Raleigh Tire & Rubber Co. v. Morris

Hoke, J., after stating the ease: The sales-in-bulk act, 1st Consolidated Statutes, sec. 1013, provides in general terms that “the sale in bulk of a large part or the whole of a stock of merchandise otherwise-than in the ordinary course of trade and in the regular and usual prosecution of the seller’s business, shall be prima facie evidence of fraud, and void as against the creditors of the seller, unless a specified notice is given to creditors and inventory made within seven days before the contemplated sale. The statute contains provision, also, that if the vendor shall, before the sale, execute to a trustee a good bond available-to creditors to an amount equal to the cash value of the goods in such instances, the law shall not apply. In several cases where the question was directly presented and considered, this has been approved as a valid exercise of the police powers of government, and these and other authorities also hold that sales coming within the effect and operation of the statute, and without compliance with the provisions as to the notice- and inventory, are void as against creditors, and where these requirements have been met such a sale is to be regarded as prima facie fraudulent in the trial of an issue as to its validity. Swift & Co. v. Tempelos, 178 N. C., 487; Armfield Co. v. Saleeby, 178 N. C., 298; Whitmore v. Hyatt, 175 N. C., 117; Gallup v. Rozier, 172 N. C., 283; Pennell v. Robinson, 164 N. C., 257. And when avoided as to creditors of the vendor by reason of failure to-comply with the statutory requirements the goods can be made available by direct process of levy and sale in the hands of the original purchaser, and being out of the usual course.of business, and so affecting him with notice, such purchaser may be held liable for their value when they have-been disposed of by him under the principles recognized and applied in the well considered case of Sprinkle v. Wellborn, 140 N. C., 163, and either remedy may be pursued by the creditors of the vendor as against subsequent purchasers as long as the goods can be identified or until they pass into the hands of a bona fide purchaser for value; and without notice. Mfg. Co., v. Summers, 143 N. C., 102. In Sprinkle v. Wellborn, supra, the principle is stated as follows: “The remedy of the-vendor is not defeated where a fraudulent vendee has sold the property to an innocent purchaser, for in such case the proceeds of the sale are as - *187 available as the property itself. The fraudulent vendee becomes chargeable with the proceeds received from the innocent purchaser, but the property itself is not, and a personal judgment may be obtained.” And in Summers’ case, supra, it was held, among other things, “That when property has been obtained by actionable fraud it can be followed as long as it can be identified and traced, and the right attaches not only to the wrongdoer himself, but to any one to whom it has been transferred otherwise than in good faith and for valuable consideration.” These being the recognized principles pertinent to the inquiry, it appears from the facts in evidence that the firm of Morris & Divers, dealers in automobile supplies, have sold their entire stock to the Matthews Company, and in our opinion such a sale comes directly within the provision of the statute; that the same is void as against plaintiff as creditor of the vendor, and the defendant purchasers are liable for the value of the goods included in the “stock of merchandise” of the vendors. It is urged for defendant, the Matthews Company, that they are proprietors of a repair shop, and were not dealers in supplies generally, but only sold to customers whose machines were taken to them for repair, and that they could not properly come within the effect and operation of the statute, citing the recent case of Swift & Co. v. Tempelos, 178 N. C., 487, in support of their position. But apart from the testimony tending to show that these defendants sold tires and tubes and gas and oil, the question here is not what Matthews, the purchaser, has done and proposed to do with the goods, but what was the business of the vendors who sold to* them, and there seems to be no dispute that this company, the original debtor, was a dealer in auto supplies. The character of the bill bought of plaintiff would of itself well-nigh suffice to establish the nature of their business, and there seems to be no dispute about it in the record. The case cited for defendant, Swift v. Tempelos, supra, was the sale of supplies held for the purpose of a restaurant, which were not usually disposed of directly to customers, but only used for the purpose of making their food acceptable to their individual patrons in the ordinary run of their trade and occupation, and while a bulk sale of such an enterprise was excluded from the effect and operation of the statute, it was treated as an exception coming very near to the border line, and in the well considered opinion of Associate Justice Walker, the inclusive character of the terms used in the statute, “a stock of merchandise,” was fully recognized. In the original series of "Words and Phrases, Vol. V, p. 4478, Webster’s definition of “merchandise” is said to be “objects of commerce; whatever is usually bought and sold in trade or market or by merchants; wares, goods, commodities.” And, citing several decided cases, the term is further there defined as including “all those things which merchants sell, either at wholesale or retail, *188 as dry goods, hardware, groceries, drugs,” etc. And again the definition is given as “commodities or goods to trade with,” saying that the word came into use as designating the goods and wares sold at fairs and markets. And in the decision referred to and much relied on by defendants, and also in Gallup v. Rozier, 172 N. C., 283, the supplies ordinarily sold in a garage are expressly recognized as coming within the statutory terms. The question of the liability of J". P. Matthews as one of the purchasers, or a member of the firm, etc., must be determined under the princi'ples ordinarily applicable to his case as presented in the pleadings and •evidence, but on the record we are of opinion as stated that this transaction between the Morris-Divers Company and the Matthews Auto Electric Company comes within the provisions of the statute governing •sales in bulk, that the purchaser must account for the value of the goods, etc., and for the error indicated plaintiff is entitled to a new trial of the •cause, and it is so ordered. New trial.