182 N.Y. 330 | NY | 1905
Lead Opinion
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *332 Before proceeding to a critical view of the challenged statute it may be profitable to make a few pertinent though trite observations on the nature, construction and effect of written constitutions. A written constitution is the fundamental expression of the sovereign will. Under our form of government that sovereign will resides in the people. A written constitution is not only the direct and basic expression of the sovereign, will, but is the absolute rule of action and decision for all departments and offices of government in respect to all matters covered by it and must control as it is written until it shall be changed by the authority that established it. It is true, as was said by Judge Cooley, that "the weaknesses of a written constitution are that it establishes iron rules which, when found inconvenient, are difficult of change; that it is often construed on technical principles of verbal criticism rather than in the light of great principles, and that it is likely to invade the domain of ordinary legislation instead of being restricted to fundamental rules." The logical corollary of the proposition that the Constitution is the supreme law of the land is that the power to legislate is a a purely delegated one, derived from the Constitution and controlled by it. In the case at bar we are concerned with no quibbles of verbiage or technicalities of construction, but with the broad question whether an act of our legislature is repugnant to the "iron rule" of our Federal and State Constitutions that no citizen shall be deprived of "life, liberty or property," or be denied the "equal protection of the laws."
In the course of judicial interpretation, the words "liberty" and "property" as used in the Constitutions, have naturally and properly been given their most comprehensive signification, so that they embrace every form and phase of individual *334
right that is not necessarily taken away by some valid law for the general good. "The term `liberty,' as protected by the Constitution, is not cramped into a mere freedom from physical restraint of the person of the citizen, as by incarceration, but it is deemed to embrace the right of man to be free in the enjoyment of the faculties with which he has been endowed by his Creator, subject only to such restraints as are necessary for the common welfare." (People v. Marx,
Let us now analyze the statute under scrutiny. Every sale (A) "of any portion of a stock of merchandise, other than in the ordinary course of trade in the regular and usual prosecution of the seller's business, or (B) the sale of an entire stock of merchandise in bulk, shall be fraudulent and void as against the creditors of the seller, unless (1) the seller and purchaser shall at least five days before the sale, (2) make a full and detailed inventory, (3) showing the quantity, and, so far as possible with the exercise of reasonable diligence, (4) *335 the cost price to the seller of each article to be included in the sale, and unless (5) such purchaser shall at least five daysbefore the sale in good faith make full, explicit inquiry of the seller as to the (6) name and place of residence or place of business of each and every creditor of the seller, and (7) the amount owing each creditor, and unless (8) the purchaser shallat least five days before the sale in good faith (9) notify or cause to be notified personally or by registered mail each of the seller's creditors of whom the purchaser has knowledge, or can with the exercise of reasonable diligence acquire knowledge of such proposed sale, and (10) of the stated cost price of merchandise to be sold, and (11) of the price to be paid therefor by the purchaser. (12) The seller shall at least five daysbefore such sale file a truthful answer in writing of each and all of said inquiries."
No one will have the temerity to suggest that this drastic and cumbersome statute is not in restraint of the rights of "liberty" and "property," as those terms have been judicially declared to have been used in the Federal and State Constitutions. It is contended, however, that the restraint which it imposes upon these rights is justifiable under that shibboleth of legislatures and courts known as the police power. Far be it from us to deny the existence of that power or to attempt to define its extent. It will be our effort, rather, to show that the statute under consideration is, in some particulars, so thoroughly unrelated to the probable object of its enactment, and in others so cumbersome, burdensome, unreasonable and unworkable, as to violate every one of the constitutional provisions under which it is challenged. The rights of "liberty" and "property," as we have seen, are sacred and substantial rights guaranteed by the Federal and State Constitutions. Any law that interferes with the right to make and enforce contracts affects both the liberty and property of the citizen. The right to sell and purchase merchandise in bulk is no less under the protection of the Constitution than the right to sell and buy in the smallest possible quantities. Any legislative interference with either of these rights, that *336 is clearly forbidden as to the other, can only be justified on the ground of public necessity, which is but another way of saying that it is for the general welfare. Such interference should not only be based upon public necessity, but it should be conservative, reasonable and well adapted to the end sought to be attained. Until the 11th day of April, 1902, it was just as lawful in this state to sell any portion of a stock of merchandise, or the whole of such a stock in bulk, as to sell the same goods piece by piece at retail. By the statute which went into operation on that day, the sale of any stock of merchandise in bulk, or of any considerable portion thereof, was made unlawful as against the creditors of the seller, unless both seller and purchaser should do many things that were clearly and substantially restrictive of the right of contract as it had theretofore been enjoyed in respect of such property. This criticism of the statute is sought to be answered by the plea that the law was designed to correct a great public evil; that it was aimed at a class of merchants who have engaged in the fraudulent practice of obtaining merchandise on credit for the purpose of making hasty and secret sales thereof in bulk and then decamping with, or otherwise disposing of, the proceeds at the expense of their creditors. It may be conceded that this was the ostensible purpose of the statute, and that the evil complained of was one of substantial reality and magnitude, for which an efficacious remedy was much to be desired. But that does not meet the argument against the constitutionality of the statute. The question still remains whether the legislature has not overstepped the limits of its power, by practically placing an embargo upon all sales of merchandise in bulk, under the guise of a statute ostensibly designed to prevent frauds in such sales.
