ARCHEARD, District Judge.
These are petitions by different parties asking for the reclamation of certain articles of personal property in the possession of the bankrupt and comprising practically the whole of his estate, which are alleged to have been held by him on bailment. This property had all been levied on by the sheriff on execution against the bankrupt, before his bankruptcy, and the levy was directed by the court to be preserved for the benefit of the estate, the trustee being subrogated to the rights of the execution creditor, so that, if held on conditional sale, as contended by the trustee, instead of on bailment, the property is to be treated as belonging to the bankrupt; such sales in Pennsylvania being constructively fraudulent as to creditors.
1. The first petition is that with respect to the cash register. This register was ordered by the bankrupt September 23, 1908, at the solicitation of an agent of the National Cash Register Company, the petitioners, and the price — or, as it was expressed in the order, the value — was to be $620; it being- arranged that the bankrupt-should make a certain payment down and receive a credit of $105 for an old machine which he had on hand, which was to be taken in exchange, the rest to be taken care of in certain monthly installments. After making the bargain, however, he repented of it, doubting bis ability to meet the deferred payments, and he tried to get out of it in consequence, but was not allowed to. A few weeks later the cash register came, and after some demur was accepted by him, a cash payment of $40 being made October 10, 1908, which, with the credit allowed for the old machine, raised the amount to $115. leaving a balance of $475. Other payments were subsequently made to the amount of $60, hut, not having been kept up, as called for by the agreement, on April 30, 1909, it was canceled, and a new one entered into, by which it was, held at the time of the alias execution. It may lie conceded that the first arrangement constituted a bailment, it having been so decided, under the local law, with regard to a contract in all respects similar, in National Cash Register Co. v. Shurber, 41 Pa. Super. Ct. 187; and so long as that arrangement continued the property, therefore, belonged to the petitioners. Put this is denied as' to the one which superseded it, which is asserted and relied on in these proceedings, and the question, therefore, is as to its character. The same printed form is used in both, but there are omissions in the second which are claimed to materially modify it. 1
As will be seen by the contract, a copy of which is given in the margin,1 the value of the property was fixed as before at $620, on which [492]*492$205 was credited, leaving $415, at which figure as rental the bankrupt agreed to lease it. No term, however, was. designated, the provision for this being left blank, and there being no other means by which to determine it. And the mere agreement to lease, and the calling of this amount rental, did not necessarily give any such character to the arrangement. Farquhar v. McAlevy, 142 Pa. 233, 21 Atl. 811, 24 Am. St. Rep. 497; Morgan Electric Co. v. Brown, 193 Pa. 351, 44 Atl. 459; Kelly Road Roller Co. v. Spyker, 215 Pa. 332, 64 Atl. 546. A down payment of $30 was also called for, and evidently made, which reduced to $385 the amount for which the bankrupt was to be liable, and a promissory note was given for this and made payable in twelve monthly installments, eleven at $30 each and one of $55. This, without more, would make out a sale, a value or price being put on the property and a definite undertaking given for its payment; and the only question is how far this is controlled by the other provisions.
No term being fixed, and there being no way of arriving at it otherwise, the agreement to lease was absolute^ nugatory, and with it fell whatever depended upon it. It is true that there may be a bailment without provision for a term. Stiles v. Seaton, 200 Pa. 114, 49 Atl. 774. But there certainly can be no lease unless a term is provided for. [493]*493And with this eliminated, what is there on which a bailment of any kind can be predicated ? It is said that at the expiration of the arrangement it is agreed that the cash register shall be surrendered in good condition, upon which the amount deposited as security for the fulfillment of the agreement is to be returned to the bankrupt, or, at his option, may be applied in the purchase of the property, the amount at which it is held being thus taken care of. But “at the expiration of this lease” is the expression in the contract, and, there being no lease, there is nothing to fulfill this condition. It is true that upon the nonpayment of the installments called for, as well as the happening of certain other adverse contingencies, there is a resulting forfeiture. But it is manifest that this is not the “expiration” which is so referred to, which contemplates the completion of the contract in due course, after full compliance with its terms, and not the abrogation of it because oí a breach. And neither is it the complete payment of the installments provided for, the only other contingency by which the arrangement is to come to an end; it not being assumable that, having paid in this way, with the other credits given, the full value of the property, the bankrupt, in the same breath, was required to surrender it. There being nothing, therefore, on which the provision for a surrender can be made opera[494]*494tive, it cannot be' relied on to make out a bailment. ' The fact is that, in using- the blank form of contract employed by this company, and failing to fill out essential parts of it, a nondescript result has been produced, which it is difficult to characterize. As possibly explaining the lapses in it, it may be that the company was content to relax, in this way, the stringency of its ordinary arrang'ement, over one-third of the price having been paid, and to rely on the security for payment of the rest, which is otherwise provided for. But, however that may be, taking it as it reads, it is not a lease, nor any other kind of a bailment. The most that can be made out of it is that it is a sale upon condition, the property having been parted with to the bankrupt upon certain terms, upon compliance with which he was to be the owner, and it cannot, therefore, as against creditors, be reclaimed by the petitioners.
