City of San Antonio v. Chas. M. Stieff, Inc.

83 S.W.2d 357, 1935 Tex. App. LEXIS 568

• Court: Court of Appeals of Texas
• Decided: March 27, 1935
• Docket: No. 9437.
• Status: Published

Opinions

MURRAY, Justice.

Appellee, Chas. M. Stieff, Inc., a Maryland corporation, as plaintiff, instituted this suit against appellant, city of San Antonio, as defendant, seeking to recover the sum of $1,300, together with interest, representing the purchase price of a certain piano delivered to, the city of Sam Antonio by Walthall Music Company, a Texas corporation. Appellee’s petition also contained a count seeking in the alternative to recover the reasonable market value of this piano.

The facts are as follows: The Walthall Music Company had been in the retail music business in the city of San Antonio for a number of years. Chas. M. Stieff, Inc., was engaged in the wholesale piano business. These two corporations, on March 4, 1929, entered into a contract or agreement, in the form of a letter written by a representative of Stieff, Inc., to Walthall Music Company and accepted by Leon N. Walthall, as president of the Walthall Music Company. This agreement is as follows:

“(Letterhead of Walthall Music Company.)

“San Antonio, Texas, March 4; 1929. “Walthall Music Company, San Antonio, Texas

“Dear Sirs: We will ship in accordance with your order, the following instruments :

#185 Stieff Petit — Figured Mahogany, dull 670.00

# 66 Davis & Son, Mahogany dull 180.00

# 60 Bennett-Bretz, Mahogany 310.00

—on consignment for four months. It is understood that Walthall Music Company is to pay the freight from Baltimore and to carry the insurance at our wholesale prices as above quoted. .If the instruments shipped under this agreement are paid for within thirty (30) days from date of shipment, a cash discount of three per cent (3%) will be allowed from billing prices.

“Should these instruments not be sold at the expiration of four months,, and should we order them returned at that time, or at any future time, Walthall Music Company agrees to pay the freight and for any unreasonable wear and tear.

“Monthly stock reports will be sent Chas. M. Stieff, Inc. showing location of all unsold consigned pianos.

“Should the instruments remain, by mutual consent, above the term of four months it is understood that Walthall Music Company is to pay Chas. M. Stieff, Inc. intérest at the rate of six per cent (6%) per annum. In the event the instruments are sold, the firm of Chas. M. Stieff, Inc. will receive from Walthall Music Company- cash .settlement in full plus the interest charge, if any.

“It is agreed that should Walthall Music Company sell an instrument consigned to them by Chas. M. Stieff, Inc. on time or on installments, Walthall Music Company may as agents of Chas. M. Stieff, Inc., sell to a finance Company such contract resulting from such sale, with recourse on the Walthall Music Company but not on Chas. M. Stieff, Inc., for a sufficient amount to enable the Walthall Music Company to settle with Chas. M. Stieff, Inc., for the instrument involved. Said settlement to be made by Walthall Music Company to Chas. M. Stieff, Inc. immediately after proceeds from sale of such contracts are returned by Walthall Music Company.

“Such additional shipments as may be agreed upon will be made on the same basis and at the then prevailing prices. Your acknowledgment and acceptance of the foregoing will constitute the contract.

“Very truly yours,

“Chas. M. Stieff, Inc.,

“Per [Signed] Frederick Phillip Stieff, i Vice Pres.

“Accepted and agreed to “Walthall Music Co.

“By: Leon N. Walthall.”

Pursuant to this agreement, appellee, Stieff, 'Inc., shipped a number of pianos to Walthall Music Company. These pianos were sold by the Walthall Music Company to various customers and settlement made with appellee by Walthall Music Company executing its trade acceptances to appellee, and attaching thereto as collateral the notes and sale contracts of the various customers. This practice continued until the music company was indebted to appellee in the sum of more than $8,000.

On November 27, 1929, appellee wrote a letter to the music company in which it stated as follows: “On receipt of your letter of November 18th we wrote you, under date of November 23rd that we were willing to accept collateral from you. Such instruments as you may have bought between November 23rd and this date you may send us collateral if you so desire, but on future orders it will be necessary for us to revert back to our original understanding covered by our contract of March 4th, 1929. This understanding is to the effect that the pianos will be consigned to you for four months, after which time interest at the rate of six per cent will be charged. Immediately upon the sale of a piano you are to pay us in cash for such piano. What arrangement you have with other finance companies is of course of no concern of ours. This is the only basis on which we would be willing to sell.”

