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pay if possible.161 And further, to avoid the sale on this ground, the purchaser must have entertained an intention not to pay in any event, an intention merely not to pay according to the contract not being sufficient,162 nor an intention to force the seller to credit the price of the goods on a claim for damages which the purchaser is urging against him.163 Again, the intention not to pay must have been formed at the time of making the contract, or at any rate before or at the time of receiving the goods.164 An intention to refuse or evade payment, and thereby to defraud the seller, conceived some time after the sale, is not equivalent to the necessary predetermined intention.165 Thus, a sale cannot be rescinded as fraudulent, though the buyer knew that he was insolvent and made no statement as to his condition, and though he mortgaged the goods on the same day he received them and soon after made an assignment for the benefit of creditors, where it appears that, at the time of ordering the goods, he intended to pay for them and had no thought of mortgaging them until after they were in his store and he was threatened with suit by a third person.168 As to the difficult matter of showing this secret purpose in the mind of the purchaser, it is said that "the intent not to pay for property bought on credit may be proved by evidence of other fraudulent purchases, part of the same scheme of fraud, by the secreting of the property bought as soon as obtained, or by turning it over to another creditor, or by evidence of admissions or of subsequent conduct indicating a design to defraud, or by other circumstances." 167 Thus, where a merchant obtains goods

161 Watson v. Silsby, 166 Mass. 57, 43 N. E. 1117.

162 Beebe v. Hatfield, 67 Mo. App. 609; Strickland v. Willis (Tex. Civ. App.) 43 S. W. 602.

163 Royal Remedy & Extract Co. v. Gregory Grocer Co., 90 Mo. App. 53.

184 Ayers v. Farwell, 196 Mass. 349, 82 N. E. 35.

165 Leedom v. Mayer, 114 Wis. 267, 90 N. W. 169.

166 Consolidated Milling Co. v. Fogo, 104 Wis. 92, 80 N. W. 103; England v. Adams, 157 Mass. 449, 32 N. E. 665.

167 1 Benj. Sales (Corbin's edn.) § 656, note, citing Wiggin v. Day, 9 Gray (Mass.) 97; Parker v. Byrnes, 1 Lowell, 539, Fed. Cas. No. 10,728; Jordan v. Osgood, 109 Mass. 462, 12 Am. Rep. 731; Davis v. McWhirter, 40 U. C. Q. B. 598. And see Samaha v. Mason, 27 App. D. C. 470; Hallacher v. Henlein (Tenn. Ch. Arp.) 39 S. W. 869.

on credit with the intention of at once placing them beyond the reach of his creditors by exchanging his whole stock for a homestead, the proceeding is evidence of a fraudulent intent in the purchase of the goods at the outset.188 So where he confesses a judgment to a third person which is enforceable at once, and the effect of which, as he knows, will be to disable him from carrying on his business.169 So, where an insolvent corporation orders large quantities of goods in anticipation of its failure, and for the purpose of surrendering them to a preferred creditor, and the carrying out of the scheme is started by a fraudulent attachment of the goods at the suit of such creditor, it is such evidence of an intention not to pay as will warrant the seller in rescinding.170 And a like ruling was made in a case where an insolvent firm executed mortgages covering its entire stock to a bank, which mortgages were not recorded, and then bought goods from the plaintiff, and before delivery thereof agreed with the bank that it should collect all accounts of the firm and apply the proceeds on the mortgages. But even the fact that defendant's entire capital had been secured by obtaining the discounting of forged notes is not so inconsistent with an intention on his part to pay for goods purchased that the goods may be retaken by the seller on the ground of fraud.172 It should here be observed that if the goods have not yet been delivered, the seller will be justified in refusing to ship them when facts come to his knowledge which induce a reasonable doubt of the purchaser's ultimate intention to pay for them.178

171

But in several of the states, the authorities do not go to the length of requiring a fixed and preconceived intention not to pay, as an essential element of the fraud which will justify a rescission of the sale. They hold that if the buyer knew of his own insolvency and knew that he would not

