Oregon Mill & Grain Co. v. Hyde

• Decision Date: 15 January 1918
• Citation: 169 P. 791,87 Or. 163
• Parties: OREGON MILL & GRAIN CO. v. HYDE (KIRKPATRICK, GARNISHEE.
• Court: Oregon Supreme Court

169 P. 791

87 Or. 163

OREGON MILL & GRAIN CO. v. HYDE (KIRKPATRICK, GARNISHEE.

Supreme Court of Oregon, En Banc.

January 15, 1918

Appeal from Circuit Court, Baker County; J. W. Knowles, Judge.

Action by the Oregon Mill & Grain Company against H. G. Hyde defendant, with Chauncey Kirkpatrick, doing business under the name of the Kirkpatrick Grocery, as garnishee. Judgment for plaintiff against the garnishee, and the garnishee appeals. Affirmed.

See also, 66 Or. 21, 133 P. 69; 78 Or. 466, 153 P. 41, 488.

Chauncey Kirkpatrick has appealed from a judgment which was rendered against him as garnishee after the issuance of an execution on a judgment that had been obtained by the Oregon Mill &amp Grain Company, a corporation, against H. G. Hyde, who once owned a grocery store. Hyde purchased goods for his business and became indebted to various wholesalers, including the Oregon Mill & Grain Company. In the early days of 1911, Hyde sold his business and the entire stock of goods, valued at $4,000, to Chauncey Kirkpatrick, who, in addition to a specified sum to be paid to Hyde, agreed to pay certain creditors who had sold goods to Hyde for use in the business. Hyde gave a bill of sale to Kirkpatrick, and this instrument contains a list of Hyde's creditors to be paid by Kirkpatrick. The name of the Oregon Mill & Grain Company does not appear in the list.

On February 14, 1912, the Oregon Mill & Grain Company commenced an action against Kirkpatrick to recover from him the amount which Hyde owed the corporation, on the theory that Kirkpatrick had agreed to pay Hyde's indebtedness to it. The goods in the store were attached as the property of Kirkpatrick. A trial resulted in a directed verdict and judgment for Kirkpatrick, and upon appeal to this court the judgment was affirmed in an opinion delivered in June, 1913 and reported in 66 Or. 21, 133 P. 69, on the ground that the bill of sale constituted the only competent evidence of the terms of sale, and that, since the name of the Oregon Mill &amp Grain Company did not appear among the names of the creditors given in the bill of sale, the corporation was without competent evidence to prove the agreement alleged by it.

Having failed in its attempt to recover from Kirkpatrick the Oregon Mill & Grain Company began an action against Hyde on September 25, 1913, to recover the price of the goods sold to him by the corporation. This action terminated on January 14, 1914, in a stipulated judgment for $716 against Hyde. An execution was issued on this judgment on January 30, 1914, and a copy of it and a notice of garnishment were left with Kirkpatrick, who responded to the notice by certifying on February 20, 1914, that he had nothing in his possession or under his control "of any nature or description belonging to H. G. Hyde." Not being satisfied with the certificate given by Kirkpatrick, the corporation obtained an order, as permitted by section 303, L. O. L., requiring the garnishee to appear for examination. Written allegations and interrogatories were served upon the garnishee in compliance with section 315, L. O. L.

In the meantime, on February 5, 1914, Hyde had begun a suit against Kirkpatrick to reform the bill of sale by inserting in it the name of the Oregon Mill & Grain Company as one of the creditors to be paid by Kirkpatrick. Because of the pendency of the suit in equity, the parties to the garnishment proceeding stipulated on November 5, 1914, that its progress should be stayed until a determination of the suit. A trial of the suit in the circuit court resulted in a decree reforming the bill of sale, as prayed for, and a judgment in favor of Hyde for $535.62, which was found to be the amount due from Hyde to the corporation. Upon an appeal to this court we rendered an opinion, reported in 78 Or. 466, 153 P. 41, 488, in November, 1915, setting aside the judgment, reversing the decree, and dismissing the suit, on the ground that the demurrer to the complaint should have been sustained because the pleading was not sufficient. It also appears that on December 5, 1914, Hyde commenced an action against Kirkpatrick to recover $661.77, but subsequently on January 19, 1915, the action was dismissed on the motion of Hyde.

