4

no demand for a return of the goods is necessary before institution of the action, and the same is true when the action is against one who takes under the buyer with notice of the fraud. Ordinarily, however, where the property has passed from the buyer to a third person without notice of the fraud and before the sale has been rescinded by the seller, though such person may not be entitled to protection as a purchaser for value, a demand should be made on him for the goods before commencing the action. It has been held that the seller in setting out his title in an action of replevin or claim and delivery, the code substitute for the common law action of replevin, may allege his ownership generally and prove thereunder that the sale was induced by the buyer's fraud."

614. Trover; Trespass.-The seller may, after rescission of the sale, maintain an action of trover against the fraudulent buyer, or one taking with notice of the fraud or after demand against one taking without notice if he is not a purchaser for value, but a prior demand on the buyer for the return of the property is not necessary because the original taking is deemed tortious. A seizure of goods by an officer is not tortious, where he takes them under regular process in favor of a creditor of the buyer, and therefore the seller, to enable him to maintain trover therefor against the officer, must make demand on him; but if, demand being made, the officer refuses to deliver them without requiring any evidence of the title of the person making the demand, he will be presumed to have waived his claim to such information.10

259; Blake v. Blackley, 109 N. C. 257, Phenix Iron Works Co. v. McEvony, 13 S. E. 786, 26 A. S. R. 566; Mac- 47 Neb. 228, 66 N. W. 290, 53 A. S. kinley v. McGregor, 3 Whart. (Pa.) R. 527. 369, 31 Am. Dec. 522; Sisson v. Hill, 18 R. I. 212, 26 Atl. 196, 21 L.R.A. 206.

Note: 2 L.R.A. 155.

4. Morrow Shoe Mfg. Co. v. New England Shoe Co., 57 Fed. 685, 6 C. C. A. 508, 24 L.R.A. 417; Sargent v. Sturm, 23 Cal. 359, 83 Am. Dec. 118; Butters v. Haughwout, 42 Ill. 18, 89 Am. Dec. 401; Wails v. Farrington, 27 Okla. 754, 116 Pac. 428, 35 L.R.A. (N.S.) 1174.

Note: 2 L.R.A. 155.

5. Butters v. Haughwout, 42 Ill. 18, 89 Am. Dec. 401; Wails v. Farrington, 27 Okla. 754, 116 Pac. 428, 35 L.R.A. (N.S.) 1174.

8. Thurston v. Blanchard, 22 Pick. (Mass.) 18, 33 Am. Dec. 700; Sleeper v. Davis, 64 N. H. 59, 6 Atl. 201, 10 A. S. R. 377; Cary v. Hotailing, 1 Hill (N. Y.) 311, 37 Am. Dec.' 323; Blake v. Blackley, 108 N. C. 257, 13 S. E. 786, 26 A. S. R. 566; Mackinley v. McGregor, 3 Whart. (Pa.) 369, 31 Am. Dec. 522. As to when trover may be maintained generally, see TROVER.

9. Thurston v. Blanchard, 22 Pick. (Mass.) 18, 33 Am. Dec. 700; Cary v. Hotailing, 1 Hill. (N. Y.) 311, 37 Am. Dec. 323.

10. Thompson v. Rose, 16 Conn. 71, 41 Am. Dec. 121. As to whether an execution creditor of the fraudulent buyer is entitled to protection,

6. Converse v. Sickles, 146 N. Y. 200, 40 N. E. 777, 48 A. S. R. 790. 7. Benesch v. Waggner, 12 Colo. see supra, par. 599. 534, 21 Pac. 706, 13 A. S. R. 254;

12

Where the seller cannot recover all the goods in his action of replevin he still has a right of action against the buyer, not on the contract, but on the theory of the conversion of the goods not found.11 It has also been held that trespass may be maintained by the defrauded seller. 1o 615. Action of Deceit.-The seller may maintain an action of deceit against the fraudulent buyer.18 And if possession of property is obtained by falsely representing a note, which is given in exchange therefor, to be good, whereas it was worthless, and well known to be so at the time that the representations were made, the party defrauded may bring an action of deceit to recover the loss that he has sustained, without either informing the other party that the note has not been paid, or without seeking its payment.14 The advantage in bringing this form of action where the buyer is insolvent and the property cannot be got at is to enable the seller to found a ground for the arrest of the buyer or to prevent his discharge in bankruptcy from operating as a discharge.15 In some cases, where the charge of fraud is based on the intention of the buyer not to pay, a distinction is made between the right of the seller to maintain an action of deceit and his right to rescind and recover the property, and while he may resort to the latter remedy he is denied the right to maintain an action of deceit.16 The measure of damages in case an action of deceit is brought is the actual value of the goods and not necessarily the price agreed to be paid by the buyer.1 The fact that the seller has secured a judgment against the buyer for the price has been held not to affect his right to sue him in an action of deceit, as both actions are consistent and founded on the existence and affirmance of the sale.18 Other cases, however, have taken the view that the seller by suing for the price after knowl

