Case Name: NATIONAL CITY BANK v. HUEY & MARTIN DRUG CO. ET AL.
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1920-01-26
Citations: 113 S.C. 333
Docket Number: 10336
Parties: NATIONAL CITY BANK v. HUEY & MARTIN DRUG CO. ET AL.
Judges: Before Gary, J., Spring term, 1919.
Reporter: South Carolina Reports
Volume: 113
Pages: 333–345

Head Matter:
10336
NATIONAL CITY BANK v. HUEY & MARTIN DRUG CO. ET AL.
(102 S. E. 516.)
1. Appeal and Error — Ruling That Issues Were Triarle by Jury Harmless Where Norte Were Submitted. — Preliminary ruling that certain issues were triable by jury was harmless; no issue having been submitted to the jury
2. Fraudulent Conveyances — Sale in Bulk op Stock Without Attempt to Comply With Statutes Conclusively Fraudulent.— Under Bulk Sales Law, sale in bulk of a merchant’s stock without any attempt to comply with the law is unlawful, and voidable at the instance of a creditor of the seller injured thereby, without regard to intention of the parties thereto; it being only where there is an attempt to comply with the statute, and a failure in some particulars, that there is a rebuttable prima facie presumption of fraud.
On Petition foe Rehearing.
3. Feaudulent Conveyances — Amount of Recovery Where Goods and Stoee Fixtuees Webe Sold Togethee. — -It is unnecessary to decide whether the words “stock of merchandise,” in Bulk Sales Law, include the store fixtures, sold along with the merchandise, where both parties to the transaction have considered the price to be paid for both as a single fund applicable to payment of the claims of all the seller’s creditors and the greater part of it has been, so applied.
4. Feaudulent Conveyances — -Liability of Buyee in Bulk Not Limited to Purchase Price. — By the provisions of Bulk Sales Law, in case of a sale in violation thereof, liability to creditors of the seller is not limited to the agreed price; but the goods, if still in the buyer’s hands, are liable, and, if he has withdrawn them, he is liable for “the value” of the goods so received by him and thus withdrawn.
Before Gary, J., Spring term, 1919.
Affirmed.
Action 'by the National City Bank against the Huey & Martin Drug Company and the Calhoun Drug Company, based on indebtedness of the Huey & Martin Company to plaintiff and sale by that company to the Calhoun Company without compliance with the Bulk Sales Daw. Verdict for plaintiff for $689.12 was directed against both defendants, and from a judgment entered thereon the defendants appeal.
The sections of the Code of Daws of 1912, requested to be set forth in the report of the case by Mr. Chief Justice Gary, are as follows:
Sec. 2434. It shall be unlawful for any merchant or corporation engaged in the buying and selling of merchandise, while he or it is indebted to any person or corporation, to sell his or its entire stock-of merchandise in bulk, or to sell the major portion thereof, otherwise than in the ordinary course of trade, in the regular and usual prosecution of the seller’s business, and with the intention of ceasing to conduct said business, in the same manner and at the same place as he or it has heretofore conducted the same, without first making a full and complete inventory of the merchandise so proposed to be sold, in which inventory the values shall be extended at the ruling wholesale price thereof; and with out further making- a full, true and correct schedule of all persons or corporations to whom he or it is indebted, stating therein the postoffice address of each of said creditors, and the amount owing to each of them; to which inventory and schedule there shall be attached the oath of the seller that the same is true and correct; or if the seller shall assert that he or it is not indebted to any person or corporation, he or it shall make affidavit to that effect and deliver the same to the purchaser, with the inventory, as hereinafter provided. The seller shall deliver said inventory and schedule to the proposed purchaser, and shall retain exact copies thereof in his or its own possession; the seller and the purchaser shall each preserve such inventory, schedule and affidavit for the period of six months after such sale and purchase, and the same shall be open to the inspection of the creditors of the seller. Ten days before such sale shall be consummated, md before the purchaser take possession of the merchandise so proposed to be sold, the seller and proposed purchaser shall join in giving.written or printed notice of the proposed sale and purchase of such merchandise to each of the creditors named in such schedule; such notice may be delivered in person to such creditors, or transmitted to them by registered letter through the United States mail, by being deposited in the United States postoffice at the place where the seller has heretofore conducted business or nearest thereto, properly addressed to the respective creditors at the post-office address given in such schedule, with proper postage affixed; such notice shall state the aggregate value of the merchandise proposed to be sold as shown by such inventory, the consideration to be paid therefor, and the time and manner of making such payment. If said seller shall fail to make such inventory of such merchandise, or if such inventory shall fail to state the true value of said goods as above required, or if said seller shall fail to make such true schedule of creditors as hereinafter provided, and the pur-:haser shall have knowledge of that fact, or in event the seller shall assert that there are no debts against him or it, if the purchaser shall fail to require the affidavit above provided, or if the seller and purchaser shall fail to give each of said creditors named in said schedule the notice above required in the manner above provided, or if such notice shall not correctly state the amount of such merchandise proposed to be sold, and the consideration to be paid therefor, and the time and manner of making the same, then and in either of such events such sale shall prima facie be presumed to be fraudulent and void as against the creditors of such seller, and the merchandise in the hands of the purchaser, or any part thereof, if it shall be found in his or its hands, shall be liable to such creditors, and in event the same, or any part thereof, shall be withdrawn by said purchaser, then the purchaser himself or itself personally shall also be liable to said creditors of such seller to the extent of the value of the merchandise so received by him or it and thus withdrawn.
