Furniss , 8 Wend. 247 ( 1831 )

The following opinions were delivered :

By Mr. Justice Nelson.

Upon a sale of goods to be paid for, or security to be given on delivery and a delivery made without exacting either, and no fraud in the case, a complete title passes to the purchaser, and the vendor cannot afterwards reclaim the property upon a refusal to comply with the terms of the sale. After such delivery, the law considers the vendor as trusting solely to the personal responsibility of the vendee. This rule of law was fully acknowledged in this court, in the recent case of Lupin v. Marie, 6 Wendell, 77. In that case, the idea of a lien for the purchase money, after an unconditional delivery of the goods, was repudiated as unfounded both in law and equity. It is equally well settled, that if the sale and delivery are conditional, or there is fraud or imposition on the part of the purchaser, though the property passes, the title does not; and on a refusal to comply with the terms of the sale, the vendor may pursue the property and reclaim it, unles protected in the hands of a tona fide purchaser. This, indeed, is little more than a deduction from the first proposition, and is fairly implied from its terms. There are many cases of conditional sales to be found in the books, but my researches have extended to none where the vendor was permitted . to reclaim the property from the purchaser after delivery, except where fraud existed, unless the delivery, as well as the sale, was conditional, or so viewed by the court. 6 Johns. Ch. R. 438. 1 Paige, 312. id. 322. 4 Mass. R. 405. 4 Pick. 516. 6 id. 262. Undoubtedly, whether the delivery is conditional or absolute must depend upon the intent of the parties at the time the goods are delivered ; and it has been urged by the respondents, that the circumstances connected with the delivery, as regards auction sales, known to both parties, explain the transaction, and are sufficient to establish the condition. The onus of the proof of the condition, (the delivery being admitted,) no doubt rests upon them, otherwise it will be deemed absolute. Assuming this to be so, they set out in their bill, and which is admitted in the answer of Furniss, that it is the known usage and custom in the city of New-York, when goods are sold at auction, to be paid for in approved endorsed notes, to deliver the goods so sold to the buyer when called for, and afterwards to send for the notes so to be given. Now it is contended that the delivery in these cases is in conformity to this known general usage, subject to the expectation and condition, that the endorsed notes will be ready when called for, and not with the intent or understanding of either party that the title to the property, or the lien upon it for the purchase money, shall be parted with until the security be given. This is the construction which has repeatedly been given to these auction sales by the court of chancery in this state, previous to the decision of the chancellor in the present case. Haggerty v. Palmer, 6 Johns. Ch. R. 437. Addis v. Hefuld, MSS. per Ch. Jones, and Haggerty v. Duane and, Furniss, I Paige, 321. And it seems to me this general usage of business known to all parties, and of course presumed to enter into their consideration in dealing with one another, with the attending circumstances, may fairly warrant the construction given to those sales. The transaction is not considered complete until the endorsed notes are received by the very terms of the sale; but for the convenience of all parties concerned, the property is delivered to the purchasers, subject to those terms. That the vendor does not intend to trust to the personal responsibility of the purchasers, appears from the conditions of the sale; the bill of sale also which is made out, containing the conditions and accompanying the delivery of the goods, strongly confirms this construction of the understanding and intent of the parties, and, all together, is as satisfactory to my mind as if the vendor had expressly declared the delivery conditional, which is deemed sufficient within all the cases. There is nothing new or peculiar in these cases in looking at the usage and custom of the trade, to ascertain the understanding of the parties in a transaction connected with it. Many instances of the kind might be referred to; a striking one is where the court infers an agreement to pay interest upon an unliquidated account, after a given credit, from the general usage and custom of a store. The fact that the sales are generally conditional, and that the delivery on such sales is made without at the time exacting performance of the condition, is evidence of the intent of the parties to carry it into the delivery, otherwise the terms of sale are unmeaning and idle. But when these terms accompany the delivery by the bill of sale, it seems to me to put the question beyond doubt. The delivery is subject to them.

