Peterson Co. v. Freeburn

Four counts are declared upon in the petition. Three state separate causes of action on individual 1. SALES: promissory notes signed and delivered September bulk sales: 10, 1925, by F.B. and Elizabeth Freeburn to nonapplica- appellant. These issues do not in any way bility of involve appellee Frank Dubes, except in the statute. manner and way alleged in Count 4. That is to say, the purpose of the last named count is to invoke the benefits of Sections 10008 to 10012, inclusive, of the Code of 1924, known as the Bulk Sales Law. Predication of appellant's case at this point is based upon the following facts: On September 10, 1925, F.B. Freeburn, Elizabeth Freeburn, and Frank Dubes entered into a copartnership at Aurelia to, and did thereunder, engage in the mercantile business from said date until September 10, 1926, when said relationship was dissolved because of the sale of their interest in said firm by F.B. and Elizabeth Freeburn to appellee Frank Dubes, without in any way attempting to meet, or in fact complying with, said legislative requirement, although, at the time of said transaction, the Freeburns were personally indebted to appellant. Whereupon, appellee Dubes appeared, and filed a motion to dismiss said Count 4, naming, among others, the ground that said legislation does not apply to a deal whereby one partner, for a consideration, acquires rights and privileges of the other members of the concern. This motion was sustained by the district court, and for alleged error in so doing this appeal was taken.

Section 10008 of said Code provides:

"The sale, transfer, or assignment, in bulk, of any part or the whole of a stock of merchandise and the fixtures pertaining to the conducting of said business, otherwise than in the ordinary course of trade and in the regular prosecution of the business of the seller, transferor, or assignor, shall be void as against the creditors of the seller, transferor, or assignor: Unless * * *" certain prerequisites are met.

Contention is earnestly made that the boundaries of the quoted provisions include a transaction wherein one copartner sells his interest to another. Reasons asserted in support of the position are that, if the contrary is true, the doors will then be open to fraud and abuse, for behind such protection the unscrupulous would hide the proceeds of such conveyance, and place it beyond the reach of creditors; and especially is this unfair, according to the argument, when loans are extended to the separate person upon the strength of his rights in the community business. We are constrained to disagree with this suggestion, and reach the opposite conclusion.

By this court the precise question has never before been determined. Foundation for our decision must be placed upon the act itself. Underlying the enactment, so far as concerns the present discussion, is that portion confining application to "any 2. STATUTES: part or the whole of a stock of merchandise * * construc- *." "Bulk Sales Law," being in derogation of the tion: common law, appellee suggests must be strictly common-law construed. Manifestly, that limited restric- interpretation is contrary to Section 64 of the tions. Code of 1924, which reads as follows:

"The rule of the common law, that statutes in derogation thereof are to be strictly construed, has no application to this Code. Its provisions and all proceedings under it shall be liberally construed with a view to promote its objects and assist the parties in obtaining justice."

Chiesa Co. v. City of Des Moines, 158 Iowa 343. Liberality, safeguarded by the legislature, however, does not warrant the supplying of words where none exist. State ex rel. Davitt v. Crow, 186 Iowa 497. So, too, indulgence in the 3. STATUTES: doctrine of generous construction cannot be construc- permitted to impose a liability not otherwise tion: existing, or work a forfeiture by extending the inherent meaning of words so far that it amounts to the limitation. addition of new ones. Caster v. McClellan,132 Iowa 502. See, also, State ex rel. Shaver v. Iowa Tel. Co.,175 Iowa 607; Brown v. Bell Co., 146 Iowa 89. Thus confined in the premises, our further course is well marked. "Part or the whole" directly modifies "stock," which necessarily means the merchandise or thing itself, — in other words, the actual and tangible. A partner does not own the "whole or a part" of the goods or other items of personalty. Tuller v. Leaverton, 143 Iowa 162; Hirsch, Wickwire Co. v. Denison Cloth. Co., 158 Iowa 117;Wile, Weill Co. v. Denison Cloth. Co., 158 Iowa 109. We said, in Tuller v. Leaverton, supra:

"Neither partner separately owns, nor has the exclusive right of possession of, any particular articles of partnership property or aliquot part thereof. The real ownership and legal title are vested in the firm, so that the sale of one half of the stock did not pass title to the stock itself, but to such share as remained after the settlement of the partnership debts and settlement of partnership accounts."

Interest of a copartner is always contingent upon the payment of firm debts, accounting between the parties themselves, and the costs and expenses of final dissolution. Joint ownership does not exist, but rather a community "property" in the assets remaining after the ultimate accounting.

Other states afford us assistance in crossing this untraveled path; for we find that it has elsewhere been held that said law does not apply to the facts here involved. Taylor v. Folds,2 Ga. App. 453 (58 S.E. 683); Yancey v. Lamar-Rankin Drug Co.,140 Ga. 359 (78 S.E. 1078); Fairfield Shoe Co. v. Olds, 176 Ind. 526 (96 N.E. 592); Parker v. Tapscott, 142 Miss. 768 (107 So. 561);Schoeppel v. Pfannensteil, 122 Kan. 630 (253 P. 567); DakotaTr. Sav. Bank v. Hanson, 5 Fed. (2d Series) 915 (8th Circuit). In Fairfield Shoe Co. v. Olds, supra, the Indiana court said:

"It is clear that a sale by a partner of his interest in `a stock of merchandise or merchandise and fixtures' is not a sale in bulk of any part or the whole of such stock * * * and the courts will not, by construction, extend it so as to include such sales * * *. It is true that Section 2 of said act provides that `sellers * * * and assignors * * * shall include * * * copartnerships,' but there was no `sale in bulk' by a copartnership or to a copartnership."

So in the case at bar, there was no sale of a "part or the whole" of the "stock" of Freeburn Dubes, but rather, the negotiation involved that "community interest" before mentioned, and nothing more. Code of 1924, Section 10009, contains this definition:

"Sellers, transferors, and assignors, purchasers, transferees, and assignees, under this chapter, shall include * * * copartnerships * * *."

Nevertheless, appellees', rather than appellant's, position is strengthened thereby. Immediately, "partnership" is coordinated with and distinguished from "individuals." Truly, if a "partnership" sells, the prerequisites of the law must be met, in the event creditors are affected. Here, the "partnership" had no debts, and had a right to sell, regardless of the obligations that might perchance exist against Freeburns, the separate associates. They did not dispose of "part or the whole of the stock," because they had none with which to part. At most, they could assign an undetermined, indefinite, and contingent "community interest." Virginia-Carolina Chem. Co. v. Bouchelle, 12 Ga. App. 661 (78 S.E. 51), cited by appellant, is not in point; for there, a man sold one-half interest in his business to another, and later disposed of the other half to the same person. Nor does its argument that the designing will take advantage of the situation, or that credit may be obtained on the strength of a person's having an interest in a business defeat the motion directed at its petition. Every creditor dealing on such an occasion knows the limitation of the chapter and paragraphs under discussion. And more than this, he has notice of the circumscribed equity, and knows, therefore, that credit given is subject to the laws of partnership. Anyway, permission to indulge in statutory construction does not enable us to expand said meaning beyond the legitimate scope of the terms utilized by the body whose right it was to exercise its prerogative to the extent, and to that only, as seemed wisest and best. Said branch of the government marked out our course. We have no other alternative, and consequently must and do hold that the "Bulk Sales Law" does not apply to the case at bar. The action of the district court was right, and its judgment is affirmed. —Affirmed.

EVANS, C.J., and STEVENS, De GRAFF, and WAGNER, JJ., concur.