Hazelton v. Allen

Chapman, J.

1. The testimony of Drury was properly excluded. The question in controversy was, whether the defendant, at the time of his purchase of the pianos in question, and surrender of his note, on the 8th and 10th of November 1856, had reasonable cause to believe the Piano Forte Co. insolvent. They failed soon afterwards. Drury was offered to prove that he himself did not know of certain entries on their books till after their failure, and that he told the defendant of these entries after the failure. Both these facts were irrelevant and immateria*. It was also proposed that he should testify that the defendant did not know of these entries until he told him. This is absurd ; because he could not have known such a fact if it were true.

2. The instruction was right as to the amount for which the defendant would be liable, if the plaintiff should prevail. The pianos marked and set apart and charged to him on the 8th of November became his absolute property. The agreement that the company might afterwards take and sell such of them as they might choose, by replacing them with others, was a mere arrangement for future exchanges, which must be made in each case by a particular agreement as to the terms, if the defendant should require it.

3. The definition of insolvency given by the court was in substantial conformity with that contained in the cases of Thompson v. Thompson, 4 Cush. 127, and Lee v. Kilburn, 3 Gray, 594. A manufacturer of pianos has occasion to own or hire a manufactory with machinery and tools; to buy stock and materials, hire workmen, and sell his manufactured goods in market. Trade constitutes a large part of his business; and it is reasonable that «the same definition of insolvency should apply to him as if his exclusive business were to buy and sell. The court correctly applied the definition to this case.

4. But the sale of pianos to the defendant, on the 8th of November 1856, to pay his preexisting debt, if intended as a preference, and therefore void or voidable, might be confirmed by the plaintiff as assignee. Snow v. Lang, 2 Allen, 18. The act of confirmation relied on by the defendant is the following: The books of the Piano Forte Co. contain an account with the defendant. Among other items therein are a charge of the pianos, and a credit of the note given up. A balance was struck on the ledger, and carried to a new account. The new account consists of pianos credited and charged, showing apparent exchanges. A balance was again struck and carried to a new account; and this new account consists of charges and credits of pianos and stools. A balance was again struck, in which the defend ant was found to be indebted in the sum of $71.36, and this balance was charged to him in a new assignee’s account. This balance the plaintiff has demanded and received, after some controversy as to items, which was settled by arbitration. The court ruled that the receipt of this balance was not a waiver of objections to the transfer of the pianos, and would not prevent the plaintiff from recovering their value in this suit, without further proof that the plaintiff knew all the circumstances of the transfer. We are of opinion that this ruling was erroneous In Campbell v. Fleming, 1 Ad. & El. 40, a contrary doctrine is held, and Denman, C. J. says there is no authority for holding that a party must know all the incidents of a fraud' before he deprives himself of the right of rescinding. The present case is stronger than the ordinary case of delaying to rescind a con tract after the discovery of fraud. The plaintiff, as assignee of an insolvent corporation, had their books, containing an account of a large quantity of pianos sold to the defendant just before the failure, and the credit of a note, which showed that they were applied to the payment of a preexisting debt. He could not fail to see that it was in effect a preference of the plaintiff under such circumstances that it was probably void. He knew he had a right to investigate the matter, and search the conscience of all parties by interrogations. Ordinarily a party is compelled by the circumstances of" the case to decide promptly whether he will rescind the contract by restoring the consideration already in his possession; knowing that any further retention of it will be a waiver. But here the plaintiff had no consideration in his hands. It was in the form of a balance of accounts, and he could not by forbearance to collect it be said to treat it as his own. He might safely wait and take time for investigation. With the knowledge he had, we think his collection of the balance was an affirmation of the transactions out of which the balance resulted, and a waiver of his right to question their validity as being fraudulent against the insolvent law On this ground the exceptions are sustained.