The position of the counsel for the appellants, that this class of cases in the court of chancery rested upon a local custom, or usage of trade with auctioneers in the city of New-York, paramount to, and controlling the general law of sales, is without foundation. If such were the fact, the objections of the counsel would have been sufficient to overturn them. As was contended by him, such custom or usage, to have the effect supposed, must be clearly established by proof, if denied; and I would be very reluctant to yield to any exception to the general law of sales of personal property, in reference either to place or business. Such exceptions tend to render the law of property complex and unequal in its operation, and should not be encouraged. But it will be seen, upon an examination of these cases, that the court of chancery does not change, or profess to change the general rules of law, and that all of them turn upon the application of principles long settled and acknowledged, both at law and in equity. The simple question in all of them was whether the sale and delivery was absolute or conditional. If then this case turned upon the custom and usage of trade among auctioneers in the city of New-York, and came within the auction cases which have frequently been decided in the court of chancery, I would be in favor of confirming the construction given to those sales, and of course would affirm the order of the chancellor. But it appears from the answer, that one of the respondents made an agreement with Furniss, that whatever might be the general terms of the auction sales, he should be at liberty to purchase goods, and settle for them in the notes of his customers received in the course of his business, endorsed by himself, making the necessary discounts, so that the notes would correspond with the terms of the sale; and that he might settle for such purchases in such reasonable time thereafter as would suit his convenience. Furniss sets up in his answer that the purchases were made in this case, and the goods delivered under this special agreement, and not according to the6 usage of the trade ; and a schedule of goods bought under this agreement» and which appear to have been paid for in pursuance of it, is given in confirmation of his allegation. For the purpose of this decision, we must assume the answer to be true, and the consequence is, that this special agreement takes the sale and delivery of the goods out of the protection of the usage and custom of the trade, and the case falls within the general principles of law contained in Lupin v. Marie. Under this agreement, the court are not at liberty to resort to the usage and course ctf trade, for the purpose of collecting the the understanding and intent of the parties in reference to the delivery of the goods, or of annexing any tacit condition to the same, because the parties have expressly regulated the terms and conditions of the transaction, by a special arrangement between themselves. By that they must be governed ; and it evidently contemplates a delivery without any condition» giving to the purchaser a future day or time in which to provide the security to be given. While this special agreement continued in force, it controlled the general usage or custom ; and as that is the only ground upon which the condition can be annexed to the delivery, it necessarily follows that it must be considered absolute upon the principles above stated.

The answer, therefore, denies the ground upon which the bill is framed, and upon which the respondents must place their right to reclaim the property, to wit, that the goods were purchased and delivered according to the usage and custom of the trade, and of consequence denies the equity of the bill; and I need not cite authorities to shew that in such a case the appellants, the defendants below, were entitled to a dissolution of the injunction.

I lay out of this case the question of fraud, which was not much pressed upon the argument, because it is positively denied by the answer, which, for the purpose of this decision, as before stated, we are bound to assume to be true.

Having come to the conclusion that the answer takes this cage QU(; t^e principles applicable to auction sales, and that a complete title passed to the purchaser upon the delivery of the goods to him, it is unimportant to examine any other of the questions raised in the case. I think the chancellor should have dissolved the injunction, on the ground that the answers deny the equity of the bill, and am therefore of opinion that the order of the chancellor, refusing the motion to dissolve the injunction ought to be reversed.

By Mr. Senator Allen.

