Court Opinion

ID: 7990722
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:30:44.587312+00
Date Added: 2024-06-11T16:35:21.581323
License: Public Domain

Anderson,- L,
after stating the facts as above, delivered the-opinion of the court.
This case involves the constitutionality and construction of the “bulk sales law,” being chapter 100, p. 90, acts of the legislature-of 1908, which is as follows:
“An act for the prevention of frauds in the sale of stocks of merchandise in bulk, and to provide for the transfer of insurance policies upon stocks of merchandise.
“Section 1. To Prevent Fraudulent Sales of Merchandise — • *782What Presumed to he Fraud. Be it enacted by the legislature of the state of Mississippi, that a sale of any portion of a stock -of merchandise, otherwise than in the ordinary course of trade, or in the regular and usual prosecution of the seller’s business, and a sale of an entire stock of merchandise in gross, shall be presumed to be fraudulent and void as against the creditors of the seller, unless, at least five (5) days before the sale:
“(a) The seller shall have made a full and detailed inventory, •showing the quantity, and, so far as can be done by the exercise of reasonable diligence, the cost price to him of each article sold; ;and
“(b) The purchaser shall have in good faith made full and ■explicit demand of the seller for the name, place of residence and business and post office address of each of his creditors, and the sum due each, and to which demand the seller shall have' made full and truthful written answers; and
“(c) The purchaser shall have in good faith notified person.ally or by mail each of the seller’s creditors, of whom he has knowledge, or with the exercise of reasonable diligence' could have acquired knowledge, of the proposed sale and of the cost pidce of the merchandise proposed to be sold and of the price to be paid therefor by the proposed purchaser.
“Sec. 2. In Case of Loss hy Fire, Creditor to he Notified. That in ease of the destruction of a stock' of merchandise by fire upon which there is insurance against such loss, the holder of ■such insurance policies shall within five days after such loss notify his creditors to whom he is indebted for merchandise, of his loss and the amount of insurance carried, and no such policy ■or policies of insurance shall be transferred or assigned for ten •days after such notice, nor shall any such insurance be paid for ■fifteen days next after the occurrence of any such fire.
“See. 3^ Act Not Applicable to Official Sales under Orders -of Court. That nothing in this act shall apply to official sales *783by sheriffs, constables, executors, administrators, guardians, receivers, commissioners, trustees in bankruptcy, or any public officer.
“Sec. 4. Buies of Evidence Not Changed by This Law. That, except as especially provided in this act, nothing’ herein contained nor any act hereunder, shall change or affect the present rules of evidence or the present presumption of law.”
The statute in question is not repugnant to the due process nor the equal protection clauses of the fourteenth amendment of the Constitution of the United States. Lemieux v. Young, 211 U. S. 489, 29 Sup. Ct. 174, 53 L. Ed. 295; Kidd, Dater & Price Co. v. Musselman Grocery Co., 217 U. S. 461, 30 Sup. Ct. 606; Squire & Co. v. Tellier, 185 Mass. 18, 69 N. E. 312, 102 Am. St. Rep. 322; Walp v. Mooar, 76 Conn. 515, 57 Atl. 277; Neas v. Borches, 109 Tenn. 398, 71 S. W. 50, 97 Am. St. Rep. 851; McDaniels v. J. J. Connelly Shoe Co., 30 Wash. 549, 71 Pac. 37, 60 L. R. A. 947, 94 Am. St. Rep. 889—all involving statutes fundamentally like this, so far as affected by these clauses of the Constitution. Nor is it,¿violative of any provision of the Constitution of this state.
It is contended for appellees that the clause in section 1 of the act, “shall be presumed to be fraudulent and void as against the creditors of the seller, unless, at least,” etc., declares a rule of evidence, and not a substantive rule of law; that the presumption is not conclusive, and may therefore be rebutted; that noncompliance with the statute renders the sale only prima facie fraudulent and void, which may be overcome by evidence of good faith; and the court below so held. On the other hand, it is contended that, where the statute is not complied with, the sale is stamped as absolutely fraudulent and void; that it therefore •declares a substantive rule of law, and not a rule of evidence. As to tire purpose of the statute, we quote with approval the language of Yann, J., in a dissenting opinion, in passing on the *784“bulk sales” act of New York in Wright v. Hart, 182 N. Y. 330, 75 N. E. 404, 2 L. R. A. (N. S.) 338, approved, by the supreme-court of the United States- in Lemiewx v. Young, supra. He said: “The object of the act was to suppress a widespread evil, ■well known to current history, and condemned by repeated adjudication in this court and in all the leading courts of the state from time out of mind. That evil is the tendency and practice of merchants who are heavily in debt to make secret sales of their merchandise in bulk for the purpose of defrauding- creditors. Common observation shows that, when a dealer has-reached a point in his business career where he cannot go on owing to the claims of creditors, the temptation is strong and the practice common of making a fraudulent sale. Fraud works in secret, and the bargain is closed and the purchaser in possession before the creditors know anything of it. The evil is difficult for the courts to handle, because the evidence to- uncover the-furtive scheme must, as a rule, be drawn from hostile witnesses, usually relatives or intimate friends of the seller, who took part in the fraud and shared in the plunder.”
The statute will have small effect, and fall far short of its purpose, if a noncompliance with its provisions may be obviated by evidence that the sale was made in good faith and for value, it merely shifts the burden of proof; for, 'under the law as it stood before, there was no great difficulty as a rule in making-out a prima facie ease of fraud. In construing a statute, the-evil sought to be remedied must be kept in view; and, if not violative of its plain provisions, it must be made to accomplish, the purpose intended. Section 4 of the statute providing, “that, except as specially provided in this act, nothing herein contained' nor any act hereunder, shall change or affect the present rules-of evidence or the present presumptions of law,” does not mean,that such rules and presumptions are intended to be affected;: for as held in Railroad Co. v. Bent, 94 Miss. 681, 47 South. *785805, 22 L. R. A. (N. S.) 821, where the statute declares a substantive rule of law, the legislature cannot change it by labeling it a rule of evidence. The statute fixes as fraudulent and void, so far as the rights of creditors are concerned, all sales made in violation of it, and evidence of good faith and payment of value will not he heard. It was so hold by the supreme court of Tennessee in Neas v. Borches, supra, in passing on the “bulk sales”-act of that state, which contained the identical language of section 1 of this statute.

Reversed and remanded.