Leftwich Tubb, for appellants.
I The pleadings. We submit that the bill and joint answers of defendants filed in this cause themselves make out a case under the Bulk Sales Law is favor of the complainants. As we understand the Bulk Sales Statute, all that the creditors of the seller need to do is to levy on and attach the goods, or file a bill as in this case, to clear away the colorable ownership outstanding against them. If the defendant claims to have bought the goods, then he must plead and prove full compliance with the Bulk Sales Statute.
This whole matter we are now dealing with is put to rest in Moore Dry Goods Co. v. Rowe, 97 Miss. 775 ; Moore Dry Goods Co. v. Rowe, on Suggestion of Error, 99 Miss. 30 . The result of the decision in this case, which is supported by numerous decisions from one side of the land to the other, is that when the sale is shown as is confessed here and is proved beyond question from Tapscott to Miss Young, the burden is on Miss Young to extricate herself at once from the purchase by affirmative pleadings and proof and the only avenue of her escape from responsibility for the goods which she took over is a full compliance with the statute, sub-sections (a), (b) and (c), 27 C.J. 876, 2nd column.
This compliance Miss Young and Tapscott both fail to prove and, therefore, the goods were found in the hands of Miss Young when they were really the goods of Tapscott and were liable to the subjection of the complainants for their judgment debt which gave them a lien against the goods. Of course, as this court has decided, the creditor may attach the goods sold in violation of the Bulk Sales Law or immediately proceed against the seller and the purchaser jointly, or pursue both remedies. Peter Branch Int. Shoe Co. v. Gunn, 121 Miss. 679 .
The effort on the part of Mr. Tapscott and Miss Young to show good faith and the payment of value is futile. Moore Dry Goods Co. v. Rowe, 97 Miss. 775 . It will be
observed that the legislature of this state adopted the Tennessee statute and in the case of Neas v. Borches, 109 Tenn. 398 , 97 A.S.R. 851, the supreme court of Tennessee sustained the act and since this statute was adopted from Tennessee the decisions of her courts are binding upon the Mississippi courts.
II. Sales of one partner to another. There can be no question under the decisions of the supreme court of Tennessee where our Bulk Sales Law originated, nor under the decisions of the state of Mississippi that a sale from one partner to another is void under the Bulk Sales Law as much so as if the sale were to a third person. Individual creditors of one partner are entitled to the statutory notice of the sale and purchase of his interest in a stock of goods by a co-partner. Gilbert v. Ashby, 133 Tenn. 370 , 181 S.W. 321; Daly et al. v. Sumter Drug Co. et al., 127 Tenn. 412 , 155 S.W. 167; Ann. Cas. 1914-B 1101.
III. Who are the creditors? It is useless to recount the requirements under section 3129, Hemingway's Code, making the sale valid but under sub-section (c) it is required "that the purchaser shall have in good faith notified personally or by mail each of the seller's creditors of whom he has knowledge," etc. We refer this court to the sub-head "Bulk Sales Acts," 27 C.J. p. 873.
The supreme court of Tennessee has again dealt with this subject and has held "that since partners are jointly and severally liable for the partnership debts upon a sale in bulk by an individual, creditors of a partnership in which he was a member are creditors entitled to notice." Mahoney-Jones v. Sames, 128 Tenn. 207 , 159 S.W. 1094; Gilgert v. Ashby, 133 Tenn. 370 .
The fact in the instant case that at the time of the pretended sale the claim of the complainants had not been reduced to judgment cuts no figure. Newcomb v. Montague, 205 Mich. 80 , 89, 171 N.W. 433; George Kraft Co. v. Heller, 188 Ind. 612 , 125 N.E. 209; Ames v. Dorron, .
When a motion to exclude the complainant's testimony on the Bulk Sales Act was made after the testimony had gone in without objection, complainant's disclaimed that an amendment was necessary, but asked to be allowed to amend their bill attacking the sale under the Bulk Sales Statute. This motion was first made orally and finally put into writing.
It was reversible error for the court to refuse to allow the amendment to be made and to permit the pleadings to conform to the proof adduced in the case. By this argument, however, we must not be held to intimate that such an amendment was at all necessary.
W.A. Blair, for appellees.
This court can see that the issue involved as presented by this bill was not the Bulk Sales Law, for nowhere in said bill does the pleader ever refer to or give intimation that he expected to rely upon the Bulk Sales Law, but they predicated their case solely and only upon the fact of general fraud and that the sale was a sham. See 27 C.J., p. 891 under Fraudulent Conveyances, which deals with the Bulk Sales Law under section 905, par. 5, p. 891. A creditor who wishes to avail himself of the Bulk Sales Statute must plead it and by proper averments bring himself within its provisions. Vinson v. Johnson, 167 P. 1014; Singletary v. Boerner-Morris, 112 S.W. 637. See also 27 C.J., p. 875, par. 883.
