The only question presented by this appeal is whether the statute regulating the sale of merchandise in bulk (L. 1902, ch. 528) violates any provision of the State or Federal Constitution. The object of the act was to suppress a widespread evil, well known to current history and condemned by repeated adjudications in this court and in all the loading courts of the state from time out of mind. That evil is the tendency and practice of merchants who are heavily in debt to make secret sales of their merchandise in bulk for the purpose of defrauding creditors. Common observation shows that when a dealer has reached a point in his business career where he cannot go on owing to the claims of creditors, the temptation is strong and the practice common of making a fraudulent sale. Fraud works in secret, and the bargain is closed and the purchaser in possession before the creditors know anything about it. The evil is difficult for the courts to handle, because the evidence to uncover the furtive *Page 347 scheme must, as a rule, be drawn from hostile witnesses, usually relatives or intimate friends of the seller, who took part in the fraud and shared in the plunder. All those who have had to do with the investigation of such transactions realize how well these frauds are protected by the forms of law and how frequently they are defended by perjury. The form of the fraud varies with the skill of the perpetrator and his advisers, but the unvarying purpose is to enable the debtor to hold and enjoy property which equitably belongs to his creditors. Inadequacy of consideration, absconding with the proceeds of the sale and the preference of fictitious claims are familiar methods. Many other means of holding on to property and concealing the facts are resorted to and it is not uncommon to see a dealer in possession of all that he had before he failed, and, acting under another name, carrying on the same business with the same stock, all unpaid for, in unblushing defiance of his creditors. Whatever the method of committing the fraud, its success depends on secrecy and perjury.
When a merchant owes more than he can pay he has no substantial equity in his stock of goods and the claims of his creditors are superior to his own. The courts may not only prevent him from parting with his property but may seize and sell it and apply the proceeds upon his debts. If an execution issued against his property is returned unsatisfied, he may be compelled to disclose under oath all his business transactions, tell what he has done with his estate, both real and personal, and the proceeds thereof, and if he still holds any property in the name of someone else, to divulge all the facts relating thereto. (Code Civ. Pro. §§ 2432, 2463.) He may be imprisoned on civil process and punished criminally for making a fraudulent disposition of his property and any person who is a party or privy to the fraud may be punished in the same way. (Code Civ. Pro. § 549; Penal Code, § 586.) Interference with his liberty and property by such methods has never been successfully questioned as a violation of fundamental rights. Many restraints upon freedom of contract, some of which reach back to our colonial history, have passed *Page 348 without challenge, or if challenged have uniformly been sustained as valid. The Statute of Frauds, the act to prevent fraudulent conveyances, insolvent laws, the Recording Act, the prohibition of usury, lien laws, regulations in relation to chattel mortgages, conditional sales and preferences by corporations and in general assignments, show in how many ways and in what varied forms the legislature may properly restrain freedom of action in commercial transactions in order to promote the general welfare. Originally all parol contracts for the sale of personal property were valid and it was unnecessary to make delivery or payment wholly or in part. The Recording Act was unknown, and transfers in writing, whether absolute or conditional, did not have to be filed. Now, however, many statutes require business to be transacted in a certain way, and that constructive notice should be given in order to protect creditors and innocent purchasers. Such interference with liberty and such limitations upon the use of property, although arbitrary and inconvenient, have always been regarded as valid in order to prevent fraud and promote justice. While commerce is hampered to a limited extent in some ways it is protected and promoted to a much greater extent in other ways. The inconvenience of the restraint is less than the evil done away with.
The statute now before us was passed for the same general purpose as the most of those mentioned. It is aimed at the same evil which is admitted to be both serious and common. It does not prohibit a sale of any kind, but it provides safeguards against secrecy, which is the bulwark of fraud. It simply requires that notice of what is to be done should be given in advance, personally or by mail, to those directly interested who are frequently made the victims of fraudulent sales.
It regulates two kinds of sales: 1. A sale of any portion of a stock of merchandise other than in the ordinary course of trade in the regular and usual prosecution of the seller's business. 2. The sale of an entire stock of merchandise in bulk. We now have to deal with the latter only. Such a use is declared fraudulent and void, not absolutely but as *Page 349 against the creditors of the seller unless the statute is complied with. If the seller pays his debts the sale stands even if not made as required by the statute, but otherwise it falls unless at least five days before the date thereof both seller and purchaser unite in making a full and detailed inventory showing the quantity and, so far as reasonable diligence will permit, the cost price of each article. This burden is cast upon both seller and purchaser, but a further burden is placed on the purchaser who is required at least five days before the sale in good faith to make full and explicit inquiry of the seller as to his creditors and the amount owing to each and to notify them personally or by mail of the proposed sale, the cost price of the stock to be sold and the price proposed to be paid. At least five days before the sale the seller is commanded to file, where is not specified but presumptively in the office where a chattel mortgage given by him should be filed, a truthful answer in writing to each inquiry made of him by the purchaser as above required. Except as thus specified the rules of evidence and the presumptions of law are left unchanged.
