Frank, Herman & Co. v. Robinson

• Decision Date: 05 December 1887
• Citation: 3 So. 253,65 Miss. 162
• Parties: FRANK, HERMAN & CO. v. C. W. ROBINSON, et al
• Court: Mississippi Supreme Court

3 So. 253

65 Miss. 162

FRANK, HERMAN & CO. v. C. W. ROBINSON, et al

Supreme Court of Mississippi

December 5, 1887

APPEAL from the Chancery Court of Lauderdale County, HON. SYLVANUS EVANS, Chancellor.

The case is stated in the opinion of the court.

Decree reversed and cause remanded.

Miller Smith & Hirsh, for the appellants.

1. The goods of the appellants, having been obtained by false and fraudulent pretences, with no intention on the part of Baum &amp Co. to pay for them, did not pass; that is, the property did not pass, and only a surreptitious possession was obtained. Consequently, the appellants promptly, upon discovery of the fraud, had the right to reclaim them, except as against an innocent purchaser for value. Donaldson, assignee, v Farwell, 93 U.S. 631; Des Farges v. Pugh, 53 Am. R. 446; Taylor v. Miss. Mills, 1 S.W. 283; Lee v. Simmons, 27 N.W. 174; Doane v Lockwood, 4 N.E. 500; Farley v. Lincoln, 51 N.H. 577; 2 Pomeroy's Eq., §§ 906, 1053; Belding, etc., v. Frankand, 41 Am. Rep. 631; Talcott v. Henderson, 27 Am. R. 504 and note; Benj. on Sales, § 440; Storey on Sales, § 176; Ayres v. French, 41 Conn. 142; Buckley v. Artcher, 21 Barb. 585; Talcott v. Henderson, 31 Ohio St. 162.

Fraudulently purchasing goods without intent to pay for them gives no title to the purchaser, nor to his assignee for the benefit of creditors as against the party defrauded. Knowles v. Lord, 4 Whart. 500; King v. Fitch, 2 Abb. App. 508; S. C. 1 Keyes 432.

An assignee or trustee for creditors is not an innocent purchaser for value. Burrill on Assignment, 3 Ed. p. 540; Pierson v. Manning, 2 Mich. 445; Doss v. Armstrong, 6 How. (Miss.) 258; Pope v. Pope, 40 Miss. 516.

The above principles are not affected by Sec. 1300, Code of 1880.

To say that persons who by false pretences have been deluded into suffering another to take possession of their property shall be sacrificed to other creditors of the fraudulent purchasers would be carrying the statute beyond any possible purpose it had in view.

There must be some limit in natural justice to the construction the courts will place upon this statute. If I should leave an article over night for safe keeping in the store of a merchant; or if a thief should steal an article belonging to me and dispose of it to a merchant, and in either case a seizure should be made on behalf of creditors under legal process; it is not conceivable that a court would deny my claim; yet in a certain sense the property might be acquired or used in the defendant's business.

The court would have no hesitation in interpolating "lawfully" before the words "acquired or used" to make the act clearly accord with the purpose and intent of the legislature.

In the cases stated, as in this case, it is submitted that any other view would result in spoliation of the most abominable nature, to wit: under the forms of law.

2. Assuming that appellant's right to reclaim their identical goods may be cut off, still the Chancery Court, by its sequestration of the goods pendente lite, will not deprive petitioners of their right to charge the purchase money as a lien upon their goods, under the act of 1884.

In legal intendment, we take it, since the possession of the assignees (mere volunteers) was the possession of Baum & Co., under the act of 1884, if appellants could not disaffirm the sale, they could still fix a lien upon the goods. By merely appointing a receiver upon the bill of a creditor, this right should not be lost.

3. But, in any view, it was error to dismiss the petition absolutely; for, if a decree should be made adverse to the creditor of Baum & Co., the possession of the goods in legal effect, if not actually, would be restored to the assignees, and be and remain subject to the rights of appellants under either branch of the case.

T. M. Miller, of counsel for the appellants, argued the case orally.

J. S. Hamm and Walker & Hall, for the appellees.

The appellees rely upon the statute (§ 1300, Code 1880) as precluding the petitioners from setting up any title to or asserting any lien upon the goods described in the petition.

The Supreme Court has, time and again, had this statute (§ 1300, Code 1880) before it for consideration and construction. See Gumbol v. Koon, 59 Miss. 264; Quin v. Myles, 59 Miss. 375; Shannon v. Blum & Co., 60 Miss. 828; Paine v. Hall Safe and Lock Company, 64 Miss. 175.

