Case ID: ohio-st_84/html/0328-01.html
Source: Caselaw Access Project
Author: {"author": "Shauck, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Williams & Thomas Company v. Preslo.
    
      Constitutional provisions requiring that laws — Regulating property rights — Shall operate generally — Extend to rules of evidence, when — Invalidity of Btdk Sale Act of April 30, 1908.
    
    1. The provisions of the constitution which require that laws regulating rights in property shall operate generally and equally extend to statutes which prescribe the presumptions and rules of evidence by which those rights are enforced.
    2. The act of April 30, 1908 (99 O’. L., 241), to render presumptively fraudulent sales in bulk of stocks of merchandise unless the seller shall, not less than seven days before the transfer, file with the recorder of the county a notice of his intention to make such sale, is repugnant to the first article of the constitution, and therefore void. (Miller v. Crawford et al., 70 Ohio St., 207, approved and followed.)
    (No. 12177
    Decided June 13, 1911.)
    Error to the Circuit Court of Mahoning county.
    The Williams & Thomas Company brought suit in the court of common pleas to set aside a sale in bulk to Preslo of a stock of merchandise, and to subject the property to the payment of the vendor’s creditors, it being alleged that the sale was made to hinder, delay and defraud creditors. The defendants denied that the sale was fraudulent. Upon the trial the cause was submitted on the following agreed statement of facts:
    “W. T. Williams and G. T. Williams are partners, trading under the firm name of the Williams & Thomas Company, and are creditors of Angelo Spina and Tony Spina, partners, formerly trading under the firm name of Tony Spina & Bro. Company.
    “Angelo Spina and Tony Spina, trading as said firm sold their entire stock of groceries in bulk, and not in the usual and regular course of business on the 5th day of April, A. D. 1909, to Mike Preslo. No written notice of such intended sale was filed, as provided by Section 6343, Revised Statutes of Ohio, by Angelo Spina or Tony Spina, or by the firm of Tony Spina & Bro. Co., with the county recorder of Mahoning county, Ohio, the county in which said stock of groceries was situated, and in which said firm did business.
    “That said sale or transfer was not made under the direction or order of a court of competent jurisdiction or by an executor, administrator, receiver, assignee for the benefit of creditors, or other officer or person, acting in the regular and proper discharge of official duty, or in the discharge of any trust imposed upon him by law.
    “Said stock of groceries are not exempt from execution.”
    No other evidence was offered by either party, the plaintiff relying on the presumption intended to be created by the following statutory provision added by way of amendment to Sections 6343 and 6344, Revised Statutes, April 30, 1908, (99 O. L., 241):
    “Any sale or transfer of any portion of a stock of goods, wares or merchandise otherwise than in the ordinary course of trade in the regular and usual prosecution of the seller’s or transferrers business, or the sale or transfer of an entire stock in bulk shall be presumed to be made with the intent to hinder, delay or defraud creditors within the meaning of this section, unless the seller or transferrer shall, not less than seven (7) days previous to the transfer of the stock of goods sold or intended to be sold, and the payment of the money thereof, cause to be recorded in the office of the county recorder of the county in which such seller or transferrer conducts his business, and in the office of the county recorder of the county or counties in which such goods are located, a notice of his intention to make such sale or transfer, which notice shall be in writing, describing in general terms the property to be sold and all conditions of such sale and the parties thereto; excepting', however, that no such presumption shall arise because of the failure to record notice as above provided in the case of any sale or transfer made under the direction or order of a court of Competent jurisdiction, or by an executor, administrator, guardian, receiver, assignee for the benefit of creditors or other officer or person acting in the regular and proper discharge of official duty or in the discharge of any trust imposed upoñ him by law, nor in the case of any sale or transfer of any property exempt from execution.”
    
      In the court of common pleas- judgment was rendered for the defendants, and that judgment was*, affirmed by the circuit court.
    
