100 Wash. 16 | Wash. | 1918
Appellant instituted garnishment proceedings against respondents, averring that the assignor of appellant was a creditor of the defendants Alexander; that, at a time when he was such, they transferred a stock of goods to the respondent corporation and failed to comply with the bulk sales law, and that the individual respondent holds the stock of goods as a common law assignee for the benefit of the corporation’s creditors.
The facts are stipulated as follows: J. D. Alexander was engaged in the bicycle and motorcycle business in Spokane. On September 6,1914, William Mas
In December, 1914, Maskell brought an action against Alexander to recover damages for the injuries sustained by him through the negligence of Alexander’s employee. The action was contested, liability being denied, but resulted in a judgment for $4,000 and costs against Alexander. Desiring to appeal, he applied to the Fidelity & Deposit Company of Maryland to execute a supersedeas bond to stay the judgment pending the appeal. The fidelity company knew that Alexander had transferred his business to the cycle
On September 18, 1916, the cycle company executed to the respondent Wilson a common law assignment of all its property for the benefit of all of its creditors, and shortly thereafter he took possession of the property and has since managed it for the benefit of the creditors. At the time the transfer of the business was made by Alexander to the corporation organized by him, he was solvent. There was no intent on his part to defraud any one, the corporation having been formed by him in good faith as a business proposition. In making the transfer, the bulk sales act was utterly ignored, and no affidavit or statement as required by it was made by Alexander or required by the corporation. Of the 750 shares of cycle company stock issued and delivered to Alexander, the appellant still had the forty-five shares which Alexander had pledged to it to indemnify it for becoming surety on the supersedeas bond, and 703 shares of the stock in the hands of Alexander were pledged to one Crandall to secure an indebtedness of about $750 owed by Alexander to Crandall. The value of the assets of the cycle company at the time of the trial was $28,961.49 more than the amount of its liabilities.
The bulk sales law, so called, provides:
“Whenever a person shall bargain for, or purchase any stock of goods, wares or merchandise in bulk, for cash, or on credit, and shall pay any part of the purchase price, or execute or deliver to the vendor thereof, or to his order, or to any person for his use, any promissory note, or other evidence of indebtedness for said purchase price, or any part thereof, without first having demanded and received from said vendor, or from his agent, the statement provided for in section 5296 and verified as there provided, and without paying, or seeing to it that the purchase money of the said property is applied to the payment of the bona fide claim of the creditors of the vendor as shown upon such verified statement, share and share alike, such sale or transfer shall be fraudulent and void.” Eem. Code, § 5297.
Section 5296, preceding, provides that:
“It shall be the duty of every person who shall bargain for, or purchase any stock of goods, wares or merchandise in bulk, for cash, or on credit, before paying to the vendor, or his agent, or representative, or delivering to the vendor, or his agent, any part of the purchase price thereof, or any promissory note, or other evidence therefor, to demand of and receive from such vendor, or agent, ... a written statement, sworn to substantially as hereinafter provided, of the names and addresses of all the creditors of said vendor, to whom said vendor may be indebted, together with the amount of the indebtedness due or owing, and
We shall not follow counsel over the extended field of discussion as to whether or not Maskell, at the time of the transaction involved, was the creditor of Alexander within the meaning of the bulk sales law, for the reason that we are of the opinion, as was the court below, that the transfer was not a sale within the bulk sales law.
The statute uses the words “cash” and “credit” in regulating such transfers as contradistinguished from each other. The common meaning of the word “cash” is “money.” 1 Words & Phrases, 995.
We have held that the object of the bulk sales law was to prevent the vendor, usually a retail merchant, from selling his stock of goods, pocketing the proceeds, and leaving his creditors remediless (McAvoy v. Jennings, 44 Wash. 79, 87 Pac. 53; Kasper v. Spokane Merchants Ass’n, 87 Wash. 447, 151 Pac. 800); and in the latter case, that no such result followed where the property was so disposed of as to make it available to the creditors; and hence, the reason for the rule failing, the rule itself failed.
We certainly would not hold that a creditor was remediless where a merchant transferred his stock of merchandise in bulk to another for an adequate exchange of real estate; for the real estate would be as available to the creditors as the stock of goods. While we might be disposed, in upholding the objects of the act, to consider commercial paper, bonds, warrants, and other securities as the equivalent of cash, because of their easy disposition and convertibility into cash .for the protection of creditors, such a case is not analogous to that here.
“There was nothing illegal or improper in the formation of the plaintiff company, nor in the transfer to it by Holt & Chipman of the property in question. At the time the company was formed, that firm appeared to have been solvent, and there is nothing to show that it was intended as a fraud upon their present or future creditors. It was not a withdrawal of their property from the grasp of creditors. On the contrary, it remained subject to their claims, though in a changed form. The interest of the partners in the corporation was represented by stock. This stock was as much liable to the demands of the creditors as was the property itself before the formation of the company.” Coaldale Goal Co. v. National State Bank of Camden, 142 Pa. St. 288, 21 Atl. 811.
See, also, Plant v. Billings-Drew Co., 127 Mich. 11, 86 N. W. 399; Kingman & Co. v. Mowry, 182 Ill. 256, 55 N. E. 330, 71 Am. St. 169; Densmore Commission Co. v. Shong, 98 Wis. 380, 74 N. W. 114.
We will not, of course, countenance a mere transmutation of the business of individuals into a corporate business and a fraudulent manipulation of its stock in such a way as to deprive the creditors of any remedy against the individual debtors. But, as we view the present case, appellant has little or nothing of which to complain. It is not hurt. It has almost the entire capital stock in its possession and control, subject to some slight indebtedness, with a large margin of assets over the liabilities apparently amply suf
The judgment below was right and is affirmed.