Tompkins v. Harrisburg Auction House

WOOLLEY, Circuit Judge. By an instrument in writing, hearing date A & 1930, David Cramer, trading as 0 7 7 7 0 Harrisburg Auction House, either leased or sold store fixtures to David B. Sykes, a merchant. After a time Sykes was adjudged a bankrupt. Cramer then filed with the referee a petition of! reclamation, asserting title to ^le I)r0P6rty under the writing between himself and Sykes which purports to be a ... , rm n „ , I .... bailment. The referee found it a eondition- , . .. , ... , . al sale; the court, a bailment. The trustee _. ’. ’ ™ Evidently the instrument was dratted by a person familiar with the Pennsylvania law of bailments and conditional sales. It describes itself as a “contract of renting” and expressly disclaims that it is a eonditional sale. It speaks of the parties as lessor and l°ssoo> provides for monthly rentals in £ivf "nV" a stated ^rm'. atiPnla*es £^at 011 de£anlt .auy monthly installment ren£’ the remaining rent shallimmediate-17 become due and payable, and contains a power of attorney to confess judgment on t J do£atllt of a sm^le installment for the full amount of rent, with a waiver of exemption and without stay of execution. The insfcrument contains no provision for return of the property at the end of the term [which may be implied, Jacquard Knitting Machine Company v. Vennell (C. C. A.) 59 F.(2,d) 496], and n0 opj¿on 0f purchase by the lessee. If this were the -whole case we think the eon-tract would conform to the law of bailments as declared by Pennsylvania courts and the claimant would he entitled to the property as against creditors of the bankrupt. Potter v. N. Stetson & Co., 11 Pa. Super. Ct. 627; Stiles v. Seaton, 200 Pa. 114, 49 A. 774; [486] Commonwealth v. P. R. T. Co., 287 Pa. 190, 134 A. 455; In re Manolis (D. C.) 44 F.(2d) 664, 665. Bnt — again under Pennsylvania law which in these cases is very positive — it is permissible, indeed it is necessary, to look at the real nature of the transaction to determine whether it is a bailment or conditional sale, tbe policy of the Commonwealth being firmly against the latter. Fully to carry out this policy, it is ruled that, in deciding whether a writing is one or the other, courts should not be controlled by technical terms and especially they should not he influenced by the name given a contract, as “tbe law pays little heed to the label,” but should look beneath and examine the nature of the transaction between the ‘parties 'and look through the screen of paper title to ascertain what was the real situation. Bowser & Co. v. Franklin Mortgage & Investment Co., 305 Pa. 459, 158 A. 170; Brunswick & Balke Co. v. Hoover, 95 Pa. 508, 40 Am. Rep. 674; Root v. Republican Acceptance Corp., 279 Pa. 55, 123 A. 650. To these authoritative guides to a proper understanding of the transaction, we shall add one of our own, namely; the manner in which the parties themselves interpreted the contract. Though skillfully drawn by the use of terms technically appropriate to a bailment, tbe writing, in the light of conduct of the parties presently to he mentioned, reflects a different construction. The contract purports to lease fixtures for the full equipment of a store. It places the value thereof at $1,290, and provides a down payment of $290 and rentals of $100 a month for a short term of ten months. In other words it provides that the down payment and ten monthly payments shall precisely equal the admitted value of the articles, which (though not conclusive) evidences a sale. Ott v. Sweatman, 166 Pa. 217, 31 A. 102; Kelly Springfield Road Roller Co. v. Spyker, 215 Pa. 332, 64 A. 546. It makes no provision for rentals after the term. On June 9, 1931, the term ended. Thereafter the lessee continued in possession of the fixtures until his trustee in bankruptcy was elected on April. 13, 1932, that is for a period of ten months after the expiration • of the lease, without paying, or being asked to pay, any rent, or being called upon to return the fixtures, so far as the evidence shows. The trustee remained in undisputed possession until May 19,1932, the day set for their sale, when Cramer, claiming ownership’, instituted reclamation proceedings. This was a tardy assertion of an owner’s rights. 3 Yale Pa. Digest 4108. The referee granted a rule against the trustee to show cause and issued a subpoena duces tecum upon the bankrupt to appear and bring with him certain cheeks whieh'he had given Cramer, showing, according to the trustee’s answer, full payment for the fixtures purchased. On return of the rule, the bankrupt failed to appear. Thereupon the referee heard testimony, secondary in character, as to the contents of one check to this effect: After the contract and before bankruptcy, a check drawn by Sykes for an amount “around $500,” made payable to and endorsed by Cramer, passed through the maker’s bank. It bore a notation “In Payment of Fixtures,” according to the testimony of one bank officer, and, payment in full for fixtures, as testified by another officer w!k> did not remember the exact words. Both related circumstances which fixed the matter in their minds. Cramer, if present, did not testify; or, if he testified, the record does not show it. This payment by check, made by one party and accepted by tbe other, bearing a notation of its purpose contrary to that of a rental and not being contradicted, is accepted as conduct of the parties interpretive of their contract as one of purchase which is consistent with its provisions — something more than coincidence — giving the value of the fixtures and placing the rentals at the same figure. We are constrained to hold the transaction a conditional sale, not good under Pennsylvania law against creditors of the bankrupt, Ott v. Sweatman, 166 Pa. 217, 229, 31 A. 102, and that accordingly the order of the District Court overruling the referee and directing delivery of the chattels to the claimant should be reversed.