Noble v. Ft. Smith Wholesale Grocery Co.

• Citation: 34 Okla. 662,127 P. 14,1911 OK 310
• Decision Date: 26 September 1911
• Docket Number: Case Number: 1128
• Parties: NOBLE v. FT. SMITH WHOLESALE GROCERY CO.
• Court: Oklahoma Supreme Court

1911 OK 310

127 P. 14

34 Okla. 662

NOBLE v. FT. SMITH WHOLESALE GROCERY CO.

Case Number: 1128

Supreme Court of Oklahoma

Decided: September 26, 1911

Syllabus

¶0 1. CONSTITUTIONAL LAW--Fraudulent Conveyances--Due Process of Law--Equal Protection of the Laws--Bulk Sales Law. The act of May 26, 1908 (Sess. Laws 1907-08, p. 55 [Comp. Laws 1909, sec. 7908]), commonly known as the "Bulk Sales Law," which declares that a sale in bulk shall be presumed to be fraudulent and void as against creditors of the seller unless certain specific conditions have been complied with, is not in contravention of, nor repugnant to, the due process clause, nor the equal protection clause, of the fourteenth amendment of the federal Constitution.

2. FRAUDULENT CONVEYANCES--Bulk Sales Law--Constitutional Law. Neither is said act violative of any of the provisions of the state Constitution.

3. SAME--Police Power. The subject to which the said act relates is clearly within the police powers of the state.

4. SAME--Chattel Mortgage. A chattel mortgage, covering a stock of merchandise, where the mortgagor remains in possession, and has the usual right of redemption, creates a lien only, and does not pass title, and is not a sale, exchange, or assignment within the meaning of said act, and is therefore not within the inhibition of said statute.

5. CHATTEL MORTGAGES-- "Transfer" --Distinction. A "transfer" is the act by which the owner of a thing delivers it to another with the intent of passing the rights which he has in it to the latter, and a chattel mortgage is not within the meaning of such term.

6. SALES--What Constitutes. A "sale" is an agreement by which one of two contracting parties, called the seller, gives a thing and passes title to it in exchange for a certain price, and a chattel mortgage is not within the definition.

7. ASSIGNMENTS--What Constitutes. An "assignment" is a transfer or setting over of property, or of some right or interest therein, from one person to another; the term denoting not only the act of transfer, but also the instrument effecting it.

Error from Le Flore County Court; James F. Hall, Judge.

Action by the Ft. Smith Wholesale Grocery Company against George W. Noble. Judgment for plaintiff, and defendant brings error. Affirmed.

The Ft. Smith Wholesale Grocery Company filed its petition on June 17, 1909, in the county court of Le Flore county, against George W. Noble, and alleged, in substance, that on December 30, 1908, one W. B. Thomas, a merchant, was indebted to plaintiff in the sum of $ 430 for goods, wares, and merchandise, to secure the payment of which a chattel mortgage was executed, and which covered his stock of merchandise, located in said county; that on February 5, 1909, the defendant, who was sheriff of Le Flore county, acting under and by virtue of the authority of a writ of attachment issued out of the county court of Le Flore county, in a suit by the McAlester Grocery Company against said W. B. Thomas, levied upon and took possession of and sold the said stock so covered by the chattel mortgage, without paying the debt which said chattel mortgage secured. At the time of the levy of the attachment process, default had been made in the payment of the debt secured by the mortgage, but the mortgagor remained in possession, and there was due to the mortgagee the sum of $ 350, with interest, for which judgment was prayed. A copy of the mortgage was set up as an exhibit to the petition, and is in the usual form, and provides that the mortgagor shall retain possession of the stock, and that he may sell the same or any portion thereof for cash, and to keep an account of sales, and make a statement of the sales to the mortgagee at stated intervals. The said mortgage was duly executed and filed for record with the register of deeds of said county prior to the levy of the attachment. The defendant answered and admitted all the allegations of the petition, except the legality of the mortgage, claiming that the execution of the mortgage by the debtor was a violation of the "Sale of Merchandise in Bulk Act" (Sess. Laws 1907-08, p. 557 [Comp. Laws 1909, sec. 7908], and that by reason thereof the mortgage was void and of no effect, as against the attaching creditor, the McAlester Grocery Company. The case was tried to the court without a jury upon an agreed statement of fact, and a judgment was rendered by the court in favor of plaintiff for the amount due under the mortgage, and holding the mortgage valid.

Jean P. Day, T. H. Du Bois, and E. L. Taylor, for plaintiff in error

T. T. Varner, for defendant in error

ROBERTSON, C.

