Loeb & Brother v. Flash Bros.

65 Ala. 526

• Court: Supreme Court of Alabama
• Decided: December 15, 1880
• Status: Published

Opinion

STONE, J.

— In instructing the jury as to the measure ot damages in this case — an action of trover — the City Court used the following language : “If the jury believe from the evidence that the sugar is worth now one cent per pound more, and the molasses ten cents per gallon more, than the prices stated in the account attached to the deposition of Flash, this additional, value should be added to the value stated in said account, and their verdict should be for the whole sum thus ascertained.” The prices stated in the account were the proximate value of the goods, when they went into the possession of the defendants. A wrongful conversion of the goods of another does not divest the title of the owner, or clothe the wrong-doer with a right or title in the'thing converted. A suit and judgment for the plaintiff works no change of ownership. Payment of a judgment thus recovered consummates the transfer, and vests the title, from that time, in him who has converted it. — 1 Addison on Contracts, 441-2; Firemen’s Ins. Co. v. Cochran, 27 Ala. 228; 2 Brick. Digest, 488, § 13. The right of property remaining in the plaintiffs all through the pendency of the suit, every moment the chattel was detained wrongfully from them was itself a conversion; and hence a large latitude is allowed in fixing the precise time of the wrongful act. Out ol this grew the principle, that in assessing damages the' jury had the entire latitude between the first act of conversion and the trial. The rule is thus stated in Jenlám v. McGonico, 26 Ala. 213 : “ The true measure of damages, in an action of trover, where the thing converted has a fixed value, is that value at the time of conversion; and the jury may give interest upon it. If the value is fluctuating, the jury may take its highest value at any time between the conversion and the trial.” — See, also, Strong v. Strong, 6 Ala; 345; Tatum v. Manning, 9 Ala. 149; Lee v. Matthews, 10 Ala. 688; Ewing v. Blount, 20 Ala. 694.

There are strong reasons for leaving this question discretionary with the jury. First: Trover is, to some extent, an equitable action, and many circumstances may enter into the transaction, requiring either full damages, or mitigating defendant’s conduct and consequent liability to simple compensation.— Williams v. Crum, 27 Ala. 468; Lee v. Matthews, 10 Ala. 682; Gray v. Cochran, 8 Port. 191; Conner v. Allen, 33 Ala. 515; Dent v. Chiles, 5 St. & Por. 383. Second ; Conversions are sometimes willful and wanton; while at other times they are innocently perpetrated, by becoming the ignorant bailee or receiver of goods, which had been converted by another. These varying phases of the question render it eminently proper that juries should be clothed with a discretion, in determining whether they will give to plaintiffs the benefit of a rise in the value of the chattel sued for, which took place after the first act of conversion. We adhere to the rule declared in JenJeins v. McGonico, both because it has been a long-settled rule in this court, and because we approve it in principle. The City Court erred in the charge copied above.

As what we have said above necessarily workes a reversal of this case, we propose, in the farther progress of this opinion, to notice only the questions which we think should enter into the second trial. We do not propose to consider all the questions in detail. There appears to be no controversy, or contrariety of opinion, as to the right of Flash Brothers to maintain the action of trover, if the suit were against Munter Brothers, provided Munter Brothers obtained the goods, when they were insolvent, or in failing circumstances, with no intention or reasonable expectation of paying for them, and without disclosing their condition, or furnishing the means of such information to Flash Brothers. We think this a sound principle — sound alike in law and in morals — and we adopt it as a necessary safeguard in commercial dealings. In Donaldson v. Farwell, 93 U. S. (3 Otto) 631, the principle is thus stated: “ The doctrine is now established by a preponderance of authority, that a party not intending to pay, who . . induces the vendor to sell him goods on credit, by fraudulently concealing his insolvency and his intent not to pay for them, is guilty of a fraud, which entitles the vendor, if no innocent third party has acquired an interest in them, to disaffirm the contract, and recover the goods.” And in anote to section 440, Amer. ed., of Benjamin on Sales, it is said, this rule prevails when the purchaser did not intend to pay, “ although there were no fraudulent misrepresentations, or false pretenses.” Yery many authorities are cited in support of this proposition; but there are respectable authorities the other way. — See, also, the numerous authorities cited on the briefs of counsel. The principle we are discussing is of rather modern growth, but it is a growth upward in commercial morals. No greater wrong could be inflicted on a wholesale dealer, than for an insolvent buyer to obtain his merchandise on credit, without intention or means to pay for them, and without disclosing his true condition to the seller. We are content, however, to leave the principle as we have stated it above.

