Dwiggins Wire Fence Co. v. Patterson

• Decision Date: 19 October 1915
• Citation: 179 S.W. 224,166 Ky. 278
• Parties: DWIGGINS WIRE FENCE CO. v. PATTERSON.
• Court: Kentucky Court of Appeals

179 S.W. 224

166 Ky. 278

DWIGGINS WIRE FENCE CO. v. PATTERSON.

Court of Appeals of Kentucky.

October 19, 1915

Appeal from Circuit Court, Nelson County.

Action by the Dwiggins Wire Fence Company against G. S. Patterson. Judgment for defendant in part and action in part dismissed and plaintiff appeals, and defendant prosecutes a cross-appeal. Affirmed on cross-appeal, and reversed on original appeal.

J. A Fulton, Osso W. Stanley, and E. N. Fulton, all of Bardstown for appellant.

J. F. Combs, of Shepherdsville, for appellee.

CLAY C.

This appeal involves both the constitutionality and proper construction of section 2651a, Kentucky Statutes 1915, known as the "Sales in Bulk Statute." The statute is as follows:

"1. A sale by a merchant engaged in business in this state, of any portion of a stock of merchandise, otherwise than in the ordinary course of his trade, and in the regular and usual prosecution of his business, or a sale of an entire stock of merchandise in bulk by such merchant, shall be fraudulent and void, as against the creditors of the seller arising out of said stock of merchandise, unless the purchaser shall, at least five days before the consummation of the sale, in good faith, for the purpose of giving the notice herein required, make inquiry of the seller as to the names and places of residence, or places of business of each and all of the creditors of the seller, arising out of said business, and unless the purchaser, at least five days before the consummation of the sale, shall notify, or use reasonable diligence to cause to be notified, personally, each of the seller's said creditors, or shall deposit in the mail a registered letter of notice, postage prepaid, addressed to each of the seller's said creditors at his post office address, according to the information furnished by the seller of said proposed sale. Said information shall be by written statement by the seller, and the purchaser shall not be responsible to any creditor not mentioned in said written statement. If the purchaser fail to give such notice as herein required, he shall hold the merchandise so purchased for the use and benefit of all the creditors of the seller, and shall be responsible to them for the fair value of such part thereof as he, the purchaser, may have transferred or conveyed to others. Nothing in this act shall be deemed or construed in anywise to authorize or validate any sale made with intent to delay, hinder or defraud creditors, purchasers or other persons, but such sales made with such intent shall be governed and controlled as provided by an act of the General Assembly, approved December 20, 1892, entitled, 'An act in relation to fraudulent and preferential conveyances, and entitled "Fraudulent and Preferential Conveyances," and the amendments thereto.'

2. * * * All civil actions brought under this act shall be instituted within ninety days of the consummation of the sale.

3. * * * The seller shall make full and truthful answer to each and all of the inquiries made of him by the purchaser, as required in section 1, and if such seller shall knowingly and willfully make or deliver, or cause to be made or delivered, to said purchaser any false answer to such inquiries, or shall induce a sale by refusing to make answer to such inquiries, or by fraudulently claiming or pretending ignorance of the matters called for by such inquiries, then in each of said cases said seller shall be deemed guilty of a misdemeanor, and upon indictment and conviction thereof in the county where said acts are done, he shall be punished, in the discretion of the jury, by a fine of not less than one hundred nor more than five hundred dollars, or by confinement in the county jail not less than thirty days nor more than six months, or both so fined and imprisoned.

4. * * * Nothing contained in this act shall apply to sales made under any order of a court, or to any sales made by executors, assignees, administrators, receivers, or any public officer in his official capacity, or by any officer of a court:

Provided, that nothing in this act shall be so construed as to give any manufacturer, wholesale merchant or jobber any right to or lien on any merchandise or article in any stock of goods, except goods sold and delivered by such manufacturer, wholesale merchant or jobber."

