Hoy v. Duncan — 33 N.Y. Super. Ct. 555

Majority

p. 555

WILLIAM E. HOY, Survivor, &c., Plaintiff and Appellant, v. BLANTON DUNCAN, Defendant and Respondent.

Headnote

Abbest.—Principles which govern the decision of motions to vacate order.

1. Constitutive facts. Where the facts on which the order issued constitute the cause of action, the principles to be applied in

■ disposing of a motion to vacate are different from those governing a case of

2. Exto'insia facts, when the order is granted on facts which are extrinsic to those constituting the cause of action.

A. Principles, Difference in.

1. In the first class of cases an order of arrest will not be vacated on motion, unless on conceded facts the law is against the plaintiff, or the proof is of such a nature as, if it were adduced on the trial, the court would be obliged to either nonsuit, or direct a verdict for defendant.

2. In the second class the court will, on the motion, pass on the disputed facts and make up its determination on those principles which appertain to the decision of questions of fact by a jury, or referee, or the court.

3. It is necessary, on all motions to vacate orders of arrest, to first determine to which class the case belongs.

4. Complaint, Construction of, on motion to vacate.

1. Where a complaint can be regarded either as being in assumpsit for goods sold and delivered, or an action on the case for deceit arising out of fraud in procuring credit for the price of the goods, or an action on the case for deceit in falsely representing the credit of a third party, it will, on a motion to vacate an order of arrest, be taken to be in assumpsit.

5. Above principles applied to a peculiar complaint.

6. Exoneration of bail. In a case falling within the second class an exoneration of bail follows from the vacation of the order of arrest.

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Before Monell, Jones, and Spencer, JJ.

Decided December 31, 1871.

This is an appeal from an order vacating an order of arrest and exonerating the bail.

The complaint (which was served after the order of arrest was granted) and the answer thereto were as follows:

Y. Y. Superior Court.

William E. Hoy, Survivor of George D. Fowle and Hugh D. Bice, composing the firm of Fowle & Co., Plaintiff, against Blanton Duncan, Defendant. ► Complaint.

The above-named plaintiff complains of the above-named defendant, and states,

I. That the plaintiff was, prior to and during the. years 1866 and 1867, a copartner in the above-named firm of Fowle & Co., of the city of Yew York, which firm was composed of this plaintiff and the said George D. Fowle and Hugh Rice, both since deceased.

II. That the said firm carried on business in said city as dealers in hardware and railroad supplies.

III. That at various times in the years 1866 and 1867, and prior to July 1, 1867, the said firm of Fowle & Co., at the city of Yew York, sold and delivered to the defendant, at his request, goods, wares, and merchandises, of various amounts, prices, and values, and at various credits, which expired before July 1, 1867, and also advanced to the defendant, and paid, laid out and expended for him and for his use, and at his request, divers large sums of money, which prices, values and sums of money amounted in the whole to thirty-two thousand two hundred and sixty-nine dollars and seventy-six cents, of which there has been paid cer

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tain sums, leaving á balance undue and paid thergon of nine thousand and fifteen dollars and forty-one cents.

IV. That the said firm of Fowle & Co., at various times m the years 1866 and 1867, and prior to July 1, 1867, at the request of the said defendant, at the city of New York, sold to him, and delivered to the firm of Budd & Sharp, for his use and benefit, goods, wares, and merchandise of various amounts, prices and values, and at various credits which expired before July 1, 1867 ; and also, at the defendant’s request, advanced to the said firm of Budd & Sharp, and paid, laid out and expended for them, at his request and for his use, divers large sums of money, which prices, values and sums of money amounted to twenty thousand seven hundred and three dollars and twenty-one cents, of which there has been paid the sum of thirteen thousand eight hundred and seventy-five dollars and twenty-five cents, leaving a balance due and unpaid amounting to six thousand eight hundred and twenty-seven dollars and ninety-six cents.

V. That the said firm of Fowle & Co., at various times in the years 1866 and 1867, and prior to July 1, 1867, at the request of the said defendant, at the city of New York, sold to him and delivered to the Hicks Steam Engine Company of Delaware, for his use and benefit, goods, wares and merchandise of various amounts, prices and values, and at various credits which expired before July 1, 1867; and also, at the defendant’s request, advanced to the said Hicks Steam Engine Company of Delaware, and paid, laid out and expended for the said company, at his request and for his use, divers large sums of money, which prices, values and sums of money amounted to over seven thousand dollars, of which there is now due and unpaid the sum of one hundred and seventy-nine dollars and ten cents.

VI. That before the said time, when the said goods,

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wares and merchandise were so sold and delivered, and the said moneys paid, laid out and expended as aforesaid, and in the month of November, 1866, at the city of New York, he, the said defendant, applied to this plaintiff’s said firm of Fowle & Co., and stated to them that he was the president of the Hicks Steam Engine Company of Delaware, and that he desired to purchase machinery and other hardware supplies of the said firm, and to open with the firm a general merchandise and cash account, and then and there falsely, fraudulently and deceitfully, and with intent to defraud this plaintiff’s said firm and procure credit, represented himself to said-firm to be not only solvent but wealthy, and falsely stated that he was worth over two hundred thousand dollars over and above all his obligations ; that relying wholly upon such representations, and believing the same to be true, the said plaintiff’s said firm opened an account with the said defendant and sold to him and to and for his use, benefit and account, as above mentioned, the said goods, wares and merchandise, and also paid, laid out and expended for him and to and for his use, benefit and account the said sums of money hereinbefore in the third, fourth and fifth sections of this complaint stated ; that thereafter, and on July 1, 1867, the plaintiff’ s said firm and said defendant accounted together, and on a statement of their account the said defendant was, and was found to be indebted to said firm by reason of the matters aforesaid in the sum of sixteen thousand and twenty-two dollars and forty-seven cents, for which said firm held the promissory' notes and written obligations of said defendant, no part of which said indebtedness, nor of said notes or obligations have been paid, although payment has been often demanded ; and the said plaintiff says that in truth and in fact the said defendant, at the time of such representations by him, was not solvent nor wealthy, nor was he worth over two hundred thou

