Goldmann, Foley and Kilkenny. The opinion of the court was delivered by Foley, J.A.D.
Defendant appeals from a judgment for plaintiffs entered in the County Court following a nonjury trial.
Plaintiffs' action to recover monies due them for the sale of ice cream products to Crest Enterprise, Inc., was based upon fraud and misrepresentation by defendant, as to the solvency of Crest.
Many of the facts proved at the trial were not seriously in dispute. Plaintiffs were in the business of the sale of ice cream. Defendant, as president and principal stockholder, operated a vending machine company, Crest Enterprise, Inc. At the end of May 1959, or shortly thereafter, the parties entered an oral arrangement whereby plaintiffs undertook to deliver their products to Crest on order at an agreed price. Deliveries were made on June 6, June 11 and June 25, 1959. Between the second and third deliveries Crest gave plaintiffs a check postdated June 26, 1959 covering the invoice of the June 6 delivery. When presented for payment, it was returned because of insufficient funds in the Crest account. Insolvency proceedings were
instituted against Crest in July 1959. Sale of its assets provided no dividend for its general creditors.
James E. Masterson, Esq., called as a witness by plaintiffs, testified that there was filed with him, as receiver in the insolvency proceedings, a large number of creditors' claims for money due and owing by Crest as of the "end of May 1959." Richard F. Allenby, assistant cashier of the Montclair National Bank and Trust Company in which Crest maintained its only bank account, testified that on May 29 funds in the account amounted to $103.83 and that the account had been overdrawn many times during May 1959.
The basic question for determination at the trial, so described by the court and assented to by defendant's attorney, was whether or not "plaintiffs relied upon any representations of the defendant as to the financial responsibility of the Crest Enterprise." This issue was purely one of fact. According to plaintiff Charles Armel, who was corroborated by his sales manager Lewis Freilich, when he met defendant at the end of May and solicited the Crest business he told defendant that he had taken over a bankrupt company, was "under-capitalized and underfinanced," so that the best credit terms he could extend were "bill on bill." This meant, according to plaintiff, that payment of the first order became due on delivery of the second, payment of the second became due on delivery of the third, and so on. In response to this proposal defendant said:
"Son, you don't have nothing to worry about. I'm a Brigadier General from the second world war. I'm a solid citizen. You're going to do business with a substantial outfit. We never defaulted on any of our payments, and you got nothing to worry about. The fact is, if you're worried about my credits, I'll pay you C.O.D.
'We're a solid outfit. We're getting bigger and bigger. We're putting more and more machines on different locations. We're expanding.' -- the fact is, he showed me a few of the machines at that time that was in the process of being shipped out to a new location -- 'and we're getting bigger and bigger by leaps and bounds.'"
Plaintiff went on to say:
"I was afraid to give him such stiff terms. I wanted to build up a little confidence in him, and I didn't want [ sic ] to think I was that greedy. I ...