
    Henry A. Gowing et al., Respondents, v. John Warner et al., Appellants.
    (Supreme Court, Appellate Term,
    February, 1900.)
    1. Replevin — By vendors against purchasers, with notice, from fraudulent vendees — Notice — Good faith — Valuable consideration.
    Vendors and partners who have been induced to sell goods by the false representations of their vendees, as to their solvency, may maintain replevin against persons who purchased the goods from the vendees with knowledge of the fraud.
    After the vendors have proved the fraud, they may rest and the defendants must then prove, not only that they purchased in good faith, but also that they paid value.
    Direct proof is not necessary to establish the fact that the defendants had actual notice of the fraudulent intent of the original vendees, and notice thereof may be inferred from the circumstances which surround the entire transaction.
    Where the defendants are shown to have taken the goods in question from the vendees at twenty-five per cent, below the inventory price, the question, whether the transfer was for a valuable consideration, must be submitted to the jury.
    3. Same — Partner bound by knowledge of his copartners — Interest in the event.
    Although the evidence of one partner of the defendants’ firm fails to disclose that he had any knowledge of the fraud in the transfer, this cannot discharge him, as he is bound by the knowledge of the fraud which his partners had.
    The testimony of the partner may be disregarded by the jury, as he is an interested party.
    3. Same — When complaint need not show wrongful detention — Code Civ. Pro., | 1731.
    Where the taking of chattels was tortious, the complaint, in an action to recover possession of them, need not set forth facts showing that their detention was wrongful.
    Section 1721 of the Code of Civil Procedure does not apply to such a case.
    
      4. Same — Payment of value cannot protect a sale where there was an absence of good faith.
    Where the jury have found that the. defendants were not purchasers in good faith, it cannot avail the defendants that they were to some extent purchasers for value.
    Gowing v. Warner, 29 Mise. Rep. 593, affirmed.
    Appeal by the defendants from a judgment of the City Court of New York, affirming a judgment entered in plaintiffs’ favor for $1,791.76, upon the verdict of a jury.
    The opinion states the nature of the action and the material facts.
    L. A. Serviss (Emanuel J. Myers and Leonard Bronner, of counsel), for appellants.
    Gruber & Bonynge (Abraham Gruber and T. B. Chancellor, of counsel), for respondents.
   Giegerich, J.

The action is to recover possession of certain goods, or their value, the sale and possession of which, it is alleged, were induced by the fraudulent representations of Gerrish & Co., to the plaintiffs, as to the former’s financial responsibility. The defendants claim title under a hill of sale, whereby the said firm sold to them, their stock in trade, including the goods received from the plaintiffs, for $16,144.22, payable as follows: $1,000 in cash, defendants’ promissory note for $'3,355.53, payable in three months, the satisfaction or discharge of an indebtedness of the said firm to the defendants amounting to $3,554.87 for goods sold and delivered, and the balance by assuming certain debts and obligations owing by Gerrish & Co. to certain persons named.

