as income till it is capitalized; but when the company ceases to exist owing to liquidation supervening, the rule is not applicable. In re Armitage (1893), 3 Ch. 337, the company in question, which had not power to add to its capital, returned in liquidation the paid up capital and something more, the surplus being attributable to an accumulation of profits not declared as dividends. The surplus was held to be capital and to go to the remainderman, for though it had not been capitalized, neither had it been declared as dividend or bonus, or dealt with by the company in any way. And that decision was also based on this further ground, that as, in the event of the shares having been sold at a profit by the executors themselves, the tenant-for-life could not claim the profit, neither could he claim a profit made on realization through liquidation.

Glasgow, Scotland.

DONALD MACKAY.

THE BULK SALES LAW.

The sentiment prompting the enactment of that class of legislation known as Bulk Sales Laws was first generally responded to in 1903. If uniformity were desired. that object has not been attained, and judicial interpretation is even less uniform. The situation is such that any attempt to classify the various decisions and compare the acts construed with the language of our own would extend this paper beyond the length permissible or proper on this occasion. Reference, therefore, will be had only to the comparatively few cases which would seem to be of value in construing the Kansas Act..

Nor is it desired that specific reference to those respects in which the law fails to afford protection to creditors, or wherein our law is less stringent than those of other states, be taken as an implied criticism of the law or a suggestion that it be made more harsh or drastic, as I do not care to assume the role of advisor to the legislature or to argue for or against the wisdom or expediency of legislation of this character.

The question as to the constitutionality of the law may be dismissed with the observation that, while over thirty states have adopted it, the courts of only four or five have found it to be offensive to either state or federal constitution. The Connecticut and Michigan Acts have been approved by the Supreme Court of the United States.1

Section One regulates the "sale or disposal" of a stock of merchandise. Section Three excepts sales by administrators, trustees in bankruptcy, public officers. acting under judicial process, etc. What transfers, then, are within the statute? This question has given rise to no little discussion.

A chattel mortgage, giving the mortgagor the right to remain in possession, has several times been held to be not within the law. There seems to be no dissent from this.2

The question as to whether a sale by a partner of his interest to his co-partner requires the observance of the Bulk Sales Law has arisen several times. The courts of Georgia and Indiana hold that in those transactions the requirements of the law need not be met. It was held in Tennessee, however, that the sale of an interest for the purpose of taking the vendee in as a partner was within the statute, and Georgia once held that a sale of a half interest followed in a few weeks by a sale of the remaining interest to the same person was a sale within the meaning of the law."

It has been held that a voluntary assignment (not statutory) to a trustee for the benefit of creditors, and a sale by him

(1) Lemieux v. Young, 29 Sup. Ct. Rep. 174; Kidd v. Musselman, 30 Sup. Ct. Rep. 606.

(2) Daniels v. Brewing Co., 150 Pac. (Wash.) 609; Noble v. Gro. Co., 127 Pac. (Okla.) 14; Wasserman V. McDonnell, 76 N. E. (Mass.) 959: Hannah v. Richter, 112 N. E. (Mich.) 713.

(3) Taylor v. Folds, 58 S. E. (Ga.) 683; Yancey v. Lamar, 78 S. E. (Ga.) 1078; Shoe Co. v. Olds, 96 N. E. (Ind.) 592.

in bulk does not necessitate a compliance with the Act." A contrary conclusion was reached in Oklahoma,' and in Texas it was said that such a transfer which preferred certain creditors was within the statute.

It has been twice held that a transfer to a creditor in acquittance of a debt, if the value of the property did not exceed the obligation, is not such a sale as is attempted to be regulated, even though it might constitute a preference under the bankruptcy law," but the contrary has been held in three states.10

The phrase "stock of merchandise" seems to require and has received but little construction. It seems clear, however, that it does not include either raw material, or the finished product of a manufacturer who is accustomed to sell in large quantities, even to the extent of at times disposing of all stock on hand.11

The Act provides that unless its requirements are met the sale shall be "void" as against the creditors of the seller. In this respect it differs from many of the measures adopted by other states. A variety of expressions have been made use of by different legislatures and assemblies. "Presumed fraudulent," "Presumed void," and "Presumed fraudulent and void" seem to be the favorites. Such language has generally, but not always, been held to create merely a rebuttable presumption capable of being overcome by evidence of good faith in fact. It is said to prescribe a rule of evi

(6) Blanks v. Sargent, 141 Pac. (Wash.) 468; Stovall v. Shepherd, 73 S. E. (Ga.) 761. (7) Humphrey v. Coquillard, 132 Pac. (Okla.), 899.