168 Meigs v. Dibble, 73 Mich. 101, 40 N. W. 935. 169 Claster v. Katz, 6 Pa. Super. Ct. 487.

170 Craig v. California Vineyard Co., 30 Or. 43, 46 Pac. 421. But compare Levi v. Bray, 12 Ind. App. 9, 39 N. E. 754.

171 Deere v. Morgan, 114 Iowa, 287, 86 N. W. 271.

172 Sinnott v. German-American Bank, 164 N. Y. 386, 58 N. E.

178 Bostick v. Mendenhall, Man. Unrep. Cas. (La.) 113.

be able to pay for the goods when due, or had no reasonable expectation of being able to pay, this is a state of facts legally equivalent to the holding of an intention not to pay, or at least a state of facts from which such an intention may legally be presumed.17 If, however, there does exist an intention of not paying for the goods, this is the gist of the fraud, and in this case the sale may be avoided or rescinded though there were no fraudulent representations or no concealment of the fact of insolvency, these being not necessary elements, but evidentiary facts tending to establish the intent not to pay.175 Or, according to

174 In re Berg (D. C.) 183 Fed. 885; In re Hamilton Furniture & Carpet Co. (D. C.) 117 Fed. 774; Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 South. 12, 8 L. R. A. (N. S.) 448, 119 Am. St. Rep. 19; McKensie v. Rothschild, 119 Ala. 419, 24 South. 716; Wilk v. Key, 117 Ala. 285, 23 South. 6; John Blaul & Sons v. Wandel, 137 Iowa, 301, 114 N. W. 899; Diggs v. Denny, 86 Md. 116, 37 Atl. 1037; Edelhoff v. Horner-Miller Straw Goods Mfg. Co., 86 Md. 595, 39 Atl. 314; Talcott v. Henderson, 31 Ohio St. 162, 27 Am. Rep. 501; Wilmot v. Lyon, 11 Ohio Cir. Ct. R. 238; Boaz v. Coulter Mfg. Co. (Tex. Civ. App.) 40 S. W. 866; Contra, Dorman v. Weakley (Tenn. Ch. App.) 39 S. W. 890. In Talcott v. Henderson, supra, it was said: "An intention on the part of the purchaser of goods not to pay for them, existing at the time of purchase, and concealed from the vendor, is unquestionably such a fraud as will vitiate the contract. But it is as certainly true, on the other hand, that, where no such fraudulent intent exists, the mere fact that the purchaser has knowledge that his debts exceed his assets, though the fact be unknown and undisclosed to the vendor, will not vitiate the purchase. Whether, therefore, a contract of purchase, where the purchaser fails to disclose his known insolvency, is fraudulent or not depends on the intention of the purchaser, and whether that intention was to pay or not to pay is a question of fact and not a question of law. In the solution of this question, though it be one of fact, it is true, however, that certain presumptions arise which are entitled to consideration and force. Thus, while it may be said that fraud must be proved and will not be presumed, there is a presumption that every reasonable person anticipates and intends the ordinary and probable consequences of known causes and conditions. Hence if a purchaser of goods has knowledge of his own insolvency and of his inability to pay for them, his intention not to pay should be presumed. I would go a step farther, and hold that an insolvent purchaser, without reasonable expectations of ability to pay should be presumed to intend not to pay. Indeed, I would not deny that an intention not to pay might be inferred from the mere fact that the purchaser had undisclosed knowledge of his gross insolvency, but in such case the inference may be rebutted by other facts and circumstances."

175 Atlas Shoe Co. v. Bechard, 102 Me. 197, 66 Atl. 390, 10 L. R.

some of the cases, a buyer, in giving his order and receiving the goods, is to be understood as impliedly representing that he intends to pay for them, and is guilty of fraud if he entertains a contrary intention.176 But the fraud does not consist in the unfulfilled promise to pay, but in the express or implied false representation of an intention to pay. On the other hand it is not fraudulent per se for a person who is insolvent or in embarrassed circumstances to buy goods, withholding from the seller information as to the actual condition of his business affairs, but with this there must be combined an intention not to pay for the property, or otherwise to cheat the seller.178

177

But the chief difference of opinion among the authorities arises upon the question whether or not there must coexist with the foregoing elements of fraud a false representation of solvency or some trick or device to deceive the seller on this point, and thereby to get credit which would not otherwise have been given. It is held, by a very strong line of authorities, that no actual misrepresentation or affirmative fraudulent concealment as to his solvency by a purchaser of goods on credit is necessary to entitle the seller to rescind, but the sale is rescindable for fraud if the purchaser, being at the time insolvent and knowing the fact, and having no intention of paying for the goods or no reasonable expectation of being able to do so, fails to disclose his financial condition to the seller and is silent with regard to his intention or expectation as to payment, provided that the seller was induced by such concealment and silence to make the sale.179 But some of the cases, while

A. (N. S.) 245; Hart v. Moulton, 104 Wis. 349, 80 N. W. 599, 76 Am. St. Rep. 881; Reager v. Kendall, 19 Ky. Law Rep. 27, 39 S. W. 257; Morrill v. Blackman, 42 Conn. 324. And see W. W. Johnson Co. v. Triplett, 66 Ark. 233, 50 S. W. 455.

