Opinion
No. 37299.
November 14, 1949.
1. Fraudulent conveyances — Bulk Sales Law — violation of.
A violation of the Bulk Sales Law by the seller of a stock of merchandise creates no lien on the merchandise in favor of seller's uninformed creditors but the effect of such a violation is only to make the sale void as to such creditors and to vest in them the right to follow the merchandise into the hands of the purchasers who hold it as trustees for the creditors. Sec. 274, Code 1942.
2 Criminal law — Bulk Sales Law — violation of not a crime.
The Bulk Sales Law does not expressly or by implication declare its violation a crime nor purport to impose a criminal penalty, and the duty of the court is to construe it strictly as to a criminal charge made under it. Sec. 274, Code 1942.
3. Criminal law — sale of property encumbered by lien.
In a prosecution for the sale of a stock of merchandise alleged to have been impressed at the time with a lien in favor of creditors without informing the purchaser of such lien, it is not enough to show that the seller was indebted to the creditors for merchandise purchased from them at some date in the past without showing also that some of the merchandise so bought was still on hand at the time of the sale in question. Sec. 2151, Code 1942.
Headnotes as approved by Roberds, J.
APPEAL from the county court of Washington County; H.O. FELTS, Judge.
North North, for appellant.
The court below erred in overruling the demurrer interposed by defendant. Murphy v. State, 24 Miss. 590 (1852); Riggs v. State, 26 Miss. 51 (1853); Norris v. State, 33 Miss. 373 (1857); United States v. Simmons, 26 U.S. 360, 362, 24 L.Ed. 819 (1878); 14 R.C.L. Section 29 p. 183; 25 C.J. pp. 631, 640; 1 Wharton Crim. Proc. Section 643; Hales v. State, 186 Miss. 413, 191 So. 273 (1939); State v. Collins, 186 Miss. 448, 191 So. 126 (1939); 35 C.J.S. Section 44 (b) pp. 694, 695; 52 C.J.S. Section 77 (1) pp. 868, 869; Rutherford v. State, 196 Miss. 321, 17 So.2d 803 (1944); Smith v. State, 30 Ala. App. 158, 2 So.2d 341 (1941); State v. Tatum, 50 So. 490 (1909); Wilson v. State, (Miss.), 37 So.2d 20 (1948); Campbell Paint Varnish Co. v. Hall, 131 Miss. 671, 95 So. 641 (1923); Weiss, Dreyfous Seiferth v. Natchez Investment Co., 166 Miss. 253, 140 So. 736 (1932); In Re Monticello Veneer Co., 2 F. Supp. 27, 22 Am. Bankr. Rep. (NS) 249 (1933); Dixie Stock Yards v. Ferguson, 192 Miss. 166, 4 So.2d 724 (1941); Section 26 of Mississippi Constitution 1890; Section 2151, Code 1942.
The court below erred in admitting the ledger sheets offered as exhibits "B" and "C" to the testimony of Miss Agnes Grady. Fatherree et al. v. Griffin, 153 Miss. 570, 121 So. 119 (1929); Smith v. Chicago Portrait Co., 120 Miss. 277, 82 So. 145 (1919).
For the purpose of brevity we consolidate the following three points, III, IV, and V. The court erred in admitting the testimony of W.W. Halstead. The court erred in overruling objection of counsel for defendant to the entire testimony of W.W. Halstead and in overruling his motion that said testimony be stricken from the record on the theory that the records referred to by the witness Halstead were not books of original entry in accordance with the rules of evidence in regard thereto. The court erred in admitting into evidence exhibits "B", "C" and "D" to the testimony of W.W. Halstead, these being copies of records not properly authenticated, and not the originals. Fatherree et al. v. Griffin, supra.
For the purpose of brevity we consolidate the following two points. The court erred in admitting exhibits "A", "B", "C", and "D" and "E" to the testimony of M.M. Billings. The court erred in overruling defendant's motion to strike the testimony of M.M. Billings from the record. 20 Am. Jur. Sections 1051, 1073, 1075, 1077, and 1213; Blackwell v. State, 166 Miss. 524, 146 So. 628 (1933); Lee v. State, 101 Miss. 387, 58 So. 7 (1912); Watkins v. State, 110 Miss. 438, 70 So. 457, (1916); Thomas v. State, 117 Miss. 532, 78 So. 147 (1918); Doss v. State, 104 Miss. 598, 61 So. 690 (1913).
The court erred in overruling the defendant's motion for a peremptory instruction at the end of the state's testimony. Overall v. State, 128 Miss. 59, 90 So. 484 (1922); Truckers Exchange Bank et al. v. Conroy, 190 Miss. 242, 199 So. 301, 303 (1940); Jakup v. Lewis Grocery Co. et al., 190 Miss. 444, 200 So. 597 (1941).