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sand dollars over and above all Ms obligations,„bnt that, on the contrary, he was utterly insolvent.

VII. That at the several times when the said goods, wares and merchandise were sold and delivered, and at the time when the 'Said moneys were so paid, laid out and expended as aforesaid, he, the said defendant, was the president of the said Hicks Steam Engine Company of Delaware; that the said defendant being so indebted to the said firm of Fowle & Co., as hereinbefore in the third, fourth, fifth and sixth sections of this complaint stated, and being liable to the said firm for such indebtedness and upon said promissory notes or other obligations given said firm by him therefor on or about the 1st July, 1867, at the city of Hew York, and at the time of the accounting aforesaid, falsely, fraudulently and deceitfully, and with intent to defraud this plaintiff’ s said firm, stated and represented to this plaintiff that he, the said defendant, although then unable to meet or pay the said indebtedness and promissory notes and other obligations then held by said firm of Fowler & Co., was nevertheless entirely solvent and would ultimately be able to pay the samp; and did then and there also falsely, fraudulently and deceitfully and with intent to defraud this plaintiff’s said firm, represent to this plaintiff that the said Hicks Steam Engine Company of Delaware was perfectly good and doing well, and that its notes would be paid at maturity; and then and there proposed to this plaintiff that his said firm of Fowle & Co. should take and accept from Mm, the defendant, for the said indebtedness, the notes and acceptance of the said Hicks Steam Engine Company of Delaware, as hereinafter stated, to be signed and given by Mm as such president, and that plaintiff’s said firm should surrender to him the said promissory notes and obligations of him, the defendant; that this plaintiff and his said firm, relying wholly upon the said representations of the de

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fendant, and believing them to be true, surrendered to the defendant the said notes and obligations of the defendant held by the said firm, and took from him the notes and acceptance of the said Hicks Steam Engine Company of Delaware, signed by the defendant as such president, copies of which are hereunto annexed ; and the plaintiff says, that in truth and in fact the said Hicks Steam Engine Company of Delaware, at the time when the said representations last mentioned were so made by the defendant, was not perfectly good or doing well or able to pay its notes at maturity, but that on the contrary, both the said defendant and said company were at the time utterly insolvent and unable to pay their notes and obligations, all which the said defendant well knew at the time, and so knowing this plaintiff charges that the said representations were made with the intention to induce said firm to surrender said notes and obligations to the defendant and to deceive and defraud the said firm of Fowle & Co., and that thereby they were induced to and did take the said notes and acceptance of the said Hicks Steam Engine Company of Delaware, and surrender to the defendant his said notes and obligations ; that when the said notes and acceptance of said company became due the same were presented at' the several places where they were payable and payment thereof demanded, which was refused ; and the plaintiff states that no part of said notes or acceptance, or the original indebtedness above mentioned has been paid, and that he is now the holder and owner of the demand therefor.

Wherefore, the said plaintiff demands judgment against the said defendant for the sum of sixteen thousand and twenty-two dollars with interest thereon, from the 1st July, besides the costs of this action.

p. 561

COPIES OP THE NOTES AND ACCEPTANCE REPEBBBED TO IN THE POREGOING- COMPLAINT.

$6,837&<V

Newcastle, Del., July 30, 1867. Four months after date pay to the order of Fowle & Co., sixty-eight hundred twenty-seven X9XV dollars, value received, and charge same to account,

Budd & Sharp.

To Blanton Duncan, Esq., Prest.

Hicks Steam Engine Co., Newcastle, Del.

(Written across the face :)

Accepted for Hicks Steam Engine Company of Delaware, Blanton Duncan, Prest.

$134t%8-0-. Newcastle, Del., July 1st, 1867.

Ninety days after date we promise to pay to the order of Hoy, Kennedy & Co., one hundred and thirty-four iW dollars (without defalcation,) value received. Payable at 4th National Bank, New York.

Due October 3, 1867.

Blanton Duncan, Prest. Hicks Steam Engine Co., of Del.

Written across the face:

(Indorsed:)

Hoy, Kennedy & Co.

19,069/Aj-. Newcastle, Del., July 1, 3867.

Ninety days after date we promise to pay to the order of Hoy, Kennedy and Co., nine thousand and sixty-nine X4JX dollars (without defalcation), value received. Payable at 4th National Bank, New York. Due October 3, 1867'.

Blanton Duncan, Prest. Hicks Steam Engine Co., of Del. Written across the face:

(Indorsed :)

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Superior Court of the City of ISTew York.