The uncontroverted proof amply supports the finding of the jury, as is assumed from their verdict, that the sale of the goods in suit was induced by the fraudulent representations of said firm as to its pecuniary responsibility, and that when purchasing they had no reasonable ground to believe that they would be able to pay. Eor the purpose of inducing the plaintiffs to make the sale, Gerrish &■ Co. stated to one of them, Sawyer, that the financial condition of the said firm was in better condition than the year previous, and that its indebtedness had been reduced and was not over $8,000, referring Sawyer to the defendant Warner, since deceased, who was then a member of the defendants’ firm, for confirmation of the truth of these representations, he (Warner) having lately gone through its hooks and being familiar with its condition according to statements then made by the said firm. Warner, when called upon by Sawyer, stated in response to a question put by the latter touching Gerrish & Co.’s condition, “ that Gerrish & Co. were all right.” After the delivery of the goods, the plaintiffs discovered that the representations so made to them were false, and, upon making such discovery, they brought this action. It appears, from the evidence, that,-at the time these representations were made,'the indebtedness of Gerrish & Co. greatly exceeded $8,000, and that they were hopelessly insolvent. The payment of the claim of one of the creditors, the William D. Barnes Commercial Company, amounting to $14,000, for money loaned and advanced long prior to the sale of the goods in controversy, had been secured by the transfer to it of all the firm’s accounts. The firm, at the time of such sale, was also indebted to three different concerns in sums amounting in the aggregate to $1,825.54, and to the Agawam Manufacturing Company in the sum of $4,000, of which $2,000 had matured at that time. It also appears that when such goods were purchased, or shortly thereafter, actions were commenced against the firm by creditors for debts contracted a long time prior thereto, to whidh no defense was interposed and judgments were entered by default, which were not paid. The goods in suit were purchased despite the fact that Gerrish & Co. knew they would probably all b¿ seized under executions issued on such judgments. In this situation, of which.the defendants seem to have been fully advised, and, as it would appear, in anticipation of the entry of these judgments and the issuance of executions thereupon, the said firm transferred to the defendants all its stock in trade, including the goods in question.

The plaintiffs, having thus proved fraud in the purchase of the goods in controversy by Gerrish & Go., were entitled to rest, even as against the defendants, upon whom then devolved the burden of showing affirmatively that they were bona fide purchasers for value. Devoe v. Brandt, 53 N. Y, 462; Moyer v. Bloomingdale, 38 App. Div. 227. The plaintiffs, however, before resting, had already presented sufficient proof from which it might fairly be inferred that the defendants had knowledge of the fraudulent intent on the part of their transferrors to hinder or defraud their Creditors when they transferred to them their entire stock in trade. The defendants sought to show their good faith in the transaction by the testimony of one of their number (De Forest), regarding the consideration given for such transfer, to the effect that he had no knowledge of the sale of the goods in question by the plaintiffs to their transferrors, and by the further testimony of their salesman respecting the amounts realized upon the sale of the stock and from collections of book accounts, and the disposition made of the same and that the goods so transferred were taken at. twenty-five per cent, below the invoice price thereof. Where property is transferred, as well for a present advance as to secure an antecedent debt, the transferee is protected under the rule applicable to the purchase by a third person for a new and valuable consideration (Hyde v. Bloomingdale, 23 Misc. Rep. 728, 730), which rule is that a transfer of property for value will not be vitiated unless the purchaser had notice of the fraudulent intent of the seller to hinder or defraud his creditors. Parker v. Conner, 93 N. Y. 118; Bush v. Roberts, 111 id. 278; Wilson v. Marion, 147 id. 589. There is thus presented for consideration the questions whether the defendants paid a fair consideration for the stock in trade so transferred to them, and whether, when they accepted such transfer, they had knowledge of the intention of Gerrish & Co. to defraud their creditors. The evidence, respecting the first proposition, does not, in my opinion, conclusively show that full value was given for the goods so transferred. There were many circumstances from which inferences to the contrary might be drawn. Thus it appears from the defendants’ own evidence that such goods were taken at twenty-five per cent, below the inventory price. True, they did not even realize that price, but the record fails to disclose the time when, and the manner in which, they were sold; and what efforts, if any, the defendants made to obtain the best prices therefor. Under these circumstances, the question whether or not the transfer was for valuable consideration was for the jury. Bagley v. Bowe, 105 N. Y. 171. Assuming, however, that the state of the evidence was such that the jury had no other alternative but to find that the price paid for such transfer was adequate, there nevertheless remains for consideration the sufficiency of the evidence adduced with respect to the defendants’ alleged knowledge of the fraudulent intention of their transferrors. While clear evidence of the existence of a fraudulent intent is necessary to overcome the presumption of honest motives, arising from the payment of a fair consideration (Billings v. Russell, 101 N. Y. 226; Nugent v. Jacob, 103 id. 125), yet the plaintiffs were not required, even if such payment had been shown, to establish by direct proof that the defendants had actual notice of the fraudulent intention on the part of their transferrors, but such fact may be inferred from the circumstances surrounding the entire transaction. Parker v. Conner, supra; White v. Benjamin, 150 N. Y. 258, 265. As was said by Vann, J., who spoke for the court, in the last cited case (p. 265): Fraud is one of the broadest issues known to the law, for it can seldom be proved by direct evidence, but is dependent upon circumstances which, separately considered, may be quite immaterial, but when combined are not only material but have great persuasiye force. 1 Wheat. Ev., § 33. The facts in an issue of commercial fraud are frequently drawn with difficulty from hostile witnesses, whose effort is to conceal- as much and reveal as little of the truth as their conscience and skill will permit.” The latter portion of these remarks is peculiarly applicable to the case at bar, and especially to the testimony given by the attorney for the defendants, who, when called to the stand by the plaintiffs, testified, that when he drew the bill of sale, the books of account of Gerrish & Go. were in the defendants’ hands. It would seem from this testimony, as well as from other facts, which need not be detailed, that the defendants, or some of them, had knowledge of the said fraudulent intention of their transferrors, when they transferred their entire stock in trade to them.

