Bailen v. E. P. Badger Import Co.

Letton, J.

On July 9, 1912, Chambers & Company, who for some years prior thereto had been in the retail merchandise business at Atkinson, finding themselves unable to meet their liabilities, executed and delivered to their principal creditor, C. Shenkberg Company, a corporation of Sioux City, Iowa, an instrument reciting that they “hereby sell, grant, convey and assign” unto the second party their stock of merchandise, consisting of dry goods, groceries, boots and shoes, etc.; also the furniture and fixtures used in connection with the stock. The instrument also transferred and assigned to the second party all their book accounts, bills receivable, and evidences of indebtedness. They constituted the second party their “agent, trustee, and attorney in fact, and in their place and stead, to take over, manage, run, and to continue said business, or to sell at public or private sale” all or part of the stock, fixtures and personal property conveyed. It was provided that, if the second party deem it advisable, they may keep up the stock by the purchase of new goods. The instrument recites that suits at law are pending to recover debts for goods, and that it is deemed best, for the purpose of keeping the assets together, “to place the business in such shape that all creditors of the same class will receive the same treatment with reference to the payment of their debt.” It was further agreed that the second party, after disposing' of the property, should pay all the expenses of carrying out the trust, including a charge for his services and for the services of his attorney, pay for new goods purchased, pay all taxes, rents and clerk hire now due, pay and discharge in full, if the residue of the funds is sufficient, all the debts, liabilities due and owing “to wholesalers, or other unsecured creditors of the same class, or such creditors as shall become parties hereto and file their claims or demands with the party of the second part.” It is further recited that one of the considerations for the execution of this instrument is that the party of the first part shall be released and absolved- from liability on any unpaid portion of the claims against them as to claims of creditors who accept this trust deed and indicate their acceptance thereof in the manner provided for, and that creditors who file their claims “shall execute an instrument in writing agreeing that the first party and the individual members of the firm shall be and stand released on any unpaid portion of the claims filed with the second party.” The second party took possession of the stock and sent letters to the creditors inclosing a copy of the instrument and a blank form of acceptance and release. The defendant, the E. P. Badger Import Company, one of the creditors, paid no attention to this communication, but proceeded with an action which it- had already begun and obtained judgment against Chambers & Company for the amount of its claim. The assignee concluded it would be advisable to sell the property at public sale, and this was done on August 8,1912. On the next day the defendant obtained judgment for the sum of $399.10' and costs. Execution was issued three days later and placed in the hands of defendant Grady, as sheriff of Holt county, who on the same day levied the execution upon the goods as the property of Chambers & Company and took possession of the same. On August 15 plaintiff commenced the present action- and retook the merchandise under a writ of replevin. The case was tried without the intervention of a jury, and from the findings and judgment in favor of defendant, plaintiff appeals.

Defendant insists that plaintiff is not in a position to question the judgment on appeal, for the reason that in his motion for a new trial his only assignment was that the judgment “was erroneous because it was contrary to law.” The office of a motion for new trial is to give the •trial court an opportunity to correct errors. When the record is complicated and many questions are presented and decided upon the trial, an assignment in the motion for new trial that the judgment is contrary to law may not challenge the attention of the court to the errors relied upon and give opportunity to correct them. It is generally held that such assignment is not sufficient to call attention to the sufficiency of the evidence to support the judgment. When, however, the record shows that there is no substantial conflict in the evidence, and that the sole question is whether upon the conceded facts the law will support the judgment, and that the court must have considered the sufficiency of the evidence in passing upon the motion for new trial, this court upon appeal should also consider that question and determine the case accordingly. Technical rules intended to secure the substantial rights of the parties are not to be strictly enforced when it is manifest that their application-would defeat, rather than promote, justice. This matter is more fully discusse'd in the opinion in Waxham v. Fink, 86 Neb. 180.

