
    Florence E. Fitchard, Appellant, v. George Doheny and Jacob Amos, as Administrators with the Will Annexed, etc., of Lucius Gleason, Deceased, Respondents.
    
      Sale of goods on credit induced, by false representations —the fact that the vendee believed on reasonable grounds that he could pay for the goods does not disprove fraud—•when a finding that the vendee did not intend to pay for the goods is immaterial.
    
    A person who sells goods to a corporation upon credit,.in reliance upon false and fraudulent statements concerning the financial condition of the corporation, made to him by the president and treasurer of the corporation with knowledge that such representations were false, may, if he does not receive payment for the goods at the expiration of the term of credit, rescind the sale upon the ground of fraud.
    The fact that the president of the corporation believed, and had reasonable grounds for such belief,.that the corporation w~uld pay for such goods when the term of credit expired, will not sustain a finding that no fraud was committed. While a finding that the purchase was made with the intention not to pay for the goods might be necessary where there were no false representations, but merely a failure to disclose a condition of insolvency, such a finding is not required where false representations are made and relied upon and damage results therefrom.
    Appeal by the plaintiff, Florence E. Fitchard, from a judgment of the Supreme Court in favor of .the defendants, entered in the office of the clerk of the county of Onondaga on the 20th day of July, 1903, upon the report of a referee, dismissing the complaint upon the merits.
    
      Charles H. Searle, for the appellant.
    
      Frank Hiscock and A. H. Cowie for the respondents.
   Williams, J.:

The judgment should be reversed and a new trial granted before another referee, with costs to appellant to abide event.

The action was brought to recover'damages for the conversion of twenty bales of hops of the value of $1,000.

The hops were originally the property of the plaintiff; about November 1, 1892, they were sold and delivered to the Greenway Brewing Company, and while in the possession of that company they were levied upon by the sheriff of Onondaga county by virtue of an execution issued upon a judgment against the company in favor of the estate of Lucius Gleason, and were sold February 9, 1893, and bid in for the said estate. After the levy and before the sale, the plaintiff claimed the hops as her property, and demanded the same of the sheriff, who refused to surrender them. The estate, with knowledge of the plaintiff’s claim, received the hops under its purchase at sheriff’s sale and appropriated the same to its own use. It paid no cash for the hops but applied the amount of the purchase price upon its execution. The plaintiff sold the hops to the brewing company upon credit; never received any part of the purchase price thereof, and her claim of title thereto was based upon the allegation that the purchase was induced by fraud and deceit practiced upon her by the brewing company and by reason thereof no title to the hops passed from her to the brewing company under the sale and delivery thereof. The question litigated in the case was the alleged fraud and deceit. The referee found that there was no fraud or deceit, and that title did, therefore, pass to the brewing company. This finding was erroneous, and should not be sustained. Fraud and deceit were clearly established by the evidence and the plaintiff was entitled to recover in the case. .

" The facts, with reference to this issue were not in dispute, and as found by the referee or proven in the case, were as follows •

The hops in question were part of thirty-five bales sold and delivered at one time, the other fifteen bales having been consumed before the seizure of the property by the sheriff upon the execution. The brewing company was a corporation with 2,000 shares of stock, of which 1,998 shares-were held by John Greenway, the president and treasurer, 1 share by Lucius Gleason, vice-president, and 1 share by Benjamin F. Hull, secretary. At the time of the sale of the hops, John Green way was carrying on and managing the business. Plaintiff’s husband and agent made the sale of the hops, transacting the business with John Green way. Plaintiff’s agent asked Green way about the pay for'the hops, and Green way said he would give a note for ninety days, and plaintiff could get the money on it at any bank in Syracuse; that the company’s bills were always paid when due ; that the company was perfectly responsible for all goods it bought, and its-paper was as good as money; that it had 40,000 pounds of extract on ' hand, worth two dollars and twenty-five cents to two dollars and fifty cents per pound, owned it, and it was paid for; that the company owned all the real estate and a good deal of other property, and its property was worth a great deal more than the company owed, and the company was in good shape.

The plaintiff relied upon these representations, believed them to be true, and was induced thereby to sell and deliver the hops upon a. credit of ninety days and to take the company’s note Eor the purchase price, payable February 1, 1893, instead of requiring cash to be paid therefor. The statements so made were grossly false and untrue, and were known by Greenway to be so when he made the same.