On December 2, 1929, the music company wrote a letter to appellee in reply to its letter of November 27, in which reply the music company made the following statement: “We note that it will be agreeable to accept collateral on goods shipped up to the 27th of November as per your letter of November 23rd, but for future shipments it is understood that the same will be in accord with the written contract of March fourth, i. e. on consignment for four months interest 6% after that time. When a sale is made we are to settle for the instrument in cash and will govern ourselves accordingly, although I am afraid this arrangement will curtail the volume that we could . otherwise do on ■ your lines.”

On November 29, 1929, appellee sent the music company the following telegram : “Can ship five foot eight grand about one week provided you assure us that settlement will be made for cash when sold in accordance with provisions of contract of March fourth. Please wire.”

On the same day the following reply was telegraphed by the music company: “Collateral aggregating thirty seven hundred sent you twenty sixth per your letter twenty third, stop. Sale five foot eight for use Municipal Little Theatre will be cash one. Please ship immediately.”

The piano delivered to the city of San Antonio was a ' Stieff grand piano, bearing No. 43936, and was shipped by appel-lee to the music company on December 13, 1929, subject to the provisions of the agreement of March 4, 1929.

A committee of ladies appointed by the mayor of the city of San Antonio called at the place of business of Walthall Music Company and, selected, for the city, the type of piano that was finally delivered to the city. However, the particular piano selected by the ladies was not delivered to the city, but another piano of the same make and style was, in fact, delivered. The piano was delivered by Walthall Music Company to the city of San Antonio in January, 1930, and, in due course, the city authorities approved the bill for the piano and ordered a warrant or voucher issued to the Walthall Music Company in the sum of $1,300. The city auditor declined to deliver the warrant to the music company for the reason that he had discovered that the Walthall Music Company was indebted to the city for past-due taxes in a sum far in excess of the price of the piano. Section 114 of the city charter prohibited his delivering a warrant under such circumstances. Mr. Walthall, as president of the music company, demanded payment in cash for the piano from the city authorities, but never, at any time, undertook to reclaim the piano. In February, 1930, the Walthall Music Company was adjudged a bankrupt, and ceased to be a going concern. The wholesale price of this piano was $720, and the difference between $720 and $1,300 represented the gross profit of the music company. After the music company was adjudged a bankrupt, appellee wrote the city demanding not only the payment of the $720, representing the wholesale price, but the entire $1,300. The city refused this demand, stating, in effect, that they had dealt with nobody but the Walthall Music Company, and that appellee was not known in any way in the transaction. Appellee then demanded the return of the piano, which was also refused. Approximately nine months later, in November, 1930, appellee instituted this suit against the city. The trial was to the court, without the intervention of a jury, and resulted in judgment for appellee against the city of San Antonio in the sum of $1,595.75. The city presented this appeal.

It is plain from the above statement of this case that the piano delivered to the city of San Antonio was shipped by ap-pellee-to the music company subject to the provisions of the agreement of March 4th, and, therefore, a proper disposition of this case requires a construction of that agreement.

It is contended by appellee that the agreement of March 4th should be construed as a contract between principal and factor, and that the interpretation of this contract should be governed by the customs and usages of factors and commission merchants. We cannot agree with this contention. One of the first essentials of a factoring contract is that the agent, or the factor, must be engaged in the business of factor, or commission merchant. 25 C. J. p. 342, § 4; R. C. L. 11, pp. 753, 754.

There is no contention that the Walthall Music Company was a factor, or commission merchant, but, on the contrary, the record affirmatively shows that it was a retail dealer in musical instruments.

Another reason why this is not a factoring contract is that under this contract the music company is at liberty to sell at any price, and receive payment at any time it likes, and is bound if it sells to pay the consignor a fixed price. 25 C. J. p. 414, § 145.

