Summary
In Leeton the merchandise was covered by the chattel mortgage and the bank as holder foreclosed its mortgage and took the merchandise into its possession before selling it. That is not the situation in this case.
Summary of this case from Starman v. John Wolfe, Inc.Opinion
March 24, 1928.
1. DEMURRER: Objection to Parties: Exception. A mere objection to the application of additional parties to be made plaintiffs does not strike at the petition, and does not fill the office of a demurrer, and without an exception to a ruling overruling it the application is not preserved for review.
2. BULK SALES LAW: Chattel Mortgage: Sale: Creditor's Bill. A chattel mortgage, given in good faith, by a merchant, upon his stock of merchandise, to secure a bona-fide debt due a bank, is not such a "sale, trade or other disposition" of the property as comes within the meaning of the Bulk Sales Law (Sec. 2287, R.S. 1919); and a creditor's bill, brought by numerous other creditors against the bank, which, after default, has taken possession of the merchandise, to compel a pro-rata distribution, is not aided by said law. [Overruling Semmes v. Stecher Brewing Co., 195 Mo. App. 621; Olean Milling Co. v. Tyler, 208 Mo. App. 430; and Vaughan v. Tyler, 206 Mo. 1.]
3. ____: Object: Chattel Mortgage. The object of the Bulk Sales Law is to prevent a merchant from selling or disposing of his stock, for which he owes his creditors, and, after obtaining the money therefor, appropriating it to his own use, and thereby defrauding them; and a chattel mortgage upon the stock given to secure the payment of a bona-fide debt, which is but a lien, although it gives the mortgagee authority to take possession upon default, does not come within its prohibitions.
4. ____: ____: Creditors: Preference. The Bulk Sales Law was not intended to prevent a diligent creditor from securing, or obtaining priority of payment of, a valid debt in good faith.
Corpus Juris-Cyc. References: Fraudulent Conveyances, 27 C.J., Section 890, p. 883, n. 35; p. 884, n. 42. Pleading, 31 Cyc, p. 309, n. 36.
Transferred from Kansas City Court of Appeals.
REVERSED.
Nick M. Bradley and M.D. Aber for appellant.
(1) The original petition did not state a cause of action. (a) Because it affirmatively appeared therefrom that the plaintiffs therein named had an adequate remedy at law. 21 C.J. 35; McKee v. Allen, 204 Mo. 673; Benton County v. Morgan, 163 Mo. 669; Schuster v. Myers, 148 Mo. 429; Somerville v. Hellman, 210 Mo. 575; Weston v. Fisher, 180 S.W. 1038; Thias v. Siener, 103 Mo. 523; Mallinckrodt Chemical Works v. Nemmich, 169 Mo. 395. Such legal remedy has been held to be by writ of attachment. Vaughan v. Tyler, 226 S.W. 163. Further, the petition averred on its face that the defendant had converted the stock of goods and then had it. Under those facts, the affidavit under Secs. 62-69, R.S. 1919, afforded an ample remedy whereby the property could have been brought into the assets of the estate. (b) Because it was multifarious. (2) The original petition failing to state a cause of action, and the amended petition, assuming that it did state a cause of action, which is denied, being filed more than ninety days after defendant took possession of the stock of goods, the bar of limitations provided by Sec. 2290, R.S. 1919, applied to all parties attempting to become plaintiffs therein. Bricken v. Cross, 163 Mo. 449; Hiller v. Schulte, 184 Mo. App. 42; Douglas Candy Co. v. Schenk, 195 Mo. App. 592. (3) Even though it be held that as to the plaintiffs in the original petition filed, the statute was tolled, it could only be tolled as to them, and subsequent persons, acting for the first time as to themselves, are barred. Sec. 2290, R.S. 1919; Douglas Candy Co. v. Schenk, 195 Mo. App. 592. (4) Plaintiff's action, being for a receiver, counts upon the rights given under Section 2287, and under that section plaintiffs have no rights except for such goods as they can identify as having been sold by them, and as they could identify none, their action fails. Sec. 2287, R.S. 1919; Riley-Penn Oil Co. v. Symmonds, 195 Mo. App. 116; Vaughan v. Tyler, 206 Mo. App. 1; Joplin Supply Co. v. Smith, 195 Mo. App. 224. The proviso at the end of Section 2287 that nothing in the act should be construed to give any creditor (or other person) any right to or lien on any merchandise or article in any stock except that sold and delivered by such creditor (or other), must have some meaning. This court has