whether the deceased died testate or in- to it in the executing instrument, and that, testate. The limitations to appointees or therefore, in such latter case there ought to be a reference to the power.

I

to distributees would, therefore, have to be held pure surplusage. At least such in sub- I find no authority sustaining this view. stance would be the effect, for if there was The argument appears to be founded on a a will containing a general bequest, it would false premise in that it assumes that go to the executor for the benefit of the per- the question of whether a power has been sons named by the will without the aid of exercised is to be determined by the ques-. any power, and if no such will, it would go tion of whether the possessor of the power to the administrator for the benefit of the had knowledge of its existence in him. distributees under the intestate laws with- do not think that such is the philosophy out the aid of the limitation contained in underlying the rules dealing with the subthe trust arrangement-subject in either ject. A power is optional. It may be excase to the rights of creditors. If such was ercised, or it may not be. A party may the intent in employing the language used, know he has the power and yet elect not to I am at a loss to understand why such a use it. The question in each case is, whethcumbersome method of expressing it should er he intended to act upon it. And this have been employed. Such, I think, was not question of intention is not determined in the intent. Rather, it is more reasonable to the affirmative by simply showing that the hold that in creating the trust, Mrs. Derrick-possessor of the power knew that it was son divested herself of all rights in the fund except as the terms of the trust saved to her; and that she did not retain an interest or estate disposable of by her aside from the trust arrangement.

The Pennsylvania case of Birdsall v. Richards, therefore, if it is to be regarded as holding that in such case as is now before me there is a disposable estate as well as a power, does not make a favorable appeal to

my judgment.

vested in him. To hold otherwise would tend to disturb all the rules which courts have for generations erected for guidance in disposing of questions of the kind now

before me.

sand dollars fund mentioned in the trust I hold that with respect to the two thouagreement of April 15, 1907, there was no disposable property interest or estate in

Mary S. Derrickson, which she could dispose of by her will; that if she by her will desired to give it to any particular person or individual, she should have done so by way of appointment in accordance with the trust arrangement. The residuary clause, therefore, in view of this holding, did not carry any interest in the way of an estate in this fund.

I further hold that the residuary clause was not an exercise of the power to appoint under the terms of the trust arrangement, taking the view that the principle laid down

[5, 6] The question of whether a power has been exercised, is a question of intention. Courts have, in adjudications extending over a long period of time, laid down certain well defined rules for the ascertaining of that intention. It is suggested that where the power is a reserved one, that it to say, is in the individual in whom the right of property resided at the time of the creation of the power, a different rule is to be observed in the ascertainment of the intent from that which is to be observed where the donee of the power is a stranger to the prop-in Lane v. Lane's Adm'r, supra, is applicable erty. This thought is urged because, it is to this case. said, where the power is reserved by the owner, such owner must be considered as having actual knowledge of its existence, and therefore no express reference to it is necessary, whereas, if the donee of the power is a stranger there is no presumption that he was aware of its existence, except as he may disclose his knowledge by a reference

I also hold that the two thousand dollars fund should be paid by the trustee to such person or persons as are entitled to receive the same as distributees of Mary S. Derrickson under the intestate laws of the state of Delaware.

Let a decree be prepared in accordance with this opinion.

(115 A.)

(13 Del. Ch. 66) creditors of the insolvent corporation regardKEEDY V. STERLING ELECTRIC APPLI- less of the Bulk Sales Act.

3. Evidence 20(1) Common knowledge that merchants operate to a large extent on credit.

In action involving the construction of the Bulk Sales Act, the fact that merchants operate to a large extent on credit, and that those who might be so disposed may easily acquire a stock of goods largely on credit, and later dispose thereof for cash, and fail to pay creditor who supplied the goods. held a matter of common knowledge.

4. Fraudulent conveyances 47-"Presumption" of fraud within Bulk Sales Act a conclusive and not a rebuttable presumption.

Bill by Charles C. Keedy, receiver of the Sterling Electric Company, a corporation of the State of Delaware, against the Sterling Electric Appliance Company, to set aside a transfer of personal property. Decree for complainant.

