Carnall v. Kramer
| Decision Date | 23 September 1922 |
| Citation | 189 N.W. 755,194 Iowa 359 |
| Parties | T. N. CARNALL, Appellee, v. FRED J. KRAMER et al., Appellants (and eight other cases) |
| Court | Iowa Supreme Court |
Appeal from Clayton District Court.--W. J. SPRINGER, Judge.
ACTION under the Bulk Sales Law, to hold appellants, who purchased a stock of merchandise, as receivers, and to require them to account to the creditors of the seller of the stock for the value thereof. The facts appear in the opinion.--Affirmed in part; reversed in part.
Affirmed in part; reversed in part.
Deacon Good, Sargent & Spangler, for appellants.
W. W Comstock, E. R. O'Brien, D. D. Murphy & Son, Alex Holmes William C. Reimer, and W. L. Eichendorf, for appellees.
One Hurley originally owned a stock of general merchandise at Strawberry Point, Iowa. On October 6, 1919, he sold said stock to the firm of Kramer & Becker for a consideration of $ 8,000, all of which was represented at the time by a note secured by a chattel mortgage on the stock. Kramer & Becker took immediate possession of the stock, and continued to operate the store thereafter, paying off a portion of the indebtedness due to Hurley. They replenished and added to the stock from time to time. Some time in March, 1920, Becker disposed of his interest in the business to his partner, Kramer, who thereafter continued to conduct the business as previously, under the firm name of Kramer & Becker. Shortly after this change had been made, Kramer met one Countryman at a hotel in Oelwein, and had a conversation with him in regard to the matter of a sale of the stock of goods, Countryman stating that he had a man in view who wanted to buy such a stock. Thereafter, Kramer and Countryman communicated with each other by letter and telephone in regard to the matter, and on April 18, 1920, they met by arrangement at Oelwein. Countryman was accompanied by one Redeman, who was introduced to Kramer as a prospective purchaser of the stock of goods. Countryman represented to Kramer at that time that Redeman owned certain lands in the states of North Dakota and South Dakota, and that he was in a position to trade for the stock of goods at Strawberry Point. On the following day, the three parties went to Strawberry Point, and Redeman looked over the stock of goods. On the 20th of April, 1920, a written contract was signed by Redeman and Kramer. This contract provided for the exchange of certain lands for the stock of goods, at an agreed price of $ 24,000. It was recited that there was an incumbrance of $ 4,400 against the land, and that Redeman was to pay Kramer this amount in cash, at the time of the settlement. The contract also expressly provided that Kramer was to furnish a bill of sale of his stock of merchandise, "showing same clear of all liens and incumbrances, and agrees to protect party of the first part under the Bulk Sales Law." The contract likewise provides that the transfer of papers under this contract shall take place within three days after date, but that possession of the properties passed upon the signing of the agreement. It also provides for the payment of $ 2,500 liquidated damages by either party, in case of default. After this contract had been signed, Redeman took possession of the stock of goods. The fact is that Redeman, the so-called "purchaser," was a mere "stool pigeon" for Countryman. Countryman, and not Redeman, owned the property that was to be exchanged for the stock of goods. Redeman never had a dollar of money or property invested in the transaction in any way, and simply consented to play the role which he did at the instance of Countryman, who was the real party in interest, and who paid Redeman $ 50 for the part which he played.
After the contract had been signed, on April 20th, and before anything had been paid on the purchase price, and while Redeman was in possession of the stock of goods, Countryman got in touch with one Danner, who was engaged in the business of conducting sales and closing out stocks of merchandise. He testified that, at the instance of Countryman, he went to Strawberry Point and examined the Kramer & Becker stock, and made Countryman an offer of $ 6,000 for it. At just what stage in the proceedings this took place, is not very clear from the evidence.
The appellants Leibsohn & Company are engaged in the mercantile business at Cedar Rapids, the firm being composed of Leibsohn and one Valentine. Some time in the fore part of April, 1920, Countryman had met the members of this firm through one Milton, a real estate man at Cedar Rapids. At that time, he stated to them, in effect, that he was about to close a deal for a stock of goods at Strawberry Point, and that, if he did so, he would like to sell the same to the said firm. This was some time before the negotiations previously referred to with Redeman; and about that time, Valentine went to Strawberry Point with Countryman and examined his stock; but nothing further appears in the record to have been done in the matter until after the contract of April 20th had been entered into between Kramer and Redeman. After this contract had been signed, however, Countryman called Leibsohn by telephone, and Leibsohn and Valentine went to Strawberry Point, where they found Redeman in possession of the stock of goods.