      Messrs. McKain & Ohl; Messrs. Thompson & Hiñe and Mr. Thomas H. Hogsett, for plaintiffs in error.
    Statutes attempting to establish conclusive presumptions would, in many cases, be unconstitutional, although statutes creating prima facie presumptions in reference to the same subject-matter would be valid. 2 Wigmore on Evidence, Sec. 1354.
    It is at once apparent, also, that if the statute is construed as raising a conclusive presumption, it is much more drastic in its effect and much more open to the charge that it would operate with unliecessary and unreasonable .harshness on an innocent purchaser than if it is construed as raising merely a prima facie presumption. In the few cases in which fhws regulating bulk sales have been held unconstitutional, the question of constitutionality has almost invariably turned upon the extent and harshness of the provisions of the particular law, rather than on the general right to place some restrictions on such sales. Block v. Schwartz, 27 Utah, 387, 76 Pac. Rep., 22; Wright v. Hart, 182 N. Y., 330; Miller v. Crawford, 70 Ohio St., 207.
    The New York courts held unconstitutional a law which declared sales without certain prescribed formalities to be void, and, later, held constitutional a similar law which declared that such sales would be “presumed to be void.” Sprintz v. Saxton, 126 App. Div., 421.
    It is possible, therefore, that the present law, although constitutional if the presumption created by it is rebuttable, might be held unconstitutional if the presumption created by it is conclusive.
    It is unnecessary to burden this brief with authorities in support of the proposition that where a word in a law is susceptible of two meanings, one of which would render the law constitutional, and the other of which would render it unconstitutional, the courts will adopt that construction which will result in sustaining the law.
    The rule is stated in Bobilya v. Priddy, 68 Ohio St., 373, and the authorities are collected in Lewis’ Sutherland on Statutory Construction, Secs. 83 and 498.
    That the word “presumed” when used in this connection is susceptible of meaning a prima facie presumption, will not be controverted; that it is not merely susceptible of such meaning, but that such is its most natural and obvious meaning, .has been held in every case in which this word has been judicially construed. Hart v. Roney, 93 Md., 432; Thorpe v. Mercantile Co., 99 Minn., 22, 108 N. W. Rep., 940; Williams v. Bank, 15 Okla., 477, 82 Pac. Rep., 496; Fisher v. Herrmann, 118 Wis., 424, 95 N. W. Rep., 392.
    In placing the burden of proceeding with evidence of good faith on the parties to the sale, the matter being one clearly within their knowledge, the present statute is in harmony with an established principle of evidence that underlies many common law presumptions, as well as numerous statutory rules of evidence. This principle is, that when a particular fact lies peculiarly within the knowledge of one party, the other party should be relieved from the burden of proof of such fact, upon proof of certain preliminary facts which afford a basis for a presumption as to the existence of the main fact, in the absence of testimony from the persons having knowledge of the circumstances. Best on Evidence, Sec. 274; 1 Greenleaf on Evidence, Sec. 79; Railroad Co. v. United States, 139 U. S., 560.
    The supreme court of Ohio has several times upheld the validity of statutes prescribing rules of evidence, which cannot be distinguished, in principle, from the rule established by Section 6343, Revised Statutes. Pennsylvania Co. v. McCann, 54 Ohio St., 10.
    If we correctly understand the opinion of this court in Miller v. Crawford, the chief objection to the law there considered, and the one objection which rendered it clearly invalid, was that the formalities required were in some instances practically impossible of performance, and in all instances so numerous and difficult that the law amounted to a practical prohibition- of sales in bulk.
    It jg evident that not one of the objections to the specific provisions of the former act, nor the principle on which such objections are based, i. e., that restrictions imposed under the guise of regulation must be reasonable, is applicable to the' present act.
    