Whether the terms of the purchases, made by the appellant, Furniss, were as stated in the bill, or as admitted by him in his answer, the conclusion is the same. In my opinion the sales in either case are conditional, and the appellant, Furniss, admits that he has not on his part complied with the additions of the sale. I consider a sale conditional when goods are sold on the credit of a surety, in addition to that of the vendee, such as an endorser or other guarantor of payment, or when they are sold for cash. If in such case the condition' is not complied with, the vendor has not the security contracted for, and in the event of the failure of the vendee before the condition is complied with, material loss may be sustained by the vendor, if his lien on the goods is taken from him ; but when a sale is' made on the credit of the vendee only, and he is to give no other security than his individual note, the vendor is in no worse condition in the event of failure, if he has not received the note than he Would be if he had, as in either case the responsibility of the individual is all he could look to. In Rapelye v. Mackie, 6 Cowen, 250, it was held that when something remains yet to be done as between the buyer and seller, or for the purpose of ascertaining either the quantity or price of the article sold, there is no delivery, and the property does not pass, though the price be in part paid ; and there need not be an express agree* ment that something farther shall be done : it is enough that it appears from the circumstances of the case to be necessary. In the present case the goods were delivered by the seller, but there remained to be performed by the buyer the engagement on his part of the delivery of the notes, in accordance with the conditions of the sale ; the property, therefore, did not pass but continued in the vendor. In the case of Marston v. Baldwin, 17 Mass. R. 606, there was a sale of goods to one Holt, conditioned that one hundred and fifty dollars cash should be paid down, and the residue in the spring ; seventy-five dollars only were paid when the goods were delivered. Shortly after the delivery, the goods were attached at the suit of one Babcock. The defendant, a sheriff, pleaded property in Holt, and the plaintiff replied property in himself. The court held that the actual delivery of goods, under a contract of sale, does not of itself transfer the ownership in them. To perfect the title of the vendee, there must be a consummation of the contract of sale. In the case of a conditional sale of goods, where the condition is not performed by the vendee, the vendor may establish his property in the goods, without shewing the contract rescinded. In Whitwell v. Vincent, 4 Pick. R. 449, it was held that it is not necessary, in order to make the delivery conditional, that an express declaration should be made to that effect at the time of delivery. In the case of Keeler v. Freeman, 1 Paige, 312, where a merchant contracted for goods, the price to be secured by his note, with endorsers, and the goods were in the meantime forwarded to his residence, it was held that the property was not changed until the delivery of the note, and the persons to whom the goods had been assigned to secure a previous debt, could not hold them against the vendor. See also, as recognizing the same principles, Hussey v. Thornton, 4 Mass. R. 405; Mason v. Lickbarrow, 1 H. Black. 362; Palmer v. Hand, 13 Johns. R. 434.

The rule in all conditional sales being so well established, it is perhaps unnecessary to pursue the subject further, unless it be to notice, the reasonableness of the rule. In sales at auction and most generally in private sales, particularly in the sale of dry goods, it becomes absolutely necessary that the goods should be delivered before the payment is made, as the purchaser must have time to ascertain, first, whether the goods agree with the sample ; second, whether they contain the quantity; and third, whether they are sound and free from damage. This will require some days, and therefore the time between the sale and delivery of the goods by the respondents to the appellant, (eight days) and when he was called on for the notes, is by no means unreasonable. If, in conditional sales, the delivery of the goods in all cases placed the property in the vendee, it would open the door to extensive frauds. In the present case the goods were purchased by the appellant on the 16th of September, and on the 19th, only three days after the purchase, he failed. He admits he was insolvent when he made the purchase, but avers he did not know it. The next day after his failure, he assigns the goods to Duane, who forthwith ships them to Philadelphia» where they are sold at auction. The assignment is not made for the benefit of those of his creditors of whom he purchased goods, but solely for the benefit of three persons named, of one of whom he had borrowed money, and for drafts drawn on him by others, or for the benefit of those who endorsed them, for what purpose is not mentioned. In all this the appellant avers he acted honestly, and that he made the purchase in good faith, and not in contemplation of his insolvency and failure in business. Be this as it may, the delivery of the goods did not place the property in the appellant, he not having performed his part of the contract by delivering the notes, either such as he had received on the re-sale of goods from his customers, which he admits to be the condition, or in approved endorsed notes, as averred by the respondents to have been the condition.

I am, therefore, in favor of affirming the decree of the chancellor.

By Mr. Senator Maynard.

No proofs have been taken in the cause, and all matters of fact must be determined from the bill and answer. The material allegation in the bill is, that the goods were sold and delivered upon a condition, from which it is inferred, that until there was a compliance with that condition, they were held in trust for the respondents. It is expressly denied that they were sold and delivered upon any condition whatever, or in conformity with any local custom or usage from which such condition might be inferred.