¶1 (after stating the facts as above). There are but two questions raised by the record in this case, viz.:

¶2 First. Is the act of May 26, 1908 (Sess. Laws 1907-08, p. 557, [Comp. Laws 1909, p. 1594]), constitutional?

¶3 Second. Is the mortgage of W. B. Thomas to the Ft. Smith Wholesale Grocery Company such a transfer of a stock of goods, wares, and merchandise as to require a compliance with the terms of such act to render it valid as against the creditors of the mortgagor?

¶4 That the act in question is valid and the proper exercise of legislative power and authority there seems to be no doubt. In discussing this identical subject the author of the note in 2 L.R.A. (N.S.) 331, says:

"Statutes regulating the sales and purchase of goods in bulk are of very recent origin. The earliest was that of Louisiana in 1896, but, like mushrooms, they have sprung up in twenty-two states and territories, and already the courts of twelve have passed upon them. The provisions of all have but one aim--to prevent the sale of goods in bulk until the creditors of the seller have been paid in full. * * * The provisions vary somewhat, but there is a very close similarity in the wording of most of them, and a central idea may be traced to all."

¶5 Section 1, Sess. Laws 1907-08, p. 557 (Comp. Laws 1909, sec. 7908), reads as follows:

"Section 1. The transfer of any portion of a stock of goods, wares or merchandise otherwise than in the ordinary course of trade, in the regular and usual prosecution of the transferrer's business, or the transfer of an entire such stock in bulk shall be presumed to be fraudulent and void as against the creditors of such transferrer, and such presumption may be rebutted only by the proposed transferee showing that, at least ten days before the transfer in good faith, he made a sufficient and explicit inquiry of the transferrer as to the name and addresses of each and all of his creditors, and that he demanded and received from such transferrer at least ten days before such transfer, a list of the names and addresses of all of the creditors of such transferrer, showing the amount owing each, which statement must be sworn to by such transferrer and shall include a declaration that it is a correct list of all of his creditors with the post-office addresses and the amount owing each; and that at least ten days before such transfer, he notified or caused to be notified of such proposed transfer, personally or by registered mail, each of the creditors of the transferrer of whom such transferee had knowledge or could, with the exercise of reasonable diligence, acquire knowledge; and that such purchase was made by him in good faith for a fair consideration actually paid."

¶6 And section 3 of the same act (Sess. Laws 1907-08, p. 558 [Comp. Laws 1909, sec. 7910]) is as follows:

"Transfers under this act shall include sales, exchanges and assignments, but nothing contained in the act shall apply to transfers made by executors, administrators, receivers, assignors under a voluntary assignment for the benefit of creditors, trustees in bankruptcy, or to sales under judicial process."

¶7 The Supreme Court of the state of Connecticut, in construing the provisions of Pub. Acts, 1903, c. 72, p. 49, which is very similar to the Oklahoma statute, said:

"The act under consideration is not unconstitutional, either as applying only to a particular class, namely, retail dealers, or as depriving such persons of their property without due process of law. A law which is uniform in its operation is not rendered invalid merely because of the limited number of persons who will be affected by it. The act in question applies equally to all the people of the state who may engage in the business described. The limitation of the act to retail dealers is not an arbitrary classification." (Walp v. Mooar, 76 Conn. 515, 57 A. 277.)

¶8 In John P. Squire & Co. v. Tellier, 185 Mass. 18, 69 N.E. 312, 102 Am. St. Rep. 322, the court sustained it under the police power and also under chapter 1, sec. 1, art. 4 of the state Constitution, which permits the Legislature "to make, ordain and establish all manner of wholesome and reasonable orders, laws, statutes, and ordinances * * * as they shall judge to be for the good and welfare of this commonwealth."

¶9 Although the requirements of the act are very strict, we cannot say that the determination of the Legislature as between the interests of owners of stocks of merchandise and their creditors was so far wrong as to render the statute unconstitutional. Within certain limitations it is for the Legislature to judge of the policy and expediency of a law, if in other respects they have power to enact it.

¶10 In Neas v. Borches, 109 Tenn. 398, 71 S.W. 50, 97 Am. St. Rep. 851, the court said in construing a similar statute:

"That it is merely a regulation of the business of merchandising; that it is not class legislation, and that the limitation of the act to merchants is not an arbitrary classification; that it does not take away the property of the citizen, but only regulates the sales of merchandise in such a manner as to prevent fraud."

¶11 In McDaniels v. Connelly Shoe Co., 30 Wash. 549, 71 P. 37, 60 L.R.A. 947, 94 Am. St. Rep. 889, the court said:

"The act, it is true, does prohibit owners of certain kinds of property from disposing of it in a particular way without

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