Opinion
Argued May 21, 1900
Decided June 19, 1900
David B. Hill for appellant. John B. Green for respondent.
There was sufficient in the evidence upon which the trial court might find as it did, that the sale of the goods to Reinhardt, the plaintiff's assignor, was induced by the fraudulent representations which he made to the defendant's agent, at the time of giving the order for the goods, respecting his financial condition and solvency. The assignment by Reinhardt following so soon after the transaction of the sale, with its showing of insolvency, in connection with the evidence of Reinhardt's bookkeeper, that his condition had been substantially the same for the six weeks preceding the assignment, afforded ample ground for holding that a fraud had been perpetrated upon the defendant.
The serious question in the case is, whether the defendant had not so elected to affirm the transaction of sale as to conclude it from thereafter prosecuting its claim to rescind it upon the ground of the fraud. It could not affirm the existence of the contract of sale, for the purpose of a recovery under it, and, subsequently, treat the contract as avoided by the fraud of the vendee; provided that the act in affirmation was with knowledge of the essential facts. It was observed by Chancellor KENT in Sanger v. Wood, (3 John. Ch. at p. 421), that "any decisive act of the party, with knowledge of his rights and of the fact, determines his election in the case of conflicting and inconsistent remedies." This is the principle upon which is based the doctrine of the election of remedies, where two exist in a given case which are substantially inconsistent. It is equally applicable to a case like this, where the defendant has decided, in effect, to ratify a transaction of sale, by asserting that his property was sold to the plaintiff's assignor, who promised to pay therefor, etc. The doctrine of affirmative action, as determining, finally, the party's attitude with respect to the transaction involved, is exemplified in the cases. ( Mills v. Parkhurst, 126 N.Y. 89; Terry v. Munger, 121 ib. 161; Conrow v. Little, 115 ib. 387; Fowler v. Bowery Savings Bank, 113 ib. 450; Seavey v. Potter, 121 Mass. 297; Ormsby v. Dearborn, 116 ib. 386.) In the Massachusetts cases cited, it was held that the claim to rescind the sale was inconsistent with a proof of claim in bankruptcy for the price of the goods. ( Seavey v. Potter, supra.) I do not consider that the filing of the mechanic's lien constituted any decisive evidence of defendant's election; but the filing of the verified proof of a claim upon the assigned estate appears to me to have been a decisive act in affirmation of the sale, and if done with knowledge of the essential facts, then, I think, the defendant was bound by it.
It is true that the finding of the trial court was to the effect that the defendant did not affirm the sale of the goods; but the finding was excepted to and if the evidence was wanting in support of it, the exception must prevail. It is perfectly clear from this record that no further facts came to defendant's knowledge up to the time of making its claim to rescind, than it was possessed of at the time of filing its proof of claim with the assignee. At that time the inventory and schedules of Reinhardt disclosed, within about six weeks of his purchase of the goods, his utter insolvency. The facts, or inferences, thus furnished were all that the defendant ever had, and the only further fact communicated, confirmatory of the fraud of Reinhardt, was in his bookkeeper's testimony upon the trial. It may well be that the defendant lacked what might be termed exact knowledge upon the subject, when it made its proof of claim upon the assigned estate. The facts were, rather, such as to furnish inferences of Reinhardt's fraud; but they were, subsequently, deemed sufficient for the maintenance of an action in rescission without any addition thereto, so far as the record discloses. I think the case to be within the application of the general rule that the defendant should be held to have been bound by its first election to affirm the transaction.
There is nothing in the point that the defendant was disabled from obtaining relief under the counterclaim in its answer for the goods, or their value, based upon the fraud of the plaintiff's assignor, by reason of its being a foreign corporation, without the authority to do business within this state, under the requirements of the General Corporation Law. (Chap. 687, Laws of 1892.) It is doubtful whether the provisions of the act would apply to such a case as this, where the party was brought in by an order of interpleader. It is still more doubtful, whether this contract was made in the state of New York. However it may be with respect to these propositions, the defendant was not doing business in this state, within the doctrine of the cases of People ex rel. Parker Mills v. Comrs. of Taxes, ( 23 N.Y. 242), and of People ex rel. Sherwin-Williams Co. v. Barker ( 5 App. Div. 246, affirmed here, 149 N.Y. 623).
For the reasons given, I think the judgment should be reversed and a new trial ordered, with costs to abide the event.
PARKER, Ch. J., O'BRIEN, HAIGHT, MARTIN and WERNER, JJ., concur; LANDON, J., dissents.
Judgment reversed, etc.