11. Silvey v. Tift, 123 Ga. 804, 51 S. E. 748, 1 L.R.A. (N.S.) 386.

12. Farley v. Lincoln, 51 N. H. 577, 12 Am. Rep. 182; Cary v. Hotailing, 1 Hill (N. Y.) 311, 37 Am. Dec. 323. 13. Louisville Dry Goods Co. v. Lanman, 135 Ky. 163, 121 S. W. 1042, 135 A. S. R. 451, 28 L.R.A. (N.S.) 363; Eaton, Cole, etc., Co. v. Avery, 83 N. Y. 31, 38 Am. Rep. 389; Tindle v. Birkett, 171 N. Y. 520, 64 N. E. 210, 89 A. S. R. 822; John V. Farwell Co. v. Wolf, 96 Wis. 10, 70 N. W. 289, 71 N. W. 109, 65 A. S. R. 22, 37 L.R.A. 138.

14. Alexander v. Dennis, 9 Port. (Ala.) 174, 33 Am. Dec. 309.

15. Louisville Dry Goods Co. v. Lanman, 135 Ky. 163, 121 S. W. 1042, 135 A. S. R. 451, 28 L.R.A. (N.S.) 363; Standard Sewing Mach.

Co. v. Owings, 140 N. C. 503, 53 S. E. 345, 6 Ann. Cas. 211, 8 L.R.A. (N.S.) 582. As to execution against the person generally, see EXECUTIONS, vol. 10, p. 1383 et seq. As to the effect of a discharge in bankruptcy generally on debts created by fraud, see BANKRUPTCY, vol. 3, p. 338 et seq.

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

17. John V. Farwell Co. v. Wolf, 96 Wis. 10, 70 N. W. 289, 71 N. W. 109, 65 A. S. R. 22, 37 L.R.A. 138.

18. Standard Sewing Machine Co. v. Owings, 140 N. C. 503, 53 S. E. 345, 6 Ann. Cas. 211 and note, 8 L.R.A. (N.S.) 582 (the second action used as ground for the civil arrest of the buyer and upheld).

Note: 8 L.R.A. (N.S.) 582.

edge of the fraud of the buyer waives his right to sue for damages for the fraud.19 According to the better view if the seller while the contract remains wholly executory, and after knowledge of the buyer's fraud, performs the contract on his part, he waives any action he otherwise might have maintained for damages. 20 Accordingly a seller who has been induced by fraud to enter into an executory contract of sale waives his right to maintain an action for damages if, after discovering the fraud, he performs the contract by delivering the property and receiving the price. Where the buyer fraudulently takes advantage of the seller's intoxicated condition to procure a contract for the purchase of his property at an inadequate price, it has been held that the latter may sue for damages for the deceit without offering to rescind the contract.

616. Assumpsit for Price or Value.-If a sale on credit is induced by the fraudulent representations of the buyer as to his financial condition the seller cannot, it would seem on principle and it has been so held, rescind the sale as regards the term of credit and sue in assumpsit for the price or what the goods were reasonably worth before the expiration of the term of credit, as such action is founded on the contract and the law will not imply a different contract, and furthermore, an action on the contract with knowledge of the fraud would constitute a waiver of the seller's right to rescind. The view has been taken, however, that the seller may treat the sale as a sale for cash, thus rescinding in part as to the term of credit, and sue for the price of the goods before the term of credit has expired. It has been held, and it seems properly, that if the buyer has resold the goods or a part thereof, the seller, after recovering those which he can reach, may waive the tort as to the balance and maintain assumpsit for the proceeds, on the implied promise to pay for property wrongfully appropriated. If the buyer by fraudulent representations induces the seller

19. Palmer v. Preston, 45 Vt. 154, 12 Am. Rep. 191.

Note: 8 L.R.A. (N.S.) 583.

