Opinion
33233.
DECIDED NOVEMBER 4, 1950. REHEARING DENIED DECEMBER 12, 1950.
Certiorari; from Fulton Superior Court — Judge Wood. June 22, 1950.
George Dan Mitchell, Noah J. Stone, for plaintiffs in error.
David Gershon, contra.
The judgment of the Civil Court of Fulton County being error as a matter of law under the undisputed facts appearing, it was not error for the superior court to sustain the certiorari and grant a new trial.
DECIDED NOVEMBER 4, 1950. REHEARING DENIED DECEMBER 12, 1950.
C. R. Waller brought suit against George A. Leonard in the City Court of Gwinnett County for $468.53 principal and $65.80 interest. Judgment in the plaintiff's favor was rendered in this action. While said suit was pending, the plaintiff made affidavit in the Civil Court of Fulton County that such suit was pending and that he had "reason to apprehend the loss of said sum or some part thereof unless process of garnishment issues." The plaintiff filed with his affidavit, bond in double the amount sued for, which was approved by a deputy clerk of said civil court. Summons of garnishment was issued and served upon Hugh W. Mason, who thereafter filed his answer into said court denying that he was indebted to the defendant, Leonard. Thereafter the plaintiff traversed the answer of the garnishee, Mason, in which he denied the allegations thereof as being untrue. A summons of garnishment was issued and served upon George C. Mitchell, the other garnishee named in the affidavit, and he was served therewith. To this garnishment Mitchell filed his answer denying any indebtedness to Leonard. The plaintiff likewise traversed this answer denying each allegation thereof as being untrue.
The garnishee, Hugh W. Mason, filed an amendment to his answer in which he set out, among other things, that he personally gave notice to the plaintiff of what had transpired with reference to the store which he had purchased from the defendant and of his depositing $6,500 in an account with the First National Bank of Atlanta, same to be checked out by Mason and George C. Mitchell, after May 12, 1948, and prior to May 21, of that year, and on May 21, 1948 a check for $250 to pay defendant's account in full with the plaintiff was delivered to said plaintiff, and that this check was refused by the plaintiff; that with full knowledge of the facts, the plaintiff did not file any garnishment proceedings until September 10, 1948, after all of said funds had been disbursed, at which time a summons of garnishment issued directed to George C. Mitchell to hold the proceeds of said sale, which summons was served on Mitchell on September 13, 1948; that then the service of the summons on this garnishee was made; that by the foregoing said plaintiff acquiesced in said sale and became estopped from prosecuting a garnishment proceeding under the Bulk Sales Law, against this garnishee.
The issue thus made was tried. It appeared that Leonard sold a drug store to Mason on May 11th, 1948, and the transaction was completed on May 12, 1948, and no bill of sale was executed. The purchaser Mason took possession on the latter date and paid the purchase-price of $6,500. There was no compliance with the Bulk Sales Law of this State (Code § 28-201, et seq.). The $6,500 paid, however, was placed in escrow for the purpose of paying valid debts owing by Leonard on the business; that no notice was given to the creditors but as the creditors would come for their money, Mitchell, attorney for Leonard in the transaction, would verify same and make out a check, and Mason would sign the same and pay such creditor; that Mason informed the plaintiff, a creditor of Leonard, claiming the above sum sued for; that the money was in the hands of Mitchell; that the plaintiff called on Mitchell and then a check was mailed to him for $200, being less that his claim, and the plaintiff refused to accept this check; that he endeavored to obtain payment from this fund for some time thereafter, not suing Leonard and running said garnishment involved here until September 10, 1948; that the value of the stock of goods was around $1200, and the fixtures and entire inventoried assets were some $2,000 in value; that among the sums paid out by Mitchell was $200 to Leonard personally, $300 to Mitchell for services in connection with handling said $6,500 and $125 fee owing by Leonard, $325 to an agent for producing Mason as purchaser of the business; and that all the remainder of the $6500 was paid to creditors of Leonard.
On the hearing, the judge of the civil court hearing said traverses without the intervention of a jury, rendered judgment in favor of the plaintiff and against the garnishees for $200, finding that the fund held was a trust fund and that $200 had been improperly paid out to the defendant Leonard, and that Mason and Mitchell "paid from the purchase-price delivered to them and deposited in their joint names, bills of sale to secure debt on the merchandise involved, judgments and taxes against George A. Leonard in a sum greater than the proven value of said stock of merchandise and fixtures. These mortgages, judgments and taxes being against George A. Leonard, the person who sold the stock of merchandise and fixtures to H. W. Mason, and that these claims are of a higher priority than the claim of C. R. Waller. The court finds that C. R. Waller knew of the sale of this stock of merchandise on May 13 or 14, 1948, and attempted to follow the proceeds of said sale; that a creditor cannot follow the proceeds of a sale and at the same time insist upon the sale being void; that because of the facts recited in the two proceeding paragraphs the court finds against the traverse and in favor of the answer of H. W. Mason on the issue of the Bulk Sales Law."
The plaintiff, Waller, moved for a new trial, which was overruled, and he thereupon applied to the Superior Court of Fulton County for a writ of certiorari. On the hearing of the petition for certiorari, the superior court sustained the same and granted a new trial in the case. To this judgment the garnishees except in the present bill of exceptions.