Beginning with the title of the statute, we observe that its object is "to regulate the sale of merchandise in bulk." If we give to the term "merchandise" its ordinary business signification, there is no escape from the conclusion that the statute applies to merchants alone as distinguished from *337 manufacturers, farmers, bankers, the members of the several professions, mechanics, etc. Under this construction of the law the merchant is prohibited from doing that which is permitted to all other men. Merchants comprise a comparatively small number of the community at large and, therefore, this would seem to be class legislation which denies to those affected by it the equal protection of the laws guaranteed by the 14th amendment to the Federal Constitution. If the term "merchandise" is given a somewhat more liberal interpretation, so as to include finished manufactured products, and the stocks of jobbers and wholesale merchants, the statute is still open to the criticism that it denies the equal protection of the laws to all citizens, because it imposes upon certain classes, such as manufacturers, jobbers and wholesale merchants, burdens that are destructive of their legitimate business. It is common knowledge that in this age of large enterprises many merchants purchase the whole products of mills and factories. In the case of the jobber or the wholesale merchant these products are again sold in bulk, or in large but varying quantities. If the manufacturer, jobber or wholesale merchant sell their entire stocks in bulk, the statute applies without regard to the question whether the sale is according to long-established custom, or in the regular course of trade. If there is a sale in bulk of less than the whole, then the validity of the sale is made dependent to some extent upon the question whether it is in the ordinary course of trade in the regular and usual prosecution of the seller's business. What is the ordinary course of trade in the regular and usual prosecution of such a seller's business? The manufacturer may dispose of his entire output to a single purchaser during a single year, or a series of years. Again, he may dispose of it in parcels to several purchasers. And yet again he may be compelled to rely upon a general market with purchasers from different quarters in varying quantities. On the first of January of a given year he may know to a certainty just how much he will produce and just where it will go. At the beginning of the next year he may not know what the morrow *338 will bring forth. This is as true of the jobber and the wholesale merchant as of the manufacturer. And what is the net result? In the years when there is a single sale of the whole output, the statute applies without regard to the ordinary course of trade or the regular and usual prosecution of the seller's business. In other years when the sales, although in bulk are in smaller quantities, the application of the statute depends, not upon the honesty of the transaction, but upon the shadowy question whether it is in the ordinary course of trade in the regular and usual conduct of the seller's business. And all this is as applicable to the purchaser as to the seller, although the former may have not the remotest knowledge of the manner in which the business of the latter is carried on. There are other and more serious constitutional objections to this statute in so far as it may affect the manufacturer, the jobber and the wholesale merchant, but as these objections militate against the statute in its relation to all classes of men, we shall consider them in their general bearing upon the "liberty" and "property" clauses of the two Constitutions.
The statute, as we have seen, discriminates between sales of entire stocks in bulk, and sales of portions of such stocks. But it does not differentiate between sales that are honestly made and sales that are made with intent to defraud. The sale of an entire stock is declared to be fraudulent and void as against the seller's creditors, no matter how solvent he may be, unless all the petty and harassing details of the statute are observed. The sale of a lesser quantity, however, is interdicted by no such sweeping fiat so long as it is made in the ordinary course of trade in the regular and usual conduct of the seller's business, although made with a fraudulent intent. But this is not all. Both seller and purchaser shall, at least five days before the sale, make a full and detailed inventory. One inventory is not enough. There must be two, or at least one joined in by both. And they must be made, not when the sale has been consummated, but five days before. Could anything be devised that would more effectually paralyze sales of merchandise in bulk? Some simple illustrations will *339 clearly outline the pernicious possibilities of this unique provision. A is the owner of a stock of goods which he is willing to sell, and which B is ready to purchase at a price agreed upon. Each may think he is making a good bargain. A is anxious to sell at once so that he may use the proceeds in making another purchase of advantage. B wants to close the sale at once because he has an immediate and profitable market for the goods. If either has to wait five days or longer, and particularly for the purpose of making an inventory involving great labor and expense, he may prefer to drop the whole matter. Suppose, however, that the work of taking an inventory is commenced, and during its progress the market price rises or falls, or that either the seller or the purchaser discovers that he has made a poor bargain because the inventory discloses a greater or less value than was in the minds of the parties when the price was fixed. In such a case either the party may refuse to go on with the inventory or to file it if it is finished, and the result is that the person who may feel aggrieved has no remedy, because the statute imposes no penalty for failure to complete or file an inventory, and there can be no valid sale until both of these things are done.
