
    Coffin et al. v. Hollister.
    
      (Supreme Court, General Term, Third Department.
    
    December 11, 1889.)
    1. False Repbesentations—Evidence.
    In an action for about $2,000 worth of goods alleged to have been obtained by a firm from plaintiffs on credit, by false representations, it appeared that the representations were made about 18 months before the sale, and that during that time the firm had bought of plaintiffs and paid for many goods. A short time after the sale of the goods sued for the firm assigned, and a statement of their financial condition showed a deficiency of about $7,000, exclusive of a debt due one of the partners. This partner had about $11,000 applicable to the firm debts. He died before trial, and the other partner testified that the goods were bought with an intention of paying for them. The evidence as to the representations was conflicting, and it was not shown that they were untrue when made. The firm was then doing a good business. Held, that the evidence showed no intent by the firm not to pay for the goods at the time of their purchase, and a judgment for defendant was warranted.
    
      2. Same.
    Debts due by the firm to one of the partners cannot be considered in examining its financial condition.
    3. Same.
    Evidence of false statements made by one of the partners after the sale, as to the firm’s financial condition, is immaterial.
    Appeal from judgment on report of referee.
    Action by Lemuel Coffin and others against William H. Hollister, Jr., assignee of Perry E. Toles and Phineas S. Pettit, individually and as copartners under the firm name of Toles & Pettit. From a judgment for defendant, plaintiffs appeal.
    Argued before Learned, P. J., and Fish and Putnam, JJ.
    
      Hall & McGregor, (B. H. Hall, of counsel,) for appellants. Nelson Davenport, for respondent.
   Learned, P. J.

This is an action to recover from Hollister, the general assignee of Toles & Pettit, certain goods which, the plaintiffs aver, belong to them, and which they aver were fraudulently obtained from them by Toles & Pettit about October 81, 1881, on a credit of 60 days, and have not been paid for. When this case was previously before this court we held that it was competent for plaintiffs to prove that in March, 1880, Toles & Pettit had made certain statements as to their property to plaintiffs before the first sale of goods, and had made confirmatory statements, down to October 31,1881, and we granted a new trial for the exclusion of this evidence. 31 Hun, 81. On the second trial the referee before whom the case was then tried found that there were no facts which authorized plaintiffs to rescind the sale or to retake the goods, and that at the time of the commencement of the action the said defendant was the actual owner of the goods. The plaintiffs now appeal, and the principal, if not the only, ground of appeal is that the referee erred in his findings of fact. We may refer to the opinion given when the cause was here before, as it contains an examination of much of the testimony ttien given, some of which seems to have been given also on the last trial. 31 Hun, 81.

As to the general principle governing this case, we need only cite Morris v. Talcott, 96 N. Y. 107; Nichols v. Pinner, 18 N. Y. 295; Bank v. Bogart, 81 N. Y. 108; Macullar v. McKinley, 99 N. Y. 353, 2 N. E. Rep. 9. In brief, there must have been an intent, when the property was purchased, not to pay for it; and a condition of known insolvency is not enough. “The intention not to pay can no more be inferred from the mere fact of insolvency than the fact of insolvency can be inferred from the existence of an intention not to pay.” Yet it should be remarked that there might be such acondition of utter and hopeless inability to pay as would justify the belief of a fraudulent intent. The sale of goods in question, amounting to about $2,000, was made October 31,1881. As to the condition of the firm soon after that time, we have the testimony of their book-keeper. In the statement of their condition he places, among their liabilities, over $12,000 owing to Toles, one of the partners. Flow, plainly, this liability is not to be considered in examining their condition. Omitting this, the statement shows liabilities of little less than $43,000. The same statement shows assets over $48,000. The witness states that during the two years since the firm commenced business it had lost about $14,000. But in making this statement heincludes the loss of capital, and of money lent by the partner, Toles; for it appears that Toles put in $600, and Pettit $3,000. Toles had also put in (including rent not paid to him) about $12,000. In the schedules attached to the assignment made January 3, 1882, it appears that the actual (not nominal) value of assets was about $40,000; the nominal, about $57,000. The liabilities, exclusive of the debt to Toles, were about $45,000. From these schedules it also appears that Toles had property, above incumbrances, of the value of about $30,000; liabilities, about $19,000. Now, it is true that this property was also mortgaged to secure liabilities of Toles & Pettit and of Toles. But, of course, these mortgage liabilities are not to be added to the liabilities already stated; that is, we are not to deduct the mortgages first from the assets, and then to. set up the total debts against the balance. We must take the total debts and the total assets in order to see what was the condition of the firm. We have deducted from Toles’ real estate the taxes, and those mortgages which were not collateral to debts of Toles & Pettit, or to debts of Toles, and that makes the value of the real estate $20,000. The same witness made' up a statement after the assignment, by which he shows unpreferred liabilities of Toles & Pettit about $24,000, and assets to pay them about $7,000, leaving deficiency $17,000. But it is evident that in these unpreferred liabilities is included the debt to Toles of over $10,000. Deducting this, the unpreferred liabilities are about $14,000, and the deficiency about $7,000. And we have already seen that of Toles’ property there was about $11,000 surplus applicable to these debts of Toles & Pettit. So much for the financial condition of the firm and the partners at the time of the purchase. Mr. Toles died before the first trial. Mr. Pettit testifies that he made the purchase with a view of paying for it, and not with any intent to avoid payment.