(8)

Terrell v. Young, 152 S. W. (Tex.) 671. (9) Sampson v. Brandon, 56 S. E. (Ga.) 488; Jaques v. Carstarphen, 62 S. E. (Ga.) 82; Gallus v. Elmer, 78 N. E. (Mass.) 772.

(10) Peterson v. Doak, 86 Pac. (Wash.) 663; Baumeister v. Fink, 135 Ill. App. 511; Schumacker v. Riddle, 52 Pa. Super. Ct. 6.

(11) Stone Co. v. Lewis, 85 Atl. (Conn.) 534; Hart v. Brierly, 76 N. E. (Mass.) 286; Cooney v. Sweat, 66 S. E. (Ga.) 257; Lee v. Gillen, 134 N. W. (Neb.) 278.

dence only, and shifts the burden to him who claims the transaction to be bona fide. Such legislation so construed would seem to add very little to previously existing law, as under the statute of Elizabeth a sale in bulk was a badge of fraud.

A large number of states, however, have declared such sales to be "void" or "fraudulent and void," or "conclusively presumed to be fraudulent and void." In one or two instances these expressions have been held insufficient to warrant the setting aside of a sale if it were in fact made in good faith, but it would seem that the weight of authority and the better reasoning maintain the view that evidence of good faith will not be admitted. in support of such a transaction.

The

omission from our law of the word "fraudulent" may be significant in determining the remedies available to the

creditor.

14

A variety of situations have called for discussion as to what is intended by "creditors." It would appear that he need not be one who has sold goods constituting a part of the stock at the time of transfer, or at any time,12 or that he be a mercantile creditor.13 An obligee in an appeal bond, though liability was not determined at the time of the sale, has been held to be a creditor and entitled to notice. Creditors as against whom the sale is void must be the same creditors to whom notice must be given, and in determining who are within that classification it has been held that where a merchant operated a drug store as a separate institution, and across the street from his other mercantile establishment, its sale in bulk required notice to all of his creditors.15 It was held in Washington that upon a sale of a stock owned by a partnership, the individual creditors of the mem

(12) Galbraith v. Bank, 130 Pac. (Okla.) 541. (13) Rabolsky v. Levenson, 108 N. E. (Mass.) 1050; Eklund v. Hopkins, 78 Pac. (Wash.) 787; Bank v. Van Allsburg, 131 N. W. (Mich.) 101. (14) Hanna v. Hurley, 127 N. W. (Mich.) 710. (15) Young v. Lemieux, 65 Atl. (Conn.) 436.

16

bers of the firm need not be notified, but the contrary was held in Tennessee.17

The law requires the purchaser to receive and the seller to furnish a complete list of creditors, certified under oath to be correct. It has been held that recitals in an affidavit that the stock is free from debt, or free and clear of encumbrance is not sufficient. If the seller in fact owes no debts, the affidavit should state that there are no creditors.18 The omission of the name of one creditor does not render the transaction vulnerable to attack by creditors who were notified,19 but the one omitted may invoke the benefit of the law whether the omission was due to mistake or actual fraud.20 It has been held that contract of sale made in violation of the law cannot be enforced by either party,21 and that a purchaser may rescind for the seller's false statement that he owes no debts.2 22 It is said in one case that the purchaser is not a warrantor of the correctness of the list furnished by the seller, and that if he notifies all the persons named therein is protected.25

Seven days' notice is required. It was held in Georgia that the time commenced to run when the letter was deposited in the post office for transmission, and was not postponed until its actual receipt by the creditor.24 It was argued that a creditor might be absent from home, or a resident of a foreign country, or so remotely located that weeks would elapse before he could be reached, and that a consummation of the sale would thereby be unduly and unreason

ably delayed. With just as good reason it might be urged, perhaps, that this rule. would give a New York creditor very little time to act if it were a Kansas sale, and a Kansas City creditor would have an immense advantage in time over creditors more remotely situated.

