Smith v. Smith, Murphy & Co.

• Decision Date: 25 July 1853
• Citation: 21 Pa. 367
• Parties: Smith <I>versus</I> Smith, Murphy, and Company.
• Court: Pennsylvania Supreme Court

21 Pa. 367

Smith versus Smith, Murphy, and Company.

Supreme Court of Pennsylvania.

July 25, 1853.

ERROR to the Common Pleas of Cumberland county.

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____, for the plaintiff in error.—To enable a seller to rescind a contract for the sale of goods, it must be shown that deceptive assertions and false representations were made by the purchaser to induce the seller to part with his goods. The mere insolvency of the purchaser, though known to himself, and a design on his part not to pay for them, is not sufficient for the purpose: 1 Greenleaf's Rep. 379, Cross v. Peters; 7 Taunton 59; 4 Greenleaf 245. The depositions referred to independent transactions and conversations having no reference to the claim of the plaintiffs.

Miller, contrà.—In order to prove fraud, it is not absolutely necessary to prove a false pretence or other direct artifice in respect to the individual purchase sought to be avoided: 3 Wharton 369, Mackinley v. McGregor; 3 Barr 21; 2 Jones 109. If there was a design to defraud, it mattered not whether the purchaser was solvent or insolvent.

Gallagher, in reply.

The opinion of the Court, filed July 25, was delivered by LOWRIE, J.

The main question of this cause is raised by an objection to the charge of the court declaring, in substance, that a purchase of goods vests a voidable title in the vendee, if, at the time of the purchase, he knew, and did not reveal the fact, that he was unable to pay and intended not to do it, even though he made use of no deceptive assertions or false and fraudulent representations to induce the sale.

This would seem to have been the opinion of several judges, though not always clearly appearing: 1 B. & C. 514; 9 Id. 59; 8 Eng. C. L. R. 146; 17 Id. 330; 16 Conn. 71; 15 Mees. & W. 216. Our own case of Mackinley v. McGregor, 3 Whart. 370, would seem to be more important; but its influence for this case may be over-estimated, if we do not read it with reference to the extraordinary character of the cause, and to the fact that this question was not raised on the bill of exceptions. No question arose on the charge of the Court or the sufficiency of the evidence, for the case was submitted without a charge.

On the other hand, the contrary doctrine is implied in nearly all the cases on this subject, and is directly declared in some of them: 9 Gill & Johns. 200; See 5 U. S. Dig. 29; 5 Taunt. 59; 1 Greenl. 386; See 2 Mason 240; 20 Eng. C. L. R. 236. The very question is raised, discussed, and thus decided in the case of Cross v. Peters, 1 Greenl. 386. But it seems still to be fairly open here to be decided according to its proper analogies and principles.

And here at the outset, we may reject, as only apparent analogies, some classes of cases that are distinguishable from the one under consideration. We reject the strictness required in the evidence of fraudulent intent in the criminal offence of false pretences; because a man is chargeable civilly, but not criminally, for the fraud of his agent, and also for the legitimate consequences of a dishonest representation, whether he intended to defraud or not: 1 Met. 1; 3 Bar. & Ad. 114; 5 Eng. L. & E. Rep. 585; 14 State Rep. 142. We reject the principle that contracts will not be specifically enforced where it would be unconscionable to ask it; for this is confined to executory contracts. We reject those moral and legal doctrines which require the strictest honesty in all dealings where one party stands in a relation of special influence or confidence toward the other; for between buyer and seller the law recognises no such relation.

Reduced to its fewest words, the instruction is, that an intention not to pay, and conscious and unrevealed insolvency, make a purchase fraudulent, legally as well as morally. Is it so?

An intention not to pay is dishonest, but it is not fraudulent: 9 Watts 34; 6 Wend. 81. The law provides an action on the contract as the remedy for just such dishonesty. And it is no more fraudulent to have such an intention at the time of the purchase than at the time when payment ought to be made. Such intention by itself is disregarded by the law, for it can be set aside by the usual contract remedies.

Nor does insolvency make a sale voidable after delivery: 6 Wend. 81; 2 Mason 240. If such were the law there is no calculating the suspicions and disputes which it would nourish. If it were so, the law of stoppage in transitu would be effectually abolished by one of a much more sweeping character. Nor does insolvency combined with an intention not to pay; for it is no more fraudulent in an insolvent, than in a perfectly solvent man, to have such an intention.

The buyer's knowledge of his insolvency would be quite as dangerous a test of fraud; for it might always be inferred from the fact of insolvency, and from the presumption that every man is acquainted with his own affairs. If the fact of buying implies an assertion of solvency, then every contract by a man in failing circumstances can be made fraudulent, for, to this implied assertion a jury might add the inference that he had either investigated his affairs and knew his insolvency, or had not, and knew his ignorance; and then might follow, just as logically, the inference of intention not to pay: 14 State Rep. 142. Thus all the elements of fraud contained in the proposition under consideration may be inferred from the mere fact of a subsequent failure, and the contract is avoided for a constructive, rather than an actual fraud. If this were law, it would soon sweep away all the law of contracts, as to persons failing, and a new law of frauds would take its place. On every failure we should have a general scramble among vendors to get back their goods, and suits without number to establish their right by convicting the buyer of fraud. As to the fact of his not revealing his insolvency, some of the above considerations tend to answer it, and it is completely set aside by the principle that no man is under a legal obligation to make known his circumstances when he is buying goods, and no wise dealer would rely upon such representations as a general rule.

We do not forget the maxim apices juris non sunt jura, and think we do not strain the proposition in question by this analysis of it. Insolvency is a state of one's affairs, and the consciousness of it and the intention not to pay are states of the mind, and if these constitute fraud, then it may be made out without proof of a single overt fraudulent act. And if none of its elements consist of an overt act, then the law requires no evidence of an overt act to establish it.

We may get a perfectly clear view of this case, by so defining the question as to avoid the danger of an irrelevant conclusion. Where must we look for the fraud? Not in the buyer's intention merely. It must be a fraud upon the vendor, that is,...