2. Upon no possible basis can the claim of Yohn Bros, be sustained to the electric or penny-in-the-slot piano. This was. sold outright and beyond question in July, 1907, by the claimants to the bankrupt for $634.50 — that is to say, $600 for the piano itself, and $34.50 for the slot boxes — on which $34.50 was paid August 15, 1907, and a note for $600 given for the balance, which was renewed from time to time in decreasing amounts, until June 25, 1909, when it had been reduced to $447.50, when, the bankrupt having got into financial difficulty, an effort was made to recall what had been done, by taking from him a so-called lease, on which $15’was-to be paid monthly. Assuming that the instrument which was so drawn up was in fact a lease, as it clearly was pot, it was altogether too late to modify the existing arrangement. It may have been good as between the parties ; but the bankrupt was not only seriously indebted, but was actual^ under levy on execution in the hands of the sheriff; and the title by which he held the property could not be juggled with in the face of this, so as to have it possibly stand as a bailment. In re Poore (D. C.) 15 Am. Bankr. R. 409, 140 Fed. 786.
Free access — add to your briefcase to read the full text and ask questions with AI
ARCHEARD, District Judge.
These are petitions by different parties asking for the reclamation of certain articles of personal property in the possession of the bankrupt and comprising practically the whole of his estate, which are alleged to have been held by him on bailment. This property had all been levied on by the sheriff on execution against the bankrupt, before his bankruptcy, and the levy was directed by the court to be preserved for the benefit of the estate, the trustee being subrogated to the rights of the execution creditor, so that, if held on conditional sale, as contended by the trustee, instead of on bailment, the property is to be treated as belonging to the bankrupt; such sales in Pennsylvania being constructively fraudulent as to creditors.
1. The first petition is that with respect to the cash register. This register was ordered by the bankrupt September 23, 1908, at the solicitation of an agent of the National Cash Register Company, the petitioners, and the price — or, as it was expressed in the order, the value — was to be $620; it being- arranged that the bankrupt-should make a certain payment down and receive a credit of $105 for an old machine which he had on hand, which was to be taken in exchange, the rest to be taken care of in certain monthly installments. After making the bargain, however, he repented of it, doubting bis ability to meet the deferred payments, and he tried to get out of it in consequence, but was not allowed to. A few weeks later the cash register came, and after some demur was accepted by him, a cash payment of $40 being made October 10, 1908, which, with the credit allowed for the old machine, raised the amount to $115. leaving a balance of $475. Other payments were subsequently made to the amount of $60, hut, not having been kept up, as called for by the agreement, on April 30, 1909, it was canceled, and a new one entered into, by which it was, held at the time of the alias execution. It may lie conceded that the first arrangement constituted a bailment, it having been so decided, under the local law, with regard to a contract in all respects similar, in National Cash Register Co. v. Shurber, 41 Pa. Super. Ct. 187; and so long as that arrangement continued the property, therefore, belonged to the petitioners. Put this is denied as' to the one which superseded it, which is asserted and relied on in these proceedings, and the question, therefore, is as to its character. The same printed form is used in both, but there are omissions in the second which are claimed to materially modify it. 1
As will be seen by the contract, a copy of which is given in the margin,1 the value of the property was fixed as before at $620, on which [492]*492$205 was credited, leaving $415, at which figure as rental the bankrupt agreed to lease it. No term, however, was. designated, the provision for this being left blank, and there being no other means by which to determine it. And the mere agreement to lease, and the calling of this amount rental, did not necessarily give any such character to the arrangement. Farquhar v. McAlevy, 142 Pa. 233, 21 Atl. 811, 24 Am. St. Rep. 497; Morgan Electric Co. v. Brown, 193 Pa. 351, 44 Atl. 459; Kelly Road Roller Co. v. Spyker, 215 Pa. 332, 64 Atl. 546. A down payment of $30 was also called for, and evidently made, which reduced to $385 the amount for which the bankrupt was to be liable, and a promissory note was given for this and made payable in twelve monthly installments, eleven at $30 each and one of $55. This, without more, would make out a sale, a value or price being put on the property and a definite undertaking given for its payment; and the only question is how far this is controlled by the other provisions.
