Cliftex Clothing Co. v. Di Santo

• Citation: 88 R.I. 338,148 A.2d 273
• Decision Date: 13 February 1959
• Docket Number: No. 9912,9912
• Parties: CLIFTEX CLOTHING CO., Inc. v. Thomas DI SANTO. Ex.
• Court: Rhode Island Supreme Court

Page 273

148 A.2d 273

88 R.I. 338

CLIFTEX CLOTHING CO., Inc. v. Thomas DI SANTO.

Ex. No. 9912.

Supreme Court of Rhode Island.

Feb. 13, 1959.

Adelson, Chernick & Decof, Melvin A. Chernick, Providence, for plaintiff.

Anthony E. Grilli, Providence, for defendant.

CONDON, Chief Justice.

This is an action of trespass on the case for fraud. It was tried before a justice of the superior court, sitting without a jury, who rendered a decision for the plaintiff. The case is here on the defendant's bill of exceptions which alleges numerous exceptions including one to such decision. On our view of the case it will be necessary to discuss only that exception.

The trial justice found from the following facts that defendant was guilty of actionable fraud on the plaintiff. The defendant in his capacity as president of Harborside Purchasing Company, a Rhode Island corporation, transferred all of its stock of merchandise and fixtures, but not in the usual course of trade, to Salbro, Inc. for a valuable consideration and gave to the purchaser a bill of sale together with an affidavit in which he stated 'that said corporation has no creditors to the best of my knowledge and belief.' At that time Harborside Purchasing Company was indebted to plaintiff in the sum of $4,463.65, which has since been reduced to $2,176.88. It is clear from the evidence that defendant knew of this indebtedness when he made the affidavit.

The plaintiff successfully contended before the trial justice and it contends here that defendant's false statement deprived it of the opportunity of enforcing collection of Harborside's indebtedness by attachment of its stock and fixtures. The plaintiff offered no evidence that it had foregone resort to that remedy as a result of a promise by defendant to pay such indebtedness. However, it takes the position that the false affidavit itself was sufficient to make defendant liable in an action of fraud and deceit by virtue of the provisions of General Laws 1956, § 6-16-2, otherwise known as the Bulk Sales Act.

In support of that view it cites In re De Nomme, D.C.R.I., 214 F. 671, 672, which held that such a false affidavit was a fraud on creditors in that it deprived them 'of the opportunity to protect their rights afforded by the statute.' The plaintiff also relies on O'Gorman v. Haber, 50 R.I. 351, 147 A. 882. The Bulk Sales Act was not involved in this case, but plaintiff claims it is nevertheless in point because this court therein held that a false promise by a debtor which deprived his creditor of his remedy to enforce collection of the debt by attachment was an actionable fraud.

The defendant contends that the Bulk Sales Act does not apply. He argues that it is expressly limited to rendering a sale fraudulent as to creditors only where the purchaser has not complied with its requirements. He further contends that to construe it more broadly as was done in In re De Nomme, supra, would be an unwarranted liberal construction, since the act is clearly in derogation of the common law and therefore should be given a strict construction.

Our act reads as follows: 'Notice to creditors of bulk sales.--The transfer of the major part in value of the whole of a stock of merchandise and fixtures, or merchandise or fixtures, otherwise than in the ordinary course of trade and in the regular and usual prosecution of the transferor's business, whether in one or more parcels or to one or more persons, provided the transfer is all part of substantially one (1) transaction or proceeding, or occurs substantially at one (1) time, shall be fraudulent and void as against all persons who are creditors of the transferor at the time of such transfer, unless the transferee demands and receives from the transferor a written list of the names and addresses of the creditors of the transferor and certified by him, under oath, to be, to the best of his knowledge and belief, a full, accurate, and complete list of his creditors; and unless the transferee shall, at least five (5) days before such transfer, notify personally, or by registered or certified mail, every creditor whose name and address is stated in said list of the proposed transfer, and shall also, in case the transferor is a corporation, notify the general treasurer of the proposed transfer within said period of said proposed transfer.'

In our opinion those statutory provisions are not broad enough to embrace the instant case and render defendant's affidavit a false representation sufficient in and of itself upon which to base an action of fraud and deceit. This court has heretofore had occasion to consider this act in Glantz v. Gardiner, 40 R.I. 297, 100 A. 913, L.R.A.1917F, 226, and we construed it strictly according to its phraseology. In that case a purchaser received from the seller a list of his creditors and thereafter did all the things required of him by the statute. However, it appeared that such list was not complete in that one creditor had been omitted. The purchaser learned of this after he had received the list but before the transfer was completed. The omitted creditor contended that this rendered the sale fraudulent as to him.

In rejecting that contention, 40 R.I. at page 304, 100 A. at page 915, the court stated: 'The statute declares the sale void only on the failure of the purchaser to do what is required of him. It does not declare the sale void if...