Summary
In Paddon v. Taylor (44 N.Y. 371), it was held that the defendant, who had received a warehouse receipt for property fraudulently obtained from the plaintiff in consideration of the surrender to the fraudulent vendee, who was insolvent, of his note, past due, given for money loaned him by the defendant, was a purchaser for value.
Summary of this case from Phœnix Insurance v. ChurchOpinion
Submitted January 9
Decided May 1, 1871
F.N. Bangs, for the appellant.
L.A. Fuller, for the respondent on the same question.
Upon the statement of the complaint and the admissions of the answer, which are found by the judge to be true, the case may be thus stated: Hicks being insolvent and not intending to pay for the same, fraudulently purchased and obtained from the plaintiff one hundred and sixty-eight barrels of flour. He deposits the same in store with Spader. He takes from Spader a receipt for one hundred barrels thereof in the words "Received in storage from W.S. Hicks, for account, risk and subject to the order of Mr. S.F. Taylor, one hundred barrels of flour." Hicks delivers this certificate and receipt to the defendant, upon receiving from him therefor his (Hicks') own promissory note then held by the defendant, which, with interest, amounted to about eight hundred dollars, the full value of the flour described in the receipt. This note was then surrendered and cancelled. Mr. S.F. Taylor in the receipt named, was the agent of and acted for the defendant in the transaction, and in addition to the handing to him the certificate, executed a formal transfer to the defendant of his interest in the flour.
Upon this state of facts, I am of the opinion that the defendant was a bona fide purchaser of the certificate, and of the flour therein described, and that the plaintiff's title to the same is at an end. It has been decided in this court, in several cases, that the surrender to a party of his own promissory note, and taking in lieu thereof a negotiable note made by a third party before its maturity, constitutes the party a bona fide holder of the latter note. Whether the note thus surrendered is past due or has not reached its maturity, is of no importance. ( Pratt v. Coman, 37 N.Y., 440; Brown v. Leavitt, 31 N.Y.R., 113; Park Bank v. Watson, 42 N.Y., 490.)
The same rule applies to bills of lading, bonds of States and other corporations, and to instruments having the form of the present certificate and to sales of property generally. ( Bank of Rochester v. Jones, 4 Comst., 497, 507; Parson's Mer. Law 45, and cases cited.)
The possession of the receipt was the possession of the flour. The delivery of the receipt to the defendant was a symbolical delivery of the flour. (4 Comst. sup.)
It has long been held that when the sale and delivery of personal property has been induced by fraud, the seller did not lose the title to his property, and could recapture it until it passed into the hands of a bona fide purchaser. When it did so pass, his right to reclaim was at an end. (Parson's Mer. Law 57 (61); Load v. Green, 15 M. W., 216; Brown v. Peabody, 3 Kern, 121.)
The perfect title to the flour in the defendant, terminates all questions of equity that are suggested, and requires an affirmance of the judgment.
The plaintiff delivered his flour to a fraudulent purchaser. He voluntarily surrendered his possession under the color of a sale. As between vendor and purchaser the contract of sale was voidable at the option of the vendor, but it was not void.
The purchaser could sell the flour and make a valid title as against the plaintiff to a bona fide purchaser; that is, to a purchaser, without notice of the fraud by which the flour was purchased from the plaintiff, or reason to suspect it, and who paid a present and sufficient consideration.
There was evidence tending to prove that defendant was such a purchaser, and the fact has been so found, as it must be assumed. This is conclusive, unless there is some indisputable fact which in law requires a different conclusion.
The plaintiff urges that the defendant did not part with or pay such a consideration as brings him within the class of bona fide purchasers, entitled to hold against a vendor where the property has been obtained through a fraudulent sale.
The facts in regard to the consideration paid by the defendant are, that he held the promissory note of the alleged fraudulent purchaser, given to him for money loaned, equal in amount to the value of the flour. He purchased the flour and gave up the note in payment of the price. This payment made the purchase by the defendant valid against the plaintiff, so far as the consideration bears upon the bona fide character of the transaction. ( Youngs v. Lee, 12 N.Y., 551; Pratt v. Coman, 37 N.Y., 440.)
The plaintiff relies on the case of Spraights v. Hawley ( 39 N Y, 441), and other cases of a like tenor, to establish his right to recover the flour or defeat the title of the defendant. The cases cited do not cover the principle involved. The mortgagee in the case cited had not voluntarily surrendered his lien nor put another in possession of the property. Mere possession is not such an indicium of ownership as will protect a bona fide purchaser for value.
The possession of an agent or bailee, who has no power of sale from the owner, or the possession of a thief will not enable a purchaser to obtain any title, however fair the price paid, and free from reason to doubt the right of such possessor to make the sale.
The consent of the owner to part with the possession of his merchandise, although fraudulently obtained, enables his vendee to give a good title to a bona fide purchaser for value. The owner has enabled his vendee to obtain the price from an innocent third party, and the law holds the last purchaser entitled to protection, if his transaction is bona fide.
The judgment should be affirmed with costs.
All concur for affirmance, except LOTT, Ch. C., not sitting.
Judgment affirmed with costs.