The plaintiffs charge an act in the nature of a crime, which must be proved, and cannot be presumed. Morris v. Taloott, ut supra. The representations alleged to have been made by Toles & Pettit were made in March, 1880, when plaintiffs, through their salesman, solicited the custom of this firm. During the two years the firm bought some $7,000 worth of the plaintiffs, and (excepting the last bill) paid for the same. The plaintiffs also charge that the rating of the firm on a mercantile agency, as it first appeared in December, 1879, and was continued through 1880 and 1881, was too high, and that they were deceived thereby. A letter of the firm to one of the firms of whom they bought, in March, 1880, refers to the rating as from $40,000 to $75,000, and says that it is not too high. This came to the knowledge of plaintiffs. There is evidence, too, that Toles & Pettit were subscribers to this agency. There is a conflict of evidence as to the alleged statements made by Pettit to the salesman. These alleged statements contained an assertion as to Toles that he was worth $75,000. There is no proof as to what Toles was then worth. It is therefore not shown that the statement was untrue, or that the rating was then too high. It is shown that the firm did a very good, if not large, business, and it is probable that they did business at a loss. But it does not appear when that loss was enough to make the firm insolvent, if, indeed, (including the assets of Toles,) it became insolvent. We do not think it would be profitable for us to detail the testimony in this case. We have examined it carefully. The question, as already stated, must be one of the intent of the firm at the time of the purchase. While we may review the report of the referee on questions of fact, we are strongly of the opinion, as we have repeatedly said, that generally the conclusion of an able and impartial referee, who hears and sees the witnesses, is better on questions of fact than that of an appellate court, which must only read the testimony. Even if we should think that we might have come to a different conclusion, we should still hesitate to reverse, on that ground, the referee’s findings. But in the present case we think the report is justified by the evidence. The alleged representations were made some 18 months before the sale in question. It can hardly be assumed that these representations were made with intent to defraud. The firm went on and did business for nearly two years. Their sales during 1881 were about $80,000. They did an increasing business, and were behind their orders; but it evidently appears that their expenses were too great, and thus they lost money. We think, from an examination of the evidence, that, when they made the purchase in question, it is not proved that they did not intend to pay for the goods, or even that they knew themselves to be in such a condition that they could not pay for them. They were probably hopeful, and more hopeful than the event warranted. They are, however, to be judged by the condition as it then appeared to them.

The plaintiffs urge that Pettit in January, 1882, made a false statement of the condition of the firm to one Smith, manager of a mercantile agency. But this statement could have had no effect on the plaintiffs in their sale of October previous. The same witness testifies to a conversation in December, 1881, in which Pettit said their rating was correct. This, too, was after the sale in question, and thus was immaterial as to the plaintiffs. The rating originally given in the books of the agency was made, as testified, on the report of one Sims, made December 5, 1879. It does not appear that Toles or Pettit made any statements to Sims, or to the mercantile agency, on which that rating was based. It may be argued that the firm knew of the rating, because they were subscribers to the agency, and because of the letter of March 3, 1880, to "Whitier & Collins. How, it is not shown that at that time the members of the firm were not worth the sum at which the firm was rated. Mr. Toles was evidently the man of capital in the firm. How much his property may have shrunk between March 3, 1880, and October 31, 1881, is not in evidence. Without repeating the evidence any further, we need only say that we see no ground to reverse the report on the facts. There are no questions as to the exclusion or admission of evidence which need be considered. Judgment affirmed, with costs. All concur.  