Babcock v. . Libbey , 1880 N.Y. LEXIS 338 ( 1880 )

Rapallo, J.

The refusal of the court to submit this case to the jury was entirely proper unless there was some substantial evidence of fraud on the part of the defendant, sufficient to have sustained a verdict in case the jury had found for the plaintiffs. If the evidence was so slight that it would have been the duty of the court to set aside a verdict based upon it, a nonsuit was justifiable.

The most prominent fact relied upon by the plaintiffs was the suppression of any information respecting the chattel mortgage held by A. T. Stewart & Co., covering the personal property of the Utica Steam Woolen Company, coupled with the evidence of the admission of Mr. Libbey, that such suppression was intentional because the mortgage was on record, though he did not admit that it was with any wrong intent. Laying out of view the consideration that this mortgage had no validity as against the creditors of the' company, an intentional suppression of the fact of its existence, with a fraudulent intent, would under ordinary circumstances. have been material, and the question of intent would have been for the jury, and the suppression, if fraudulent, would not have been excusable on the sole ground that the mortgage was on record. But in this case the form of the inquiry made by the plaintiffs, of Stewart & Co., was, we think, such as to induce them to suppose that the plaintiffs were aware of the relations existing between Stewart & Co. and the Utica Steam Woolen Company, and did not desire information in regard to the liens which Stewart & Co. had upon the property of the company, and which appeared upon record, but an opinion in view of all existing facts, as to the pecuniary ability of the company. The letter of inquiry begins by informing Stewart & Co. that the plaintiffs understand that Stewart & Co. have “ a lien,” etc., on the mills of the company, and inquires whether Stewart & Co. will buy their paper, and if not, asks for the views of Stewart & Co. as to the ability of the company to pay. In responding to such a letter the defendant might reasonably assume that it was no part of the purpose of the inquiry to elicit information as to the “ lien,” etc., which Stewart & Co. held, and which were matters of public record, but that for information as to the particulars of such “ lien,” etc., the plaintiffs having knowledge of their existence, would resort to the records. From the omission of the defendant to give information respecting them, under those circumstances, a jury would not have been warranted in finding a fraudulent intent. Had there been other liens not of record, and of which the plaintiffs had no knowledge or means of knowledge, a different question would be presented.

The residue of the evidence relates to the affirmative statements contained in the letter. One general feature of the letter, which first attracts attention, and cannot fail to be observed, is that it cautiously avoids expressing any opinion on the subject of the ability of the company to pay, or giving a direct answer to the question asked, but refers the inquirers to the company itself, stating that it will no doubt fairly answer all inquiries. The statement nearest to a recommendation which the letter contains is, “ as far as we can judge they have made money. They say that they have done better than at any former period.” These expressions, coupled as they are with a disclaimer of any means of forming an opinion as to their management, except from the period of their connection with the writers, which was very brief, and with the suggestion that the inquiries should be made of the company itself, were hardly sufficient to justify a prudent merchant in relying upon the letter in question as a recommendation, or an assertion of the solvency or ability of the company.

The specific facts stated in the letter are, 1st. “ The Utica S. W. Co. consign to us all their goods.” It is not claimed that this was untrue. 2d. “ For which we have a ready sale, sometimes sold largely ahead of their product, on order.” It must be remembered that the letter speaks as of the date when it was written, November Y, 1868, and that the connection of Stewart & Go. with the company began in August, 186Y. The evidence relating to the salability of the goods produced by the company before August, 186Y, and the sacrifices made on those goods or on the goods consigned after November, 1868, of which the case contains much, does not legitimately impeach the statement as to the condition of the business on the Yth November, 1868.

The burden of proof was upon the plaintiffs to show that at that date the statement was intentionally false. ■ Neither is the evidence that the market in general was dull during the period spoken of furnish the necessary proof. That was a fact as much within the knowledge of the plaintiffs as of the defendant. It was incumbent upon the plaintiffs to show that, at the period of which the letter speaks, the prbducts of the mills of the company, consigned hy it to Stewart & Go., did not meet with a ready sale, and that they were not at times sold largely ahead on order.

The substance of the evidence to support this negative is, that the market generally for woolen goods was a declining one from August, 186Y, when the account of the Utica Steam Woolen Co. was turned over by Spaulding, Hunt & Co. to A. T. Stewart & Co., down to November, 1868. Mr. Jacobson, one of the first named firm, testified that some of the goods they turned over to Stewart & Co. maintained their price, and others depreciated much, and none, he thinks, advanced. The defendant’s letter, however, should not be construed as applicable to the old stock received from Spaulding, Hunt & Co., fifteen months previously, but to the current products of the mills, for it speaks of such as were consigned by the company to Stewart & Co., and such as were sold on order, before being manufactured, and Mr. Jacobson admits that there may have been special things on which there was a profit, and that the mill may have woven them, that he cannot tell. He shows that he had no knowledge of the actual current transactions, and was not competent to falsify the statement in defendant’s letter.

