Court Opinion

ID: 7948012
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:22:57.949269+00
Date Added: 2024-06-11T16:34:00.934382
License: Public Domain

Ostrander, J.
(dissenting). The opinion of Mr. Justice McAlvay covers considerable ground, and is prepared so as to rule several distinct points. He first rules that, because no demurrer was interposed, defendant (appellant) was precluded at the hearing below, and is precluded in this court, from raising the question of the jurisdiction of a court of equity in the premises. Secondly. He rules that the remedy in the instant case, by which I suppose he means the remedy sought by the bill, is given by the statute, meaning, of course, the sales in bulk act—
“By which any and all creditors may, as soon as knowledge comes to them that the requirements of the statute have not been followed, proceed immediately, not to set aside the sale, but to impound the property or its proceeds. * * * The judgment creditor rule does not apply.”
Thirdly. He rules that the bill was not filed—
“Upon the theory of a judgment creditor’s bill, or a bill in aid of execution, but upon the theory that the statute made the transfer to defendant Baker absolutely void as to creditors; that creditors of Mc-Gahey are entitled to reach this property and apply it upon their claims; that for such purpose it is necessary to have a receiver, an injunction, and an accounting.”
Fourthly. He rules that the sales in bulk act gives *235jurisdiction to equity to grant relief to creditors, but that the jurisdiction so given is not exclusive. All of these rulings are of such general importance as to justify a somewhat critical study of their soundness.
If the statute referred to does not give this complainant a remedy, if he is required to resort to general equity jurisdiction and equity rules to maintain his right to file the bill, he must be a judgment creditor. Nothing is better settled than that a simple contract creditor whose claim is not reduced to judgment, and who has no express lien upon his debtor’s property, has no standing in a court of equity to obtain seizure of the debtor’s property and its application to his debt. We have, further, a statute which recognizes the general rule (1 Comp. Laws, §§ 436, 437) in defining the jurisdiction of chancery courts. Certain facts must appear to sustain a judgment creditor’s bill, and not appearing, the court cannot proceed. Vanderpool v. Notley, 71 Mich. 422 (39 N. W. 574); Grenell v. Ferry, 110 Mich. 262 (68 N. W. 144). Jurisdiction in such cases is not acquired because a defendant fails to question it. None of the cases cited in the opinion sustains a contrary doctrine. In Hollins v. Iron Co., 150 U. S. 371 (14 Sup. Ct. 127), it appearing that such a suit had been dismissed upon the merits, it was held that it should have been dismissed for want of jurisdiction. Want of jurisdiction of the subject-matter may be urged at any time.
He is right in finding that the bill in this cause is not, and was not intended to be, a judgment creditor’s bill. The solicitor for complainant leaves us in no doubt upon the subject. He says, in the brief:
“Section 3 [referring to .the sales in bulk law] carves out a new remedy, not before known to the law.”
And also:
“One cannot read this statute without at once con-*236eluding that it was the intention of the legislature to give the general creditor one new, complete remedy by one action and not compel him to pursue his remedy through several courts.”
In this connection it may be observed that the decree appealed from is nothing more or less than a money judgment against appellant Baker primarily and against defendant Schmidt secondarily. There is no decree against the goods and no provision in the decree for selling them to satisfy complainant’s demand.
The second and the fourth rulings which I have referred to are the important ones. They agree only in part with complainant’s theory.
The statute makes a sale of goods in bulk void as to creditors of the seller, unless accompanied by certain specified formalities. What, in such cases, is the remedy of the creditor of the seller? If the statute gives a remedy, it is clearly a remedy in equity. If it was the legislative intention that the merchandise transferred in violation of the statute, or the value thereof, should be a fund for payment of the debts of the seller, the remedy is in equity.
In Musselman Grocer Co. v. Kidd, Dater & Price Co., 151 Mich. 478 (115 N. W. 409), it was the contention of appellants that:
“The legislature meant that on the application of any creditor, and after hearing, the court would make an order declaring the purchaser to hold the goods for the benefit of all the creditors of the seller pro rata.”
The contention was overruled; the justices sitting in that case holding that:
“It would destroy the intent of the legislature in passing the act to require the intervention of a court of equity.”
The action was garnishment, and a personal judg*237ment against the purchaser of the goods for the amount of the seller’s debt to the plaintiff was fiffinnsd
In Bixler v. Fry, 157 Mich. 314 (122 N. W. 119), which was a suit in equity, the bill of complaint charged that one R. S. Drew was a retail merchant who became indebted to the complainant for merchandise and also became indebted to others; that Drew sold his stock of goods to defendant Fry, in bulk, without complying with the statute, whereby said Fry “became and is a receiver and liable to said creditors for all goods * * * that have come into his possession by virtue of the said sale.” It was charged that Drew was insolvent. In behalf of complainant and all other creditors of Drew, it was prayed that Fry appear and answer, that he be decreed to hold all of said goods, etc., as receiver and in trust for creditors of Drew, that he come to an accounting and turn over to the court sufficient of the goods to pay Drew’s debts, the property to be disposed* of and proceeds distributed under the order and direction of the court. No personal judgment against Fry was asked for; but the attempt was to follow the goods as a fund for payment of creditors. The bill was filed according to the theory that the statute, by its terms, imported, if it did not create, an equitable remedy. The court below overruled a demurrer to the bill, and in an opinion used the language following:
“Section 3 of Act No. 223 of the Public Acts of 1905, Michigan, reads:
“ ‘Any purchaser, transferee, or assignee shall upon application of any of the creditors of the seller, transferror or assignor, become a receiver and be held accountable,’ etc.
