representations of third persons.15 If, however, the buyer had no knowledge of the misrepresentation by third persons of his financial condition, a charge of fraud cannot be based thereon. This principle is exemplified in the case of a mistaken report by a commercial agency as to the buyer's solvency, not based on any statement of the buyer to the agency.16

587. Intention of Buyer Not to Pay; General Rule.-If an insolvent buyer purchases goods without disclosing his insolvency and without any intention at the time of the purchase of paying for the same, this is considered, according to the great weight of authority, such a fraud as will entitle the seller to rescind and recover the property.17 So long as fraud rests in mere intention the law will give no relief against it, for indeed an unexecuted purpose to defraud another can

15. Fitzsimmons v. Joslin, 21 Vt. 129, 52 Am. Dec. 46. 16. Poska v. Stearns, 56 Neb. 541, 76 N. W. 1078, 71 A. S. R. 688, 42 L.R.A. 427.

Note: 85 A. S. R. 383, 384. See supra, par. 584, as to statements by a buyer to mercantile agencies generally.

17. Donaldson v. Farwell, 93 U. S. 631, 23 U. S. (L. ed.) 993; Fechheimer,

etc.,

66 N. W. 1059, 59 A. S. R. 434; Rowley v. Bigelow, 12 Pick. (Mass.) 307, 23 Am. Dec. 607; Bidault v. Wales, 19 Mo. 36, 59 Am. Dec. 327; Cary v. Hotailing, 1 Hill (N. Y.) 311, 37 Am. Dec. 323; Durell v. Haley, 1 Paige Ch. (N. Y.) 492, 19 Am. Dec. 444; Hall v. Naylor, 18 N. Y. 588, 75 Am. Dec. 269; Nichols v. Michael, 23 N. Y. 264, 80 Am. Dec. 259; Converse v. Sickles, 146 N. Y. 200, 40 N. E. 777, Co. v. Baum, etc., Co., 37 Fed. 42 A. S. R. 790; Des Farges v. Pugh, 167, 2 L.R.A. 153; Gillespie v. J. C. 93 N. C. 31, 53 Am. Rep. 446 (in this Piles, 178 Fed. 886, 102 C. C. A. 120, case there was also the further misrepL.R.A.(N.S.) 1; Thompson v. resentation that the buyer was the 16 Conn. 71, 41 Am. Dec. mayor of his town and a practicing O swego Starch Factory v. Len- attorney); Ditton v. Purcell, 21 N. D. 57 Ia. 573, 10 N. W. 900, 42 648, 132 N. W. 347, 36 L.R.A. (N.S.) Rep. 53; Reid v. Cowduroy, 79 149; Talcott v. Henderson, 31 Ohio la. 169, 44 N. W. 351, 18 A. S. R. St. 162, 27 Am. Rep. 501; Belding Kearney Milling, etc., Co. v. Bros., etc., Co. v. Frankland, 8 Lea Pac. R. Co., 97 Ia. 719, 66 N. (Tenn.) 67, 41 Am. Rep. 630; GainesW. 1059, 59 A. S. R. 434; J. J. Smith ville Nat. Bank v. Bamberger, 77 Tex. Lumber Co. v. Scott County Garbage 48, 13 S. W. 959, 19 A. S. R. 738; Reducing, etc., Co., 149 Ia. 272, 128 Miller v. White, 46 W. Va. 67, 33 S.

44

Rose, 121; drum, Am.

359;

Union

N. W Lowry S. W

389, 30 L.R.A. (N.S.) 1184; E. 332, 76 A. S. R. 791; Hart v. Moulv. Dye, 33 Ky. L. Rep. 573, 110 ton, 104 Wis. 349, 80 N. W. 599, 76 833, 17 L.R.A. (N.S.) 1032; A. S. R. 881; Ripon German Nat. Louisville Dry Goods Co. v. Lanman, Bank v. Princeton State Bank, 128 135 . 163, 121 S. W. 1042, 135 A. S. Wis. 60, 107 N. W. 454, 8 Ann. Cas. R. 451. 28 L.R.A. (N.S.) 363; Burrill v. 502, 6 L.R.A. (N.S.) 556. Stevens, 73 Me. 395, 40 Am. Rep. 366;

Atlas

Shoe Co. v. Bechard, 102 Me.

Notes: 19 Am. Dec. 444; 37 Am. Dec. 323; 52 Am. Dec. 57; 64 Am.

197, 66 Atl. 390, 10 L.R.A. (N.S.) 245; Dec. 205; 75 Am. Dec. 272; 80 Harris v. Alcock, 10 Gill & J. (Md.) Am. Dec. 268; 27 Am. Rep. 504; 53

226,

32 Am. Dec. 158; Higgins v.

Am. Rep. 449; 10 A. S. R. 364; 18 A.