And what must such an inventory contain? First, the quantity. That is usually and of itself entirely sufficient in the case of a sale in bulk. Second, the cost price to the seller of eacharticle to be included in the sale, although the purchaser, one of the parties who must file an inventory, may have no means of knowing anything about the cost price to the seller. It is true that the latter feature of the inventory is only made necessary in so far as it is possible with the exercise of reasonable diligence. But the seller may have full knowledge on the subject, which he may decide not to disclose. The purchaser may know nothing about it, but his bargain can be annihilated by the seller's refusal to exercise the "due diligence" by which the information could be disclosed. Then again, a purchaser may have a market for goods which he is willing to purchase at a specified price. This market he would lose if compelled to file a long and *340 detailed inventory containing the cost price to the seller. And the inventory must be filed. While the statute does not designate the place of filing, it would be of no value unless in some place where the inventory would become public property. Such an inventory, moreover, is not only unnecessarily burdensome, but practically prohibitory of such sales. Not only the quantity of the goods sold, but the cost price of each article must be given in detail. This requires a disclosure of the very secrets that make sales in bulk a business possibility, and entails upon the prospective contractors many details that in a given case may require weeks or months, and that neither may care to go into. In the case of a sale of the whole or any part of the stock of a great department store, for instance, the cost price to the seller of every paper of pins or fine tooth comb would have to be inventoried, although the producing cause of the sale might be based upon considerations that would utterly fail if such infinitesimal matters had to be taken into account.
The next requirement of the statute has to do with the purchaser alone. At least five days before the sale he must make full, explicit inquiry of the seller as to the name and place of residence or business of each of the seller's creditors, and of the amount owing to him, and, having done this, he must then notify or cause to be notified each of such creditors, personally or by registered letter, of the proposed sale and the stated cost price of the merchandise, as well as the price to be paid by the purchaser. In other words, the purchaser, who is under no legal or moral obligation to the seller's creditors, is not only required to obtain from the seller all these details concerning his creditors, but he must send to each one, no matter how great their number or how remote their places of residence or business, all the detailed information that is to be included in the inventory. Thus the inventory may have to be duplicated by the hundreds or thousands and sent to creditors scattered over all portions of the globe. It is true that this obligation rests upon the purchaser only to the extent that it can be fulfilled in the exercise of reasonable diligence, but this *341 qualification emphasizes rather than mitigates the arbitrary command of the statute. And, finally, the seller shall, at least five days before such sale, file a truthful answer in writing to each and all of said inquiries. There is no intimation as to the place of filing, or as to what will happen if there is no filing. Neither are we informed as to the effect upon the purchaser, of the seller's failure to tell the truth or to file his written answers. In the midst of such a mass of detail it is refreshing to feel that this trifle is left to the imagination.
Let us again emphasize the assertion that we do not question the power of the legislature to enact reasonable laws for the prevention of fraud and the protection of creditors. That this right falls within the general scope of the police power no one will deny. But the police power only begins where the Constitution ends. Broad and comprehensive as the police power concededly is, and incapable of precise definition or exact demarkation as we know it to be, it is never difficult to determine that its limits have been transcended when it is clear that the sacred domain of the Constitution has been trespassed upon. And when the exercise of the police power clearly infringes upon vested constitutional rights, courts should not concern themselves with the probable purposes for which it is exercised, or the evils which it was designed to correct. First the Constitution and then the police power. The statute under consideration sweeps away the constitutional rights of liberty and property of a limited class of our citizens who are entitled to the equal protection of the laws with all other citizens. It invades the right of liberty because it arbitrarily and unnecessarily denies the right of a specified class of citizens to contract for, bargain and sell a particular kind of property. It violates the Constitution in prohibiting all sales of merchandise in bulk, whether honest or dishonest, except upon conditions that are harsh, drastic, unreasonable and unnecessary in so far as they do not tend to effectuate the objects for which such a statute may properly be enacted. It ignores the constitutional *342 guaranty relating to property rights because it so restricts the right of contract as to deprive property of its characteristics as such.
