Goodwin v. Tuttle ( 1914 )

Mr. Justice Burnett

delivered the opinion of the court.

The controlling question in this case is whether or not the court erred in refusing to allow the plaintiff to prove in his case in chief the allegations of his reply respecting the bulk sale of the property to the defendant by the corporation, and in directing a verdict for the defendant. The statute affecting such transfers, as it stood at the time of the transaction, is found in Sections 6069, 6070, L. O. L.:

“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, to demand and receive from the vendor thereof, and if the vendor be a corporation then from a managing officer or agent thereof, at least five days before the consummation of such bargain or purchase, and at least five days before paying or delivering to the vendor any part of the purchase price or consideration therefor, or any promissory note or other evidence of indebtedness therefor, a written statement under oath containing the names and addresses of all of the creditors of said vendor, together with the amount of indebtedness due or owing, or to become due or owing, by said vendor to each of such creditors, and if there be no such creditors, a written statement under oath to that effect; and it shall be the duty of such vendor to furnish such statement at least five days before any sale or transfer by him of any stock of goods, wares, or merchandise in bulk”: Section 6069, L. O. L.

“After having received from the vendor the written statement under oath mentioned in section 6069 the vendee shall, at least five days before the consummation of such bargain or purchase, and at least five days before paying or delivering to the vendor any part of the purchase price or consideration therefor, or any promissory note or other evidence of indebtedness for the same, in good faith notify or cause to be notified, personally or by wire or by registered letter, each of the creditors of the vendor named in said statement, of the proposed purchase by him of such stock of goods, wares, or merchandise; and whenever any person shall purchase any stock of goods, wares, or merchandise in bulk, or shall pay the purchase price or any part thereof, or execute or deliver to the vendor thereof or to his order, or to any person- for his use, any promissory note or other evidence of indebtedness for said stock, or any part thereof, without having first demanded and received from his vendor the statement under oath as provided in section 6069, and without having also notified or caused to be notified all of the creditors of the vendor named in such statement, as in this section prescribed, such purchase, sale, or transfer shall, as to any and all creditors of the vendor, be conclusively presumed fraudulent and void”: Section 6070, L. O. L.

Section 70 of the National Bankrupt Law provides:

“The trustee of the estate of a bankrupt, upon his appointment and qualification, # * shall in turn be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, * * ” to “property transferred by him in fraud of his creditors”; and “property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold undet judicial process against him. * * The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whoever may have received it, except a bona fide holder for value. For the purpose of such recovery any court of bankruptcy, as hereinbefore defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction. ’ ’

1. It was argued that, because the property was described as being “acquired” from the Co-Operative Trading Company, the complaint, in effect, pleaded property in the defendant. A fair construction of the complaint, however, taking it by the four corners, does not justify such a conclusion. The word “acquired” is used merely as descriptive of the property, and does not necessarily mean that title had passed to the defendant. A thief may properly be said to have “acquired” the property which he has stolen, and in a certain sense any person taking possession of property may be properly said to have “acquired” it.

2. It was also contended by the defendant that where the plaintiff alleges that he is the absolute and unqualified owner of the property in dispute, which defendant denies, he is required to prove it, and that proof that the plaintiff holds it in trust for another is not enough. Contrary to the single authority cited in support of that point, it has been held in this state in several cases that in replevin under the allegation of general ownership the plaintiff may prove a special property entitling him to possession: Reinstein v. Roberts, 34 Or. 87 (55 Pac. 90, 75 Am. St. Rep. 564); Backhaus v. Buells, 43 Or. 558 (72 Pac. 976, 73 Pac. 342); Culver v. Randle, 45 Or. 491, (78 Pac. 394); Harvey v. Lidvall, 48 Or. 558 (87 Pac. 895); Swank v. Elwert, 55 Or. 487 (105 Pac. 901); Roberson v. Ellis, 58 Or. 219 (114 Pac. 100).

