Daly v. Sumpter Drug Co.

• Decision Date: 05 April 1913
• Citation: 155 S.W. 167,127 Tenn. 412
• Parties: DALY et al. v. SUMPTER DRUG CO. et al.
• Court: Tennessee Supreme Court

155 S.W. 167

127 Tenn. 412

DALY et al. v. SUMPTER DRUG CO. et al.

Supreme Court of Tennessee.

April 5, 1913

Appeal from Chancery Court, Giles County; W. S. Bearden, Chancellor.

Bill by Thomas E. Daly and others against the Sumpter Drug Company and others. Decree for defendants, and plaintiffs appeal. Reversed.

Stewart Wilkes, and E. E. Eslick, both of Pulaski, for appellants.

J. D Woodward, of Pulaski, for appellee Elledge.

NEIL C.J.

Prior to May 5, 1910, Ed F. Anderson was engaged in the retail drug business at Pulaski, this state, trading under the name of the Sumpter Drug Company, a name long and favorably known in the business life of that city. On the day just mentioned he sold a half interest in the business to defendant Claud Elledge, at the price of $4,000, of which sum $2,500 was paid in cash, and the residue in short installments, all within a few months. As a part of the transaction of purchase, an equal partnership was formed between the two; the whole stock being estimated at $8,000. At this time Anderson was indebted to various persons in various amounts, aggregating between $7,000 and $8,000. Elledge knew nothing of this indebtedness. He inquired of Anderson as to the extent of his indebtedness pending the negotiations, and was informed that the latter owed only a few hundred dollars; Anderson showing him a book purporting to contain the amounts of these debts, and the names and addresses of the creditors. These Anderson said he would pay out of the purchase money. Anderson owned practically no other property besides the stock of goods, and therefore was really insolvent when he sold to Elledge; but the latter did not know this. Anderson was generally supposed, in Pulaski, to be a man in good circumstances, and possessed of a prosperous business; only a few persons being aware of his real condition. Elledge trusted the general reputation of Anderson, and his promise to pay the few small debts which he admitted owing, and so purchased a half interest in the stock without complying with the Bulk Sales Law. Within three months after the purchase Anderson's creditors began to make themselves known and to demand payment. Elledge disclaimed all obligation to any of them saying boldly to all that he owed them nothing, and would pay them nothing, and if they thought he was bound in any way to sue him, and he would defend himself in court. Anderson paid some of his creditors and postponed some, but left a large number unsatisfied. So matters continued until May 25, 1911, when Anderson suddenly died. Within a few weeks thereafter the present suit was brought against Elledge, to hold him liable for the value of the goods to the extent of the debts described in the bill, less in the aggregate than the value of the half interest he had bought from Anderson. The action was based on the theory that, Elledge having failed to comply with the Bulk Sales Law, his purchase was fraudulent in law, and he had thereby exposed himself to suit by the creditors of Anderson for the value of the goods, as in a case where a conversion has taken place, and the complainant, waiving the tort, sues for the value of the property converted. Between the date of the purchase made by Elledge and the death of Anderson, a period of more than a year, the firm had sold goods at retail and had from time to time replenished the stock, until there was hardly any of the original stock left at the time the bill was filed. After the death of Anderson, his administrator sold the half interest of Anderson's estate to Elledge for $2,750. It does not appear what disposition had been made of this money.

The chancellor granted a recovery in favor of certain of the complainants, and from this decree defendant Elledge, the only real defendant, did not appeal. He dismissed the bill as to complainants Thomas E. Daly and E. E. Bennett, and they have appealed.

It does not appear from the chancellor's decree on what ground he based his decision against the complainants last mentioned as distinct from those to whom he granted relief, but the defendant Elledge interposes several grounds of defense, viz.: That a sale of a half interest in a stock of goods, where the purchaser contemporaneously becomes a partner therein with the seller, does not fall under the Bulk Sales Law, and therefore he was not bound to comply with the terms of that law, and his purchase was not fraudulent in law; secondly, that if he was mistaken in this, still complainants' only remedy was by attachment of the stock of goods, or the half interest he had purchased, and that complainant had no legal right to forego this remedy, and sue him for the value of the goods; thirdly, that complainants had, by failing to sue for more than a year after the purchase, acquiesced in the purchase, and estopped themselves from suing, and had conclusively waived and abandoned any right to sue; fourthly, that by reason of the same lapse of time the complainants must be repelled under the doctrine of laches.

An additional special defense made against Thomas E. Daly was based on the following facts: Daly was bound as surety of Ed F. Anderson to one O. W. McKissack on a promissory note for $1,000. This note was, after maturity, several times extended for the period of a year by the payment of interest in advance, without the knowledge of Daly, the surety; that, notwithstanding this fact, Daly, when called upon for payment by McKissack, after the death of Anderson, did not claim the release and discharge which the law allowed him under these facts, but paid the amount of the note and interest, and took an assignment thereof from McKissack. Hence it is argued he is a mere volunteer, and was not such a creditor as the Legislature had in view when it enacted the Bulk Sales Law. It is further said the right of action, if any, was in McKissack, and that there is no allegation in the bill asserting the right of subrogation to McKissack's right of action. Daly, in the bill, sets out the note in full, alleges that he was surety and that he took an assignment thereof, and sues as holder and owner of the note.

The bill stated fully the facts concerning the sale of the half interest by Ed F. Anderson to Elledge, that the Bulk Sales Law was not complied with, alleged that the sale was fraudulent therefore in law, and also fraudulent in fact, that the stock after such purchase by Elledge had been sold from and replenished from time to time, in the usual course of the business of retail merchandise, until at the time of the filing of the bill the old stock was so intermingled with new purchases that it would be impossible to distinguish the new from the old. The answer admitted that the Bulk Sales Law had not been complied with, averred that full value had been given for the half interest purchased, that defendant made inquiry of Anderson as to the amount of his debts, and was informed that he owed only a few hundred dollars, and these debts he promised to pay out of the cash payment of $2,500, and the answer further denied all fraud.

The prayer of the bill was that complainants be granted a personal judgment against defendant Elledge, that the sale from Ed F....