It is urged, however, that the impositions of this statute are more nominal than real, since a seller has only to pay his debts in order to make his sale valid. The argument, so far from supporting the statute, really serves to disclose one of its most sweeping and unreasonable features. If the statute affected none but insolvent sellers, or related merely to debts due, or gave to purchase-price creditors an equitable lien for their respective shares of the proceeds of a proposed sale, or if, instead of interdicting in advance a sale in bulk, it had made some reasonable provision for impounding the proceeds of sale until the seller's legal obligations could be judicially ascertained, there might be some force in the suggestion. But what is the fact? The act embraces all sales of entire stocks of merchandise in bulk. It covers every sale of any part of a stock not made in the ordinary course of trade in the regular and usual prosecution of the seller's business. It requires notice to be given to all the seller's creditors, whether their debts are due or not, that a sale is contemplated. It requires this notice to be given five days in advance of a sale. It requires observance of every one of its details or payment of every creditor. What is the practical effect? A seller who is abundantly able to pay his debts is compelled by law to do so before he can dispose of a part of his possessions. He must pay his debts whether they are due or not. He must pay them whether they are in dispute or not. He must pay creditors who have no legal, equitable or moral claim upon the particular property or its proceeds. And if he depends upon the proceeds of the particular sale to pay his debts, he must pay them at least five days before he gets the money. Thus an intending seller is under the necessity of practically obtaining the consent of his creditors before he can make a sale. He must pay a claim that may be in dispute, right or wrong, and he must take what equitably belongs to the creditor for purchase price and pay it to general creditors, or he *343 can be "held up." This may not be a literal taking of property without due process of law, but it is an annihilation of its value and a destruction of its attributes, so that while the owner is permitted to retain his property in name he is deprived of its essence and substance. (Wynehamer v. People, supra.)
It is said also that similar statutes, some of them much more drastic, have been adopted in twenty different states or jurisdictions. Twenty wrongs can never make one right. There is, moreover, a singular, not to say suspicious, coincidence in the time and substance of all this legislation. We are indebted to our brother BARTLETT for the suggestion that more than half of these statutes were enacted in 1903 and 1904, and nearly all of them since 1900. Statutes that are passed pro bono publico
rarely sweep the country with such irresistible momentum, while much fantastic legislation has resulted from organized crusades upon legislatures by the advocates and supporters of special classes. This statute "is evidently of that kind which has been so frequent of late, a kind which is meant to protect some class in the community against the fair, free and full competition of some other class, the members of the former class thinking it impossible to hold their own against such competition and, therefore, flying to the legislature to secure some enactment which shall operate favorably to them or unfavorably to their competitors." (PECKHAM, J., in People v. Gillson,
If we have succeeded in making our position plain, it will be unnecessary to answer in detail that portion of Judge VANN'S very learned and able opinion in which he illustrates the manifold purposes for which the police power has been exercised by legislatures and upheld by courts. The existence of the power is not denied. Its limits cannot be accurately demarked. The well-beaten paths which it has pursued time out of mind contain no guide board to the new and untrodden field sought to be explored by this particular phase of paternal legislation. Therefore, old cases and old laws are of little help except as they expound general principles applicable *344
to special conditions. In its final analysis the question is one of power in this particular case. We think that power has been transcended. "To justify the state in interposing its authority in behalf of the public it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and, second,
that the means are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. The legislature may not, under the guise of protecting public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations." (Colon v. Lisk,
Owing to the length of this opinion we refrain from discussing the cases decided in other states upon similar statutes, except to say that those which have been upheld in Massachusetts, Connecticut, Tennessee and Washington are far less drastic than our own, in that they either except from their operation all sales by executors, administrators, receivers, etc., or provide that sales of merchandise in bulk shall only be presumptively void if the statutory requirements are not observed; or, as in Connecticut, that one day after the sale there shall be filed a descriptive writing duly signed and acknowledged. In Ohio and Utah, where such legislation was condemned by the courts, it was in some respects even more far reaching and burdensome than here.
The judgment of the Special Term and Appellate Division should be reversed and judgment ordered sustaining defendant's demurrer, with costs in all the courts.
