Owosso Carriage & Sleigh Co. v. McIntosh & Warren

• Decision Date: 13 October 1915
• Docket Number: (No. 2417.)
• Citation: 179 S.W. 257
• Parties: OWOSSO CARRIAGE & SLEIGH CO. v. McINTOSH & WARREN.
• Court: Texas Supreme Court

Page 257

179 S.W. 257

OWOSSO CARRIAGE & SLEIGH CO. v. McINTOSH & WARREN.

(No. 2417.)

Supreme Court of Texas.

October 13, 1915.

Error to Court of Civil Appeals of Third Supreme Judicial District.

Action by the Owosso Carriage & Sleigh Company against C. K. Sweet and McIntosh & Warren, garnishee. A judgment in part for plaintiff against the defendant garnishee was reversed and remanded by the Court of Civil Appeals (146 S. W. 239), and plaintiff brings error. Judgment of Court of Civil Appeals reversed, and that of trial court affirmed.

I. J. Rice, of Brownwood, for plaintiff in error. T. C. Wilkinson, of Brownwood, for defendant in error.

YANTIS, J.

This case involves, as the main questions, the constitutionality of what is commonly known as the "Bulk Sales Law," passed by the Thirty-First Legislature, and the effect of the service of the writ of garnishment upon the proceeds of the sale of merchandise which was purchased by McIntosh & Warren, defendants in error, at private sale, and not in the ordinary course of trade, but in bulk, and in violation of all the provisions of said bulk sales statute, and afterwards resold by them and converted into cash prior to the service of the writ of garnishment upon them, which was issued at the instance of the Owosso Carriage & Sleigh Company, plaintiff in error.

Trial in the court below was had on an agreed statement of facts, which showed, substantially, as follows:

One C. K. Sweet was engaged in the implement, vehicle and hardware business in the town of Brownwood. The evidence strongly indicates that on the 10th day of August, 1909, he was insolvent. On said date, and for at least 30 days prior thereto, he was indebted to the plaintiff in error, a foreign creditor, in the sum of $1,700 for vehicles, etc., sold him by the plaintiff in error for use in said business. He was also indebted to various other wholesale dealers for goods used in said business, among them the Keating Implement & Machinery Company for $3,617.95, and the Emerson Manufacturing Company for $1,294. He owed various other creditors in the aggregate sum of $3,000. On said 10th day of August, 1909, he sold his stock of goods in bulk to McIntosh & Warren, defendants in error, for the consideration of $6,005.97; they assuming the payment of said $3,617.95 to Keating Implement & Machinery Company, and $1,294 to the Emerson Manufacturing Company as a part of said consideration, and paying to said Sweet in cash the sum of $500, and giving him one negotiable promissory note for $594.02, due January 1, 1910, which was paid to said Sweet on the day of its maturity. The consideration paid was a fair price for the property. At the time of said transfer and sale of said merchandise, the said Sweet had no other property except some negotiable promissory notes, amounting in the aggregate to about $7,000, due him by various customers scattered over his trade territory, for merchandise which had been sold to them. The evidence shows that, if the crops had been good in that section for the years 1909 and 1910, said notes would have been worth something like their face value; but the crops were unusually short, and said notes were worth only about 50 cents on the dollar, and at the time of the trial it was agreed that Sweet was unable to pay all of his creditors, and was insolvent.

On October 19, 1910, plaintiff in error filed suit against the said Sweet on a promissory note in the sum of $1,695.34, and interest thereon, and at the same time caused a writ of garnishment to be issued, which was served upon the defendants in error on the 20th day of October, 1910. On the 20th day of December, 1910, plaintiff in error recovered in said suit its judgment against said Sweet in the sum of $1,883.60, with costs of suit and interest at the rate of 8 per cent.

The evidence indicates that there was no intentional fraud upon the part of the defendants in error in purchasing said merchandise or on the part of said Sweet in making the sale, and while there is no distinct finding of fact by the trial court, or in the statement of facts to this effect, we will assume such to be true in the consideration of the issues. In making the purchase of said merchandise, the defendants in error did not at least 10 days prior thereto, or at any time prior to the sale, make inquiry of the said Sweet, the transferrer of said goods, as to the names and places of residence, or place of business of each and all creditors of said Sweet, and the amount owing to each said creditor by him, or obtain from him a written answer in any form to such inquiries; nor did they 10 days prior to said purchase, or at any other time before said sale, notify each of the creditors of said Sweet of said proposed sale and transfer. The plaintiff in error had no notice of said proposed sale at any time before it occurred, and the bulk sales statute of 1909 was not complied with in any form in making said sale. Defendants in error, who were the garnishees, answered said garnishment suit to the effect that they were not indebted to said Sweet in any amount at the time said writ was served, or afterwards, nor at the time of answering the same, and that they did not have any of his effects in their possession. Plaintiff in error contested this answer, alleging both that they were indebted to said Sweet, and that they had effects of said Sweet in their possession at the time said writ was served, in that they purchased the stock of goods without complying with the bulk sales statute. The plaintiff in error did not allege that the defendants in error had sold said merchandise prior to the service of the writ of garnishment, and the defendants in error did not file any special exception to said pleading for said omission, but the defendants in error by their second special exception excepted to said pleading, as follows:

"Because it appears from said controverters' affidavit that plaintiff is endeavoring to hold these garnishees liable for property that has passed out of their possession, on the ground that they should be held as trustees for property wrongfully received by them."

In section 10 of the agreed statement of facts it appears that it was proven at the trial that the defendants in error, who were the garnishees, had sold all of said goods, wares, and merchandise prior to the service on them of the writ of garnishment, and that they had realized from same at least as much as they had paid for them. It does not appear which party to the suit introduced the evidence, and neither does it appear that either party to the suit objected to its introduction. It also appears that in their sixth assignment of error the defendants in error assert the fact of sale by them prior to the service of the writ of garnishment, and ask relief because of that fact, claiming that, having already sold the property before the service of the writ, no lien attached, and no liability arose against them.

Upon the trial of the case in the court below plaintiff in error awarded judgment against the defendants in error for the sum of $1,094, with 6 per cent. interest from the date of said judgment, which is the amount that was paid by defendants in error to Sweet as a part of the consideration for the transfer; but the trial court did not enter a judgment against the defendants in error for the full amount of the plaintiff in error's judgment against Sweet, which was $1,883.60, and the plaintiff in error's cross-assignment complaining of the failure of the trial court to render judgment against the defendants in error for the full sum was abandoned on motion for rehearing in the Court of Civil Appeals. The judgment of the trial court was reversed and remanded by the honorable Court of Civil Appeals for the Third District, with instructions that a reasonable attorney's fee be allowed by the court below in favor of the attorney for the defendants in error; said court holding that the writ of garnishment was served too late to be effective, on account of the resale of merchandise before its service.

The bulk sales law, so far as...