MacKler v. Lahman

1. The act of August 27, 1931 (Ga. L. 1931, p. 153; Code of 1933, §§ 67-109, 67-1305), providing that the effect of a failure to record a mortgage or bill of sale or deed to secure debt "shall be the same as is the effect of failure to record a deed of bargain and sale," so changed the previous law with reference to those securities as to render such instruments, even though unrecorded, superior in rank to subsequent liens created by law.

2. A transaction by which a debtor gave to his creditor a deed to secure a debt is not such a transfer as comes within the purview of the bulk-sales law found in the Code, § 28-203.

3. Under the principle that equity never assumes jurisdiction when full and adequate relief can be granted at law, the defendants in error were by the law of garnishment afforded such relief in so far as reaches money belonging to their debtor in the hands of plaintiff in error.

4. Upon application of the foregoing principles, the demurrer to the petition should have been sustained.

5. There is no merit in the motion to dismiss the writ of error.

No. 14600. SEPTEMBER 11, 1943. Harry Lahman and Roy D. Harman are judgment creditors of Ralph L. Willner. Lahman's judgment was obtained on December 3, 1940, and Harman's on March 4, 1941. Before those dates (on January 1, 1938) Willner had given to Harry A. Mackler a security deed conveying all accounts receivable and all of the merchandise, furniture, and fixtures located at a designated place on Peachtree Street, Atlanta, described in exhibits A, B, and C, attached to the equitable petition of Lahman and Harman, against Mackler and Willner. The grantor and the grantee in this security deed had litigation concerning it, and on May 11, 1940, settlement of this litigation was effected, and the suit was dismissed; and on the same day a new agreement in writing was entered into between Mackler and Willner, whereby Willner gave to the grantee, Mackler, a security deed to designated storage and repair accounts receivable, as well as such others as Willner might acquire during the balance of that year. The agreement of May 11, 1940, contained a provision, that, at the option of Mackler, Willner might substitute from time to time other and further accounts receivable or other personal property, the better to secure Mackler, and that such substituted accounts or other security would be covered by the instrument, and that to do so the parties had only to attach to the instrument a schedule and description of said additional or substituted security. The agreement contained also provisions whereby in case of default the grantee could take physical possession of the property, and another provision that he could sell it as attorney in fact. No copy of either security deed and no copy of the bill of sale is attached to the plaintiffs' petition. It was agreed, however, that the bill of sale contained not only all the accounts receivable, but also certain designated fixtures and furnishings and other personal property.

The petition attacked the substituted security, on the grounds, that it did not appear of record, and that the sale thereof did not divest the lien of petitioners' judgments. It attacked the sale, on the ground that it was violative of the bulk-sales law of this State. It was prayed, that the original security deed of January 1, 1938, be canceled; that Mackler be required to account for all that part of the $9000 consideration recited in the bill of sale of January 28, 1941, which was in excess of $4650, plus interest; that a receiver be appointed; and that the defendants be enjoined from interfering with the receiver's possession, and from altering the status of any of the assets of the business conducted by Willner; and for general relief.

