Hunter v. Hudson River Iron & Machine Co.

20 Barb. 493, 1855 N.Y. App. Div. LEXIS 74

• Court: New York Supreme Court
• Decided: September 3, 1855
• Status: Published

Opinion

By the Court, C. L. Allen, J.

Several objections were taken by the defendants’ counsel on the trial of this action, and have been urged on the argument here, which it will be proper first to notice and dispose of in their order.

1. It is objected that the evidence of the purchase of the goods in question by Hears as the treasurer of the defendants, and by the direction and under the authority of the defendants, on the 18th of April, 1854, and that at that time the company was insolvent, was improperly received under the pleadings. The action was commenced under section 206 of the code, for the claim and delivery of personal property. The complaint is in the form of the old declaration in replevin in the detinet, and .charges that the defendants have become possessed of and wrongfully detain the goods and chattels in question. The plaintiffs proceed upon the ground that the title to the goods was never changed, but remained in them, up_ to the time of the commencement of the action. They claim to succeed, and must succeed, if at all, on this ground alone. Hence they endeavored to prove that the alleged purchase was made by Hears by the direction of the defendants while the company was largely insolvent. This was competent evidence, on the question of fraud. It is urged that the complaint is insufficient, in not averring a demand of the goods, and in containing no allegation of the insolvency of the defendants, or of any of the facts offered to be proved. This was not necessary. If the purchase was á fraudulent one, the plaintiffs still retained their legal right in the goods, unless, after discovering the act of fraud, they assented to the sale, either positively or by such delay in reclaiming them as would authorize the inference of an assent. The old cases fully establish the position that a sale and delivery of goods, procured through the false representations of the vendee in regard to his solvency and credit, passed no title whatever to the property, as between the parties, and the vendor might maintain either trover or trespass or replevin in the cepit or detinet, to recover their value, even though the actual possession Was in another. In such cases the declaration was sufficient if in the usual form, in those actions. (Ash v. Putnam, 1 Hill, 302. Cary v. Hotailing, Id. 311. Olmsted v. Hotailing, Id. 317. Matteawan Co. v. Bentley and others, 13 Barb. 641. Root v. French, 13 Wend. 570.) The latter case was relied upon by the defendants’ counsel to show the necessity of averring a demand, in the complaint. But it is believed that it establishes no such position. It decides with the plaintiffs that a fraudulent purchase of goods gives no title to the fraudulent purchaser, and that the vendor in such case may maintain replevin for the goods. It then goes further and affirms the principle that a bona fide purchaser from the vendee of goods obtained by fraud, without notice, will under certain circumstances, be protected. And, to maintain an action against him, a demand, in some cases, must be made before suit brought. But no such demand is necessary as against the fraudulent vendee. An action, in the nature of trespass, or for the wrongful detention of the property under sec. 206 of the code, may be maintained immediately; that section having been undoubtedly intended as a substitute for the old action of replevin. (6 How. .) Besides, in this case, no objection was taken, on the trial, of want of proof of demand.

The cases are somewhat conflicting as to what is necessary to be averred in the complaint in an action like the present, under the code. But I think the weight of authority is with the plaintiff, as to the form which he has adopted in this casé. A direct and issuable averment that the goods claimed were the property of the plaintiffs ; nothing being necessary on their part to be returned, in order to restore the defendants to the condition in which they were at the time of the sale, has been held to be sufficient. (Vandenburgh v. Van Valkenburgh, 8 Barb. 217. 13 id. 641.) It has been too often decided that facts, and not the evidence of facts, should be pleaded. The testimony in this case went to show that the goods were fraudulently obtained, and that therefore the title to the property was not changed, and I think was properly received. The defendants might have required the complaint to be made more definite and certain, under sec. 160 of the code. And even if it should be held to have been necessary to set out the facts more fully, I am disposed, after trial, and when the party has had the full benefit of any defense which he chose to make, to grant the plaintiffs leave to amend, so as to conform their complaint to the facts proved. That portion of the answer which avers that the goods in question were the property of the defendants is as general as the complaint. Neither party demurred, and both have gone to trial with a full understanding of their rights. Neither has been taken by surprise by the pleading of his adversary. A full and fair investigation has been had,upon the merits, and such an amendment should be allowed as will do substantial justice to both. (Code, §§ 169, 173.)

