Enterprise Distributing Corp. v. Zalkin

113 S.E. 409, 154 Ga. 97, 1922 Ga. LEXIS 313

• Court: Supreme Court of Georgia
• Decided: August 18, 1922
• Docket: Nos. 3061, 3062
• Status: Published

Opinion

Hines, J.

(After stating the foregoing facts.)

1. The pertinent parts of the written contract between Enterprise. Distributing Corporation and United Picture Productions Corporation are set out in the foregoing statement of facts. Under this instrument the transaction between the parties is one of sale,- and not a lease proper, although denominated the latter. It is á sale under a nom de plume. This written instrument, wherein the Enterprise Distributing Corporation let to the United Picture Productions Corporation the property therein described, for the period of fifty-two weeks, the latter company agreeing to make to the former corporation, at stated intervals during this term, certain payments as rentals, and the former agreeing to deliver to the latter a bill of sale to said property, after the expiration of said term, if the United Picture Productions Corporation had fully complied with all its obligations as to such payments and otherwise, constitutes a sale. This principle is so well established by the decisions of this court as to need no elaboration. Hays v. Jordan, 85 Ga. 741 (11 S. E. 833, 9 L. R. A. 373); Cottrell v. Merchants &c. Bank, 89 Ga. 508 (15 S. E. 944); Snook v. Raglan, 89 Ga. 251 (15 S. E. 364); Ross v. McDuffie, 91 Ga. 120 (16 S. E. 648); Lytle v. Scottish American Mortgage Co., 122 Ga. 458 (50 S. E. 402); North v. Goebel, 138 Ga. 739 (76 S. E. 46).

2. Under this instrument, if the buyer failed to make any one of the payments on the purchase-money of this property, 'the seller had the right to declare the agreement at an end, and to require the buyer to return all of the property forthwith to the seller. The ' buyer paid the seller $88,000 on the purchase-money of this property under this contract. On or about the second week in April, 1930, the defendant retook from the buyer the possession of this property, because of its default in keeping up such payments, and was in possession thereof at the time of the institution of this suit. The buyer was adjudged a bankrupt on April 37, 1930; and this suit was brought by the trustee in bankruptcy to recover those payments, less the reasonable value of the property for rent while in the possession and use of the buyer. The right of the plaintiff to this relief is challenged by the demurrer of the defendant. The defendant contends that the petition does not set out any cause of action, or state any facts which entitle the plaintiff to the equitable relief sought; and this contention is based upon certain matters which we shall now consider. In the first place, it is urged that the petition alleges that the defendant retook possession of this property, but fails ,to state how this retaking took place. It is alleged in the petition that the defendant retook possession of this property because of the default of the buyer in keeping up its payments. In the contract of lease, which we find to be one of sale, it is provided that if the buyer should fail to make any payment when the same falls due, the seller can declare the agreement to be at an end, and require the vendee to return all property leased to the seller forthwith. This contract is attached as an exhibit to the petition, and is made a part thereof. Construing the petition in the light of this contract, it sufficiently appears that the seller repossessed itself of this property because of the default of the buyer in making payments of the purchase-money, and under the right to do so given in this contract of sale. Independently of the contract, the seller had the right to the possession of the property, and could retake the same. 35 Cyc. 697; Pfeiffer v. Norman, 22 N. D. 168 (133 N. W. 97, 38 L. R. A. (N. S.) 891). It is further insisted that the contract between the parties is one of lease, and not of sale. This contention has been disposed of in what is said in the first division of this opinion. Counsel for the defendant further insists that only a small portion of this property is located within the limits of this State, and that for this reason a court of equity in Georgia cannot deal with this agreement on the principles applicable to a simple conditional bill of sale covering property within this State. No reason is given, and no authority is cited, to sustain this position. It seems to hint at the doctrine that the courts of this State have no extraterritorial jurisdiction, and that they can not deal with persons or property not within the State. Dearing v. Bank of Charleston, 5 Ca. 497 (48 Am. D. 300); Adams v. Lamar, 8 Ga. 83. In the case at bar the court is not proceeding to exercise jurisdiction over property not within its limits; but the purpose of the proceeding is to assert a money demand against a resident of this State. This is far from exercising extraterritorial authority.

It is earnestly insisted that the United Picture Productions Corporation was in default in its payment of the purchase-money of the property embraced in this sale; and that a party in default, or his trustee in bankruptcy, can not maintain a suit in equity to enforce any right which he might claim under the contract without performing or offering to perform the obligations resting upon him under the contract. The plaintiff is not attempting to assert any rights under this contract; but it is endeavoring toássert equities growing out of a rescission of the contract by the defendant. He is not undertaking to treat the contract as in force; but treats the same as rescinded and ended. “ Usually, rescission is in toto, leaving the rights of the parties to be determined by a court of equity, and not by the abrogated contract.” Lytle v. Scottish-American Mortgage Co., supra. What are the rights of the purchaser under such circumstances? The rescission of the contract of sale by the seller gives to the buyer the right to the return of so much 'of the purchase-price as has been paid, less rent, and less any deterioration in the value of the property, above natural wear and tear and other damages which it may have sustained while in'the hands of the buyer. See cases first above cited; also, Scott v. Glover, 7 Ga. App. 189 (66 S. E. 380); Rhodes Furniture Co. v. Jenkins, 2 Ga. App. 475 (58 S. E. 897); Haverty Furniture Co. v. Calhoun, 15 Ga. App. 620 (84 S. E. 138).