This is certainly as strong a case as any of the above. In the case before the court, it is not contended that the petitioners, Frank, Herman & Co., did not part with the title to the goods. The title, it is admitted by their counsel, vested in Joseph Baum & Co.; but it is said that the title thus vested in Joseph Baum & Co. was a defeasible title, and that, having been acquired by fraud, the sellers have a right to rescind the contract of sale, divest the title and regain possession of the goods.

But it surely needs no argument to show that to allow this claim under the circumstances of this case would be to allow petitioners to set up and establish a secret claim to property which they had, months ago, sold and delivered to Joseph Baum & Co., and which had been incorporated and mingled with the other merchandise in the hands and possession of that firm.

This case is not only within the spirit, but is within the very title of the statute (§ 1300, Code 1880); and even though said Joseph Baum & Co. may, as alleged and charged by the petitioners, have procured the goods from them by fraud, yet they cannot be heard, in the face of the statute (§ 1300, Code 1880), to urge any claim to the goods, as against the creditors of Joseph Baum & Co. Nor can they assert any such claim against the receivers, who merely represent the creditors, and are bound to protect their interests.

Nor can the petitioners, Frank, Herman & Co., establish any lien on the goods under the provisions of the act of March 11, 1884. To allow them to do so (even if that act applied to the sales of personal property generally, and not merely to personal property exempt from execution, except where the purchase-money has not been paid) would be to allow them to set up and establish a secret claim or lien on personal property in the hands of a merchant or trader, as against the creditors of such merchant or trader--the very evil which the statute (§ 1300, Code 1880) was designed to prevent.

G. Q. Hall, of counsel for the appellees, argued the case orally.

OPINION

COOPER, C. J.

On the 21st of September, 1887, Baum & Co. made an assignment for the benefit of their creditors to Robinson and Wright assignees. On the 25th of September, Jaffrey & Co., exhibited their bill in the chancery court of Lauderdale County, attacking the assignment as fraudulent and void, and seeking to subject the property assigned to the payment of their demand. Their bill is of a double aspect and the prayer is that the assignment be declared void and the goods appropriated to the payment of their debt; but if upon hearing it should be made to appear that the assignment was made in good faith, then they ask that the trust be administered under the direction of the chancery court and by a receiver to be appointed by it. By consent of parties the assignees were appointed receivers of the court, and now hold the property assigned in that character.

On the 28th of September, Frank, Herman & Co. exhibited in the court having control of the property their petition, by which they charge that Baum & Co. by false and fraudulent representations of their solvency induced petitioners to sell to them a large quantity of boots and shoes for which nothing has been paid; that a large part of the goods were on hand at the time of the assignment, and passed to the assignees and are now in the hands of the receivers. They claim the right to rescind the sale for fraud and to have delivery of the goods from the receivers. Their petition is also in the alternative and they ask that failing to establish the fraud of Baum & Co., a lien may be established upon so much of the goods sold by them as remain on hand for the purchase money due thereon. To this petition a demurrer was interposed by the receivers.

The substantial grounds of demurrer are:

1. That the goods, though acquired by Baum & Co. by fraudulent representations of their solvency, were nevertheless "used or acquired in the business transacted by them," and are, by virtue of Section 1300 of the Code of 1880, to be treated as the property of said firm in favor of their creditors as against the secret right of the petitioners to dis-affirm the sale.

2. That Jaffrey & Co., proceeding under Sections 1843, 1844 and 1845 of the Code, acquired a lien upon the goods by exhibiting their bill to declare the assignment fraudulent, which lien must prevail, unless upon final hearing the assignment shall be declared valid.

3. That the vender's lien sought to be enforced by the petitioners exists by law upon personal property only when such property is of the class covered by the exemption laws of the State.

The objections thus taken are determinable by construction of the several statutory provisions relating thereto, and for convenience they are here set out in full.

Section 1300 of the Code is as follows:

"If any person shall transact business as a trader or otherwise, with the addition of the words 'agent,' 'factor,' and 'company,' or 'and Co.' or like words, and fail to disclose the name of his principal or partner, by a sign in letters easy to be read, placed conspicuously at the house where such business is transacted; or if any person shall transact business in his own name, without any such addition, all the property, stock, money and choses in action used or acquired in such business shall, as to the creditors of...