William E. Hot, Survivor of George D. Fowle and Hugh Rice, composing the Firm of Fowle & Co., against Blanton Duncan. -Answer.

I. The defendant for a first defense, denies each and every allegation of the complaint.

II. For a second defense to the causes of action set forth in the complaint, the defendant says : That on or about the 6th July, 1887, the copartnership of Fowle & Co. solicited, received, and accepted the notes, acceptances and obligations of the “Hicks Steam Engine Company,” a corporation created by, and under the laws of the State of Delaware, in full satisfaction, ex-tinguishment, and payment of the claims and indebtedness alleged in the complaint.

III. For a third defense to the causes of action set forth in the complaint, the defendant says, on information and belief, that the plaintiff has already recovered judgment against the defendant, on the said claims and causes of action in the circuit court of the State of Georgia.

IV. For a farther defense to the causes of action set forth in the complaint, the defendant says : That the said claims and causes of action arose and accrued against Budd & Sharp, and against the said “Hicks Steam Engine Company,” and not against the defendant ; and that the negotiable securities of the defendant mentioned in the complaint were given to the firm of Fowle & Co., without consideration, and by way of accommodation, and were afterwards surrendered and canceled by the said Fowle & Co., who accepted in lieu thereof the negotiable paper of the said “Hicks Steam Engine Company,” and released and discharged the defendant from all obligation for and on account of said claims and negotiable securities.

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V. For a fifth defense to the causes of action set forth in the complaint, the defendant says, on information and belief, that the plaintiff is not the real party in interest herein, nor is he an executor or administrator, or trustee of an express trust, or one authorized to sue without joining with him the person for whose benefit this action is brought; but that Hoy, Kennedy & Co., a copartnership existing and doing business in the City of Hew York, possesses and asserts the" exclusive ownership of the said claims and causes of action.

VI. For a special defense to the third cause of action set forth in the complaint, the defendant says, that the goods, wares, and merchandise mentioned in division V. of the complaint as having been sold and delivered by Fowle & Co. to the Hicks Steam Engine Co., were by the said Hicks Steam Engine Co. returned, on or about the 1st day of February, 1867, to the said Fowle & Co., and were by said Fowle & Co. received and retained, and the contract for the sale of the said goods, wares, and merchandise by the said Fowle & Go. to the said Hicks Steam Engine Co. was, on or about the 5th day of July, 1867, abandoned and rescinded by the mutual assent of the parties.

VII. The defendant explicitly denies each and every allegation of fraud and deception imputed to him in the complaint.

The order of arrest was obtained on the affidavit of ' the plaintiff and Thomas R. Sharpe.

The plaintiff swears that in Hovember, 1866, defendant falsely and fraudulently represented himself to be not only solvent, but wealthy, and falsely stated to deponent that he was worth two hundred thousand dollars over and above all his obligations. He also swears that afterwards defendant admitted to him that when he made said representations he had no property other than what was held in his wife’s name.

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Sharpe swears that he introduced defendant to the plaintiff about November, 1866 ; that about that time defendant informed him that he was a person of ample means, and was worth in various kinds of property the sum of four hundred thousand dollars, consisting principally of real estate, and that he had represented to plaintiff that he had ample means to carry on the business he proposed to engage in, which was the manufacture of Hicks steam engines and boilers.

The defendant moved to vacate on the complaint (which had been served), his answer thereto, his own affidavit, and the affidavits of William Gr. Whitely, Joshua F. Bullitt, Thomas Budd, and Thomas F. Bayard.

■ Defendant, in his affidavit, swears that the only representations he made were that he was solvent, and that he would have a large amount of available means as soon as the government should restore to him his property which had been seized for confiscation ; and that he had then been pardoned and had been informed by the attorney-general of the United States and others that the effect of such pardon would be the immediate restoration of his property ; that these representations were made in good faith and were true. He further swears that immediately after making these representations he applied to the proper authorities for the restoration of his property, which was refused, and he forthwith, about November 15, 1866, communicated that fact to plaintiff s firm; that said property has since been abandoned» to defendant, and was, with other property of his at the time of the alleged representations, worth the sum of two hundred thousand dollars ; that he did not admit to plaintiff at any time that when he made the representations as to his solvency he had no property other than what was held in his wife’s name.

Joshua F. Bullitt swears that he was counsel for

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defendant in an application for the restoration of his condemned property; that the district court decided that the pardon of the 13th October, 1866, did not "restore the property; that the decree of confiscation was finally reversed in November, 1869, by the circuit court, and by consent of the district attorney all claim to the property was abandoned by the United States ; that defendant was always confident of recovering possession of his property, and was advised by his counsel that the effect of the decision of the circuit court was to restore to defendant property valued at some one hundred thousand dollars, and accrued rents amounting to sixteen thousand dollars, and to invest the ownership in him at the date of his application in October, 1866, the same as it had been invested in him previous to the decree of condemnation.

Thomas Bndd swears that he was copartner with the aforesaid Thomas R. Sharp, that he is positively certain he never heard from defendant any fraudulent representations in regard to his financial condition, but on the contrary his statements were ever characterized by an open manly frankness.

The affidavits of Whitely and Bayard refer to another part of the case.

The plaintiff opposed the motion on a further affidavit of his own, a further affidavit of Sharp, and the affidavits of John P. Kennedy, Robert M. Gfallaway, Joseph Marsh and John R. Davis.