Question certified answered in the negative. *345
Concurrence Opinion
I concur in the opinion of WERNER, J. He has called attention to the defects in the statute in not specifying the place where the inquiries shall be filed. But in addition thereto the notice to creditors provided for means non-resident as well as resident creditors. The notice to creditors must be served either personally or by registered mail at least five days before the sale. The notice would be of no benefit unless it was received before the sale was completed and in time for the creditor to take action in reference thereto. The statute has, therefore, fixed the period of five days. If the notice is served personally it must be five days before sale. If by registered mail, the statute doubtless means the same thing; that is, the notice should be received at least five days before the sale. In other words, if the service is by registered mail, the posting must take place a sufficient time in advance so that the creditor may receive it at least five days before the sale is completed. (Steinhardt v. Bingham,
Dissenting Opinion
The only question presented by this appeal is whether the statute regulating the sale of merchandise in bulk (L. 1902, ch. 528) violates any provision of the State or Federal Constitution. The object of the act was to suppress a widespread evil, well known to current history and condemned by repeated adjudications in this court and in all the loading courts of the state from time out of mind. That evil is the tendency and practice of merchants who are heavily in debt to make secret sales of their merchandise in bulk for the purpose of defrauding creditors. Common observation shows that when a dealer has reached a point in his business career where he cannot go on owing to the claims of creditors, the temptation is strong and the practice common of making a fraudulent sale. Fraud works in secret, and the bargain is closed and the purchaser in possession before the creditors know anything about it. The evil is difficult for the courts to handle, because the evidence to uncover the furtive *347 scheme must, as a rule, be drawn from hostile witnesses, usually relatives or intimate friends of the seller, who took part in the fraud and shared in the plunder. All those who have had to do with the investigation of such transactions realize how well these frauds are protected by the forms of law and how frequently they are defended by perjury. The form of the fraud varies with the skill of the perpetrator and his advisers, but the unvarying purpose is to enable the debtor to hold and enjoy property which equitably belongs to his creditors. Inadequacy of consideration, absconding with the proceeds of the sale and the preference of fictitious claims are familiar methods. Many other means of holding on to property and concealing the facts are resorted to and it is not uncommon to see a dealer in possession of all that he had before he failed, and, acting under another name, carrying on the same business with the same stock, all unpaid for, in unblushing defiance of his creditors. Whatever the method of committing the fraud, its success depends on secrecy and perjury.
When a merchant owes more than he can pay he has no substantial equity in his stock of goods and the claims of his creditors are superior to his own. The courts may not only prevent him from parting with his property but may seize and sell it and apply the proceeds upon his debts. If an execution issued against his property is returned unsatisfied, he may be compelled to disclose under oath all his business transactions, tell what he has done with his estate, both real and personal, and the proceeds thereof, and if he still holds any property in the name of someone else, to divulge all the facts relating thereto. (Code Civ. Pro. §§ 2432, 2463.) He may be imprisoned on civil process and punished criminally for making a fraudulent disposition of his property and any person who is a party or privy to the fraud may be punished in the same way. (Code Civ. Pro. § 549; Penal Code, § 586.) Interference with his liberty and property by such methods has never been successfully questioned as a violation of fundamental rights. Many restraints upon freedom of contract, some of which reach back to our colonial history, have passed *348 without challenge, or if challenged have uniformly been sustained as valid. The Statute of Frauds, the act to prevent fraudulent conveyances, insolvent laws, the Recording Act, the prohibition of usury, lien laws, regulations in relation to chattel mortgages, conditional sales and preferences by corporations and in general assignments, show in how many ways and in what varied forms the legislature may properly restrain freedom of action in commercial transactions in order to promote the general welfare. Originally all parol contracts for the sale of personal property were valid and it was unnecessary to make delivery or payment wholly or in part. The Recording Act was unknown, and transfers in writing, whether absolute or conditional, did not have to be filed. Now, however, many statutes require business to be transacted in a certain way, and that constructive notice should be given in order to protect creditors and innocent purchasers. Such interference with liberty and such limitations upon the use of property, although arbitrary and inconvenient, have always been regarded as valid in order to prevent fraud and promote justice. While commerce is hampered to a limited extent in some ways it is protected and promoted to a much greater extent in other ways. The inconvenience of the restraint is less than the evil done away with.
The statute now before us was passed for the same general purpose as the most of those mentioned. It is aimed at the same evil which is admitted to be both serious and common. It does not prohibit a sale of any kind, but it provides safeguards against secrecy, which is the bulwark of fraud. It simply requires that notice of what is to be done should be given in advance, personally or by mail, to those directly interested who are frequently made the victims of fraudulent sales.
