Stewart v. Strasburger

Daniels, J.

—This action was brought to recover the sum of $2,304.23, which was the purchase-price of dry goods sold and delivered by the plaintiffs on the defendant’s credit, in the months of November and December, 1875. The goods were purchased by the defendant’s wife for family use, and' were delivered at the defendant’s residence, in the city of New York. At and before the times of the purchases the defendant was insolvent and in failing circumstances, and, on the 14th day of December, 1875, made a general assignment for the benefit of his creditors, and closed up the business previously carried on by him as a dealer in jewelry and watches. It appeared that he bought watches, watch movements and clocks during the last of August, and in the fall of 1875, of two different persons, upon representations of the solvency of a firm in St. Louis of which he was a member, amounting to over $14,500, of which about $12,500 still remain unpaid. And it was stated in one of the affidavits produced on the hearing of the motion, that the defendant had purchased of the firm of Arnold, Constable & Co., during the same fall, over $2,500 worth of dry goods, and about $1,000 worth of carpets, which had not been paid for.

When the goods were, purchased at the plaintiff’s store no representations were made concerning the defendant’s circumstances ; but as his wife had previously purchased goods there in the defendant’s name, which were afterward paid for by him, no suspicion as to his solvency or credit seems to have existed on the part of plaintiffs. No term of credit was agreed upon, but the bill was not presented until the latter part of December, and then the defendant failed to pay it.

The plaintiffs insisted that the goods were purchased and procured from them fraudulently, and that the fraud was perpetrated by intentionally concealing from them the condition of the defendant’s circumstances, and upon that theory the order of arrest was made. If his pecuniary condition had been known to the plaintiffs at the time of the sale, it is entirely evident that no credit would have been given for the goods; for he was then insolvent and his early failure was actually inevitable. No prudent dealer would, under such circumstances, sell him goods upon credit. And that fact was undoubtedly well known to both the defendant and his wife. They, however, swear that he did not at the time know of the purchases, and that she had no knowledge or information of his pecuniary condition. But whether that was true or not must be determined from the circumstances affecting the transaction, as well as the statements contained in the affidavits. She stated that she had frequently made purchases from the plaintiffs for her family amounting to from $1,500 to $2,500, during the period of a few months, while in contradiction of that statement it was shown from the plaintiffs’ . books that in no one month had the purchases amounted to the sum of $100. And from the 2d of December, 1874, to the 22d of October, 1875, they amounted to no more than $268.36. This is a very important contradiction of a material statement made by her, tending to throw a great degree of discredit upon her affidavit. If she had made such purchases previously, as she stated she had, those made in November and December would not have appeared so unreasonable or ■ extraordinary. But, as she did not do that, the fact that her ■ last purchases were so extensive has a direct tendency to establish the conclusion that they were not prompted by the mere motive of supplying the wants of the defendant’s family. That conclusion is fortified by her own statement, that in the fall of 1875 she bought other bills of goods from the plaintiffs, for cash and on credit, for the use of her family. For, after making them, there would seem to be no reason for supposing that any necessity could exist for those procured by her in November and December, particularly as over $2,500 worth of dry-goods were bought the same fall from Arnold, Constable & Co. These facts are entirely inconsistent with the- truth of the statement that the goods were needed for family use when they were bought, and they indicate the probability that another motive prompted the purchases. ' The one assigned was evidently untrue; and, that being so, the quantity of goods bought, the early failure of the defendant and the fact that the family could not, at the time, have needed the goods for its use, create, as well as justify, the conclusion that the purchases were made under the expectation of an early failure, which would prevent the plaintiffs from obtaining payment. Proof of fraud, which always endeavors to guard itself against discovery by concealment, is peculiarly dependent upon the force of circumstances for its support, and when they are so decided as satisfactorily to justify the conclusion that an intent to defraud existed, it is not to be rejected because of the positive denial of it by the parties concerned in the commission of the wrong. That is the nature of the circumstances shown in this case. They are wholly inconsistent with the truth of the assertion that the goods were purchased because they were then needed for the use of defendant’s family, and they indicate the design to have been to make the purchases because of the impending and prospective failure of the defendant, the effect of which would be to prevent the plaintiffs from obtaining payment of their debt. The coincident circumstances indicate no other possible conclusion, and that, under the authorities, was sufficient to constitute a fraud in the contraction of the debt, which was all that the Code required to entitle the plaintiffs, to an order of arrest.

The defendant’s wife may not have been informed in direct terms of her husband’s insolvent condition, but to produce the understanding on her part that such was the fact did not require any thing so unequivocal. There are various other modes in which that result could be produced without expressing it in words, that would be consistent with the literal truth of his statement that he had not informed her of his pecuniary condition, and that of her own, that she had no knowledge that he had become embarrassed. And her conduct can be accounted for on no other supposition than that if she had not been informed, and did not know, she still understood that his pecuniary condition had become extremely critical, and that it was desirable that large purchases should be made before the facts should be known which would at once discredit him. Her conduct was not rationally accountable on any other practicable theory. And upon that the probability is very decided that the goods were purchased by her with the expectation and design that they would not be paid for. And that combined all the elements of actual fraud (Brown agt. Montgomery, 20 N. Y., 287; King agt. Phillips, 8 Bos., 603; Carpenter agt. Danforth, 52 Barb., 581; Johnson agt. Monell, 2 Abb. Ct. Appeals Decisions, 470).

In contracting the debt by means of it, she acted, as she had done before, as the agent of her husband, the defendant, and the goods were delivered at his residence. So large a quantity could hardly be received there without his knowledge of them, and of the means by which they had been procured; and that was sufficient to render him an actual participant in the transactions. That he did know of the receipt of the goods at his residence was not denied, either by himself or his wife, as it probably would have been if he had not understood such to have been the fact; and when he was requested to pay the bill, he in no way indicated any disposition to part with the fruits of the fraud that had been committed.

In Bennett agt. Judson (21 N. Y., 238), the principal was held liable for the consequences of his agent’s fraud, even when it was perpetrated without his knowledge or authority, in the transaction of business that had been authorized by him. It was there stated to be the law, that “ if an agent defrauds the person with whom he is dealing, the principal, not having authorized or participated in the wrong, may, no doubt, rescind when he discovers the fraud, on the terms of making complete restitution; but so long as he retains the benefits of the dealings, he cannot claim immunity on the ground that the fraud was committed by his agent and not by himself ” (Id., 239, 240); and the soundness of that proposition has not been questioned (Griswold agt. Havers, 25 id., 595, 599-602; Davis agt. Bernio, 40 N. Y., 454; Greaves agt. Spier, 58 Barb., 349, 366, 367).

The defendant’s wife bought the goods in his name and under his authority. They were received as his. for the use of his family. He had the benefit of them, and became liable to the plaintiffs for the payment of the purchase. That was fraudulently incurred, and he was lawfully held to bail by the order made, for the debt that had been created.

The order appealed from should be reversed, with ten dollars costs, and also disbursements, and the motion made should be denied with costs.

Davis, P. J.

I am impressed with the belief that the larger purchases were made of plaintiffs and others on the eve of failure with the intention of providing for that event. The courts should scrutinize with severity transactions so suspicious in their character, otherwise dealers may be victimized by customers in whom they have implicit confidence, but whose circumstances lead them to take advantage of such confidence in preparation for approaching bankruptcy. I concur in the conclusions reached by my brother Daxiels,