Tree Plateau Co. v. Mount Vernon Mills, Inc.

22 A.D.2d 587, 257 N.Y.S.2d 733, 1965 N.Y. App. Div. LEXIS 4563

Opinions

Per Curiam.

In the Summer of 1960, defendant sold certain cotton duck fabric to Hession Textile Company (hereinafter “Hession”) under written contracts. The fabric was to be invoiced when ready for delivery, and if delivery was not taken immediately, the fabric was to be held by defendant in its warehouse for the account of Hession until delivery was requested. Plaintiff, late in 1960 and early in 1961, purchased the fabric from Hession in the name of a division of plaintiff corporation—Doria Textile Company (hereinafter “Doria”). That purchase on behalf of plaintiff was effected by Michael Hession and Jack Kamen, who were the principal officers of Hession. Plaintiff paid Hession for the goods in February, 1961. In November, 1961, defendant purported to rescind the sale of the goods to Hession. In the meantime, plaintiff had contracted to sell the goods—which it had purchased from Hession—to Seaboard Textile, Inc. On December 4, 1961, plaintiff advised defendant of the .sale to Seaboard and requested that defendant release the goods to that company. On December 6, 1961, defendant refused to do so. This action for replevin and conversion ensued. The Trial Justice found for the plaintiff.

There is no dispute as to the applicable principles of law in this case.

Footnotes

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* Under rule 1 of section 100 of the Personal Prop erty Law, title to the goods passed to Ilession as of the invoice dates even though the goods were not delivered. However, the title obtained by Ilession was a voidable one because of the provisions of sections 134,135 and 142 of the Personal Property Law. Under subdivision 1 of section 134 an unpaid seller had a vendor’s lien on the goods while in possession of them and a right to rescind the sale. Subdivision 1 of section 135 limited the vendor’s lien, inter alia, to the situation where goods had been sold on credit and the terms of credit had expired. There is no question in this case that the amounts owed by Hession to defendant were long past due when Hession resold the goods to plaintiff.

Under subdivision 1 of section 142 an unpaid seller, having a right of lien, could rescind the transfer of title and resume property in the goods where, among other things, the right to do so was expressly reserved in case the buyer should default. Unquestionably, defendant reserved such a right, for the order forms incorporated by reference the “Worth Street Buies” which gave the seller the power upon eight days’ notice by registered mail to cancel a sale and return the goods to stock if the buyer be in default over five days.

However, subdivision 2 of section 142 of the Personal Property Law provided that the transfer of title was not to be held to have been rescinded by an unpaid seller until the seller had manifested by notice to the buyer, or by some other overt act, an intention to rescind.

Beference should now be made to section 105 of the Personal Property Law which provided: 11 Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the [subsequent] buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller’s defect of title ”.

That section must, however, be read in connection with section 143 which stated that an unpaid seller’s right of lien was not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller had assented thereto.

With these unquestioned principles of statutory law in mind, what concerns us is whether the Trial Justice correctly applied them to the facts of this case. Essentially, there were three controlling issues of fact: (1) Was title transferred to plaintiff by Hession before defendant manifested its intention to rescind? (2) Was plaintiff a bona fide purchaser for value? (3) Bid defendant assent to the resale of the goods within the meaning of section 143 of the Personal Property Law, and thereby waive its vendor’s lien?

The majority of this court concurs with .the Trial Justice’s finding’s in favor of plaintiff on all of these issues. The correctness of the ruling below that Hession’s title was not attempted to be voided until November 22, 1961—many months after Hession had resold the goods to plaintiff —is beyond cavil.

On the issue of whether plaintiff was a bona fide purchaser of the goods for value, the Trial Justice found that Michael Hession and Jack Kamen, as principals of Hession, did not disclose to plaintiff or its Doria division that the goods had not been paid for by Hession and were thus subject to a seller’s lien on behalf of defendant. Since, at the time the goods were resold to plaintiff, Michael Hession and Jack Kamen were under 'contract with plaintiff to act as its purchase and sales agents, defendant contends that their knowledge must be attributable to plaintiff, and consequently plaintiff cannot be hold to be a bona fide purchaser.

As a general rule a principal is chargeable with the knowledge or notice to the agent received while the agent is acting within the scope of his authority. (3 Am. Jur. 2d, Agency, § 273; 2 N. Y. Jur., Agency, § 259.) However, there are a number of exceptions to this presumption of imputed knowledge. In the Restatement of Agency 2d (§ 274, Comment d) one such exception is stated to arise “where the agent obtains property on his own account and subsequently, as a vendor, transfers it to his principal ”. The instant case falls within the scope of that exception.

Another exception to the rule that the knowledge of the agent is to be imputed to the principal arises in those oases where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate the facts to the principal, and, on the contrary, warrant the inference that the agent will conceal or withhold the information. (Brooklyn Distilling Co. v. Standard Distilling & Distr. Co., 193 N. Y. 551, 555; Benedict v. Arnoux, 154 N. Y. 715, 728; Henry v. Allen, 151 N. Y. 1, 9-11; Hurley v. John Hancock Mut. Life Ins. Co., 247 App. Div. 547, 550-551; 3 Am. Jur. 2d, Agency, § 282; 2 N. Y. Jur., Agency, § 268; Ann. 104 A. L. R. 1246-1253.) Thus, whether viewed as falling within the exception concerning a transfer of property by an agent on his own account or the inference arising from a presumption that an agent will not communicate to his principal matters which the agent would necessarily conceal or withhold to cover his own fraud, the Trial Justice was justified in finding that the knowledge of the agents was not imputable to the plaintiff as their principal.

Finally, there remains the question as to whether the defendant assented to the resale of the goods within the meaning of section 143 of the Personal Property Law and waived its seller’s lien in accordance with section 137 of the Personal Property Law. A seller’s lien is destroyed if the seller agrees •to hold the property as a bailee for a subpurchaser. (3 Willis-ton, Sales [Rev. ed., 1948], § 509, p. 109.) In effect, the seller thus assents to the resale of the goods. We agree with the finding of the Trial Justice that defendant assented to the resale to Doria and waived its vendor’s lien. Such assent and waiver were properly inferred from verifications of inventory lists in May and October, 1961, in which defendant verified that according’ to its records defendant was holding the merchandise for the account of Doria. The subsequent attempt in November, 1961, to characterize the October verification as “ in error ” still did not relieve defendant from its previous admission in May of its attornment to Doria.

Moreover, the shipment of part of the goods to plaintiff’s customers was another indication of assent so as to deprive defendant of its vendor’s lien. The record shows that pant of the goods in question were sold by Doria and that defendant in May, 1961, complied with instructions to deliver such goods to Dori'a’s customers. This delivery of part of the goods to a customer of the subpurchaser was compelling evidence of an assent by defendant that it was holding the goods as a bailee for plaintiff. (See 3 Williston, Sales [Rev. ed., 1948], § 509, p. 109.)

The dissenting opinion of Justice Steves, is based upon a contrary version of the weight of the evidence on the issues of fact involved in this case from that arrived at by the Trial Justice. In our opinion, the findings of the Trial Justice on these issues are fully supported by the testimony and the documentary evidence, and the proper inferences to be drawn therefrom. The judgment should therefore be affirmed, with costs and disbursements to plaintiff-respondent.

Since this ease was tried before September 27, 1964, when the Uniform Commercial Code became effective, references are to the Personal Property Law rather than to the Uniform Commercial Code which displaced the relevant sections of the Personal Property Law.