No term being fixed, and there being no way of arriving at it otherwise, the agreement to lease was absolute^ nugatory, and with it fell whatever depended upon it. It is true that there may be a bailment without provision for a term. Stiles v. Seaton, 200 Pa. 114, 49 Atl. 774. But there certainly can be no lease unless a term is provided for. [493]*493And with this eliminated, what is there on which a bailment of any kind can be predicated ? It is said that at the expiration of the arrangement it is agreed that the cash register shall be surrendered in good condition, upon which the amount deposited as security for the fulfillment of the agreement is to be returned to the bankrupt, or, at his option, may be applied in the purchase of the property, the amount at which it is held being thus taken care of. But “at the expiration of this lease” is the expression in the contract, and, there being no lease, there is nothing to fulfill this condition. It is true that upon the nonpayment of the installments called for, as well as the happening of certain other adverse contingencies, there is a resulting forfeiture. But it is manifest that this is not the “expiration” which is so referred to, which contemplates the completion of the contract in due course, after full compliance with its terms, and not the abrogation of it because oí a breach. And neither is it the complete payment of the installments provided for, the only other contingency by which the arrangement is to come to an end; it not being assumable that, having paid in this way, with the other credits given, the full value of the property, the bankrupt, in the same breath, was required to surrender it. There being nothing, therefore, on which the provision for a surrender can be made opera[494]*494tive, it cannot be' relied on to make out a bailment. ' The fact is that, in using- the blank form of contract employed by this company, and failing to fill out essential parts of it, a nondescript result has been produced, which it is difficult to characterize. As possibly explaining the lapses in it, it may be that the company was content to relax, in this way, the stringency of its ordinary arrang'ement, over one-third of the price having been paid, and to rely on the security for payment of the rest, which is otherwise provided for. But, however that may be, taking it as it reads, it is not a lease, nor any other kind of a bailment. The most that can be made out of it is that it is a sale upon condition, the property having been parted with to the bankrupt upon certain terms, upon compliance with which he was to be the owner, and it cannot, therefore, as against creditors, be reclaimed by the petitioners.
2. Upon no possible basis can the claim of Yohn Bros, be sustained to the electric or penny-in-the-slot piano. This was. sold outright and beyond question in July, 1907, by the claimants to the bankrupt for $634.50 — that is to say, $600 for the piano itself, and $34.50 for the slot boxes — on which $34.50 was paid August 15, 1907, and a note for $600 given for the balance, which was renewed from time to time in decreasing amounts, until June 25, 1909, when it had been reduced to $447.50, when, the bankrupt having got into financial difficulty, an effort was made to recall what had been done, by taking from him a so-called lease, on which $15’was-to be paid monthly. Assuming that the instrument which was so drawn up was in fact a lease, as it clearly was pot, it was altogether too late to modify the existing arrangement. It may have been good as between the parties ; but the bankrupt was not only seriously indebted, but was actual^ under levy on execution in the hands of the sheriff; and the title by which he held the property could not be juggled with in the face of this, so as to have it possibly stand as a bailment. In re Poore (D. C.) 15 Am. Bankr. R. 409, 140 Fed. 786. This is too plain for argument, and without stopping further over it, the petition must be dismissed.