The next question presented is whether or not this was a contract of bailment for the purpose of sale, whereby the Walthall Music Company became the agent of appellee for the purpose pf selling appellee’s pianos. We conclude that this is not a contract of bailment. It is sometimes very' difficult to determine whether or not a particular contract is one of bailment for the purpose of sale, or one of conditional sale. In construing the contract here involved we must resort to the familiar rule that the intention of the parties is to govern, and that this intention is to be arrived at, not from any particular expression in the contract, but from the contract as a. whole and the surrounding circumstances. The manner in which the contract was treated by the parties before any controversy arose is, as a rule, very helpful in arriving at the intention of the parties. In this case the wholesale dealer shipped pianos to the retail dealer to be placed among its stock of merchandise and daily exposed to sale. The music company sold these pianos to various customers, taking notes and sale contracts in its own name, then executing trade acceptances to appellee, and attaching these notes and sale contracts as collateral, and in this manner securing ap-pellee for the wholesale price of the pianos. This method of selling would indicate that the music company was treating this contract as one of sale and not of bailment, and appellee’s acceptance of these trade acceptances with the accompanying collateral confirms this construction.

One element lacking in this contract, which definitely determines that it was not a contract of bailment for the purpose of sale, is the failure of the contract to provide, either in express terms or by implication, that the proceeds of the sale of these pianos should belong to appellee. The contract does not provide that the title of the pianos shall remain in appellee. It does not attempt to control the manner in which these pianos may be sold, or at what price, or whether for cash or on time; it simply provides that when the pianos are sold Walthall Music Company shall be indebted to Stieff, Inc., for the invoice or billing price of the pianos. The music company covenants that it will pay this price in cash when a sale is made. The lack of this element is made still plainer by the letter of November 27, 1929, in which Stieff, Inc., informs Walt-hall Music Company, in effect, that they are not concerned with how Walthall Music Company secures the money to pay the invoice price, but that when a piano is sold Stieff, Inc., expects the music company to remit to it in cash for the wholesale price of the piano.

In 55 C. J. p. 585, § 593, this principle of law is aptly stated in the following language: “Ordinarily where goods are consigned by one person to another for sale by the latter, the title thereto remains in the consignor; but whether the consignee is to be considered as a buyer or an agent depends on the intention of the parties, and on the real nature of the transaction rather than the language which the parties may have employed. Where the transaction is such that the consignee acquires complete dominion over the goods with the right to sell them on such terms and conditions as he may see fit, and is bound to pay the consignor a stipulated price therefor, it amounts to a sale and delivery, which passes title to the consignee, and such transfer of title is not affected by the fact that the goods are not to be paid for until resold by the consignee, or that he has an option of returning the goods which he has not resold. Also, where the consignor clothes the consignee with indicia of title and permits him, without objection, to deal with the property as his own, the consignee may transfer title to a purchaser, which will be good as against the consignor.”

See, also, Buffum v. Descher, 1 Neb. (Unof.) 736, 96 N. W. 352; Northern Electrical Mfg. Co. v. J. G. Wagner Co., 108 Wis. 584, 84 N. W. 894; Yoder v. Haworth, 57 Neb. 150, 77 N. W. 377, 73 Am. St. Rep. 496; Fulton Motor Truck Co. v. Gordon Fireproof Warehouse & Van Co., 105 Neb. 515, 181 N. W. 162; Mack v. Drummond Tobacco Co., 48 Neb. 397, 67 N. W. 174, 58 Am. St. Rep. 691; Willys-Overland Co. v. Chapman (Tex. Civ. App.) 206 S. W. 978; Eason v. De Long, 38 Tex. Civ. App. 531, 86 S. W. 347.

We are of the opinion that this contract was a contract of sale, and in some respects it partakes of the element’s of an absolute sale, but, in any event, it is at least a contract of conditional sale. In 55 C. J. p. 1192, § 1168, a conditional sale is defined as “a contract for the sale of per sonal property under which possession is delivered to the buyer, but title is retained in the seller until the performance of some condition, usually the payment of the purchase price.” •

Here we have a contract which provides for the transfer of the possession of personal property from one party to ánother, to be paid for at a stipulated price when such property has been sold by the receiver thereof. A 5 per cent, discount is to be allowed if payment is made within 30 days from date of shipment. The receiver is to pay the freight and pay for keeping the goods insured. The receiver might retain the goods for four months without paying interest on his account, but after that time the account would bear interest at 6 per cent. The receiver is to render monthly reports showing the location of unsold pianos, but the shipper seems to be uninterested in resold pianos. The contract in no way attempted to control the manner of selling by the receiver, nor the proceeds of the sale. This contract merely provides for an absolute promise on the part of the receiver to pay a stipulated price for the pianos to the shipper when they are resold. Unsold pianos may be returned if so ordered by the shipper. These provisions are all elements of a contract of sale and are lacking in the elements of bailment for the purpose of sale.

