Dodd v. Raines
| Decision Date | 26 September 1924 |
| Citation | 1 F.2d 658 |
| Parties | DODD v. RAINES. |
| Court | U.S. District Court — Northern District of Georgia |
W. S. Dillon and Wm. J. Davis, Jr., both of Atlanta, Ga., for plaintiff.
Hendrix & Buchanan, of Atlanta, Ga., for defendant.
This is a plenary suit in equity and a motion to dismiss it. No question is made as to the jurisdiction in equity or in the federal court, but the contention is that no cause of action in law or equity exists in the trustee in bankruptcy to recover the amount sued for. According to the bill, the bankrupt, on January 10, 1924, the date of the bankruptcy not being alleged, sold the entire stock of merchandise in one of his two stores to Lewis Raines for $6,700, paid in cash and in notes which were discounted. The suit is against the purchaser for the full value of the stock of merchandise, which has since been disposed of. The claim is that in the sale there was no compliance with the bulk sales statute of Georgia (Civ. Code, § 3226 et seq.), which requires a sworn list of creditors, with their addresses, and a statement of his assets and liabilities, to be furnished by the seller, and that a written notice be given, five days before payment, by the purchaser to each creditor, by registered mail, of the terms and conditions of sale, with copy of statement of assets and liabilities. On failure to comply with these requirements, the statute declares "such sale or transfer shall, as to any and all creditors of the vendor, be conclusively presumed to be fraudulent." Civ. Code, § 3228. Neither insolvency nor actual fraud is alleged.
1. No public policy is involved in the Georgia act. Bulk sales are not thereby prohibited nor penalized. The only purpose is to give creditors such notice as will tend to prevent frauds on them, and give them a fair chance to secure payment from the proceeds of the sale. Manifestly the duties imposed on seller and purchaser, respectively, of furnishing a list of creditors and giving them notice, relates only to then existing creditors. These alone could be listed, and they alone are sought to be protected. The words "as to any and all creditors of the vendor," above quoted, refer to those creditors to whom the duty of listing and notice is due. Where there was no actual purpose of defrauding future creditors, they have no concern in the matter. They could not avoid a bulk sale which occurred before they extended credit solely because of a noncompliance with this statute. Compare First National Bank v. Bayless, 96 Ga. 684, 23 S. E. 851. And the existing creditors who are not paid may attack the sale only to the extent necessary to collect their debts. They may not in any other sense avoid or set it aside.
2. On bankruptcy of the seller, these creditors, unless they have acquired some specific lien, lose their right to proceed against the stock sold or its proceeds, and the right passes to the trustee in bankruptcy. The trustee's right as to transfers void against creditors is dealt with by sections 67e, 70a, and 70e of the Bankruptcy Act (Comp. St. §§ 9651, 9654). Section 67e positively invalidates transfers by the bankrupt made within four months before the filing of the petition "with the intent * * * on his part to hinder, delay, or defraud his creditors," except as to bona fide purchasers, makes the property so transferred to pass to the trustee, and requires him to reclaim it and administer it for the creditors. To come within this provision, which operates independently of state law, there must be the actual intent mentioned. The presumption of fraud raised by the Georgia bulk sales law is not its equivalent.
Section 67e next invalidates similar transfers made while insolvent and within four months of bankruptcy, which are held void as to creditors by the law of the state or territory in which the property is situated. But in the present case there is no allegation of insolvency, so that this clause does not apply.
Section 70a vests title in the trustee to all property transferred by the bankrupt in fraud of his creditors. This is to be construed with 67e and 70e,...
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Thomas E. Hogan, Inc. v. Berman
...subs. a(4), e, and this included the right of the creditor to set aside a transfer made in contravention of the Bulk Sales Act. Dodd v. Raines, D.C., 1 F.2d 658;Gross v. Grossman, 5 Cir., 2 F.2d 458;Pratt Paper Co. v. Eiffler, 196 Iowa 199, 194 N.W. 370;Union Guardian Trust Co. v. Detroit C......
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Thomas E. Hogan, Inc. v. Berman
...110a (4), e, and this included the right of the creditor to set aside a transfer made in contravention of the bulk sales act. Dodd v. Raines, 1 F.2d 658. Gross Grossman, 2 F.2d 458. Pratt Paper Co. v. Eiffler, 196 Iowa, 199. Union Guardian Trust Co. v. Detroit Creamery Co. 265 Mich. 636. Mo......