Sec. 2435. Whenever a notice, as provided in section 1488, is sent by registered mail, the creditor or person to whom the notice is mailed shall be presumed conclusively to have received the notice, and the time of the notice shall be dated from the time of the mailing and registration, or actual service of said notice.
Sec. 2436. Except as expressly provided in the preceding sections, nothing therein contained, nor any act thereunder, shall change or affect the present rules of evidence or the present presumption of law.
Mr. J. Harry Poster, for Huey & Martin Drug Co., appel-ant,
submits: That the case under the pleadings and issues should have gone to the jury: 91 S. C. 461; 1 Strob. 301 ; 28 S. C. 149; 8 S. C. 290; 10 E. R. A. 676; 85 S. C. 479; 106 S. C. 267; 89 S. C. 484; 93 S. C. 71. As to the meaning of prima facie: 8 R. Ed. 514; 27 Am. St Rep. 329; 17 Am. St. Rep. 248; McKelvie on Ev., p. 64
Mr. W. J. Cherry, for Calhoun Drug Co., appellant,
submits : The Bulk Sale Statutes of this State are ■unconstitutional: Constitution of South Carolina (1895), article I, secs. 5 and 17; and article V, and section 1 of article IV of the amendments of the Constitution of the United States; 182 N. Y. 330; 2 U. R. A. (N. S.) 338; 75 N. E. 404; 126 App. Div. 421; 110 N. Y. Supp. 585; 80 Ohio St. 207; 71 N. E. 631; 84 Ohio St. 328; 95 N. E. 900; D. R. A. 1916c, 1023; 110 N. E. 648; 235 Ill. 40; 20 L. R. A. (N. S.) 167; 6 U. R. A. 621, and notes; 115 Mo. 307; 21 Utah 387; 65 E. R. A. 308; 101 Am. St. Rep. 971; 36 Idaho 438, L. R. A. 1915e, 923. The Bulk Sales Law of this State is a criminal statute: 1 Bishop on Criminal Daw, sec. 300; 8 Enc. of Daw, pp. 287, 299. The South Carolina Statute cannot he sustained as a police regulation: 26 Idaho 438, U. R. A. 1915e, 923; 27. Utah 387; 65 U. R. A. 308; 101 Am. St. Rep. 971; 211 U. S. 489; 53 U. Ed. 295; 182 N. Y. 330; 2 U. R. A. (N. S.) 338; 75 N. E. 404; 70 Ohio St. 207; 71 N. E. 631; 217 U. S. 411; 54 L. Ed. 839. Prima facie means first appearance, and a prima facie presumption is always rebiUtable: 22 Enc. of Daw 1294; 99 Minn. 22; 108 N. W. 940; 93 Md. 432; 49 Atl. 661; (Okla.) 2 R R. A. 334; 118 Wis. 424 ; 95 N. W. 392; 26 Enc. of Daw 216. The Bulk Stales Statutes of this State provide no new remedies: 33 S. C..538; 66 S. C. 141; 69 S. C. 196-7; Code of Civil Procedure, ch. IV; (Okla.) 2 D. R. A. 334. The only remedy under the Bulk Sales Statutes is a general creditors’ bill: 4 S. C. 514; 53 S- C. 583. If they were set aside for fraud, actual or constructive, respondent would only be entitled to his pro rata share of the proceeds of the merchandise: (Tenn.) 51 D. R. A. (N. S.) 343; 200 Mass. 588; 86 N. E. 942; (Texas) 146 S. W. 239; Bump on Eraud, Conveyances, secs. 622, 631. _ The word “merchandise” as used in such statutes does not include “fixtures:” 26 Idaho 438, L. R. A. 1915e, 923; (Minn.) 104 N. W. 371; 37 Wash. 206; 79 Pac. 628.