In the meantime, Hurley, having been informed of the contemplated sale by Kramer, notified Countryman and Redeman, on the evening of April 20th, that he held a chattel mortgage upon the stock, which must be satisfied before the stock could be sold.
After Leibsohn and Valentine arrived at Strawberry Point, they made an examination of the stock, and offered Countryman $ 7,000 for the same. Leibsohn returned to Cedar Rapids the next morning, and Valentine remained to close the deal for the stock. He did not see Countryman that day, but learned from Redeman that Countryman had gone to Oelwein to see Kramer about some trouble that had arisen over the chattel mortgage on the stock. On the morning of April 23d the parties met again. Valentine was told by Countryman that there was an outstanding chattel mortgage of $ 6,800 on the stock, that would have to be taken care of. He testified that Redeman and Countryman told him that all of the accounts against the stock were paid, and that they proposed that he should advance $ 4,400 for the purpose of helping to pay off the chattel mortgage. Valentine gave Countryman and Redeman a check for $ 4,400, made payable to Redeman, and Redeman drew a check for $ 4,400, payable to Kramer, at the request of Countryman. This check was drawn on the Cedar Rapids National Bank. Redeman had no funds in the bank at the time; but on the following morning, he went to the bank and deposited the check of $ 4,400 which Valentine had issued and made payable to him. Kramer took the check for $ 4,400 which he had received from Redeman, and indorsed the same to Hurley, the holder of the chattel mortgage. This left a balance of $ 2,400 due on the mortgage.
The deeds to the land mentioned in the contract were turned over to Kramer, manual delivery of the same apparently having been made by Redeman. One parcel of land described in the contract was not deeded; but in lieu thereof, Countryman gave Kramer 100 shares of stock of the Rock Island Railroad Company, which he represented to Kramer to be worth $ 32.50 on the market. Countryman told Kramer to go to the bank with the deeds and railroad stock, and borrow enough money to pay the balance due on the mortgage to Hurley; and Kramer went to the Strawberry Point State Bank and secured $ 2,400, on a five-day loan. Kramer proposed to immediately take the railroad stock to Chicago, and turn it into cash, and pay the bank out of the proceeds of this sale. It afterwards transpired that the railroad stock was worthless.
After Kramer had secured the $ 2,400 from the bank, he paid the same over to Hurley, and received from him a satisfaction of the mortgage; and at said time, which was the afternoon of April 23d, Kramer delivered to Redeman a bill of sale of the stock of goods. Redeman also signed a bill of sale, which appears to be unacknowledged and without date, conveying the stock of goods to the appellants, which bill of sale recites a consideration of $ 7,000, and also recites that the same is free and clear of any and all incumbrances. Valentine thereupon gave his check to Redeman for the balance of the purchase price, $ 2,600. This check was indorsed by Redeman to Countryman, who deposited the same to his own credit. After the transactions had been completed in the manner outlined, the appellants took possession of the stock of goods, and proceeded to dispose of the same as their own. Subsequently, this action was started, under the Bulk Sales Statute, to hold the appellants as receivers of said property, and to require them to account for the value thereof for the benefit of the creditors of Kramer & Becker.
I. It is contended that the Bulk Sales Law has no application to the facts in the instant case; that the appellants are good-faith purchasers from a third party, Redeman, and cannot be held to account to the creditors of the original owners of the stock, Kramer & Becker.
Our Bulk Sales Statute is Chapter 64 of the Acts of the Thirty-seventh General Assembly. In a general way, the statute provides that the sale in bulk of a stock of merchandise shall be void as against the creditors of the seller, unless the seller shall, at least seven days before the sale, make a detailed inventory of the same, and unless the purchaser demand and receive from the seller a written list of names and addresses of the creditors of the seller and the amount of indebtedness due to each, and unless the...
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