Stuart v. Elk Horn Bank & Trust Company

• Decision Date: 03 April 1916
• Docket Number: 309
• Citation: 185 S.W. 263,123 Ark. 285
• Parties: STUART v. ELK HORN BANK & TRUST COMPANY
• Court: Arkansas Supreme Court

185 S.W. 263

123 Ark. 285

STUART v. ELK HORN BANK & TRUST COMPANY

No. 309

Supreme Court of Arkansas

April 3, 1916

Appeal from Clark Chancery Court; James D. Shaver, Chancellor modified and affirmed.

McMillan & McMillan, for appellant.

1. The Bulk Sale law is unconstitutional. Acts 1913, 326. It conflicts with article 2, section 2 and article 2, section 18, Declaration of Rights; 211 U.S. 295; 235 Ill. 40; 125 Am St. 184, 189; 236 Ill. 157.

2. Defendant, Stuart complied with the law, if constitutional. Am. Ann. Cas. 1915, C, p. 415; 140 Ga. 10; 78 S.E. 609; 45 L R. A. (N. S.) 492; 70 Ore. 182; 138 P. 847. Stuart knew nothing of the bank's debt. It was not defrauded or in any way defeated in the collection of its debt. When he learned of the debt he offered to turn over to it all he had left of the stock, all of the fixtures, counters, shelving etc.

3. It was error to render judgment for all the costs against Stuart and the judgment is excessive.

Hardage & Wilson, John H. Crawford and Dwight H. Crawford, for appellee.

1. The Bulk Sales Act is constitutional. 217 U.S. 466, 468; 263 Ill. 363; Ann. Cas. 1915 C. 411; 60 L. R. A. 947; 185 Mass. 18; 71 S.W. 50; 76 Conn. 515; 20 L. R. A. (N. S.) 160; 15 Okla. 477; 34 Id. 662; 46 L. R. A. (N. S.) 455; 49 Id. 600; 146 S.W. 874; 110 Me. 163; 177 Ind. 1; Ann. Cas. 1914 C. 708; 26 Ia. 438; 118 Wisc. 424; 145 Mich. 721; 99 Minn. 22; 93 Md. 431; 211 U.S. 489; 217 Id. 461; Ann. Cas. 1915 C. 414; 179 Ind. 509; 180 Id. 536; 146 N.W. 356; 49 Mont. 307; 86 N.J.L. 97; 70 Ore. 182; 145 P. 246, and many others.

2. Appellant did not comply with the act. He litigated the claim and lost and the costs were properly adjudged against him.

OPINION

SMITH, J.

One J M. Henderson owned a small retail grocery business in Arkadelphia and on November 17, 1914, made a bulk sale of his stock of goods and fixtures to appellant. The consideration was $ 200, of which $ 30 was cash, and the balance consisted of claims due creditors who had furnished goods amounting to $ 118.09, which appellant assumed, and an item of $ 25 for rent, and a telephone bill of $ 2.50, which appellant also assumed.

Appellant testified that the stock of goods invoiced $ 204 and was worth 60 per cent. of that amount and that the fixtures were worth $ 40. But there was evidence that this property was worth $ 300. Upon the consummation of the sale appellee sued appellant for the amount of its debt against Henderson, and recovered judgment for the debt with interest and costs amounting to $ 223.35, and, in addition, the court gave judgment against appellant for all costs of the receivership and of the suit.

On the date of the sale Henderson delivered to appellant an affidavit purporting to contain a list of his creditors and the amount due each of them. Of these creditors two lived in Arkadelphia, one in Texarkana, and three in Little Rock. Appellee's banking house was across the street and four or five doors east from Henderson's place of business, and appellant knew nothing of the bank's debt until after his purchase. It was shown that Henderson's debt to the appellee bank was due November 6, and when it was not paid Henderson applied for an extension, which was not granted because the terms upon which the extension was promised were never complied with. In these negotiations Henderson told the cashier of the bank that he might sell out his business, but he did not state positively that he would do so. It is insisted that as this conversation occurred more than ten days before the date of the sale that this information supplied the notice required by the Bulk Sales Act of the intention to sell, and it is urged that it should be so held in view of the fact that appellant assumed and agreed to pay the debts of all the creditors of whom he had notice, and that neither Henderson's books nor his affidavit showed the bank to be a creditor and appellant could not, therefore, have given it notice. It is urged by appellant, not only that he substantially complied with the requirements of Act No. 88 of the Acts of 1913 entitled "An Act to prevent fraudulent sales of stocks of merchandise," and commonly known as the Bulk Sales law, but he also insists that the law is unconstitutional and he earnestly contends that it should be so held if it is to be so construed as to make him liable to appellee under the facts of this case.

We think the law is not unconstitutional. It appears from the briefs of learned counsel in the case that similar legislation has been enacted in nearly all of the states and by the Federal Government in the District of Columbia, and the appellate courts of nearly all these states have been called on to pass upon the constitutionality of the legislation. Many of these cases are cited in the briefs. In the early history of this legislation the courts do not appear to have been unanimous in upholding it. But our attention has not been called to any case holding the legislation unconstitutional since the opinion of the Supreme Court of the United States in the case of Lemieux v. Young, 211 U.S. 489, 53 L.Ed. 295, 29 S.Ct. 174. The necessity for such legislation is indicated by the fact that the Legislatures of nearly all the states have seen proper to enact it, and it has been pretty generally sustained as a valid exercise of the State's police power. The various acts on this question are not identical in their provisions, but they are all directed against the same evil, viz., the prevention of fraud in the sale and transfer of merchandise in bulk. Appellant attacks our statute upon the ground that it contravenes section 2, article 2, of our Constitution, which guarantees the right of acquiring, possessing, and protecting property; and also that it contravenes section 18 of the same article, which provides that the General Assembly shall not grant to any citizen, or class of citizens, privileges or immunities which, upon the same terms, shall not equally belong to all citizens. Similar provisions are contained in the constitutions of other states which have enacted this legislation, and it has been generally held by the courts of those states that the legislation does not contravene those constitutional provisions. It is pointed out that this legislation does not prevent the retail dealer who owes no debts from lawfully selling his entire stock without giving the required notice, and one may make a valid sale without such notice by paying his debts even after the sale is made, and that it is the insolvent and fraudulent vendors who are chiefly affected, and that the legislation was intended for the protection of creditors against sales by them of their entire stock at a single transaction and not in the regular course of business. It may be true that compliance with this law will defeat some sales which would otherwise be made and which would not be fraudulent if made; but any exercise of the State's police power operates to abridge in some measure the individual's freedom of action. Without reviewing the cases on this subject, or repeating the arguments made in upholding the law, we announce our conclusion to be that this legislation is a valid exercise of the police power, in that it is intended to protect the rights of creditors from fraudulent sales of property upon which credit was extended.

Nor do we agree with appellant that he has substantially complied with the requirements of this act. The act provides that an inventory must be made before the sale, and must be preserved. No inventory here was made before the sale. The act also provides that the seller shall furnish a written list of the names and addresses of his creditors with the amount of the indebtedness due to each not less than ten days prior to the sale and delivery and payment; whereas the affidavit here was made on the day of the sale. It is also provided that ten days before taking possession of the bulk stock, or paying the money therefor, the purchaser shall notify personally, or by registered mail, every creditor whose name and address is on said list, or of whom he has any knowledge, of the terms of the sale. Appellant admits that he did not comply with...