Meyers v. Jacham Enterprises, Inc.

Horney, J., delivered the opinion of the Court. This appeal involves the disposition of the proceeds of a promissory note attached by a judgment creditor in the hands of garnishees (subsequently paid into court) but awarded by the court to a claimant of the attached funds after a hearing in the attachment proceeding on the motion of the attaching creditor for a judgment of condemnation absolute. The garnishees (Ruchs, Inc., and Herman E. Ruch and Mildred M. Ruch, individually) purchased a going business, known as Sans Souci, and the premises on which the business was conducted from the respective owners thereof and delivered to the vendors of the business a promissory note for $5,000 in part payment of the purchase price. The note was duly assigned, by mesne assignments, to Jacham Enterprises, Inc. (claimant) before the attachment proceeding was filed.

In lieu of strict compliance with the terms and provisions of the Sales in Bulk Act (Code [1957], Art. 83, §§ 97-101, often hereinafter referred to as the bulk sales statute), a sales agreement was entered into by and between five parties. Eouis J. Meyers, individually, and trading as Marclay-Oden Company (real estate broker and attaching judgment creditor), who had procured the Ruchs as purchasers was not a party to the agreement. The parties of the first and second parts were the vendors of the business and the owners of the premises. Certain creditors of the business, including the claimant, were designated as parties of the third and fourth parts, and the Ruchs, as purchasers, were the parties of the fifth part.

The agreement, after reciting that it was made in lieu of a strict compliance with the statutory requirements ⁹¹ and to protect the purchasers, set forth the terms, provisions and general conditions concerning the sale and concluded with what was designated as paragraph seven (hereinafter often referred to as the “protection” clause), the pertinent provisions of which were as follows: “The alleged indebtedness of one T. Braden Silcott in the amount of $2291 * * * is hereby rejected by all of the parties vendors; but in order to save harmless the * * * parties of the fifth part [the Ruchs] from any successful action on the part of * * * Silcott resulting in any obligation on the part of the * * * parties of the fifth part to pay such claim, the promissory note in the amount of $5000 * * * shall be held in escrow * * * for the purpose of paying the * * * indebtedness if and when the same is legally established and as securitfy] for the payment of any other claims for fees, commissions or creditors who shall have legally and successfully prosecuted * * * claims against any parties or against the * * * fifth parties for which the fifth part[ies) shall become liable for payment therefor [emphasis added], and [the holders in escrow] shall hold [the] note until all claims have been paid or satisfied, at which time the * * * note shall be delivered to the * * * parties of the fourth part less any credit for payments made or encumbered against * * * note, if any there shall be * * The broker, being unable to collect his commissions after the sales had been consummated, filed suit against the vendors and owners and was awarded a judgment for the amount of the commissions claimed. When, however, the judgment proved to be of little value, the judgment creditor (Meyers) attempted to attach the proceeds of the promissory note by laying an attachment in the hands of the Ruchs as garnishees. The claimant (Jacham) countered by filing an “answer” in the nature of a claimant’s petition in the attachment proceeding and, in a separate action, also sought to enter a con ⁹² fessed judgment on the promissory note. By the consent of all of the parties, the Ruchs were allowed to pay the balance due on the note into court, and the attachment and confessed judgment proceedings were consolidated for trial.

At a hearing of the consolidated proceedings the court— upon holding that the “protection” clause (paragraph seven) of the agreement was executed for the sole benefit of the Ruchs in that the postponed payment of the balance of the purchase price, represented by the promissory note, was in effect a device to secure the Ruchs against the payment of the claims of any creditors of the vendors for which they might become liable under the bulk sales statute—dismissed the motion of the judgment creditor (Meyers) for a judgment of condemnation absolute and awarded the proceeds of the note to the claimant (Jacham). Meyers,