It is suggested in 55 C. J. p. 1193, that the use of the term conditional sale, in connection with a contract such as we have here, is a misnomer and inaccurate and tending to confusion, and that such a transaction is not, strictly speaking, a sale, but an agreement to sell, or an executory contract of sale. And perhaps it would be better here to refer to this contract merely as an executory contract of sale. It was when entered into unquestionably such a contract. It was an agreement to sell to the Walthall Music Company such pianos as might be shipped to it at a fixed price, to be ,paid for in cash when pianos were resold. If the goods remained with the receiver for more than four months, 6 per cent, interest would be added to the invoice price.

The music company received this piano from appellee under the conditions and covenants contained in the agreement of March 4th. This agreement became an executed contract as to the piano sold to the city of San Antonio when the sale was made, and Walthall Music Company became indebted to appellee for the billing price of the piano.

The question is raised as to whether or not there was a valid sale of this piano to the city. Unquestionably the sale to the city was valid. It is clear from the testimony that there was no understanding as to whether this sale to the city was one for cash or on time. The unconditional delivery of the piano to the city, without the purchase price being paid, was sufficient to pass title to the city and complete the sale. And, this sale having been made, the Walthall Music Company became indebted to appellee for the invoice price of $720, and the appellant, city of San Antonio, became indebted to-the music company for the retail price of $1,300. It is plain from the evidence that the music company expected to receive the purchase price in cash from the city when the piano was delivered, and the city intended to pay for the piano in cash, but this apparent understanding of the parties is insufficient to render the delivery of the piano to the city a conditional delivery becoming complete only upon the payment of the purchase price in cash. However, if this sale to the city be regarded as a sale for cash only, the music company waived its right to receive cash on delivery by its failure to reclaim the piano when the payment in cash was refused by the city. 55 ■ C. J. 567, § 576. The music company had authority to sell this piano to whom it pleased, for cash or on time, merely becoming indebted to appellee for the wholesale price of the piano, under the covenant contained in the agreement to pay for the pianos when they were resold. The judgment of the trial court does not hold the .sale to the city to be invalid, but, on th'e contrary, affirms the sale and gives to appellee judgment for the full amount of the retail price, plus interest at 6 per cent.

It is perfectly obvious that under no construction of this contract could appellee be entitled to any sum of money in excess of the $720, plus interest, representing the invoice price. The only claim that appel-lee makes to this difference between the wholesale and the retail price of the piano is that the music company, shortly before becoming a bankrupt, had agreed to pay this sum tc> it. Appellee has no right as against other creditors to here enforce this promise; and to permit appellee to recover this profit, which belongs unquestionably to the bankrupt estate, would be to-permit ap- pellee to have an unfair preference over other creditors of the bankrupt estate. The city is a preferred and secured creditor of the bankrupt estate.

The construction of this agreement of March 4th being a question of law, and this court being of the opinion that this agreement was one of sale and not of bailment, appellee would have no right to maintain a suit against the city of San Antonio for a debt owing to it by the bankrupt estate of the Walthall Music Company. There would simply be no privity of parties.

It is stated in 55 C. J. p. 1214, under the heading “Effect of authorization to sell,” that: “In some jurisdictions, the law is well settled that where goods are sold to a retail merchant for resale .in the ordinary course of business, a provision in the contract that title to the goods shall remain in the seller until the goods are paid for, is void as against public policy and the absolute title to the goods passes to the buyer.” Unquestionably, this is the rule in this state. Article 5489, R. S. 1925, provides that: “All reservation of the title to or property in chattels, as security for the purchase money thereof, shall be held to be chattel mortgages. * * * ” And article 4000, R. S. 1925, provides: “Every mortgage, deed of trust or other form of lien attempted to be given by the owner of any stock of goods, wares or merchandise daily exposed to sale, in parcels, in the regular course of business of such merchandise, and contemplating a continuance of the possession of said goods and control of. said business, by sale of said goods by said owner, shall be deemed fraudulent and void.” Unquestionably, if this contract was a reservation of title by the shipper to merchandise daily exposed to sale, it would be void in this state under the provisions of the above articles of our statute. Eason v. De Long, supra.

There is no privity of contract or otherwise between appellee and appellant, and, therefore, the judgment of the court below cannot be upheld. It will be reversed, and judgment here rendered that appellee take nothing by reason of this suit, and pay all court costs.