repeatedly held that the proviso did not apply to actions by attachment or to proceedings under execution or garnishment. It must then, not only by elimination but also by sheer necessity, apply to this sort of proceeding. Otherwise it would be wholly ignored, and be in effect repealed by judicial legislation, a thing abhorrent alike to the bench, the bar and the public. Authorities above; Henry v. Evans, 97 Mo. 52; Macke v. Byrd, 131 Mo. 690; Drainage District v. Jamison, 176 Mo. 557. And this is true particularly of the statute under consideration. Balter v. Crum, 199 Mo. App. 386. (5) The giving of the chattel mortgage was not such a transfer as is within the provisions of the Bulk Sales Law, Secs. 2286, et seq., R.S. 1919. 27 C.J. 883, citing Farrow v. Farrow (Ark.), 206 S.W. 134; Avery v. Carter (Ga.), 89 S.E. 1051; Packing Co. v. Uncaphor, 156 N.W. 171; Mills v. Sullivan (Mass.), 111 N.E. 605; Wasserman v. McDonnell (Mass.), 76 N.E. 959; Hannah v. Richter Brewing Co. (Mich.), 112 N.W. 713, 119 Am. St. Rep. 674; Schwartz v. Realty Co. (N J.), 109 A. 567; Noble v. Grocery Co. (Okla.), 46 L.R.A. (N.S.) 455; Dill v. Ebey (Okla.), 46 L.R.A. (N.S.) 440; Drinkle v. Shoe Co., 20 B.C. 314. (6) It was error to include the claim of Fred Stone in calculating amounts to be awarded plaintiffs. He had abandoned his claim by dismissal. 1 C.J. 1169; Sec. 1410, R.S. 1919.
Montgomery Rucker, S.J. Caudle, J.R. Rothwell and W.E. Owen for respondents.
(1) The demurrer to the original petition, to the amended petition and to the amendments making additional parties plaintiff, should not have been sustained, and appellant is not in position to complain of the action of the court for several reasons. (a) Because no exceptions to the action of the court in overruling the demurrer or demurrers is shown to have been preserved either in the bill of exceptions or the record proper. (b) The only demurrer set out in the abstract of the record is to the amended petition, and clearly that should have been overruled. No exceptions to the action of the court were preserved. (c) The record does not set out any other demurrers to making other parties plaintiff, hence this objection cannot be considered. (d) Appellant does not point out wherein first or amended petition fails to state a cause of action, but merely asserts that they do not. Where no exceptions have been saved to the action of the court, the objections cannot be considered on appeal. (2) The Bulk Sales Law should be liberally construed "so as to effectuate the true intent and meaning" of the General Assembly. Sec. 7048, R.S. 1919; Turner v. Drees Co., 207 Mo. App. 582. (3) A creditor's bill in equity to declare the chattel mortgage fraudulent as against creditors and to declare the defendant a trustee for the creditors of Mohler was a proper proceeding in this case. (a) Practically all the creditors of Mohler except the defendant joined in the bill as plaintiffs. Each creditor joining had secured judgment in the probate court, establishing his or its claim as a just debt. Each had a right to have the chattel mortgage declared fraudulent and void. It is conceded that each one might have instituted an attachment suit and levied on the property or garnished the defendant after he sold the property of the decedent, but they did not have to do this with its multiplied costs and priorities. Equity will often take jurisdiction of purely legal matters to prevent a multiplicity of suits, and in one proceeding settle all the rights and interest of the parties. This is but common learning. Here the plaintiffs all had one common right after their claims had been reduced to judgment and that was to have the property subjected to their judgment claims. Their interests were legally the same, and this situation furnishes a luminous example of the interposition of a court of equity to furnish one remedy the same to all creditors, and create the defendant vendee a receiver for all of the creditors. (b) An administrator or heir cannot challenge a chattel mortgage or other conveyance by the deceased as fraudulent as against creditors and recover the property for the purposes of administration. Such conveyance can only be set aside at the instance of the creditors. The debtor having died and his estate being admittedly insolvent and without assets, the probate court could grant no further relief than to render judgment for the true amount of the claims of each creditor. The creditors could issue no execution