The court erred in granting instruction Number one (1) for the State.
The court erred in refusing instruction Number one (1) asked by defendant.
The court erred in overruling defendant's motion for a new trial. Upton v. State, 192 Miss. 339, 6 So.2d 129 (1942); Ashford v. State, (Miss.) 6 So.2d 471 (1942); Ladner v. State, (Miss.) 9 So.2d 878 (1942); Ewing et al. v. State, (Miss.) 9 So.2d 879 (1942); Moore v. State, (Miss.), 20 So.2d 96 (1944); Perdue v. State, 199 Miss. 624, 25 So.2d 185 (1946).
The verdict of the jury was contrary to and against the overwhelming weight of the credible testimony in this case and evinces passion and prejudice on the part of the said jury and therefore was not the verdict of a fair and impartial jury. Upton v. State, supra; Ashford v. State, supra; Ladner v. State, supra; Ewing et al. v. State, supra; Miller v. State, 198 Miss. 277, 22 So.2d 164 (1945); Moore v. State, supra; Perdue v. State, supra; Simmons v. State, 160 Miss. 582, 135 So. 196 (1931); Overall v. State, 128 Miss. 59, 90 So. 484 (1922); Whittington v. Yazoo Delta Mortgage Co., 148 Miss. 861, 114 So. 752 (1927).
George H. Ethridge, Assistant Attorney General, for appellee.
There are several sections bearing on false pretenses but, manifestly, the indictment undertook to charge the offense and denounced by Section 2151, Code 1942. Looking at the evidence in the case, however, it seems to me that it would have been better to have brought the charge under Section 2149, Code 1942, for the testimony of Mr. Utz would probably sustain an indictment under this section. Our statute provides that if there is a variance between the charge and the proof the defendant shall not be discharged but shall be held to answer on proper charge under the appropriate statute. See sections 2433, 2434, Code 1942.
Section 274, Code 1942, does not, I think, establish a lien on all of the property which was sold by appellant to Reynolds and Utz. The effect of the section is merely to make the sales of stock in bulk void and to give the creditor a right of civil action to set aside the sale as fraudulent and to establish what property the creditor sold to the appellant. Before the creditor can claim a lien other than a vendor's lien he must bring a proceeding either by attachment, injunction or sequestration to seize the property and impress a lien upon it. There is no doubt in the present case that the statute was not complied with but I have found no case holding that a general lien of property was a right of any person but only such liens recognized by law or contract as may have existed prior to the immediate time of the sale. In Parker v. Tapscott, 142 Miss. 768, 107 So. 561, it was held that a bill to set aside a sale of a stock of goods under the Bulk Sales Law should specifically set out facts which show failure to comply therewith. General allegations that the stock of goods was sold to defraud creditors is insufficient. In Whittington v. Yazoo Delta Mortgage Co., 148 Miss. 861, 114 So. 752, it was held that a creditor securing execution on goods transferred in bulk in violation of law must show that it was creditor on date of transfer and the amount to which it was a creditor. In Allison and Hyde v. Williams, 142 Miss. 825, 108 So. 142, it was held that in suits based on violation of the Bulk Sales Law the plaintiff must allege and prove fair market value of goods alleged to have been unlawfully sold without notice to creditors, and, in absence of defense, plaintiff must impanel jury on writ of inquiry to ascertain fair market value of the goods on hand at the time of the sale. Of course, a creditor must rely on his own claim and show a lien in his favor if he desires to establish a lien against the goods sold by appellant to Reynolds and Utz. He does not have a lien good against third persons but he may hold the buyer personally liable for value of the goods that the purchaser has disposed of under the Bulk Sales Law. Creditor suing purchaser indebtedness under this section must allege and prove the value of the goods at the time of the sale from appellant to Reynolds and Utz. It is evident in the case of Miller-Allaire Company v. Hutcherson, 147 Miss. 453, 112 So. 589, that if a peremptory instruction on which a judgment was based was given under this section on failure to allege and prove value of goods, judgment would be affirmed. In McLendon v. Peoples Bank of Lumberton, 111 So. 843, it was held that any proceeding under this statute to set aside the sale and hold the purchaser for debt thereunder, it is necessary to allege and prove the value of the stock of goods at the time of the sale. If the creditors had any lien at all it was only a money lien under Section 337, Code 1942.
It will be noted from this section that a purchase-money lien only exists while the property on which it exists is in the hands of the first purchaser or of one deriving title or possession through him with notice that the purchase money was not paid.