While the record fails to disclose any evidence of De Forest’s participation in the fraud, he is nevertheless bound by the knowledge which his partners may have had of the fraudulent intention of Gerrish & Co. to hinder or defraud their creditors. 2 Bates Par., §§ 389-393 and citations. At all events, under the circumstances, it was incumbent upon all the defendants to show that they did not know of the fraudulent motives of their transferrors. This they failed to do. As seen, the nearest approach thereto was the testimony of the defendant De Forest to the effect that he did not know of the purchase of the goods in controversy, by the said firm from the plaintiffs, but no testimony whatever was -offered that neither of the defendants had any knowledge or belief that the transfer, to them, by Gerrish & Go., was made with intent to hinder or defraud the creditors of the latter. Apart from this, the testimony of De Forest, by which the defendants endeavored to show that they did not have such knowledge, being .that of an interested party, was not conclusive, and the jury were at liberty to disregard it. Moyer v. Bloomingdale, supra.

The question of the bona fides of the transaction was fairly submitted to the jury, upon all the evidence, which warranted them in finding,- as they did, that when the transfer in question was made the defendants knew that their transferrors intended to defraud their creditors, that the defendants participated in and actually furthered such fraudulent design, and hence that they were not bona fide transferees for value.

The sufficiency of the amended complaint was directly challenged upon the trial by the defendants, who unsuccessfully sought to exclude testimony tending to show knowledge on their part of the fraud perpetrated by Gerrish &. Co. against the plaintiffs, in the original purchase of the goods in suit, as well as the circumstances under which such goods came into their possession. The defendants excepted to such ruling and likewise to the denial of the motion to dismiss the complaint, made when the plaintiffs rested, and renewed at the close of the case. As already observed, the plaintiffs, upon proving the fraud of Gerrish & Co. in purchasing the goods in question, cast upon the defendants the burden of proving the bona fides of the said transfer, and hence were not called upon to give any testimony upon this head until the latter had offered evidence as to the fairness of the. consideration for such transfer. But as the objection applies to the original purchase as well as to the transfer in question, a consideration of the point so urged is deemed proper. The amended complaint alleges that the plaintiffs are the owners of the goods in suit and entitled to the immediate possession thereof; that the sale and delivery of the goods by the plaintiffs to Gerrish & Co. was made in consequence of the false and fraudulent representations of the latter to the former, and their reliance thereon; that “the defendants obtained possession thereof by virtue of an alleged bill of sale given to them by the said Margaret J. Gerrish,” and that, prior to the commencement of this action, the plaintiffs demanded from the defendants the immediate return of said goods, which they refused, and that the latter wrongfully detained the possession of the same from the plaintiffs.” The defendants maintain that the said pleading does not comply with the provisions of section' 1721 of the Code of Givil Procedure, which provides: “ Where the complaint contains a sufficient statement of the plaintiffs title, a general allegation, that the defendant wrongfully took the chattel, is sufficient, without setting forth the facts, showing that the taking was wrongful. Where the taking of the chattel is not complained of, hut the action is founded upon its wrongful detention, the complaint must set forth the facts, showing that the detention was wrongful.” It is well settled that the taking of goods, upon fraudulent representations, is a tortious taking. Acker v. Campbell, 23 Wend, 372; Cobbey Repl., § 