against the dead man's estate or property. They properly joined in a creditor's bill attacking the conveyance to defendant as fraudulent by reason of its terms permitting the decedent to remain in possession and sell the merchandise in the regular course of his business and to retain the proceeds of the sales, and under the Bulk Sales Law. Lyons v. Murry, 95 Mo. 28; Merry v. Fremon, 44 Mo. 518; Pendleton v. Perkins, 49 Mo. 565; Jackson v. Robinson, 64 Mo. 292; George v. Williamson, 26 Mo. 190; Steele v. Reid, 284 Mo. 285; Hall v. Callahan, 66 Mo. 316; Zoll v. Sopher, 75 Mo. 460. (c) It is true that in St. Francis Mill Co. v. Sugg, 169 Mo. 136, a conveyance of land was set aside at the suit of creditors as fraudulent as against creditors, and that the administrator thereupon applied for and secured an order of probate court to sell the same and did sell and receive the proceeds thereof and that this action was approved as legal. The situation here is however radically different from that in the Sugg case. In this case the probate court upon the application of the administrator, and before a single claim of the plaintiffs had been probated, made an order for the sale of the equity of redemption in the mortgaged property, and the sale was effected for the magnificent sum of $25. We take it that thereby the estate parted with any right to have the property if recovered or the proceeds thereof covered into the estate and administered by the administratrix. Furthermore it is a rule of equity in such proceedings that those who first bring suit to set aside a fraudulent conveyance have the first right as creditors to share in the proceeds recovered. Jackson v. Robinson, 64 Mo. 292. The circuit court then was the only forum that had jurisdiction to try and decide whether the conveyance to defendant by deceased in his lifetime was fraudulent as against creditors. Having done so and found for the plaintiffs that court could, based upon the creditor's bill in equity, declare the defendant a receiver or trustee for the plaintiff creditors, and give full and complete relief and administer and distribute the proceeds recovered. (4) Taking possession of a stock of goods under a chattel mortgage, without complying with the provisions of the Bulk Sales Law, is such a disposition of property as comes within the provisions of said law. Such mortgage is fraudulent as to creditors, and this is true regardless of the intention of the parties, and regardless of the honesty of the debt secured, if action is taken within the ninety-day limit after taking possession of the property. Vaughan v. Tyler, 206 Mo. App. 1; Semmes v. Brewing Co., 195 Mo. App. 621; Joplin Supply Co. v. Smith, 182 Mo. App. 212; Olean M. Co. v. Tyler, 208 Mo. App. 430. (5) The Bank of Lecton had the right to act as it did and replevin the mortgaged property and sell the same without coming into the probate court and having its claim allowed, and after conditions broken (which happened before plaintiffs' claim was probated) the Mohler estate had a mere equity of redemption, a chose in action not subject to levy and sale under execution or attachment. And in a replevin suit there could have been no interplea or intervening by the creditors asserting their rights and seeking to defeat the lien of the mortgage. Rice Estate v. Hudson, 225 S.W. 111; Lange v. Motor Co., 131 S.W. 272; Browning v. Hillig, 69 Mo. App. 594; Cobbey on Replevin, sec. 432. (6) A chattel mortgage on a stock of goods which permits the mortgagor to remain in possession and sell the goods in the usual course and apply the proceeds as he sees fit is fraudulent and void as to the mortgagor's creditors. Liles v. Potter, 206 S.W. 582; Jackson v. Burgess, 143 Mo. App. 438. (7) It has been held by the courts of appeals in three separate opinions that the giving and taking of a chattel mortgage on a stock of merchandise, without complying with the provisions of the Bulk Sales Law, is a disposition thereof, in violation of the terms of that act first passed in 1913. The first case decided was in 1916 very shortly after the passage of the law. These cases are: Semmes v. Brewing Co., 195 Mo. App. 626; Olean M. Co. v. Tyler, 208 Mo. App. 430; Vaughan v. Tyler, 206 Mo. App. 1. The first expression of judicial construction on this law was an authoritative ruling that the giving of a chattel mortgage on the stock of merchandise was such a disposition as was prohibited by the Bulk Sales Law and was void as to