Kranke v. American Fabrics Co.

• Decision Date: 31 July 1930
• Citation: 112 Conn. 58,151 A. 312
• Court: Connecticut Supreme Court
• Parties: KRANKE v. AMERICAN FABRICS CO.

151 A. 312

112 Conn. 58

KRANKE v. AMERICAN FABRICS CO.

Supreme Court of Errors of Connecticut.

July 31, 1930

Appeal from Superior Court, Fairfield County; Carl Foster. Judge.

Action by Eric O. Kranke against the American Fabrics Company to recover damages, a decree declaring a transfer of machinery to defendant void, or other equitable relief. Judgment for defendant, and plaintiff appeals.

Error and judgment reversed, with directions.

Frank L. Wilder, of Bridgeport, for appellant.

David S. Day, of Bridgeport, for appellee.

Argued before WHEELER, C.J., and MALTBIE. HAINES, HINMAN, and BANKS JJ.

WHEELER, C.J.

The Kellner Lace Corporation on January 20, 1926, owned and used machinery in the manufacture and sale of goods at wholesale in New Jersey where, on this date, the plaintiff, Kranke obtained a judgment against it for $1,610 with costs amounting to $43.12. On February 18, 1926, the corporation entered into an agreement with the plaintiff with a view to adjusting and compromising their differences relative to this judgment, by which the plaintiff agreed to accept $875 in full settlement of this judgment, and the corporation agreed to pay the $875 and to pay it from the rentals received from defendant for rental of its factory by defendant, and in consideration thereof plaintiff agreed to discharge and satisfy this judgment and to take no further steps to levy on goods of Kellner Lace Corporation, or to collect it in any way unless default in the payment of the $875 or any of the installments be made, " in which event." it was provided, " the agreement shall become null and void."

The Kellner Corporation paid $775 of the $875, and was in default as to the payment of the balance of $100, when about February 6, 1927, the defendant purchased all of the machinery and equipment used in the factory of the corporation from it and removed it to Connecticut. At the time of this transfer there existed in New Jersey a statute which provided that the sale in bulk of the whole or a large part of the stock or merchandise and fixtures, or goods and chattels otherwise than in the ordinary course of trade, and in the regular and usual prosecution of the seller's business, shall be void as against his creditors, unless the purchaser shall make inquiry concerning his creditors and receive from him a list in writing of their names and addresses and the indebtedness to each, and unless the purchaser shall give personal notice of the proposed sale to each of these creditors upon this list or use reasonable diligence to cause personal notice, or notice by registered mail in accordance with the information contained in this list to be given them. The notice, it provides, shall state when and where the transfer is to be made and the consideration to be paid; " provided, however, that no proceedings *** shall be brought against the purchaser to invalidate any such voidable sale after the expiration of ninety days from the consummation thereof." Chapter 208, § 1, p. 377, of the Laws of New Jersey (1915). The contract of transfer was a New Jersey contract and governed by the law of that state. Construing this act, the Chancery Court in New Jersey held: " A sale in bulk is void as to creditors unless the provisions of the act are complied with, but this does not give creditors a claim upon the purchase price. The act implies that, the sale being void, creditors have a remedy at law and in equity; that is, as I take it, creditors may execute their judgment at law by a levy and sale of the goods, or, if unable to execute the judgment by a levy and sale, they may cause the writ to be returned nulla bona, and proceed in equity against the purchaser for the value of the goods, exactly as if the goods had been transferred without consideration, with intent to cheat and defraud creditors." Smith v. Goldner, 92 N.J. Eq. 504, 113 A. 487, 488.

The defendant did not receive from the Kellner Corporation a list of the creditors, nor give to each the notice required by the statute, nor give to this plaintiff such notice, although it then knew the plaintiff was a creditor of the Kellner Corporation. The sale to the defendant was in violation of the statute, and hence void.

The only question in issue which the defendant seriously presses is that its third and fourth defenses constitute valid defenses to the cause of action arising on the complaint. The third defense is that the Kellner Corporation on February 6 1926, entered into a contract in writing compromising and settling the liability of that corporation under the judgment referred to in the complaint, which superseded the judgment. The fourth defense was that the parties to this contract settled the liability of this corporation under the judgment for $875, of which the corporation had paid $775. These defenses are based upon a misconstruction of the contract. The plaintiff by this agreement did not promise to discharge the judgment until the consideration for its agreement had been fully paid. The plaintiff promised that he would take no further steps to collect the judgment unless default was made in any of the installments and if default was made the...