The complainant, as receiver of Sterling Electric Company, filed this bill against Sterling Electric Appliance Company praying that the sale and transfer by the Electric Company to the Appliance Company of certain property and assets be decreed to be fraudulent, and that said property and assets be decreed to be the property and estate of the Electric Company in the hands of the complainant, its receiver, for the benefit of its creditors and stockholders.

The cause was heard on bill, answer and testimony of witnesses heard orally before the Chancellor. The facts, about which there is very little dispute, are as follows:

The Sterling Electric Company was organized for the purpose of doing a business of dealing in electric washing machines, electric fixtures and appliances of various kinds. Its business did not prosper, and by November, 1920, it was in an insolvent condition. Its. The presumption of fraud under Bulk Sales officers, upon the advice of one of its princiAct, § 18, as amended by Act Gen. Assem. April pal creditors, thereupon organized a new cor17, 1917 (29 Del. Laws, c. 222), providing poration, the defendant, herein called the Apthat a sale made in violation thereof is "pre-pliance Company, for the purpose of taking sumed" to be fraudulent and void, held a conclusive and not a rebuttable presumption, in view of the purpose of the statute and the provision of act subjecting purchaser to punishment for failure to comply with act.

[Ed. Note.-For other definitions, ese Words and Phrases, First and Second Series, Presumption.]

5. Corporations ~542(4)—Insolvent corporation's transfer of assets void as to its credItors regardless of Bulk Sales Act.

Where officers of insolvent corporation organized a new corporation and transferred to the new corporation a substantial portion of the assets of insolvent corporation in return for stock in the new corporation, and where the only assets of the new corporation consisted of property it acquired by the transfer, the transfer was fraudulent and void as to

over a considerable portion of its assets. The officers of the Electric Company became the officers also of the Appliance Company. Both corporations were, therefore, controlled by the same individuals. The Electric Company while insolvent transferred certain merchandise, equipment, etc., valued at $3,825.00 to the Appliance Company and also certain so-called lease contracts evidencing sales of electric washing machines, the face value of which leases was $6,775.61. In return for this transfer and as consideration

therefor, the Appliance Company issued to the Electric Company one hundred and fiftythree shares of its capital stock of the par value of $3,825.00, and agreed to assume the Electric Company's liabilities in connection with the leases in the sum of $3,347.55, as

well as an obligation to supply labor and | and obtain from the seller a written answer materials in keeping the electric machines to such inquiry; and unless the purchaser in repair. The liabilities and obligations to repair, however, continued as against the Electric Company.

The bill charges, and the answer admits, that at the time of this transfer the Electric Company was insolvent, its liabilities greatly exceeding its assets, including this property, and that both companies, through their respective officers, had actual or constructive knowledge of these facts. At the time of the transfer the Electric Company's balance sheet showed assets of $20,910.54 and liabilities of $59,429.31.

A short time after the organization of the Appliance Company, its officers issued two hundred and forty shares of its capital stock ($6,000.00 par) to themselves, the company receiving therefor the individual notes of the officers for the par value of their respective shares. No money has ever been paid on account of these notes, the officers crediting them with weekly allotments from salaries. The amounts so credited on the notes aggregate nine hundred and sixty dollars. The business of the Appliance Company has been conducted at the same location as that conducted by the Electric Company prior to the transfer by it of its assets to the Appliance Company.

Under this state of facts the complainant charges that the transfer of the assets by the Electric Company to the Appliance Company was in fraud of the creditors of the Electric Company and, therefore, void.

