2020 Georgia Code
Title 11 - Commercial Code
Article 6 - Bulk Transfers

- Requirement that bulk sales of heating fuel be accompanied by delivery ticket containing identification of commodities, count of packages, etc., § 10-2-10.

- For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982). For article, "Leveraged Buyouts in Bankruptcy," see 20 Ga. L. Rev. 73 (1985).

ANALYSIS

• General Consideration
• Remedies

General Consideration

Editor's notes.

-.

In light of the similarity of the provisions, decisions under former Civil Code 1910, § 3226, and former Code 1933, § 28-203 are included in the annotations for this article.

Article derogates common law, and one's right to alienate one's own property without restriction and is therefore to be strictly construed. Yancey v. Lamar-Rankin Drug Co., 140 Ga. 359, 78 S.E. 1078 (1913); Martin v. Taylor, 24 Ga. App. 598, 101 S.E. 690 (1919); Bank of LaGrange v. Rutland, 27 Ga. App. 442, 108 S.E. 821 (1921), later appeal, 29 Ga. App. 478, 116 S.E. 49 (1923) (decided under former Civil Code 1910, § 3226).

- Purpose of this article is not to eliminate remedy of original seller, but rather to protect seller on contractual indebtedness assumed to have been made at least partly on implication of solvency of purchaser arising from ownership of inventory of a going business. McClain v. Laurens Glass Co., 127 Ga. App. 316, 193 S.E.2d 194 (1972).

Central purpose underlying Art. 6 of the Uniform Commercial Code is to deal with type of commercial fraud in which merchant debtor sells stock and trade to another, pockets the proceeds, and then absconds, leaving the merchant's creditors unpaid. Johnson v. Vincent Brass & Aluminum Co., 244 Ga. 412, 260 S.E.2d 325 (1979).

Purpose of article is to protect creditors against fraudulent sales by debtors. W.W. Stovall Co. v. W.E. Shepherd Co., 10 Ga. App. 498, 73 S.E. 761 (1912) (decided under former Civil Code 1910, § 3226).

Purpose of article is to permit seller's creditors to subject consideration of proposed sale to garnishment before buyer disburses funds of such sale. McLean v. G.T. Duke Co., 95 Ga. App. 135, 97 S.E.2d 537 (1957) (decided under former Code 1933, § 28-203).

This article is for protection of creditors existing at time of sale, who are to be notified, and in absence of fraud such sale cannot be attacked by subsequent creditors for noncompliance with this article. Dodd v. Raines, 1 F.2d 658 (N.D. Ga. 1924) (decided under former Civil Code 1910, § 3226).

- In imposing obligation upon third party buyer (transferee) and allowing cause of action against that party for breach of obligation, the article creates right in creditor not known at common law. Indon Indus., Inc. v. Charles S. Martin Distrib. Co., 234 Ga. 845, 218 S.E.2d 562 (1975).

- The effect of this article is to require transferee to help in creditor protection, principally a matter of giving notice, if transferee wants to ensure that they cannot reach goods in transferee's hands after transferee has paid for them. McClain v. Laurens Glass Co., 127 Ga. App. 316, 193 S.E.2d 194 (1972).

Article applies to secured as well as to unsecured creditors. NCR Co. v. Stubbs, 29 Ga. App. 543, 116 S.E. 44 (1923) (decided under former Civil Code 1910, § 3226).

- This article draws no distinction between those creditors whose debts may have arisen from sale of merchandise and such creditors as sustain that relation by reason of indebtedness created by debtor for other independent and disassociated reasons. It applies as well to a sale of a stock of goods in bulk by a debtor to a creditor in extinguishment of debtor's debt as to a sale for cash or on credit. Anderson v. Merchants & Miners State Bank, 161 Ga. 12, 129 S.E. 650 (1925) (decided under former Civil Code 1910, § 3226).

