APPEAL from the Circuit Court of Cook County; the Hon. CHARLES
R. BARRETT, Judge, presiding.
MR. JUSTICE ADESKO DELIVERED THE OPINION OF THE COURT:
Rehearing denied July 26, 1972.
Pastimes Publishing Company (hereinafter Pastimes) filed a complaint and application for supervision of liquidation naming various persons, businesses and corporations who have a claim or interest as creditors of Pastimes. Upon Pastimes' motion the court entered an order enjoining any action by Pastimes' creditors without leave of the court. Among the creditors were defendant-appellant, Midland Paper Company (Midland) and defendant-appellee Jupiter Press, Inc. (Jupiter).
Midland filed a motion for summary judgment and for a turnover order wherein it stated that it had a perfected security interest in an account receivable of $27,636 based upon a sale by Pastimes to Saalfield Published Company (Saalfield). Jupiter objected to the motion and brought in Saalfield as an additional party defendant. Saalfield filed an answer admitting that it owed plaintiff $27,636 and that it was willing to pay said sum to the court pending the resolution of the controversy.
The trial court denied Midland's motion for summary judgment and set the matter for a hearing. The court entered an order finding that the sale of Pastimes' property to Saalfield was in violation of Section 6-109 (1) of the Commercial Code and constituted a bulk sale and that the proceeds are subject to the lien of the creditors of Pastimes under Section 6-105 of the Commercial Code, which lien has priority over the lien created and perfected under the security interest given by Pastimes to Midland. On appeal Midland contends:
(1) The trial court erred in finding that the sale to Saalfield was a bulk sale in violation of the bulk transfers act.
(2) The trial court erred in finding that the proceeds of the sale to Saalfield were subject to the lien of all Pastimes' creditors.
(3) The perfected security agreement between Pastimes and Midland was effective against all Pastimes' creditors.
The facts are as follows:
Pastimes pretty much ceased doing business in 1967. On August 23, 1968, Pastimes sold its entire inventory of books to Saalfield for approximately $27,000. Pastimes owed Midland over $34,000 for prior purchases. On September 16, 1969, Pastimes assigned the Saalfield account receivable to Midland and executed a security agreement. On October 24, 1968, the financing statement was filed with the Illinois Secretary of State. No notice was sent to Pastimes' creditors informing them of the sale of Pastimes' inventory.
• 1 Midland's first contention was that the trial court erred in finding that the sale to Saalfield was a bulk sale in violation of the bulk transfers act. Section 6-102 (1) of the Commercial Code provides:
"A `bulk transfer' is any transfer in bulk and not in the ordinary course of the transferor's business of a major part of the materials, supplies, merchandise or other inventory (Section 9-109) of an enterprise subject to this Article." Ill. Rev. Stat. 1969, ch. 26, par. 6-102.
Pastimes sold its entire inventory to Saalfield in 1968. An officer of Pastimes testified that Pastimes had virtually ceased doing business in 1967. The sale was not in the ordinary course of business. ...