Plaintiff, in his further affidavits, swears, among other things, as follows :

“That said Duncan did state to deponent that the United States government had confiscated some of his property, but he also stated that he was worth at least the sum of two hundred thousand dollars over and above all his debts and liabilities, and he stated to deponent that he had such large amount of available

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means without reference- to the property confiscated by the government.

“ And deponent denies that the alleged representations mentioned in the second section of defendant’s affidavit of May 4, 1870, were the representations which Duncan made in respect of his property, or that they were the only representations which he made relative thereto; and deponent states that the whole effect and tenor of the defendant’s conversation at all times with deponent was that he, Duncan, was a wealthy man and entirely solvent.

“8. Deponent denies on information and belief that the said defendant was at the time of making such representations or at any subsequent time, worth the sum of two hundred thousand dollars or any like sum, or that any property of that value has been abandoned to him by the government; deponent further says, that he has received from the register of the bankrupt court, in which said defendant was declared a bankrupt, a certified copy of his petition and schedules thereto annexed ; that the said petition was sworn to December 7th, 1868 ; and that neither said petition nor schedules contain any statement of any such property alleged to have been abandoned to the defendant; that defendant, as appeared from the said schedules was worth about twenty-two thousand dollars and the total amount of his indebtedness was about forty-six thousand dollars, of which indebtedness seventeen thousand and sixty-nine dollars was stated as indebtedness to Hoy, Kennedy & Co., and five hundred dollars as indebtedness to James Hoy, and twelve thousand dollars as indebtedness to Garnett Duncan, the father of the defendant ; that all the alleged assets of said bankrupt in his schedules consisted of promissory notes and balances of account, and that in and by said schedules he stated that he had no interest in any real estate ; and that in and by said petition and schedules the said

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bankrupt makes no statement whatever of any loss or .disposition of his property which will account for the loss of the property mentioned in the second paragraph of Duncan’s affidavit.”

Sharpe, in his further affidavit, swears that during a negotiation respecting the formation of a partnership between defendant and Budd and Sharpe, defendant sent him a letter dated London, July 19, 1866, an extract from which is as follows :

“ I am willing to co-operate with you and form such an arrangement as will make a fortune for ad concerned. Once with a pardon in my hands, I can com- . mand what I please in the way of money, and I would myself go into partnership with you and Budd and Mrs. D., taking a fourth interest, and giving you all the capital and credit you could use. That we can arrange, however, at a future day. With a pardon my interest in Louisville would be worth, say----$200,000

Mrs. D.’s residence, Louisville................ 25,000

Mrs. D.’s Cola, property..................... 40,000

$40,000 H. Stock, say..-...................... 10,000

Mrs. D.’s interest, Sharp & Budd ............ 5,000

Bonds in Cowan’s hands..................... 12,000

Spare cash here, say $13,500 gold............. 20,000

Mississipi Plantation........................ 100,000

Making a total sum of..................$412,000

—besides three thousand five hundred dollars gold owing me by Mr. Picklin, of which I should then force a settlement.”

That he showed this letter to the plaintiff about the time of its receipt; that he introduced defendant and plaintiff October 23,1866, immediately after defendant’s arrival from Europe.

The affidavits of Kennedy, Galloway, Marsh, and Davis, refer to another branch of the case.

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Tracey & Olmsted, attorneys for appellants, and Charles Tracey, of counsel,—urged :

I. The second transaction as to the substitution of the Hicks Engine Company notes being vitiated by fraud, the order is sustainable on the first fraud (Murphy v. Fernandez, 11 Bosw. 665 ).

II. The three affidavits, on which the order of arrest was granted, fully conform to the practice laid down in a recent opinion in Smith v. Jones (4 Robt. 656). It appears therein : 1. That goods were sold and credits given to the defendant; that the indebtedness is unpaid, and plaintiff is owner of demand. 3. That the credits were given at defendant’s request. 3. That the defendant represented himself as “not only solvent but wealthy,” and worth'“ over two hundred thousand dollars over and above his obligations.” 4. Plaintiff’s belief and reliance upon the representations. 5. The falsity of defendant’s representations as to his own solvency, by these facts : (1.).During eight months he was unable to meet a note for five thousand five hundred and fifty-five dollars, one-fortieth part only of his pretended resources. (3.) On the settlement, July, 1867, only eight months from the time of the represenations, he is unable to pay sixteen thousand dollars, or any part of his indebtedness, but attempts to pay them with notes of the company. (3.) By fraud he induces plaintiff to accept those worthless notes of the company, thus fraudulently procuring an extension of time on his own indebtedness. (4.) He admits after^ wards that at the time of the representations as to his own condition, he had no property other than what was in his wife’s name. 6. The falsity of Duncan’s representations as to the solvency of the company in July, 1867. Duncan had himself, as president of company, confessed judgment for over ten thousand dollars in favor of company’s creditors, and for twelve thousand dollars at about the same time ; and execution had been