A recent amendment provides that a sale "will be presumed to be fraudulent and void as against the creditors of the seller" unless the statute is complied with, while the act governing the case now before us makes such a sale absolutely void as to creditors. (L. 1904, ch. 569.)
The statute is confined to merchants and dealers, as is apparent from the use of the expressions "a stock of merchandise" and "the cost price to the seller." No sale is forbidden, but certain sales are regulated in order to prevent fraud. No restraint is placed upon sales made in the ordinary course of business, whether at wholesale or retail, for the statute applies only to unusual and extraordinary sales. There is no attempt to regulate sales generally, but merely those which experience shows are so frequently made a cover for fraud. There is no interference with the ordinary business of merchants, but when they sell their entire stock and go out of business, or sell any substantial portion thereof in an irregular and unusual way, notice to creditors is required so that they can protect *Page 350 themselves against fraud. No protection is afforded to strangers, but simply to those who have a strong equitable right to see that the sale is for a fair price and free from fraud. If the merchant pays his debts there can be no attack upon the sale, however made. The act is less drastic than one imposing a lien upon goods sold until the purchase price is paid, with the right to discharge the lien by sales in the ordinary course of business, which is clearly within the power of the legislature. The requirement of notice is less burdensome than the imposition of a lien.
While the statute in question disturbs freedom of contract, so does fixing the price of elevating grain (People v. Budd,117 N.Y. 1; Munn v. Illinois, 94 U.S. 113); the prohibition of options to buy or sell grain at a future time (Booth v.Illinois, 184 U.S. 425), and the annulment of all contracts for the sale of corporate stocks for future delivery, or on margin (Otis v. Parker, 187 U.S. 606). It interferes with the use of property, but so does a limitation upon the height of buildings (People ex rel. Kemp v. D'Oench, 111 N.Y. 359); the requirement that tenement houses shall be furnished with water (Health Dept. of New York v. Rector, etc., Trinity Church,145 N.Y. 32); forbidding the sale of stamped bottles (People v.Cannon, 139 N.Y. 32); or of lottery tickets issued in a state where lotteries are lawful (People v. Noelke, 94 N.Y. 137); or of game purchased in another state as lawful merchandise and brought into this state (People v. Bootman, 180 N.Y. 1). It interferes with liberty, but so does the act "to regulate barbering on Sunday" (People v. Havnor, 149 N.Y. 195; Petit v. Minnesota, 177 U.S. 164); the statute making it a misdemeanor to exhibit a child as a dancer in order to earn a living (People v. Ewer, 141 N.Y. 129); the exclusion of children not vaccinated from school (Matter of Viemeister,179 N.Y. 235), and the compulsory vaccination of all the inhabitants of a community (Jacobson v. Mass., 197 U.S. 11).
Twenty states as well as the Federal government in the District of Columbia have similar statutes, some with provisions *Page 351 more stringent than our own and all aimed at the suppression of an evil that is thus shown to be almost universal. (California, Civil Code, § 3440, as amended March 10th, 1903; Colorado, Laws 1903, ch. 110; Connecticut, Public Acts 1903, ch. 72; Delaware, Laws 1903, ch. 387; Dist. of Columbia, U.S. Statutes at Large, ch. 1809; 58th Cong. April 28th, 1904; Georgia, Laws 1903, No. 457; Idaho, Laws 1903, H.B. 18; Indiana, Acts 1903, ch. 153; Kentucky, Acts 1904, ch. 22; Louisiana, Acts 1896, No. 94; Maryland, Laws 1900, ch. 579; Massachusetts, Acts and Resolves 1903, ch. 415; Minnesota, General Laws 1899, ch. 291; Ohio, Laws 1902, H.B. 334; Oklahoma, Session Laws 1903, p. 249; Oregon, Billinger's Ann. Codes and Statutes, ch. 7; Tennessee, Acts 1901, ch. 133; Utah, Laws 1901, ch. 67; Virginia, Act approved January 2d 1904; Washington, Laws 1901, ch. 109; Wisconsin, Laws 1901, ch. 463.)