Messrs. Dunlap & Dunlap, for respondent,
submit: Testimony by the maker of promissory notes that he got no value for the notes is incompetent as against an innocent purchaser for value before maturity3 and it was proper to strike out such testimony: 105 S. C., p. 100. Sections 2432, 2433 and 2436, vol. I, 1912, are constitutional: (N. C.) 81 S. E. 417; (West Virginia) 91 S. E., p. 386. The act is constitutional when it declares the violation of the act fraudulent and void: 102 Am. St. R., p. 322. The statute in question is a valid exercise of police power: 94 A. S. R. 889 (Washington) ; 97 A. S. R. 851 (Tennessee); 106 S. C. 362; 103 U. S. 344; -26 R. Ed. 565.
January 26, 1920.

Opinion:
The opinion of the Court was delivered by
Mr. Justice; HYDRrCIC.
I think the judgment is right and ought to be affirmed. There was no prejudicial error. If it be conceded that the issues were all equitable, and, therefore, triable by the Court, they were so tried. The preliminary ruling that certain issues were triable by jury was not prejudicial, because no issue was in fact submitted to the jury.
The statute starts out by denouncing as unlawful certain sales, without compliance with its provisions, which are in the main: (1) The making of a complete inventory; (2) a true schedule of the seller's creditors, or an affidavit of no indebtedness; and (3) the giving of joint notice by seller and purchaser to each creditor of the proposed sale. It then goes on to provide that, if the seller shall fail to make such inventory, or if the same shall fail to state the true value of the goods as required, or if the seller shall fail to make such true schedule of his creditors as required, and the purchaser shall have knowledge of that fact, or if the seller asserts that he owes no debts and the purchaser fails to require the affidavit of that fact, or if the joint notice is not given to each creditor, or if the same be incorrect as to the amount and consideration of the sale and the time and manner of payment therefor, "then and in either of such events, such sale shall prima facie be presumed to be fraudulent and void as against the creditors of such sellers," etc.
The intention of the legislature was that, if a sale within the terms of the statute be made without any attempt to comply with the provisions thereof, it should be held to be unlawful, and voidable at the instance of a creditor of the seller who may be injured thereby, without regard to the intention of the parties to the sale. But' if the parties attempt to comply with the provisions of the statutes, and fail in some particular or particulars, such failure shall not necessarily have the effect of making the sale void, but it shall only have the effect of raising a presumption that it is fraudulent. The difference lies in the failure to make any effort at all to comply with the provisions of the statute, and in making an effort which falls short of a legally sufficient compliance. In the first case, the sale is unlawful. In the second, it is only presumptively so — the presumption being 'slight or strong, according to the nature and extent of the failure and the circumstances of it. Bor example, notwithstanding the exercise of reasonable care and diligence, errors or omissions may occur in making the inventory, or the schedule of creditors, or in complying with other requirements of the statute. In such cases the act creates only a prima facie presumption of fraud which may be rebutted by showing the good faith of the parties to the sale and honest and diligent efforts to comply with the statute. No doubt the provision was intended to prevent fraudulent evasions of the statute, and to stimulate the parties to make an honest effort to comply substantially with its provisions.
But where, as in this case, the statute is utterly ignored and no attempt whatever is made to comply with its provi sions, to hold that only a prima facie presumption of fraud is raised, which may be-rebutted by proof of the good faith of the parties, would practically nullify the statute.
Judgment affirmed.
Messrs. Justices Watts, Fraser and Gage concur.