I cannot agree with the chancellor, that if the goods were sold arid delivered under an agreement between the parties that payment was to be made in the notes of the customers of the vendee, endorsed by himself at “ such reasonable time thereafter as should suit his convenience,” that the delivery was attended by any condition. It was a specified mode of payment, but one that precluded a retention of any lien upon the goods. In what respect was this sale upon that supposition more conditional than any sale where payment is to be made at a future time, in a specified manner, and no agreement that upon a failure to pay, the goods were to be returned 1 If a lien were retained, when was it to cease ? There was no specification of time. At “ such reasonable time after the sale as might suit the convenience of the vendee,” is too indefinite for the retention of a lien. Where a sale is conditional, and there be a delivery without a compliance, the goods cannot, in all cases, be reclaimed. Where goods are sold for cash, and delivered without payment^ the property, is changed. Chapman v. Lathrop, 6 Cowen, 110.

The case of Haggerty v. Palmer, 6 Johns. Ch. R. 437, has been cited in support of the supposed rights of the respondents. In that case the bill was substantially the same as in this. The answer is not given in the report. The chancellor held, that the vendor was entitled to the proceeds of the goods then in the hands of the assignees of the vendee. That decision was founded on the assumption that the sale was conditional, and that until the notes were given in payment, the delivery of the goods was a deposit, in trust for the vendor. The Chancellor assigns as a reason for his opinion, that “ in a case like this, where the purchaser knew of the usage, and that the delivery of the goods before the delivery of the notes was a deposit in trust, and well understood to he upon the delivery of the notes,” &c. from which it may be inferred that there was no dispute about facts, and that the sale and delivery were admitted in the answer to have been upon the condition, under the circumstances, and according to the usage alleged in the bill. Such is not this case. Here the allegations of the bill as to the conditional character of the sale and delivery, are directly and expressly denied; a special agreement, inconsistent with a conditional sale averred, and an explicit averment that the sale was absolute and unconditional: therefore the trust supposed in that case did not exist in this. I do not deem it necessary to determine what the decision should be, if the allegations of the bill as to the terms of the sale, and the condition of the delivery, had been admitted in the answer. It is sufficient that there is a direct, unequivocal denial, in place of admission, and no proof in support of the' allegations.

It is insisted also, that there was fraud, and that on that ground the respondents are entitled to the proceeds of the goods. It is not charged that the purchase was fraudulent, but that the voluntary assignment was an act of fraud. In the case of Haggerty v. Palmer, the chancellor held such assignment fraudulent; but that opinion was founded on the same assumption that the sale and delivery were conditional, and the vendee a trustee for the vendor. Upon such a state of facts, a voluntary assignment would unquestionably be fraudulent. It would clearly be an act of fraud in a debt- or, to assign as his own, and for the payment of his own debts to favorite creditors, property which he knew he held only in trust. But the change of facts changes the character of the transaction. Here the condition, and consequently the trust inferred from it, are denied. On the principle that governed the case of Haggerty v. Palmer, the assignment in this case cannot be declared fraudulent. The case of Keeler & Freeman v. Field, 1 Paige, 312, was like that of Haggerty v. Palmer, except that the vendors were not auctioneers. In that case also, there was no dispute about facts; the material allegations of the bill were admitted by the answer. That was held to be a conditional sale, and the voluntary assignment, without fulfilment of the condition, an act of fraud. If it were a conditional sale, there can be no doubt of the correctness of the decision which was made solely upon that assumption. The facts in that case would perhaps justify the conclusion that the vendee meditated fraud when he made the purchase ; and if so, having acquired possession of the goods by fraud, the title was not changed. But the principle of that case has no application to a sale made on no condition other than that payment should be made in a specified manner at an undefined period.

