Leedom v. Earls Furniture & Carpet Co.

• Decision Date: 06 November 1895
• Docket Number: 596
• Citation: 42 P. 208,12 Utah 172
• Parties: THOMAS L. LEEDOM AND OTHERS, CO-PARTNERS, AS THOMAS L. LEEDOM & CO., RESPONDENTS, v. EARLS FURNITURE & CARPET COMPANY, A CORPORATION, AND I. A. BENTON, UNITED STATES MARSHAL FOR UTAH TERRITORY, APPELLANTS. [1]
• Court: Utah Supreme Court

42 P. 208

12 Utah 172

THOMAS L. LEEDOM AND OTHERS, CO-PARTNERS, AS THOMAS L. LEEDOM & CO., RESPONDENTS, v. EARLS FURNITURE & CARPET COMPANY, A CORPORATION, AND I. A. BENTON, UNITED STATES MARSHAL FOR UTAH TERRITORY, APPELLANTS. ^[1]

No. 596

Supreme Court of Utah

November 6, 1895

APPEAL from the District Court of the Third Judicial District. Hon George W. Bartch, Judge.

Action in claim and delivery by Thomas L. Leedom, Charles L. Leedom Samuel Thomas and James W. Lynd, co-partners, etc., against the Earls Furniture and Carpet Company, a corporation, and I A. Benton, United States marshal for Utah territory. From a judgment for plaintiffs, and from an order denying a new trial, defendants appeal.

Affirmed.

Mr. J. G. Sutherland and Mr. Andrew Howat, for appellants.

Mr. James H. Moyle, Mr. Clesson S. Kinney and Messrs. Richards & Richards, for respondents.

"In all investigations of questions involving fraud, the courts extend an exceptional liberality to the admission of evidence." 2 Rice on Ev. pp. 953-4; Zerbe v. Miller, 16 Pa. 488; Hopkins v. Siebert, 58 Mo. 201; Stauffer v. Young, 39 Pa. 455; Castle v. Bullard, 64 U.S. 424. "And a broad interpretation is to be afforded to all the rules of relevancy." 2 Rice on Ev. p. 953, see, also, p. 946; Smalley v. Hale, 37 Mo. 102. Improper admission of evidence is harmless error where the judgment without such evidence must have been the same. Rio Grande Ry. Co. v. Armendaiz, 5 Tex. Civ. App. 449; Morris v. Turner, 5 Tex. Civ. App. 708; Tollman v. Bowerman (S. D.), 58 N.W. 568; Balt. & O. R. Co. v. State Strunz (Md.), 29 A. 518; Bank v. Spooner (Cal.), 36 P. 121; Ins. Co. v. Frederick (C. App. 8th C.), 7 C. C. A. 122. An objection to evidence as being "incompetent and immaterial" without pointing out any definite or specific defect therein is too general and does not raise the question that it is inadmissible under the pleadings. Gaslight Co. v. Poore (D. C. App.), 22 Wash. L. Rep. 249; Merrick v. Hill, 28 N.Y.S. 237; Claflin v. N.Y. Stand. Watch Co., 28 N.Y.S. 42; LeMesnager v. Hamilton, 101 Cal. 532; Ins. Co. v. Miller, 60 F. 254. The concealment of insolvency, with no reasonable expectation of paying, renders a sale fraudulent and entitles the seller to possession of the property as against the purchaser or his voluntary assignee. Morrow Shoe Mfg. Co. v. Shoe Co., 57 F. 685-693, affirmed in 60 F. 341; Davis v. Stewart, 8. F. 803.

We desire to call special attention to the case of Donaldson v. Farwell, et al., 93 U.S. 631, where the court in the opinion said: "The doctrine is now established by a preponderance of authority that a party not intending to pay, who, as in this instance, induces the owner to sell him goods on credit by fraudulently concealing his insolvency and his intent not to pay for them, is guilty of a fraud which entitles the vendor, if no innocent third party has acquired an interest in them, to disaffirm the contract and recover the goods." See, also, cases cited in the opinion. Byrd v. Hall, 2 Keyes, 647; Johnson v. Monell, 2 Abb. App. Dec. 470; Noble v. Adams, 7 Taunt. 59; Kilby v. Wilson, Ryan & Moody, 178; Bristol v. Wilsmore, 1 Barn. & C. 513; Stewart v. Emerson, 52 N.H. 301; 2 Rice on Ev. p. 958 and cases cited. Concealment of insolvency by a purchaser of goods, who obtains them without intending to pay for them, is fraud, and the property does not pass. Durell v. Haly, 1 Paige, 492; Stewart v. Emerson, 52 N.H. 301; Chaffee v. Fort, 2 Lans. 87. If the purchaser has no reasonable expectation of being able to pay, it is equivalent to an intention not to pay. Talcott v. Henderson, 31 Ohio St. 162; Powell v. Bradley, 9 Gill. and J. 220; Johnson v. Monell, supra. Where one who is insolvent, buys on credit, with the intention or proconceived design of not paying for what he buys, he is guilty of fraud and no title passes. Ayers v. French, 41 Conn. 142; Ross v. Niner, 35 N.W. 60; Donaldson v. Farwell, 93 U.S. 631; Stewart v. Emerson, 52 N.H. 301; Burrill v. Stevens, 73 Me. 395; Mulliken v. Millar, 12 R. I. 296; Fox v. Webster, 46 Mo. 181; Peters v. Hiles, 48 Md. 506, 512; Shipman v. Seymour, 40 Mich. 274; Buckley v. Archer, 21 Barb. 585; Wright v. Brown, 67 N.Y. 1; Kline v. Baker, 99 Mass. 253. The question of fraud in a court of law is a question of fact for the jury under the instructions of the court. Warner v. Norton, 20 How. 448; Grigg v. Sayre, 8 Pet. 244.

