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That the jury would have been warranted, from the whole evidence in this case, in finding that the assignment was made for the purpose of delaying and defrauding
creditors, may perhaps be conceded. The account which Pinner gave of the causes which led to his failure were not very satisfactory. He seems to have been a close buyer of goods, and to have done a good and safe business. The losses proved would scarcely account for so bad a failure.
But the question whether the purchase of the stock of goods, in the preceding April, from the plaintiffs, was fraudulent, was a very different one. The defendant Pinner had long been a customer of the plaintiffs. He made his purchases at the usual time. No representations were made by him to the plaintiffs, in regard to his condition, tending to mislead them and to induce them to give him a credit which they would otherwise have withheld. Some evidence, it is true, had been given, showing that his purchases were larger that spring than usual; but he explained that at the time, by stating that he designed to open another store and sell by wholesale, which statement is not claimed to have been untrue. So far, therefore, as the evidence discloses, it was the ordinary purchase by a customer with whom the plaintiffs had dealt for several years, and in whom they had the utmost confidence as a merchant and a man of business. The most, therefore, that could be claimed from the evidence, when the plaintiffs rested and the motion for a nonsuit was made, so far as it bears upon facts existing at the time of those purchases in April, is, that Pinner was in fact at the time insolvent, and knew that he was so. The motion, therefore, must have been denied, either upon the assumption that it was a fraud upon the plaintiffs for Pinner (knowing himself insolvent, or rather knowing that he was owing more than his assets were worth) to purchase a bill of goods without disclosing the condition of his affairs to the seller, or that the subsequent failure alone was sufficient evidence from which the jury might infer that the purchase was made with the design to cheat and defraud the plaintiffs out of the goods.
It was not contended, upon the argument, that the fact of known insolvency at the time of the purchase, alone, rendered it incumbent upon Pinner to disclose the fact to the vendors, to escape the imputation of fraud. The authorities, if any were needed, are all the other way. To constitute fraud in such cases, there must be an intention to cheat; at least, there must be intention to do an act, the necessary result of which will be to cheat and defraud another. But it is clear that such intention is not necessarily inferable from the fact that a man in good credit, going on with his regular business, makes his usual purchases for the purpose of continuing that business, after he is made aware that his property is not sufficient to pay his debts. It is not fraudulent in him to make reasonable efforts to retrieve his fortune and to extricate himself from his embarrassment. It is not unnatural that he should cling to the hope that better times would come — that to-morrow should be asthis day and much more abundant; and that with this hope, however delusive results may have shown it to be, he should have been impelled to buy more goods, contract new debts, and struggle on until some casualty should precipitate the catastrophe upon him, and he find himself in hopeless bankruptcy. This is an every-day experience in the commercial world; and it would be hard, indeed, if the unfortunate victim of hopes that looked to him at the time as reasonable, must, in his misfortunes, be judged by the actual instead of the possible results. The authorities do not sustain any such harsh doctrine, but the reverse. (Lupin v. Marie, 6 Wend., 77; Conyers v.Ennis, 2 Mas., 236; Mitchell v. Worden, 20 Barb., 253;Smith v. Smith, Murphy Co., 21 Penn., 367.)
Upon the question whether the purchase was made with the actual design not to pay for the goods, but to cheat and defraud the plaintiffs out of their value, it is not necessary in this case to examine whether the simple purchase of goods, with the preconceived design not to pay for them,
when there was no artifice or deceit used, is in itself such a fraud as to render the sale void. The important question in this case is, whether there was sufficient evidence of any such intent to be submitted to the jury. I think there was not.
Fraud must be proved affirmatively. The presumption is always in favor of innocence and not of guilt. "Odiosa et inhonesta nonsunt in lege præsumenda." The evidence should, therefore, be direct and strong, which would authorize the repudiation of a contract on the ground of fraud; especially in the case of an executed contract of sale, where the goods have been delivered and become mingled with the mass of the purchaser's other property. It should be upon no doubtful testimony, upon no equivocal circumstances, that the vendor in such a case should be allowed to repudiate the sale and reclaim the goods, thus gaining a preference over other creditors equally meritorious.
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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]
That the jury would have been warranted, from the whole evidence in this case, in finding that the assignment was made for the purpose of delaying and defrauding
creditors, may perhaps be conceded. The account which Pinner gave of the causes which led to his failure were not very satisfactory. He seems to have been a close buyer of goods, and to have done a good and safe business. The losses proved would scarcely account for so bad a failure.
But the question whether the purchase of the stock of goods, in the preceding April, from the plaintiffs, was fraudulent, was a very different one. The defendant Pinner had long been a customer of the plaintiffs. He made his purchases at the usual time. No representations were made by him to the plaintiffs, in regard to his condition, tending to mislead them and to induce them to give him a credit which they would otherwise have withheld. Some evidence, it is true, had been given, showing that his purchases were larger that spring than usual; but he explained that at the time, by stating that he designed to open another store and sell by wholesale, which statement is not claimed to have been untrue. So far, therefore, as the evidence discloses, it was the ordinary purchase by a customer with whom the plaintiffs had dealt for several years, and in whom they had the utmost confidence as a merchant and a man of business. The most, therefore, that could be claimed from the evidence, when the plaintiffs rested and the motion for a nonsuit was made, so far as it bears upon facts existing at the time of those purchases in April, is, that Pinner was in fact at the time insolvent, and knew that he was so. The motion, therefore, must have been denied, either upon the assumption that it was a fraud upon the plaintiffs for Pinner (knowing himself insolvent, or rather knowing that he was owing more than his assets were worth) to purchase a bill of goods without disclosing the condition of his affairs to the seller, or that the subsequent failure alone was sufficient evidence from which the jury might infer that the purchase was made with the design to cheat and defraud the plaintiffs out of the goods.
