Every evening, Wilmington daily commercial., 1921-10-31
CHANCELLOR RULES
ON BULK SALES ACT
Gives Decision in Suit of Keedy,
Receiver, vs.. Sterling Elec-
trio Appliance Co.

Receiver, VS.. Sterling Elec-
trio Appliance Co.
Chancellor Josiah o. wolcott, i'm the
Court Of Chanccry, today. rendered
an opinion in the case of Charles G.
keedy. receiver of the Sterling Elec-
trio Co, against the Sterling Electric
Appliance Co.
The case had been heard by the
chancellor on bill, an answer and
the testimony of witnesses. The fact,
concerning which there was little
dispute. were that the electric COM
pany was organized 10 do business In
electric washing machines and cleo
trio fixtures OF various kinds. In
November, 1920, the electric company
was In an insolvent condition, with
assets OF about S2i 900 and liabilities
exceeding $4,000. On the advice OF
one of the principal creditors the Of
ficers of the electric company organiz-
ed new corporation, called the Sterl-
Ing Electric Appliance Co, and they
transferred certain assets, valued at
1895. 10 the. appliance company and
also certain lease. contracts showing
sales OF electric washing machines
whose face value was about $4,000 and
4, return received 153 shares Of the
stock OF the appliance company. the
last named corporation agreeing 10
assume the electric company's liabli-
ties in connection with the leases. y
short time after the organization o:
the appliance company its officers is
sued TO themselves 240 shares Of stock,
par value $4,000, giving tC the COM
pany their individual notes therefor.
No money was ever paid on account
cf these notes. but the officers credited
weekly allotments from the their
salaries to the amount OF SOC.
This was the first time that the so
called Bulk Sales act came before the
court for construction. The original
act. passed i'm 1908, provided that II
the sale OF any part of stock OF mer-
chandlse were made other than in the
course Of ordinary business or the en-
tire stock was sold in bulk IL would
be presumed so be fraud and void as
against the seller unless written in
ventory of the cost price was given
and a notice mailed to each of the
| Issuer's creditors OF the proposed sale
THE cost price and the price to be paid
I for said merchandise. BY an amend
ment passed in 1917 the Delaware
1 Legislature provided penalty fol
treach OF the act.
Many states have acts OF this char
aCter. some declaring such a sale is
| fraudulent and void and not presumed
20 be. Courts I'm other States hav,
held that the words presumed TO be-
make the presumption rebuttable
But al 81 these laws contain another
clause. providing that nothing in the
acts shall be construed TO change ol
alter rules Of evidence.
The purpose OF the Delaware act as
tho court construed IL. was 10 max,
Il impossible for those engaged in
merchandising 10 circuit their creditors
BY turning their goods into cash by
sales made in bulk out OF the ordinary
course OF business Chancellor VOL.
colt also held the purpose OF the sc'
was not 90 interfere with existinE
rules Of evidence and the burden o
proof in case Of fraud. but 20 lay dowr
regulations which must be compiled
with IN all sales as are contemplated
by the act st the peril OF having th'
same overturned by the objectins
creditors. Any other construction
would render the act valueless, tn,
chancellor said.
Referring TO the paragraph whic.
subjects the purchaser TO n fine. th'
court asked what is the Significance
of this proposition Is II not an in.
dication the Legislature intended I,
lay down positive rules and regulation
which IN all cases must be observed?
In view OF the foregoing. il is no
necessary TO discuss the facts in tn
ught Of the other contention urge,
by the complainant. namely. tha. a
a natter Of law, regardless Of tn
Bulk Sales act. the transfer TO -
applianCe company Is fraudulent an
void As against the creditors OF IN
electric company" the Chancellor sait
This much may say. however.
the case rested on this contentio
alone I would be construed 10 declar
I ii void.
The Chancellor called attention {
the fact that I53 chares Of stoc
turned over 10 the electric coT1pan
/ bv the new COTi0anv in exchange q
assets wsre az the time bought by IN
stock % the appliance company. bu
when the officers issued TO themscive
, go shares OF stock without iacreasin
the assets o. the company. the electri
, lcompany's share IN the appliance CON
1 pany available 10 its creditors wa
/ reduced bye mo q Than cue half
This transaction cannot stand
a court of equity" the chancell'
continued. ~It matters not how inn'
cent the officers may have been. u
effect % their conduct was 10 hind'
. and delay and. as matter OF law,
defraud the creditors Of the elecu
company. The sale and transfer wei
. fraudulent and void. and the proper
I and assets so sold and transferred a.
/. the property and estate Of the electr
/. company. and as such belong 10 u
receiver Of that company for the ben
J., az % the creditors and stockholdeT
and the defendant must deliver u
!, same 20 the complainant"