      The present’ act is not an amendment of' the former act, nor does it expressly repeal the former act. The former act was Section 4155-5, Revised Statutes, contained in the chapter on conveyances and incumbrances. The present act is an amendment of Section 6343, which relates to ■fraudulent conveyances. This statute was held constitutional by this court in the case of Bobilya v. Priddy, 68 Ohio St., 373.
    The present law is not invalid as class legislation, but is, in every respect, a valid and constitutional enactment.
    No argument is needed to demonstrate that the law operates equally upon all who are in the same class, i. e., upon all who are the owners of stock, goods, wares and merchandise, and upon all who are the creditors of owners of stocks of goods, wares and merchandise'. The only question is whether the possession of stocks of goods, wares and merchandise is a reasonable basis for classification. The test by which the validity of this act must be ascertained is stated in the opinion in Miller v. Crawford, 70 Ohio St., 214.
    The classification of traders and merchants 'as a distinct “class” which is properly subject to special restrictions for the protection of its creditors has been recognized by legislation for more than 300 years. Statutes giving remedies against, merchants and traders which are not available against debtors in general', have existed 'since 1570. The English bankruptcy act (Act of 13 Eliz., 1570) limited its provisions as to who might be declared bankrupt to traders, merchants and dealers in money.
    
      At the date of the American Revolution the-English law exempted from its operation, “every-' body except traders, brokers and merchants, in general, those dealing in money and buying and selling.” 1 Remington on Bankruptcy, 11. The United States law of 1800 was likewise limited to traders, merchants, underwriters and brokers. 1 Remington on Bankruptcy, 12. The Lower Canada bankruptcy act of 1869 applied to “traders” only. Harman v. Clarkson, 22 U. C. C. P., 291.
    Where the validity of a law passed for a lawful purpose, such as the prevention of fraud, depends upon the reasonableness of a classification made by the law, the court will presume that the facts justify the classification made by the legislature in the absence of proof that the classification is unreasonable. Marmet v. State, 45 Ohio St., 63; State, ex rel., v. Trenton, 53 Atl. Rep., 202; St. John v. New York, 201 U. S., 637.
    We are unable to see why the same presumption should not be made in favor of the reasonableness of a classification adopted by the legislature, tha£ is universally made as to the reasonableness of rates of charge prescribed by law. Cotting v. Stock Yards Co., 183 U. S., 79; State v. Hanlon, 77 Ohio St., 32.
    The Fourteenth Amendment to the Federal Constitution is, at least, as strict in its prohibition of class legislation as the provisions of the Ohio Constitution. State, ex rel., v. Ferris, 53 Ohio St., 314; State v. Gilbert, 70 Ohio St., 242;
    That the classification made by the present law is not forbidden by the United States Constitution was expressly held by the supreme court of the United States in the recent case of Lemieux v. Young, 211 U. S., 489.
    The comparison of the classification created by this act with other classifications which have been sustained as reasonable by this court, should remove all doubt as to its validity. Senior v. Ratterman, 44 Ohio St., 661; Adler v. Whitbeck, 44 Ohio St., 574.
    It seems to us that the supreme court of Illinois reasoned more convincingly in its decision in the case of Booth v. People, 186 Ill., 43, 184 U. S., 425, than in the case of Off & Co. v. Morehead, 235 Ill., 40, in which they held the bulk sales law unconstitutional. In the former case, the court held constitutional a statute' prohibiting grain option contracts, although no other option contracts were prohibited. Phillips v. State, 77 Ohio St., 214.
    The courts of Connecticut, Massachusetts, Michigan,’ Minnesota, New York, Georgia, Kentucky, Maryland, Oklahoma, Tennessee, Washington and Wisconsin have held similar laws constitutional, and the decisions in Louisiana, Pennsylvania and New Jersey have enforced similar laws. Walp v. Mooar, 76 Conn., 515; Young v. Lemieux, 79 Conn., 434; Squire & Co. v. Tellier, 185 Mass., 18, 69 N. E. Rep., 312; Spurr v. Travis, 145 Mich., 721, 108 N. W. Rep., 1090; Pierson & Hough Co. v. Noret, 154 Mich., 267, 117 N. W. Rep., 644; Thorpe v. Mercantile Co., 99 Minn., 22, 108 N. W. Rep., 940; Sprintz v. Saxton, 126 App. Div., 421; Neas v. Borches, 109 Tenn., 398, 71 S. W. Rep., 50; McDaniels v. Shoe Co., 30 Wash., 549; Fisher v. Herrmann, 118 Wis., 424, 95 N. W. Rep., 392; Jacques & Tinsley Co. v. Carstarphen Co., 131 Ga., 1, 68 S. E. Rep., 82; Grocery Co. v. Conley, 31 Ky. Law Rep., 989; Hart v. Roney, 93 Md., 432; Schmucker v. Lawler, 38 Pa. Sup. Ct., 578; State v. Artus, 110 La., 442; Dickinson v. Harbison, 72 Atl. Rep., 941; Williams v. Bank, 15 Okla., 477, 82 Pac. Rep., 496.
    We believe the only state which now holds a similar law unconstitutional is Illinois. The law held unconstitutional in Illinois imposed restrictions of the same general nature as the prior Ohio law. Off & Co. v. Morehead, 235 Ill., 40, 85 N. E. Rep., 264.
    We believe the reasoning of the court in this case is sufficiently answered by the previous portion of this brief. The decision also strikes us as somewhat inconsistent with the decision of the same court in Booth v. People, supra, and Gage v. Caraher, 17 N. E. Rep., 777; Meadowcroft v. People, 163 Ill., 56, 45 N. E. Rep., 305.
    