3. The soda fountain is claimed by the Liquid, Carbonic Company, and was delivered to the bankrupt July 1, 1908, under a writing-, a copy of which appears in the margin.2 Like the one in the case of the [495]*495cash register, supra, this started out with an order with elaborate specifications, giving- the type oí soda fountain desired, and describing its appointments; the paper on its face at the same time stating that it is “sold by Hawkins” (an agent); the “price” being given at $2,227.-75, on which there is an allowance of $-1-98.50 for a secondhand apparatus, turned over by the bankrupt, making the “net price,” as it is said, $1,729.23. This the bankrupt agrees to lease from the claimants for the term of 30 months, for a total rental of $1,729.23, its full net value, a sight draft for $329.23 to be honored on receipt of the goods, the balance to be paid in monthly installments of $40. At the end of the term the property is to be surrendered by the bankrupt in good con[496]*496dition, but may be purchased by him ?t his option upon payment o£ the further sum of $1, on receipt of which a bill of sale is to be given, until which time no title is to be taken as passing-. The bankrupt further agrees not to sell the property or remove it from the place where it is set up; and in default of payment, or on a breach of any of the conditions, the whole rent is to become due, and the claimants are to have the right to enter and remove the property without the aid of legal process. ' e
The transaction so consummated, while thinly disguised as a lease, with a definite term and a specified monthly rental, was so evidently a sale, put in this form in order to make sure of the purchase money, that it is hardly worth while to argue it. Not only is the soda fountain declared to have been “sold” by the agent named, but the price is specified, and a credit allowed by the old machine for nearly one-fourth of [497]*497it. This credit of $498.50, as it is to be noted, was a credit on the gross price, and not on the rental subsequently provided for, and this constituted a direct payment on account of the property, by which a definite interest was acquired, which the superadded arrangement for a lease was ineffective to qualify. The rental to be paid, also, is nothing more or less than the net price of the property, and with the credit previously given makes up the full gross value of it, for which, upon the basis of a lease, for the term named, there is no possible equivalent benefit. It is true that there is an agreement to surrender the property at the end of the term, but this is accompanied with an option, by which the bankrupt has the right to buy and apply what has been paid, which the formality of a bill of sale and the payment of a dollar, without which no title is to pass, does not detract from. This provision is a constituent part of the agreement and the ultimate aim of it; and the bankrupt being thus clothed from the outstart with the right to buy, at a specified price, on which, a substantial credit is in terms given, and the payment of the balance in certain installments being in effect provided for, a sale on condition is thus made out, regardless of what it may be denominated in the writing, which as to creditors becomes a sale absolute. The case is to be classed with Farquhar v. McAlevy. 142 Pa. 233, 21 Atl. 811, 24 Am. St. Rep. 497, and Kelly Road Roller Co. v. Spyker, 215 Pa. 332, 64 Atl. 546, which sustains this view of it. See, also, In re Tice (D: C.) 15 Am. Bankr. Rep. 97, 139 Fed. 52, and In re Morris (D. C.) 19 Am. Bankr. Rep. 422, 156 Fed. 597. The petitioners, therefore, are not entitled to reclaim the property, and the petition must be dismissed, with costs.
4. In December; 3 907, the bankrupt obtained from the same parties, upon a similar writing, a carbonator, for use in connection with the soda fountain which he then had, which was also “sold by Hawkins,-’ the same agent; the “price” being $240, and the bankrupt agreeing to lease it for 19 months for that figure, $50 to be paid on receipt and the balance in monthly installments of $10. This agreement is identical in terms with the one for the soda fountain, and not to be distinguished from it. According to the conclusions reached in that connection, the attempt to reclaim must be similarly disposed of.
5. The same fate also must attend the ice cream freezing apparatus, and for even stronger reasons. Hxcept that a blank of the same form is utilized on which to put down the bargain, there is hardly the semblance of anything but a sale to be made out of the instrument as executed. As there appears, through the instrumentality of the same sales agent, in November, 1908, an order was given for certain apparatus, which is specified as follows:
1 # 813.1 I. C. Freezer. $ 70.00
1 ‡ 54 Creary T. Braker. 54.00
12 696.9 Tube 2.75 . 33.00
32 884.9 Cans 1.60. 19.20
$176.20
TjGSS 5%.. 8.81
$167.39
[498]*498This property the bankrupt agrees to lease for the term of three months for a total rental of $167.39, the net price. And then, entirely disregarding- the printed provisions of the blank, it is declared, “Terms 30, 60 & 90 days.” This cannot be wrested into anything but a sale for the price and upon the terms named, for failure to pay which as so provided the claimants are not entitled to get back the property, but must look to the estate like other creditors.
The petition in each case is dismissed, at the cost of the respective petitioners.