20. Simon v. Goodyear Metallic Rubber Shoe Co., 105 Fed. 573, 44 C. C. A. 612, 52 L.R.A. 745.

Notes: 7 Ann. Cas. 280; 20 Ann. Cas. 172.

1. McDonough v. Williams, 77 Ark. 261, 92 S. W. 783, 7 Ann. Cas. 276, 8 L.R.A. (N.S.) 452 and note.

2. Baird v. Howard, 51 Ohio St. 57, 36 N. E. 732, 46 A. S. R. 550, 22 L.R.A. 846.

3. Kellogg v. Turpie, 93 Ill. 265, 34 Am. Rep. 163; Jacobs v. Shorey, 48 N. H. 100, 97 Am. Dec. 586.

Notes: 3 L.R.A. (N.S.) 908-909; 7 Ann. Cas. 545.

See supra, par. 610 et seq., as to waiver of the seller's right to rescind. 4. Tatium v. Ackerman, 148 Cal. 357, 83 Pac. 151, 113 A. S. R. 276, 7 Ann. Cas. 541. 3 L.R.A. (N.S.) 908. See also Kellogg v. Turpie, 93 Ill. 265, 34 Am. Rep. 163 (referring to authorities in New York but refusing to follow them).

Notes: 3 L.R.A. (N.S.) 908; 7 Ann. Cas. 544.

5. Silvey v. Tift, 123 Ga. 804, 51 S. E. 748, 1 L.R.A. (N.S.) 386; Sleeper v. Davis, 64 N. H. 59, 6 Atl. 201, 10

to take the note of a third person in payment for the goods, the seller may sue the buyer in assumpsit for the price, and he may maintain such action forthwith though the note is payable at a future day."

617. Suit in Equity.-Since the defrauded seller has an adequate remedy at law, he cannot ordinarily maintain a bill in equity for relief. Still it has been said that a defrauded seller may sue to enforce his right of rescission either at law or in equity," and where the transaction has been complicated by the intervention of the rights of third persons claiming under the buyer, a bill in equity to set aside the sale has been upheld, and usually so without the propriety of the remedy being questioned.10 Where a court of equity has assumed jurisdiction. to grant relief it may award to the seller damages based on the value of property which cannot be secured and returned.11

618. Following Proceeds of Goods.-The defrauded seller may not only follow the goods into the hands of the fraudulent buyer or one taking under the buyer and not entitled to protection as a bona fide purchaser for value, but he may also follow the proceeds where they can be identified under the general doctrine of following trust funds.12 And it has been held that since a judgment in replevin based on an admission that no demand for the return of the goods replevied had been made, when such demand was necessary to sustain an action, is no more than an adjudication that the action was prematurely brought, and does not estop the seller, after paying to the sheriff levying on the goods at the instance of creditors of the fraudulent buyer the value of the goods which were the subject of the action of replevin, from maintaining an action against him to recover the sum so paid on the ground that such goods were procured from the seller by means of a fraudulent sale, which, after the discovery of the fraud, he rescinded.18 Where the fraudulent buyer has sold the goods and thereafter made an assignment for the benefit of creditors the seller has been held entitled to follow the proceeds of the sale into the hands

A. S. R. 377. See also Kellogg v. Turpie, 93 Ill. 265, 34 Am. Dec. 163.

6. Hoopes v. Strasburger, 37 Md. 390, 11 Am. Rep. 538.

7. See supra, par. 272.

8. American Sugar Refining Co. v. Fancher, 145 N. Y. 552, 40 N. E. 206, 27 L.R.A. 757. See EQUITY, vol. 10, p. 316 et seq.

9. Smith v. Ryan, 191 N. Y. 452, 84 N. E. 402, 123 A. S. R. 609, 14 Ann. Cas. 505, 19 L.R.A.(N.S.) 461. 10. Fechheimer v. Baum, 37 Fed. Rep. 167, 2 L.R.A. 153; Arnold v. Hagerman, 45 N. J. Eq. 186, 17 Atl. 93, 14 A. S. R. 712; Durell v. Haley,

1 Paige (N. Y.) 492, 19 Am. Dec. 444; American Sugar Refining Co. V. Fancher, 145 N. Y. 552, 40 N. E. 206, 27 L.R.A. 757.

