Case Name: United Sales Promotion Co. et al. v. Anderson et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1919-06-10
Citations: 100 Ohio St. 58
Docket Number: No. 15931
Parties: United Sales Promotion Co. et al. v. Anderson et al.
Judges: Jones, Johnson and Robinson, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 100
Pages: 58–65

Head Matter:
United Sales Promotion Co. et al. v. Anderson et al.
Bulk sales law — Limitation of actions — Runs against creditors not parties, when — Creditors may intervene by cross-petition, when — Section 11102 et seq., General Code.
1. Where one or more creditors commence a proceeding under favor of Section 11103-1, General Code, challenging the validity of a sale in gross, such action does not stop the running of the statute as to other creditors not parties thereto.
2. Where such an action has been commenced in due time by one or more creditors of the seller, other creditors may intervene by cross-petition at any time before the expiration of ninety days from the date of purchase.
(No. 15931
Decided June 10, 1919.)
Error to the Court of Appeals of Mahoning county.
In September, 1916, Wayne Anderson sold his entire stock and fixtures pertaining to the drug business, which up to that time had been conducted by him in the city of Youngstown, Mahoning county, Ohio, to Walter Zimmerman, in bulk, and not in the ordinary course of trade or in the regular and usual prosecution ,of the business.
Walter Zimmerman requested of and received from Wayne Anderson a statement under oath containing a list of creditors of Wayne Anderson, with the names and addresses of the same, and the amount of the indebtedness to each. This list included Lytle & Wentz, one hundred and fifty-six dollars.
Zimmerman did not notify personally, or by registered mail, the creditors whose names and addresses appeared in this list of creditors furnished under oath by Wayne Anderson, five days before taking possession of such merchandise and fixtures; but certified checks were sent to all out-of-town creditors of whom the purchaser had knowledge.
' On the 15th day of November, 1916, Lytle & Wentz commenced an action against Wayne Anderson and Walter Zimmerman, averring that Wayne Anderson was indebted to them in the sum of four hundred and fifteen dollars and sixty-one cents at the time of the sale in bulk, and asking that Zimmerman be declared trustee for the benefit of all of the creditors of Wayne Anderson under the provisions of Sections 11102, 11103 and 11103-1 of the General Code.
In June, 1917, The United Sales Promotion Company filed a cross-petition setting up a claim of fifty-four dollars against Wayne Anderson, and asking that Walter Zimmerman be declared a trustee for. its benefit.
On the same day The American Druggists Syndicate also filed its cross-petition, averring that Wayne Anderson was indebted to it in the sum of one hundred and eighty-five dollars and ninety-one cents, and praying for the same relief.
The common pleas court entered judgment in accordance with the prayer of the petition and cross-petitions.
On appeal, the court of appeals declared that Zimmerman held the property purchased from Wayne Anderson as trustee for Lytle & Wentz only, and dismissed the cross-petitions.
This proceeding in error is prosecuted in this court by the plaintiffs in error to reverse the judgment of the court of appeals dismissing their cross-petitions in the suit of Lytle & Wentz against Anderson and others.
Messrs. McKain & Ohl, for plaintiffs in error.
Mr. W. W. Zimmerman; Mr. J. H. C. Lyon and Mr. H. L. McCarthy, for defendants in error.

Opinion:
Donahue, J.
The act of April 18, 1913 (103 O. L., 462; Sections 11102, 11103 and 11103-1, General Code), is a separate and independent act of the general assembly of Ohio relating to the transfer of a stock of merchandise and fixtures other than in the usual course of trade. It covers the whole subject-matter mentioned in its title, and provides a remedy. It has no connection whatever with Section 11104, General- Code, further than that the sections of this act and Section 11104 are intended for the protection of creditors; but Section 11104, General Code, relates to entirely different .transactions, conditions, and circumstances, and likewise provides a remedy for any violation of its provisions.
Section 11102, General Code,- is a limitation upon the common-law and constitutional right of contract, and therefore must be strictly construed; A creditor claiming the protection of this section and seeking to avail himself of the remedy provided by Section 11103-1 must bring himself fairly within the provisions of both sections. •
Section 11103-1 expressly limits the time in which a creditor of the seller may challenge the validity of the sale, transfer, or assignment in bulk of any part or the whole of a stock of merchandise and the fixtures pertaining to the conduct of the business, otherwise than in the ordinary course-of trade and in the regular and usual prosecution of the business of the seller. This limitation of ninety days in which to commence proceedings is in no wise unreasonable, at least so far as the creditor is concerned, for the subsequent creditors of the purchaser are entitled to fair consideration.
The remedy is not only adequate, but severe. It deprives the purchaser of his title to the property purchased and constitutes him trustee for the creditors of the seller. It is therefore only reasonable that the creditors should be required to act promptly, so that the public generally may safely enter into trade relations with the purchaser within a reasonable time after the purchase.