The controversy arose in the following manner: J. W. Edwards owned and conducted a general merchandise store in the town of Boston, in Nelson county. The Dwiggins Wire Fence Company sold to Edwards certain merchandise, for which Edwards, on January 2, 1914, executed to the company five promissory notes, amounting to $200 each, payable in four, five, six, seven, and eight months from date, with 6 per cent. interest. Each of the notes provided that in case of default on any one of the notes all should become due. In the month of April, 1914, Edwards sold and transferred his entire stock of merchandise to G. S. Patterson. Neither Patterson nor Edwards complied with the provisions of the above statute. On May 20, 1914, this action was brought by the Dwiggins Wire Fence Company against G. S. Patterson to recover of Patterson and subject the stock of goods to payment of plaintiff's debt. On the trial it appeared that of the wire fence sold by plaintiff to Edwards, the purchaser, Patterson, received only $213.17 worth. Of this he had disposed of $168.28 worth, and still had on hand wire fence of the value of $44.89. It was stipulated that the value of the entire stock of merchandise exceeded $1,000. The trial court adjudged that plaintiff recover of Patterson the sum of $168.28, with interest, and further adjudged the plaintiff was entitled to recover in kind the remainder of the wire fence of the value of $44.89. So much of the petition as sought to subject the entire stock of goods or the value thereof to the satisfaction of plaintiff's claim, and so much of the petition as sought to have the merchandise, with the exception of the wire on hand at the time of the sale, held in trust for the benefit of plaintiff and the other creditors of Edwards, was dismissed. From a judgment so entered, plaintiff appeals, and defendant Patterson prosecutes a cross-appeal.

The first question to be considered is the constitutionality of the statute. If resort be had to authority, it will be found that there is an irreconcilable conflict in the opinions of the courts. Similar statutes have been enacted in a number of states. In New York, Ohio, Indiana, Illinois, and Utah they have been declared unconstitutional. Wright v. Hart, 182 N.Y. 350, 75 N.E. 404, 2 L.R.A. (N. S.) 338, 3 Ann.Cas 263; Miller v. Crawford, 70 Ohio St. 207, 71 N.E. 631, 1 Ann.Cas. 558; McKinster v. Sager, 163 Ind. 671, 72 N.E. 854, 68 L.R.A. 273, 106 Am.St.Rep. 268; Off v. Morehead, 235 Ill. 40, 85 N.E. 264, 20 L.R.A. (N. S.) 167, 126 Am.St.Rep. 184, 14 Ann.Cas. 434; Block v. Schwartz, 27 Utah 387, 76 P. 22, 65 L.R.A. 308, 101 Am.St.Rep. 971, 1 Ann.Cas. 550. On the other hand, statutes of like import have been held valid in Mississippi, Massachusetts, Connecticut, Tennessee, Washington, Georgia, Michigan, Minnesota, Pennsylvania, and Oklahoma. Moore Dry Goods Co. v. Jas. H. Rowe et al., 97 Miss. 775, 53 So. 626; John P. Squire & Co. v. Tellier, 185 Mass. 18, 69 N.E. 312, 102 Am.St.Rep. 322; Young v. Lemieux, 79 Conn. 434, 65 A. 436, 600, 20 L.R.A. (N. S.) 160, 129 Am.St.Rep. 193, 8 Ann.Cas. 452; Walp v. Mooar, 76 Conn. 515, 57 A. 277; Neas v. Borches, 109 Tenn. 398, 71 S.W. 50, 97 Am.St.Rep. 851; McDaniels v. J. J. Connelly Shoe Co., 30 Wash. 549, 71 P. 37, 60 L.R.A. 947, 94 Am.St.Rep. 889; Jacques & T. Co. v. Carstarphen Warehouse Co., 131 Ga. 1, 62 S.E. 82; Spurr v. Travis, 145 Mich. 721, 108 N.W. 1090, 116 Am.St.Rep. 330, 9 Ann.Cas. 250; Thorpe v. Pennock Mercantile Co., 99 Minn. 22, 108 N.W. 940, 9 Ann.Cas. 229; Wilson v. Edwards, 32 Pa. Super. Ct. 295; Feingold v. Steinberg, 33 Pa. Super. Ct. 39; Williams v. Fourt Nat. Bank, 15 Okl. 477, 82 P. 496, 2 L.R.A. (N. S.) 334, 6 Ann.Cas. 970; Noble v. Fort Smith Wholesale Grocery Co., 34 Okl. 662, 127 P. 14, 46 L.R.A. (N. S.) 455. In Wisconsin and Maryland the courts did not consider the question of constitutionality, but assumed the acts to be valid. Fisher v. Herrmann, 118 Wis. 424, 95 N.W. 392; Hart v. Roney, 93 Md. 432, 49 A. 661. Those courts hol...