      Mr. William R. Stewart, for defendant in error.
    Under this statute, if is unimportant whether the vendor at the sale was solvent or insolvent; whether he acted in good faith or not; whether his stock was small or large; whether the sale was open or secret; whether the proceeds were to be given to his creditors or not, a purchaser could not buy, an owner could not sell, until the latter’s declared intention to sell, describing the property, and all the conditions of the sale were for seven days spread on the public records, where the. seller did business.
    Such legislation, we submit, unreasonably interferes with the rig'ht to buy and sell. merchandise. It deprives the buyer and seller, even though they be of abundant means, of purchasing, selling or enjoying property. Mugler v. Kansas, 123 U. S., 623.
    The protection of the citizen in the equal enjoyment of personal freedom and private property are secured by our constitution in terms as broad as those which vest the legislative power in the general assembly. The power to destroy or substantially impair these rights is not included in the grant of legislative power, and a law purporting to be the exercise of legislative power, whether of the power of -taxation, or of trade regulation, or of protective legislation (often called police power), or of any other legislative power, is void if in effect it is a substantial impairment of these rights secured by the constitution against the operation of every manifestation of legislative power. State v. Conlon, 65 Conn., 478; State v. Insurance Co., 73 Conn., 255; McKeon v. Railroad Co., 75 Conn., 343; State v. McMahon, 76 Conn., 97; State v. Feingold, 77 Conn., 326; Miller v. Crawford, 70 Ohio St., 207.
    The defendant in error insists the amended statute interferes not only with' the liberty and property of the vendor, as stated, but that its pro-, visions are inexcusably oppressive upon the vendee, insomuch as the alleged protection of the vendor’s creditors may, in a measure, appear publicly worthy, while, in his case there' appears no sufficient excuse or good reason for imposing a purchase prohibition that interferes and hinders him from trading with and lawfully acquiring from a retail dealer, property he could unrestrictedly acquire from any other person than a retail dealer. In re Jacobs, 98 N. Y., 98; People v. Marx, 99 N. Y., 377; People v. Gillson, 109 N. Y., 389; State v. Goodwill, 33 W. Va., 179, 6 L. R. A., 621.
    The legislature may not, under the guise of protecting the public interest, arbitrarily interfere with private business or impose unusual or unnecessary restrictions upon lawful occupations. In other words, its determination as to what is a proper exercise of its police power is not final or conclusive, but is subject to the supervision of the courts. Lawton v. Steele, 152 U. S., 133; Colon v. Lisk, 153 N. Y., 188.
    It does not appear that said amended statute is justified as a police regulation. This statute does not assume to be a remedy against fraudulent transfers of property, or occasion inquiry as to . whether the vendor or vendee were actuated by good or bad motives. Under its provisions the bona ñdes of the parties or their solvency is not regarded, the innocent and the wicked suffer • ■equally. A statute such as this may possibly be’ justified in point of morals as a police regulation, if it be' true that all sales of merchandise in bulk by retailers are probably or presumed fraudulent, and that the parties to such sales ordinarily intend to cheat their- creditors. ’In- this regard we know, however, of common knowledge, that only in a small percentage of such sales does actual fraud exist. It is as unnecessary, therefore, as it is unjust, to put the seal of suspicion and condemnation on transfers of property that are in their essentials not probably or necessarily fraudulent. No legislative enactment 'can impute a crime under the guise of police power to any person whilst pursuing the exercise of a constitutional right. People, ex rel., v. Warden, 157 N. Y., 116; State v. Julow, 129 Mo., 163; Commonwealth v. Perry, 155 Mass., 117; Godcharles v. Wigeman, 113 Pa. St., 431; State v. Goodwill, 33 W. Va., 179; Ramsey v. People, 142 Ill., 380; State v. Tie & Timber Co., 65 L. R. A., 588; Ritchie v. People, 155 Ill., 98; People, ex rel., v. Coler, 166 N. Y., 1; State v. Dalton, 48 L. R. A., 775; People, ex rel., v. Grout, 179 N. Y., 417.
    We beg to call the attention of the court, in addition to the above, to a class of cases which appear to involve the precise principles upon which our statute is based.
    In Block v. Schwartz, 76 Pac. Rep., 22, 65 L. R. A., 308, decided by the supreme court of Utah on March 24, 1904, it was held that a statute prohibiting, under penalty, a merchant from ■ disposing of his stock of goods in bulk, without notifying his creditors, was a violation of federal constitutional safeguards, and not justified by the police power. Wynehamer v. People, 13 N. Y., 378; Wright v. Hart, 182 N. Y., 330; State v. Loomis, 115 Mo., 307; Allgeyer v. Louisiana, 165 U. S., 578.
    In Neas v. Borches, 109 Tenn., 398, 71 S. W. Rep., 50, the dissenting opinion of Mr. Justice Wilkes is clearly more satisfactory than the bare conclusions announced by the majority of the court.
    Various cases may be cited in opposition to these authorities, but on an examination it will be found that they are either based on statutes different in their effect, else that the constitutional question was not raised, or that the constitutional provisions which were considered were different from those on which we rely, or that the cases were not well considered. Such cases are McDaniels v. Shoe Co., 30 Wash., 549, 60 L. R. A., 947; Squire & Co. v. Tellier, 69 N. E. Rep., 312; Hart v. Roney, 93 Md., 432; Fisher v. Herrmann, 95 N. W. Rep., 392.
   Shauck, J.

