
    George J. Grossman, Resp’t, v. Richard N. Walters et al., App’lts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed October 24, 1890.)
    
    1. Replevin—Fraud.
    Plaintiff and liis assignors were induced by false representations of one K. as to bis standing to sell goods to him. It appeared that K. was aware of his -insolvency, but notwithstanding such knowledge continued to purchase goods until the day before he sold out his entire stock to H. B. Claflin & Co. This sale was made through one J., who had knowledge of K.’s condition. Claflin & Co., in consideration of the sale, satisfied an indebtedness of K. amounting to $3,000, and gave a check for the balance of the purchase price, $10,000. They immediately sold the same to one O. for $500 less, and he placed the goods with defendants for sale at auction. No inventory was taken or any special examination of the goods made at either of these sales. O. paid Claflin from the proceeds of the auction sale. Held, that under these circumstances the finding that Claflin & Co. had notice or knowledge of the fraudulent intention of It. was supported by the evidence.
    2. Same—Value.
    In the absence of proof warranting a different conclusion, the presumption is that the property continued to be of the value for which it had been sold by the plaintiff and his assignors to K.
    3. Same—Evidence.
    Sworn statements made by him on supplementary proceedings are admissible to remind or refresh the recollection of a witness, and he may then be asked whether such statements were true.
    4. Same—Judgment.
    Where the sales counted upon are separate and distinct, an error as to one of them may be corrected by deducting the amount thereof from the judgment with the assent of the plaintiff.
    Appeal from a judgment entered upon the report of a referee.
    
      S. F. Kneéland, for appl’ts ; Abram Kling, for resp’t.
   Daniels, J.

The plaintiff, as the assignee of his own firm and of six other parties, brought this action to recover the possession of personal property sold and delivered to Ephraim M. Kantrowitz. The sales were made partly in May but mainly in June, 1888, and they consisted generally of furniture and carpetings. On the 29th of June, 1888, Kantrowitz, the purchaser, sold and transferred to the firm of H. B. Claflin & Co., “ The stock, fixtures, store and office furniture, good will, trade-marks, horse, harness and truck, and all other property connected with or pertaining to the store of the party of the first part, situated at No. 1 Fourth avenue in the city of New York, also the goods on storage or contained in the basement at No. 212 Bowery, belonging to the said party of the first part.” Claflin & Co. on the same day sold the property to Miles O’Brien, who placed it in the possession of the appellants as auctioneers for sale. The parties from whom Kantrowitz had purchased the furniture and carpetings claimed to have been induced to make the sales by means of fraudulent representations made by him concerning bis pecuniary condition ; and that he made this transfer afterwards to the firm of Claflin & Company to defraud his creditors and that they received the transfer understanding that to be at the time his intention. And to carry that more completely into effect they transferred the property to Miles O’Brien. The referee adopted this view of the case and. held the plaintiff to be entitled to recover the goods in controversy or their value. At the time of the commencement of the action the goods were in form taken by the sheriff under process of claim and delivery, but upon an undertaking executed on behalf .of the appellants the goods were restored to them. And by the final conclusion of the referee it -was determined that the plaintiff was entitled to the possession of the property, and if possession could not be obtained, to the value thereof, with interest, amounting to the sum of $2,406.82.

These conclusions of the referee concerning the nature of the purchases made by Kantrowitz, and the subsequent sales of the goods, have been criticised with uncommon severity by the counsel for the appellants. It has been urged that these conclusions were devoid of evidence, and that the judgment accordingly very clearly is erroneous. But very direct proof was given that the sales made by Elliott & Cougle, Otto Denecke, The Anderson & Blatt Folding Bed Co., and the Indiana Furniture Co., were procured by means of direct misrepresentations. For Kantrowitz is shown to have represented to the persons acting on behalf of these vendors, shortly prior to the time of the sales, that he had the sum of $12,000 which he had received from his preceding firm and put into the business commenced by himself as his capital. The representations in this manner made were either accompanied with the statement that he was free from all liabilities, or the language employed by him in each instance was such as to produce the impression in the minds of the persons to whom the representations were made that he had this sum as unimpaired capital upon which he transacted his business.