Gleason, the vice-president of the brewing company, was president of the Third National Bank of Syracuse from 1889 until he died, January 3, 1893. Both Gleason and his bank had business relations with the brewing company for many years. In 1890 Gleason held a mortgage upon the brewing company’s real property, which he foreclosed, and the property was sold on September fourth of that year, and bid in by Gleason, and judgments taken for deficiency against the company for over $90,000. "The bank also recovered a judgment against the brewing company during that year for an indebtedness of over $30,000. September 4,1890, an agreement was made between Gleason and John Green way wherein it was recited that the brewing company was indebted to Gleason in the sum of $444,000 and to the bank in the sum of $46,000, and wherein it was agreed Gleason would sell to Greenway the real property covered by the mortgage and bid in under the foreclosure sale for the amount owing by the brewing company to Gleason and the bank, and all costs and expenses of the foreclosure of the mortgages and the procuring of the judgments by Gleason and the bank, less anything that' might be realized by a sale of any personal property of the brewing company upon executions issued upon such judgments, the payments by Green way to be made as follows : Interest on the whole amount quarterly at six per cent and principal, $12,500, on April 1, 1891, and the same amount every three •months thereafter until the whole principal sum should be paid, and whenever, the principal should be reduced to $250,000 a deed should be made and a mortgage given back for the balance of the purchase price unpaid. There were other provisions in the agreement as to details, which are unimportant to refer to here. It was provided that upon default being made in any payments of principal or interest by Greenway, Gleason should have the right to forfeit the agreement and to take and hold possession of the real property. At the time the hops in question were purchased of the plaintiff Green-way had made substantially no payments under this agreement, so that the condition of things then was this: The brewing company had no interest whatever in the real property. All its - title had passed to Gleason under the foreclosure, and he and the bank had judgments against the brewing company for over $130,000, ■ and could issue executions upon the judgments whenever they desired and levy upon and sell the personal property of the company. It was contemplated by the- agreement between Gleason and Green way that they ,might and would do this, and Greenway . would have the benefit of the personal property so sold in reduction of the purchase price he had agreed to pay Gleason for the real property. There was no provision for redeeding the real property to the brewing company in any event. It. is difficult to determine from the evidence what personal property the company-had at the time the hops were purchased liable to sale under the executions., It is not necessary to go into details. There certainly was not enough to satisfy the judgments against the company, and the referee has found and counsel on the trial before the referee and on the argument here conceded that the company was at the time the hops were sold, and had been for a long time prior thereto, -insolvent and unable to pay its debts. . It was in a bad condition financially, wholly irresponsible and unable to meet its obligations. It will be seen without the statement of further details that the-representations made by Greenway to the plaintiff’s agents were, as above stated, grossly false and untrue, and were well known by • Greenway to be so when he made them.

In the face of these well-established facts the referee found that Greenway, when he made the statements, did not intend to deceive or defra/ud the plaintiff. The idea of the referee, in making such a finding, is apparent from a subsequent finding that Greenway did not intend to acquire or obtain possession of the hops without paying for them when the term of credit expired, and he then had reasonable grounds to believe that the hops would be paid for.

That is, there was no intent to defraud or deceive because he believed upon reasonable grounds that the hops would be paid for when the term of credit expired. There can be no doubt that he made the false statements for the purpose of securing the ninety days’ credit instead of paying cash for the hops, and that the plaintiff was induced to part with her property on credit in reliance upon the truth of such statements. It follows, therefore, as a matter of course that Greenwav intended to, and did, deceive the plaintiff and thereby to secure the property on credit and such deceit resulted in damage to the plaintiff to the extent of the value of the hops sold and delivered. That was a fraud upon the plaintiff whether Green- . way believed the property would be paid for or not. It was not necessary that it should be found by the referee that he intended not to pay for it. While such a finding might be necessary where there were no representations, but merely a condition of insolvency and a failure to disclose it, nothing of that kind is required where false representations are made and relied on and damages result therefrom. (Morris v. Talcott, 96 N. Y. 100; Phoenix Iron Co. v. Hopatcong & Musconetcong, 127 id. 206; Hotchkin v. Third National Bank, Id. 329 ; Harrisburg Pipe Bending Co. v. Welsh, 26 App. Div. 515.)

We conclude, therefore, that fraud was established in this case and the finding by the referee that there was no such fraud was contrary to the evidence, and that plaintiff’s right to recover was beyond question.

Therefore, the judgment appealed from should be reversed and a new trial granted as already stated.

All concurred ; Hiscock, J., in result only.

Judgment reversed and new trial ordered, with costs to the appellant to abide event upon questions of law and of fact.  