It regulates two kinds of sales: 1. A sale of any portion of a stock of merchandise other than in the ordinary course of trade in the regular and usual prosecution of the seller's business. 2. The sale of an entire stock of merchandise in bulk. We now have to deal with the latter only. Such a use is declared fraudulent and void, not absolutely but as *349 against the creditors of the seller unless the statute is complied with. If the seller pays his debts the sale stands even if not made as required by the statute, but otherwise it falls unless at least five days before the date thereof both seller and purchaser unite in making a full and detailed inventory showing the quantity and, so far as reasonable diligence will permit, the cost price of each article. This burden is cast upon both seller and purchaser, but a further burden is placed on the purchaser who is required at least five days before the sale in good faith to make full and explicit inquiry of the seller as to his creditors and the amount owing to each and to notify them personally or by mail of the proposed sale, the cost price of the stock to be sold and the price proposed to be paid. At least five days before the sale the seller is commanded to file, where is not specified but presumptively in the office where a chattel mortgage given by him should be filed, a truthful answer in writing to each inquiry made of him by the purchaser as above required. Except as thus specified the rules of evidence and the presumptions of law are left unchanged.
A recent amendment provides that a sale "will be presumed to be fraudulent and void as against the creditors of the seller" unless the statute is complied with, while the act governing the case now before us makes such a sale absolutely void as to creditors. (L. 1904, ch. 569.)
The statute is confined to merchants and dealers, as is apparent from the use of the expressions "a stock of merchandise" and "the cost price to the seller." No sale is forbidden, but certain sales are regulated in order to prevent fraud. No restraint is placed upon sales made in the ordinary course of business, whether at wholesale or retail, for the statute applies only to unusual and extraordinary sales. There is no attempt to regulate sales generally, but merely those which experience shows are so frequently made a cover for fraud. There is no interference with the ordinary business of merchants, but when they sell their entire stock and go out of business, or sell any substantial portion thereof in an irregular and unusual way, notice to creditors is required so that they can protect *350 themselves against fraud. No protection is afforded to strangers, but simply to those who have a strong equitable right to see that the sale is for a fair price and free from fraud. If the merchant pays his debts there can be no attack upon the sale, however made. The act is less drastic than one imposing a lien upon goods sold until the purchase price is paid, with the right to discharge the lien by sales in the ordinary course of business, which is clearly within the power of the legislature. The requirement of notice is less burdensome than the imposition of a lien.
While the statute in question disturbs freedom of contract, so does fixing the price of elevating grain (People v. Budd,
Twenty states as well as the Federal government in the District of Columbia have similar statutes, some with provisions *351 more stringent than our own and all aimed at the suppression of an evil that is thus shown to be almost universal. (California, Civil Code, § 3440, as amended March 10th, 1903; Colorado, Laws 1903, ch. 110; Connecticut, Public Acts 1903, ch. 72; Delaware, Laws 1903, ch. 387; Dist. of Columbia, U.S. Statutes at Large, ch. 1809; 58th Cong. April 28th, 1904; Georgia, Laws 1903, No. 457; Idaho, Laws 1903, H.B. 18; Indiana, Acts 1903, ch. 153; Kentucky, Acts 1904, ch. 22; Louisiana, Acts 1896, No. 94; Maryland, Laws 1900, ch. 579; Massachusetts, Acts and Resolves 1903, ch. 415; Minnesota, General Laws 1899, ch. 291; Ohio, Laws 1902, H.B. 334; Oklahoma, Session Laws 1903, p. 249; Oregon, Billinger's Ann. Codes and Statutes, ch. 7; Tennessee, Acts 1901, ch. 133; Utah, Laws 1901, ch. 67; Virginia, Act approved January 2d 1904; Washington, Laws 1901, ch. 109; Wisconsin, Laws 1901, ch. 463.)
A statute with the same object attained by a similar remedy has been held valid by the highest courts in Massachusetts, Connecticut, Tennessee and Washington. (J.P. Squire Co. v.Tellier,
On the other hand, a statute with more exacting conditions was held unconstitutional in Ohio (Miller v. Crawford,
The question before us is one of power, not of policy. Courts may pass upon the power of the legislature, but not upon its policy. Statutes, whether wise or unwise, are equally binding upon us, provided no provision of either Constitution is molested. According to the general rule, unless there is a plain conflict between a statute and the Constitution, the statute stands, for every presumption is in its favor. The respect due to a co-ordinate branch of the government will not permit mere judicial doubt to undermine a statute, for there must be clear judicial conviction that it violates the Constitution before the courts can set it aside. The legislature with all the power of legislation there is, may pass any law upon any subject, unless it is expressly or impliedly forbidden by the supreme law of the State or of the United States. There is a power beneath the Constitution but not superior to it, unwritten, not fully defined, necessary, resting on the sovereignty of the state, which exists because the state cannot exist without it and which must be considered in connection with the Constitution. That power, known as the police *353 power, aims to promote the public welfare by compulsion and restraint and it is under the exclusive control of the legislature. The executive department can exert it only as authorized by the legislature. The courts can neither exercise it, nor prevent its exercise, but they can determine whether a statute is a constitutional use of the power. We cannot overturn a statute because we do not like it, for our likes and dislikes affect us as citizens, not as judges. We greatly prefer the amended act to the original, because although effective it is not so harsh, but that has nothing to do with the validity of either.