A statute with the same object attained by a similar remedy has been held valid by the highest courts in Massachusetts, Connecticut, Tennessee and Washington. (J.P. Squire Co. v.Tellier, 185 Mass. 18; Walp v. Mooar, 76 Conn. 515; Neas v. Borches, 109 Tenn. 398; McDaniels v. J.J. Connelly ShoeCo., 30 Wn. 549.) An act declaring such sales presumptively fraudulent was assumed to be valid by the courts of last resort in Wisconsin and Maryland. (Fisher v. Herrmann, 118 Wis. 424;Hart v. Roney, 93 Md. 432.)
On the other hand, a statute with more exacting conditions was held unconstitutional in Ohio (Miller v. Crawford, 70 Ohio St. 207), and a similar act met the same fate in Utah, where a violation of the statute was made a crime (Block v. Schwartz,27 Utah, 387). The weight of authority, thus far announced, is in favor of the validity of such legislation. The general grounds upon which it has been sustained are well illustrated by the following extract from the opinion of the Supreme Court of Massachusetts: "A purchaser, to be safe, has only to see that the vendor's creditors are provided for. The vendor may sell freely, without regard to the statute, if he pays his debts. The legislature, when contemplating this *Page 352 legislation, had occasion to consider and balance against each other the general right of property owners to make contracts and dispose of their property, and the general right of creditors to be paid, and to have reasonable opportunities secured to them for the collection of their debts. That this is within a class of legislation for which there is constitutional authority is too plain for question. The object of it is like that of our numerous statutory provisions which authorize attachments on mesne process, and establish courts with all the necessary machinery for the collection of debts. The statute requires of the vendor nothing that cannot be done with reasonable effort. If he is unable or unwilling to pay his debts, it puts a substantial obstacle in his way when he wants to dispose of his stock of merchandise in bulk and to receive payment for himself. But, under such circumstances, the property in most cases ought not to be sold in bulk without first giving creditors an opportunity to consider what ought to be done with it." (J.P. Squire Co. v.Tellier, 185 Mass. 18, 20.)
The question before us is one of power, not of policy. Courts may pass upon the power of the legislature, but not upon its policy. Statutes, whether wise or unwise, are equally binding upon us, provided no provision of either Constitution is molested. According to the general rule, unless there is a plain conflict between a statute and the Constitution, the statute stands, for every presumption is in its favor. The respect due to a co-ordinate branch of the government will not permit mere judicial doubt to undermine a statute, for there must be clear judicial conviction that it violates the Constitution before the courts can set it aside. The legislature with all the power of legislation there is, may pass any law upon any subject, unless it is expressly or impliedly forbidden by the supreme law of the State or of the United States. There is a power beneath the Constitution but not superior to it, unwritten, not fully defined, necessary, resting on the sovereignty of the state, which exists because the state cannot exist without it and which must be considered in connection with the Constitution. That power, known as the police *Page 353 power, aims to promote the public welfare by compulsion and restraint and it is under the exclusive control of the legislature. The executive department can exert it only as authorized by the legislature. The courts can neither exercise it, nor prevent its exercise, but they can determine whether a statute is a constitutional use of the power. We cannot overturn a statute because we do not like it, for our likes and dislikes affect us as citizens, not as judges. We greatly prefer the amended act to the original, because although effective it is not so harsh, but that has nothing to do with the validity of either.
Starting always with the presumption that the statute, although challenged, is valid, we study it in connection with the Constitution to see whether there is such a conflict as to divest the legislature of jurisdiction. If purporting to be passed in the exercise of the police power, we endeavor to see, first, whether there was an evil to be remedied, and, second, whether the remedy prescribed is "calculated, intended, convenient or appropriate" to suppress it and not designed to trespass upon personal rights "under the guise of a police regulation." If "the act has a fair, just and reasonable relation to the general welfare," it may so regulate "the conduct of an individual and the use of property" as to "interfere to some extent with the freedom of the one and the enjoyment of the other." If it violates no express command of the Constitution and tends "in a degree that is perceptible and clear towards the preservation of the lives, the health, the morals or the welfare of the community, as those words have been used and construed in many cases heretofore decided," and is not passed "ostensibly in favor of the promotion of some such object, while really it is an evasion thereof and for a distinct and totally different purpose," it comes within the jurisdiction of the legislature and the courts are bound to sustain it. The police power cannot be arbitrarily exercised so as to deprive the citizen of his liberty or property, "but a statute does not work such a deprivation in the constitutional sense, simply because it imposes burdens or abridges freedom of action, or regulates occupations, or subjects individuals *Page 354 or property to restraints in matters indifferent, except as they affect public interests or the rights of others. Legislation under the police power infringes the constitutional guaranty only when it is extended to subjects not within its scope and purview, as that power was defined and understood when the Constitution was adopted."
