Ward & McGowen Grocery Co. v. Franklin, Stiles & Franklin

This suit was begun in the municipal court of Jefferson county by Franklin, Stiles Franklin against J.O. Hoover. A constable's garnishment was served on the appellants, Ward McGowen Grocery Company, to which writ of garnishment the appellants answered, denying indebtedness to J.O. Hoover. An oral answer was thereupon demanded.

In Their oral answer it was shown without dispute that the defendant Hoover was indebted to Ward McGowen Grocery Company in the sum of $436.87, and that Hoover conveyed and delivered to Ward McGowen Grocery Company his entire stock of goods, the reasonable market value of which was $218.87, in part settlement of his indebtedness of $436.87. Ward McGowen Grocery Company credited Hoover's account with an amount representing the value of the goods conveyed. Upon this answer, disclosing this state of facts, the trial court rendered judgement against Ward McGowen Grocery Company for $67.40, being the amount of Franklin, Stiles Franklin's debt with costs against Hoover.

Prior to the enactment of the Bulk Sales Law, the transfer of his stock of goods by an insolvent merchant to one of his creditors, in settlement of his indebtedness, was not fraudulent, provided the claim of the creditor was bona fide, the gods were taken at their reasonable fair value, and that no benefit was secured or reserved to the debtor. An assignment or transfer of property under such circumstances was not fraudulent and void as against other creditors of the insolvent debtor. We will cite only a few of the numerous decisions where this principle has been expressly recognized. Hodges Bros. v. Coleman Carroll, 76 Ala. 103; Lienkauf Strauss v. Morris,66 Ala. 406. Within certain restrictions, as shown by these cases, and many others decided by the Supreme Court of Alabama, an insolvent creditor has the right to prefer in the payment of his debts one creditor over another, and such preference is not fraudulent and void.

The Bulk Sales Law (Acts 1911, p. 94) declares that the sale by a merchant of an entire stock of merchandise in bulk shall be presumed to be fraudulent and void as against the creditors of the seller, unless certain prescribed conditions be complied with. It is obvious that this act prescribes a rule of evidence, and places upon the tansferee the burden of proving that the sale was not fraudulent and void. We do not understand that this act goes any further than to lay down a rule of evidence, and to change and shift the burden of proof in cases covered by it.

All the facts and circumstances relating to the transfer by Hoover of his stock of goods to Ward McGowen Grocery Company are laid bare by the answer made in this case. That answer shows that Hoover reserved to himself no benefit under the terms of the transfer, that the credit allowed for this stock of goods was their reasonable value, that Hoover was justly indebted to Ward McGowen Grocery Company in a sum greatly in excess of the value of the stock of goods, and that there was no fraud whatever involved in the transaction, unless we are prepared to hold that a mere preference, and nothing more, creates fraud. But our decisions do not denounce a preference as fraudulent. The facts of this case conclusively show that Ward McGowen Grocery Company occupied a position of a preferred creditor.

The Bulk Sales Law does not render a preference fraudulent and void. Terry v. McCall Co., 203 Ala. 141, 82 So. 171; Pizitz Merc. Co. v. M. Cohen Sons, 205 Ala. 482, 88 So. 435. The appellants, Ward McGowen Grocery Company, were entitled to be discharged upon their answer.

Reversed and rendered.