
    Philo L. Mills and Others, Appellants, v. Abraham Brill, Carrying on Business as A. Brill & Co., and Louis H. Bronner, as Assignee of Abraham Brill, for the Benefit of Creditors, Respondents.
    
      Statements to commercial agencies to obtain credit — a merchant who sells goods in reliance thereon may sue to recover the goods and damages —intent to defraud the merchant implied—proof that the merchant could have borrowed money is incompetent.
    
    Where a merchant, for the purpose of obtaining credit through the medium of ■ commercial agencies, makes to such commercial agencies false representations concerning his financial condition, with knowledge of their falsity, if another merchant to whom such false representations are commuñicated by the commercial agencies, in reliance thereon, sells the first-mentioned merchant goods upon credit, and the vendee merchant neglects to pay for the goods and refuses to return them, the vendor merchant may maintain an action against him to recover possession of the goods or to recover damages in lieu thereof.
    In such an action it is not necessary for the vendor merchant to prove that the vendee merchant intended to defraud the vendor merchant when he made the false representations concerning his financial condition, as such an intent on the part of the vendee merchant will be inferred, as matter of law, from the fact that he knew the representations to be false and made them for the purpose of obtaining credit.
    Upon the trial of the action it is improper for the court to allow the vendee merchant to show, by his own testimony and that of others, that, at the time "the goods in question were sold to him, various persons would, if he had requested them to do so, have loaned him money.
    Appeal by the plaintiffs, Philo L. Mills and others, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Hew York on the 9tli day of June, 1903, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 11th day of June, 1903, denying the plaintiffs’ motion for a new trial made upon the minutes.
    
      
      Frank R. Lawrence, for the appellants.
    
      Samuel D. Levy, for the respondents.
   McLaughlin, J.:

This action was brought to recover possession of personal property, or, in lieu thereof, damages. The complaint alleged, in substance, that in March, 1898, the defendant Brill, by means of false and fraudulent representations to the effect that he was doing a good business, discounting his bills, and worth about $50,000 over and above his liabilities, induced the plaintiffs to sell and deliver to him 125 dozen pairs of kid gloves; that the representations were false and known by Brill to be so; that the same were made for the purpose of obtaining credit; that the plaintiffs, believing the representations to be true, and relying upon them, parted with the possession of their property ; that they elected to rescind the sale and had demanded a return of the property, which had been refused. \

The action was originally commenced against Brill, who immediately following made a general assignment to the defendant Brenner for the benefit of creditors, and he was thereafter made a party defendant. Brill and the assignee each interposed an answer, in which the material allegations of the complaint, in so far as the right to rescind the sale and recover possession of the property was predicated, were denied, and the assignment to and possession of the property, or some part of it, by the assignee was pleaded as a separate defense. The defendants had a verdict and from the judgment entered thereon plaintiffs have appealed.