Defendant also contends the assignment constitutes a sale in bulk and is void as to creditors, for the reason that it was made without compliance with the provisions of section 2651, Rev. St. 1913. This section provides: “The • sale, trade or other disposition in bulk of any part or the whole of a stock of merchandise, otherwise than in the ordinary course of trade and in tbe regular and usual prosecution of the seller’s business, shall be void as against tbe creditors of the seller,” unless certain provisions with respect to tbe making of an inventory of tbe goods and a list of tbe creditors and tbe giving of notice to such creditors be complied with. It is conceded that tbe requirements of this statute were not followed, and it is contended by tbe appellant that such a transfer for tbe benefit of creditors who release their claims is not embraced within the prohibition of tbe statute. It will be noticed that tbe statute specifically prohibits a disposition in bulk “otherwise than in tbe ordinary course of trade and in tbe regular and usual prosecution of tbe seller’s business.” Tbe appellant contends that in this state it is lawful for a debtor to prefer any one or more of his creditors, that the assignment was made in good faith, with no intention of evading tbe provisions of tbe law, and was not in violation of its spirit or intent. " By tbe terms of tbe assignment no creditor was entitled to share in tbe proceeds unless be accepted, or agreed to accept, a possible pro rata payment in full of bis demand, and released tbe individual members of tbe partnership from liability for any balance that might exist. A creditor who refused these terms could receive nothing, and thus would be prevented from receiving tbe benefits the legislature intended by tbe passage of tbe bulk sales law. Tbe debtor sought to compel each creditor to accept a share of tbe proceeds of tbe firm assets, and to release a valid claim against tbe individual members of tbe partnership.

A similar question was considered by tbe supreme court .of Massachusetts (in which state, as in this, debtors may lawfully prefer creditors) in a case where an insolvent debtor in that state transferred his stock in bulk to a bona fide creditor without compliance with tbe bull?: sales law of that state, which is substantially tbe same as that of this. After holding that tbe transfer might be valid by way of accord and satisfaction as between tbe debtor and creditor themselves, tbe court say:

“But the transaction had another phase, so far at least as respected Kopec’s other creditors. There was a change in the ownership of the property, which, if Adalid as against them, freed from liability property which theretofore could have been attached by them; and thus their security was impaired. While it is true that in its strictest sense a sale is a transfer of personal property in consideration of money paid or to be paid, still in the interpretation of statutes it is often held to include barter and any transfer of personal property for a valuable consideration. * * We are of the opinion that the statute in question was intended to prevent a trader from disposing of his stock of merchandise in a manner outside his usual course of business, so that the same should be taken away from his creditors in general, and that the transfer under the circumstances disclosed in this case was a sale, although made to a creditor.” Gallus v. Elmer, 193 Mass. 106.

Construing a similar statute, the supreme court of Georgia, in Sampson v. Brandon Grocery Co., 127 Ga. 454, said: “Construing the act of 1903 and section 2697 together, we may easily reach The conclusion that sales of stock in bulk by a debtor to a creditor, in extinguishment of his debt, in whole or in part, are still permissable, but.that such sales are null and void unless there be compliance with the terms of the act of 1903.” (Bulk sales law.) In discussing the matter the court suggested that, if the value of the goods exceeded the amount of the debt and the excess was paid in cash or by the giving of a promissory note, could it be said that such a transaction would not be within the statute? And that, if such a sale for acquittance of the debt and an additional consideration comes within the act, why should a sale in extinguishment of the debt be excluded?

To the same effect are the cases of Humphrey v. Coquillard Wagon Works, 37 Okla. 714, and Youghiogheny & Ohio Coal Co. v. Anderson, 152 N. W. (Mich.) 1025. The object of the statute is pointed out in the cases followed, whiclx is the protection and benefit of all creditors. The legislature was of the opinion that a disposition of a stock of goods otherwise than in the usual course of business interferes with the just rights of creditors. If the provisions of the law are followed, the end attained will be to put creditors more nearly upon an equality than before with respect to the collection of claims, in cases of a disposition of a whole stock. The supreme court of Washington seem to take a contrary view, but we believe the rule adopted by other courts is more in accordance with the [purpose and intention of the legislature.

It has been suggested that by remaining silent and making no objections to the assignment and sale the defendant was estopped to proceed against the goods. But there could be no estoppel, because by the very terms of the assignment no creditor could be bound by it unless he filed a claim with the trustee, and, in addition, filed a release of the debtor for all liability for his debt in excess of any dividend received. Under such a provision notice by a creditor that he did not or would not agree to the assignment was unnecessary. His silence could not give consent. On the contrary, it clearly indicated his nonassent and his purpose to rely on the legal proceedings he ha'd instituted. The purchaser at the trustees sale was bound to take notice of the title he was buying and of the limitations of the instrument. . He could not be an innocent purchaser under the circumstances.

The judgment of the district court is

Affirmed.