The lower court speaking through Chancellor Cox says that this Bulk Sales Law was not the issue presented and found that there was no fraud. Of course, the court's decree, or rather his opinion, stated that if the appellant wanted to bring a suit and present the Bulk Sales Law as an issue, it would have to be done in a different suit where the issue could be met and fairly presented to the court by both sides.
E.O. Sykes, for appellant, on suggestion of error.
I. Are the allegations of the bill sufficient to permit complainant to invoke the Bulk Sales Law? Section 3129, Hemingway's Code. It is charged that Tapscott was the owner of this stock of merchandise; that complainant was his creditor; that in order to defeat the collection of this debt Tapscott wrongfully and fraudulently pretended to sell the stock of goods to Miss Rosa Young. We have the judgment creditor and a wrongful and fraudulent sale of the stock of merchandise in bulk for the purpose of defeating the collection of this debt.
Under the law in Mississippi, we submit that the sole allegation of a sale of a stock of merchandise in bulk, that at the time the sale was made the seller had creditors, and the creditors complaint about this sale are sufficient allegations to show a non-compliance with the Bulk Sales Law.
However, the Bulk Sales Statute makes a sale in bulk prima-facie fraudulent, thereby doing away with any further specific allegations of fraud or the proof of any other fact save the sale alone. This is what this court has expressly decided in the Rowe case, 97 Miss. 775 , and 99 Miss. 30 . We submit that the Bulk Sales Law is necessarily invoked in any suit by a creditor of the seller when the bill alleges a sale in bulk.
There is another feature of the case wherein we submit that the learned chancellor erred and that is that all of the testimony about this sale in bulk and the non-compliance with sections (a), (b) and (c) of this law went in without objection on the part of the defendants. Complainant was of the opinion that the allegations of the bill made out a prima-facie case of a violation of the Bulk Sales Law. They went further and without objection on the part of the defendants proved non-compliance with these sections of the law. We submit that it was the duty of the defendants to have objected at the proper time to this testimony when it was offered. Had this objection been made, under the ruling of the court
it would have been sustained. Then certainly at that stage of the trial the court would have permitted the bill to be amended by inserting a specific allegation of a violation of this section of the code. The defendants could either have then proceeded with the trial or asked the court to continue the case. All of the testimony here went in without objection. In fact, we think that the testimony shows that the defendants had introduced all the testimony they possibly could on this issue. In view of these facts, we think the court should have permitted this amendment to be made to further the ends of justice even after the testimony was concluded. He could then, of course, have continued the case or permitted the defendants to introduce any further testimony on this issue.
As we view this record, it shows a non-compliance with the Bulk Sales Law. We think the whole case is fully developed and that under it the appellant is entitled to a decree.
W.A. Blair and Francis S. Harmon, for appellees, answering memorandum from the court in response to suggestion of error.
I. This court quite properly held that the allegations of the bill of complaint were not sufficient to permit complainants to invoke the Bulk Sales Law, section 3129, Hemingway's Code. The bill is shot through and through with repeated allegations that the purported sale was only a pretense and that the change of ownership was merely nominal and was brought about solely as a fraud upon Tapscott's creditors. Having properly lost their cause in the trial court and in this court, appellants now grasp at the last slim straw available to them and insist that by the allegations of the bill they sought to invoke and can now successfully invoke section 3129, Hemingway's Code. It is impossible to reconcile the language of the bill with its allegations of pretense and sham with the bald statement in the statute that a "sale of a
stock of goods . . . shall be presumed to be fraudulent and void, etc. . . ." Certainly, this court diagnosed the case correctly.
In further support of the correctness of this statement from the opinion of the court, let us consider the purpose of the Bulk Sales Statutes and the canons of construction applicable thereto. The evil sought to be corrected was the tendency or practice of merchants who were heavily indebted to make secret sales of merchandise in bulk for the purpose of defrauding their creditors. The initiative was taken by wholesalers throughout the country, but the statutes are broad enough to cover any creditors of the business. 12 R.C.L., p. 525, sec. 54; Escalle v. Mark,
5 A.L.R. at 1514, 183 Pac. (Nev.). The Bulk Sales Statute in Mississippi creates a conclusive presumption of fraud when the conditions laid down therein have not been fulfilled. Moore Dry Goods Co. v. Rowe, 97 Miss. 775 , 53 So. 626; on suggestion of error, 99 Miss. 30 .
The rule is laid down in a number of cases that since these statutes are penal in their character, in derogation of the common law, and the right to alienate property without restriction, they should be strictly construed. Missos v. Marks et al. (Wis., 1924), 197 N.W. 196; Bank of LaGrange v. Rutland (Ga., 1921), 108 S.E. 821; Smith v. Boyer (S.C., 1922), 112 S.E. 71 ; Swift v. Templos (N.C.), 7 A.L.R. at 1583, 101 S.E. 8 , 25 L.R.A. (N.S.) 758.
