
    Seth M. Milliken, Samuel D. Brewster, Gerrish H. Milliken, Harold A. Hatch, Thomas P. Curtis, Daniel W. Farnsworth, Henry Maxwell and Albert L. Fitzpatrick, Copartners, as Deering, Milliken & Company, Plaintiffs, v. Frisbie, Coon & Company, Oneida Regal Company, The Richelieu Company, George A. Frisbie and Sherrill Sherman, Defendants.
    (Supreme Court, New York Special Term,
    March, 1915.)
    Corporations — written statements to mercantile agency as to assets and liabilities —■ when judgment granted to plaintiff.
    The defendants F and S were president and secretary, respectively, of a corporation, and F was also the assistant treasurer of another corporation and the officer chiefly charged with the management of its financial affairs. They organized a third corporation to act as sole agent of the first two corporations which made a contract of such a nature as to insure the transfer of the great bulk of the tangible assets of one of ■ them to the third corporation in praesenti and its finished product in futuro at less than the actual cost of manufacture. Then F gave to a mercantile agency a written statement which was materially false and fictitious of the assets and liabilities of the corporation of which he was president, S participating in the preparation of the figures in said statement. Said corporation was in fact insolvent and inevitably destined by the operation of the contract with the third corporation to become in a worse and worse financial plight as time went on. In the meantime plaintiff induced by said false statement sold goods on credit to the corporation of which F was president but the goods were not paid for. Held, that in an action to rescind said sale, the complaint alleging a conspiracy among all the defendants to defraud, judgment will be granted in favor of plaintiff against all the defendants.
    Action to rescind sale of goods.
    Dyer, Strong & Whitehead (Seldon Bacon, of eounsel), for plaintiffs.
    William M. Morrill, for defendant, Frisbie Coon & Co.
   Ford, J.

Plaintiffs allege a conspiracy among the defendants to defraud and proves the following facts: Defendant Frisbie, Coon & Co. is a corporation of which defendant George A. Frisbie and Sherrill Sherman were president and secretary respectively. Defendant Oneida Regal Company is also a corporation of which the defendant Frisbie was assistant .treasurer and the officer chiefly charged with the management of its financial affairs. The Richelieu Company was a third corporation organized by the persons interested in the other two corporations to act as sole sales agent for them.

A contract of such nature as to insure the transfer of the great bulk of the tangible assets of Frisbie, Coon & Co. to the Richelieu Company m praesenti and its finished products in futuro at less than the actual cost of manufacture was made between those two corporations.

Then the defendant Frisbie gave to a representative of the mercantile agency, R. Gr. Dun & Co., a written statement of assets and liabilities of Frisbie, Coon & Co. which was materially false and fictitious. In the preparation of the figures in that statement contained, the defendant Sherman participated. In point of fact the corporation had been losing heavily in its business for a long time and was plainly insolvent and inevitably destined by the operation of the contract with the Richelieu Company to become in a worse and worse financial plight as time went on.

Unless a degree of incompetency at which my common sense revolts be ascribed to the defendants Frisbie and Sherman, they must be charged with knowledge of this situation. The inevitable result followed. Frisbie, Coon & Co., denuded of its assets and manufacturing at a loss, simply dried up leaving nothing but the empty shell.

In the meantime, the plaintiffs, induced by the false statement of assets and liabilities furnished by the defendant Frisbie, Coon & Co. to Dun & Co., and by the latter to it, sold goods on credit to Frisbie, Coon & Co., which have not been paid for. They bring this suit to rescind the sale and for judgment against all the defendants as parties to the conspiracy.

It is clear from the testimony that there was another concern, not a defendant, which has been aptly referred to upon the trial as the master creditor by whom the scheme adopted by the defendants seems to have been dictated for the purpose of transferring the assets of Frisbie, Coon & Co. first to the Oneida Regal Company and the Richelieu Company, and then to the master creditor. That does not excuse the defendants. They may not supinely submit themselves to the ■will of others in perpetrating a fraud upon creditors and go unwhipped of justice.

It was an adroit mind which conceived the scheme for the absorption of the assets of plaintiffs’ debtor and it may be that all the participants did not fully understand its scope and purpose. But their plea of ignorance is of no avail. As was said in Huntington v. Attrill, 118 N. Y. 374: “ The means of judging of the knowledge which the defendants had and upon which they acted, and the motive by which they were influenced, must be derived from the circumstances treating those persons as men of ordinary discernment and sagacity. The officers assuming the responsibility and charged with the duties of the management of the business of corporations, are not supposed to shut their eyes to that which is open to observation and legitimately subject to their inspection and control.”

■ Judgment will be granted in favor of the plaintiffs and against all the defendants as prayed for in the complaint.  