p. 569

issued thereon ; the company a few weeks afterwards was declared bankrupt; see affidavit of Sharp, vice-president of company. It distinctly appears by the whole testimony that the Budd & Sharp indebtedness was in reality credit given to the defendant himself, and at his request. 2. The defendant did represent himself as wealthy and solvent in the first transaction. This is partly admitted by defendant; but the real character of the representations and their utter falsity is fully proven by plaintiff’s and Sharp’s affidavits and defendant’s schedules in bankruptcy. It appears that defendant represented himself as owning certain parcels of real estate and other property; his owni rship, in the absence of proof of alienation, will be presumed to have continued (Flanders v. Merritt, 3 Barb. 201 . The ownership of a newspaper was presumed for two years (Fry v. Bennett, 28 N. Y. 330 ). 3. Defendant does not deny the falsity of the representations as to the condition of' the Hicks Engine Company, at the time of the second transaction, but tries to throw the whole responsibility for the representations upon Mr. Sharp. It is fully proved that defendant knew of all the affairs of the company, that the second fraud was deliberate and intentional—a well contrived scheme. 4. That on the exchange of the notes, defendant did represent the company as good and solvent. 5. The defendant stands entirely impeached as a witness, by the facts sworn to in the affidavits of Galway, Sharp, Marsh and Davis, all disinterested witnesses.

III. The court had no power on the motion of the defendant alone to exonerate the bail, or to discharge them from liability, until the final determination of the litigation, in which their principal must be successful (Code, § 191 ; Von Gerarde v. Lighte, 13 Abb. Pr. 103 : Bank of Geneva v. Reynolds, 12 Id. 81, note). A judgment alone is the final determination of the rights of

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the parties (Mott v. Union Bank of the City of New York, 38 N. Y. 18 .

• Thomas L. Snead, attorney for respondent, and Roger A. Pryor, of counsel,—urged :

I. It is the obvious policy of the legislature to mitigate the harshness of the remedy by arrest (Code, § 186, Amendment' 1870). Such, also, is the disposition of the courts. Hence an order of arrest is not a matter of absolute right, but is subject to the discretion of the court (Knickerbocker Life Ins. Co. v. Ecclesine, 6 Abb. Pr. N. S. 9), and so far within the discretion of the judge that his decision is not appealable (National Bank of the Commonwealth v. Temple, 39 How. 432 ). Hence, too, the duty of the courts to resist applications for provisional remedies (Skiff v. Stewart, 39 Mow. 385).

II. In determining this appeal, it is essential to distinguish the specific cause of action (National Bank of the Commonwealth v. Temple, 39 How. 432 ; Code of Procedure, § 179 ; Townsend v. Herricks, 39 How. 477 ).

III. (1.) The summons and complaint disclose clearly the character of the action. The summons is in the form prescribed by sub. 1, section 129, of the Code. If the complaint were ambiguous, the summons would discriminate the nature of the action (Chambers v. Lewis, 10 Abb. 207 ). But in fact, the complaint conforms to the summons, and exhibits an action for money demand on contract. (2.) If this were an action of déceit, or for fraud, the summons would be for relief; the specific cause of complaint would be the alleged fraud, and the prayer would be for unliquidated damages. The action would belong to the class ex delicto. But here the summons is for “ money demand. on contract.” The gist of the complaint is the indebtedness of the defendant for goods, wares and mer

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chandise, and for money paid, laid out and expended; and the recovery claimed is a snm certain alleged to be due, as a balance on an accounting. Plainly, this action is not in tort, is not to recover damages for fraud, but is assumpsit for a definite amount. (3.) While the complaint purports to set out all the facts of the case, it is evident enough that the specific ground of action is the original indebtedness of the defendants for money advanced and goods sold and delivered. The action is not founded on the securities given by the Hicks Steam Engine Company ; else the Hicks Steam Engine Company, and not Blanton Duncan, would be the defendant. The facts of the substitution of the company paper for the individual notes of the defendant are stated in anticipation, to obviate a plea of the surrender and cancellation of the defendant’s notes, by showing such surrender and cancellation to be void by reason of fraud. The object and office of this part of the complaint is to re-establish the original indebtedness of the defendant, and to leave that indebtedness unimpaired and operative as a ground of action.

IV. This being an action upon contract to recover sixteen thousand and twenty-two dollars and forty-seven cents, alleged to be due for goods sold and delivered, and money paid, laid out and expended, the inquiry, and the only inquiry, is, was the defendant “guilty of fraud in contracting the debt or incurring the obligation ” which is the foundation df the action ? ¡N o independent or incidental fraud of the defendant— no fraud which was not present and operative in contracting the debt for which the action is brought, is available to support the order of arrest. The language of the Code is explicit to this effect (Sec. 179, subd. 4). So are the decisions. In Wallace v. Murphy, 22 How. 416 , Ch. J. Robinson said: “ The statute intends that any fraud committed in making the contract shall subject the offender to arrest.” In Oatley v. Lewin, 47

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Barb. 21, the supreme court, at general term, vacated an order of arrest, on the specific objection that, although the defendant was guilty of a fraudulent representation, yet the representation had no connection with the obligation upon which the action was brought (Merchants’ Bank v. Dwight, 13 How. 366 ; Alliance Ins. Co. v. Cleveland, 14 How. 405 ).

V. Conceding for argument, that defendant’s representation as to the solvency of the Hicks Company was false and fraudulent; still, as that representation was subsequent to the contracting the debt for which plaintiff sues, and was made with the view, not of incurring an obligation by the defendant, but of imposing an obligation on the Hicks Company, which obligation plaintiff repudiates, and stands on the original indebtedness of defendant—this representation being subsequent to and wholly apart from the contracting the debt in litigation, is not available to support the order of arrest.