creditors. That ruling has been concurred in for ten years and has become a fixed rule of property and no reason can be seen why it should be disturbed and overthrown. Why should not stare decisis apply here? The first time this question of the effect of a chattel mortgage on a stock of merchandise came under review it was held to be a disposition within the meaning of the Bulk Sales Law, and that unless notice, etc., had been given and its requirements follow that the disposition was void. That ruling has been accepted by the bench and bar of the State, by wholesale and retail merchants and all persons dealing with merchants for the past ten years, by adhering to this first and following decisions: "Where the same points come again in litigation, as well to keep the scales of justice even and steady, and not liable to waiver with every new judge's opinion, as also because, the law in that case being solemnly declared and determined, what before was uncertain, and perhaps indifferent, is now become a permanent rule, which it is not in the breast of any subsequent judge to alter or swerve from according to his private sentiments." 31 Bouvier's L.D. (3 Ed.) 3118. (8) The ruling that the giving of a chattel mortgage on a stock of merchandise and fixtures without complying with the provisions of the Bulk Sales Law renders it void as against creditors is the just and true rule, one in harmony with the spirit and intent of the law, meets a condition of preference the law sought to set aside. Overturning that ruling now will work wrong to creditors, impair the true intent of the law, and permit certain creditors under the guise of a chattel mortgage to really procure the disposition of the entire stock of merchants in failing condition and thus secure a preference of their particular debts as against other creditors, who may not even know or suspect that the debtor is hard up or financially pressed. Supply Co. v. Smith, 182 Mo. App. 216. (a) It is common knowledge that this law was passed at the urgent demand of wholesalers and jobbers who are the principal creditors of the ordinary retail merchants and for the purpose of making void dispositions of their property, without notice, to the injury and damage of such creditors, and requiring that before such disposition could be effectual certain notices and steps must first be taken and complied with and time given the creditors for action, and only after such elapsed time and in default of action by the creditors could such sale, trade or other disposition be validly made. (b) We call attention to the particular wording of the first section of the Bulk Sales Law, Sec. 2286, R.S. 1919. The effective words here are "sale, trade or other disposition." A chattel mortgage may not be a sale passing the title under the later holdings of our courts, but is a conditional sale, and creates a lien, and when possession is taken or a sale had under the terms of the mortgage, as here, it is just as much a disposition of the entire stock of merchandise and fixtures as if an outright sale had been made. It surely comes within the terms and meaning of the words "or other disposition." Here the stock was just as effectively disposed of as if an outright sale or trade thereof had been made, without notice or any of the formalities had under the Bulk Sales Law, and with no opportunity given the other creditors to take any steps to protect their rights and interests. Attention is called to the fact that nowhere in the opinion of Judge TRIMBLE in the instant case is a statute cited that is like ours. The usual phraseology is "sell, transfer or assign" and that is the phraseology used in the citation from Ruling Case Law cited in the opinion, and also in the case from Michigan. Hannah v. Richter Brewing Co. Our statute is broader and more comprehensive than any to which our attention has been called, and our Legislature meant just what it said when it declared void other disposition than a sale or trade. How can it be held that a chattel mortgage where the mortgagee takes possession under the instrument and forecloses and sells is not a disposition of the stock of merchandise, is a mystery in legal lore and statutory interpretation beyond our comprehension. The common layman would hold that it is, for he would see the title pass by this process into the hands of others, the creditors rendered helpless to interfere, and the mischief the statute sought to bridle, by this subterfuge, entirely evaded.
