mulated before or after the creation of the trust estate, as income belonging to the life tenant. It is this last rule which the majority of the court have adopted.

It is a plain principle of law, recognized, I believe, by all the courts, that "money earned by a corporation remains the property of the corporation, and does not become the property of the stockholders, unless and until it is distributed among them by the corporation. The corporation may treat it and deal with it either as profits of its business, or as an addition to its capital. Acting in good faith and for the best interests of all concerned, the corporation may distribute its earnings at once to the stockholders as income; or it may reserve part of the earnings of a prosperous year to make up for a possible lack of profits in future years; or it may retain portions of its earnings, and allow them to accumulate, and then invest them in its own works and plant, so as to secure and increase the permanent value of its property;" and, unless in case of fraud or bad faith, its discretion in this respect cannot be controlled by the courts.

the date of the authorization of the stock. For the issuance of the stock carries with it an interest not only in the earnings which had theretofore been expended and appropriated for substantial and permanent betterments and improvements to the company's railroads and appurtenances, under authority of the board of the company, approved by its stockholders, which earnings, by such use and by the issuance of the stock as representative of the increased value of the corporation, became and were capitalized; but the capitalization of such earnings and the issuance of stock therefor also carry therewith an interest in the pre-existing capital of the company, including the then-outstanding stock representative of such capital. No intent of such character, on the part of the testator, affecting the remaindermen so vitally, is manifested by the testator's will, and in the absence of such intent, every presumption in law is against it. The distribution of the stock in question to the life tenant, affecting the tenants in remainder so prejudicially, without any clear intent of such distribution, on the part of the testator, is, it seems to me, inequitable. I am of the opinion that the new shares of stock in question, and now in the hands of the trustees, should be held by them as a part of the capital of the trust estate, to be by them disposed of under the terms of the will of the said testator, in accordance with the decree of the chancellor.

It seems to me, after a careful considera

that this conclusion leads to results, as between the parties to this suit, more nearly just and equitable than does any other rule. I am, therefore, for the affirmance of the decree of the chancellor.

I am of the opinion that the rule adopted by the majority of the court, and the Pennsylvania rule as well, disregard the logic of these fundamental principles. Accumulated earnings, or undivided profits, until distributed by the corporation, are assets, and form a part of the corpus of the corporation; and by a stock dividend, such as was authorized in this case, there is, in fact, no distribution of surplus earnings to the stock-tion of the cases dealing with the question, holders. In this case, if the so-called stock dividends should be held as part of the corpus of the trust estate, as I think they should be, the interest of the remaindermen in the corporate funds or property would remain the same as it did before the issuance of the new stock; but a different result follows upon the distribution of the stock to the life tenant. It seems to me that the new stock issued by the board of the company, authorized and approved by the stockholders, clearly evidencing a conversion by the corporation of certain surplus earnings into capital, should, as between the remaindermen and the life tenant, be considered as capital, and not as income, in the same manner as the said surplus, undistributed and invested in improvements and betterments, inured to the benefit of the said trust estate before the stock was issued for the purpose of representing said surplus in capitalization.

I cannot accept the doctrine that the issuance of the new stock was in law a distribution of the surplus earnings of the railroad company, accruing before or after the death of the said testator, and prior to

GEORGIA SUPREME COURT. INTERNATIONAL

SILVER COMPANY, Plff. in Err.,

V.

F. G. HULL et al.

(Ga. 78 S. E. 609.)

Bulk sales law honest omission of creditor - effect.

If one desiring to purchase a stock of

Headnotes by LUMPKIN, J.

Note. Effect of misrepresentations in statement seller is required to make as a condition of a valid sale in bulk. A careful search discloses but one case other than INTERNATIONAL SILVER Co. v. HULL, dealing with the question of the ef

Lumpkin, J., delivered the opinion of the court:

Prior to 1903 sales of stock of merchandise in bulk could only be attacked for fraud under the same rules as were applicable to sales generally. Civil Code, §§ 3224, 4109. The legislature was of the opinion that this was not sufficient to meet creditors, it was held in an action by the creditors to recover the amount of their debts and the price of the goods, which had not been entirely paid by the purchasers, that the misrepresentation by the sellers that they had no creditors was material, and just ground for rescission by the purchasers.