The firms of Grossman & Sons and Blanck & Co. are stated to have sold and delivered their goods upon information concerning the standing of Kantrowitz obtained from the Lyon Furniture Association. This was an association in the interest of the dealers in furniture, obtaining and furnishing information to persons and firms in the business relative to the financial standing of dealers applying for credit. And evidence was given from which the referee could very well conclude, as he did, that Kantrowitz had made substantially the same representations that he did to the other persons with whom he dealt to this association as to his financial condition. And these two firms are stated to have made their sales to him upon the faith of the in formation obtained from that association.

The defendant Kantrowitz was examined as a witness on behalf of the plaintiff, and from, his testimony, which certainly may be assumed to be credible so far as it was against himself, it was shown that he was aware of his own insolvency as early as the 15th of June, 1888, and probably as early as the commencement of his business. For he does not appear to have encountered any substantial loss in his business from the 17th of February, when he made the statement to the Lyon Furniture Association, to the time of his sale to Claflin & Go. And this condition of his affairs exhibits the fact to be that when he made the representations they were untruthful and designed to deceive the persons to whom they were made.

For notwithstanding the concession made by himself, that he was aware of his own insolvency as early as the middle of June, 1888, he still continued to purchase goods from persons who sold him under the evident impression that his representations were truthful. From Elliott & Cougle he purchased a folding bed for the price of seventy-two dollar’s, on the 29th of June, which, in compliance with his order, was sent to the city of Chicago. On the 28th of June he purchased goods amounting to the sum of fifty-one dollars of the firm of Blanck & Co., which were delivered on the 29th, and on the 29th of June he also purchased bedding of Otto Deneclcc. These last purchases were made on the same day, and the day preceding the sale of his entire stock to H. B. Claflin & Co., and after he had become, from his own evidence, entirely aware of his insolvent condition and inability to continue his business. And they, together with the other evidence, supply unmistakable proof that he was actuated with a fraudulent intention in making his purchases. And that is further confirmed by the fact that no part of the moneys received by him from the sale of his stock was appropriated to the payment of these creditors. As to him, therefore, the plaintiff, as the assignee of these parties, was entitled to recover the articles sold after they went into the possession of the appellants, and they had been demanded from them and they had refused to deliver them.

A special objection has been taken to the right of the plaintiff to recover as the assignee of the Indiana Furniture Company, on the ground that the company was not induced to sell its furniture to Kantrowitz by means of any false representation made to that company. But the evidence of the agent, Alexander C. Kelley, deprives this objection of its support. For the representation was made by Kantrowitz directly to him, and was then communicated by him to the company in Indiana which ordered the sale of the goods. And the witness testified that after that the goods were shipped on the basis of the statement made to the witness. There was nothing, therefore, in this sale substantially distinguishing it from the others which have been referred to.

The fact that the referee mistook the time when the statement was made to the Lyon Furniture Association, or assumed the immaterial circumstance that Elliott & Cougle were subscribers to that association, are without the least m ateriality in the case. And equally “so are other immaterial circumstances mentioned or referred to in the report. For the evidence was manifestly sufficient to support the important conclusions deemed by the referee to be sustained by it, that Kantrowitz had fraudulently misrepresented his circumstances to these different vendors, and had obtained their goods with the intention of unlawfully depriving them of their property. As to these facts, which are the controlling facts in this part of the case, very little room was left for doubt or question.

After having obtained the property in this manner, Kantrowitz could deprive the vendors of their right to follow and obtai". its return from him, or other persons succeeding to his title, on y by making a bona fide sale of it for a valuable consideration. , The burden of establishing that to be the nature of the sales mr le was placed upon the persons claiming under those sales. Stevens v. Brennan, 79 N. Y., 254, 258; Weaver v. Barden, 49 1, 286.

And to meet this requirement of the law evidence was f ren concerning the sale made to II. B. Claflin & Go., showing 'at Kantrowitz was indebted to that firm in the sum of $3,^ ,.35, and made the sale to the firm,to satisfy that indebtedness, ? d received from the firm its check for the sum of $6,234.65, making in all the sum of $10,000, for which the sale was made to Claflin & Co.

