Rawdon v. Blatchford

The Assistant Vice-Chancellor.

On the state of facts established in this case, I think the complainants are clearly entitled to the stock in question. Assuming that the deposite of the scrip by Redfield, and the subsequent action upon it, amounted to an acceptance of the stock by the bank; they took it for a precedent debt, and subject to the equity of the complainants to have it restored to them; if it turned out that such equity existed. Keeler v. Field, (1 Paige’s R. 312.) Root v. French, ( 13 Wend. 570 .)

It was argued that Redfield obtained the stock from the com-plainants in good faith, because he testifies that he fully intended to fulfil his promise to them, and believed that he was solvent; and if is "Said that there was no intent on-' his part to-defraud them, and that no fraud is established.

It by no means follows that Redfield acted in good faith, from this testimony. If he intended to replace the stock, he probably deceived himself, as he did those with whom he negotiated.

He was perfectly desperate at the time, and grasping at every" straw to saye his drowning: reputation. Whether so intended or not, it was a gross fraud upon the complainants.

While the secret of his defalcation was kept, he was running at large, virtually endeavoring, by robbing others, to make good his delinquency to the bank, and shield himself from infamy if not from punishment.

If he had told the complainants that he was a defaulter to the bank, and wanted this stock to turn out to1 the institution, no one supposes for a moment that they would have permitted him to take it. His concealing these facts was of itself a fraud upon them. They acted upon the supposition that he was in good standing, and able to make them secure. They relied upon his integrity and good faith, in delivering up their security, and receiving his naked promise to replace it; when he knew perfectly well that he was destitute of both faith and honesty, and that he was possessed of conclusive evidence of that destitution of which they were utterly ignorant.

Chancellor Kent says, “ if there be an intentional conceal *347 ment or suppression of material facts in the making of a contract in cases in which both parties have not equal access to the means of information, it will be deemed unfair dealing, and will vitiate and avoid the contract.” (2 Kent’s Comm. 482, 2d ed.) And Mr. Justice Story, in his Commentaries on Equity, places the ground of relief in such cases, as well on the ignorance or mistake of material facts known to the one party and not to the other, as upon the unconscientious advantage taken of the latter by the concealment of them. (1 Story’s Eq. 160.)

In Durell v. Haley, (1 Paige’s R. 492,) the Chancellor held that if a purchaser who is insolvent, concealing his insolvency from the vendor, obtains goods from him without intending to pay for them, it is a fraud upon the vendor, and the property in the goods will not be changed.

In Lupin v. Marie, (2 Paige’s R. 169,) he says that if a merchant in good credit purchase goods upon his own responsibility, who knows himself to be insolvent at the time, but conceals that fact from the vendor, for the purpose of placing them in the hands of an assignee for the benefit of other creditors, it would be such a fraud as would avoid the sale.

This is precisely what Redfield did in this case. Not that he knew he was insolvent, but he knew facts which he concealed, and which would if disclosed, have been even more fatal to his application for the stock.

And see Livingston v. Peru Iron Company, (2 Paige’s R. 390.) (a)

Upon well settled equitable principles, to say nothing of honesty and fair dealing, the stock was fraudulently procured from the complainants, and it must be restored to them.

The Receiver was probably justified in resisting the claim for their benefit, as between himself and his beneficiaries. His costs and those of the complainants will be paid out of the fund in his hands.

And Martin v. Morgan, (3 J. B. Moore’s R. 635.)