DONALDSON, ASSIGNEE,
v.
FARWELL ET AL.
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A seller who fraudulently induced a buyer to purchase goods on credit by concealing the buyer's insolvency and intent not to pay may rescind the contract and recover the goods, provided no innocent third party has acquired an interest in them. The Supreme Court affirmed that when a bankrupt's assignee steps into the bankrupt's shoes, the assignee obtains only the same defeasible title the bankrupt possessed, which was defeated here when the sellers promptly disaffirmed the contract upon discovering the fraud.
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Mr. Justice Davis delivered the opinion of the court.
The instructions present the questions of law arising upon the facts which this controversy involves. 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 lor them, is guilty of a fraud which entitles the vendor, if no innocent third party has. acquired án interest -in them, to disaffirm the contract and recover the goods. Byrd v. Hall, 2 Keyes, 647; Johnson v. Monell, id. 655; Noble v, Adams, 7 Taunt, 59; Kilby v. Wilson, Ryan & Moody, 178; Bristol v. Wilsmore, 1 Barn. & Cress. 513; Stewart v. Emerson, 52 N. H. 301; Benjamin on. Sales, sect. 440, note of the American editor, and cases there cited.
Here the vendors, exercised the right of rescission shortly after the sale in question, and as soon as they obtained knowledge of the fraud. If, therefore, this controversy were between Mann and them, it is clear that he would not be, entitled to recover. The assignment relates back to the commencement of the proceedings in bankruptcy, and vests, by operation of law, in the assignee the property of the bankrupt, with certain specified exceptions, although the same be then attached. It also dissolves any attachment made within four months next preceding the commencement of the proceedings. If there be no such liens, and the property has not been' conveyed in fraud of' creditors, hé has no greater interest in or better title to it than the bankrupt. Only the defeasible title of the latter to the goods in controversy passed to the assignee, and it was determined by a prompt disaffirmance of the contract.
Judgment affirmed.
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Hewit v. Berlin MacHine Works, 194 U.S. 296 (U.S. 1904)…or mortgagees in good faith, the District Court was right, and affirmed the judgment. 118 Fed. Rep. 1017. We concur in this view which is sústained by decisions under previous bankruptcy laws, Winsor v. McLellan, 2 Story, 492; Donaldson v. Farwell, 93 U. S. 631; Yeatman v. Savings Institution, 95 U. S. 764; and is not shaken by a different result in cases arising in States by whose laws conditional sales are void as against creditors. In our opinion, these machines were not, prior to the filing .of the pe…
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- Bank of Leavenworth v. Hunt, 11 Wall. 391 (U.S. 1870)