YI. The only fraud appropriate and effectual to support the arrest is defendant’s alleged false and fraudulent representation as to his solvency and sufficiency. 1. To constitute a false representation, available either as a cause of action or of arrest, these three circumstances must concur and characterize the representation : 1st. It must be false (Stewart v. Patten, 37 How. 68 ). 2nd. It must be fraudulent, i e., known to be false (Taylor v. Scoville, 54 Barb. 37 ; Marsh v. Falker, 40 N. Y. 562 ; Kelsey v. Oil Company, 54 Barb. 112 ). Indeed in some cases it is held that an actual intent to defraud must be fixed on the defendant (Claflin v. Frank, 8 Abb. 412 ; Birchell v. Strauss, 28 Barb. 293 ). By all authorities, if the defendant believe the representation to be true, be it ever so false in fact, he is not guilty of fraud nor liable to arrest (Gafney v. Burton, 12 How. 516 ; Birchell v. Strauss, supra; Claflin v. Frank, supra; Stewart v. Patten, supra;

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Marshall v. Gray, 39 How. 172 ). 3rd. The fraudulent-representation must be productive of damage to the plaintiff. Here, as in every other occasion of legal intervention, there must be the damnum as well as the injuria (Taylor v. Scoville ; Marsh v. Falker ; Kelsey v. Oil Company, supra). In Taylor v. Scoville the court ruled that though the defendant misrepresent his ability, either by general exaggeration or by a claim of specific property not his own, yet, if he have means sufficient to discharge the debt fraudulently contracted, he does the plaintiff no damage, and is not guilty of legal fraud. 2. Admitting defendant represented his ability as imputed, it is evident, first, that the representation was true ; second, that, if not true, defendant believed it to be true ; third, that if not as rich as he pretended, defendant had ample property to pay the debt for which this action is brought, and which he is charged to have fraudulently contracted. 1st. Plaintiff says, defendant represented himself to be worth two hundred thousand dollars. Was he not worth that amountÍ (a.) Plaintiff concedes in his complaint that of an aggregate indebtedness of sixty thousand dollars incurred by defendant he paid forty-four thousand dollars. (5.) Duncan swears that he contributed fifty thousand dollars to the Hicks Steam Engine Company, and his testimony is corroborated by the affidavits of Bayard and Whitely. (c.)' Bullitt, Thompson, and Duncan swear that defendant’s property, then under seizure by the government, was of the value, at least, of one hundred and sixteen thousand dollars. Here is an aggregate of two hundred thousand dollars available to defendant. But he had other property. His property in Louisville alone was worth one hundred and sixteen thousand dollars at the lowest figure, whereas the debt he is charged to have contracted by a fraudulent exaggeration of his sufficiency, is only sixteen thousand dollars. Under the rule propounded in

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Taylor v. Scoville, here is plainly no damage to the plaintiff. We say the representation, even as imputed by the plaintiff, is literally trae, and there is nothing whatever in the plaintiffs affidavits to impeach its accuracy. 2nd. Whether the representation was true-or not, defendant believed it, and that was sufficient to avoid the arrest. Defendant had means in hand to pay, and did pay plaintiff and the Hicks Company ninety-four thousand dollars. He had property locked up by the confiscation acts to the amount of one hundred and sixteen thousand dollars. Thompson and Bullitt swear defendant always believed he would recover this property, and they advised he would recover it. In point of fact, he did recover it, and by the decision of the court it was adjudicated that the property was his, notwithstanding the seizure—was his at the time of the representation. When he made the representation and contracted the debt, defendant had been pardoned by the president ; had been advised by the attorney general that the pardon operated a restoration of his property ; himself believed he would recover his property ; and in fact did recover it. That defendant did not conceal his difficulties and the embarrassments oí his property, is disclosed by plaintiff’s letter of 6th July, 1867. 3. What if -defendant did misrepresent his ability % For the truth of the representation, he referred plaintiff to “some of the first banking houses in the city.” This reference plainly shows defendant’s good faith. If plaintiff had made the inquiries suggested by defendant, he would have got the truth. He could not willfully neglect the opportunity of information put within his reach, and then pretend he had been deceived. It is a familiar rule that the means of knowledge is equivalent to knowledge. It was plaintiff’s own fault and folly to rely on defendant’s unsupported statements when he had the means of verifying or discrediting them. 4. Wherefore, it appearing that

p. 575

the representation of the defendant, by which the debt in suit was contracted, was true literally and to its full extent; or, if not true literally and to its full extent, was true to this extent, that the defendant owned property equivalent many times over to the debt contracted ; or, if not true at all, the defendant believed it to be true, nay, had reason so to believe ; or, if not true at all nor believed by defendant, it was plaintiff’s own wrong to rely upon it—the order of arrest was properly set aside.

