Oswego Starch Factory v. Lendrum - 57 Iowa 573, 10 N.W. 900 (1881)

Rule:

An intention on the part of the vendee not to pay for goods bought by him, which he conceals from the vendor, is a fraud which authorizes the vendor to rescind the sale.

Facts:

The seller sold certain goods to the buyer and thereafter discovered that the buyer was insolvent at the time of the purchase and never intended to pay for the goods. The seller rescinded the contract without any notice to the buyer and initiated an action of replevin for the goods. The sheriff held the goods under a levy of attachment by other creditors of the buyer. The trial court granted a demurrer for the sheriff that the seller did not have a right to rescind and could not replevin the goods subsequent to their levy without prejudicing the other creditors. The seller appealed.

Issue:

Was the buyer's alleged intention not to pay for the goods and its purchase of the goods sufficient to show a fraudulent act justifying rescission?

Answer:

Yes.

Conclusion:

The court reversed the judgment. The court found that the seller was not required to give notice of the rescission because the sheriff possessed the goods under a competing claim of title and fraud was alleged against the buyer. Because the rights of the sheriff and the other creditors were only those held by the buyer, the court determined that the seller could rescind the sale after the levy of attachment. The court concluded that the buyer's alleged intention not to pay for the goods and its purchase of the goods was sufficient to show a fraudulent act justifying rescission