Appellant complains of instruction given to the State which appears on pages 133 and 134. It seems to me that this instruction is inaccurate and should be more carefully framed in any case similar to the one at bar. It does not require the jury to find as a fact that there was a lien on a specific group of goods or merchandise in stock at the time of the transaction nor does it separate the cases as involved between the purchasers of the bulk sale and the seller's goods to the appellant. It embraces both the claims of the Interstate Coffee Company and D. Canale and Company "and diverse other parties and corporations" without then and there or at any time prior thereto informing the said Reynolds and Utz of the existence of such liens and encumbrances and of the exact state of title of the above described property. The instruction as applied to the case developed in the trial is muddy and inaccurate. There is in this case an embarrassment in dealing with the case on its merits. It is apparent that the appellant was dealing unfairly with both his creditors and the purchasers at the bulk sale, and that he deserves some sort of punishment but the facts should always be stated clearly so as to inform the defendant of the charge and the proof should be limited to the particular offense for which the party is being tried. I do not think the State desires to convict persons on general principles but only for specific crimes specifically charged and definitely proven. I do not discuss the question as to the methods of proving the accuracy of the original purchases by appellant from his creditors but leave that matter for the court and if, after a full consideration, the court decides that the indictment is sufficient and that the variance which as indicated was not harmful to the appellant then these questions should be fully and definitely settled by the court.
Appellant was indicted for selling to Reynolds and Utz a stock of merchandise and fixtures impressed at the time with a lien in favor of two named creditors and others whose names were unknown to the grand jurors without informing the purchasers of such lien. Apparently the indictment intended to charge the crime created by Section 2151, Mississippi Code of 1942, Annotated, which provides that if any person shall sell real or personal property "on which he knows there is a lien of any kind by contract or by law, without informing the person to whom he so sells . . ." of such lien, the seller is guilty of obtaining under false pretenses whatever he received from the person dealing with him. However, the entire proof proceeded upon the idea that defendant had failed to comply with what is known as the Bulk Sales Law, Section 274, said Code, which provides that a sale of an entire stock of merchandise in gross shall be presumed to be fraudulent and void as against the creditors of the seller, unless at least five days before the sale (a) the seller shall have made a full and detailed inventory of the articles sold; (b) the purchaser shall have made demand of the seller the names, places of residence and addresses of his creditors and the sum due each, and in response to which demand the seller shall have made full and truthful written answer, and (c) the purchaser shall have notified the creditors of the proposed purchase and the cost price of, as well as the price he proposes to pay for, such merchandise. If appellant is guilty of any crime it is under one or the other of the foregoing sections.
We will deal first with the Bulk Sales Law. Reynolds and Utz made demand for the information detailed in section 274. Fox made the inventory and furnished the names of some, but not all, of his creditors. Fox paid some of the omitted creditors, but it appears that Reynolds and Utz paid approximately $600 of these left-off debts. However, Reynolds and Utz did not furnish to any of the creditors the information required of them by subdivision (c) above. (Hn 1) The question is, did the creditors, at the time of the purchase, have a lien upon the stock of merchandise within the contemplation of the criminal laws of this State? We do not think so. The effect of the Bulk Sales Law, if section 274 is not complied with, is to render the sale void as to creditors, and vest in them the right to follow the merchandise into the hands of the purchasers, who hold it as trustees for the creditors. Section 274 impresses no lien upon the stock of merchandise at the time of the sale; it simply confers the foregoing rights. Indeed, the sale being void as to creditors, it is difficult to understand, in the nature of the case, just how their right could be that of a lien upon the property as against the creditors, who get no title thereto. Moore Dry Goods Co. v. Rowe, 97 Miss. 775, 53 So. 626; Walton v. Walter Fisher Co., 146 Miss. 291, 111 So. 364; 24 Am. Jur. No. 244, pg. 354; No. 246, page 355. It is not necessary for us to, and we do not, decide whether the right of the creditors ripens into a lien, legal or equitable, upon institution of legal proceedings to enforce the statutory rights. Should that be the effect of such proceeding, the lien is not in existence until the proceeding is begun. This record does not disclose definitely what the creditors did, nor the time thereof, but the action taken, whatever its nature, was some time subsequent to the date of sale.
(Hn 2) The statute does not expressly or by implication declare its violation to be a crime, nor purport to impose a criminal penalty therefor. In determining the question under consideration, it is our duty to construe it strictly.
Nor have we endeavored to determine what effect, if any, the failure of the purchasers to give notice to creditors might have had upon this situation.
(Hn 3) As to the offense created by section 2151, there is no proof whatever in this record that Reynolds and Utz purchased, or were delivered, any property impressed at the time with a purchase-money lien for the unpaid purchase price thereof. It is shown that Fox owed creditors for merchandise he had bought from them, but it is not shown he had any of this on hand when he sold to Reynolds and Utz. As stated, the proof undertook to show guilt under the Bulk Sales Law — not under the purchase-money lien law.
Whether appellant may be indictable and found guilty under some statute other than the two involved in this prosecution, we do not decide or intimate.
Reversed and appellant discharged.