Mackler's general and special demurrers were overruled, and he excepted. Lahman and Harman moved to dismiss the writ of error, on the ground that Mrs. Ralph L. Willner, administratrix of the estate of her husband, and the original party defendant, who was substituted as a defendant in the original suit, was not made a party to the bill of exceptions. The plaintiff in error moved to amend the bill of exceptions by inserting the name of Mrs. Ralph L. Willner, as administratrix, as a plaintiff in error. 1. There is no attack on the bona fides of the transaction of May 11, 1940, under which Willner and Mackler, having settled their differences growing out of the litigation over the first security deed, entered into a new contract. Under the terms of that contract, Willner executed a second deed to secure not only a pre-existing indebtedness of $1650, but also to secure a present advancement of $3000 to him by Mackler. In this instrument it was provided, that from time to time other and further accounts receivable and other personal property, at the option of Mackler, might be substituted; that in order to effect such substitution the parties had only to attach to the instrument a schedule thereof; that upon default Mackler should have not only the right to take possession, but also to exercise the power of sale therein conferred. The petition must be construed in the light of its omissions as well as its averments. What is left unsaid must be kept in mind, because it may be as significant as what is expressly stated. Toney v. Ledford, 184 Ga. 856 (193 S.E. 761). So construed, it must be held that the petition shows on its face that the additional security was given in terms of the agreement. For, while the petition contains no positive averment that the new security was given, it is stated that the security deed provided for such; that the grantor sold other named property under the power of sale contained therein; and the whole complaint of the petition is that the grantor had no right to give the additional security as against the rights of the defendants in error, who were creditors whose liens were obtained before the giving of the second security deed. The latter deed was recorded, but there was no record of the new security, to wit, the fixtures and other personal property. Treating the added security as a change in the obligation already assumed by Willner, at most it only presented a new security deed. So in that view of the matter, a contest arises between the holder of the altered security deed and the lien of the judgment aforesaid. In so far as it contains the physical property, the record of the new security deed must be treated as no record at all; for its substitution came after the record of the deed which pledged as security only accounts receivable. The case of the defendants in error as to this does not have to stand on the provision of the Code § 67-103, which declares that a mortgage may cover a stock of goods, or other things in bulk, but changing in specifics.

The plaintiff in error finds a safe refuge in another provision of law, which is that the act of August 27, 1931 (Ga. L. 1931, p. 153; Code of 1933, §§ 67-109, 67-1305), declaring that the effect of a failure to record a mortgage or bill of sale or deed to secure debt "shall be the same as is the effect of failure to record a deed of bargain and sale," so changes the previous law with reference to those securities as to render such instruments, even though unrecorded, superior in rank to subsequent liens created by law. EvansMotors of Georgia Inc. v. Hearn, 53 Ga. App. 703 (186 S.E. 751); Massachusetts Mutual Life Insurance Co. v. Hirsch,184 Ga. 636 (192 S.E. 435).

2. A further contention is that the sale by Mackler as attorney in fact, under a provision of the security deed, is violative of our bulk-sales law (Code, § 28-203). The Court of Appeals of this State has three times ruled that a transaction of that kind is not such a transfer as comes within the purview of the act. Avery v. Carter, 18 Ga. App. 527 (89 S.E. 1051);Wright v. Cline, 27 Ga. App. 129 (107 S.E. 593); Bank ofLaGrange v. Rutland, 27 Ga. App. 442 (108 S.E. 821). Those decisions are sound, and are in accord with the overwhelming weight of authorities. See 9 L.R.A. 473, 14 L.R.A. 753; 57 L.R.A. 1049. The power of sale is but an incident of a security deed. Compare Mutual Loan Banking Co. v. Haas, 100 Ga. 111 (27 S.E. 980, 62 Am. St. R. 317). The power of sale is part of the security, recognized as the usual mode of enforcement of the security, and it has more than once been said that it is the equivalent of a legal foreclosure. Federal Land Bank ofColumbia v. Bank of Lenox, 192 Ga. 543, 547 (16 S.E.2d 9). The petition shows no violation of the bulk-sales law.

3. Under the allegations of the petition, Mackler has in his hands, as the result of the sale under power, about $4350 as the property of Willner, the same representing the difference between the amount of the debt and what the property brought at the sale. This fact, however, could form no valid reason why this petition states any ground for a receiver or other equitable relief. For aught that appears, a simple garnishment could afford the creditors a full, complete, and adequate remedy.

4. Upon application of the foregoing principle, the petition stated no cause of action, and the demurrer should have been sustained. Since the sale was not subject to attack for either of the reasons alleged, Mackler got a good title. If he permits the former debtor to remain in possession, as alleged in the petition, that is no concern of the plaintiff. There are no allegations that show that the giving of the security deed was for a fraudulent purpose, or that the power of sale was unfairly exercised. The plaintiffs were not entitled to any of the relief for which they prayed.

5. There is no merit in the motion to dismiss the writ of error. See Huey v. National Bank of Fitzgerald, 177 Ga. 64,67 (169 S.E. 491); Edwards v. United Food Brokers, 195 Ga. 1 (22 S.E.2d 812).

Judgment reversed. All the Justices concur.