Mr. Savage, a former clerk of Stewart & Co., testified for the plaintiffs that the old stock received from Spaulding, Hunt & Co. sold considerably below the prices at which it was invoiced, but that for the few months preceding Hovember, 1868, good styles of goods were selling very well, and that the mill in question produced some very fine styles, and about twenty per cent of their goods were sold on order, but that in all articles there was a dull demand, and that witness, who was entitled to a percentage on the profits of the woolen business of A. T. Stewart & Co., on leaving their employment expressed to Mr. Libbey chagrin and disappointment at not receiving profits, and was told by Mr. Libbey that they were not making money in the woolen department. This witness, however, did not leave until December, 1870, and Mr. Libbey’s admission is of that date. The witness, however, corroborates Mr. Libbey’s letter by stating, on his cross-examination, that some of the styles made at the mill sold very well on order in advance of production, from samples, and he mentions one sale in the fall of 1868 of a thousand pieces on order, at very good prices, $3 per yard he mentions, each piece containing twenty-five to thirty yards. He also further testified on cross-examination that after the mill came into the hands of A. T. Stewart & Co. it changed from old style to new, and large quantities of the new styles were sold in 1868, and that during 1868, before Hovember of that year, they were selling well and freely.

This is in substance all the evidence introduced for the purpose of establishing the falsity of the statement that Stewart & Co. had a ready sale for the goods consigned to them by the woolen company, and sometimes sold largely ahead of their product on order. So far from tending to falsify, it rather tends to confirm the statement. It tends to show that the old stock transferred fifteen months before, by Spaulding, Hunt' & Co., had to be sold at a loss, but Mr. Libbey cannot be supposed to be speaking of that, when he speaks of goods consigned by the company and sold ahead of their production on order. This branch of the plaintiffs’ case entirely fails.

The statement that as far as Stewart & Co. can judge, the company has made money, relates to the period of its connection with them. It cannot fairly be deemed to apply to the old transactions with Spaulding, Hunt & Co., or the result of the old stock which Stewart & Co. took out of their hands. It is at most the expression of an opinion, and the evidence entirely fails to show that it was made in bad faith.

There was no evidence introduced to falsify the statement, “ They say that they have done better than at any former period.”

The statement, “ we have taken considerable orders ahead for their spring production,” is not only not disproved, but is prbved by the plaintiffs’ witness Savage, who testifies to one order in the fall of 1868 to the amount of from $15,000 to $90,000, and says that about twenty per cent of the products of the mill was sold on orders.

That the defendants “ anticipate a good season for their fabrics ” is hardly a representation on which a charge of fraud can be based, and it is not disproved.

Taking the whole letter together, although its tone is not such as to cast suspicion upon the ability of the company, yet it is such as would naturally induce a prudent man, instead of treating it as a recommendation, to adopt the suggestion with which it closes, of addressing his inquiries to the company itself.

The evidence in relation to the overdrafts by the company on Stewart & Co., does not tend to show the falsity of any of the representations made. It appears that Stewart & Co., although objecting to the alleged overdrafts, nevertheless paid them, and thus extended to the company a larger credit than it was entitled to under its contract.

The rest of the plaintiffs’ evidence relates to transactions subsequent to the. writing of the letter, and to the subsequent disposition of the property of the company, and a great deal of the evidence consists of alleged recommendations of the Woolen Company by the defendant to parties other than the plaintiffs. This class of evidence may be admissible in some cases, after the falsity of the representations has been established, but it cannot supply the place of that proof. If the statements made to the plaintiffs are not shown to have been untrue, it is immaterial to the issues in this action what became of the property, or whether the defendant falsely recommended the company to other parties. (Mayer v. People, March, 1880.) Each case must stand upon its own merits.

We think the evidence entirely fails to make out a case of a false and fraudulent recommendation. It is not necessary, therefore, to pass upon the technical points raised as to the organization of the company, the validity of the mortgage, and other points of that nature.

The judgment should be affirmed.

All concur, except Folgeb,'C1i. J., and Daneobth, J., dissenting ; Finch, J., not on bench at argument.

Judgment affirmed.