Lodge, 68 Md. 229, 11 Atl. 846, 6 A. S. R. 363; 2 L.R.A. 153; 14 L.R.A. S. R.437; Kearney Milling, etc., Co. 265; 44 L.R.A. (N.S.) 1 et seq.; 8 Ann. Union Pac. Ry. Co., 97 Md. 719, Cas. 506.

work no injury. But when the purpose is carried out by acts and injury results, as by the purchase of goods with the intention of not paying for them, the seller is entitled to relief.18 So it has been held that a purchase of goods by an insolvent, with a view to subjecting them to an execution which has been issued immediately after a confession of judgment to a friend, is a fraud, and the execution creditor will not be permitted to hold the goods.19 It is held that to entitle the seller to rescind on account of the buyer's intention not to pay, it must have been an intention never to pay for them, as distinguished from an intention not to pay at the stipulated time,20 and an instruction that it would be a fraud if the buyer did not intend to meet "his engagement" has been held erroneous, as the difference between not intending to pay on the day fixed by the contract and intending never to pay-between getting property for nothing, under the mere color of a purchase, and getting it upon a longer credit than was agreed upon by the parties, but with an expectation ultimately to pay-is entirely lost sight of. It has been held that in order that an intention not to pay existing at the time of the purchase may afford ground for rescission the buyer must have been insolvent or in failing circumstances. In many cases where the intention not to pay is declared such a fraud as to entitle the seller to rescind, the element of insolvency is not adverted to; this may be accounted for by the fact that there was no question but that the buyer was insolvent. Where the terms of the sale is cash, and the buyer, though he is not insolvent, fraudulently gains possession without payment of the price, the buyer may regain possession, on the theory that the delivery of possession to him was conditional only. The view has been taken that the purchase of goods by an insolvent without any intention of paying therefor is a fraud entitling the seller to maintain an action for damages for fraud and deceit. On the other hand, a distinction has been made between the right of the seller to maintain an action of deceit and his

18. Oswego Starch Factory v. Lendrum, 57 Ia. 573, 10 N. W. 900, 42 Am. Rep. 53.

19. Durell v. Haley, 1 Paige Ch. (N. Y.) 492, 19 Am. Dec. 444.

20. Burrill v. Stevens, 73 Me. 395, 40 Am. Rep. 366; Bidault v. Wales, 20 Mo. 546, 64 Am. Dec. 205.

Notes: 64 Am. Dec. 209; 44 L.R.A. (N.S.) 24.

1. Bidault v. Wales, 20 Mo. 546, 64 Am. Dec. 205.

2. Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A. (N.S.) 448. It is to be noted that in Alabama an inten

right to rescind the sale, and it has been held that while the buyer's intent not to pay entitles the seller to rescind, it will not enable him to maintain an action for deceit in which a body execution may be issued. In some instances statutes have been enacted expressly recognizing the intent of the buyer not to pay as a fraud on the seller.?

588. Minority Rule as to Intention Not to Pay.-In Pennsylvania the rule is now established that the failure of a buyer to disclose his insolvency accompanied by a preconceived intent not to pay for the goods is not sufficient to permit the seller to rescind. There must be the further element that the intent to mislead should be carried out by false representations, contrivances, or artifices, or by conduct which reasonably involves a false representation.8 This rule was formulated at a fairly early date, and has been uniformly followed, though not without expressions of dissatisfaction," and seems to be a departure from the earlier cases. 10 The Pennsylvania rule seems to have met with the approval of the California courts.11 In Alabama it seems that the mere intention not to pay, unless it is also accompanied by a fraudulent concealment by the buyer of his insolvency or misrepresentations with respect thereto, affords no ground for rescinding the sale.12

589. Time of Forming Intention Not to Pay.-It would seem on principle, and it has been so held, that the mere conception by the buyer of an intent not to pay for the goods after the sale had been. made and fully executed would not render it fraudulent so as to confer on the seller the right to rescind,18 and some cases hold that the intent not to pay must exist at the time of the purchase, and that an intent formed subsequently, at the time of delivery, will not be sufficient to enable the vendor to avoid the sale.14 This has been held true where the intention not to pay was conceived while the goods were

6. People v. Healy, 128 Ill. 9, 20 N. E. 692, 15 A. S. R. 90. As to when an execution against the person may be issued, see EXECUTIONS, vol. 10, p. 1383 et seq.

7. Note: 44 L.R.A.(N.S.) 25. 8. Smith v. Smith, 21 Pa. St. 367, 60 Am. Dec. 51.

Notes: 60 Am. Dec. 56; 27 Am. Rep. 504; 14 L.R.A. 265; 6 L.R.A. (N.S.) 44 L.R.A. (N.S.) 26; 8 Ann. Cas.