After the termination of the suit in equity, the circuit court, on January 18, 1916, heard and overruled a motion which the garnishee had filed against the allegations served upon him in the garnishment proceeding. The governing theory upon which the allegations were framed was that the sale to Kirkpatrick was void as against the Oregon Mill & Grain Company because made without compliance with the requirement of the bulk sales act, and that therefore Kirkpatrick stood in the position of a third person holding Hyde's property. The motion which the garnishee had filed and the court had overruled was directed against those parts of the allegations which referred to the violation of the bulk sales act. The garnishee then returned the allegations and interrogatories with his written answer as directed by section 316, L. O. L. The answer reiterates the affirmation made in the certificate that the garnishee neither owed Hyde any money nor had any property belonging to him. The garnishee refers to the action which Hyde commenced on December 5, 1914, and dismissed on January 19, 1915, narrates all the steps taken from the beginning to the end of the action prosecuted by the Oregon Mill & Grain Company against Kirkpatrick, and recites the entire story of the suit in equity brought by Hyde against Kirkpatrick; and, based upon these facts, the garnishee pleads the defense of former adjudication, and also alleges that the Oregon Mill & Grain Company ought to be estopped to claim that the grocery store belonged to Hyde, because by prosecuting the action against Kirkpatrick the corporation elected to treat the store as property belonging to him.

Replying to the answer of the garnishee, the Oregon Mill & Grain Company explains the action which it unsuccessfully prosecuted against Kirkpatrick by averring that it was informed by both Hyde and Kirkpatrick that the latter would pay the debt owing from the former, and that acting upon such information it pursued a mistaken remedy.

The circuit court concluded that a failure to observe the provisions of the bulk sales act operated to void the sale as against the Oregon Mill & Grain Company, and that therefore Kirkpatrick had in his possession property belonging to Hyde, and a judgment for $716 was accordingly rendered against Kirkpatrick in favor of the company.

M. D. Clifford, of Baker (Clifford & Correll, of Baker, on the brief), for appellant. O. B. Mount, of Baker, for respondent.

HARRIS, J. (after stating the facts as above).

Sections 6069-6072, L. O. L., as amended by chapter 281, Laws 1913, and commonly referred to as the "Bulk Sales Act," requires a written statement under oath containing the names and addresses of the creditors of the vendor, directs the giving of notice to such creditors, and provides that a sale of a stock of goods in bulk without complying with the act "shall, as to any and all creditors of the vendor, be conclusively presumed fraudulent and void." The sale by Hyde to Kirkpatrick was the sale of a stock of goods in bulk, and it was made without attempting to comply with the requirements of the bulk sales act. The judgment in the garnishment proceeding is predicated upon the theory that as against the judgment creditor, the Oregon Mill & Grain Company, the garnishee, Kirkpatrick, had in his possession property belonging to the judgment debtor, Hyde. The appeal is presented on the hypothesis that the suit in equity prosecuted by Hyde against Kirkpatrick and the action at law pursued by the corporation against Kirkpatrick constituted (1) an adjudication that Kirkpatrick was not indebted to Hyde; and (2) an election by the corporation to approve the sale to Kirkpatrick.

The right of a judgment creditor to recover from a garnishee depends upon whether the garnishee has property belonging to, or owes a debt to, the judgment debtor. The garnishee becomes liable to the judgment creditor only because he is indebted to, or has property in his possession belonging to, the judgment debtor. The garnishee may have in his possession property which (1) is in fact, or (2) is in contemplation of law, although not in fact, owned by the judgment debtor. It may be assumed, for the purposes of the instant case, that as between Hyde and Kirkpatrick the latter neither owes nor has in his possession property belonging to the former; and it may also be assumed, but it is not decided, that the court adjudicated in the suit prosecuted by Hyde and in the action maintained by the corporation against Kirkpatrick that the latter did not agree to pay Hyde's debt to the corporation. In brief, in order that the contention of the garnishee may be presented upon a statement of facts most favorable to him it may be assumed that he neither owed Hyde a debt nor agreed to pay Hyde's debt to the corporation; that as between Hyde and Kirkpatrick the latter did not have in his possession any property belonging to the former; and that it has already been determined by a final adjudication that Kirkpatrick did not agree to pay Hyde's debt to the Oregon Mill & Grain Company.

The sale of the stock of goods was valid as between Hyde and Kirkpatrick, and therefore as between them the latter did not have property which in fact belonged to the former. 12 R. C L. 525. The statute, however, interposes and provides that as to the creditors of the vendor the sale shall "be conclusively presumed fraudulent and void," so that while there may be a change of possession there cannot be a transfer of title if the bulk sales act is not complied with, and hence the vendee...