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Bacon v. Kendall

49 N.Y. Super. Ct. 123 17 Jones & S. 123 Court N.Y. Super. Ct. Decision date 1883-04-09 English

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p. 123
DANIEL G. BACON, et al., Appellants, v. CHARLES B. KENDALL, et al., Respondents.

Headnote

Arrest—when individual partner may he arrested in action against firm.
In an action upon contract against partners, to justify an arrest of any defendant, it is necessary to prove that he actually and individually participated in the fraud which is alleged to be connected with the contracting of the liability.
Where the fraud alleged is the purchase of goods when the firm was hopelessly insolvent, the concealment of said fact, and the intent not to pay for said merchandise,—each partner will be presumed to be acquainted with the accounts and affairs of the firm.
That one of the partners was served with summons in an action against the firm on a business indebtedness of a large amount, and long overdue, is a fact which makes strongly against him on motion to vacate an order for his arrest, upon the question of his belief in the firm’s solvency.
Before Sedgwick, Ch. J., and O’Gorman, J.
Decided April 9, 1883.
Appeal by plaintiffs from order vacating an order of arrest as to defendant Charles B. Kendall.
The order of arrest was made under Go. Civ. Pro. § 549, subd. 4.
The complaint was upon contract, and alleged that the defendants were guilty of a fraud in contracting the liability. The contract averred was that the plaintiff sold and delivered to defendants certain merchandise of the value of $11,308.90, which the defendants agreed to pay ; the fraud alleged was, that at the time of the sale the defendants were hopelessly insolvent; that they fraudulently concealed their insolvency and bought the merchandise, then intending not to pay for the same.
The affidavits on which the order of arrest was granted, showed that at thé time of the sale the defendants were partners in business and had so been for some years ; that the names of the partners were Charles B. Kendall, as to whom the order of arrest was vacated, and Hugh F. Kendall ; that for a" long time the business of the firm had been in an embarrassed state ; that it had bought goods in large
p. 124
quantities and had immediately sold them, at loss, and below market prices; that at the time of the sale an action for a business'debt of $13,000 had been pending for some months against the firm, and judgment was taken by default of answer, a few days after the sale ; that Charles B. Kendall knew of this action, the summons'having been served upon him alone, and he had not informed Hugh F. Kendall of this service; that by the books of account of the firm it appeared that the firm was insolvent.
The affidavit of Charles B. Kendall averred that his knowledge of the actual state and conduct of the business was solely derived from oral statement made by Hugh F. Kendal]; that he was younger than the latter and confided in him ; that he exclusively attended to a part of the business, the control of which did not involve a knowledge of those matters which were claimed to show fraud by defendants. The affidavit of the book-keeper of the firm tended to show that Charles B. Kendall had no knowledge of the contents of the books of account, and averred that no statement of account had ever been given to him. It was further shown that the purchase in question had been, in fact, made by Hugh F. Kendall, and Charles B. Kendall did not know of it until after the delivery of the goods.
John Sidney Davenport, for appellants.
Frederick H. Man, for respondents.

—The cases of the Bank of Commonwealth v. Temple ( 39 How 432 ), and Hathaway v. Johnson ( 55 N. Y. 93 ), sustain the proposition that in an action against partners on contract, to justify an arrest of any defendant, it is necessary to prove that he actually and individually participated in the fraud,' which it may be alleged was connected with the contracting of the liability. It is necessary to show by affidavit “ that the defendant was guilty of a fraud in contracting or incurring »a liability.” The court of appeals, in Hathaway v. Johnson (supra) said of a like provision of the Code of Procedure (§ 179), “He .must have been guilty of a fraud;

p. 125
and this implies personal misconduct-, moral or actual, and not merely legal or constructive fraud, in respect to the transaction which is the subject of the suit.”

The affidavits showed guilt on the part of Hugh F. Kendall. They also presented facts, which, if not explained, would support the conclusion that Charles B. Kendall was guilty also. On the motion below, the latter did attempt to make explanation. It is, at once seen, that the improbability is great, that he should be so ignorant of the affairs of the firm, as it was necessary to show that he was, to make a sufficient explanation. It was not impossible, however, that he should entirely trust to his brother, and. with great negligence indeed, but no criminality, omit to look at the accounts, and not inquire as to those details of the business, which were not in his own charge. It is a fact of great weight against him, that an action was pending against the firm for $11,000, for a business indebtedness over-due for a long time, in which service of summons was made upon him, and that he should still believe that the firm was solvent, and could honestly continue to make purchases. Again, however, it was possible, that he should believe that the firm was able to pay this indebtedness, if the leniency of the creditors would allow the firm to apply the necessary cash to its other general business, while paying the indebtedness, in convenient installments, and that he should believe that the creditor after beginning his action would, in fact, extend as much leniency in the future as he had in the past.

The point then, was, on the motion to vacate the order of arrest, did the defendant show this possible, but improbable state of things ? The answer to this depended upon the credence due to the defendant. His assertions were somewhat corroborated by the affidavit of the book-keeper, and by some intrinsic probabilities arising from the mode of conducting the business. On this appeal, I cannot find what would justify a difference in opinion from the judge below, who was satisfied that the affidavit of the defend-, ant was truthful.

p. 126
The order appealed from is affirmed, with $10 costs.

O’ Gorman, J., concurred.

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