This case orignated in the Circuit Court of Johnson County. It was first heard on appeal by the Kansas City Court of Appeals and was decided by that court in an opinion written by TRIMBLE, P.J., with ARNOLD, J., concurring, and BLAND, J., dissenting. The case was certified to this court on the specified ground that the holding of the Kansas City Court of Appeals is in conflict with the holding of the St. Louis Court of Appeals in the case of Semmes v. Stecher Brewing Company, 195 Mo. App. 621, 187 S.W. 604. We have carefully read and considered the entire record, and fully concur in the majority opinion of the Kansas City Court of Appeals. That opinion, which we adopt as the opinion of this court, is as follows:
"E.M. Mohler, on February 2, 1921, was in the general merchandise business at Leeton, Missouri, his store consisting of a stock of general merchandise and fixtures. On that date, Mohler gave defendant bank a chattel mortgage on said stock and fixtures to secure a note of even date, due in thirty days, for $2980. The mortgage was recorded on February 3, 1921, and provided that the property should remain in mortgagor's possession until default be made in payment of said note, but, in case of a sale or attempt to sell or remove same from the store building, `except thru natural channels of selling merchandise,' or in case of an unreasonable depreciation in value, the bank could take said property into its possession — and then followed the usual provision for foreclosure. The chattel mortgage contained this provision immediately after the description of the note: `Privilege is granted to Bank of Leeton to assist in taking an inventory when said bank has good reason for believing stock has been reduced to $2980.'
"Five days later, to-wit, on February 7, 1921, Mohler committed suicide.
"On February 11, 1921, his widow, Kate L. Mohler, was appointed administratrix and took possession of the stock. On February 21, 1921, the bank, by replevin, under its chattel mortgage, took said stock away from her.
"The administratrix, on March 14, 1921, under a proceeding instituted in the probate court, sold the estate's equity of redemption in said stock to George S. Moore for the sum of $25. Thereupon Moore paid $2200 to the bank and it released or dismissed its replevin suit, and delivered possession of said stock to Moore.
"Between March 21 and May 2, 1921, the fifteen creditors of Mohler, who are now plaintiffs herein, obtained allowance of their respective claims as demands against Mohler's estate.
"On May 5, 1921, and within ninety days after defendant bank took possession of said stock, the first named six of the plaintiff-creditors, to-wit, Farmers' Cooperative Company, H.D. Lee Mercantile Company, S.H. Beiler Grocery Company, National Candy Co., Mishawaka Woolen Manufacturing Company and Fred Stone, filed a bill in equity, in the nature of a creditors' bill, alleging the allowance of their demands and the giving by Mohler of the chattel mortgage to the bank and his death shortly thereafter; that his widow was appointed administratrix and went in charge, but that the bank in replevin took possession of the stock; that thereafter, without the knowledge of plaintiffs, the administratrix obtained an order for the sale of the equity of redemption and sold said equity to Moore, who then purchased said stock from the bank.
"The bill then alleged that the chattel mortgage given by Mohler to the bank provided that the property should remain in Mohler's possession until default, but that in case of sale or attempt to remove from the store building `except through the natural channels of selling merchandise' or an unreasonable depreciation thereof, the bank could take possession and foreclose; that within ninety days of the filing of the bill, the bank `took possession of said stock of the value of $3500 and converted it to its own use, and the same has rendered the estate of said Mohler wholly and utterly insolvent.'
"The bill further alleged that the chattel mortgage was fraudulent and void as against creditors `and especially as against the judgments in favor of these plaintiffs and other parties, similarly situated, who may join in this action, for the following reasons:' Because the chattel mortgage and the taking possession of said stock was in violation of the `Bulk Sales Law, Article Six, Chapter Nineteen, Revised Statutes 1919, and particularly of the provisions of Section 2286,' in that the bank did not obtain a list of the creditors and give notice seven days before taking possession of said stock, etc.
"It further averred that the chattel mortgage was void because it failed to indicate the amount of indebtedness claimed by the bank, and was made for Mohler's benefit in that he was allowed to remain in possession and to sell and dispose of same in the usual course of business for his own use, and the bank took no steps to see that the proceeds of sale of goods were accounted for and paid in satisfaction of said indebtedness.
"The bill further alleged that plaintiffs `bring this action for the benefit of themselves and for all other persons who, similarly situated, have unpaid claims against the estate of the said decedent, and who may join in this cause of action;' and that they have no other remedy, etc.
"Wherefore, it was prayed that the chattel mortgage be declared void, and judgment be rendered for the value of the stock and fixtures; that the court would permit other creditors similarly situated to be made parties; that after payment of costs and a reasonable attorney's fee, the balance be distributed according to the parties' respective rights as found, and for all other relief.
"On June 18, 1921, after the lapse of ninety days from the time the defendant bank took possession of said property, the other nine creditors filed their respective applications to be made parties-plaintiff along with the original six. The court, over the objections of defendant, allowed them to join in the bill.