It was not contended, upon the argument, that the fact of known insolvency at the time of the purchase, alone, rendered it incumbent upon Pinner to disclose the fact to the vendors, to escape the imputation of fraud. The authorities, if any were needed, are all the other way. To constitute fraud in such cases, there must be an intention to cheat; at least, there must be intention to do an act, the necessary result of which will be to cheat and defraud another. But it is clear that such intention is not necessarily inferable from the fact that a man in good credit, going on with his regular business, makes his usual purchases for the purpose of continuing that business, after he is made aware that his property is not sufficient to pay his debts. It is not fraudulent in him to make reasonable efforts to retrieve his fortune and to extricate himself from his embarrassment. It is not unnatural that he should cling to the hope that better times would come — that to-morrow should be asthis day and much more abundant; and that with this hope, however delusive results may have shown it to be, he should have been impelled to buy more goods, contract new debts, and struggle on until some casualty should precipitate the catastrophe upon him, and he find himself in hopeless bankruptcy. This is an every-day experience in the commercial world; and it would be hard, indeed, if the unfortunate victim of hopes that looked to him at the time as reasonable, must, in his misfortunes, be judged by the actual instead of the possible results. The authorities do not sustain any such harsh doctrine, but the reverse. (Lupin v. Marie, 6 Wend., 77; Conyers v.Ennis, 2 Mas., 236; Mitchell v. Worden, 20 Barb., 253;Smith v. Smith, Murphy Co., 21 Penn., 367.)
Upon the question whether the purchase was made with the actual design not to pay for the goods, but to cheat and defraud the plaintiffs out of their value, it is not necessary in this case to examine whether the simple purchase of goods, with the preconceived design not to pay for them,
when there was no artifice or deceit used, is in itself such a fraud as to render the sale void. The important question in this case is, whether there was sufficient evidence of any such intent to be submitted to the jury. I think there was not.
Fraud must be proved affirmatively. The presumption is always in favor of innocence and not of guilt. "Odiosa et inhonesta nonsunt in lege præsumenda." The evidence should, therefore, be direct and strong, which would authorize the repudiation of a contract on the ground of fraud; especially in the case of an executed contract of sale, where the goods have been delivered and become mingled with the mass of the purchaser's other property. It should be upon no doubtful testimony, upon no equivocal circumstances, that the vendor in such a case should be allowed to repudiate the sale and reclaim the goods, thus gaining a preference over other creditors equally meritorious.
I have not been able to find that kind of evidence in this case. As I have before suggested, I find nothing in the circumstances attending the purchase of the goods that should be deemed to indicate a fraudulent design not to pay for them — nothing which should be submitted to a jury upon that point. If, therefore, there was any evidence at all which ought to be submitted to establish the allegation of fraud in the purchase, it must be found in the fact of the assignment and the circumstances attending it. The plaintiffs showed that the defendants did not agree in regard to the amount of indebtedness from Pinner to Michael and the consideration for such indebtedness, and that Pinner did not explain in the most satisfactory manner the causes of his failure. This is about all the evidence given tending to cast any suspicion upon the assignment itself. It was all relevant upon the question whether the assignment itself was honest or dishonest — whether it was an honest appropriation by Pinner of his property, for the purpose of paying his debts, or whether it was a device for the purpose of delaying and defrauding creditors. And if there had been
an issue in the case involving these questions, there was perhaps evidence enough to submit to a jury upon such issue; but it seems to me they did not alone, unconnected with other circumstances of suspicion at the time, by any natural or necessary inference, bear at all upon the question whether the goods that were bought some four months previously were bought with the fraudulent design of not paying for them. The inferences by which the two transactions are sought to be connected are not natural, but forced. There is no natural inference, because an assignment was made in August, that the party intended, the previous April, to assign. And if we may infer from the fact of insolvency, in August, that Pinner was insolvent in the previous April, and upon this also infer that he knew it, it by no means follows that he knew that he should be unable to continue his business and should be compelled to assign. And if it be assumed that the assignment was fraudulent (and unless that be assumed there is nothing at all in the plaintiffs' case), there is no necessary or natural inference that the fraudulent design was formed some four months previous to carrying it into execution. The natural inference would be that the fraudulent design was formed, if at all, about the time that it received outward expression in the form of an assignment. It should require something more than the fraudulent transaction itself, something pointing to a preconceived design, to authorize the ante-dating such design so long before. There should be some affirmative proof of such anterior fraudulent design on the part of the purchaser, before the vendors should be allowed to thus repudiate the sale and gain a preference over other creditors. And as I have been unable to find any such evidence in the case, I think the learned justice erred in refusing to grant the motion for a nonsuit, and that the defendants' exception was well taken.
I think the court also erred in refusing to charge that the omission of Pinner to disclose his circumstances was not sufficient alone to render the purchase fraudulent.
As the case stood, especially after the defendants had proved that Pinner had paid some $28,000 of debts between April and the time of making the assignment, it was difficult to perceive upon what ground fraud in the purchases could be predicated, unless it was upon the assumption that he was bound to disclose his circumstances. It was perfectly proper, therefore, for the counsel for the defendants to require a ruling from the court, one way or the other, upon that proposition, and the judge should have responded to that request.
Other exceptions were taken which were argued; but the conclusion at which we have arrived, upon those already considered, makes it unnecessary to examine them.
The judgment must be reversed and a new trial granted.