Belleville Pump & Skein Works v. Samuelson

52 P. 282, 16 Utah 234, 1898 Utah LEXIS 9

• Court: Utah Supreme Court
• Decided: February 24, 1898
• Docket: No. 841
• Status: Published

Opinion

Zane, C. J.:

This is an appeal from a judgment for the plaintiff against the defendants for the goods described in the complaint. The plaintiff, in Belleville, Ill., sold the defendant, the Sorenson & Neilson Furniture Company, a firm doing business in Salt Lake City, Utah, upon the latter’s order, the bill of goods in question, upon a credit of four months. After the goods were delivered; the plaintiff elected to rescind the sale, and brought an action to recover them, on the ground that the representations of the furniture company as to its assets, liabilities, and financial responsibility, upon which it relied, wére false and fraudulent. The issues were tried by' the court upon the evidence, and found for the plaintiff.

On tbe trial tbe plaintiff offered in evidence a written statement of tbe assets and liabilities of tbe furniture company, delivered by it to tbe Bradstreet Commercial Agency, in Salt Lake City, and by tbe latter communicated to tbe plaintiff in Belleville. Tbe footing of tbe items constituting tbe liabilities of tbe furniture company, as indicated by tbe figures under tbe column, when tbe statement was delivered to tbe commercial company, was $8,-563.45; but, when correctly added, tbe items only aggregated $5,'773.45. Through tbe $8,563.45, tbe commercial company drew a pencil mark, and under it wrote “$5,-773.45.” Tbe statement, as corrected, tbe commercial company delivered to tbe plaintiff. To tbe ruling- of tbe court in admitting tbe statement as changed, tbe defendant objected and excepted. Tbe figures of tbe respective items constituting tbe liabilities, with those of tbe assets, if correctly stated, showed tbe financial responsibility of tbe furniture company. Tbe erroneous footing did not. It indicated a mistake. Tbe report represented just what a correct footing of tbe items indicated. Tbe commercial agency bad no right to make any change in tbe import of tbe statement received from tbe furniture company. For any such change of meaning tbe latter would not be responsible; but the correction of a mistake in footing, apparent from tbe face of tbe paper, we cannot regard as a change of tbe meaning or its import. Tbe meaning of tbe report, when all considered together, was the same with tbe correction as without. Any alteration of a contract after delivery, by one party, without tbe consent of tbe other, changing its legal effect as to the party not consenting, renders it absolutely void. Mistakes in such papers can only be corrected with the consent of both parties, or when mutual, as to a mistake of fact, they may be reformed by a court of equity. Tbe same rigid rule cannot be applied to a report made by a business firm to a commercial agency for the purpose of obtaining credit.

The court did not err in overruling the objection to the admission of the report in evidence. Such reports by merchants or other dealers to commercial agencies are for the purpose of informing those whom they may ask to trust them of their financial standing and ability to pay debts they may contract. Such statements to commercial agencies, when communicated to persons relying upon them, have the same effect as when made directly to them; and the creditor so relying may rescind the sale, and demand a return of the property, when he finds the statements to be false, and bring suit to recover his property. Humphrey v. Smith, 39 N. Y. Supp. 1055; Mooney v. Davis, 75 Mich. 188; Bank v. Bamberger, 19 Am. St. R. 738; Eaton v. Avery, 38 Am. Rep. 389.

It is true that statements involving estimates of value —opinion, judgment, only — cannot be relied upon to avoid a sale; and such statements must be such as would be likely to deceive a prudent man in the light of all the circumstances within the seller’s knowledge. Benj. Sales (Bennett’s Notes) p. 443; Gregory v. Schoenell, 55 Ind. 101; Kendel v. Scott, 70 Cal. 514.

While some of the items of the statement relied upon in this case to avoid the sale involve estimates of value,— judgment only, — others involve statements of fact; and we think they were such as a reasonable man might believe under the circumstances attending the sale as shown by the evidence.

It is further urged that the furniture company, after purchase and possession, executed chattel mortgages on the property to the other defendants, without notice to them of the fraud or any intention to rescind. If a vendee in possession of property, by virtue of a sale, voidable because obtained by means of false and fraudulent representations, mortgages or sells it for a valuable consideration to another, who is without notice, the rule is that the right of such mortgagee or vendee is superior to that of the defrauded vendor. This rule is qualified, however, by another, based, as we think, upon the weight of authority as well as upon sound reason, which is, if the sum secured by the consideration of such subsequent sale is an antecedent debt, the right of such mortgagee or vendee cannot avail against that of the defrauded vendor electing to rescind. In that case the confidence involved in the creation of the antecedent debt could not have been induced by the voidable sale; and, if such fraudulent sale is rescinded, the antecedent debt remains due to the mortgagee or vendee, with the remedy for its collection. But if, in the transaction between the mortgagee or vendee and his mort? xgor or vendor, a new consideration is given, such as the surrender of security, the extension of time, or the surrender of any other right, or the incurring of any new liability, the mortgage or purchase will be valid against the defrauded vendor. Busenbarke v. Ramey, 53 Ind. 499; Woodburn v. Chamberlin, 17 Barb. 446; 20 Am. & Eng. Enc. Law, 591; Gilchrist v. Gough, 30 Am. Rep. 250; Jones, Chat. Mortg. (3d Ed.), §81; Cary v. White, 52 N. Y. 138; Port v. Embree, 54 Ia. 14; Thompson v. Van Vechten, 27 N. Y. 568.

The court below found — and there was evidence to support it — that the debts for which the new notes were given, and which the mortgages relied -upon were made to secure, were incurred long before the sale was made which the plaintiff seeks to set' aside. But it also appears that, after the voidable sale of the goods, the furniture company executed new notes for the antecedent indebtedness, and the mortgages relied upon by the defendants, on all the company’s property, to secure them, tbe legal effect of which, standing alone, would hare been to extend the time of payment of such indebtedness. The court, however, found that the mortgagees immediately went into possession of the mortgaged property, and continued to sell it, and apply the proceeds on the new notes. In effect, the court found that the sole purpose of the new notes, and the mortgages to secure them, was security, and not the extension of the time of payment, and that they were so treated by both parties to the transaction; and there is evidence in the record to support the finding. That being so, and this being a law case, we have no authority to disturb the finding. Walley v. Bank, 14 Utah 305; Johnston v. Meaghr, 14 Utah 426. The judgment is affirmed.

BaiitCh and MINER, JJ., concur.