“The purchaser, transferee, or assignee does not become a receiver and accountable until appointed as such, and he cannot be so appointed, except by a court of chancery. To delay the appointment until the *238creditors become judgment creditors would render the statute practically of no benefit in many cases. I do not care to be responsible for such a construction, but rather prefer to give the construction that will secure the results evidently intended by the legislature. Whether Drew ought not to have been made a party, is a question I do not now pass upon, as later he may be added, if deemed necessary. This would seem true, unless made a party, no claim can be made out against Drew in this proceeding. Judgment would have to first be obtained in an action at law against him before the funds in the hands of the receiver could be applied to the liquidation of complainant’s claim. The necessity of the case demands that the purchaser be placed in a position of responsibility at the earliest possible moment. Largely for this reason, I overrule the demurrer, granting the usual time to plead.”
From the order overruling the demurrer, the defendant appealed. Two of the eight justices who heard the argument were of opinion that the bill was demurrable because Drew was not made a party defendant, and two favored an affirmance of the decree upon the ground that the statute “establishes the right of a court of equity to interfere in such a case.” Four of the justices were of opinion that prior decisions of the court disposed of the contention that the statute itself provided for or indicated a proceeding in rem, or for the exclusive jurisdiction of courts of equity, and held that a court of equity would assume jurisdiction only when such jurisdiction was warranted by general rules.
Having held that to require the intervention of a court of equity in such cases would destroy the intention of the legislature, having held that, the purchaser of the stock of goods is liable in garnishment, having held (Porter v. Goudzwaard, 162 Mich. 158 [127 N. W. 295]), that a creditor of the seller of a stock of goods in bulk may attach the goods, it would seem to be settled that the statute we are considering does *239not give a remedy. It would seem that the court had heretofore been of opinion that creditors of the seller have an adequate remedy at law. And the opinions referred to cannot be harmonized with the theory that the goods sold constitute a trust fund for creditors.
If the effect of these decisions is not that the purchaser of the goods is liable to the creditors of the seller to the extent of the value of the goods, and that such creditors have such, and only such, remedies as, independent of the particular statute, are afforded by law, then I have misunderstood them. If my Brother McAlvay’s conclusions are sustained, we come to this proposition, viz.: Any creditor of a seller of a stock of goods in bulk may, at Ms election, pursue the buyer at law, or pursue the goods or their proceeds in equity, without having secured a judgment at law; equitable jurisdiction being grounded upon the statute itself.
How, in practice, can such a proposition be sustained? If the first creditor who acts files a bill in equity, are other creditors thereby deprived of the right to pursue the purchaser in actions at law? If, in a particular case, some creditor institutes garnishment proceedings or attachment and garnishment proceedings, and some creditor later files a bill in equity, will the equity court administer so much of the fund as shall remain after the plaintiff in the law action is satisfied, or will it dislodge the plaintiff in the law case and oblige all creditors to accept an equitable division of the property or of its proceeds? These are questions which at once suggest themselves.
The statute either leaves creditors to such remedies as existed when the law was passed or else it provided a new remedy. If it provided a new remedy, it did so in the words:
“Any purchaser * * * who shall not conform to the provisions of this act shall, upon application of *240any of the creditors of the seller, * * * become a receiver and be held accountable to such creditors for all the goods, wares, merchandise, and fixtures that have come into his possession by virtue of such sale.”
If it provided a new remedy, it is necessarily an exclusive remedy. The unlawful sale is void. The goods, as to his creditors, belong to the vendor. The vendee is a receiver “accountable to such creditors for all the goods * * * that have come into his possession by virtue of such sale.”
In my opinion, it would have been logical if in the initial case presented this court had agreed with the contention of the appellant and had held that the legislative intention, in case the law was disobeyed, was to make the buyer a trustee for creditors of the seller, responsible to all creditors alike for the value of the goods. Such a holding and such a construction of the act would affirm the idea of a new and complete remedy under the statute and preclude the idea that the swift creditor may recoup himself, even to the extent of the entire value of the goods sold, in garnishment or other proceedings at law. But the court rejected this construction of the act and in so doing, I repeat, necessarily decided that no new remedy was given by the statute. Independent of statute, a simple contract creditor has no remedy in equity.
If the construction then placed upon the act was wrong, it can be remedied by overruling the decision and those which followed it. I do not favor such a course, believing the remedy at law to be fairly adequate.
One other proposition remains to be considered, and that is whether the bill can be sustained as a judgment creditor’s bill, upon the ground that it was impossible by reason of the debtor’s absence to obtain a judgment. It was filed upon no such theory, but according to a theory which I have stated. Moreover, *241there is not here present as there was in Earle v. Kent Circuit Judge, 92 Mich. 285 (2 N. W. 615), the fact that the demand could not be satisfied by an action at law. Plaintiff might have proceeded by attachment and garnishment.
The decree should be reversed, and the bill dismissed, with costs of both courts to appellant.