The transaction resulting in this sale took place between Kantrowitz and Mr. Jordan, who was employed in the business of H. B. Claflin & Co. Kantrowitz testified that he had previously informed Jordan that he was embarrassed in his business, and that he could not stay in his business, and had told him that his indebtedness amounted to the sum of $20,000. The firm of H. B. Claflin & Co. are chargeable with the information in this manner acquired by Jordan in the transaction of the business, and must be held to have been aware of the fact that Kantrowitz had reached the point where he could not continue in his business. But that of itself would not prevent them from obtaining a valid title to the property sold, so far as the consideration paid for it was valuable, as it certainly was to the extent of the check given by them to Kantrowitz. But there were circumstances attending the sale, and the conduct of their representative in procuring it, that indicated the conviction on his part that Kantrowitz designed to dispose of this property in fraud of the rights of his other creditors. These circumstances consisted mainly of the important fact that the property was purchased speedily and without any inventory or such careful examination as apparently would have been made in the exercise of good faith. It was taken at a round sum of $10,000, without any such investigation as would ordinarily be expected to be made by careful or" discreet purchasers of that amount of property, not consisting generally of articles in which this firm was engaged in dealing. Then under an evident consciousness, not denied by Jordan, that the purchase might not be capable of being sustained, a sale was immediately made through the intervention of Jordan to Miles O’Brien, another person in the employment of H. B. Claflin & Company. This sale was made for the sum of $500 less than the price for which the property was bought by Claflin & Co. And the reduction does not appear to have been caused by observation, or examination leading to the supposition that the firm had been mistaken as to the value of the property bought. But the object of this sale could very well, by the referee, be inferred to have been the confirmation of their pur chase in such a manner that it should not be disaffirmed by the creditors of Kantrowitz. This probability is increased in its effect by the fact that O’Brien obtained from the cashier of the firm of Glaflin & Go. the $3,000 he paid to Jordan upon his purchase.

The residue, amounting to $6,500, was included in a promissory note of O’Brien, given to the firm, due in three months afterwards. O’Brien did not require the property for any special purpose; neither was any inventory of it made apprising him of the articles, or the extent of the stock, prior to the time of his purchase. But a general examination took place, consisting of no further consumption of time than the period of about two hours. And that, too, by persons whose business was that of dry goods. In his testimony, O’Brien states further that “ I had the stock examined, and took steps as quickly as I possibly could to sell the stock through an auctioneer.” These auctioneers were the defendants who have appealed from this judgment The property was placed in their possession, and it was sold by them at auction. And from the proceeds of the auction sales, which exceeded the sum of $9,500, O’Brien repaid the loan obtained by him, and also, before it became due, paid the note which had been given by him for the balance of the price. The circumstances were consistent with no other conclusion than that the property had been obtained to avoid the claims of other persons against Kantrowitz, and was sold as speedily as practicable to secure that end. And while there was no direct proof that the purchases were made by Jordan for Glaflin & Go., and from them by O’Brien, with knowledge of the fact that Kantrowitz intended to defraud his creditors in selling the stock as he did, these circumstances were such as naturally would produce the conviction of the existence of that knowledge or understanding, both on the part of Jordan and of O’Brien. And that fully warranted the referee in concluding, as he did, that these purchases were made with notice or knowledge of the fact that Kantrowitz. disposed of the property to defraud his other creditors. In May v. Walter, 56 N. Y., 8, the leading facts were quite similar to those in this action And it was held by the court that it was the duty of the judge at the trial to submit the question to the jury, whether the property had not been purchased by the vendee with intent to avoid the rights of the creditors of the vendor.

The payment of an adequate consideration did not preclude that inquiry under these circumstances. For a valuable and adequate consideration is not sufficient to maintain such a purchase, where it may fairly be inferred from the facts that the purchaser understood or had notice of the vendor’s fraudulent intention. Billings v. Russell, 101 N. Y., 226, 233; Starin v. Kelly, 88 id., 418, 421. The evidence was certainly sufficient to submit this question of notice or knowledge to the deliberation of the referee. And liis finding as to the existence of notice is so far' supported by the proof as to render it unassailable on this appeal.

The referee found the value of the property in dispute at the time of the trial. And while there was no direct evidence as to this value, there were circumstances from which the fact could be inferred as he has stated in his report. For the goods were sold to Kantrowitz at the prices which the referee has considered to be their value when the action was tried. And the sales made to H. B. Olaflin & Co., and by them to O’Brien, and by the defendants as auctioneers, sustain the conclusion that this was the fair value of the goods in controversy. And as no change in the market price or value of the goods was shown to have taken place between the time when they were sold and the trial of the action, the inference was fairly reasonable that the goods were of the same value at the time of the trial as they were when they wore sold to Kantrowitz. The probabilities were all with the plaintiff. And the presumption, in the absence of any proof1 warranting a different conclusion, would be that the property continued to be of the value for which it had been sold by these different dealers.