It is further charged that the alleged sale and transfer was fraudulent and void as against creditors because there was no attempt to comply with the so-called "Bulk Sales Act" of this state, approved April 17, 1917, being chapter 222 of volume 29, Laws of Delaware.

shall retain such inventory and written an swer for at least six months and also, at least five days before the sale notify, or cause to be notified, each of the seller's creditors of the proposed sale, the cost price of the merchandise and the price to be paid therefor. If the seller makes false answer to the inquiry made of him by the purchaser, he is declared to be guilty of a misdemeanor. The act excepts sales by executors, administrators, receivers or any public officer acting in his official capacity from its operation.

The original act was re-enacted by chapter 222, volume 29, Laws of Delaware, approved April 17, 1917, with this one addition by way of amendment, viz. if the purchaser wilfully fails to make the inquiry of the seller as above described and to obtain the written answer thereto from the seller, or if the purchaser willfully fails to give the prescribed notice to the seller's creditors, he is guilty of a misdemeanor, punishable by fine of not over one thousand dollars, or imprisonment not exceeding five years, or both in the discretion of the court.

[1] Neither the seller nor the purchaser made any effort to comply with this law. Failure to do so undoubtedly prejudiced the rights of creditors. One of the large creditors knew of the proposed sale. In fact, it was on the advice of this creditor that the new corporation was formed and the assets transferred. But at least two other large creditors and other creditors in the amount of from three thousand dollars to four thousand dollars were ignorant of the fact. The sale clearly falls within the condemnation of the statute, and is thereby stigmatized as fraudulent and void as against creditors.

In many of the states statutes of this character declare that the sale is not presumed to be, but is fraudulent and void. Authorities George N. Davis, of Wilmington, for com- in such states are, therefore, of no value in plainant.

construing the Delaware act, for in this state

Edmund S. Hellings, of Wilmington, for the statute declares that the sale is "presumdefendant.

cerned.

ed" to be fraudulent and void. Again, a statute such as is found in Georgia, where THE CHANCELLOR. The original “Bulk it is declared that the sale is "conclusively" Sales Act" (chapter 387, volume 22, Laws of presumed to be fraudulent, renders the deci Delaware) was approved March 24, 1903. sion of the Supreme Court of that state in This act appears as section 2638 (section 18) Jaques & Tinsley Co. v. Carstarphen Wareof the Revised Code of 1915. It provided house Co., 131 Ga. 1, 62 S. E. 82, of no interthat "a sale of any portion of a stock of mer-pretative value in Delaware, at least so far chandise otherwise than in the ordinary as the nature of the presumption is concourse of trade in the regular and usual prosecution of the seller's business, or a sale In Maryland, Illinois, Minnesota and Wisof an entire stock of merchandise in bulk, consin the statutes are similar to the Delawill be presumed to be fraudulent and void ware act, in that the sale is declared to be as against the creditors of the seller," un- "presumed" to be fraudulent. The courts less an inventory of the goods is made show-of last resort in those states have held that ing the cost price, and unless the purchaser the presence of the words "presumed to be" shall at least five days before the sale in- in the statute makes the presumption a require of the seller as to the names, addresses buttable one. Hart v. Roney, 93 Md. 432, 49 of all creditors and the amount owed to each,| Atl. 661; Fisher v. Hermann, 118 Wis. 424,

(115 A.)

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act. The more so is this true because of the clause in their acts, absent in ours, which has been alluded to.

In North Carolina, the Supreme Court, in construing the statute of that state, where such sales are declared to be "prima facie evidence of fraud, and void as against the creditors of the seller," held that the presumption was a conclusive one. Pennell v. Robinson, 164 N. C. 257, 80 S. E. 417, Ann. Cas. 1915D, 77.