See note to McCormick v. Kistler, post, 497, as to the applicability of the bulk sales law to exempt property. W. W. A.

the evil, or possible evil, of a failing mer- comply with the requirements of the statchant's making a secret sale of his stock ute, there is no declaration that he shall

in bulk, placing the proceeds beyond reach, and leaving his creditors helpless, unless they could show both fraud on his part and notice to the purchaser. Even then, a subsequent innocent purchaser might take a good title. It was deemed proper to give additional safeguards to creditors in connection with sales of stocks in bulk. The act of 1903 (now codified in Civil Code, §§ 3226 to 3229) was passed. Section 3226 makes it the duty of every person who shall bargain for or purchase any stock of goods, for cash or credit, before paying or delivering to the vender any part of the purchase price, to demand and receive from the vender a written statement under oath of the names and addresses of all the creditors of the vender, together with the amount of the indebtedness due or owing to each. This duty is placed upon the proposed purchaser. The duty is placed on the seller to furnish such a statement, and also a statement of assets and liabilities

lose his purchase because of the omission by the seller of the name of a creditor. On the contrary, in referring to the duty of the purchaser to send out the statement of assets and liabilities, after the two have taken an inventory, the expression is used "as furnished him by the vender," indicating a legislative purpose as to such statement at least that the purchaser was not to be held liable for every possible cmission of the vender, of which the purchaser had no notice. And, in declaring when the sale shall be presumed fraudulent, one expression used is: If the purchaser shall pay or give any evidence of indebtedness for the purchase price, or any part thereof, "without having first demanded and received from said vender the statement under oath, mentioned in § 3226, and without having first given to each of said creditors the notice," etc. There is nothing here to show that an omission by the vender of a creditor from the sworn list should be vis

and of the cost price of the merchandise,―ited on a bona fide purchaser without the cost price to be arrived at by an in- notice. ventory taken at the time by both. "There- It was argued that the statute required upon" it is made the duty of the purchaser to give to each of "said creditors" notice of the proposed sale and the price and terms (accompanied by a copy of the statement of the assets and liabilities "as furnished him by the vender"), at least five days before the completion of the purchase, or the payment of the purchase money. Section 3227. By § 3228 it is declared that, if the purchaser fails to comply with the duties required of him as therein specified, the sale shall be deemed fraudulent as against the creditors of the vender.

A consideration of these sections will show that certain duties are imposed upon the proposed purchaser and certain duties upon the proposed vender. If the purchaser fails to comply with the duties imposed upon him, he gets no title as against creditors of the vender. If the vender knowingly and wilfully makes and delivers, or causes to be made and delivered, any statement of which a material portion is false, or fails to include the names of all his creditors, he is declared to be guilty of a misdemeanor. Penal Code, § 718. But if the purchaser demands from the vender a written statement under oath of the names and addresses of the creditors of the latter, with the amount due or owing by the seller to each of them, and the seller delivers a statement purporting to contain all of his creditors, and the purchaser, in good faith and without any knowledge or notice of the omission of the name of a creditor therefrom, proceeds to

the purchaser, not only to demand, but aiso to "receive," from the vender a list of all of the creditors of the latter, and that he had not received a list of all of them, if one were omitted. But this is too exacting and verbal a construction. The statute did not make the purchaser a warrantor of the absolute completeness and accuracy of the sworn statement of the vender, or punish him for the omission from such sworn statement of the name of a creditor, without any fraud on his part, or any notice thereof.

It was further urged that, if it should be held that an omission by the vender from the statement of one creditor did not avoid the sale, he might omit any number of his creditors, and thus they might get no notice, and a fraud might be perpetrated upon them. This is possible. But the penal statute appears to provide some obstacle to the wilful furnishing by the vender of an incomplete list of creditors. And, moreover, the statute now under consideration furnished a cumulative protection to creditors. It did not repeal the pre-existing laws against fraudulent sales. If the vender and purchaser should collude to omit certain creditors, and thus defraud them, or if the vender should omit the names of one or more creditors, with intent to delay or defraud them by sale, and the purchaser should have notice thereof, the omitted creditors could still have a remedy under Civil Code, §§ 3224, 3225.

A careful consideration of the statute

CONNECTICUT STEAM BROWN STONE ing rough stone in large unbroken sizes

A sale of his tools and stock in trade by one who buys stone in the rough and cuts and dresses it to fill orders which he may receive is not within a statute making void a sale of his stock, without certain notices to creditors, by one who makes it his busi-235 Ill. 40, 20 L.R.A. (N.S.) 167, 126 Am. ness to buy commodities and sell the same in small quantities for the purpose of making a profit.