Starting always with the presumption that the statute, although challenged, is valid, we study it in connection with the Constitution to see whether there is such a conflict as to divest the legislature of jurisdiction. If purporting to be passed in the exercise of the police power, we endeavor to see, first, whether there was an evil to be remedied, and, second, whether the remedy prescribed is "calculated, intended, convenient or appropriate" to suppress it and not designed to trespass upon personal rights "under the guise of a police regulation." If "the act has a fair, just and reasonable relation to the general welfare," it may so regulate "the conduct of an individual and the use of property" as to "interfere to some extent with the freedom of the one and the enjoyment of the other." If it violates no express command of the Constitution and tends "in a degree that is perceptible and clear towards the preservation of the lives, the health, the morals or the welfare of the community, as those words have been used and construed in many cases heretofore decided," and is not passed "ostensibly in favor of the promotion of some such object, while really it is an evasion thereof and for a distinct and totally different purpose," it comes within the jurisdiction of the legislature and the courts are bound to sustain it. The police power cannot be arbitrarily exercised so as to deprive the citizen of his liberty or property, "but a statute does not work such a deprivation in the constitutional sense, simply because it imposes burdens or abridges freedom of action, or regulates occupations, or subjects individuals *354 or property to restraints in matters indifferent, except as they affect public interests or the rights of others. Legislation under the police power infringes the constitutional guaranty only when it is extended to subjects not within its scope and purview, as that power was defined and understood when the Constitution was adopted."
Liberty under the Constitution does not mean natural liberty, or the right to act as one pleases subject only to the laws of nature, for society cannot exist on that basis. Constitutional liberty is the right to act without restraint upon person or property, except such as is necessary or expedient for the general advantage of the public. (Matter of Jacobs,
The legislation under consideration was intended to suppress a deep-seated evil, common in sales of a certain kind. The existence of the evil is admitted, and the right of the legislature to provide a remedy is also admitted, but it is insisted that the remedy provided is so unreasonable that it violates the primary guaranties of the Constitution. The same claim was made when a maximum price was fixed for doing a certain kind of work, but it was rejected, because the work was done in a business affected with a public interest. (People v. Budd,supra.) The same position was taken when one state absolutely prohibited sales on margin and another options to buy or sell at a future time, contracts which were previously valid, but both provisions were sustained by the Supreme Court of the United States, because they tended to prevent gambling. (Booth v.Illinois, supra, and Otis v. Parker, supra.) While many contracts of the kind prohibited were free from wrong, as so many were made for the purpose of gambling, all were swept away, the good and the bad alike. Is gambling a worse evil than fraud? Does it *355 affect commerce more seriously? Is freedom of contract interfered with more by requiring notice to creditors before certain sales are made, than by forbidding certain other sales altogether? The statute is intended to interfere only with those who buy and sell in bad faith toward the creditors of the vendor. It doubtless interferes with some who act in good faith, but so do the other statutes referred to. In order to prevent injustice and fraud, legislation for time out of mind has placed some restraint upon commercial transactions, and where the legislature has jurisdiction to act the method of suppressing the evil is wholly within its sound discretion.
The right to pass laws to prevent fraud being conceded, what principle is to guide us in drawing a line to separate the act before us from those considered in the cases cited? How can we declare this statute void and the others valid? It has no ulterior purpose. No attempt is made to protect some favored interest from injurious competition. Its object is not, as in theGillson case, to interfere with a lawful business, but to prevent one man from keeping property which equitably belongs to others. It seeks to maintain justice, which is one of the leading features of the public welfare. The protection of creditors has always been a primary function in the administration of justice. Why should the Constitution require courts to be maintained to punish fraud and yet deprive the legislature of power to prevent fraud by requiring notice to a class apt to be defrauded?
As it is known that dishonest merchants abuse freedom of contract by secretly selling out in such a way as to defeat the claims of creditors, may not the legislature surround the right with some safeguards, such as an inventory and notice thereof? When the end sought is within the domain of legislation and the form of the remedy proposed is fairly adapted to that end, the courts have no power to interfere. When jurisdiction exists, the details are within the exclusive control of the legislature. While a merchant, owing debts, has an absolute constitutional right to sell his stock of goods, he may properly be required to do something for the protection of his creditors *356 and what he shall do is for the legislature to prescribe. With power to act upon the subject it may pass a foolish statute or a wise one, and we cannot overturn the one unless we can the other. It is only when there is a want of power to legislate that the courts can declare a statute void.