VII. It has been already shown that the alleged fraud of defendant in procuring the surrender of his notes, and the substitution of the Hicks Company securities, is irrelevant and unavailable to sustain the order of arrest. But, was defendant guilty of fraud in procuring this substitution \ The plaintiff so swears ; but, 1st. It is apparent, by the plaintiff’s own letter,. that he himself solicited the substitution of the Hicks Company securities, and that they were not imposed upon him by the fraud of the defendant. Plaintiff not only solicited the substitution, but gave a reason for the substitution which excludes any inference of fraud on the part of the defendant.. 2nd. Even if defendant was guilty of a false representation as to the solvency of the Hicks Company, the plaintiff sustained no damage; and so the representation was immaterial. The only effect of the representation—in truth it had no effect at all, since the substitution was the consequence of the plaintiffs own solicitation—the only effect, if any, of the representation was, the substitution of the Hicks Company securities for defendant’s individual notes. But, plaintiff says defendant was at that time insolvent; how then was plaintiff harmed % 3rd. It is abundantly evident that the Hicks Company was not then insolvent. In any event defendant believed it to be solvent. Sharp told him it was solvent, and defendant’s faith was so strong, that he invested fifty thousand

p. 576

dollars in the company. 4th. The plaintiff presents no evidence whatever of the insolvency of the Hicks Company ; bnt on the contrary, his own chief witness swore the company was not only solvent, but prosperous.

VIII. The alleged confession of defendant, “that he had no property other than what was held in his wife’s name,” is not at all inconsistent with his statement of his circumstances. The admission rather implies that defendant was the owner of property; and as cestui que trust he might be worth two hundred thousand dollars, or a.ny other amount. And mark; this is the only evidence in the case of the untruth of defendant's representation. The statements of the-plaintiff in his rebutting affidavit are irrelevant and immaterial, because, 1st. These statements are all hearsay and pretend to give the substance of an official record in the affiant’s possession. 2nd. They purport to give the financial condition of defendant, not at the time of the representation, but more than two years afterward. 3rd. If plaintiff failed to show good ground of arrest in the first instance, he cannot repair the omission by supplementary affidavits. Defendant explicitly denies the admission ; and, in the absence of corroborative evidence, the plaintiff fails to exhibit that preponderance of proof essential to the support of an arrest (Mulrey v. Evelett, 3 Robt. 716 ; Smith v. Jones, 4 Robt. 656 ; Draper v. Beers, 17 Abb. 163 ).

IX. Fraud is never presumed, but must be established by affirmative prove—“ by proof ‘ strong and direct” Nichols v. Pinner, 18 N. Y. 300 ). Now. in view of the whole transaction, it is perfectly apparent, that Colonel Duncan’s conduct throughout, was characterized by an unreserved and ingenuous candor. 1st. On his introduction to the plaintiff, he said, in effect, “Don’t rely on my representation, but inquire of the gentlemen I name, who are among the first bankers of the city.” 2nd. He frankly disclosed his difficulties to

p. 577

the plaintiff, in so far as to engage his sympathies. 3rd. On discovering the embarrassments of the Hicks Company, he promptly communicated with the plaintiff.

X. We submit, that on the uncontradicted facts of the case, the order vacating the arrest was right and proper, and should be affirmed.

Under the present exceedingly liberal rule of construction of pleadings, this action, to speak in the former technical language of the law, might be regarded either as an action in assumpsit for goods sold and delivered, or an action on the case for deceit arising out of fraud in procuring credit for the price of the goods, or an action on the case for deceit in falsely representing the credit of the Hicks Company.

The principles which govern this court (Lorillard Ins. Co. v. Meshural, 7 Robt. 308), in disposing of motions to vacate orders of arrest where the facts on which the order issued are those which constitute the cause of action, are different from those which obtain, when the order is granted on facts which are extrinsic to those constituting the cause of action.

In the first class of cases, as the controverted facts • must necessarily be passed on by the jury, and as on a judgment entered on a verdict for the plaintiff, he would, as matter of course, be entitled to an execution against the body, if an' execution against the property should be returned unsatisfied, in whole or in part, the court will not on motion infringe on the province of the jury, and render a decision on the facts which may possibly affect the jury in their deliberations, and which, if they should arrive at a conclusion different from the court, would deprive the plaintiff of the benefit of the security taken on the arrest. In this case, therefore, the court will not vacate on motion, unless on conceded facts the law is against the plaintiff, or the

p. 578

proof is of such nature as, if it were adduced on the trial, the court would be obliged to either nonsuit or direct a verdict for the defendant.

In the other class of cases, as the disputed facts cannot be submitted to the jury, the court is necessarily called upon to pass on them on the motion, and to make up its determination on those principles which appertain to the decision of questions of fact on a trial thereof by jury, or referee or the court.

It becomes necessary then, on motions of this character, to determine to which class the action belongs. If, in arriving at the determination, any doubt arises, the leaning of the court should be in favor of personal liberty.

If then the plaintiff inserts in his complaint such allegations as to render it uncertain to which class the action belongs, and as to whether the jury will be called on to pass upon the matters authorizing an arrest, the court, on a motion to vacate an order of arrest, will construe the pleading to contain a cause of action founded solely on matters which do not authorize an arrest.

In this view the present action must, on this motion, be considered as an action in assumpsit for goods sold and delivered.

Therefore the averments of the representations on which the plaintiffs were induced to sell the goods on credit, are to be regarded as surplusage, and not issuable ; while the averments of those representations on which the plaintiff, as alleged, was induced to substitute the company in the place of the defendant as their creditor, must be deemed as inserted to avoid an anticipated defense, and not as forming any part of the cause of action.

Regarding this, then, for the purpose of this motion, as a simple action for goods sold and delivered, it devolved on the court to pass on the question as to

p. 579

whether there was fraud in obtaining the goods, &c., on credit or not, on the merits; and in passing on that, the principles which obtain in the above mentioned second class of cases are applicable.