"Afterwards, on October 23, 1921, all fifteen of the plaintiff-creditors of Mohler filed an amended petition or creditors' bill in equity, making the same allegations as before, and asking to have the chattel mortgage declared fraudulent and void because Mohler was allowed to remain in possession and to sell from said stock for his own benefit in the usual course of business, and because such `disposition' of the stock by Mohler was in violation of the `Bulk Sales Law,' Sections 2286 to 2290, Revised Statutes 1919. The amended bill alleged that plaintiffs' demands and allowances were due and unpaid and they had no other remedy, and concluded with a prayer for relief similar to that of the original bill, except that the amended bill sought distribution only of the $2200 received by the bank from Moore.
"A demurrer was filed to the amended bill, but the same was overruled.
"The case was tried by the chancellor on an agreed statement of facts, which includes all those facts hereinbefore set out.
"It was further admitted that at the execution of the chattel mortgage the possession of the property was not delivered to defendant, and that it put no one in charge thereof, but that `Mohler was permitted to continue in possession thereof and to sell goods therefrom;' that it was ` orally agreed, by reason of the chattel mortgage having no blank space for writing such agreement therein, . . . that Mohler should not buy any more goods, would put on a sale, and that he would keep the receipts therefrom and bring them at the close of business each day to the defendant to be applied upon the indebtedness.' (Plaintiffs objected to the competency of this, because it varied the terms of the mortgage, but admitted the truth thereof subject to its competency).
"It was further admitted that plaintiffs were proceeding under the provisions of the Bulk Sales Law and were asking for a receiver; that all of the demands or claims of plaintiffs were for goods, wares and merchandise sold by them to Mohler, except the claim of Fred Stone, whose claim was for borrowed money; that the aggregate of the plaintiffs' claims was about $3000, and that Mohler was, and for a long time prior to the giving of the chattel mortgage had been, insolvent, and at the time of the trial his estate had been closed, and that plaintiffs were not able to identify any of the goods they had respectively sold Mohler, or to say that the goods they sold to him were remaining in the stock on the date defendant took possession of it.
"Before submitting the case, defendant objected to any evidence under the petition, because no equity was pleaded therein, because plaintiffs had an adequate remedy at law, and because of all the reasons stated in the demurrer. At the request of the attorneys, the chancellor allowed counsel on each side the sum of $150 as attorney's fees. Thereafter, the chancellor rendered a judgment or decree declaring the chattel mortgage to be null and void, and the defendant to be a receiver for the benefit of all the creditors of Mohler, including the defendant bank itself, to the extent of the $2200 received by it, less the attorney's fees and costs, and directed that the remainder of said fund be distributed to Mohler's creditors, including defendant, as follows: Defendant to retain 29/55ths and to pay plaintiffs 26/55ths thereof pro rata according to their respective demands or allowances stated in the petition.
"The record does not disclose any demurrer to the original petition. The `answer and objection' of defendant to the application of the additional parties to be made plaintiffs state certain matters which, if contained in a demurrer, would be grounds thereof, but that pleading was not striking at the petition. While it has been held that a motion to dismiss, going to the whole case and dispositive thereof, can be regarded as, in substance, a demurrer and hence needs no exceptions to preserve it (State ex rel. v. Ellison, 266 Mo. 423), yet we do not think a mere objection to the application of parties to be made additional parties-plaintiff can fulfill the office of a demurrer. However, the same grounds are contained in the demurrer to the amended petition, which demurrer is in the record, and the substance of defendant's contention is preserved thereby and remains in the case. These (so far as concerns the grounds now considered) are that the amended bill stated no cause of action either in law or in equity; that equity had no jurisdiction herein; that plaintiffs had an adequate remedy at law and the bill shows such fact on its face; and that the amended petition shows it was filed more than ninety days after defendant took possession of the stock.