While it is true that, as a general rule, the first grant of a new trial in a case will not be disturbed by this court unless the verdict and judgment rendered were absolutely demanded by the evidence and under the law (see Connally Realty Co. v. Nally, 38 Ga. App. 292, 143 S.E. 786, and Stone v. Elder, 42 Ga. App. 508, 156 S.E. 475), there is no substantial conflict as to the material facts, and the questions presented here are purely of law.
This was a sale of a stock of merchandise and entire business by the defendant, Leonard, to the garnishee, Mason, and there was no compliance with the provisions of the Bulk Sales Law of this State (Code § 28-204 et seq.) as to notifying creditors of the seller. The plaintiff Waller was a creditor in the sum of $468.53 and his claim was not paid. The $250 sent to him out of the funds held by the trustees was not payment. This check was refused. There was no agreement by him to accept less than the amount of his claim and no composition of creditors.
Where there is a failure of the seller and purchaser of a stock of merchandise and business to comply with the Bulk Sales Law of this State, such sale is conclusively presumed to be fraudulent as to a creditor of the seller who is not paid. Such creditor may sue the debtor and sue out a garnishment against the purchaser, and the garnishee will be deemed liable for such claim. Haralson v. Mendel, 36 Ga. App. 174 ( 136 S.E. 88). The mere fact that the creditor knew that the sale had taken place, acquiring such knowledge afterwards, will not suffice to take the place of notice to him under the statute. See National Cash Register Co. v. Stubbs, 29 Ga. App. 543 ( 116 S.E. 44). The fact that the creditor, the plaintiff Waller, attempted to collect his claim from the fund placed in escrow by negotiating with Mitchell, the attorney, who had charge of paying out the fund placed in escrow to pay claims owing by the seller, Leonard, before bringing suit against the debtor and running the garnishment against the purchaser, Mason, and the person in charge of the fund placed in escrow to pay the claims, Mitchell, does not constitute a waiver on the part of the plaintiff creditor to insist upon his rights under the Bulk Sales Law and to insist that the sale was as to him fraudulent where that law was not complied with. See Haralson v. Mendel, supra. In that case a note was taken by the creditor and this note was not paid. The court held: "The note taken by the plaintiff . . merely changed the form of an already existing indebtedness; it contained no release of Haralson for his violation of the Bulk Sales Act, and the taking of it was not a waiver of plaintiff's right to proceed against Haralson for the amount due the plaintiff." The evidence did not show knowledge on the part of the plaintiff prior to the same that this sale would be made by Leonard. In the Haralson v. Mendel case, supra, the court said: "It appearing that . . the plaintiff had no notice of this sale before or at the time it was made; that the sale was made in bulk; that Haralson did not comply with the Bulk Sales Act . . and that the claim of plaintiff was less than the value of the merchandise, the sale of the goods by Lanier to Haralson was fraudulent and void so far as the plaintiff was concerned; and Haralson was liable in garnishment to the plaintiff in the sum claimed, this being less than the value of the goods."
Under the above, Mason was liable to the plaintiff and the trial court erred in finding against the plaintiff's traverse of the answer of this garnishee.
As to the attorney Mitchell: He held the $6,500 placed in escrow to pay the creditors of Leonard. He paid certain creditors, but did not pay the plaintiff, a creditor. The amount of the plaintiff's claim was $468.53, and the attorney paid out of this fund $200 to Leonard and $425 to himself for legal fees, together with $325 to an agent for producing Mason as the purchaser of the business. The trial court also erred in overruling the traverse of the answer of this garnishee.
The fact that Mason placed the entire purchase-price in escrow to pay creditors of Leonard will not constitute a compliance with the Bulk Sales Law. Where this law is not complied with the sale is conclusively presumed to be fraudulent and void as to all unpaid creditors. Code, § 28-205; and see Wyone Shoe Co. v. Daniels Co., 136 Ga. 192 ( 71 S.E. 1); 27 C. J. 876, 877.
The fact that the plaintiff testified that he was "looking to the funds that Mr. Mitchell had to get my money" did not constitute any estoppel or waiver or prevent the creditor from attacking the sale as being void under the Bulk Sales Law and from suing out this garnishment. The trial judge erred in holding that Waller was precluded by seeking to collect his money from this fund.
There was no such acquiescence in the sale as to constitute any waiver of the plaintiff's rights under the Georgia Bulk Sales Law. The case of Stovall Co. v. Shepherd, 10 Ga. App. 498 ( 73 S.E. 761), is not applicable here.
The fact that there may be evidence that the value of the merchandise sold was only $1200 and the combined value of the merchandise and fixtures was only $2000, and that more than this sum had been paid out to the creditors, did not preclude the plaintiff under the facts of this case, from recovering the amount of his claim by garnishment against the purchaser, Mason, who paid $6500 for the business in bulk, and against the holder of the purchase-price, Mitchell. The fact that the money had all been paid out when the garnishment was run does not relieve the garnishees from liability under the facts of this case, where the Bulk Sales Law had not been complied with, and there was no consent to the sale or acquiescence therein, and the claim is less than the purchase-price of the merchandise.
Applying the foregoing principles, the judge of the superior court did not err in sustaining the petition for certiorari and granting a new trial.
Judgment affirmed. MacIntyre, P. J., and Townsend, J., concur.