It is well settled that these severe laws must be pleaded and that "a creditor who wishes to avail himself of the statute must by proper averments bring himself within its provisions. Singleterry v. Boerner-Morris Candy Co., 129 Ky. 556 , 112 S.W. 637; Benson v. Johnston, 165 Pac. (Ore., 1917) 1001.
Instead of the pleading being predicated on the Bulk Sales Statute, complainant's entire theory was that Tapscott pretended to transfer his interest in the goods in
fraud of his creditors, while appellees' answer denied the pretense and set up an actual sale, open and above board, notice of which was published to the world and by which a valuable consideration was given and received.
II. The motion to amend at the close of the trial was properly refused and such refusal, being within the sound discretion of the chancellor, is not erroneous. Griffith's Ch. Practice (2d Ed.), sec. 393, p. 403; Noxubee County v. Long, 106 So. 83 .
III. Even if the pleadings are broad enough to enable the Bulk Sales Statute to be invoked, said statute is inapplicable on the facts of this case. A. Individual creditors of the selling partner cannot invoke the statute. Fairfield Shoe Co. v. Olds
(Ind., 1911), 96 N.E. 592; Taylor v. Folds (Ga., 1907), 58 S.E. 683; Whitehouse v. Nelson, 43 Wn. at 177, 86 P. 174; Maskell v. Alexander, L.R.A. 1918-C 929, 100 Wn. 16 , 170 P. 350; 2 Williston on Sales (2d Ed.), sec. 643, p. 616.
B. Appellants are not "creditors" within the meaning of the statute. The testimony in the case, taken most favorably for the appellants, is to the effect that Tapscott sold his interest in the stock of goods to Miss Young on January 10, 1921; that is to say, nearly a year before a decree was had in the suit over the pine timber. We insist, therefore, that at the time this sale was consummated in January, 1921, Tapscott was not a debtor within the meaning of this act. The claim of Parker Brothers, growing out of the timber contract, was an unliquidated claim, a mere contingent liability, and did not become fixed as against Tapscott until the court by its judgment in April, 1922, found him liable under the timber contract. If he was a "debtor" at the time of the sale, then the Bulk Sales Statute is a patent absurdity. How could any merchant satisfy the provisions of this statute if every person having a contingent claim against
him is to be classed as a creditor? See Trimble v. Covington Grocery Co. (Va., 1917), 72 S.E. 724.
Applying strictly the rule of construction to the Bulk Sales Statute, the court cannot hold that the legislature clearly intended for individual creditors of a retiring partner to avail themselves of its provisions; and even if such creditors can invoke this law, these appellants, having only a contingent claim which had not been reduced to judgment at the time of the sale, are not creditors within the meaning of the act. We, therefore, submit that the opinion of this court is correct.
E.O. Sykes, for appellants, answering memorandum from court on suggestion of error.
I. Are the allegations of the bill sufficient to permit complainants to invoke the Bulk Sales Law? Under our law it is unnecessary to refer directly to this statute, but is simply sufficient to allege a sale or a pretended sale either in bulk or of any portion of the stock of merchandise otherwise than in the ordinary course of trade. Our bill does that, and in addition thereto alleges facts, which if proved, would show actual fraud, disconnected from this statute.
An analogy might very properly be drawn with what has to be alleged under this statute and what has to be alleged in a declaration where a running train has injured or killed a human being or an animal. Under the prima-facie railroad statute, one can allege as many specific acts of negligence as he so desires. He can then prove that the injury occurred because of the running train and by virtue of that statute he has made out a prima-facie case, yet in his declaration he has nowhere referred to the statute.
II. The Bulk Sales Law is applicable to the individual creditors of a member of a firm. The Rowe case, 97 Miss. 775 ; Shoe Co. v. Gunn, 121 Miss. 696 ; Daly v. 156 N.Y.S. 526.
III. Is a sale by one partner of his interest to another partner a violation of this law? The language of section 1 of our statute plainly includes within its terms a sale by one partner to another. This particular question has been decided favorably to our contention by the supreme court of Tennessee in Daly v. Sumpter Drug Co., 127 Tenn. 412 ; Gilbert v. Ashley, 133 Tenn. 370 ; and Howell v. Howell, 142 Tenn. 31 . Another well-reasoned case is Marlow v. Ringer (W. Va.), L.R.A. 1917-D 619.
IV. Counsel further raises the point that appellants are not creditors within the meaning of the statute. The record in this case shows that the claim of these appellants against Tapscott arose "ex contractu" and not "ex delicto." Bouvier's Law Dictionary defines a creditor as follows, "A creditor is he who has a right to require the fulfillment of an obligation or contract." See sections 121, 125, 313, Hemingway's Code. Our court has uniformly held under these statutes that a simple contract creditor has the right to maintain any of these suits. Shoe Co. v. Gunn, 121 Miss. 679 .
We ask that the opinion of the court be set aside and a decree granted appellants for the amount of their claim.
Argued orally by C.L. Tubb, for appellants.