Liberty under the Constitution does not mean natural liberty, or the right to act as one pleases subject only to the laws of nature, for society cannot exist on that basis. Constitutional liberty is the right to act without restraint upon person or property, except such as is necessary or expedient for the general advantage of the public. (Matter of Jacobs, 98 N.Y. 98;People v. Marx, 99 N.Y. 377; People v. Arensberg,105 N.Y. 123; People v. Gillson, 109 N.Y. 389; People v.Budd, 117 N.Y. 1; Health Dept. of New York v. Rector, etc.,Trinity Church, 145 N.Y. 32; Slaughter House Cases, 16 Wall. 36; Barbier v. Connolly, 113 U.S. 27; New Orleans Gas Co. v. Louisiana Light Co., 115 U.S. 650.)
The legislation under consideration was intended to suppress a deep-seated evil, common in sales of a certain kind. The existence of the evil is admitted, and the right of the legislature to provide a remedy is also admitted, but it is insisted that the remedy provided is so unreasonable that it violates the primary guaranties of the Constitution. The same claim was made when a maximum price was fixed for doing a certain kind of work, but it was rejected, because the work was done in a business affected with a public interest. (People v. Budd,supra.) The same position was taken when one state absolutely prohibited sales on margin and another options to buy or sell at a future time, contracts which were previously valid, but both provisions were sustained by the Supreme Court of the United States, because they tended to prevent gambling. (Booth v.Illinois, supra, and Otis v. Parker, supra.) While many contracts of the kind prohibited were free from wrong, as so many were made for the purpose of gambling, all were swept away, the good and the bad alike. Is gambling a worse evil than fraud? Does it *Page 355 affect commerce more seriously? Is freedom of contract interfered with more by requiring notice to creditors before certain sales are made, than by forbidding certain other sales altogether? The statute is intended to interfere only with those who buy and sell in bad faith toward the creditors of the vendor. It doubtless interferes with some who act in good faith, but so do the other statutes referred to. In order to prevent injustice and fraud, legislation for time out of mind has placed some restraint upon commercial transactions, and where the legislature has jurisdiction to act the method of suppressing the evil is wholly within its sound discretion.
The right to pass laws to prevent fraud being conceded, what principle is to guide us in drawing a line to separate the act before us from those considered in the cases cited? How can we declare this statute void and the others valid? It has no ulterior purpose. No attempt is made to protect some favored interest from injurious competition. Its object is not, as in theGillson case, to interfere with a lawful business, but to prevent one man from keeping property which equitably belongs to others. It seeks to maintain justice, which is one of the leading features of the public welfare. The protection of creditors has always been a primary function in the administration of justice. Why should the Constitution require courts to be maintained to punish fraud and yet deprive the legislature of power to prevent fraud by requiring notice to a class apt to be defrauded?
As it is known that dishonest merchants abuse freedom of contract by secretly selling out in such a way as to defeat the claims of creditors, may not the legislature surround the right with some safeguards, such as an inventory and notice thereof? When the end sought is within the domain of legislation and the form of the remedy proposed is fairly adapted to that end, the courts have no power to interfere. When jurisdiction exists, the details are within the exclusive control of the legislature. While a merchant, owing debts, has an absolute constitutional right to sell his stock of goods, he may properly be required to do something for the protection of his creditors *Page 356 and what he shall do is for the legislature to prescribe. With power to act upon the subject it may pass a foolish statute or a wise one, and we cannot overturn the one unless we can the other. It is only when there is a want of power to legislate that the courts can declare a statute void.