95 N. W. 392; Baumeisten v. Fink, 141 Ill. App. 372; Thorpe v. Pennock Mercantile Co., 99 Minn. 22, 108 N. W. 940, 9 Ann. Cas. 229. In each of those states, however, the statute contained a clause, not found in the Delaware act, providing in substance that except as therein provided, nothing in the act should affect or change the present rules of evidence or presumptions of law. The Court of Appeals of Maryland observed the presence of this clause, and found therein confirmation of its view that the statute was The construction to be given to each statmeant simply to create a presumption avail-ute is dependent upon the view as to whethable to creditors who might seek to assail the er the statute attempts to merely lay down a transaction as fraudulent, a presumption, rule governing the burden of proof in cases however, which was rebuttable by proof that where fraud is charged as attending the sale the transaction was bona fide. In other in bulk, or whether it is meant to inhibit, as words, the statute was designed solely to a matter of public policy, all such sales in place the burden of proof on the purchaser bulk unless the regulations prescribed are to show that there was no fraud, instead of complied with. leaving the burden, as it was before, on the creditors to establish the fraud.

In the other states above mentioned, where a clause similar to the one in the Maryland act is found, the courts reach the same conclusion, though no special mention is made of the significant clause. The presence of such a clause in the statutes of those states must, however, have been given some interpretative value. At all events, the absence of this clause from the Delaware act is a distinguishing feature which differentiates our act from the acts in those states, and the rulings in those jurisdictions accordingly cannot be as persuasive here as they might otherwise be.

Where the act contains language which implies that the subject matter it was dealing with was rules of evidence and presumptions of law, as in Maryland, Wisconsin, Illinois and Minnesota, there is some reason to conclude that the presumption is not a conclusive one; though where such is the case, yet the courts of some states have, as above pointed out, declined to adopt such conclusion.

[2] But when there is no such implication to be found in the language of the act, resort must be had to the general purpose the Legislature had in mind, the sort of evil it was trying to meet, and the adequacy of the act as construed to remedy it, for the proper conIn Mississippi, South Carolina and Tennes-struction of the presumption. If language see, however, notwithstanding the presence is susceptible of two constructions, that in their statutes of a clause declaring that, one may legitimately be adopted which will except as provided therein, nothing in the give efficacy to what the court conceives to act should be construed to alter or change have been the purpose which the Legislature the existing rules of evidence, or the existing sought to accomplish. presumptions of law, the Supreme Court of each of these states held that the presump tion of fraud, in case no attempt was made to observe the requirements of the act, was conclusive and no evidence could be received to show the bona fides of the transaction. Moore Drygoods Co. v. Rowe et al., 97 Miss. 775, 53 South. 626; (on rehearing) 99 Miss. 30, 54 South. 659, Ann. Cas. 1913C, 1213; National City Bank v. Husy & Martin Drug Co. et al.. 113 S. C. 333, 102 S. E. 516; Cantrell v. Ring, 125 Tenn. 472, 145 S. W. 166.

In Mississippi and Tennessee, like Delaware, the language of the act is "shall be presumed to be fraudulent and void as against creditors," and in South Carolina the language is "shall prima facie be presumed to be fraudulent and void as against the creditors of such seller." The rulings in these three states are, therefore, because of the similarity of their statutes to ours in declaring that the fraud is presumed, of

[3] In the case of the statute now before the court, it is not specifically declared whether the presumption of fraud shall be a conclusive one, or a rebuttable one. It must be one or the other. The purpose of the act, as the court conceives it, was to make it impossible for those engaged in merchandising to circumvent their creditors by turning their goods into cash by sales in bulk made out of the ordinary course of business. It is common knowledge that merchants operate to a large extent on credit and, to those who might be so disposed, a facile means of getting easy money would be to acquire a stock of goods largely on credit and later dispose of the same for cash and leave the creditor who supplied them to find the cash if he could. That such frauds had been perpetrated to an alarming extent is best evidenced by the fact that in nearly every state of the Union laws similar to the one now under discussion have been enacted.