Perhaps the most perplexing question to be encountered in applying this law is what remedies, if any, are available to the creditor. It is a matter of disappointment that so little enlightenment may be had from cases so far decided. It is believed that it was quite generally understood by those actively interested in procuring the passage of the bill, and very likely by some lawyers also, that the act itself afforded grounds for attachment upon its violation. At least one wholesale concern, evidently acting upon this assumption, attached a large stock of goods, and now finds itself. the defendant in a substantial damage suit. The district court vacated the attachment upon the theory that the Bulk Sales Law did not afford grounds for attachment, and that there was no evidence that any of the usual grounds for attachment existed. This would seem to be the law. The act does not purport to create any lien on the goods upon the happening of any contingency, nor does it prescribe any procedure, or confer any new or additional rights. At most, it seems to relieve the creditor of the burden of proving the sale void, if the provisions of the law are not followed.25 The New York courts say that fraud warranting an attachment must be actual and intentional, and not statutory or constructive fraud; hence an attachment is not supported alone by showing a violation of the Bulk Sales Law.26

As has been noted, such sales are not declared to be fraudulent. The word "Fraudulent" does not appear in the statute. Were sales in violation of the act

(25) Kasper v. Merc. Ass'n, 151 Pac. (Wash.) 800; Hardware Co. v. Morris, 146 S. W. (Tex.) 874.

(26) Millang v. Lambros, 153 N. Y. S. 944.

templation. He must, as heretofore, prove the sale to be fraudulent. In the eyes of the Bulk Sales Law it is a perfectly legitimate transaction. It stretches forth no hand to assist the creditor or to conserve the proceeds of the sale.

It would thus seem that the remarkable thing about this law is that it does not get anywhere. If the law is violated, the creditor is simply relieved of the burden of proving the sale to be void. If its mandates are obeyed, he gets a notice and may then apply his remedy if he has any. The following language from the Supreme Court of Texas sizes up the situation concisely:

"The law provides no special remedy for the collection of debts; that must be according to the general rules of procedure, which apply to all alike. There is not a shadow of a preference in favor of the creditor, expressed or implied, in the terms of the act. It is simply notice of the sale that the creditor gets; and the law leaves each creditor to pursue such lawful course as he may elect."

If thought desirable, the law might be made more effective from the standpoint of the creditor, by making the failure to give the notice grounds for attachment of itself, irrespective of whether the sale is fraudulent in fact. If the notice is given, the protection which is entirely wanting at present could be supplied by a requirement of the purchaser that he see that the purchase price is applied toward the payment of the debts of the seller, or by a provision that if the seller should refuse. on demand to secure the claims of creditors by placing the proceeds of the sale at their disposal, or otherwise, attachment would at once lie. No difficulty will be experienced in finding legislative precedent for such measures.

to defeat creditors, though it offers no. effective legal remedy, but if it is intended by this law to put within the reach of creditors some remedy which will circumvent the shifts of the designing and dishonest debtor, the measure should be equipped with more "Teeth" than it now has.

There is no pretense that the foregoing embraces all questions which may arise in the enforcement of this law, or that reference has been had to the one hundred

fifty or more cases already reported, but if any problem concerned with construction which is of interest to the profession has been suggested, and a clue to its solution advanced, this paper will have attained its object.

This is an action to recover damages for shortage in acreage in a tract of land bought by the plaintiffs from the defendants. The plaintiffs allege in their complaint that they purchased the land relying on representations made by the defendants that the tract of land contained 550 acres, that these representations were false, that in fact the tract of land only contained 379 acres, and that the representations were fraudulently made. These allegations were denied by the defendants. On the trial the plaintiffs abandoned all allegations of fraud.

to make secret transfers of their property

Evidence was introduced on behalf of the

represented that the tract of land contained