The only direct proof on the subject of the representations made at the time of the opening the account, is that furnished by the parties themselves—the plaintiff on the one side and the defendant on the other.

The plaintiff first swears in effect that defendant represented that he had two hundred thousand dollars, over and above all his obligations; and then, after reading defendant’s affidavit, admits that defendant did state that some of his property was confiscated, but swears that defendant stated that he had two hundred thousand dollars of available means without reference to the confiscated property. 0

Defendant, on the other hand, swears that the only representation that he made was that he was solvent, that he would have a large amount of available means as soon the government should restore his property, that he bad been pardoned, and had been informed by the attorney-general and others that the effect of said pardon would be the immediate restoration of his property.

This first question is, which is correct in his version of the conversation ?

The affirmative rests on the plaintiff to maintain, by preponderating evidence, his allegation of fraudulent representation. Unless he derives from the other evidence, facts and circumstances appearing on the motion, more support than the defendant, he must fail on this point, for in that event the proof would be either balanced or the preponderance would be in favor of defendant.

All the affidavits (including those relating solely to the representations alleged to have been made in re-respect to the company) have been carefully scrutinized to ascertain whether anything therein contained lends

p. 580

more support to the plaintiff than to defendant, and the conclusion arrived at is that there is-not.

But there .are some matters -which render it more probable that the defendant is correct, and the plaintiff wrong. About three months before the representation he wrote to plaintiff’s witness a business letter from London, in which he gave a specific enumeration of what his property will consist of, as well as his estimated value of it upon a pardon being granted. This letter was shown to plaintiff. Again: Budd (Sharp’s partner) testified that in all defendant’s dealings with that firm he found defendant straightforward and manly, which evidence is corroborated by the above letter.

It is not probable that a man of such a character, should, in the short space of three months, make to a person to whom Sharpe introduced him, and with whom he knew Sharpe had business transactions, representations for the purpose of advancing the very business in reference to which said letter was written (and in reference to which it was -shown to plaintiff), other than such as were consistent with that letter; but it is probable that under such circumstances his representations would be consistent with the facts in the letter.

Again: in a conversation had with Sharpe a short time after the alleged representation, he stated to him that he told plaintiff he had ample means to carry on the business. This evidence was introduced by the plaintiff ; its effect is, while it does not impugn defendant’s version as to the rest of the conversation had with plaintiff, to justify to some extent his statement that no amount was mentioned.

It would seem that the plaintiff’s version is rather the result of his reasoning upon his recollection of the contents of the letter, and the statements of the defendant, than a statement of the substance of the conversation. His recollection of the letter was that it showed

p. 581

defendant to be worth over two hundred thousand dollars, if a pardon was granted, and coupling that with the statement that a pardon had been obtained, and that its effect would be an immediate restoration of the property, his mind instantly reached the conclusion that the defendant was then worth, in immediately available means, over two hundred thousand dollars.

The result thus reached was more firmly fixed in his mind than the conversation itself, and it is not surprising, that after the lapse of one year and nine months, he should give the result thus arrived atas the substance of the conversation.

The statement in his subsequent' affidavit can have, under the circumstances, but little weight attached to it.

The next question is, whether the representation testified to by defendant is substantially true.

He had at that time property to the

amount of...................... $50,000 and over

since paid into the Hicks Company.

Real estate to the amount of....... 100,000 and over

then under confiscation. ' .•

Accrued rents under confiscation, say 8,000

Other property, as shown8 by bankruptcy proceedings, valued at.... 22,000

$180,000

By the bankruptcy proceedings it appears that on December 7, 1868, the defendant, besides the indebtedness to plaintiff, was only in-

debted to his father in.......... $12,000

James Hoy, in.................... 500

But it nowhere appears that this indebtedness existed at the time of the representation.

It also appears that he had at that time his pardon, and had been advised that the effect thereof was to im

p. 582

mediately restore his property, which advice was subsequently confirmed by the decision of the circuit court.

It is suggested that in the bankruptcy proceeding no mention is made of any real estate as belonging to the defendant.

This may be accounted for by the fact that at time of the filing of the petition in bankruptcy, the decision of the district court holding that the pardon of the president did not restore the property, was in full force and unreversed.

The facts in this case indicate pretty clearly that defendant’s financial embarrassments and inability to successfully carry on the business of the company (in which event this suit would not, in all probability, have been instituted), arose out of the refusal by the authorities to restore his property, and the adverse decision of the district court, all of which was contrary to the confident expectation and belief of the defendant, and to the legal advice given him, and, indeed, contrary to the law and his just rights.

Such refusal and adverse decision must, of necessity, have seriously interfered with his command of money, or realizing on his property.

The decision vacating the order of arrest was correct. The exoneration of the bail follows, of course, from the vacating the order of arrest, subject to be revived if the vacatur be reversed..

The order below should be affirmed, with costs.

THE END.

Cases cited

Flanders v. Merritt 3 Barb. 201 N.Y. Gen. Term 1848-06-05 p. 569
Mott v. Union Bank 38 N. Y. 18 N.Y. p. 570
United States v. Vallejo 22 How. 416 SCOTUS p. 571
Marsh v. Falker 40 N. Y. 562 N.Y. p. 572
Birchell v. Strauss 28 Barb. 293 N.Y. Sup. Ct. 1858-11-04 p. 572