It is contended for appellants that the principle stated above does not apply to this case, because Munter made no false representations of his solvency — in fact, made no representations at all; that he was not interrogated as to his financial condition, and therefore committed no fraud, either by false statement, or by concealment; that he was asked for a reference, gave a reliable one, and the response of the referee was unsatisfactory. What they contend is, that with full knowledge of the commercial standing of Munter Brothers — knowledge obtained from their own correspondent, as well as from the referee furnished — Flash Brothers, choosing between evils, concluded to take the risk, as to the goods which had been shipped' to Montgomery through mistake, and therefore made the sale with full knowledge they were extending credit to an unreliable house. In connection with, and support of this proposition, it is claimed that no sale was made to Munter Brothers until after the goods reached-Montgomery.

The facts of this case, in brief, are, that Flash Brothers were merchants in New Orleans, doing business as “wholesale grocers, general commission and produce merchants.” Munter Brothers and Loeb & Brother were each mercantile firms, doing business in Montgomery, their stores and places of business being in said city. On the 26th and 27th November, 1878, Munter Brothers applied to Flash Brothers to purchase merchandise on thirty days’ time, their credit rates of sale. Flash Brothers required a reference, and Farley, Spear & Co., bankers in Montgomery, were given as referees. Flash Brothers inquired of Farley, Spear Co., by telegram, and, on tbe 27th November, received a reply which was not satisfactory. They immediately wrote to Munter Brothers that they could not fill their order, without such acceptance as they, Elash Brothers, could use. By some mistake, however, part of the goods ordered had been shipped to Munter Brothers at Montgomery. This shipment could not have been earlier than the 27th. The letter of Elash Brothers, declining to fill the order, was probably received by Munter Brothers before the goods arrived, as mail trains notably out-travel freight trains. We are not informed by the record when the letter was received, or when the goods arrived. After the goods arrived in Montgomery, date not given, Munter Brothers wrote Elash Brothers, informing them of their arrival, and directing them to draw on them at thirty days. Elash testifies he did this, “as the goods had gone.” The letter inclosing this draft is dated December 6th, 1878 ; and we suppose this was soon after the receipt of Munter’s letter, giving notice of the receipt of the goods. The writing and mailing of this letter, December 6, must be treated as the consummation of the contract; it was then their two minds came together. All before that was negotiation. The argument here made is, that inasmuch as Elash Brothers, before they agreed to treat the transaction as a sale, had full information and warning of the commercial stahding of Munter Brothers, they could not be, and were not defrauded.

If this case stood alone on the facts summarized above, we would be inclined to agree with appellant’s counsel; at least, in the absence of facts and circumstances tending to show to the jury that, at the time of making the purchase, Munter Brothers, being insolvent, either did not intend to pay for the goods, or had no reasonable expectation of doing so. Of course, what their intentions, or reasonable expectations were, could rarely be the subject of positive proof. These inquiries would rest with the jury, on a proper-weighing of all the facts and circumstances in evidence. But, on the trial of this case, it was shown that, at and before the arrival of the goods in Montgomery, Munter Brothers were considerably indebted to Loeb & Brother by account, which the latter were pressing for payment; and that when the goods arrived, they were not carried to the store of Munter Brothers, but were carted directly from the railroad to the store of Loeb & Brother, and placed therein as the merchandise of the latter. A credit was allowed and entered on the outstanding account of Munter Brothers by Loeb & Brother, for the amount of the original cost of the goods, but no credit was allowed for the expense of railroad transportation. Cunningham, agent of Elash Brothers, who visited Montgomery December 25th, to look after the interest of his employers growing out of this transaction, testified, “ that he received information that the sugar and molasses [the articles bought] had been sent from the railroad depot in Montgomery, directly to the store of defendants, Loeb & Brother ; that he called upon defendants, who declined, upon his first visit, to acknowledge that they had ever received the sugar and molasses; stating, in response to his inquiries, that they did not know whether they had received it or not from M. Munter & Brother; but that upon a subsequent call upon them, an hour or two later, they stated they had the sugar and' molasses, that it was their property, and that they had paid their money for it.” The testimony does not inform us whether, at the time Munter Brothers wrote Flash Brothers the goods had arrived, they had been carted from the depot to the store of Loeb & Brother, or whether the removal was made afterwards. The fact, however, that they were never carried to the store of Munter Brothers, but went directly to the store of Loeb & Brother, tends to show that at, or before their arrival, it was agreed or understood that they should be so delivered, and thus used in part liquidation of the account of Munter Brothers with Loeb & Brother. On such testimony, if believed, and not rebutted, a jury would feel -authorized to find there had been such agreement, dating back at least to the time of the arrival of the goods, if not to an earlier date.