176 Phelps, Dodge & Palmer Co. v. Samson, 113 Iowa, 145, 84 N. W. 1051; Atlanta Skirt Mfg. Co. v. Jacobs, 8 Ga. App. 299, 68 S. E. 1077.

177 McCready v. Phillips, 56 Neb. 446, 76 N. W. 885.

178 Harrisburg Pipe-Bending Co. v. Welsh, 26 App. Div. 515, 50 N. Y. Supp. 299.

179 Union Manufacturing & Commission Co. v. East Alabama Nat. Bank, 129 Ala. 292, 29 South. 781; Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 South. 12, 8 L. R. A. (N. S.) 448, 119 Am.

accepting this rule in the main, hold that there must be a "concealment" of the fact of insolvency, that is, some falsehood on this point, or some successful effort either to mislead the seller or to induce him to forbear making an investigation, and that the mere failure of the purchaser to volunteer information, or his mere silence as to his financial condition when no inquiry is made, is not equivalent to concealment, and therefore not such fraud as to vitiate the sale.180 And in some jurisdictions (notably Pennsylvania) it is settled law that, in order to constitute such fraud as will render a sale void or rescindable by the seller, the buyer's intention not to pay the price and his concealment of his own insolvency are not alone sufficient, but in addition there must have been some artifice or trick, intended and fitted to deceive the vendor, or some false pretense or false representation.181 But a fraud is committed within the meaning of this rule (the other elements being present) if the buyer falsely represents that he owns a valuable farm and has other means amply sufficient for his business, and always buys for cash, and owes no debts,182 or if he obtains

St. Rep. 19; Maxwell v. Brown Shoe Co., 114 Ala. 304, 21 South. 1009; Upchurch v. Mizell, 50 Fla. 456, 40 South. 29; Tennessee Coal, Iron & R. Co. v. Sargent, 2 Ind. App. 458, 28 N. E. 215; Oswego Starch Factory v. Lendrum, 57 Iowa, 573, 10 N. W. 900, 42 Am. Rep. 53; In re Spann (D. C.) 183 Fed. 819; Donaldson v. Farwell, 93 U. S. 631, 23 L. Ed. 993; Johnson v. O'Donnell, 75 Ga. 453. Compare In re Davis (D. C.) 112 Fed. 294. In Georgia, the rule stated in the text is enacted into statutory law. "Where one who is insolvent purchases goods, and, not intending to pay therefor, conceals his insolvency and intention not to pay, the vendor may disaffirm the contract and recover the goods, if no innocent third person has acquired an interest in them." Civ. Code Ga., § 4111.

180 Stein v. Hill, 100 Mo. App. 38, 71 S. W. 1107; Kaminer v. Wolf, 13 Ohio Cir. Ct. R. 612; Strickland v. Willis (Tex. Civ. App.) 43 S. W. 602.

181 Smith v. Smith, 21 Pa. 367, 60 Am. Dec. 51; Backentoss v. Speicher, 31 Pa. 324; Rodman v. Thalheimer, 75 Pa. 232; Diller v. Nelson, 10 Pa. Super. Ct. 449; Shirk v. Konigmacher, 3 Pa. Super. Ct. 45; North American Smelting Co. v. Temple, 12 Pa. Super. Ct. 99; Collings Tailor Co. v. Appenzellar, 42 Pa. Super. Ct. 414; Reed v. Felmlee, 25 Pa. Super. Ct. 37; In re Lewis (D. C.) 125 Fed. 143: Thompson v. Peck, 115 Ind. 512, 18 N. E. 16, 1 L. R. A. 201; Levi v. Bray, 12 Ind. App. 9, 39 N. E. 754; Holmes v. Henderson, 12 Ind. App. 698, 40 N. E. 151.

182 Kline v. Baker, 99 Mass. 253.

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