Court Opinion

ID: 6429158
Source: CourtListenerOpinion
Date Created: 2022-06-25 12:06:38.084172+00
Date Added: 2024-06-11T15:51:30.627469
License: Public Domain

Braley, J.
The plaintiff’s title to the chattels alleged to have been converted is derived under a sale from a corporation described as the Favorite Biscuit Company. By way of defence this sale is alleged to have been made by the vendor either in violation of the St. 1903, c. 415, or for the purpose of defrauding its creditors, and hence to be voidable by them at common law.
In Squire v. Tellier, 185 Mass. 18, although this statute was held to be constitutional, the scope of its application to mercantile transactions similar to those found in this case was neither involved nor determined.
The company was engaged in making biscuits and crackers, which upon being packed in boxes or barrels were sold only at wholesale. Presumably its business was managed in the ordinary way, fo.r although it is not stated what portion of the company’s output was taken daily by customers, or how much remained *601unsold, yet from tlie nature of the product such an enterprise to be conducted successfully required frequent sales, for if not used before they became stale the biscuits and crackers would become unsalable and worthless. It may be conceded that bread made and put up for the market in this form is merchandise within the meaning of the act, and may comprise the whole or the principal part of a merchant’s stock in trade, but the sale prohibited without notice to the vendor’s creditors by St. 1903, c. 415, is a disposal of the stock in bulk, or as a whole, leaving them unpaid. Unless the transaction is outside of the ordinary course adopted by the trader for the disposal of the commodity in which he deals, it is not made unlawful. Squire v. Tellier, ubi supra.
Where a going mercantile business is so conducted that to be profitable large quantities of goods must be sold to different customers, even to the extent of exhausting the entire stock which may be on hand at any stated time, such a sale is not voidable although all the stock in the seller’s possession at the time may be delivered to a single buyer.
The statutory test is whether the sale was made in the usual way in which a merchant owing debts conducts his business, or whether he takes an unusual method of disposing of his property in order to get the money for his own use, leaving his creditors unpaid. This inquiry is essentially an issue of fact depending upon the nature of the seller’s business, his ordinary method of making sales, and his indebtedness. A sale of his entire stock by one trader might not be uncommon, while such a sale if made by another would be extraordinary and within the statute.
The written executory contract between the plaintiff and the company by which it sold to him a quantity of its product already manufactured, and the entire pi-oduct of its bakery for a period of at least three months following, must be read in connection with the commercial system under which the company necessarily transacted its business, as the parties incorporated this condition of things into their contract. Knight v. New England Worsted Co. 2 Cush. 271, 283.
If the company lawfully could have sold its merchandise as manufactured at wholesale to more than one customer without violating the statute, this agreement to take and pay for its *602entire product does not become voidable at tbe election of existing creditors because by reason of its provisions such sales are made continuously to a single purchaser.
In substance the instructions to the jury defined the scope of this part of the statute in accordance with what we have said, and were sufficiently favorable to the defendant.
Under these instructions the jury having found specially that the property was sold and delivered in the regular and ordinary course of the company’s business, the plaintiff’s title became unimpeachable, while if they had found otherwise it would have been open to attack as being fraudulent and void by force of the statute.
This special finding goes far to dispose of the defendant’s further contention that the agreement was fraudulent as against creditors under the provisions of St. 13 Eliz. c. 5.
The conduct of a vendor or grantor when a conspiracy to defraud is charged becomes material in proof of a fraudulent purpose. A sudden sale of his entire stock in trade by a retail merchant, who at the time is insolvent or is in contemplation of insolvency, by which he realizes the value of his goods for his own gain, is strongly presumptive of a deliberate intention to cheat his creditors.
But where the sale is shown to have been effected according to the usual course of the debtor’s affairs, that is evidence tending to show its validity. Killam v. Peirce, 153 Mass. 502. Leighton v. Morrill, 159 Mass. 271.
It is not therefore surprising that, in response to further instructions, accompanied by a question to them after they had returned into court, and before the general verdict was recorded, the jury stated that the allegation in the defendant’s answer of a conspiracy between the plaintiff and the company to defraud its creditors was not proved.