At the conclusion of the trial there was substantially no dispute between the parties as to the material facts involved. In this connection it appeared that in March, 1898, the plaintiffs received, through a salesman, an order from Brill for the gloves in question, and though they had been dealing with him for some time, this order was so much larger than any previous ones that, before filling it, they obtained from the commercial agencies of R. G. Dun & Co. and Bradstreet a statement as to his financial standing, relying upon which they, on the twenty-sixth of that month, delivered the gloves to him ; that a few days later they elected to rescind the sale and demanded a return of the gloves upon the ground that the state* ments were false and untrue; that Brill ref used to return them; that on the 4th of April, 1898, this action was commenced, and on the day following Brill made a general assignment to the defendant Bronner for the benefit of creditors; that the inventory filed by the assignee showed, at the time the assignment was made, that Brill was insolvent; that he had property of the actual value of only $36,757.88, while his liabilities amounted to $65,592.54, and included in the indebtedness was a claim for money alleged to have been loaned to him by his brother-in-law, the assignee, amounting to $19,635.76, also a claim for money alleged to have been loaned by his motlier-in-law for $3,000 ; that the financial rating of Brill given by the commercial agencies to the plaintiffs was due to statements which he had made to them extending over a period of about two years; that in March, 1896, lie stated to one of them that his inventory on the first of February of that year showed a surplus of nearly $50,000 after paying his brother William $3,000 and investing about $4,000 in bonds; that on the twentieth of May following he stated to the other that his last inventory of February, 1896, showed a surplus of $54,600 ; that he stated in March, 1898, to a representative of R. G. Dun & Co., in answer to an inquiry as to his financial standing — after being told that on the basis of his former statements he was being rated at from $35,000 to $50,000 —• “ I am worth just as much as I ever was; ” that similar statements to the effect that he was solvent and had a surplus were made to both agencies; that these statements were made was not denied by Brill; nor did he deny that the same were not true, or that they did not correctly set forth his financial condition at the time they were made; on the contrary, he testified that his financial condition at the time the general assignment was made was substantially correct as set forth in the inventory, except that by taking the stock at its nominal value — which was nearly $20,000 in excess of its actual value — he concluded that his total assets were $55,890.71 and his liabilities $65,592.54, which included an indebtedness for borrowed money, as follows: To his brother-in-law for over $19,000, some of it as far back as 1892; to his mother-in-law in the amount set forth in the inventory, borrowed prior to 1896, the time when the first statement was made; to his brother upwards of $4,000, and to the Hew Amsterdam Bank for $4,500. He further testified that his financial condition, on the day he made the assignment, was substantially the same as it was at the time he obtained possession of' the goods, and it was then about the same as it had' been since 1895, except that it had improved somewhat.

The undisputed facts, therefore, established that Brill, at the time he made the statements to the commercial agencies, did not have a surplus of $50,000 over and above his liabilities, nor did he have any surplus; on the contrary, that he was then insolvent. The statements were false and known by him to be so. They were made for the purpose of obtaining credit and thereby inducing' parties with whom he might deal to part with their property. Such statements were calculated and intended to 'influence the action of, others in extending credit to him. They came to the knowledge of the plaintiffs and in reliance upon them they parted with their goods. There was thus established all the material facts necessary to enable them to reclaim the goods and for damage, viz., “representation, falsity, scienter, deception and injury.” (Brackett v. Griswold, 112 H. Y. 454; Ettlinger v. Weil, 94 App. Div. 291; Hingsland v. Haines, 62 id. 146.) It is true the representations made by Brill were not made to the plaintiffs personally, but that, is of no importance. They were made to the commercial agencies, for the purpose of obtaining, through them, a credit.and were just as effective for-that purpose, and if false, subjected Brill to the same liability as though made to the plaintiffs personally. (Tindle v. Birkett, 171 N. Y. 520; Eaton, Cole & Burnham Co. v. Avery,. 83 id. 31; Bier Brothers v. Doheny, 93 App. Div. 1; Arnold v. Richardson, 74 id. 581.)

It is also true that direct proof was not given of Brill’s intent to. defraud the plaintiffs by making the false statements which he did as to his financial condition, but this.was not necessai'y. When the plaintiffs had proved that the statements were false; that Brill knew it and made the same for the purpose of obtaining credit, then his, intent to cheat and defraud followed as a necessary inference. He •may have expected to pay, but the liability was incurred upon the basis of a false statement, and the necessary result of his act was to-cheat and defraud the plaintiffs, and, therefore, in law he must be held to have so intended.

In Anonymous (67 N. Y. 598) the court, in holding that under such circumstances intent would be inferred, said: “ But it is believed that no case can be found in the books holding that a trader who was hopelessly insolvent, knew that he could not pay his debts, and that he must fail in business, and thus disappoint his creditors, could honestly take advantage of a credit induced by his apparent prosperity and thus obtain property which he had every reason to believe he could never pay for. In such a case he does an act, the necessary result of which will be to cheat and defraud another, and the intention to cheat will be inferred.”

