199 F. 1 | 3rd Cir. | 1912
Whether the contract in suit is a bailment or conditional sale is here presented by this record. The writing was entered into between the D. C. Smith & Bro. Typewriter Company and the Franklin Dumber Company, Incorporated, on the 4th day of February, 1909. The latter having since been declared a bankrupt, its creditors are represented by S. H. Alleman, as trustee.
The contract discloses that the Smith Company delivered to the Franklin Company a certain typewriter, designated by factory number, for use and hire for the term of seven months, at a rental of $105, pajmble as follows: $30 upon the execution of the agree'ment, and $10 per month thereafter, and one payment of $15 at the office of the Smith Company, without notification or demand. The Franklin Company agreed to preserve the property in as good
“It is further agreed between the parties that upon the return of the property at tile expiration of the term, that upon the payment, of one dollar by the party of the second part, in addition to tiie sum paid for rental, the party of the first part (Smith Company) will execute a bill of sale of the aforesaid property to the party of the second part (Franklin Company).”
Payments under this agreement aggregating $70 were made in unequal amounts at irregular intervals up to May 4, 1910, shortly before the Franklin Company was declared a bankrupt.
The referee held that the “conduct of the parties” to the agreement, subsequent to its execution, referring to these payments, operated to convert what was once a bailment into a conditional sale. The learned court, in reviewing his decision, held that the contract had not been changed from a bailment to a conditional sale, but that, viewing it in the light of'the subsequent acts of the parties, it had always been a conditional sale, saying:
“In our opinion, the contract has not been changed, but only been interpreted by the subsequent conduct of the parties. In reality it has always been a contract of conditional sale, although it may be true that the bankrupt himself would not have been permitted to prove its true character.”
An analysis of the statement of facts relied upon by the court warranting in his opinion the interpretation that this paper, upon its face a good bailment, was in reality a conditional sale, were: (a) Payments under the agreement in sums other than therein provided; (b) payments at irregular intervals; (c) failure by the Franklin Company to return the machine to the Smith Company at the expiration of the term provided for; and (d) failure by the Smith Company to pursue its remedy under the contract and retake the machine, until six months after the expiration of the term and after the bankruptcy of the Franklin Company.
As was said in Wright v. Gas Co., 2 Pa. Super. Ct. 219:
“The parties to a contract, where there may be some ambiguity, always have a right and can put their own construction upon their own lease, and it is a proper question to submit to the jury whether both parties agree to such a mutual construction, and the jury so finding should adopt such construction as their own.”
But, where there is no ambiguity, the fact that a party acted in accordance with a certain construction does not make such construction binding upon him. Penna. Co. v. Erie, etc., Co., 108 Pa. 621.
The learned court furthermore says:
“Assuming that the bankrupt would be bound by the words of this agreement and could not deny it to be a lease, his trustee is not so bound, and may contend that the contract is really one of conditional sale. In such a contention he may offer any competent and relevant evidence, and it is obvious, I think, that the conduct of the parties may ordinarily throw much light on the true meaning of their agreement If they treat it as a contract of sale, it makes no difference what name they have given it. A creditor may adopt their own construction, and they cannot successfully object.”
The learned judge cites, in support of this, the cases of Brunswick v. Hoover, 95 Pa. 508, 40 Am. Rep. 674, Peck v. Heim, 127 Pa. 500, 17 Atl. 984, 14 Am. St. Rep. 865, and Ott v. Sweatman, 166 Pa. 217, 31 Atl. 102. All of these cases were contests in which execution creditors figured. In each case the contract was held to be a conditional sale and not a bailment. This construction, however, was based upon a written contract, which bore upon its face the indicia of a conditional sale.
“It is to be observed that, to bring the case within the statute of Elizabeth, the contract must vest presently a title of some kind in the buyer, and the mere right to acquire title at some future time, or upon the happening of some future contingency, will not have that effect. Hose v. Story, 1 Pa. 190, 44 Am. Dec. 121. In other words, the title to the goods must pass to the vendee at the time he receives the possession, otherwise there is no sale, but only a bailment.”
Therefore this court holds that, since the contract is plain and unambiguous, it is not permissible to resort to the subsequent actions of the parties thereunder, in order to its interpretation, and that, even though it was permissible so to do, the actions relied upon are insufficient to overcome or overrule the plain terms of the writing.
Again, the indulgences as to manner and time of payment of rental and retention of chattel by the Franklin Company after the expiration of the seven months’ term cannot operate to change the construction which otherwise would be put upon the instrument. Conceding that there was a parol agreement modifying the contract as to the time when the installments should be paid, that will not avoid the remaining covenants in the contract, and it still remains a bailment upon its plain terms. Said Mr. Justice Porter in Whitehill v. Schwartz, 27 Pa. Super. Ct. 529:
“Even if tbe parol agreement, modifying tbe written contract as to the time when the installments of rent should be paid, was made, all the other covenants of the lease were still binding on the parties. The relations of the parties to the property and to each other remained unchanged, and a default in payment of an installment of rental, at the time it became due under the new contract, would involve all the consequences stipulated for in the written agreement.”
Grant that there was a subsequent parol agreement modifying the definite term of the contract into an indefinite one. That circumstance, coupled with the modification of the terms of payment of the rental,
The desire of many judges to do away altogether with the mischief frequently occasioned by the misuse of contracts of bailment has often led to the error here committed. And while it must be admitted that this device is resorted to by designing persons to cover doubtful transactions, often resulting in injustice to innocent 'parties, it must be remembered that much of the business of men is dependent upon it, and in many ways it is enabling the poor to hire property needful to them. '
Notwithstanding such consideration, the contract, being a bailment in its inception, so remained at the time of the bankruptcy, and the trustee of the Franklin Company is not entitled to retain possession tof the machine.
The decree is reversed, with costs.
BRADFORD, District Judge. I am constrained to join in the judgment of reversal solely for the reason that, the decisions of the Supreme Court of Pennsylvania having established a rule of property in force in that state on the subject of conditional sales and bailments of personal property, the federal courts are under obligation to enforce it there without regard to its soundness or unsoundness.