In the case at bar it was a question of fact for the jury whether the corporation purchased the goods with a fraudulent design not to pay for them, and the jury found that they did purchase them with that design. It is not within the province of the court to set the verdict of the jury aside in a case of fraud, unless it is clearly erroneous. See above cases cited, also: Byrd v. Hall, supra; Hall v. Naylor, 18 N.Y. 588; Hennequin v. Naylor, 24 N.Y. 139; Buckley v. Archer, 21 Barb. 585; Johnson v. Monell, supra. In reply to statement in appellants' brief that "the evidence introduced to show the fraudulent intent was entirely circumstantial" we answer, that circumstantial evidence is sufficient, and in most cases is the only proof that can be adduced in cases of fraud. 2 Rice on Ev. p. 970, and cases cited; Rea v. Missouri, 84 U.S. 17; Castle v. Bullard, 23 How. 172; Craig v. Fowler; 59 Ia. 203; Schuylkill R. R. Co. v. Monson, 81 U.S. 442; Schuchardt v. Allen, 68 U.S. 359; Pleasants v. Fant, 89 U.S. 22; Herbert v. Butler, 97 U.S. 320; County Com'rs v. Beal, 113 U.S. 240. Circumstances may show that a concealment of insolvency by a purchaser of goods was fraudulent evincing an intent not to pay for them. Fechheimer v. Baum, 37 F. 167; Johnson v. Bonnell, supra; Wright v. Brown, supra; Powell v. Bradley, 9 Gill & J. 220; Hal v. Naylor, 6 Duer, 71; Talcott v. Henderson, 31 Ohio St. 163. The circumstances in this case show that the insolvent defendant company first fraudulently reduced their capital stock from $ 100,000 to $ 25,000 in order to make it fully paid up. Then for fear the reduction might not hold the stockholders shifted 944 shares of the 1,000 shares into the name of Benj. F. Earls, who was wholly insolvent.

SMITH, J. MERRITT, C. J., and KING, J., concur.

OPINION

SMITH, J.:

This is an action by the plaintiffs against the Earls Furniture & Carpet Company, a Utah corporation, and I. A. Benton, as United States marshal, for the recovery of certain goods sold to the defendant company during the summer and fall of 1892, alleging that when the defendant company purchased the goods it was insolvent, and purchased the goods with the intention at the time of the purchase not to pay for the same. The defendant I. A. Benton, United States marshal, who had taken the property under execution issued upon judgments by confession of the Earls Furniture & Carpet Company to John T. Ballard and J. A. Earls, filed his answer denying the allegation of fraud. This was the only question tried and submitted to the jury. The jury returned a verdict against the defendants, and found that the plaintiffs were the owners and entitled to the possession of the property as described in the complaint, and also found that the value of said property was $ 731.63, and assessed the damage for its detention at $ 77.88.

The points relied upon for a reversal by the appellants may be divided in two groups; and for the purposes of this decision the first and second points relied upon may be considered together, and the third, fourth, and fifth may also be considered together. Taking up the first of these, it is claimed that the court erred in permitting to be read to the jury the twenty-third and twenty-fourth interrogatories of the deposition of James W. Lynd on behalf of the plaintiffs, and in overruling the defendants' objection thereto, and in permitting the answer to be read over the objection of the defendants thereto; the said interrogatories, the objections and answers thereto, being as follows: "Int. 23. Did the defendant company ever inform you that on the 10th day of June, at a special stockholders' meeting, duly called for the purpose, it was resolved that the sixth article of the articles of association of the company was to be so amended as to read as follows: 'Article 6. That the amount of the capital stock of said corporation shall be $ 25,000, which shall be divided into shares of the face or par value of $ 25 each;' and that said resolution amending article 6 was duly filed with the secretary of the territory on June 14, 1892?"--to which interrogatory the defendants objected on the ground that the same was immaterial and incompetent, which objection was overruled, and the answer thereto was read as follows, to wit: "The defendant company did not inform us of the change in the articles of association as set forth in this interrogatory." "Int. 24. Did the defendant company ever inform you that at all times between the 1st day of July, 1892, and the 1st day of December, 1892, that one Benjamin F. Earls was the owner of over nine hundred (900) shares of the capital stock of said defendant corporation, and that said capital stock, under the said amended articles of incorporation, was fully paid?"--to which the defendants objected as being incompetent and immaterial, which objection was overruled by the court, and the answer to said interrogatory was read as follows, to wit: "The defendant company did not inform us of the matter related in this interrogatory."

The issue in this case was one of fraud in the purchase of the goods by the defendant corporation, the Earls Furniture &amp Carpet Company. The allegations of fraud are clearly sufficient to justify the introduction of the evidence complained of by the appellants. This allegation of fraud in plaintiff's complaint is as follows: "That the defendant corporation...