It is insisted, and the argument is not without force, that while the provisions of the act, so far as they relate to the vendor, may be valid, the restraint upon the purchaser is so severe as to impinge on the right of liberty and property. What is required of the purchaser? To some extent he must look after the interests of creditors, if there are any. He must either see that they are paid or notify them in advance of what is to be sold, the price paid and to be paid and must ask the seller who his creditors are. If there are no creditors the statute does not apply. If the inquiry, when carefully made, discloses no creditors and the purchaser knows of none, he may buy in safety without the inconvenience of inventory or notice. If there are creditors, the risk is in proportion to the amount of their claims, and whether it is large or small, they have rights which need protection from a sale made in bad faith and it is at such sales that the statute strikes. The purchaser may be buying property in which the seller has less real interest than his creditors, and it is reasonable to charge both seller and purchaser with the exercise of some care toward them, in the interest of justice and the general welfare. The inconvenience to purchasers is an evil, as it hampers commerce to some extent, but the injury to commerce from fraudulent sales is a much greater evil, so that on the whole commerce is not harmed but helped. The legislature had the right to balance these evils and to promote the common good by trying to do away with the greater. The everyday business of the seller and buyer is not touched, for that is outside of the statute, but when an extraordinary sale is made, such as can occur but few times in the life of a merchant, certain conditions and restraints are imposed, not to hamper business, but to prevent secret sales in bulk of property usually bought on credit and generally unpaid for when the sale is *357 made. The remedy provided tends to furnish the protection needed by creditors without any interference whatever with ordinary business and without disturbing freedom of contract in the rare and irregular cases to which the act applies any more than was within the power of the legislature according to the principles laid down by repeated adjudications in this court and in the Supreme Court of the United States.
Purchasers who complain of the act as a violation of their constitutional rights are themselves protected by legislation equally drastic, for they could not purchase in safety were it not for the acts in relation to chattel mortgages and conditional sales. They might purchase and pay in good faith and yet have the property taken away from them under a lien they knew nothing about and which they could not discover. As the legislature passed these acts, it can repeal them and in that event purchasers, however careful, might not get a good title, while now, even with the act under consideration in full force, they can get a good title if they only take pains. They cannot, therefore, consistently object to such a statute. They cannot in fairness assert that interference with an unlimited right of contract is constitutional when it operates in their favor, but unconstitutional when it operates in favor of creditors and against themselves.
It is also claimed that an unreasonable burden is imposed upon a limited class of debtors for the benefit of a limited class consisting of their creditors. A statute which is uniform in its effect upon all persons to whom it applies is not invalid because it applies to a limited number. This act applies to all the people of the State who carry on a certain kind of business, which presents special temptations and opportunities for the commission of fraud. The classification is not arbitrary, but is founded on a "reasonable and just difference between the persons affected and all others." The difference is seen in the nature of a business conducted largely on credit, which, as shown by the records of our courts, furnishes peculiar facilities for the perpetration of a characteristic fraud. As was said by Mr. Justice BREWER in a late case: "It is *358
within the undoubted power of the Government to restrain some individuals from all contracts as well as all individuals from some contracts" (Frisbie v. U.S.,
I close my review by repeating as applicable generally to the case before us the words of the Supreme Court of the United States in a decision of great importance: "The power which the legislature has to promote the general welfare is very great and the discretion which that department of the government has, in the employment of means to that end, is very large. While both its power and its discretion must be so exercised as not to impair the fundamental rights of life, liberty and property * * * yet in many cases of mere administration the responsibility is purely political, no appeal lying except to the ultimate tribunal of the public judgment exercised either in the pressure of public opinion or by means of the suffrage." (Powell v. Penn.,
The judgment should be affirmed, with costs, and the question certified answered in the affirmative.
Dissenting Opinion
I concur entirely in the opinion of my brother VANN, but as the point has now been raised that the statute before us makes unlawful discrimination between sales of one kind of personal property and sales of other personal property, of sales by persons engaged in one character of business and those in another, and, therefore, violates the provision of the Federal Constitution guaranteeing equal protection of the laws, I desire to add a word.
Of course, absolutely arbitrary selection by the legislature in imposing a tax or in creating a crime cannot be justified, and for this reason we refused to uphold the imposition of a transfer tax in the Pell Case (
GRAY and BARTLETT, JJ., concur with WERNER and HAIGHT, JJ.; CULLEN, Ch. J. (in memorandum), and O'BRIEN, J., concur with VANN, J.
Judgment reversed, etc. *361
