
    Joseph Seeman and Others, Respondents, v. Louis Levine and Louis Rosenbaum, Appellants.
    First Department,
    October 21, 1910.
    Sale — fraudulent sale of business— inquiry as to creditors of transferor — Personal Property Law construed.
    The provisions of the Personal Property Law requiring the transferee of any portion of a stock of goods or merchandise sold otherwise than in the ordinary course of trade to make a full and explicit inquiry of the transferor as to the names and addresses of his creditors and to notify such creditors, otherwise the sale to be deemed fraudulent, only require an inquiry as to the creditors of the immediate transferor. The transferee is not required to inquire as to the creditors of prior transferors.
    Latjghlin, J., dissented.
    Appeal by the defendants, Louis Levine and another, from an order of the Appellate Term of the Supreme Court, entered in the office of the clerk of the county of New York on the 10th day of March, 1910, affirming a judgment of the Municipal Court of the city of New York in favor of the plaintiffs, rendered on the 30th day of October, 1909, in an action upon a third party bond given, in attachment proceedings.
    
      M. Spencer Bevins of counsel [Philip Cohen, attorney], for the appellants.
    
      Clarence McMillan of counsel [Norman C. Hewitt with him on the brief], for the respondents.
   Clarke, J. :

Julius Chill had a grocery store at 771 Amsterdam avenue. On February 4, 1909, plaintiffs brought an action against Chill for goods sold and delivered, obtained a warrant of attachment and made a levy on the stock of groceries and fixtures in said store valued at $390, whereupon the defendant Levine, as claimant of the property, gave the bond herein sued upon the condition being “that if in an action upon this bond, commenced within three months thereafter, said claimant will establish that he was the general owner of the property claimed at the time of the seizing, or if he fails so to do, that he will pay * * - the value thereof with interest, then this obligation to be void, otherwise to remain in full force and virtue.”

It appears that Chill, by a bill of sale dated January 27, 1909, sold “ all the stock of goods and other merchandise of whatsoever description now contained in the grocery store and basement in the premises known as No. 771 Amsterdam avenue, * * * also all the fixtures of whatsoever description in said store, except the cash register, all and everything free and clear from any mortgage, claim or incumbrances,” to one Louis Sakouf, and also assigned to him the lease of the premises. Sakouf sold by a bill of sale to Levine on February second the good will, right, title and interest of his grocery store, together with the stock and fixtures, except one tub of butter and one case of eggs, situated and contained in the store of the premises known as No. 771 Amsterdam avenue.

In an affidavit attached to the bill of sale Sakouf swore that he was the absolute owner of the grocery store, that he owed no bills and that there were no mortgages of any kind whatsoever on said premises.

There was evidence that Chill, at the time that he conveyed, had creditors who were unpaid at the time of the trial. There was no evidence that Sakouf had any creditors. Levine testified without contradiction that Sakouf ■ called him up by telephone asking him to call in reference to some business; that he did so: Sakouf said, “ I bought this place of business and I would like, to dispose of it; ” that “ he is not the kind of a man for this kind of business.” Sakouf “ explains me that he sells everything in the store, excepting one tub of butter and one case of eggs, which he has not paid for, and this he wants to return, and also a register was there, that was mortgaged, and this he told me that T have got to return. I have asked him : ‘ Do you owe anything else on the stock or have you any other mortgages ? ’ ‘ Nothing at all except the tub of butter and the case of eggs. I bought the store and it ain’t for me. I cannot make' any success there; ’ he didn’t buy any goods — just what he bought — he cannot make out and this he wants to return.” After considerable discussion as to price, Bosenbaum, Levine’s partner, having been sent for and participating therein, an agree-, ment was reached at $390, the bill of sale wa°s prepared by a notary, the money paid and delivery and possession given.

The Municipal Court gave judgment for the plaintiffs which was affirmed upon appeal by the Appellate Term by a divided court (67 Misc. Rep. 74), from which determination this appeal is taken.