The courts below have concluded that the statute, upon which the plaintiff relied to relieve it from the burden of proving the fraud which it had alleged, is unconstitutional. On behalf of the defendant it is insisted that that judgment is fully sustained by our decision in Miller v. Crawford, 70 Ohio St., 214. Counsel' for the plaintiff in error call attention to manifest differences between this statute and its predecessor, which was denounced as unconstitutional in the case cited. The statute denounced in that case apparently gave no consideration either to the nature of legislative power or to the limitations which are placed upon its exercise. In that case it was pointed out that in view of the intricate provisions of the act sales in compliance with it would, in many cases, be entirely impracticable, and that the statute in effect would amount to a prohibition of such sales. The terms of the present statute go no farther than to create a presumption that a sale in bulk, without giving the prescribed notice, is fraudulent, only placing upon the parties to the transaction, the burden of which vendors and purchasers are relieved in all other cases of proving a sale free from fraud. The statute does not define the character of the presumption intended by the act, whether it shall be prima facie or conclusive. If the difference is material in the present inquiry, as counsel seem to regard it, we should, in deference to the familiar doctrine that if of two permissible interpretations one would render a statute unconstitutional and the other would not, the latter should be adopted, accept the statement of plaintiffs'’ counsel as correctly defining the character and scope of the presumption intended: “The provisions of Section 6343, Revised Statutes, that certain sales 'shall be presumed to be made with intent to hinder, delay or defraud creditors/ unless notice is filed as thereinafter provided, creates a rule of evidence. It renders admissible the fact that the vendor -has failed to file notice of a sale out of the ordinary course of business, as a fact from which the intent of the parties may be inferred, and places upon the defendant the burden of proceeding with evidence óf the actual intent after proof of the lack of notice has been introduced.” The question then is, whether the guarantees of the Constitution respecting the equal rights of all to the enjoyment and use of property includes or excludes the rules of evidence and the presumptions by whose application those rights are practically preserved and enforced. This question is quite apart from that so much discusse’d in the briefs and cases cited respecting the power of the general assembly to establish rules of evidence by statutes of general and equal operation. It would seem that the distinction in this respect upon which counsel for plaintiff insist is quite inconsistent with the nature and scope of these constitutional guaranties as they are set forth in Miller v. Crawford. Without repetition of anything that is there said, it is quite convenient to quote a pertinent statement of the nature of those guaranties from a writer whose views are received with general respect: “If the legislature should undertake to provide that persons following some specified, lawful trade or employment, should not have capacity to make contracts, or to receive conveyances or to build such houses as others were allowed to erect, or in any way to make such use of their property as was permissible to others, it can scarcely be doubted that the act would transcend the due/ bounds of legislative power, even though no express constitutional provision could be pointed out with which it would come in conflict.” Cooley Const. Limitations. Although counsel point out the suggested differences between the provisions of the two statutes, they do not inform us of any difference in the constitutional view between a provision that a sale without compliance with the statute should be fraudulent absolutely, and one which upon the same condition shall be prima facie evidence that the sale is fraudulent, thus devolving upon the parties in the limited case to which the statute applies, a burden for the protection of their property rights of which all others are relieved. The pertinent effect of the constitutional provisions referred to is to ordain equality of rights in property. In contemplation of this act, where the subject of the contract of sale is the limited property described by the terms of the act, the sale is to be presumed to be fraudulent, while in all other 'cases the sale is presumed to be unaffected by fraud. Counsel have not communicated to us any view upon which we could sustain the proposition that laws can be equal which accord to one, without proof, rights which they accord to others only upon proof.

