Summary
In American Express Co., the Court of Appeals of Georgia noted that optional section 6-106 "* * * has been construed to impose personal liability on a transferee who misappropriates or otherwise converts property subject to the Bulk Transfer Act. [Citations.
Summary of this case from Wikelund Wholesale Co. v. Tile WorldOpinion
46548.
SUBMITTED SEPTEMBER 15, 1971.
DECIDED FEBRUARY 1, 1972.
Action on account. Fulton Civil Court. Before Judge. Bradford.
Sheldon R. Wittner, A. Mims Wilkinson, Jr., for appellant.
Hansell, Post, Brandon Dorsey, Terrence Lee Croft, Bryan, Cave, McPheeters McRoberts, Veryl L. Ridde, Robert F. Scoular, for appellees.
Where there is a failure to comply with the provisions of the Uniform Commercial Code-Bulk Transfers ( Code Ch. 109A-6), a creditor of the transferor may not maintain a contract action on an open account against the transferee.
SUBMITTED SEPTEMBER 15, 1971 — DECIDED FEBRUARY 1, 1972.
This is an appeal taken from an order which granted the defendant's motion for summary judgment as to Counts 1 and 2 as to the plaintiff's complaint. Error was enumerated only as to Count 1 and no argument or citation of authority was made as to Count 2. Hence, on this appeal we consider only Count 1 of the complaint.
In Count 1 of the complaint the plaintiff, American Express Company, S. A. I., sought to recover against the defendants Bomar Shoe Company (hereinafter referred to as Bomar) and H. A. Shoe Company (hereinafter referred to as H. A.) as transferee of Bomar. It was alleged by agreement on December 1, 1969, that H. A. purchased from Bomar all its leasehold interests, furniture, fixtures and office equipment, together with all accounts receivable and inventory of shoes and accessories and the trade name; that such purchase included the retail shoe stores and leased retail shoe departments which the defendant Bomar operated in Georgia; that defendant H. A. assumed the liabilities of Bomar; that the sale came under the Bulk Transfer Act of the Uniform Commercial Code ( Code Ann. § 109A-6-101; Ga. L. 1962, pp. 156, 321); that notice of the transfer was not given to the plaintiff as required by law and thus such sale is ineffective against the defendant as a creditor of Bomar. As amended the complaint alleged that the defendants are indebted to the plaintiff in the sum of $59,493.60 on account and that said account is past due and unpaid. By amendment it was also alleged to the best of plaintiff's knowledge that defendant H. A. had converted the property and assets transferred to it by the defendant Bomar.
It is true that under the Ga. Uniform Commercial Code — Bulk Transfers, a failure to comply with Code Ch. § 109A-6 makes the transfer "ineffective as to any creditor of the transferor." Code Ann. § 109A-6-104 (1) and 109A-6-105. However, the applicable provisions are silent as to the remedies available to the creditor. The commentaries on the Uniform Commercial Code point out that this section does not affect a change in the remedies available but leaves the creditor with the traditional remedies which he had prior to the enactment of such section. Duesenberg-King, Sales Bulk Transfers, § 15.08; 37 AmJur2d 923, Fraudulent Conveyances, § 272. See ULAUCC Official Comment § 6-104 (2), 6-105 (3) and 6-111 (2).
In Albertson v. Williams, 108 Ga. App. 627, 628 ( 133 S.E.2d 897), this court dealt with the Bulk Sales Act which was in effect prior to the enactment of the Ga. Uniform Commercial Code, and held: "Failure to comply with the provisions of the Bulk Sales Act is penalized by a failure of the sale to pass title to the vendee. Therefore, the creditor has any remedy he might have had against the vendor or against the goods. Under this theory, the remedies of attachment, Carstarphen Warehouse Co. v. Fried, 124 Ga. 544 ( 52 S.E. 598), garnishment, Haralson v. Mendel, 36 Ga. App. 174 ( 136 S.E. 88), and levy on the goods after judgment against the vendor, cf. Feagan v. Cureton, 19 Ga. 404, are allowed. However, no contract action on open account against the purchaser could be maintained on this basis." See also Parham Co. v. Potts-Thompson Co., 127 Ga. 303 (8) ( 56 S.E. 460).
We find no cogent reason for not applying this same rule to the instant situation. It should be pointed out that there is foreign authority to the effect that a transferee or purchaser may be held personally liable. See cases in 37 CJS 1352, Fraudulent Conveyances, § 484 (b); 37 AmJur2d 928, Fraudulent Conveyances, § 275. Sec. 6-106 of the Uniform Commercial Code has been construed to impose personal liability on a transferee who misappropriates or otherwise converts property subject to the Bulk Transfer Act. See Darby v. Ewing's Home Furnishings, 278 F. Supp. 917; B H Auto Supply v. Andrews (Tex.Civ.App.), 417 S.W.2d 341. However, our legislature did not adopt § 6-106 of the Uniform Commercial Code, but in Code Ann. § 109A-6-106 inserted a provision relative to "definition of public notice." We construe this as further evidence of legislative intent not to impose personal liability on the transferee in a case of this sort but to leave the creditor with his traditional remedies of garnishment, etc.
It is here urged that unless personal liability is imposed the plaintiff could not use garnishment because a creditor cannot reach by garnishment any assets which his debtor could not recover from the garnishee. Tim Co. v. Franklin, 87 Ga. 93 ( 13 S.E. 259). See Carter v. Sherwood Plaza, 118 Ga. App. 612 ( 164 S.E.2d 867). However, the Supreme Court of Georgia in an early garnishment case regarding bulk sales pointed out that "though the defendant can maintain no action against the garnishee, yet a creditor of the defendant may subject the effects in the garnishee's hands by garnishment." Jaques Tinsley Co. v. Carstarphen Whse. Co., 131 Ga. 1, 2 ( 62 S.E. 82). This same case further points out that even though the transferee might sell or otherwise dispose of the goods to a third party the proceeds of such goods would still be held by the transferee, in trust, and the proceeds would be subject to garnishment.
The trial judge did not err in granting the defendant's motion for summary judgment as to Count 1 of the plaintiff's complaint.
Judgment affirmed. Jordan, P. J., and Evans, J., concur.