Whitmore-Ligon Co. v. Hyatt, 175 N.C. 117 (1918)

Feb. 20, 1918 · Supreme Court of North Carolina
175 N.C. 117

WHITMORE-LIGON COMPANY, Inc., v. R. B. HYATT, Sheriff of Edgecombe County, S. A. GARDNER and R. E. FULFORD.

(Filed 20 February, 1918.)

1. Statutes — Vendor and Purchaser — Merchandise in Bulk — Police Powers— Constitutional Law.

Statutes regulating the “sales of merchandise in bulk” are a valid exercise of the police power of the State. Pell’s Revisal, 964a, as amended.

2. Statutes — Vendor and Purchaser — Merchandise in Bulk — Void Sales.

A “sale in bulk of a large part or the whole of merchandise” under the conditions set forth in our statute, without an inventory and proper notice to creditors, or without an adequate or proper bond to account for the proceeds, is absolutely void as to creditors and may be made available for their debts and claims.

3. Same — Exemptions and Executions.

A vendor of merchandise in bulk which is void under our statute is not deprived of his right to his personal property exemption under execution of his judgment creditor.

4. Sheriffs — Exemptions—Fees Demanded.

Where the judgment debtor claims his personal property from execution, the sheriff is justified in refusing to proceed further till such exemptions are properly set apart, and the payment of his fees for the purpose by the plaintiff in the action, except when the suit is brought in forma pauperis. Revisal, sec. 1275.

Civil actioN, beard on demurrer to complaint by Daniels, J., at November Term, 1917, of Edgecombe.

Tbe action was in part against the defendant sheriff, to compel the sale of certain, goods levied on under an execution in plaintiff’s favor against defendant S. A. Gardner, judgment debtor, and without setting apart the personal property exemptions of said Gardner, as requested by him, and also to recover certain penalties against said sheriff by reason of other defaults in the enforcement of said process. The claim for specific penalties having been withdrawn, the demurrer of the sheriff to plaintiff’s first cause of action was sustained, and plaintiff, having duly excepted, appealed.

There were other facts stated in the complaint looking to further recovery by plaintiff against S. A. Gardner, vendor, and his codefendant, E. E. Eulford, vendee, arising by reason of a sale of goods from the former to the latter without any compliance with the requirements of the statute regulating taxes of merchandise in bulk, as set forth in Pell’s Eevisal, 964a, amended by Laws 1913, Extra Session, eh. 66; Gregory’s Supp., p. 108; but, as judgment on that feature of the ease was rendered against said defendants and they do not appeal, the questions relevant to the claim against these parties is not presented.

*118 James M. Norfleet for plaintiff.

A. W. MacNair for defendant Gardner.

W. 0. Howard for defendant Hyatt.

Hoee, J.

It appears from the complaint that S. A. Gardner, a retail merchant, in October, 1916, sold his stock of goods in bulk to his code-fendant R: E. Fulford without in any way complying with the requirements of the statute regulating such sales, Pell’s Revisal, sec. 964a, and Gregory’s Supp., same section, p. 108; that plaintiff, a creditor of the vendor, by reason of goods sold, delivered and unpaid for, instituted his action before a justice of the peace and recovered judgment for the then debt, $78.76 and costs, and that execution thereon having been placed in the hands of the defendant sheriff, he levied on the stock of goods remaining unsold and thereupon the fraudulent'vendor, having requested that his personal property exemption be set apart to him, the sheriff,, demanding that his fees for the purpose be paid by plaintiff, a position allowed by the law (Lute v. Reiley, 65 N. C., 20), except when the suit is in forma pauperis, Revisal, sec. 1275, declined to proceed further without the setting apart of the exemption as claimed.

It appeared, further, from the complaint that Gardner was insolvent and had no property other than the interest that might arise to him on their goods or the balance due on the purchase price, and further, that Fulford is also insolvent, the amount of goods remaining on hand and in his possession at the time of levy being about $125.

Upon these facts, admitted by the demurrer to be true, we concur in the view of the court below and are of opinion that the vendor is entitled to his exemption and the sheriff was justified in refusing to proceed further till such exemptions were properly set apart.

Prior to the enactment of the “sales in bulk” statute, it has been repeatedly held with us that when an insolvent debtor has made disposition of his property, real or personal, with the fraudulent intent to avoid the payment of his debts and the conveyance has been successfully assailed by the creditors and the property, by judicial proceedings, made available on the vendor’s debts, the latter is entitled to his homestead or personal property exemption, or both, according to the nature of the-property. Cowan v. Phillips, 122 N. C., 70; Gaster v. Hardie, 75 N. C., 460; Board v. Reiley, 75 N. C., 144; Duvall v. Rollins, 71 N. C., 218; Crummen v. Bennet, 68 N. C., 494.

Speaking to the position and the basic reason for it, Chief Justice Pearson, in the Grummen case, supra, said: “A makes a conveyance of his land to B, which conveyance is fraudulent and void as against the creditors of A. A creditor takes judgment and issues execution, treating the conveyance to B as void; can the homestead of A be sold? The creditor treats the conveyance to B as void and of no effect; take that *119to be so, bow can. tbe creditor bave any more right agai-nst A tban be would bave bad if tbe conveyance bad not been made? "We can see no ground to support tbe position tbat an attempt to commit a fraud is a forfeiture of tbe debtor’s homestead; there is no provision of tbe kind, either in tbe Constitution or tbe statutes.”

It has been also held in several well-considered opinions tbat tbe legislation regulating .the “sales of merchandise in bulk” should be upheld as a valid exercise of tbe police power, and tbat a “sale in bulk of a large part or tbe whole of a stock of merchandise” under tbe conditions set forth in tbe statute, without an inventory and proper notice to-creditors or without an adequate and proper bond to account for tbe proceeds, is absolutely void as to creditors and may be made available for their debts and claims. Gallup v. Rozier, 172 N. C., 283; Pennel v. Robinson, 164 N. C., 257.

Applying tbe principle of these various decisions, we see no reason why tbe position upheld in tbe first class of eases should not be controlling in tbe second. In tbe one, tbe conveyance is avoided because made with a fraudulent intent. In tbe other, because of noncompliance with tbe statutory requirements, but both proceed on tbe theory tbat, as to creditors and their claims, tbe property did not pass, and, if this position is established and tbe property is held to be still in tbe debtor, then tbe incidents of ownership must attach and such debtor becomes entitled to tbe homestead and personal property exemptions allowed him by tbe constitution and laws of tbe State.

In tbe cases cited and chiefly relied upon by tbe appellant, Daly v. Drug Co., 127 Tenn., 412, and Marlow v. Ringer, 91 S. E., 386 (W. Va.), tbe question of tbe debtor’s right to bis exemptions was not presented or considered and tbe decisions do not seem to be apposite to tbe facts of this record. In those cases, it was held, among other things, tbat legislation of this character is valid; tbat tbe transactions in those particular cases were within tbe provisions of tbe státute and tbat tbe vendee, in such sale, could be held liable to creditors for tbe value of tbe goods sold by him.

This last position seems to bave been recognized in tbe present instance, for we find tbat judgment has been entered for plaintiff against both tbe vendor and vendee for tbe amount of plaintiff’s claim, this on allegation tbat a large amount of tbe goods has been sold by tbe vendee.

As heretofore stated, however, this question is not involved in tbe present appeal, which was taken from a judgment upholding tbe vendor’s right to bis personal property exemptions on final process against tbe goods and which, as we understand tbe record, bad been levied on as tbe property of tbe vendor.

There is no error in this judgment appealed from and tbe same is