This court has held that the seller, when he rescinds such conditional contract of sale of personal property, becomes liable to the buyer in an action for money had and received, for the amount of the partial payments which were made on the price, less a reasonable sum for hire of the property during the time the buyer had possession of it, and less any depreciation in the value of the property by'damage or injury over and above ordinary wear and tear which it may have sustained while in the hands of the buyer. Snook v. Raglan, supra.

The same doctrine has been declared by the Court of Appeals. Rhodes Furniture Co. v. Jenkins, Scott v. Glover, and Haverty Furniture Co. v. Calhoun, supra. If an action at law would lie, for money had and received in such a case of rescission, we see no reason why an equitable petition, seeking an accounting, and undertaking to assert the equities of the buyer, would not lie. This right is peculiarly an equitable one. The Supreme Court of the United States has well said: “ There seems to be no doubt, however, that a court of equity may require the return of the money paid, less the amount of any damage sustained to the property, and a reasonable compensation for the use of the same, particularly if there be a clause in the contract providing that upon a certain contingency the property shall be returned to the seller.” Sunflower Oil Co. v. Wilson, 142 U. S. 313 (12 Sup. Ct. 235, 35 L. ed. 1025);

This is not a right which can be asserted only defensively by the buyer. -Where the seller does not rescind, the vendee, who makes default in the payment of the purchase-money, can not go into a court of equity for the purpose of rescinding the contract and recovering the purchase-money paid by him in part performance of the contract of sale. This would permit the vendee to take advantage of his own wrong. The vendee must wait until the vendor rescinds or attempts to rescind. When the vendor rescinds, and takes possession of the property sold, the latter becomes liable to the purchaser for the return of the purchase-money, less rent and damages. The vendee, by making payments upon the purchase-money, acquired an equitable interest in the' property, of which he can not be deprived by the action of the seller in rescinding the contract of sale. What was said in Lytle v. Scottish-American Mortgage Company, supra, to the effect that this right could only be asserted defensively by the vendee, must be considered in view of the facts of that case, which was an equitable proceeding by the vendor to rescind.

After the vendor rescinds a contract of sale, and takes possession of the property sold, under a right reserved in such contract, the vendee, certainly in the absence of a provision for forfeiture, can file an equitable petition against the vendor for an accounting for the purchase-money paid; and will be entitled to recover such purchase-money, less rent of the property during its use by the vendee, and any damage which the property may have sustained while in the possession of the vendee.

3. The grounds of special demurrer to the petition are without merit. Lack of jurisdiction in the District Court of the Southern District of New York to adjudge the Dnited Picture Productions Corporation a bankrupt does not appear on the face of the petition, its jurisdiction being presumed. White v. Davis, 134 Ga. 274 (67 S. E. 716). The trustee could sue without specific authority from the court of his appointment. McLanahan v. Blackwell, 119 Ga. 64 (45 S. E. 785); Chalman v. Dodd, 23 Ga. App. 653 (99 S. E. 150).

The court below did not- err in overruling the demurrer to the petition in this case.

4. We come to consider the questions raised in the cross-bill of exceptions. In the seventh paragraph of its answer the defendant alleged that all money paid by the purchaser to the defendant, over and above the initial payment of $25,000, was paid by deducting the same each week from earnings received by defendant from the property embraced in this contract of sale; and the defendant denied that the seller ever paid to it any sums of money, except said $25,000, other than that which was collected out of the business and property turned over by the defendant to the buyer. To this paragraph of the answer the plaintiff demurred on the ground that the facts therein stated were irrelevant. We think this ground of demurrer was well taken, and that this paragraph of the answer should have been stricken. The buyer must account for the rents of the property in this accounting. It would be manifestly unjust to require him to do this, and at the same time deprive him of the income received by him from the use and exploitation of the property purchased. The plaintiff likewise demurred to the eleventh paragraph of the answer of the defendant, on the ground that the same is vague, indefinite, and does not set out with sufficient certainty the damages claimed by the defendant. This paragraph of the answer is set out in full in the statement of the facts. We think this paragraph subject to the special attacks made thereon in the grounds of special demurrer; and that in the absence of an amendment the same should have been stricken on the special grounds of demurrer thereto. Watters v. Retail Clerks Union, 120 Ga. 424 (47 S. E. 911); Traders Ins. Co. v. Mann, 118 Ga. 381 (45 S. E. 426); McKenzie v. Mitchell, 123 Ga. 72 (2) (51 S. E. 34); John A. Roebling's Sons Co. v. Southern Power Co., 142 Ga. 464 (3) (83 S. E. 138, L. R. A. 1915B, 900).

We do not mean to hold that the defendant, by proper and specific allegations, would not be entitled to set off against the claim of the plaintiff the reasonable rent of the property while in its use and possession, and any damages with which the purchaser should be chargeable. What we hold is, that the defendant does not set out in the eleventh paragraph of its answer, with sufficient certainty, it claim for rent and damages. The court erred in not sustaining the special demurrers of the plaintiff to the paragraphs of the answer therein attacked.

J udgment affirmed on main bill of exceptions; reversed on cross-bill.

All the Justices concur, except Gilbert, J., absent.