Not placing ultimate reliance upon the suggested differences between the two statutes, counsel insist that there is a valid basis for discrimination to be found in the ease with which stocks of merchandise may be purchased upon credit and then sold and transferred to the prejudice of the original vendor. Careful attention to what has been said upon this point has failed to develop in our minds the perception of any difference in this respect between sales where the subject, upon one hand, is merchandise, and on the other, flocks, herds or machinery, or the capital stock of corporations, or any others of the large list of the subjects of property. The case in this respect does not differ from Miller v. Crawford, and it is not deemed necessary to add further to what was said in that case.

Finally, we are admonished that acts of the general assembly should not be adjudged unconstitutional upon doubtful considerations. Not since The State, ex rel. Knisely, v. Jones et al., 66 Ohio St., 453, has the admonition been urged upon our attention with so much eloquence and impressiveness. Since the beginning of constitutional government, according to the American understanding of that phrase, the courts háve so admonished themselves, and the admonition has become an established rule of interpretation. It was founded upon the observation that members of the lawmaking department of the government take the same oath as do those of the judicial department to heed the provisions of the constitution, and the further observation that they were mindful of their oath. The rule continues as expressive of becoming deference to a coordinate department of the government. But nothing would be more fatal to the efficient exercise of the judicial function in constitutional government than to invoke, for the purpose of raising doubts, a rule devised for solving them. In that respect it is quite like the familiar rule respecting reasonable doubts as a test of the probative effect of evidence in criminal cases. He has been an inattentive student of the history of the state who thinks that public or private injury has resulted from a too devoted adherence to the provisions of the organic law. It seems to us that this act very plainly from its nature, takes its place among the enactments which constitute the promoted legislation of the state not suggested by comprehensive views of the rights and interests of all the people, but furthered by those who desire to obtain advantages not accorded by the general law.

Judgment affirmed.

Spear, C. J., Davis, Price, Johnson and Donahue, JJ., concur.