560; 508.

9. Note: 8 Ann. Cas. 508. 10. Mackinley v. McGregor, 3 Whart. (Pa.) 369, 31 Am. Dec. 522; Knowles v. Lord, 4 Whart. (Pa.) 500, 34 Am. Dec. 525,

R. C. L. Vol. XXIV.-20.

305

Note: 26 L.R.A. (N.S.) 26.

11. Notes: 60 Am. Dec. 56; 27 Am. Rep. 506.

12. Le Grand v. Eufaula Nat. Bank, 81 Ala. 123, 1 So. 460, 60 Am. Rep. 140; Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A. (N.S.) 448.

13. Kearney Milling, etc., Co. v. Union Pac. R. Co., 97 Ia. 719, 66 N. W. 1059, 59 A. S. R. 434; Burrill v. Stevens, 73 Me. 395, 40 Am. Rep. 366; Skinner v. Michigan Hoop Co., 119 Mich. 467, 78 N. W. 547, 75 A. S. R. 413.

Note: 44 L.R.A. (N.S.) 24.
14. Note: 44 L.R.A. (N.S.) 24.

in transit to the buyer, the title to the property having passed to the buyer by the delivery to the carrier, though it was still subject to the eller's right of stoppage in transitu.15 Other cases hold that receiving the goods, with the then "intent not to pay" formed at the time of receiving the goods, will be such a fraud as will enable the seller to rescind.16

590. Want of Reasonable Expectations of Paying.-In some jurisdictions the view is taken that where the buyer fails to disclose his insolvency and has no reasonable expectations of being able to pay for goods purchased on credit, this is such a fraud as entitles the seller to rescind, since no reasonable expectation of being able to pay is equivalent to an intent not to pay; 17 but in other jurisdictions it is held that these facts do not constitute such a fraud as to entitle the seller to rescind, if the buyer has no intent not to pay if he should be able to do so.18

591. Nondisclosure of Insolvency.-If the absence of reasonable expectations of paying for the property does not constitute fraud, it would necessarily follow, and it seems to be the general rule, that the mere failure of the buyer to disclose his insolvency, if he was not interrogated as to his financial condition, does not constitute such a fraud as to entitle the seller to avoid the sale.19 Otherwise, as has been well said, the door of hope would be well nigh closed to the struggling merchant whose liabilities exceed his assets, and an honest, though abortive, purpose to continue business and pay for the goods

15. Skinner v. Michigan Hoop Co., 119 Mich. 467, 78 N. W. 547, 75 A. S. R. 413. As to the general right of stoppage in transitu, see supra, par. 399 et seq.

16. Note: 44 L.R.A. (N.S.) 24. 17. Morrow Shoe Mfg. Co. v. New England Shoe Co., 57 Fed. 685, 6 C. C. A. 508, 24 L.R.A. 417; Gillespie v. J. C. Piles, 178 Fed. 886, 102 C. C. A. 120, 44 L.R.A. (N.S.) 1; Skinner v. Michigan Hoop Co., 119 Mich. 471, 78 N. W. 547, 75 A. S. R. 413; Talcott v. Henderson, 31 Ohio St. 162, 27 Am. Rep. 501; Perlman v. Sartorius, 162 Pa. St. 320, 29 Atl. 852, 42 A. S. R. 834 (stating the law of Maryland).

Notes: 41 Am. Rep. 633; 18 A. S. R. 363; 38 A. S. R. 265; 2 L.R.A. 154; 6 L.R.A. (N.S.) 556 et seq.; 44 L.R.A. (N.S.) 11; 8 Ann. Cas. 507.

Pa. St. 320, 29 Atl. 852, 42 A. S. R. 834; Dalton v. Thurston, 15 R. I. 418, 7 Atl. 112, 2 A. S. R. 905; Miller v. White, 46 W. Va. 67, 33 S. E. 332, 76 A. S. R. 791; German National Bank v. Princeton State Bank, 128 Wis. 60, 107 N. W. 454, 8 Ann. Cas. 502, 6 L.R.A. (N.S.) 556. See also People v. Healy, 128 Ill. 9, 20 N. E. 692, 15 A. S. R. 90; Com. v. Eastman, 1 Cush. (Mass.) 189, 48 Am. Dec. 596; Bidault v. Wales, 20 Mo. 546, 64 Am. Dec. 205; Blake v. Blackley, 109 N. C. 257, 13 S. E. 786, 26 A. S. R. 566.

Notes: 48 Am. Dec. 609; 18 A. S. R. 364; 6 L.R.A. (N.S.) 558 et seq.; 44 L.R.A. (N.S.) 15.