There does not appear to have been fraud in the purchase. It is not charged, and Furniss denies all fraudulent acts or intent, and avers in his exculpation, that although he was insolvent at the time, he did not know it, and never supposed he should be compelled to stop payment until the day of his actual failure. He avers, that until that day, he was in full business, and daily received and paid greater sums than the amount of those purchases. The case of Conyers v. Ennis, 2 Mason, 236, is a strong one against the imputation of fraud from such circumstances. There the vendee was “ deeply and fraudulently insolvent,” and two days after giving the order for the property in question, committed suicide, in consequence of the detection of his frauds ; yet that purchase was not held fraudulent. The circumstances chiefly relied upon in vindication of the honesty of intention were, that the vendee “ was in full business as a merchant, and there was no reason to suppose that he did not expect to keep in business and that “ the sum was not so large as not to be completely within the ordinary means of a merchant.” All these exculpatory circumstances exist here, and although Furniss was “ deeply,” it is not charged or pretended, that he was “ fraudulently” insolvent. Some acts of the assignee were relied upon in support of the allegation of fraud; they are not such as imply fraud, and there is no proof that they were done with fraudulent intent, nor is it charged or proven that Furniss had any agency in causing them. My opinion is, that the equity presented by the bill is denied by the answer, and that the order of the chancellor was incorrect, and that the injunction shall be dissolved.

By Mr. Senator Tallmadge.

I concur in the opinions expressed, that the special agreement repudiates all idea of a conditional delivery of the goods. This, of itself, is a sufficient ground on which to reverse the order of the chancellor. I am strengthened in this view by the fact stated in the answer, that it is the usage, generally, on Saturday of each week succeeding the sales, to send for the notes to be given on such sales. The two packages of goods were sold, the one on the 11th, the other on the 16th of September, and notes called for on the 25th of the same month—a lapse of 9 and 14 days. This shows that all parties acted under the special agreement; and the probability is, had not Furniss stopped payment, “ approved endorsed notes” would not have been demanded, but he would have paid in the notes of his customers under the agreement. The averment of the agreement is responsive to the bill; and aside from any other consideration, is a sufficient answer to the equity of the bill.

Laying the special agreement out of the question, I am constrained to dissent from the view taken by Mr. Justice Nelson of the custom or usage set up in the bill. If this had been a mere isolated transaction, there can be no doubt that it would be held an absolute delivery, within the principle of the case of Lupin v. Marie, decided in this court. There can be, therefore no condition annexed to the delivery, except it be under the custom or usage; which is, as stated by the respondents, when goods are sold at auction, to be paid for in approved endorsed notes, to deliver the goods so sold to the buyer when called for, and afterwards to send for the notes so to be given. This the appellants admit. But does it follow that the delivery was conditional ? Or does it not rather show that the respondents relied on the implied promise and legal liability of Furniss, to give the notes when called for, according to the usage, and that the delivery was considered absolute 1 This is the more probable, from the further fact stated in the answer that the auctioneers claim the right to withhold the goods sold at auction until they are settled for agreeably to the terms of sale; and they exercise that right in all cases where the purchaser is a stranger, or his character for responsibility is unknown.

It may well be doubted whether the usage is sufficiently charged in the bill. Be that as it may, it is fully denied by the answer. Local usage is a matter of fact to be proved, and not of law to be settled by the court. Coming before us, as this case does, on bill and answer, the usage is not established. But, admitting for a moment that the usage is made out, and the delivery conditional, still I am inclined to think that the condition was waived by the lapse of time between the delivery of the goods and demand of the notes, within the case of Smith v. Dennie, 6 Pick. 262.

The bill does not charge fraud in the purchase of the goods ; neither do the facts justify such a charge in the assignment to Duane. All fraud, too, is denied by the answer. There is no pretence, therefore, on that ground, that the title to the goods did not vest in Purniss.

Such is, briefly, my view of the usage and of the question of fraud. Aside from these, I consider the case against the respondents on the special agreement.

On the question being put, Shall this decree he reversed ? Eighteen members expressed their opinions in the affirmative, and four in the negative. The members who expressed their opinions in the negative were, Senators Allen, Hubbard, Throop and Warren. Whereupon the decree was accordingly reversed.