3. Another argument of the defendant was that the new matter in the reply constituted a departure from the complaint. It seems that it was upon this ground that the Circuit Court refused to allow the plaintiff to prove the invalidity of the alleged bulk sale of the property. Under the terms of the national bankrupt law quoted, the trustee by operation of law is vested with the title of all the bankrupt’s estate, and is equipped with all the legal remedies for the recovery of the same. Suppose that he had found the property of the bankrupt in the possession of some individual without any claim of title whatever on the part of the holder. No one would claim in such a case that the trustee should be compelled to set up in his complaint the evidence of his own title. It would be sufficient in the first instance for him to allege in the ordinary form his property and right 'to the immediate possession of the chattels in question. So it is in the first place always where the trustee seeks to recover the possession of property. It is only when, as in this litigation, the defendant has alleged title in himself that it becomes necessary or even proper for the plaintiff to reinforce his complaint by showing in greater detail the invalidity of the defendant’s claim to the property. This is the purpose and effect of the new matter in the reply in the case at bar. It is not a departure from, but rather a fortification of, the complaint, and hence is not open to objection: Moores v. Clackamas County, 40 Or. 536 (67 Pac. 662); Cooper v. Blair, 50 Or. 394 (92 Pac. 1074); Roots v. Boring Junction Lbr. Co., 50 Or. 298 (92 Pac. 811, 94 Pac. 182); Pioneer Hdw. Co. v. Farrin, 55 Or. 590 (107 Pac. 456).

4. The principal contention of the defendant is that the property can only be recovered in an action by the trustee as the representative of the creditors upon an attachment of the property. If, in the absence of bankruptcy proceedings, the creditors themselves were seeking to collect their claims, it would indeed be necessary for them to establish their demands by re-covering judgment thereon against the debtor, or at least to attach the property as a basis upon which to subject it to their demands as against its present possessor. It is well settled that creditors have no direct action against one holding the possession of property which might otherwise be subjected to the payment of claims against the debtor, because there is no privity of contract between one in the possession of the property under such circumstances and the creditors seeking to apply it to their claim. So it has been held often in this state that a creditor seeking to subject property to the liquidation of his claims while the goods are in the possession of a third party must previously establish his claim by judgment or acquire a lien by attachment: Dawson v. Coffey, 12 Or. 513 (8 Pac. 838); Dawson v. Sims, 14 Or. 561 (13 Pac. 506); Matlock v. Babb, 31 Or. 516 (49 Pac. 873); Fleischner v. Bank of McMinnville, 36 Or. 553, 562 (54 Pac. 884, 60 Pac. 603, 61 Pac. 345); Bennett v. Minott, 28 Or. 339 (39 Pac. 997, 44 Pac. 283).

The controlling proposition in such cases is that, if one would disturb a transaction which might otherwise be valid between the immediate parties to it, he must show his right to intermeddle. This is accomplished by establishing in a judicial proceeding that the former owner of the property was indebted to the claimant upon an unpaid demand. On behalf of the trustee the reason of the rule is satisfied in a bankruptcy proceeding, whereby it has been adjudicated that the debtor is insolvent and unable to pay his debts. The appointment and qualification of the trustee in such circumstances complete the demonstration of the reason, and show that he is entitled to the possession of the property for the purpose of applying it to the claims of the creditors. The principle finds expression in the words of the national statute which not only vests the title of the bankrupt’s property in the trustee, but also gives the latter the right to recover the same from whomsoever has possession of it, excepting only the purchaser in good faith. The conjunction of title and the right to possession in one and the same person, the trustee in such cases, constitute the basis for an action of replevin in his favor.

5. It is conceded that up to December 31, 1912, the bankrupt was the owner and in possession of the stock of goods in question. Its ownership continued in the bankrupt, and finally became vest.ed in the trustee, unless that result is prevented by the sale in bulk. Our statute, however, has spoken on that subject, and has laid down the rule that such a transfer under the circumstances contained in the offer to prove shall conclusively be presumed fraudulent and void. In other words, such a transaction does not, as against the trustee, affect the title to the property in any way. A person who takes' possession of property in direct violation of the statute on the subject in such cases cannot “be a bona fide holder for value prior to the date of the adjudication.” It matters not that he gave his note for the same, because our own statute says that whenever any person shall purchase any stock of goods in bulk, or shall pay the purchase price, or any part thereof, or execute or deliver to the vendor thereof, or to his order, or to any persons for his use, anypromissory note or other evidence of indebtedness for such stock, or any part thereof, without having first demanded and received from his vendor the statement alluded to in the statute, such purchase, sale, or transfer shall as to any and all creditors of the vendor be conclusively presumed fraudulent and void.

The questions of the ownership or possession of the note or the enforcement of the payment thereof are not before us. Giving the note does not take the sale out of the operation of the statute. We can only give effect to the terms of the act of the legislature respecting the property in question. The plaintiff was entitled to prove the course of the possession of the property from the bankrupt to himself, and the court was in error when it directed a verdict in favor of the defendant.

The judgment is reversed and the cause remanded for further proceedings.

Reversed and Remanded.