19. Morrow Shoe Mfg. Co. v. New England Shoe Co., 57 Fed. 685, 18 U. S. App. 256, 6 C. C. A. 508, 24 L.R.A. 417; Le Grand v. Eufaula Nat. Bank, 18. Gavin v. Armistead, 57 Ark. 81 Ala. 123, 1 So. 460, 60 Am. Rep. 574, 22 S. W. 431, 38 A. S. R. 262; 140; Gavin v. Armistead, 57 Ark. 574, Burrill v. Stevens, 73 Me. 395, 40 Am. 22 S. W. 431, 38 A. S. R. 262; ThompRep. 366; Perlman v. Sartorius, 162 son v. Peck, 115 Ind. 512, 18 N. E. 16,

is consistent with the buyer's own knowledge of his insolvency and the purchase is not fraudulent when made with such intent, though founded in delusion and unreasonable expectations.20 Even the fact that he is deeply insolvent does not have that effect, unless he purchases with no intention or expectation of paying; for if there is no dishonest mind or purpose, there is no fraud; 1 and a fortiori the mere fact that the buyer was insolvent at the time of the purchase, if he was unaware of the fact, does not constitute fraud so as to entitle the seller to rescind the sale as against a creditor of the buyer who immediately after the sale attaches the property. An express representation by the buyer that he will pay for the goods at the agreed time cannot itself constitute the basis for a charge of fraud, being nothing more than what the law would imply as well as a representation as to future intention or promise to do a future act. So the seller's mistake as to the purchaser's ability to pay where he sells to one reputed, and believing himself to be, solvent, but who is in fact insolvent, will not avoid the sale or furnish ground for relief in equity. The fact that the buyer becomes insolvent and has even made an assignment for the benefit of his creditors after the purchase and while the goods are in transit to him can afford the seller no ground for avoiding the sale, his right of stoppage in transitu not having been exercised.5

1 L.R.A. 201; J. J. Smith Lumber Co. v. Scott County Garbage Reducing, etc., Co., 149 Ia. 272, 128 N. W. 389, 30 L.R.A. (N.S.) 1184; Cross v. Peters, 1 Greenl. (Me.) 376, 10 Am. Dec. 78; Newell v. Randall, 32 Minn. 171, 19 N. W. 972, 50 Am. Rep. 562; Bidault v. Wales, 19 Mo. 36, 59 Am. Dec. 327; Hall v. Naylor, 18 N. Y. 588, 75 Am. Dec. 269; Des Farges v. Pugh, 93 N. C. 31, 53 Am. Rep. 446; Talcott v. Henderson, 31 Ohio St. 162, 27 Am. Rep. 501; Dalton v. Thurston, 15 R. I. 418, 7 Atl. 112, 2 A. S. R. 905; Belding v. Frankland, 8 Lea (Tenn.) 67, 41 Am. Rep. 630; Gainesville Nat. Bank v. Bamberger, 77 Tex. 48, 13 S. W. 959, 19 A. S. R. 738; Fitzsimmons v. Joslin, 21 Vt. 129, 52 Am. Dec. 46; Woonsocket Rubber Co. v. Loewenberg, 17 Wash. 29, 48 Pac. 785, 61 A. S. R. 902; Miller v. White, 46 W. Va. 67, 33 S. E. 332, 76 A. S. R. 791; German Nat. Bank v. Princeton State Bank, 128 Wis. 60, 107 N. W. 454, 8 Ann. Cas. 502, 6 L.R.A. (N.S.) 556.

Notes: 52 Am. Dec. 57; 75 Am. Dec.

272; 80 Am. Dec. 268; 18 A. S. R. 364; 38 A. S. R. 265; 14 L.R.A. 265; 44 L.R.A. (N.S.) 16; 8 Ann. Cas. 505.

20. German Nat. Bank v. Princeton State Bank, 128 Wis. 60, 107 N. W. 454, 8 Ann. Cas. 502, 6 L.R.A. (N.S.) 556.

1. Dalton v. Thurston, 15 R. I. 418, 7 Atl. 112, 2 A. S. R. 905.

2. Cross v. Peters, 1 Greenl. (Me.) 376, 10 Am. Dec. 78.

3. People v. Healy, 128 Ill. 9, 20 N. E. 692, 15 A. S. R. 90.

4. Lupin v. Marie, 6 Wend. (N. Y.) 77, 21 Am. Dec. 256.

5. McElroy v. Seery, 61 Md. 389, 48 Am. Rep. 110. But in Belding v. Frankland, 8 Lea (Tenn.) 67, 41 Am. Rep. 630, where the buyer made an assignment for the benefit of creditors before the goods reached him and on their arrival refused to claim them and directed his assignee to ship them back, the seller was held entitled to reclaim the goods from the assignee. As to the general right of stoppage in transitu, see supra, par. 399 et seq.