When a retail merchant buys in quantity from a wholesale dealer, the ostent of the transaction is, that he buys to sell again in the regular course of his business. The profits of his enterprise consist in the sum of his sales, less the cost of his merchandise and the expense of the business. If, at his own expense of time and money, he visit a distant mart, and there purchase goods, ship them, and, before receiving them actually into his possession, sell them to another merchant at cost, making no charge for transportation, it needs no calculation to show that this is a losing business. Legitimate time-purchases by merchants are ordinarily made on the expectation, in part, that by sales of the merchandise the purchaser will put himself in funds, with which to pay his own debt contracted in the purchase. If, instead thereof, he dispose of them in gross to another merchant, not at profit, but at a loss, — not for money, but in payment of an antecedent debt; and if he is at the time in failing or insolvent circumstances, this, unexplained, tends to show that he did not intend or expect to pay for the goods.

We state the following as legal principles applicable to the testimony bearing on the question of sale by Flash Brothers to Munter Brothers, and the sale by the latter to Loeb & Brother. The jury should have been instructed to inquire, first, whether at the time of the purchase, Munter Brothers intended, or expected to be able, to pay for the goods; second, whether Munter Brothers, before they wrote, informing Plash Brothers of the arrival of the goods, had sold, agreed to sell, or determined to turn over the goods to Loeb & Brother, and whether the goods were in fact delivered directly to Loeb & Brother from the railroad depot; third, whether,, at the time of the purchase, Munter Brothers were insolvent, or in failing circumstances. If these three propositions be found by the jury, the first negatively, and the other two affirmatively, then it was a fraud on Plash Brothers, if Munter Brothers so purchased and received the goods, without informing them of the disposition they had made, or intended to make of the goods, to Loeb & Brother; Which fraud would authorize Plash Brothers to renounce the sale, and sue in trover for the goods. Such fraud would render the contract voidable, at the option of Plash Brothers, seasonably expressed.

It is contended, however, that Loeb & Brother are innocent purchasers, and that this suit can not be maintained against them. Merely entering a credit on an account, past due, without surrendering any thing valuable, would not, under any circumstances, constitute them bona fide purchasers, so as to defeat an action such as this. But we go farther. Receiving the goods under the circumstances the testimony tends to prove, and on the terms this record discloses, was such a wide departure from the ordinary methods of mercantile transactions, as to put Loeb & Brother oh inquiry into the circumstances attending Munter Brothers’ purchase, and charges them with notice of all information which legitimate and faithful inquiry would have led to. They can claim nothing on the alleged ground of bona fide purchase.

It is contended for appellants, that the City Court erred in allowing evidence to be given of other transactions about that time between Munter Brothers and Loeb & Brother. Ve do not think the City Court erred in this. There was testimony before the jury, sufficient to raise the inquiry by that body,- whether or not there was a common purpose or conspiracy between Munter Brothers and Loeb & Brother, to obtain the merchandise from Plash Brothers, with no intention or expectation of paying for them. On questions of conspiracy, when enough has been shown to authorize the jury to pass on it, the rules for the introduction of evidence are very liberal. The acts of each conspirator become the acts of all. We think a sufficient predicate had been laid in the unusual features of this transaction, to justify inquiry into other dealings between these parties, had about the same time. — 1 Greenl. Ev. § 111; Freeman v. Scurlock, 27 Ala. 407. Great latitude is also allowed, in proving the fact of insolvency.— Graham v. Lockhart, 8 Ala. 9.

A question asked witness Boothe was objectionable. Tanner v. Louisville & Nashville Railroad, 60 Ala. 621. It is not shown, however, that this question elicited any answer. Rupert v. Elston, 35 Ala. 79. We do not find any error in the admission of evidence, unless Boothe gave evidence in answer to the question noticed above.

There is nothing in the objection made, that Flash Brothers, soon after receiving the accepted draft on Munter Brothers, indorsed and transferred it to Hibernia National Bank. An act like this, to constitute ratification, must be done with knowledge of the facts which constitute the fraud. There is no evidence that Flash Brothers knew the goods, on their arrival, went immediately into the possession of Loeb & Brother, until their agent visited Montgomery, December 25th. — Thompson v. Lee, 31 Ala. 292; Foster v. Gressett, 29 Ala. 393; 1 Lead. Cases in Eq., 4th ed., 833; et seq.; Bigelow on Fraud, 184. When Flash Brothers received the draft back from the bank, and again became the owners of it, their rights were re-instated, as if they had never negotiated the paper. — Bankhead v. Owen, 60 Ala. 457.

Reversed and remanded.