io8
THE GREEN BAG
stock of merchandise in bulk shall be fraudulent as against the creditors of the seller unless at least five days before sale a full and detailed in ventory is made and the purchaser makes ex plicit inquiry of the seller as to the names of creditors and notifies thein, etc., is in conflict with New York Constitution, Art. i, {§ i, 6, and United States Constitution Amend. 14, $ i, guarantying the equal protection of the laws and forbidding deprivation of property without due process of law. This law, the court says, finds no justifica tion in the police power, but so interferes with the freedom of contract as to be in violation of the Constitution. It is pointed out that the practical effect of the law is to require the seller to pay all his debts before he can dispose of his property, and this whether the debts are due or not, and whether they are in dispute or not. He is re quired to pay creditors who have no legal, equi table or moral claim on the proceeds of the prop erty, and if he depends upon the proceeds of the particular sale to pay his debts he must pay them before he gets the money. Thereby, an intending seller is under the necessity of practically obtain ing the consent of his creditors before he can make a sale. The purchaser must also pay claims that are in dispute, whether he is right or wrong in the dispute. This, the court says, may not be a literal taking of property without due process of law, but is. an annihilation of its value and a destruction of its attributes, so that while the owner is permitted to retain his property in name, he is deprived of its essence and substance. Sales in Bulk Acts in substantially the form of the New York statute have been enacted in over twenty states. The highest courts of the states of Ten nessee (Nessv. Borches, 109 Tenn. 398), Washing ton (McDaniels v. J. J. Connelly Shoe Co., 30 Wash. 549), Connecticut ( Walp v. Mooar, 76 Conn. 515), and Massachusetts (J. P. Squire Co. v. Tellier, 185 Mass. 18), have sustained the constitutionality of such legislation, while in Ohio (Miller v. Crawford, 70 Ohio St. 207), and Utah (Block v. Swartz, 27 Utah, 387), the courts are in accord with the New York decision. In the New York case the court was divided four to three against the constitutionality of the act. The principal majority opinion, written l>y Judge Werner, holds that the statute is class legislation imposing upon merchants, manufac turers, and jobbers, burdens that are destructive of their legitimate business. Not differentiating be tween sales that are honest and those made with intent to defraud the statute sweeps away vested constitutional rights of liberty and property, and transcends the common limits of the police power of the state. In addition to these reasons, Judge Haight,
in a concurring opinion, adds, " that the statute unnecessarily and unreasonably restricts the power to contract." In an able dissenting opinion, Judge Vann believed the statute constitutional. " Such interference with liberty and such limitations upon the use of property, although arbitrary and incon venient, have always been regarded as valid- in order to prevent fraud and promote justice." The Court has only to pass upon the question of power, not of policy. The enactment of such a statute is clearly with the police power of the State. Although the question is a close one the better view seems to favor the constitutionality of the act. A statute is not objectionable as applying to a particular class if it applies to all who come within the reason for its enactment. Commonwealth v. Danziger, 176 Mass. 290. Rideout v. Knoz, 148 Mass. 368. Moore v. Mo., 159 U. S. 673. Atchison, etc., R. v. Matthews, 174 U.S. 96, 103. "It is within the undoubted power of govern ment to restrain some individuals from all con tracts, as well as all individuals from some con tracts." Frisbie v. U. S., 157 U. S. 160, 165. Generally this statute may be sustained by the same line of arguments that have justified oleo margarine statutes. Plumley v. Mass., 155 U. S. 461.; or prohibitions of marginal stock transactions. Otis v. Parker, 187 U. S. 606; or a hundred other similar limitations on personal liberty or the enjoyment of property under the police powers of the State. It is not for the court to judge whether the statute is commercially wise or unwise, desirable or undesirable. That is for the legislature alone. Lee M. Friedman. The long list of statutes regulating the sale of merchandise in bulk is given in the dissenting opinion. Acts of this nature have been declared unconstitutional in Utah (76 Pac. 22) and, as to certain features, in Indiana (72 N. E. 119); but have been sustained in the majority of jurisdictions (Connecticut, Massachusetts, Ohio, Oklahoma, Tennessee, Washington) the opinions delivered in the New York case reveal the usual and hopeless divergency of views as to the extent of the police power. In view of the fact that the prevailing opinion lays stress upon the failure of the act to differentiate between sales that are honestly made and sales that are made with intent to defraud, attention should be called to an amendment of the law made in 1904 (ch. 569) and not passed upon by this decision by which sales not complying with the act are
