Court Opinion

ID: 4718959
Source: CourtListenerOpinion
Date Created: 2021-08-12 02:34:51.215285+00
Date Added: 2024-06-11T08:07:34.198179
License: Public Domain

Chadwick, C. J.
(dissenting) — Upon a rehearing En Banc a majority of the judges incline to our former opinion. I concurred in that opinion, but I am now convinced that the court fell into error. While there is nothing that I can say that will change the result, I feel it to be my duty to explain why I think we were wrong in the beginning,and why it is wrong to adhere to our opinion.
I am willing to subscribe to the trust fund doctrine, which this court has affirmed without material qualification, and vigorously, since Thompson v. Huron Lumber Co., 4 Wash. 600, 30 Pac. 741, 31 Pac. 25; but the trust fund theory is not substantive law ex propria *324vigore — it is a rule of equity arising, first, in the conscience of the chancellors and finally recognized generally as a rule binding on all who deal with corporate assets. The power of the legislature to limit, qualify or negative any rule of decision cannot be questioned. The legislature has functioned upon the precise subject-matter of this controversy. The sales in bulk law (Rem. Code, § 5296 et seq.) has, to the extent that it is applicable, modified the trust fund theory as applied to the sale of corporate assets, if those assets be a “stock of goods, wares or merchandise.” By that act, the right of an individual or a corporation to sell a stock of goods is recognized. The legislature must have had in mind the hardship that had come all too often to innocent buyers of stocks of goods, as our reports will show. That the innocent buyer might have protection and the sale and transfer of goods might go on as a favored relation under the law, as it has ever been, it is provided:
“It shall be the duty of every person who shall bargain for or purchase any stock of goods, wares or merchandise, in bulk, for cash or on credit, before paying to the vendor, or his agent, or representative, or delivering to the vendor, or his agent, any part of the purchase price thereof, or any promissory note or other evidence therefor, to demand of and receive from such vendor, or agent, or if the vendor or agent he a corporation, then from the president, vice-president, secretary, or managing agent of such corporation, a written statement, sworn to substantially as hereinafter provided, of the names and addresses of all the creditors of said vendor, to whom said vendor may be indebted, together with the amount of the indebtedness due and owing, and to become due and owing, by said vendor to each of said creditors; and it shall be the duty of said vendor, or agent, to furnish such statement, which shall be verified by an oath to the following effect: ’ ’ Rem. Code, § 5296.
*325Now, if the rule of the majority obtains, the words ‘ ‘ or if the vendor or agent be a corporation, then from the president, vice-president, secretary, treasurer or managing agent of such corporation” are without meaning and lumber the statute without having a place therein; for it would follow that, whatever the good faith of the purchaser of a stock of goods may be, however careful he may have been to protect himself under the law, however literally he may have followed the terms of the statute, the affidavit which the statute says may be made by the president, vice president, secretary, treasurer or managing agent of such corporation, if the vendor be a corporation, will not protect him if the corporation has other debts than those scheduled by the agent of the corporation.
"What means the language, “It shall be the duty” of one who buys a stock of goods to do certain things? Unless we abandon all rules of construction it means that, if the legal duty imposed as a condition precedent to a sale in bulk is performed, title will pass to the innocent purchaser. The innocence and good faith of respondent are not impeached. She is drawn into a pit of our own maldng, after she has done all that the written law of this state says that she should have done.
If it were not for the trust fund theory, which does not obtain in all of the states, but which we confess to be the rule here, a sale by an insolvent corporation would be good if made to an innocent purchaser without notice. It is only because the courts have said the assets of a corporation are a trust fund for all creditors that it is so, not because of any statute; therefore, it would seem to follow that when the legislature, having notice of our holdings, passes a law which says that a purchaser who complies with its terms, whether the *326sale be made by a corporation or by an individual, is good, I cannot understand why it should not be so.
The act is drawn for the announced purpose of protecting a vendee, and it provides the manner of that protection. It is drawn with a like intent to compel a truthful deliverance on the part of the seller. It fixes a penalty for the false swearer. It makes him guilty of perjury and provides for imprisonment in the penitentiary or a fine not exceeding the sum of one thous- and dollars.
In the instant case, the respondent was a heavy creditor of the corporation. To save herself she agreed to buy the stock and to pay the debts which had been listed for her benefit. She was willing to pay that price for the stock, and we are not in a position to assume that she would have paid more. She took every precaution that the law demanded, and is now compelled to pay that which she would not have paid if she had known of other debts.
It may be said that, because respondent was a creditor, she cannot claim the protection of the statute. My answer to this is that the statute makes no such exceptions. It applies to all who act in good faith.
It seems to me that the statute settles the case; but if the statute permitted of any doubt or required any construction, all question is foreclosed. This case falls squarely upon the foundation, and fits completely the superstructure, of Friend v. Rosenfeld-Rovig Co., 87 Wash. 329, 151 Pac. 776.
“As we understand the argument of the appellant, it is not claimed that there was any actual fraud in the transfer from Leo Lynch to the respondent. But it is argued that the transfer was a fraud in law because one of the creditors was omitted from the affidavit. Upon the trial, Leo Lynch testified that he had previously informed the respondent Rosenfeld-Rovig Com*327pany that he owed his sister some money, but at the time he made the affidavit stating the names of his creditors, he made no snch statement. The persons present at the time the affidavit was made testified that he made no statement to the effect that he owed his sister anything. The trial court found that, at the time of the transfer, the respondent had no notice or knowledge that there was any debt owing by Leo Lynch to his sister; that the first notice the respondents had of this fact was after they had taken possession of the stock of goods and were negotiating; for the sale thereof, when Miss Lynch stated that she was a creditor of her brother. She permitted the property to be sold and the debts to be paid before any action was taken by her to avoid the sale. ’ ’
It may be said of that case that the vendee had no notice that the party was insolvent, and it may be contended that the respondent knew that her vendor was insolvent, but that is not controlling, for the sales in bulk law was enacted for the protection of those who buy of insolvent vendors, as well as solvent vendors. If all purchases were made from solvent firms there would be no reason for the enactment. But knowledge of insolvency would not deny respondent her legal right, for another reason. She was buying under a contract which bound her to pay all the disclosed liabilities of the vendor.
I have extended my views merely for the purpose of writing it into the books as one of the last acts of my judicial career that I was wrong. I believe that respondent has been undone of her rights, and, while it affords poor consolation, I can do no more in the way of correcting my error than to confess my fault.