"The essence of respondents' position or contention may be stated somewhat as follows:
"That under the circumstances of this case, a creditor's bill in equity is maintainable under general principles of equity aided by the authority granted by the Bulk Sales Law, including both the first and second sections thereof, and that the case is not bottomed solely and alone on the second section; that in this case all of Mohler's creditors, except the defendant, joined in the bill; that all of them before doing so, had obtained judgment in the probate court on their claims; that each had a right to have the chattel mortgage declared fraudulent; that after their claims had been reduced to judgment, they had one right in common — to have the property subjected to their claims; that a fraudulent conveyance can be set aside only at the instance of creditors; an heir or administrator cannot do so (Merry v. Fremon, 44 Mo. 518; George v. Williamson, 26 Mo. 190); nor can a purchaser at an administrator's sale (Hall v. Callahan, 66 Mo. 316); that Mohler being dead and his estate insolvent, the probate court could grant no further relief than to allow the claims, or, in other words, render judgment on them; that no execution could issue; and therefore no further proceedings at law were required to lay a foundation for equitable relief against a fraudulent grantee. [Lyons v. Murray, 95 Mo. 23, 28-29.] See also the following other cases as to the right to maintain a creditor's bill: Pendleton v. Perkins, 49 Mo. 565; Jackman v. Robinson, 64 Mo. 289, 292; Steele v. Reid, 284 Mo. 269, 285.
"Hence respondents say that the facts herein furnish an example of how a court of equity can interpose to furnish one remedy, common, just and fair to all, and that no good reason exists why its power should not be applied to the situation in this case. And respondents contend, in effect, if we understand them, that they can therefore join in a creditors' bill attacking the mortgage, not only because it is fraudulent in allowing the mortgagor to remain in possession and sell in the usual course of business, but also because the mortgage was made without complying with the Bulk Sales Law as to the giving of seven days' notice, etc. Such, in brief, is the position taken by respondents. Their theory is that, under the circumstances of this case, the right to maintain a bill in equity exists under general principles of equity, just the same as the right of each creditor to sue by attachment exists at law; that the Bulk Sales Law, making the chattel mortgage fraudulent and void when its provisions are not complied with, does not grant only such legal remedies as attachment, levy of execution, etc., but that since the aforesaid law makes the chattel mortgage fraudulent and void, then equitable remedies are also open, when circumstances are such as to give rise to them; and that the right to have a fraudulent vendee declared a receiver under the second section of said Bulk Sales Law (Sec. 2287, R.S. 1919) is not confined by the proviso attached to said section to those creditors who can pick out and identify the goods in the stock which they sold to the debtor. The respondents' view is that the said second section (2287) making a fraudulent vendee a receiver applies to the entire Bulk Sales Law, to the first as well as the second sections thereof, as shown by the use of the word `Act' in the Session Laws, 1913, page 163, and the word `article' in the revised statutes; that the law says such vendee, on the application of any of the creditors, shall become a receiver for all of the merchandise and fixtures that come into his possession; and respondents contend that if the proviso at the end of the second section be construed as restricting the receivership to such goods only as the creditor can identify, then he is far from being a receiver for all the goods for the benefit of the creditors suing, and under such interpretation the law becomes conflicting, complicated, unworkable and worthless; that the proviso should be interpreted as merely a negative way of stating that a creditor shall have a specific individual lien only on the articles he sold and can identify, and that he can retake them without being required to allow them to go into the general fund to be distributed pro rata among all the creditors.
"The contentions of respondents, unless they are wholly without foundation, present some very interesting and novel questions; but after considering the case in all its branches we do not find it necessary to attempt to pass on the questions hereinbefore adverted to, since we are more deeply concerned with another point made by appellant and which, if valid, strikes at the root of the entire case. And that is that the chattel mortgage herein is not such a `sale, trade or other disposition' of the property as to come within the meaning of the Bulk Sales Law. In Vaughan v. Tyler, 206 Mo. App. 1, 4, this court, in an opinion by the author hereof, held that, under the circumstances of that case, the taking possession under a chattel mortgage was within the provisions of the Bulk Sales Law, citing Semmes v. Stecher Brewing Co., 195 Mo. App. 621. The precise point made in the case at bar was not pressed or briefed in the Vaughan case, but the question was rather whether the trial court was right in proceeding to apply the provisions of the second section of the Bulk Sales Law. However, if the holding in the Vaughan case that a chattel mortgage given in good faith to secure a valid debt is within the purview of the Bulk Sales Law, is wrong, then the sooner the correct rule is announced the better it will be.