Under the second and third questions * the jury found that the *603sales and deliveries of the goods were not of the kind prohibited by the statute, and as the plaintiff further was found to be a purchaser for value and in good faith from the vendor, who lawfully could sell, there being no violation of the statute and no fraud at common law, no creditors, whatever their number, had any remedy, and the eleventh instruction to which the defendant excepted, though erroneous in law, becomes immaterial. Gordon v. Clapp, 113 Mass. 335. Carroll v. Hayward, 124 Mass. 120.
The argument now advanced that the contract was consummated with the intent to defraud future creditors is not open under the answer, but if it was, there is no evidence upon which such a defence could be founded within the general rule of Winchester v. Charter, 12 Allen, 606, 610, 611. To sustain this defence proof must be advanced that the company designed to contract debts which it did not intend to pay, and which it had reasonable ground at the time to believe it might not be able to pay.
In connection with this branch of the case is the exception relating to the exclusion of the record of judgments obtained •by two of the company’s creditors. This exclusion affords no just ground of exception, and the defendant was not prejudiced, as the evidence was offered after an agreement of the parties had been introduced establishing the amount of the claims of the judgment creditors and the fact that they were in existence at the time shown by the record of judgments itself.
The defendant also offered the petition and schedules in bankruptcy of the company, and though excluded they were admissible for the limited purpose of contradicting the statement of its treasurer, who was a witness for the plaintiff, as to its indebtedness.
But the offer of proof at the trial made no reference to this reason for its admission, but was limited to the express purpose of showing debts due from the company before the date of the contract, and the time when these debts were contracted. It is, however, well settled that declarations made by the grantor after an alleged fraudulent conveyance, when the grantee is not present, are not admissible for the purpose of impeaching the title of the latter. Aldrich v. Earle, 13 Gray, 578. Holbrook v. Holbrook, 113 Mass. 74, 76.
*604A further exception is taken to the submission of special questions to the jury as well as to inquiries orally addressed to them as to the grounds upon which they based their general verdict, or inquiring if they had determined certain issues involved in the case. But it was within the discretionary power of the trial judge to submit or ask any or all of these questions calling for special findings, and as this discretion does not appear to have been improperly exercised no ground of exception is shown. Spoor v. Spooner, 12 Met. 281. Lawler v. Earle, 5 Allen, 22. Graves v. Washington Ins. Co. 12 Allen, 391. Spurr v. Shelburne, 131 Mass. 429. Boston Dairy Co. v. Mulliken, 175 Mass. 447.
A general verdict having been returned in favor of the plaintiff, an assessor was appointed to assess damages. Upon the coming in of his report the defendant moved that it be recommitted for the correction of erroneous rulings and refusals to rule, and, the motion being denied and the report confirmed, these questions are now before us.
As the issue of the defendant’s liability had been settled previously, the validity of the original agreement was not before the assessor. By the ordinary rule the measure of damages would be the fair market value of the goods at the date of their conversion, and evidence that the plaintiff under the contract could buy them for less than the market price was not competent to reduce the amount of the defendant’s liability as he was not entitled to the benefit of the plaintiff’s bargain. Lorain Steel Co. v. Norfolk & Bristol Street Railway, 187 Mass. 500, 506.
The plaintiff also was allowed damages for the conversion of six hundred pounds of crackers, which he alleged had been manufactured before but were sold to him on the date of the contract, and it is the contention of the defendant that because the jury specifically found that none of the goods converted were in existence when the contract was made there can be no recovery for this item. But no judgment has been entered upon the general verdict, and until this is done there is no estoppel preventing the plaintiff from showing such conversion. Burlen v. Shannon, 99 Mass. 200, 203. Hawks v. Truesdell, 99 Mass. 557. O’Connell v. O’Leary, 151 Mass. 83, 84.
The exceptions, therefore, must be overruled, and the order accepting and confirming the assessor’s report affirmed.

So ordered.

 The questions and answers referred to were as follows: “2. Was the sale and delivery of the goods on hand on June 15, 1903, made in' the ordinary course of trade? The jury answer, Yes. 3. Did the Favorite Biscuit Company at the time of the sale and delivery to the plaintiff of the first lot of goods on June 15, 1903, have other creditors whose claims were due and owing? The jury answer, No. ”