In the prevailing opinion it is said : “ One "of the issues upon the trial was whether the bill of sale which Chill executed to Sakow [Sakouf] and the transfer of his property which took place under it were valid or invalid. It is conceded that except for the presumption that the sale was fraudulent and illegal, which arises from section 44 of the Personal Property Law, the evidence was insufficient to justify a judgment for the plaintiffs.”

'The statute in force at the time of the transactions under consideration, and which is now section 44 of the Personal Property Law (Consol. Laws, chap. 41; Laws of 1909, chap. 45), was chapter 722 of the Laws of 1907. Section 1 thereof provided as follows: “ The transfer of any portion of a stock of goods, wares or merchandise otherwise than in the ordinary course of trade, in the regular and usual prosecution of the transferor’s business, or the transfer of an entire such stock in bulk, shall be presumed to be fraudulent and void as against the creditors of the transferor, unless the proposed transferee shall, at least five days before the transfer, in good faith, make full and explicit inquiry of the transferor as to the names and addresses of each and all of the creditors of the transferor, and unless such transferee shall at least five days before the transfer, in good faith, notify or caused to be notified of the proposed transfer, personally or by registered mail, each of the creditors of the transferor of whom such transferee has knowledge or can with the exercise of reasonable diligence acquire knowledge.” .

Chapter 528 of the Laws of 1902, the source from which the above statute was derived, provided that such a sale of merchandise in' bulb “ shall be fraudulent and void as against the creditors of the seller” unless certain specified things were done. That act was declared to be unconstitutional in Wright v. Hart (182 N. Y. 330). As amended by chapter 569 of the Laws of 1904, the legislation under consideration was declared constitutional by the learned Appellate Division in the Second Department in Sprintz v. Saxton (126 App. Div. 421), holding that the substitution of the words “ will be presumed to be fraudulent and void ” for the phrase in the original statute “ shall be fraudulent and void ” simply prescribed a rule of evidence. In view of that decision we limit our inquiry to the question whether the defendants in the case at bar come within the purview of the statute.

What the statute provides is that the transfer in bulk shall be presumed to be fraudulent and void as against the creditors of the transferor unless the proposed transferee shall make inquiry of the transferor as to the names and addresses of the creditors of the transferor, and unless such transferee shall notify or cause to be notified each of the creditors of. the transferor of the proposed transfer. The question here is as to the title of Levine. His transferor was Sakouf. Levine did make full and explicit inquiry of his transferor, Sakouf, as to his creditors,- and was told that there were none, except the sellers of the tub of butter and the case of eggs, and the cash register which was mortgaged, all of which were returned to their owners, so that it is established that the transferee of this transaction did make the proper inquiries. There were no creditors of the transferor to notify of the proposed transfer, and there were no creditors of Sakouf at the time of the trial.

We have, then, the transaction between Levine and Sakouf not only in strict accordance with the provisions of the statute, but evidencing good faith and fair dealing on both sides, the payment of full value, the disclosing of goods to which Sakouf had no title and could not convey, and the return of those articles to their real owners. If Levine was required to go further and show compliance with the statute in the transaction between Sakouf and Chill, then, no matter how many prior transfers there may have been, he would have been required to show the same as to each, and if the rule of evidence as to the presumption of fraud is to be so interpreted, it appears to ns that the present statute would be as susceptible to the criticisms made hy the Court of Appeals in Wright v. Hart (supra) as the statute there under consideration. We do riot think that the statute should be so construed.

It follows, therefore, that the determination of the Appellate Term and the judgment of the Municipal Court should be reversed, with costs and disbursements to the appellant, and judgment directed for the defendants, with costs in the Municipal Court and at the Appellate Term.

Ingraham, P. J, McLaughlin and Dowling, JJ., concurred; Laughlin, J., dissented on the prevailing opinion at Appellate Term.

Determination appealed from and judgment of Municipal Court reversed, with costs, and judgment directed for defendants, with costs in the Municipal Court and at the Appellate Term.  