Bowen v. Quigley, 165 Mich. 337, 34 L.R.A., notice shall be signed by such person or in (N.S.) 218, 130 N. W. 690.

The bulk sale's act applies only to retail merchants.

Young v. Lemieux, 79 Conn. 442, 20 L.R.A. (N.S.) 160, 129 Am. St. Rep. 193, 65 Atl. 436, 600, 8 Ann. Cas. 452; Walp v. Mooar, 76 Conn. 521, 57 Atl. 277.

Mr. Thomas M. Cullinan for appellee.

his name by his attorney."

Concerning the question of the applicability of this statute the trial court has found these further facts: Mahoney and Gill operated a stone yard with working benches and tables, grinding wheels, and general tools of the stone cutters' trade. They bought building stone, in quantity, sawed into slabs of various sizes and

Hall, Ch. J., delivered the opinion of the shapes, which were delivered to them at court:

their yard, in that form. There they cut On February 11, 1911, the plaintiff com- the slabs into smaller pieces of various pany brought an action against William B. shapes and sizes to agree with orders given Mahoney and Thomas Gill, and attached to them to furnish articles of stone to be as their goods certain personal property of used in the construction of buildings or the value of about $700, which prior to their appurtenances. These articles were January 10, 1911, had belonged to Ma- made to order for particular jobs, and the honey and Gill as proprietors of a stone stone had to be chiseled, tooled, cut, yard conducted by them in Bridgeport, and dressed, and polished in accordance with which on said January 10th they had by the particular order. They were not used written bill of sale transferred to the de- in the identical size and shape that the fendant Lewis, but without having recorded slabs were in when received. The value of a notice of their intention to make such the finished products of the plant was in sale, as the plaintiff claims was required a large proportion made up of labor, and by the provisions of chapter 21 of the Pub- not of material. No change was made in lic Acts of 1909. The bond in suit was the structure, and the smaller pieces, when given by the defendants to procure the re- cut and dressed, were easily recognizable lease of said attachment. The plaintiff as parts of the larger slabs from which subsequently obtained judgment against they had been cut. They sometimes cut Mahoney and Gill for $714, and afterwards, upon their refusal and that of the defendants to pay said judgment, brought this action.

The only question involved in this case is whether, upon the facts found, the provisions of said chapter 21 of the Public Acts of 1909, are applicable to the sale of January 11, 1911, by Mahoney and Gill, to the defendant Lewis. That act, which repeals previous statutes upon this subject, reads as follows: "When any person who makes it his business to buy commodities and sell the same in small quantities for the purpose of making a profit shall, at a single transaction, not in the regular course of business, sell, assign, or deliver the whole or a large part of his stock in trade, such sale shall be void as against all persons who are his creditors at the time of such sale, assignment, or delivery, unless he shall, not less than ten days nor more than thirty days previous to such sale, assignment, or delivery, cause to be recorded in the town clerk's office in the town in which such vendor conducts his said business, a notice of his intention to make such sale, assignment, or delivery, which notice shall be in writing, describing in general terms the property to be so sold, assigned, or delivered, and all conditions of such sale, assignment, or delivery, and the parties thereto; and said

up the stone into sills and similar articles, before receiving orders therefor, and occasionally sold such stone articles to a purchaser who had not previously ordered them; but their regular business was the furnishing stone articles cut and shaped to order. Prior to and ever since January 10, 1911, the plaintiff has been a creditor of Mahoney and Gill. The bill of sale of January 10th described the goods sold as "all cut and uncut stone, tools, traveling crane, building, office furniture, fences, tool shed, and all the property at our stone yard at.

The sale was made in

good faith, for a valuable consideration, and Lewis took immediate possession of the property sold, and held such possession at the time of the attachment. The sale was not in the regular course of the business of Mahoney and Gill, and included all their stock in trade. Upon these facts the trial court held that the statute cited was applicable to said sale, and rendered judgment for the plaintiff for a sum representing only what was found to be the

value of the attachable interest of Ma

honey and Gill in the stone attached by the plaintiff, with interest thereon.

Manifestly the act in question does not apply to sales by persons who sell only at wholesale, whether or not they themselves produce, manufacture, or purchase the goods so sold by them, or change the form of the goods or material purchased by them