"In 27 Corpus Juris, 883, it is said: `It has been almost uniformly held that a chattel mortgage of goods in bulk which operates only to secure a lien, the title remaining in the mortgagor, is not a sale, transfer, exchange, or assignment within the meaning of those terms as used in the bulk sales statutes, except where used as a mere device to effect what is in fact a sale or transfer in evasion of the statute.'
"In Hannah v. Richter Brewing Co., 149 Mich. 220, 222, the court, in construing the Michigan Bulk Sales Law, which forbade the `sale, transfer or assignment' of stocks without certain formalities, held that the giving of a chattel mortgage was not within the meaning of that law. The court said: `Taking this language and the other language of the act, it is apparent that its object was to regulate those sales made of an entire stock upon an immediate payment and change of possession, and which before the act might have been valid, although in fact a fraud upon creditors. To hold a chattel mortgage within the meaning of the statute it is necessary to hold that it is a sale within the common acceptation of that term, transferring the entire title, and entitling the vendee to immediate possession. This, by the specific terms of this mortgage, which are the same as those of chattel mortgages generally in this State, and under our decisions above cited, cannot be done.'
"Similar rulings are to be found in the following cases: Des Moines Packing Co. v. Uncaphor, 156 N.W. 171; Farrow v. Farrow, 206 S.W. 134; Avery v. Carter, 89 S.E. 1051; Wasserman v. McDonnell, 76 N.E. 959; Schwartz v. King Realty Co., 109 A. 567; Noble v. Fort Smith Grocery Co., 127 P. 14; McAvoy v. Jennings, 44 Wn. 79; Greenburg v. Lenz, 12 Brit. Col. 395; Mills v. Sullivan, 111 N.E. 605.
"In 12 Ruling Case Law, 526, sec. 55, it is said the test is whether the merchant in the sale takes `an unusual method of disposing of his property in order to get the money for his own use, and leave his creditors unpaid,' and that the `terms "sale, transfer or assignment," used in such acts, taken in their usual and ordinary signification, mean the disposition of the entire title of the seller. Such words are held not to be sufficiently broad to include a mortgage made in good faith.'
"It is true the words in the various statutes vary, but as stated in some of the decisions they mean practically the same thing, and the object of the statute is to prevent a merchant from selling or disposing of his stock, for which he owes his creditors, and, after obtaining the money therefor, putting it in his pocket and thereby defrauding them. The decisions say that the Bulk Sales Law is what its name indicates, a law against sales, trades or disposals of property and that a chattel mortgage which merely creates a lien on the property and not a title therein does not come within its purview. Such laws were not intended to prevent a diligent creditor from securing, or obtaining priority of payment of, a valid debt in good faith.
"It is conceded in the case at bar that the chattel mortgage was given for `money owed the bank' and was not a mere scheme to evade the statute. While it is true that if the mortgagor were permitted to remain in charge and sell in the usual course of business for his own benefit and without accounting to the mortgagee, this would be fraudulent in law, yet the mortgage was at once recorded and the mortgagee took possession before any steps were taken by other creditors or any new creditors came into existence; and the purpose was not to obtain possession of more goods than the debt amounted to, nor was that done, but merely to enforce the bank's debt. We think that a chattel mortgage given in good faith to secure a valid debt is not within the meaning or purview of the statute, and that therefore none of the plaintiff-creditors could proceed under the Bulk Sales Law, regardless of whether nine of them were barred by the ninety-day limit of Section 2290, Revised Statutes 1919, and regardless of whether or not they, or the original six plaintiff-creditors, could join in a creditors' bill in equity, but must first invoke their legal remedies."
It follows that the contrary ruling of the St. Louis Court of Appeals in the case of Semmes v. Stecher Brewing Company, 195 Mo. App. 621, 187 S.W. 604, is overruled; likewise, the previous rulings of the Kansas City Court of Appeals in the cases of Olean Milling Co. v. Tyler, 208 Mo. App. 430, 235 S.W. 186, and Vaughan v. Tyler, 206 Mo. App. 1, 226 S.W. 1034, and other rulings of our courts of appeal which are in conflict with the ruling in this case.
The judgment of the circuit court is accordingly reversed. Higbee and Davis, CC., concur.
The foregoing opinion by HENWOOD, C., is adopted as the opinion of the court. All of the judges concur.