Diggs v. Denny

Bryan, J.,

delivered the opinion of the Court.

This was an action of replevin, brought by the appellants against the appellee. The j udgment being for the defendant, the plaintiffs appealed.

It appeared in evidence that Julius and August Hellweg, partners under the firm name of August Hellweg, had been dealing with Diggs & Co. about twelve years, and had during that time purchased from them large quantities of coal; that in August, 1896, they were indebted to Diggs & Co. more than nine thousand dollars ; that more than two thousand dollars of this sum had accrued between the first and thirteenth days of August, eighteen hundred and ninety-six ; that on the fifteenth day of August the Hellwegs made a deed of trust to Harry L. Denny, the defendant, which conveyed to him all their property for the benefit of their creditors, without preference or priority. There was evidence on both sides bearing on the question whether the Hellwegs at the time of purchasing the coal were insolvent and knew themselves to be so, and had no reasonable expectation of paying for it. The case was tried, before the Court without a jury. The Court found a verdict for the defendant; and at the same time made a special finding of facts as follows : “I find from the evidence in this case, as facts:

1. That at the time of the purchase of the coal for which the replevin in this case was issued, the purchasers, August and Julius Hellweg, did not know themselves to be insolvent.

2. That said August and Julius Hellweg had an expectation of paying for said coal, in accordance with their contracts of purchase based upon their assets and their experience of their business in former years, and that such expectation was in their estimatiou reasonable, but a disinterested *127 person capable of comprehending the real situation of their affairs could not have founded a reasonable expectation of meeting their engagements with the plaintiffs from all the resources shown to have been within the reach of said firm at the time said purchases were made ; and this without regard to the question of their ability to meet all their obligations to other parties.”

The questions in this case have no connection with proceedings under our insolvent system. If the purchase of the coal was fraudulent, the plaintiffs had a right to dis-affirm the sale, and to take it under the writ of replevin. The Court in substance ruled on the prayers of the plaintiff that if at the time of the purchase the buyers were insolvent and knew themselves to be so, and had no reasonable expectation of paying for the coal, then the purchase was fraudulent. But the Court refused to rule that the transaction was fraudulent if the purchasers had good reason to know themselves to be insolvent. The Court on the prayer of the defendant ruled that if the purchasers at the time of the sales were insolvent and knew themselves to be so, they were under no obligation to disclose such facts to the plaintiffs and such failure to disclose did not make the purchases fraudulent; and that if the purchasers had a reasonable expectation of paying for the coal at the maturity of the debt, the purchase was not fraudulent; and that the Court was not to consider the question of their ability to pay all their debts to other persons; and that the Court might consider their indebtedness to other persons as affecting the reasonableness of their expectation to pay for the coal. This instruction is modelled on the second prayer of the appellant in Peters v. Hilles, 48 Maryland, 506 . The leading case on this subject is Powell v. Bradlee, 9 Gill and Johnson, 222. In that case the Court approved the sixth instruction to the jury, given by the trial Court, to the effect that the purchase of goods vested a good title in the buyer, provided that at the time of the sale and delivery he intended to pay for them, although he was then insolvent and knew the fact. But in *128 considering the fourth and fifth instructions given to the jury, the Court decided that if the purchaser was insolvent and was aware of his insolvency and had no reasonable expectation of paying for the goods, then the purchase was fraudulent. And in considering the fourth prayer of the defendant the Court decided that the purchase was not made-fraudulent by the facts that the purchaser knew himself to-be insolvent at the time of the purchase, and did not so inform the seller, although he knew at the-time that the seller was ignorant of the fact and had not the means of ascertaining it. It was said : “ The prayer seems to have been founded on the idea, that the sale was fraudulent if thevendees knew themselves to be insolvent at the time of the-purchase and did not communicate that -circumstance to-the vendors ; knowing at the time that they were ignorant of the fact, and had not the means of becoming acquainted with it. The law, it seems, does not sanction such an elevated tone of morality in mercantile dealings, as would have warranted the granting of the prayer, to the extent, asked for by the defendants in this case. Such a strict and. rigid doctrine, considering the vicissitudes and changes incident to mercantile life, would go far to cramp the operation of trade and commerce, and has not received the countenance of the Courts of Justice, either in this State or elsewhere, as far as we have been able to ascertain. Moreover,, the proceeds of sales of the property purchased might have enabled them to fulfill their contract, and from anything-which appears might have been intended to be applied to-that purpose.” Powell v. Bradlee has always been considered as settling the law in this State in regard to sales made: under the circumstances mentioned.

The granted prayers in this case ruled what the verdict: should be on a hypothetical state of facts ; but the special, finding by the Court determined positively what the facts-were. This finding is a part of the verdict; and when the-Court rendered judgment it was a decision that these facts defeated the plaintiffs. The question is properly presented *129 by the plaintiffs’ motion for a judgment non obstante veredicto.

The Hellwegs were not guilty of fraud unless they intended to get the coal without paying for it. And if they did not know themselves to be insolvent at the time of the purchase ; and if founding their opinion on their assets and their experience in business during former years, they had a reasonable expectation of making payment, it could not be inferred that they intended to get the coal without paying for it. They had a right to conduct their business according to their own judgment, provided it was not exercised mala fide or recklessly; and they could not be required to conform their conduct to the opinions which other persons might form, who had no interest in the matter. The reasonableness of the expectation of payment would, of course, be decided by the facts known to exist at the time of the purchase, and not by occurrences which took place afterwards. If the Hellwegs did not know that they were insolvent at the time of the purchase of the coal, and they had a reasonable expectation of paying, they are not to be convicted of a fraudulent intent. The counsel for the appellants contended that if they had good reason to know that they were insolvent, they ought to be visited with the consequences of a knowledge of that fact. We do not find this rule established by the authorities ; and there are many difficulties in the way of its practical application. A man of cool, calm and steady judgment, who was not liable to-be swayed by his hopes and wishes, might make an accurate estimate of the value of his assets, and see clearly the improbability of paying his debts, and therefore come to the conclusion that he was insolvent. Another man equally honest, but less intelligent, and who was more ready to hope for the best, and to believe what he earnestly desired, might in perfect sincerity think that he would be able to make an advantageous disposition of his property, and pay all his debts. The future is usually uncertain, and it appears very differently to men of different temperaments and *130 characteristics. How is a jury to determine which of these two men had good reason for his opinion ? Is it to arrive at a conclusion by hearing evidence of dispositions and relative mental powers ? In marked contrast to this proposed rule, there is another one of easy application, and sufficiently definite for the purposes of practical justice. If a debtor intends to pay his debts, and in the honest exercise of such judgment as belongs to ordinary men, he believes that he will be able to do so, then, even if he has made a mistake in his ability to pay, he is not to be put on the footing of one who knows himself to be insolvent. This latter rule fully meets the requirements of justice, and is in harmony with our leading authority.

(Decided June 23rd, 1897).

Of course we cannot review the special finding of facts. Upon it, considered as an essential part of the general verdict, the judgment was properly rendered for the defendants.

Judgment affirmed.