Reed v. Brown

• Decision Date: 17 October 1893
• Citation: 89 Iowa 454,56 N.W. 661
• Parties: REED ET AL. v. BROWN ET AL.
• Court: Iowa Supreme Court

89 Iowa 454

56 N.W. 661

REED ET AL.

v.BROWN ET AL.

Supreme Court of Iowa.

Oct. 17, 1893.

Appeal from district court, Buena Vista county; Lot Thomas, Judge.

Action to recover possession of certain articles of merchandise of the value of $49.93. Judgment was entered for the plaintiffs. Defendants appeal upon certificate of the trial judge that the case involves a question of law, upon which the opinion of this court is desired.Frank J. Brown and T. D. Higgs, for appellants.

C. A. Irwin, for appellees.

GIVEN, J.

1. The certificate upon which this appeal is taken is as follows: “Where goods are purchased from an insolvent firm, but without any knowledge on the part of the purchaser of said insolvency, to be paid for in part with a pre-existing debt, and a promise on the part of the purchaser to pay the balance on demand, but where the balance is not demanded or paid, and a receipt given to the vendor by the purchaser for the debt, as aforesaid, and when the purchaser is told to take any goods he chooses from a large quantity, and the purchaser takes goods that were obtained by fraud on the part of the vendee, and the defrauded vendor rescinds the sale, does such a purchase constitute a purchase for value, as against the defrauded vendor?”

It is not questioned in the record, or in argument, but that appellees had the right to, and did, rescind the contract by which they sold the goods in controversy to appellants' vendors, Rae & Harker, and would be entitled to recover them from Rae & Harker, if still held by them. Nor is it questioned but that appellants were innocent purchasers of the goods from Rae & Harker. The sole contention is whether they were purchasers for value, or, in other words, whether the pre-existing debt, and the promise to pay the excess of the value of the goods over the amount of the debt, was a valuable consideration, as against the defrauded vendors, the appellees.

We first inquire whether the pre-existing debt was a valuable consideration for the purchase. This question is presented for the first time in this court. Though the amount in controversy is small, counsel urge the importance of the question, and have aided us in its solution by the marked care and ability with which it is presented. Cobbey, in his Law of Replevin (section 286) states the law to be as follows: “Goods obtained by fraud, and used to pay a pre-existing debt, may be replevied by the true owner. Where goods obtained by fraud are turned over to pay a pre-existing debt of the vendee, either by actual sale or by pledge, such second vendee is not considered as an innocent purchaser for value, as, if he is compelled to surrender the goods to the true owner, he is in no worse condition than before. In such cases it is well settled that the true owner may retake his property.” See, also, Newm. Sales, § 205. Of the many cases which we find fully supporting this statement of the law, we cite the following, most of which are directly in point: Root v. French, 13 Wend. 570;Sargent v. Sturm, 23 Cal. 359;Durell v. Haley, 1 Paige, 492;Linnard's Appeal, (Pa. Sup.) 3 Atl. Rep. 840;Bradley v. Obear, 10 N. H. 477;Farley v. Lincoln, 51 N. H. 577;Sleeper v. Davis, (N. H.) 6 Atl. Rep. 201;Johnson v. Peck, 1 Woodb. & M. 334; Ruth v. Ford, 9 Kan. 17; Thompson v. Rose, 41 Amer. Dec. 121; Dickerson v. Tillinghast, 4 Paige, 215;Stevens v. Brennan, 79 N. Y. 254;Poor v. Woodburn, 25 Vt. 234;Ratcliffe v. Langston, 18 Md. 383; Spira v. Hornthall, 77 Ala. 137; Henderson v. Gibbs, 39 Kan. 680, 18 Pac. Rep. 926;Eaton v. Davidson, 46 Ohio St. 355, 21 N. E. Rep. 442. In Factory v. Lendrum, 57 Iowa, 573, 10 N. W. Rep. 900, this court held that an attaching creditor of a fraudulent vendee parts with no consideration; that he stands in the shoes of the vendee, and cannot hold the property attached, as against the defrauded vendor. The reasoning in that case is in harmony with the cases cited above. The only cases we have discovered, holding contrary to the above-mentioned cases, are Shufeldt v. Pease, 16 Wis. 689; Butters v. Haughwout, 42 Ill. 18. Appellants cited Johnson v. Barney, 1 Iowa, 531, and Trustees v. Hill, 12 Iowa, 463. In the former case it is held, in harmony with the general current of decisions, “that the rights of the holder of a negotiable instrument are the same whether the debt for which it is transferred is pre-existing, or contracted at the time of the transfer.” The latter case recognizes this rule as applying to transfers of negotiable paper in payment of a pre-existing debt, and holds that if the transfer is as collateral security for a pre-existing debt, without any new consideration, an assignee of the negotiable instrument is not a purchaser for value, in the usual course of trade. This case has been followed in Ryan v. Chew, 13 Iowa, 589;Ruddick v. Lloyd, 15 Iowa, 441;Bank v. Barber, 56 Iowa, 559, 9 N. W. Rep. 890;Bone v. Tharp, 63 Iowa, 223, 18 N. W. Rep. 906.

Being thus settled as the law of this state that a pre-existing debt is a valuable consideration for the transfer of a negotiable instrument, appellants contend that the same rule should apply to the transfer of any chattel property. In considering this claim, we must have in mind the distinction between negotiable instruments and other chattels. It is unquestionably the policy of the law, in the interest of trade and commerce, to facilitate the circulation of commercial...