
For the following bonds and notes I held against them, which has been surrendered to them;
Bond of Courtney Schenck, dated 1 Nov., 1848, $3,000
do do “ 1 Feb., 1849, 1,500
do do - “ “ 1851, 1,600
do Edward Schenck, “ “ 1849, 1,500
do do 1851, 800
Note of Courtney Schenck & Br., dated 23 Dec., 1850, 1,000
do do 15 Feb., 1851, 1,000
do do 17 “ 1,000
do do 25 1,200
do - do .7 Aug. 2,000
do do 5 Sept. 1,700
do do 16 “ 1,600
do do 2 Oct. 1,800
do do 9 Sept. 2,000
do do 2 Oct. 2,000
do do 24 July 1,000
$24,700
To interest— For the interest on above, say 1,000
$25,700
Besides the above, a note for $1,500 for cash paid them 24 Oct. There was no evidence given or offered,, to show that Courtney Schenck & Brother met with any losses after they purchased of the plaintiffs, and prior to- their failure.
Wm. Ourtis Noyes, and Edwards Pierpont, Esqrs., for appellants.
G. O. Goddard, Esq., for respondent.
By the Coubt.
The charge of the Judge who presided at the trial, is not contained in the ease made. We must, therefore assume, that it was in all respects correct, and that there was nothing in it, of which the appellant can justly complain.
p. 106
The appellant contends, that in order to impeach the bona fides of the sale to Peter H. ¡Schenck, it must appear, that at the time of the transfer to him, he had notice of such specific frauds practised by Courtney Schenck & Brother, as would be sufficient to avoid the sale, as betweep. them and the' plaintiffs.-
We do not understand that to be the rule. It is enough that he had notice of such facts and circumstances as would have led a man of ordinary care and caution to suspect, that they did not get possession of the goods by honest means. If he'had such notice, it was- his duty to inquire; If,- having such notice, he did not choose to inquire, his condition is no better than if he had inquired and obtained knowledge of such facts, as proper inquiries would have furnished.
This is the rule with respect to an endorsee of negotiable paper, obtained from the maker by fraud. There are no considerations of public policy, which would give to a purchaser of chattels from a fraudulent vendee, greater immunity, than would be ¡extended to an endorser of negotiable paper. (Chitty on Bills, 279-282. Pringle v. Phillips & Nesi, 5 Sand. S. C. R. 157.)
The evidence shows clearly, that P. H. Schenck was informed, before the sale was made, that his sons had applied to the plaintiffs to purchase on a credit of eight or-nine months, representing that they were very good. His own answer to the letter the plaintiffs wrote' him, informed them that Courtney Schenck & Brother had been started in business with a very handsome capital, and did not bring to their knowledge the fact, that they then owed him $12,600. He knew, at the time of the transfer, .that in about eleven weeks after the letter written by himself, they had failed, owing about $70,000. He knew at that .time that they owed him enough to exhaust their whole estate. He knew that in nearly every week, between this sale and- the transfer to himself, they had been borrowers of him, refunding nothing. It is difficult to resist the conclusion, that he inquired and learned the cause of this rapid succession of pecuniary wants. If he had not done so, he- could not well have failed to learn before . the transfer to. himself,, that Courtney Schenck & Brother, when they applied .to the plaintiffs to purchase from them on credit, instead of being in a very good, .were in a very bad condition, and must have so known at the time. He knew that whatever the repre
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sentations were which had been made to the plaintiffs, they desired further assurance as to the means of his sons before trusting them, and had written to him as a person who could probably give the desired information. Such a letter, followed by immediate and continued applications from his sons, for loans of money, would naturally have led him to ascertain their condition. We do not feel at liberty to say, the jury were not authorized in finding, on the evidence submitted to them, that he had notice at the time of the transfer to himself, of such facts and circumstances as would naturally lead him to the conclusion, that Courtney Schenck & Brother obtained possession of the goods by a fraudulent misrepresentation or concealment of their pecuniary condition. The testimony of Willetts, if credited, was open to the construction, and in connection with the other evidence, would justify the conclusion, that he did not consider, at the time he wrote his letter of the 5th of August, 1851, that their circumstances were very prosperous. As the case is presented to us, we cannot say that the evidence does not warrant the verdict rendered by the jury.
The motion for a new trial was properly denied, and the order appealed from must be affirmed.