Kidd, Dater & Price Co. v. Musselman Grocer Co.

Background

A merchant in Michigan, Frank B. Ford, sold the stock of his grocery department to a buyer who did not follow the state’s Sales-in-Bulk Act requirements. After that sale, a creditor, the Musselman Grocer Company, sued Ford and sought to reach the buyer as a garnishee, arguing the sale should not protect the purchaser because the law’s notice and inventory rules were not followed. The trial court and the Michigan Supreme Court held the state law valid, and the case reached the United States Supreme Court for review.

Reasoning

The central question was whether Michigan’s Sales-in-Bulk Act violates the Fourteenth Amendment’s protections. The Court found the law was a proper exercise of the State’s power to protect creditors from being defrauded by secret, wholesale sales of a merchant’s business. The opinion relied on an earlier decision upholding a similar Connecticut law, concluded the classification and requirements were reasonable, and said the inventory and notice rules were not arbitrary or oppressive. As written, the statute makes a sale without required notice ineffective against creditors and allows a noncomplying purchaser to be made a receiver and held accountable to creditors.

Real world impact

Merchants, buyers, and creditors are directly affected: buyers must obtain a detailed inventory and a sworn list of creditors and must notify each creditor personally or by registered mail several days before taking possession. If they fail, the sale can be treated as ineffective against creditors, and the buyer may be forced to return or account for the goods. This decision affirms that those state safeguards are constitutional and enforceable under federal law.