The case of Muller v. Hubschman, 84 N. J. Eq., 30, presented a very similar question. That case involved the construction of a statute limiting the right of action to ninety days from the date of the transaction complained of, and in reference to this the court said, at page 32: "When the legislature saw fit to give this new and drastic remedy — a remedy which confounds the innocent and the guilty because of the difficulty of discriminating between them — it did not think it wise to allow it to be applied, except for that limited period."
Lytle & Wentz commenced this action within ninety days from the date of such purchase. Section 11103-1 provides in express terms that where any of the creditors make such application within ninety days, the purchaser will become a trustee and be held accountable to such creditors.
The term "such creditors" undoubtedly refers to the creditors who make application within ninety days.
It is insisted, however, where one of the creditors of the seller begins a proper proceeding within the time limited by the statute, that other creditors may intervene by cross-petition after their cause of action has been barred by this statute of limitation.
This identical question was involved in the case of Patterson v. Peaslee-Gaulbert Co. et al., 174 Ky., 47. The statute of that state relating to the sale of a stock of merchandise in bulk, or otherwise than in the ordinary and usual course of trade, contains a similar provision as to the time in which proceedings may be commenced by creditors of the seller. In that case the validity of a sale made in April, 1914, was challenged by a petition filed by a creditor on May 20, 1914. After the expiration of the ninety days, forty-two other creditors of the seller intervened by cross-petition. The court held that the limitation of ninety days for the bringing of an action against the purchaser of a stock of goods in bulk as provided in Section 2651-a, Kentucky Statutes, is mandatory, and creditors cannot avoid this provision by filing an intervening petition after the expiration of the ninety days.
The same conclusion was reached by the supreme court of California in the case of Mars v. McCabe, 14 Cal., 127. That was a suit to enforce a mechanic's lien. The supreme court of California very properly held that a suit to enforce a particular lien under the mechanics' lien law is a proceeding to enforce all the liens against the property, and that other lienholders have the right to intervene at any time before their causes of action are barred by the statute of limitation. But the court expressly declared that if the interveners had failed to connect themselves with the proceedings until after their liens had expired by lapse of time, the pendency of the original suit could avail them nothing as against the limitation provided by the statute.
The time in which proceedings may be commenced by creditors of the seller under the provisions of the bulk sales law of this state is expressly limited to ninety days. This is a special statute of limitation, yet it is subject to the same construction that applies to a general statute of like character.
It is undoubtedly the settled law of Ohio that a cross-petition setting up a cause of action barred by the statute of limitation is just as vulnerable to a demurrer, or to the defense of the bar of the statute, as if it were a petition filed in an original action.
The fact that the plaintiff in this case brought an action within ninety days from the date of the purchase, in which action other creditors of the seller had a right to intervene, cannot prevent the statute of limitation running as to those who failed to intervene by cross-petition within the time limited. In other words, a cross-petition must aver facts sufficient to entitle the cross-petitioner to relief in an independent suit.
If a cause of action is barred by the statute of limitation, necessarily the courts are as powerless to grant relief upon cross-petition as they would be upon an original petition asking a recovery upon the same cause of action.
Section 11104 contains no provision limiting the time in which action shall be commenced under favor of that section, but it does provide that when such action is commenced it will inure to the benefit of all the creditors of the seller.
If the general assembly had intended that an action brought under the provisions of Section 11103-1, by one or more of the creditors of the seller, would inure to the benefit of all his creditors, it would undoubtedly have said so, instead of providing in express terms that the purchaser should become the trustee for such creditors as challenge the validity of the sale within ninety days from the date thereof. This is made more obvious by the fact that before the passage of the act of April 18, 1913 (103 O. L., 462), Section 11106, General Code, provided a remedy for any failure to comply with the provisions of Sections 11102 and 11103; and an action brought under the provisions of Section 11106, by the express terms of that section, would inure to the benefit of all creditors. This section contained no limitation of time within which the action could be brought. But when Section 11102 and Section 11103 were amended (103 O. L., 462), Section 11103 was supplemented by Section 11103-1, which .expressly provides a remedy for failure to comply with the provisions of Section 11102, and limits the time of the commencement of the action to ninety days. Section 11106, General Code, now has no application to these sections.
In view of the broader provisions of Sections 11104 and 11106, General Code, it must have been the intent of the lawmaking power when it passed the act of 1913 to limit relief under that act. to creditors that commenced an action, or intervened in an action commenced by other creditors, within the time named in Section 11103-1. Otherwise, the broader provisions of Section 11106, General Code, would obtain, and the enactment of Section 11103-1 would be purposeléss.
Judgment affirmed.
Jones, Johnson and Robinson, JJ., concur.