Court Opinion

ID: 6739496
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:20:52.184425+00
Date Added: 2024-06-11T16:01:54.933467
License: Public Domain

Grace, J.
(dissenting). The facts of this case are quite folly set forth in the majority opinion, and it is needless here to restate them. The section of our statute here for construction is § 1224, Comp. Laws 1913, and it provides: “The sale, transfer, or assignment, in bulk, of any part or the whole of a stock of merchandise, or merchandise and fixtures pertaining to the conducting of said business, otherwise than in the ordinary course of trade and in the regular prosecution of the business of the seller, transferrer, or assignor, shall be void as against tbe creditor of the seller, transferrer, or assignor, unless the seller, transferrer, assignor and purchaser, transferee, and assignee shall, at least five days before the sale, make a full detailed inventory, showing the quality, and, so far as possible with exercise of reasonable diligence, the cost price to the seller, transferrer, and assignor of each article to be' included in the sale; and unless the purchaser, transferee, and assignee demand and receive from tbe seller, transferrer, and assignor a written list of names and addresses of the creditors of the seller, transferrer and assignor, with the amount of indebtedness due or owing each, and certified by the seller, transferee, and assignor, under oath, to be a full, *294accurate, aud complete list of his creditors, and of his indebtedness; and unless the purchaser, transferee, and assignee shall, at least five days before taking possession of such merchandise, or merchandise and fixtures, or paying therefor, notify personally or by registered mail every creditor whose name and address are stated in said list, or of which he has knowledge, of the proposed sale and of the price, terms, and conditions thereof.”
It is conceded that the purchaser of this stock of merchandise paid therefor full value, that he acted in good faith in every respect, and that there is no actual fraud. In view of these facts, it is clear that no creditor, excepting one who has attached the property, or who has obtained a lien thereon by garnishment, etc., and who has obtained judgment for his debt, is entitled to appropriate the property held by the innocent vendee, who has paid the seller the full consideration for it. McGreenery v. Murphy, 76 N. H. 338, 39 L.R.A.(N.S.) 374, 82 Atl. 720.
Again, we think it is correct to hold that the purchaser of a stock of goods in good faith, for full value, who became such without attempting to comply with the Bulk Sales Law, and who pays one of the creditors of the seller, would be liable only to the other creditors for their pro rata share of the contract price of the property sold, and that the purchaser would be entitled to share pro rata for the share he had thus paid over to any creditor. That is, Nelson having paid the claim of Harwell, Ozmun, Kirk, & Company, he is entitled, with the remaining creditors, to share pro rata in the distribution of the value of the whole stock of merchandise. In other words, he is entitled, as a matter of law, to be subrogated to the rights of Farwell, Ozmun, Kirk, & Company Fechheimer-Keifer Co. v. Burton, 128 Tenn. 682, 51 L.R.A.(N.S.) 343, 164 S. W. 1179. That case cites Adams v. Young, 200 Mass. 588, 86 N. E. 942.
In the latter ease the defendant, as here, had purchased a stock of goods in violation of the Bulk Sales Law. There, the seller and purchaser acted in good faith and with no actual intent to defraud creditors, and, as in this case, a large part of the consideration was paid over to a creditor. The creditor there, however, held two mortgages on the goods, and had taken possession of a part of the property, under the terms of the mortgage. Upon the payment of these claims, he discharged the *295first mortgage and assigned the second to the purchaser of the goods. The balance of the purchase price was used in paying other small debts which were owing by the seller.
It was held that the plaintiff (the trustee in bankruptcy of the seller) was entitled to no relief against the defendant (the purchaser), and the court there said:
“But one whose purchase of property has, for that reason, been avoided by the creditors of the seller, being himself free from any actual fraud, may stand in the place of creditors whose demands he has paid out of the property or in consideration of the transfer to himself. Citing, Loos v. Wilkinson, 113 N. Y. 485, 4 L.R.A. 353, 10 Am. St. Rep. 495, 21 N. E. 392; Robinson v. Stewart, 10 N. Y. 189; Pond v. Comstock, 20 Hun, 492; Butler v. White, 25 Minn. 432; Crowninshield v. Kittridge, 7 Met. 520. So, if he has paid off debts which constituted liens or encumbrances upon the property conveyed to him, he may, for his protection and reimbursement, take, by subrogation, the rights of the secured creditors whom he has thus paid. . . . The merely constructive fraud of a purchaser will not prevent' him from being protected in this manner, if he has not himself actively participated in the fraud.” .
We see no reason why that same principle is not applicable here. As a matter of equity, Nelson should be subrogated to the rights of Earwell, Ozmun, Ilirk, & Company, as they existed at the time of the sale. In other words, all the creditors of Zorn were entitled to was to have the value of the entire stock of merchandise applied to the discharge of their debts. Provided, further, they had attached or garnished the goods, and reduced their debts to judgment.
By the majority opinion, the creditors attaching and those’not attaching are not only allowed to resort to the value of the entire stock of merchandise, but also, in effect, to the sum of $4,947.84, which Nelson had paid Earwell, Ozmun, Kirk, & Company. In other words, there was that amount left to the remaining creditors for the satisfaction of their debts, more than if Earwell, Ozmun, Kirk, & Company had not been paid.
Now, it woukl seem, all the creditors, in any event, are entitled to, is that the value of the whole stock of goods be forthcoming to satisfy the claims of all creditors whose claims were in existence at the date of *296sale. In other words, that the law means there was no sale, and that matters must be placed in the same condition as they were before the sale.
In this view of the case, Nelson should be permitted to share pro rata with all the creditors, even if, as claimed by the majority opinion, all the creditors are entitled to share without any attachment proceedings, etc.