Coleman v. Costello

• Decision Date: 09 February 1924
• Docket Number: 24,993
• Citation: 115 Kan. 463,223 P. 289
• Parties: JAMES P. COLEMAN, Trustee, etc., Appellee, v. LEE COSTELLO, Appellant
• Court: Kansas Supreme Court

223 P. 289

115 Kan. 463

JAMES P. COLEMAN, Trustee, etc., Appellee, v. LEE COSTELLO, Appellant

No. 24,993

Supreme Court of Kansas

February 9, 1924

Decided January, 1924.

Appeal from Geary district court; CASSIUS M. CLARK, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. STOCK OF MERCHANDISE--Sold Without Compliance With Bulk-sales Act--Creditor With Full Knowledge of Sale Accepted Cash in Part Payment and a Demand Note for Balance of His Claim--No Waiver by Creditor of Right to Look to Stock of Merchandise for Final Satisfaction of His Claim. Actual knowledge by a creditor that his debtor was about to sell his stock of merchandise in bulk, and later knowledge that such debtor had sold the same and that neither buyer nor seller had made any effort to comply with the provisions of the bulk-sales act and a later acceptance by the creditor of a payment on the account due him from the debtor, and a still later acceptance of a demand promissory note for the balance due the creditor--neither of these incidents, nor all of them together, can be held to constitute a waiver of the creditor's right to look to the stock of merchandise for the final satisfaction of his claim, where there was no showing of prejudice to the rights of the purchaser of the stock of merchandise involved therein.

2. SAME--Conduct of Other Minor Creditors No Waiver of Their Rights. Minor claims of other creditors against the stock of merchandise sold without compliance with the bulk-sales act, and the evidence relied on to constitute a waiver of their rights, examined, and the defense of waiver not sustained, nor any fact disclosed which would require a denial of judgment in their behalf.

James V. Humphrey, and A. S. Humphrey, both of Junction City, for the appellant.

Robert Stone, George T. McDermott, Robert L. Webb, Beryl R. Johnson, all of Topeka, and I. M. Platt, of Junction City, for the appellee.

OPINION

DAWSON, J.:

This action grows out of the sale and purchase of the merchandise stock of a drug store in disregard of the bulk-sales act.

For some time prior to June, 1920, one Frank P. Kibbey conducted a drug store in Junction City, and as an incident thereto he dealt in phonographs which he bought at wholesale from one of his creditors, the Great Eastern Manufacturing Company of Chicago, giving that concern his own trade acceptances therefor. He sold these phonographs at retail and received so-called trade acceptances as pay or part pay therefor. Kibbey turned over to the Chicago firm the latter acceptances as collateral security to his own acceptances.

On June 26, 1920, the defendant, Lee Costello, bought Kibbey's entire mercantile stock of goods. No attempt was made to comply with any of the provisions of the bulk-sales act. (R. S. 58-101 et seq.) The mercantile stock and fixtures were valued at $ 20,000; Kibbey's liabilities were $ 28,000. Later, Kibbey became a voluntary bankrupt, and plaintiff was appointed federal trustee of his bankrupt estate. Claims aggregating $ 21,368 against Kibbey were satisfied, and this action is to subject the stock transferred to Costello to the payment of certain remaining indebtedness of Kibbey.

For answer, the defendant Costello, in part, pleaded that while negotiations between Kibbey and defendant for the purchase of the stock were pending, Kibbey, who was then indebted to the Chicago company in the sum of $ 5,955.11, informed that creditor that he was about to make the sale, and after the sale was consummated he informed that creditor that the sale had been effected; and that the Chicago company, with full knowledge of the sale, orally agreed with Kibbey to cancel and surrender the trade acceptances it held against him, and in lieu thereof to take Kibbey's note due on demand for $ 5,995, and that this agreement was performed.

Claims of certain other creditors were also involved in this action. These will be noticed below.

The trial court made findings of fact and conclusions of law, and gave judgment for the plaintiff trustee on the claims of the Chicago company and of two other creditors, the Tri-State Sales Company of Kansas City, Mo., and the Steinburg corporation.

Defendant appeals, contending that the special findings and undisputed testimony disclosed that the Chicago company had waived its right to look to the Kibbey stock of merchandise in Costello's possession for the satisfaction of its claim. This waiver is sought to be established by these facts:

(a) On June 11, Kibbey notified the Chicago creditor of his intention to sell. (b) About July 1, Kibbey notified the Chicago creditor that he had sold the store and contents to Costello. (c) The Chicago creditor insisted on receiving part of the proceeds, and Kibbey accordingly paid to it "several hundred dollars." (d) The Chicago creditor accepted Kibbey's demand note for the balance due, and turned over to him the trade acceptances. (e) That the undisputed evidence (the foregoing) showed a settlement of Kibbey's debt to the Chicago creditor and a consequent waiver of any claim or right under the bulk-sales act.

There are cases, of course, where the taking of a note for pre-existing debt has been construed as a settlement and a consequent waiver or renunciation of some other recourse which might have furnished satisfaction to the creditor. (Lanphear v. Ketcham, 53 Kan. 799, 37 P. 119; Bank v. Chatten, 69 Kan. 435, 77 P. 96.) On the other hand, our own decisions have repeatedly held that the taking of a note for an antecedent debt is not a satisfaction or extinguishment of it in the absence of an express agreement of the parties that it was so intended. (Bank v. Cooper, 99 Kan. 731, 162 P. 1169, and precedents cited and quoted therein; Bank v. Hoyt, 103 Kan. 44, 172 P. 994.) It cannot be said that any express agreement was made between the Chicago creditor and Kibbey that the former should waive its rights under the bulk-sales act. Such waiver could scarcely arise unless the creditor had voluntarily and intentionally renounced his claim against the stock of goods in defendant's possession, and some act inconsistent with the creditor's right, or inaction of the creditor leading to the prejudice of a third party like defendant, would have to be shown to constitute a waiver. Certainly the fact that the Chicago creditor did not institute an action forthwith on receipt of the information that Kibbey had disposed of the merchandise stock was not a waiver. The creditor might accept a "few hundred dollars" on account, might turn over to the debtor trade acceptances to be collected and applied on the debt, might take a demand note for the balance due, might give the creditor time to straighten out his affairs, might forbear to commence an action to enforce his statutory right as long as the statute of limitations would...