2. It is further objected that the testimony of the witness, Van Dyke was improperly received. It ivas material for the plaintiffs not only to show that the company was insolvent at the time of the purchase, but that the defendants, or Hears the agent, or both, knew of such insolvency. (McCrackan v. Cholwell, 4 Seld. 133.) The testimony of Van Dyke went to show this knowledge, on the part of both, and was therefore proper. It is said that the testimony only proved the declarations of Hears ; that such declarations were not within the scope of his authority, even if an agent, and were therefore hearsay and immaterial. Even if this were so, they were proper to show knowledge in Hears, who afterwards testified, on the part of the defendants, that he did not know, at the time of the purchase, that the company was insolvent, and that he made the declarations to the plaintiffs which were proved, in good faith. But Hears was acting, at the time of those declarations, within the scope of his authority. He was transacting business with the witness as one of the firm of Hammond & Co. to whom the company was largely indebted, as their agent. He was endeavoring to obtain an extension of time, and as one inducement to the witness to consent, represented to him that unless time could be obtained the company must stop business and give up their property for the benefit of their creditors; that their indebtedness was from 75 to $78,000, and their assets amounted only to about 30 or $40,000. This conversation occurred the first week in April, a week or fortnight only before the purchase from tbe plaintiffs. The testimony, in my judgment, was clearly admissible, and the authorities hereafter cited abundantly show it.

3. It is insisted that the proof offered, that all the directors present at the time of the statement made by Hears, except him, expressed their surprise at the condition of the company, ought to have been received. The court permitted the defendants to show that none of those directors knew of the insolvency of the company, at that time, which could have been done by calling upon them to testify, as Pratt, one of them, had done. But the expression of their surprise was a matter wholly immaterial, and was properly rejected. It was a matter of no consequence, as will be hereafter shown, whether the defendants knew of their insolvency or not. But if it were, their expressing a súrprise at Hears’ statement would not show a want of knowledge on their part.

4. The next objection interposed by the defendants is that the mortgage ivas improperly received in evidence. The certificate of the justice states that Hears testified that he was the treasurer of the company; that it was a corporation, but had no corporate seal; that he signed his name to the mortgage and affixed the seal (his seal) thereto, by the order and resolution of the trustees of said corporation, duly made and given in writing, and that the same was executed by him as such treasurer, for the purposes therein mentioned. , In Johnson v. Bush, (3 Barb. Ch. Rep. 207, 233,) where the same objection was taken, as here, that the resolution of the board of directors ought to have been produced and proved, the chancellor decided that formerly the execution of the instrument under the corporate seal, if there was one, (and under the seal of the treasurer if there was no corporate seal,) was prima facie evidence of authority to execute the deed, which might be overcome by showing, either directly or circumstantially, that there was no authority, either general or specific, and that now it may be overcome by showing that there was no resolution of the board. . The certificate in this case recites all that is necessary, in the first instance, and it would have been a very easy matter for the defendants to show that no such resolution had ever been passed, and that Hears swore falsely in so testifying. The mortgage was dated in January, 1854, but was not acknowledged until June of that year. Nevertheless,-Hears, who was the treasurer, knew of its existence when it was executed, and it was not pretended that it was not made on the day it purports to bear date. It was properly received in evidence, therefore, even if not sufficiently proved as the act of the company, to show a full knowledge in Hears of the condition of the company on the day of its date. And it is not to be presumed, in the absence of all proof to the contrary, that Beach, who was involved with Hears in large liabilities for the company, did not know of its existence. "This evidence was in a manner collateral, and was introduced to show an additional fact tending to prove the insolvency of the defendants, and a knowledge on the part of the company. It was not offered as between the parties to recover its amount, but to prove an act or acknowledgment of their own pecuniary condition. The mortgage was sufficiently proved for that purpose, and it was properly received in evidence.

These views dispose of all the primary objections, and bring us to the consideration of the only remaining question presented.