In Pier Brothers v. Doheny (supra), which was an action quite similar to this one, the court reversed the judgment, even though there was a finding by the referee that the defendant, in making the statements to the commercial agencies, “did not intend to deceive, cheat or defraud the plaintiff,” and in doing so said: “ There can be no doubt but that he made the statements for the purpose of establishing a credit with those who might deal with the company, and that the statements were communicated to the plaintiff and it was thereby induced to give the ninety days’ credit, relying on the truth of the statements. It follows, therefore, as a matter of course, that Greenway intended to deceive the plaintiff and thereby secure its property on credit, and such deceit resulted in damage to the plaintiff to the extent of the value of its hops sold and delivered. That was a fraud upon the plaintiff whether Green-way believed the property could be paid for or not; whether he intended it should be paid for or not. It was not necessary to find that the purchase was made with a design not to pay for the property in order to render the company liable.”

And in a recent case in this court (Nathan v. Uhlmann, 101 App. Div. 388) where action was brought to recover certain deposits from officers and directors of an insolvent bank, it was held that “ irrespective, therefore, of any intentional wrong or bad faith, the defendant, if the jury found that he had knowledge that the bank was insolvent, and participated thereafter in the receipt of deposits, was, as matter of law, guilty of fraud and liable for the loss sustained thereby.”

This rule is tersely stated in Coleman v. Wolcott (1 Conn. 285) as follows: “ When the effect of an act understandingly done is neeessarily injurious to the rights of another, the quo animo is not a matter of fact, it is settled and becomes an inference of law.”

See, also, 14 American and English Encyclopaedia of Law (2d ed. 104) and cases cited, where it is said that to render a false representation fraudulent, and the person making the same liable, it is not at all necessary that there shall have been any actual dishonesty of motive or intention. As far as the mental attitude of the party is concerned, all that is necessary is to show that he knew the representation was false, or to show facts from which such knowledge may be implied and that he intended that it should be acted upon by the person injured.”

The rule thus alluded to as to intent was not called to the attention of the jury; on the contrary, they were told, in effect (to which an exception was taken), that if Brill did not intend to cheat the plaintiffs then they must find for the defendants. The exception was well taken and the finding of thé jury that Brill did not intend "to cheat and defraud the plaintiffs was clearly against the weight of evidence. Under the authorities cited his intent necessarily had to be inferred from his false statements and by means of which he obtained possession of the plaintiffs’ property and thereby caused them damage. The judgment, therefore, must be reversed.

In view of the fact that there must be a new trial it may not be out of place to also call attention to another error which was committed in the admission of testimony. ' Brill was permitted to prove by the testimony of several witnesses that, at or about the time of the sale of the goods and the assignment by him, such persons would have loaned him various sums of money had he requested them to do so. The witness Koenig was permitted to testify that he was worth $50,000 and would have indorsed Brill’s paper for $9,000 or $10,000, or would have loaned him $5,000; Bronner, that he would have loaned him $5,000 had he requested it; Rosenthal, that he had done $900,000 worth of business the previous year and on the 4th of April, 1898, or any time prior thereto, he would have loaned Brill $5,000 or indorsed his note for that amount; and Brill himself was then permitted to testify that there were other persons who "would have advanced him money, including a brother-in-law whom he stated was worth in the neighborhood of $750,000. All of the testimony of this character was duly objected to by plaintiffs’ counsel, and it seems hardly necessary to add that the objections should have been sustained. It had no bearing upon the real issue and its only effect was to divert the minds of the jury, and thereby induce them to conclude that the defendant did not intend to accomplish the necessary result of his own act; that even though he intentionally made a false statement for the purpose of deceiving the plaintiffs, upon which they relied, nevertheless, inasmuch as he might have borrowed money from some one, he could not have intended to deceive. He did not borrow the money. He did deceive the plaintiffs, and these results cannot be changed by a mere possibility of what he might have done.

The judgment and order appealed from, therefore, must be reversed and a new trial ordered, with costs to the appellants to abide the event.

O’Brien, Ingbaham and Hatch, JJ., concurred.

Judgment and order reversed, new trial ordered, costs to appellants to abide event.  