Objections were taken to the introduction of the sworn statements of Kantrowitz, made upon his examination in supplementary proceedings. But these statements were not introduced as evidence upon the trial of this action against these defendants, but they were introduced to bring the attention of the witness Kantrowitz to the statements which he had made in the course of his supplementary examination. And then the question was asked him whether those statements were true, and so far as they had any importance or materiality in this litigation he testified that they were. This was not giving in evidence the former testimony of Kantrowitz, but it was used to remind or refresh his recollection as to what he had previously sworn to concerning the facts which were the subjects of inquiry. And having his attention directed to what had been so stated by him, he was then asked whether these statements were true, and so far as they were of the slightest importance in the case he testified that they were. There was for that reason no impropriety presented by this proceeding upon the trial.

Other objections to these parts of the case have been presented upon the argument, but they are not of such a nature as to deserve special consideration, inasmuch as the leading facts upon which its disposition depended were established on the trial. And no legal difficulty stood in the way of maintaining the action against the auctioneers who had the actual possession of the property. The case in that respect is quite distinguishable from McDougall v. Travis, 24 Hun, 590, where the possession was no other than that of a servant.

Neither is there any defect in form in the decision of the referee, or the judgment entered upon it, for it has fixed the value of the chattels in dispute and the damages, by way of interest, the plaintiff was considered entitled to recover, as that has been required by § 1726 of the Code of Civil Procedure. But if there should be held to be auy formal mistake in this respect, the judgment cannot be reversed on account of it, for it can in no manner prejudice or injure the defendants, or those represented by them, in the least degree, and must, in conformity with §§ 721—23-of the Code of Civil Procedure be disregarded. The case contains no such defects as those in Wood v. Orser, 25 N. Y., 348. And that' decision, therefore, has no application to the controversy.

But it docs appear that a larger amount of interest was allowed by the referee than could legally be computed for the time mentioned in the report.

So, also, it appears from the evidence that the sales made by the firm of Theodore W. Bailey & Co. to Kantrowitz -were not induced by means of fraudulent misrepresentations, as the others were. John W. Hoyt, the witness examined in behalf of that firm, testifies that he made the sales relying upon a statement obtained from Dun & Company concerning the financial condition of Kantrowitz, while it appears by the evidence of a person in the employment of Dun & Company that no statement was obtained from Kantrowitz by that firm. And Kantrowitz himself testifies that he made no statement of his affairs to that firm, and there was no proof in the case that he ever had made such a statement. And consequently he was not responsible for the information which Dun & Co. may have given to the representative of Bailey & Company. Mr. Hoyt was recalled and further examined as a witness, but he stated no more upon this subject than that Kantrowitz said, “I have money and stock enough to make a success of it.” This, however, was not made in any form the foundation of the referee’s decision as to the plaintiff’s right to recover for the goods sold by Bailey & Company. He has placed that upon the statement that Kantrowitz represented himself to bo worth $15,900, which was $12,000 over his debts and liabilities, and that this firm sold the goods which they delivered to him relying upon the truth of that representation. This conclusion of the referee is unsupported by the evidence. And for the goods which they sold, amounting to the sum of $768.62, the plaintiff did not accordingly establish liis right to maintain the action. As to this part of the case the evidence was radically defective. But it does not follow that the judgment should be reversed on account of this error, for • this was a separate and distinct sale from each of the others, alleged as the ground of the sixth cause of action mentioned in the complaint. And where that is the nature of the demand erroneously found to exist, the judgment may be corrected by its deduction with the assent of the plaintiff. Crim v. Starkweather, 88 N. Y., 339, 341.

On this account, and to correct the allowance of interest contained in the report of the referee and the judgment, the judgment should be reversed, and a new trial ordered, with costs to abide the event, unless within twenty days after notice of the decision the plaintiff shall stipulate to deduct this sum of $768.62, with the interest upon it, and the excess of interest allowed upon the other items, from the judgment. In case of such stipulation being given, then the judgment will be modified by correspondingly reducing its amount, and affirmed, as modified, without costs of the appeal to either party.

Van Brunt, P. J., and Brady, J., concur.  