It is insisted, and the argument is not without force, that while the provisions of the act, so far as they relate to the vendor, may be valid, the restraint upon the purchaser is so severe as to impinge on the right of liberty and property. What is required of the purchaser? To some extent he must look after the interests of creditors, if there are any. He must either see that they are paid or notify them in advance of what is to be sold, the price paid and to be paid and must ask the seller who his creditors are. If there are no creditors the statute does not apply. If the inquiry, when carefully made, discloses no creditors and the purchaser knows of none, he may buy in safety without the inconvenience of inventory or notice. If there are creditors, the risk is in proportion to the amount of their claims, and whether it is large or small, they have rights which need protection from a sale made in bad faith and it is at such sales that the statute strikes. The purchaser may be buying property in which the seller has less real interest than his creditors, and it is reasonable to charge both seller and purchaser with the exercise of some care toward them, in the interest of justice and the general welfare. The inconvenience to purchasers is an evil, as it hampers commerce to some extent, but the injury to commerce from fraudulent sales is a much greater evil, so that on the whole commerce is not harmed but helped. The legislature had the right to balance these evils and to promote the common good by trying to do away with the greater. The everyday business of the seller and buyer is not touched, for that is outside of the statute, but when an extraordinary sale is made, such as can occur but few times in the life of a merchant, certain conditions and restraints are imposed, not to hamper business, but to prevent secret sales in bulk of property usually bought on credit and generally unpaid for when the sale is *Page 357 made. The remedy provided tends to furnish the protection needed by creditors without any interference whatever with ordinary business and without disturbing freedom of contract in the rare and irregular cases to which the act applies any more than was within the power of the legislature according to the principles laid down by repeated adjudications in this court and in the Supreme Court of the United States.
Purchasers who complain of the act as a violation of their constitutional rights are themselves protected by legislation equally drastic, for they could not purchase in safety were it not for the acts in relation to chattel mortgages and conditional sales. They might purchase and pay in good faith and yet have the property taken away from them under a lien they knew nothing about and which they could not discover. As the legislature passed these acts, it can repeal them and in that event purchasers, however careful, might not get a good title, while now, even with the act under consideration in full force, they can get a good title if they only take pains. They cannot, therefore, consistently object to such a statute. They cannot in fairness assert that interference with an unlimited right of contract is constitutional when it operates in their favor, but unconstitutional when it operates in favor of creditors and against themselves.
It is also claimed that an unreasonable burden is imposed upon a limited class of debtors for the benefit of a limited class consisting of their creditors. A statute which is uniform in its effect upon all persons to whom it applies is not invalid because it applies to a limited number. This act applies to all the people of the State who carry on a certain kind of business, which presents special temptations and opportunities for the commission of fraud. The classification is not arbitrary, but is founded on a "reasonable and just difference between the persons affected and all others." The difference is seen in the nature of a business conducted largely on credit, which, as shown by the records of our courts, furnishes peculiar facilities for the perpetration of a characteristic fraud. As was said by Mr. Justice BREWER in a late case: "It is *Page 358 within the undoubted power of the Government to restrain some individuals from all contracts as well as all individuals from some contracts" (Frisbie v. U.S., 157 U.S. 160, 165), and by Mr. Justice FIELDS in an earlier case: "Special burdens are often necessary for general benefits. * * * Regulations for these purposes may press with more or less weight upon one than upon another, but they are designed not to impose unequal or unnecessary restrictions upon any one, but to promote, with as little individual inconvenience as possible, the general good. Though, in many respects, necessarily special in their character they do not furnish just ground of complaint if they operate alike upon all persons and property under the same circumstances and conditions." (Barbier v. Connolly, 113 U.S. 27, 31.) "The discriminations which are open to objection are those where persons engaged in the same business are subjected to different restrictions or are held entitled to different privileges under the same conditions." (Soon Hing v. Crowley, 113 U.S. 703,709.) The Constitution means "that no person or class of persons shall be denied the same protection of the laws which is enjoyed by other persons or other classes in the same place and under like circumstances." (Missouri v. Lewis, 101 U.S. 22; Moore v. Missouri, 159 U.S. 673, 678.)
I close my review by repeating as applicable generally to the case before us the words of the Supreme Court of the United States in a decision of great importance: "The power which the legislature has to promote the general welfare is very great and the discretion which that department of the government has, in the employment of means to that end, is very large. While both its power and its discretion must be so exercised as not to impair the fundamental rights of life, liberty and property * * * yet in many cases of mere administration the responsibility is purely political, no appeal lying except to the ultimate tribunal of the public judgment exercised either in the pressure of public opinion or by means of the suffrage." (Powell v. Penn.,127 U.S. 678, 685, citing Yick Wo v. Hopkins, 118 U.S. 370.) *Page 359
The judgment should be affirmed, with costs, and the question certified answered in the affirmative.