It is insisted that the motion for a nonsuit should have been granted, upon the grounds urged upon the trial. The first ground, in relation to the suEciency of the complaint, has been already disposed of. The second, that the declarations of Mears were made without authority, and which is the principal one relied upon, remains to be considered. It has been already remarked that Mears was the treasurer and general agent of the company and was particularly employed to make the purchases of the goods which from time to time were effected, in Hew York and elsewhere, on credit. That he had the custody and control of the books, the making of the notes, and the transaction in short of all the principal business affairs. This is evident not only from his own testimony but from his acts which had been and were from time to time acquiesced in and sanctioned by the company. The other oEcers and stockholders depended on him for all information, in relation to its condition. Hence the assembling, and calling upon him for the statement to which he testified, and to which allusion has been before made. It was conceded on the argument that Mears was the treasurer, and that his powers were those of a general agent. But it was urged that although he had the power to make a contract for the purchase of goods, by the defendants, on credit, and could make and execute all the necessary notes and other papers as to the quantity purchased and the times of credit and payment, yet he had no authority to speak as to the credit of the company, so as to bind them; without an additional special authority. And the naked proposition is put forth, (for the argument certainly amounts to that,) that an irresponsible agent, one intrusted with the management of the whole affairs of a corporation, who is perfectly cognizant of their condition, may be authorized by them to purchase goods on credit and to execute notes in their name for the amount of the purchase money, and yet if he makes false representations in regard to the condition of the company, who receives the goods thus fraudulently obtained, it may turn around, in an action brought by the vendors to reclaim them, and say, “ you trusted to the word of our agent. He had no authority to say we were solvent, or to speak of our credit, so as to bind us. He was acting entirely without the scope of his authority, and you must look to him for your remedy.” And this too by an association of men forming a partnership for particular purposes, and the agent whose acts are thus sought to be repudiated, one of the partners, having more knowledge of the affairs of the company than all the other associates. Neither the cases cited, nor the elementary writers quoted, sanction any such doctrine.-jf-A principal is liable for the fraud or misconduct of his agent; and he not only cannot take any benefit from a misrepresentation fraudulently made, but is bound to make the party compensation for the injury sustained. And this, although he may be innocent provided the agent acted within the scope of his authority. There need not be express authority to make a particular representation, but the authority may be implied, as incident to a general authority. (1 Parsons on Cont. 62, and notes. Angell & Ames on Corp. 291, 301, 302. Story on Agency, §§ 45, 46 and cases cited. 3 Seld. 364, 365. 11 Wend. 518.) The authority to Hears to purchase was authority to make the necessary representations as to the credit and solvency of the defendants ; just as much so as it was to receive the goods and accept the delivery for the company. Such authority was necessarily incident to the power to purchase on credit. The declarations were part of the res gestee, and were equally obligatory upon the principal as if made by himself. In no other way could there be any safety to third persons in dealing with an agent. The defendants, or those composing the company, knew perfectly well that one of the first facts necessary for them to establish to the satisfaction of a vendor, to obtain a credit, would be their ability to pay. That probably the very first question (as indeed it was) would be, what are your pecuniary circumstances 1 “ How are you getting along ?” Hears, acting under his authority as treasurer and agent, and with a full knowledge, as the jury found, answered these question in a manner to satisfy the plaintiffs of the ability of the company to pay, and succeeded in effecting his purchase. And even if the other defendants did not know, at the time, that his representations were false, they are liable upon the principle that of two innocent parties, the one shall suffer who, by his agent causes the injury, and will in all such cases receive the least harm. As in this case, the plaintiffs parted with their goods upon the false representations of the defendants’ agent, they were delivered to the defendants without consideration. And the plaintiffs by their action have reclaimed them, that is have received them back from the company who have paid nothing for them, and seek to hold them, upon the naked assertion that they are not bound by the declarations of the fraudulent agent—one who is a partner with them, and is to participate in the profits of his own fraud. This, clearly, cannot be the law, within any of the cases. The company held Hears out to the world as their principal agent, authorized and empowered to transact their business generally; and whether the principal is defrauded by his representations, or not, is a matter of no consequence, in the application of the principle as to liability to third persons. (Story on Agency, § 452.) The agent was apparently, and I might say necessarily, authorized to make the representations which he did, else the purchase could not have been effected. They were according to the usual course of business in purchasing goods on credit. Hears had so purchased before, and had no doubt made like representations. The defendants composing the company all well knew that the goods could not have been obtained, without them. They sent him to purchase, as a man on whose word reliance could be placed. And they as a corporation are liable for his acts and frauds while acting apparently within the limits of his authority, in the same manner as individuals. (See opinions in the case of The Mechanics’ Bank v. The New York and New Haven Rail Road Co., recently decided by the superior court of New York.)

I think the. defendants are also liable on another ground. Hears was not only the treasurer and agent of the company, but he was a member of it, a partner in a joint stock association ; and his knowledge and his acts were the knowledge and his acts of the partners, within the principle laid down in Jeffrey v. Bigelow, (13 Wend. 518.)

[St. Lawrence General Term, September 3, 1855.

It is said that a fair construction of the declarations of Hears would not authorize the plaintiffs to maintain this action. Those representations were undoubtedly made with an object, and that object was to induce the plaintiffs to believe the company ■were solvent and able to pay. The jury have so found, as a question of fact, and that and all other questions were properly and fairly submitted to them, as no exception seems to have been taken to the charge.

It is further said that there was no proof that the company knew, at the time, that'the representations of Hears were false. It has been shown that this was not necessary. But I am not prepared to say there was no proof on that subject. The jury have passed upon it, and found in favor of the plaintiffs on that as well as the other facts of the case. The defendants’ counsel must have overlooked the admission that the company was insolvent for many thousands of dollars, as well as the testimony of Hears and the other evidence in the case, when he gravely put forth as a 4th ground of nonsuit, that there was a total absence of proof that the defendants were insolvent at the time the representations were made. The evidence was abundant and overwhelming on that subject, and the jury have found, and well found, in my judgment, that Hears well knew the fact, when he made the purchase.

I can see no good reason, after a careful examination of all the facts in this case, for disturbing the verdict; and judgment must be rendered for the plaintiffs.

C. L. Allen, Bockes and James, Justices.]