- This article does not inhibit creditors, where statute has been complied with, from obtaining judgment against original purchaser who received goods and contracted with supplier to pay for them; compliance with its provisions merely prevents creditors, after judgment, from levying on property, title to which has passed out of judgment debtor's hands. McClain v. Laurens Glass Co., 127 Ga. App. 316, 193 S.E.2d 194 (1972).

Cited in Kamlapat v. Purvis-Wade Carpet Mills, 112 Ga. App. 781, 146 S.E.2d 138 (1965).

Remedies

Compliance by transferee necessary for protection.

- Unless transferee complies with requirements of this article, creditors may pursue goods as though they still belonged to transferor. McClain v. Laurens Glass Co., 127 Ga. App. 316, 193 S.E.2d 194 (1972).

- Where article has not been complied with, it is no defense that purchase price of property was paid by purchaser directly to another of defendant's creditors. McLean v. G.T. Duke Co., 95 Ga. App. 135, 97 S.E.2d 537 (1957) (decided under former Code 1933, § 28-203).

- Noncompliance with this article subjects inventory transferred to attachment within 12-month statute of limitation. Willson v. Johnson Stores, Inc., 139 Ga. App. 308, 228 S.E.2d 340 (1976).

- Inasmuch as transfers in violation of this article are ineffective to pass title of goods from transferor to transferee, remedies available to original seller are those seller would have had against transferor, and contract action on open account against transferee is not such a remedy. American Express Co. v. Bomar Shoe Co., 125 Ga. App. 408, 187 S.E.2d 922 (1972).

- This article permits only in rem action against transferred goods or proceeds therefrom, not in personam action against transferee. American Express Co. v. Bomar Shoe Co., 127 Ga. App. 837, 195 S.E.2d 479 (1973).

The Bulk Transfer Act, O.C.G.A. § 11-6-101 et seq., preserves a creditor's remedy against the goods, not against the transferee personally, and permits a creditor to pursue goods in the hands of a transferee as though they still belonged to the transferor. Consequently, this act does not authorize a direct action for negligence against the transferee of corporate stock. Brown Transp. Corp. v. Street, 194 Ga. App. 717, 391 S.E.2d 699 (1990).

- This article has no language which compels creditor of one who thereafter sells to another in bulk to look to latter for payment, whether or not as between debtor and debtor's transferee there is an agreement that latter will pay the debt, where original seller has not agreed to substitute transferee in place of purchaser and is stranger to contract between the latter. McClain v. Laurens Glass Co., 127 Ga. App. 316, 193 S.E.2d 194 (1972).

- Where the relationship of the creditor to the bulk transferor is multifaceted, the creditor may pursue common law and equitable remedies, if any, against the transferee without reliance on the bulk transfer law. Boss v. Bassett Furn. Indus. of N.C., Inc., 249 Ga. 166, 288 S.E.2d 559 (1982).

There is nothing in the Uniform Commercial Code to indicate that the creditor of a bulk transferor may not proceed on any common law or equitable cause of action the creditor may have against the transferee, notwithstanding the bulk transfer law. On the contrary, the Uniform Commercial Code provides that unless displaced by particular provisions, the principles of law and equity, including fraud, etc., shall supplement its provisions. Boss v. Bassett Furn. Indus. of N.C., Inc., 249 Ga. 166, 288 S.E.2d 559 (1982).

RESEARCH REFERENCES

ALR.

- Rights between parties to sale in violation of Bulk Sales Law, 5 A.L.R. 1517.

Applicability of Bulk Sales Law to chattel mortgages and sales thereunder, 9 A.L.R. 473; 14 A.L.R. 753; 57 A.L.R. 1049.

Right of creditor to judgment for value of goods against transferee in violation of Bulk Sales Law, 61 A.L.R. 364.

Subrogation of purchaser at sale contrary to Bulk Sales Law to rights of creditors, 80 A.L.R. 712.

Garnishment as remedy in case of violation of Bulk Sales Law, 155 A.L.R. 1061.

Bulk transfers: construction and effect of UCC Article 6, dealing with transfers in bulk, 47 A.L.R.3d 1114.