Duhrkop Oven Co. v. Tormay

WOOLLEY, Circuit Judge. Pursuant to a written contract the Oven Company built an oven for Kohler upon premises which he held under lease and used as a bakery. The structure was placed outside the bakery and consisted of metal plates, tie rods, beams, pipes, flues, etc., there assembled and put together, surrounded on its four sides by brick walls, one, the outer wall of the building, and the others newly constructed walls. Kohler made some payments and defaulted in others and went into bankruptcy before all became due. The Oven Company, claiming the contract to be one of bailment (termed a lease) instituted reclamation proceedings to recover the “leased chattel.” Pending tho petition, the bankrupt’s assets were sold free of liens and preferential claims and this claim was allowed to stand against tho fund. On hearing, the referee found against the Oven Company, and, on review, the district eourt approved the referee’s order. Prom the decree the ease is here on appeal. The controversy below revolved around the issue whether the contract is a bailment or a conditional sale. If the former, it is good under Pennsylvania law and the Oven Company should have the money; if the latter, it is bad and the trustee should pro [282] vail. We incline to the view of the referee that it is neither one nor the other. Therefore it bepomes necessary to state and examine what, admittedly, is an unusual instrument. Paraphrasing and compressing the writing, the Oven Company agreed “to let” to Kohler “for the term of one year * * * one Duhrkop Patent Oven,” including a specified assortment of parts, “for the consideration of $3,400,” of which Koh-' ler agreed to pay “fifty per cent, during construction. Balance in one year at six per cent.” The Oven Company then agreed “to build said oven upon the premises” occupied by Kohler. The parties further agreed- that if Kohler should, default in the payment.of “one or more of the aforesaid sums or installments of rental,” the Oven Company might “resume possession of said oven,” and to do so it might enter upon the premises and “take away and enjoy the said oven” as though the agreement had not been made. Otherwise, Kohler, upon paying the installments, might “hold and enjoy the said oven for the said term.” Finally, the Oven Company agreed that if Kohler should “make no default in payment of * * * the installments of rental,” it would, for the consideration of the paid installments, deliver to him a bill of sale, for the oven. Title was not expressly reserved by the Oven Company. To support its claim that the writing is a bailment for use, the Oven Company stands on the proposition that, under Pennsylvania law, three elements are essential to the validity of such a bailment and that they are present in this agreement. These are, “first, a term for which the chattel is to remain in the possession of the bailee; second, a rental agreed upon between the parties; and, third, an agreement for the re-delivery of the article to the bailor in the same or in an altered form, such agreement for return to be either express or implied.” We venture to add a fourth element, namely; that the subject-matter of the bailment must be a chattel. When the contract was entered into the oven was not in existence. Nor, “during construction” when Kohler paid $1,700, or “fifty per cent.” of “the consideration,” had the oven come into being. When fhe construction was completed, the oven for the first time became the thing contracted for. It then became an entity — whether a chattel or something else — and consisted of metal parts seated in and surrounded by masonry sunk into the ground and connected with a brick house — the very substantial cost of the masonry being reckoned in the consideration of $3,400. While we do not hold that the oven thus built was realty, or a fixture, it is close enough to one or the other to throw light on what the parties really contemplated by their contract. Returning to the original three elements of a bailment under Pennsylvania law, the first — a term-for which the chattel is to remain in the possession of the bailee — is stated. The second — a rental — is present only in words. Payments are alternately referred to as “rental” and “consideration.” We think they are the latter. The third — an agreement for re-delivery of the article to the bailor on the bailee’s default — though present in words, was not contemplated in fact, because the subject matter of the agreement— an oven consisting of metal parts and masonry — is not susceptible of re-delivery. It is susceptible only of demolition, and when demolished it would not be the oven which the company had built and for' which Kohler had partly paid. ' Much of it would be scrap; some of it, for instance, the masonry, would be valueless. This instrument, as drawn, has several legal aspects, those of a bailment, a conditional sale, a lease of a chattel real, and a building contract. They are so commingled that it is difficult to tell what the agreement really is. It looks more like a contract to build than anything else. However, we are not called upon to define it. We are required only to determine whether it is a bailment, for, if it is not, the Oven Company, petitioner in the reclamation proceeding, is not entitled to the fund which came from the sale. We have, with the aid of counsel, made ourselves familiar with the law of bailments as construed by Pennsylvania courts and particularly with contracts of bailment where title to a chattel is reserved by the bailor to be conveyed by him to the bailee at the end of a term on full payment of the price. Myers v. Harvey, 2 Pen. & W. (Pa.) 478, 23 Am. Dec. 60; Rowe v. Sharp, 51 Pa. 26, 30; Enlow v. Klein, 79 Pa. 490; Ditman v. Caottrell, 125 Pa. 606, 17 A. 504; Farquhar v. McAlevy, 142 Pa. 233, 240, 21 A. 811, 24 Am. St. Rep. 497; Lippincott v. Scott, 198 Pa. 283, 47 A. 1115, 82 Am. St. Rep. 801; Stites v. Seaton, 200 Pa. 114, 49 A. 774; Federal Sales Co. v. Kiefer, 273 Pa. 42, 116 A. 545; Ott v. Sweatman, 166 Pa. 217, 31 A. 102; Walton v. Tepel, 210 F. 161, 127 C. C. A. 11; Smith & Bro. Typewriter Co. v. Alleman, 199 F. 1, 117 C. C. A. 577. The contract in suit [283] does not meet that law. Primarily, the instrument is a contract to build an oven, not to surrender a chattel for use or hire; secondarily, the builder sought to protect itself on deferred payments by writing the contract in terms peculiar to the law of bailments. But this did not make the transaction other than what it was. Lacking some of Ike essential elements, it was not, in our judgment, a bailment. The decree of the District Court is affirmed.