out compliance with the statute, the creditor | subjects the purchaser to a fine of not more should have the benefit of a prima facie than one thousand dollars, or imprisonment case of fraud in his favor does not afford him of not more than five years, or both in the much relief; for, if that be the extent of the discretion of the court, if he willfully negstatutory remedy, his prima facie case lects to make the required inquiry of the against the purchaser may be destroyed by seller as to his creditors, or to give them the a showing of bona fides on his part, and the required notice. dishonest seller may secrete the money. The creditor is thus without relief. And if the prima facie case could not be overcome because of a lack of bona fides on the part of the purchaser, then the statute would prove of little value, for in such case there would have been fraud which the creditor, at least in many instances could show anyhow and thus create his own prima facie case without the aid of the statute. I am not unmindful of the difficulty of proving fraud, nor am I disposed to speak slightingly of the value of a statutory rule that the creditor may cast the burden of proof on the purchaser merely by challenging the sale. At the same time, fraud in such matters as are now under consideration is not so hard to make out as might be supposed, for it is to be remembered that, in the absence of a "Bulk Sales Act," a sale of goods in bulk out of the ordinary way of business, or in an unusual manner, has been held to be a badge of fraud, and being such may in itself, without the aid of any statute, be of value in calling upon the purchaser to explain. Walbrun v. Babbitt, 16 Wall. 577, 21 L. Ed. 489; Dokken v. Page, 147 Fed. 438, 77 C. C. A. 674; Hoffer v. Gladden, 75 Ga. 532. If this be true, what is the necessity of the statute, if all it does is to raise a prima facie case of fraud?

I hold the purpose of the act was not to interfere with existing rules of evidence, and the burden of proof in cases of fraud, but to lay down regulations which must be complied with in all such sales as are contemplated by the act, at the peril of having the same overturned by objecting creditors. Any other construction would render the act valueless.

The act may impose a little inconvenience on purchasers, but the Legislature foresaw no unreasonable hardship in its operation. If persons desire to make a kind of purchase which experience teaches is of a type that has frequently been employed by dishonest men to cheat their creditors, it was evidently thought not unreasonable to require that before the purchase is completed creditors should be notified. Such seems to the court to have been the view of the General Assembly in the enactment of this statute, and the act is to be construed accordingly.

[4] Not only because of what has been already said is this court inclined to hold the presumption to be conclusive, but also for a further reason founded in a feature of the Delaware act not met in other jurisdictions.

What is the significance of this provision? Is it not an indication that the Legislature was intending to lay down positive rules and regulations which must in all cases be observed? So imperative are the requirements, that fine or imprisonment, or both, may be visited on him who disregards them. If the presumption of fraud was to be of a rebuttable nature only, it is hardly conceivable that this penal clause would have been adopted. If the presumption is rebuttable, then let it be imagined what might happen in a supposed case. Let a case be supposed of a purchaser of a stock of merchandise who makes no attempt whatever to comply with the requirements of the act. A presumption of fraud is thereupon raised against him, and the creditors of the seller pursue the goods. But let it be supposed that the purchaser rebuts the presumption by a showing of perfect bona fides. In that event, the goods cannot be reached by the creditors. But the purchaser, not having done the things prescribed, is liable to indictment for his failure so to do. The result of which, in such a supposed case, is that the creditors cannot disturb the goods and chattels, but can put their owner in jail. I cannot conceive that the Legislature of this state ever intended to employ language in such a sense as would permit of an incongruous possibility of this kind. A construction of the act which views it as a body of substantive law, regulating the matter of sales of the kind contemplated, avoids such absurd possibility as is above indicated.

[5] In view of the foregoing, it is not necessary for me to discuss the facts in the light of the other contention urged by the complainant, namely, that as a matter of law, regardless of the "Bulk Sales Act," the transfer to the Appliance Company is fraudulent and void as against the creditors of the Electric Company. This much, I may say, however, that if the case rested on this contention alone, still I would be constrained to declare it void. The transfer was arranged by the same set of officers acting for both companies, the transferring corporation was heavily insolvent, a large and substantial portion of its assets was turned over to another corporation whose assets consisted only of the property it was receiving by the transfer; the property remained in the same place where the transferor continued to appear to do business; the transferring corporation received nothing in exchange for the prop