National City Bank v. Huey & Martin Drug Co.

• Decision Date: 26 January 1920
• Docket Number: 10336.
• Citation: 102 S.E. 516,113 S.C. 333
• Parties: NATIONAL CITY BANK v. HUEY & MARTIN DRUG CO. ET AL.
• Court: South Carolina Supreme Court

102 S.E. 516

113 S.C. 333

NATIONAL CITY BANK v. HUEY & MARTIN DRUG CO. ET AL.

No. 10336.

Supreme Court of South Carolina

January 26, 1920

ON PETITION FOR REHEARING March 29, 1920.

Appeal from Common Pleas Circuit Court of York County; Frank B Gary, Judge.

Action by the National City Bank against the Huey & Martin Drug Company and the Calhoun Drug Company, based on indebtedness of the Huey & Martin Company to plaintiff and sale by that company to the Calhoun Company without compliance with the Bulk Sales Law. Verdict for plaintiff for $689.12 was directed against both defendants, and from a judgment entered thereon the defendants appeal. Affirmed.

The sections of the Code of Laws of 1912, requested to be set forth in the report of the case by Gary, C.J., are as follows:

Sec 2434. It shall be unlawful for any merchant or corporation engaged in the buying and selling of merchandise, while he or it is indebted to any person or corporation, to sell his or its entire stock of merchandise in bulk, or to sell the major portion thereof, otherwise than in the ordinary course of trade, in the regular and usual prosecution of the seller's business, and with the intention of ceasing to conduct said business, in the same manner and at the same place as he or it has heretofore conducted the same, without first making a full and complete inventory of the merchandise so proposed to be sold, in which inventory the values shall be extended at the ruling wholesale price thereof; and without further making a full, true and correct schedule of all persons or corporations to whom he or it is indebted, stating therein the post office address of each of said creditors, and the amount owing to each of them to which inventory and schedule there shall be attached the oath of the seller that the same is true and correct; or if the seller shall assert that he or it is not indebted to any person or corporation, he or it shall make affidavit to that effect and deliver the same to the purchaser, with the inventory, as hereinafter provided. The seller shall deliver said inventory and schedule to the proposed purchaser, and shall retain exact copies thereof in his or its own possession; the seller and the purchaser shall each preserve such inventory, schedule and affidavit for the period of six months after such sale and purchase, and the same shall be open to the inspection of the creditors of the seller. Ten days before such sale shall be consummated, and before the purchaser take possession of the merchandise so proposed to be sold, the seller and proposed purchaser shall join in giving written or printed notice of the proposed sale and purchase of such merchandise to each of the creditors named in such schedule; such notice may be delivered in person to such creditors, or transmitted to them by registered letter through the United States mail, by being deposited in the United States post office at the place where the seller has heretofore conducted business or nearest thereto, properly addressed to the respective creditors at the post office address given in such schedule, with proper postage affixed such notice shall state the aggregate value of the merchandise proposed to be sold as shown by such inventory, the consideration to be paid therefor, and the time and manner of making such payment. If said seller shall fail to make such inventory of such merchandise, or if such inventory shall fail to state the true value of said goods as above required, or if said seller shall fail to make such true schedule of creditors as hereinafter provided, and the purchaser shall have knowledge of that fact, or in event the seller shall assert that there are no debts against him or it, if the purchaser shall fail to require the affidavit above provided, or if the seller and purchaser shall fail to give each of said creditors named in said schedule the notice above required in the manner above provided, or if such notice shall not correctly state the amount of such merchandise proposed to be sold, and the consideration to be paid therefor, and the time and manner of making the same, then and in either of such events such sale shall prima facie be presumed to be fraudulent and void as against the creditors of such seller, and the merchandise in the hands of the purchaser, or any part thereof, if it shall be found in his or its hands, shall be liable to such creditors, and in event the same, or any part thereof, shall be withdrawn by said purchaser, then the purchaser himself or itself personally shall also be liable to said creditors of such seller to the extent of the value of the merchandise so received by him or it and thus withdrawn.

Sec. 2435. Whenever a notice, as provided in section 1488, is sent by registered mail, the creditor or person to whom the notice is mailed shall be presumed conclusively to have received the notice, and the time of the notice shall be dated from the time of the mailing and registration, or actual service of said notice.

Sec. 2436. Except as expressly provided in the preceding sections, nothing therein contained, nor any act thereunder, shall change or affect the present rules of evidence or the present presumption of law.

Gary, C.J., dissenting in part.

J. H. Foster and Wm. J. Cherry, both of Rock Hill, for appellants.

Dunlap & Dunlap, of Rock Hill, for respondent.

HYDRICK J.

I think the judgment is right and ought to be affirmed. There was no prejudicial error. If it be conceded that the issues were all equitable, and therefore triable by the court, they were so tried. The preliminary ruling that certain issues were triable by jury was not prejudicial, because no issue was in fact submitted to the jury.

The statute starts out by denouncing as unlawful certain sales, without compliance with its provisions, which are in the main: (1) The making of a complete inventory; (2) a true schedule of the seller's creditors, or an affidavit of no indebtedness; and (3) the giving of joint notice by seller and purchaser to each creditor of the proposed sale. It then goes on to provide that, if the seller shall fail to make such inventory, or if the same shall fail to state the true value of the goods as required, of if the seller shall fail to make such true schedule of his creditors as required, and the purchaser shall have knowledge of that fact, or if the seller asserts that he owes no debts and the purchaser fails to require the affidavit of that fact, or if the joint notice is not given to each creditor, or if the same be incorrect as to the amount and consideration of the sale and the time and manner of payment therefor, "then and in either of such events, such sale shall prima facie be presumed to be fraudulent and void as against the creditors of such sellers," etc.

The intention of the Legislature was that, if a sale within the terms of the statute be made without any attempt to comply with the provisions thereof, it should be held to be unlawful, and voidable at the instance of a creditor of the seller who may be injured thereby, without regard to the intention of the parties to the sale. But if the parties attempt to comply with the provisions of the statutes, and fail in some particular or particulars, such failure shall not necessarily have the effect of making the sale void, but it shall only have the effect of raising a presumption that it is fraudulent. The difference lies in the failure to make any effort at all to comply with the provisions of the statute, and in making an effort which falls short of a legally sufficient compliance. In the first case, the sale is unlawful. In the second, it is only presumptively so--the presumption being slight or strong, according to the nature and extent of the failure and the circumstances of it. For example, notwithstanding the exercise of reasonable care and diligence, errors or omissions may occur in making the inventory, or the schedule of creditors, or in complying with other requirements of the statute. In such cases the act creates only a prima facie presumption of fraud which may be rebutted by showing the good faith of the parties to the sale and honest and diligent efforts to comply with the statute. No doubt the provision was intended to prevent fraudulent evasions of the statute, and to stimulate the parties to make an honest effort to...