503. Hence the complaint in an action of this character need not set forth the facts showing the wrongful detention. But, assuming that these views are erroneous, the question is whether the above-cited section of the Code applies to a case like this. That section was enacted as a substitute for 2 Revised Statutes, 528, part 3, chap. 8, title 12, § 36. See Throop’s Anno. Code, note under § 1721. The section of the Revised Statutes, so quoted, reads as follows: “ Where the original taking of the goods is not complained of, but the action is founded upon the wrongful detention of such goods, the declaration shall be conformed to the writ, and shall allege, with requisite certainty of time, place.and value, that the defendant received the property described in the writ from the plaintiff or from some other person (naming him) to be delivered to the plaintiff when thereunto after-wards requested; and that the defendant, although requested so to do, has not delivered the same to the plaintiff, but refuses so to do, and detains the same property to the damage of the plaintiff.” It' will be perceived that the language of the first part of the last-cited enactment is almost identical with that of the last sentence of section 1721 of the Code, supra. These provisions, when read together and compared, clearly evince the legislative intention to limit the application of the latter portion of this section of the Code to a case where the defendant came rightfully into the possession of the chattel, but wrongfully detains the same. These views are supported by adjudications in actions to recover the possession of chattels claimed to have been obtained fraudulently,' which hold that the complaint need not set forth the facts constituting the wrongful detention of the property. Hunter v. Hudson River Iron Co., 20 Barb. 493; Bliss v. Cottle, 32 id. 322; Chapin v. Merchants’ Nat. Bank, 31 Hun, 529; Davenport Glucose Mfg. Co. v. Taussig, id. 563; Desbecker v. McFarline, 42 App. Div. 455. In either aspect, therefore, the complaint states facts sufficient to constitute a cause of action.

Argument is made that the trial justice erred in refusing to instruct the jury that if they found that any part of the consideration paid by the defendants was paid in good faith, then they were entitled to a verdict, and it is urged that the opinion of the court in Cooper Manufacturing Company v. De Forest, 5 App. Div. 43, is decisive of this question. In that case, however, the botia fides of the transfer to the defendants by Gerrish & Co. (which is the identical transaction inquired into in this action) was not submitted to the jury, and solely for that reason a new trial was ordered. The remarks of Van Brunt, P. J., who delivered the opinion of the court, as to the defendants being bona fide purchasers pro tanto, are based entirely upon the theory that they acted in good faith in the transaction in question, and, therefore, have no application to the present case, in which, as we have seen, the jury found that the defendants were not bona fide purchasers for value. In this situation the entire transfer of Gerrish & Co.’s stock in trade to the defendants was wholly void, and consequently any portion of the consideration which, in fact, may have been paid by the defendants cannot stand as security or indemnity for that portion. Baldwin v. Short, 125 N. Y. 553.

The defendants insist that error, is predicable of the refusal to charge the jury, at their request, that unless the jury found that they had notice of the fraud perpetrated, or claimed to have been perpetrated by Gerrish & Go., their verdict must be for the defendants, but as the trial justice had already instructed the jury to the same effect, he was not required to repeat the instructions upon that subject.

The question as to the sufficiency of the form of the motion for dismissal is immaterial in view of our conclusion upon the merits.

For the reasons above stated, the judgment should be affirmed, with costs.

Beekman, P. J., and O’Gorman, J., concur.

Judgment affirmed, with costs.  