[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 102
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 103 Upon an appeal from an order denying a motion to vacate an order of arrest, obtained upon the theory of a fraudulent contraction of the debt, this court will not review the order when the facts and circumstances proved, or the legitimate inference deducible from such facts, furnished some evidence tending to establish the existence of a fraudulent intent on the part of the defendant in the creation of the debt. (Wright v.Brown, 67 N.Y. 1.)
But when there is no evidence legitimately tending to establish such a conclusion, and the natural inferences to be drawn from the facts stated do not necessarily lead to the presumption of a fraudulent intent, a question of law is presented which calls for the judgment of this court.
The motion under review was based upon the original papers used in obtaining the order of arrest, and, therefore, no question arises over conflicting evidence or in relation to the credibility of witnesses, and the sole matter for our consideration is whether there are any facts or circumstances disclosed in such papers upon which a finding of fraud could be properly founded.
We are of the opinion that the proof was insufficient to sustain *Page 105 such a finding. The grounds upon which it was attempted to be supported were:
First. That the defendant falsely and knowingly made representations with reference to his responsibility which induced the plaintiffs to give him credit; and,
Second. That the evidence tended to establish a fraudulent design on the part of the defendant to obtain the plaintiffs' property without paying for the same.
The only evidence to support the charge of fraudulent representations is that furnished by the proof that the defendant, in April, 1882, upon being requested by the plaintiffs to give them an indorser upon a note for the balance of an existing account, refused to do so, saying that he was "perfectly good and solvent without an indorser."
There is no evidence in the case tending to rebut the legal presumption of the truth of this statement, except that arising from the proof that the defendant failed in business nine months thereafter, under circumstances undisclosed by the proof in the case.
We do not think that this fact alone was sufficient to establish the falsity of the representations alleged, neither do we think that these representations had any legitimate connection with the credit afterward extended to the defendant. The representation was not made in contemplation of any new credit, or with a view of continued dealings between the parties, but was obviously made solely as a reason for non-compliance with the plaintiffs' request. No further dealings were had between the parties until the month of September thereafter, when the defendant again commenced to purchase goods of the plaintiffs.
There is nothing from which it can be inferred that the defendant, in making the representation in question, intended it as an inducement for a further credit with the plaintiffs, or from which he could have supposed that they regarded it in that view. While representations made by a party with a view of procuring credit with another may be held to apply to and affect subsequent credits extended by the vendor to the vendee, *Page 106 yet such representations, in order to have that effect, must be made in the course of the dealing and under circumstances from which it may be inferred that they were made with an intent to induce a continued credit. (Dambmann v. Schulting, 75 N.Y. 61. )
We do not think that these circumstances exist in this case, or that the representations can be referred to to support the imputation of the fraudulent intent alleged to have existed five months thereafter when opening a disconnected course of dealing. That intent must be found from the other circumstances appearing in the case, if it be found to exist at all, in connection with the purchases in question.
The credits alleged to have been fraudulently obtained by the defendant are stated to have been so obtained between September 6, 1882, and the 9th day of December thereafter.
It is further shown by the admission of the defendant that some time in the month of September, 1882, he had examined his books and discovered his insolvency. That he then found that he was owing about $2,200 more than his assets, besides an indebtedness of $13,000 to his father, which had existed for a number of years. It further appeared that in December the defendant made a general assignment to his father and brothers of all his property for the benefit of his creditors.
It is not alleged that any fictitious debts were entered in this assignment, or any property fraudulently withheld from the inventories, or but that the disposition of the debtor's property thereby made was fair and equal among his creditors.
No proof is given of the nature, extent or character of the defendant's business, or the amount or value of the assets passing under his assignment. There is proof that the place of business and fixtures of the defendant were sold, by his assignees, in December to one Guilfoyle for $1,500, but what part of such assets the "place and fixtures" constituted, nowhere appears. It may fairly, perhaps, be inferred from these facts, that the defendant was insolvent, and that he discovered this insolvency as early as the 1st day of October, 1882, but we *Page 107 do not think any thing further than this can fairly be inferred from them.
The time when the indebtedness in question accrued, except that it was between September 5 and December thereafter, does not appear; and for aught that is shown in the papers it may all have been created before the discovery of his insolvency by the defendant.
There is no proof in the case which even tends to show the existence of a fraudulent intent prior to this discovery.
The fraud charged against the defendant herein is of the nature of a crime, and cannot be presumed, but must be established by evidence. (Henry v. Henry, 8 Barb. 592; Ward v. Center, 3 Johns. 281; Jackson v. King, 4 Cow. 207.)
While it is true that it may be proved by circumstantial evidence, and the inferences legitimately deducible therefrom, yet the defendant is entitled, in the judicial consideration of the proofs, to the application of the rule, that the presumptions of the law are in favor of the innocence of the person accused.
A party, therefore, relying upon the establishment of a cause of action, or a right to a remedy against another, based upon the alleged commission of a fraud by such person, must show affirmatively facts and circumstances necessarily tending to establish a probability of guilt, in order to maintain his claim. When the evidence is capable of an interpretation which makes it equally as consistent with the innocence of the accused party as with that of his guilt, the meaning must be ascribed to it which accords with his innocence rather than that which imputes to him a criminal intent.
It is well settled in this State that an intent to defraud cannot be imputed to a party who contracts a debt knowing that he is insolvent, merely from the fact of his insolvency, and his omission upon a purchase of property upon credit to disclose such condition to his vendor. (Nichols v. Pinner, 18 N.Y. 295; 23 id. 264; Wright v. Brown, 67 id. 9; People's Bank v.Bogart, 81 id. 108.) A condition of known insolvency on the part of an intending purchaser of property, accompanied *Page 108 with an intention to acquire the property of his vendor without paying for it, constitutes such a fraud as will make the vendee liable to arrest in an action for the debt; but the intention not to pay can no more be inferred from the mere fact of insolvency, than the fact of insolvency can be inferred from the existence of an intention not to pay. In either case it is essential that the necessary facts be made out by competent evidence.
We do not think that upon the evidence in this case the intention can legally be imputed to the defendant, that he commenced the course of dealing which resulted in the debt sued for, with the intent not to pay for the property purchased; and, therefore, the orders of the General and Special Terms should be reversed, and the motion vacating the order of arrest granted, with costs.
All concur.
Ordered accordingly.