## Facts

- Oswego Starch Factory sold and shipped goods to Thompson & Reeves on their orders.
- Thompson & Reeves allegedly were insolvent, knew of their insolvency, and ordered and received the goods intending not to pay, concealing both insolvency and intent from the seller.
- After the goods arrived, Lendrum, the Polk County sheriff, levied on and took possession of the goods under writs of attachment obtained by Thompson & Reeves’ creditors.
- The attaching creditors allegedly had no notice of Thompson & Reeves’ fraud.
- After learning of the alleged fraud, Oswego elected to treat the sale as rescinded and brought replevin against the sheriff, claiming present ownership and an immediate right to possession.

## Issues

1. Whether a seller induced by the buyer’s fraud (concealed insolvency and intent not to pay) may rescind and reclaim goods after the buyer’s creditors have attached the goods without notice of the fraud.
2. Whether the seller must give notice of its election to rescind before filing replevin to recover fraudulently obtained goods.
3. Whether a demand for return of the goods is a prerequisite to replevin when both parties claim title and a right to possession.

## Decision

- The Iowa Supreme Court reversed the judgment sustaining the demurrer and remanded.
- The court held the petition stated a valid replevin claim based on rescission for fraud.
- The court held rescission and reclamation could defeat an attachment by the buyer’s creditors because the creditors acquired no better rights than the fraudulent buyer.
- The court held no pre-suit notice of rescission and no prior demand were required under the pleaded circumstances.

## Legal Principles

- A buyer who, knowing of insolvency, procures goods while intending not to pay and conceals that intent commits fraud authorizing the seller to rescind and reclaim the goods.
- An attaching creditor is not a bona fide purchaser for value; the creditor takes only the debtor’s interest and “stands in the shoes” of the buyer, so the attachment is subordinate to the seller’s rescission based on fraud.
- When a sale is induced by fraud, the seller need not give separate notice of rescission before suing to recover the goods; filing replevin may constitute an effective election to rescind.
- A prior demand is unnecessary in replevin when the defendant’s possession rests on an adverse claim of title and right to possession.

## Conclusion

The court held that a seller defrauded by a buyer’s concealed insolvency and intent not to pay may rescind the sale and recover the goods from a sheriff holding them under creditor attachments, and that neither pre-suit notice of rescission nor a prior demand is required where the parties’ claims to title and possession are adverse.


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