11. Sevan v. Talbot, 152 Cal. 142, 94 Pac. 238, 17 L.R.A. (N.S.) 1066.

12. Montgomery v. Bucyrus Mach. Works, 92 U. S. 257, 23 U. S. (L. ed.) 656; Gillespie v. J. C. Piles, 178 Fed. 886, 102 C. C. A. 120, 44 L.R.A. (N.S.) 1; American Suger Refining Co. v. Fancher, 145 N. Y. 552, 40 N. E. 206, 27 L.R.A. 757. As to following trust property, see TRUSTS.

13. Converse v. Sickles, 146 N. Y 200, 40 N. E. 777, 48 A. S. R. 790.

of the assignee by whom the price was collected from the second purchasers.14 So where the buyer has become bankrupt and the goods have been sold under the order of a court of bankruptcy, as perishable, the seller may assert his right to the proceeds.15

Fraud of Seller

619. Rule of Caveat Emptor Generally.-Caveat emptor is the general common law rule as to the sale of chattels and if the article is unsound, to entitle the buyer to relief, he must rely either on a warranty or fraud.16 The tendency of the modern cases is to construe affirmations on the part of the seller as to the quality or condition of the subject matter as warranties for the purpose of affording relief to the buyer, and thus to narrow to a large extent the full operation of the rule of caveat emptor.17 At an early date an exception to the rule of caveat emptor was made in respect to the sale of goods of which the buyer had no opportunity of inspection,18 but the mere fact that the inspection would be inconvenient or difficult is not equivalent to its impracticability.19

620. Nondisclosure of Patent Defects.-Where there is a patent or open defect in the article sold which could be discovered by such an examination as a careful and prudent man would ordinarily make, the mere failure of the seller to disclose the defect to the buyer, if there was no artifice used to conceal it, does not constitute fraud,20 nor does

14. American Sugar Refining Co. v. Fancher, 145 N. Y. 552, 40 N. E. 206, 27 L.R.A. 757.

15. Gillespie v. J. C. Piles, 178 Fed. 886, 102 C. C. A. 120, 44 L.R.A. (N.S.) 1.

16. Kohl v. Lindley, 39 Ill. 195, 89 Am. Dec. 294; Merchants, etc., Sav. Bank v. Fraze, 9 Ind. App. 161, 36 N. E. 378, 53 A. S. R. 341; Hight v. Bacon, 126 Mass. 10, 30 Am. Rep. 639; Kircher v. Conrad, 9 Mont. 191, 23 Pac. 74, 18 A. S. R. 731, 7 L.R.A. 471; Stewart v. Stearns, 63 N. H. 99, 56 Am. Rep. 496; Fleming v. Slocum, 18 Johns. (N. Y.) 403, 9 Am. Dec. 224; People's Bank v. Bogart, 81 N. Y. 101, 37 Am. Rep. 481; Brown v. Gray, 51 N. C. 103, 72 Am. Dec. 563; Hadley v. Clinton County Importing Co., 13 Ohio St. 502, 82 Am. Dec. 454; Weimer v. Clement, 37 Pa. St. 147, 78 Am. Dec. 411.

Note: 90 Am. Dec. 426.

17. See supra, par. 425 et seq.

18. Note: 90 Am. Dec. 427. 19. Hyatt v. Boyle, 5 Gill & J. (Md.) 110, 25 Am. Dec. 276.

Note: 90 Am. Dec. 427.

As to the buyer's right of inspection, see supra, par. 256. As to opportunity for inspection as affecting the transaction as a sale by sample, see supra, 485.

V.

20. Kitchin v. Long, 67 Fla. 72, 64 So. 429, L.R.A.1917C 617; Kohl v. Lindley, 39 Ill. 195, 89 Am. Dec. 294; Brown v. Gray, 51 N. C. 103, 72 Am. Dec. 563; McFarlane Moore, 1 Overt. (Tenn.) 174, 3 Am. Dec. 752; Wintz v. Morrison, 17 Tex. 372, 67 Am. Dec. 658; Mamlock v. Fairbanks, 46 Wis. 415, 1 N. W. 167, 32 Am. Rep. 716. See also Frenzel v. Miller, 37 Ind. 1, 10 Am. Dec. 62; Court v. Snyder, 2 Ind. App. 440, 28 N. E. 718, 50 A. S. R. 247.

Notes: 90 Am. Dec. 429; L.R.A. 1917C 619.