Kagan v. Industrial Washing Machine Corp., 4475.

Decision Date19 May 1950
Docket NumberNo. 4475.,4475.
PartiesKAGAN v. INDUSTRIAL WASHING MACHINE CORPORATION. In re DU GRENIER, Inc.
CourtU.S. Court of Appeals — First Circuit

J. J. Sullivan, Boston, Mass. (Kenneth Tiffin, Boston, Mass., on brief), for appellant.

Bailey Aldrich, Boston, Mass. (John B. Reigeluth, Boston, Mass., on brief), for appellee.

Before MAGRUDER, Chief Judge, and MARIS (by special assignment) and WOODBURY, Circuit Judges.

WOODBURY, Circuit Judge.

These are consolidated appeals by a trustee in bankruptcy from two orders of the United States District Court for the District of Massachusetts. One appeal is from an order of the court below reversing an order of a referee in bankruptcy disallowing an amended petition for reclamation of a certain described washing, rinsing and bonderizing machine, and instead directing the trustee in bankruptcy to turn over to the petitioner-appellee the balance of the agreed purchase price ($2,370.95) due from the bankrupt on the machine, it having been sold with other assets by the trustee by leave of court free and clear of liens. The other appeal is from a subsequent order of the court below amending its above order by the addition thereto of directions to the trustee to pay interest on the above balance at the rate of 6% per annum from April 11, 1947, the date of the bankrupt's default, "to the extent at least that the actual proceeds of the sale of the said apparatus in the hands of the trustee are sufficient to satisfy such a payment." There is no dispute over the facts, all of which appear in exhibits and a stipulation of counsel.

The bankrupt, DuGrenier, Inc., agreed to purchase the industrial washing machine involved by the contractual device of accepting on April 4, 1946, a so-called "proposal", made to it by petitioner-appellee two days earlier. In the proposal the machine is described by model letters and numbers and also "as shown on previously submitted prints;" its specifications are given in detail; its price fixed and stated to be f. o. b. New Brunswick, N. J., the place where the petitioner-appellee has its plant, and the terms of the transaction are stated as "25% with order; 25% on delivery; balance 30 days from installation and test." In addition it is provided that the purchaser shall procure and maintain adequate insurance payable "as interest may appear" against, or assume full responsibility for, loss or damage to the machine by fire or other causes until it is fully paid for in cash; and it is stipulated that when the proposal is accepted and countersigned it will constitute the entire agreement between the parties, superseding all previous understandings regarding the apparatus, and "is an indivisible contract of sale." Omitting other provisions for the present, it was provided with respect to title as follows: "Title in this apparatus shall remain in us until the full purchase price including any modifications or extension of payment whether evidenced by note or otherwise shall be fully paid in cash; and it is agreed that this apparatus shall retain its personal character, and shall not become a fixture by being annexed or affixed in any manner to any land, foundation, or building of any sort, and that if it be placed on any mortgaged or encumbered premises or land, foundation, or building of any sort, it shall not be subject to such mortgage or encumbrance. Upon default in the payment of any part of the purchase price, we shall have the right at our election to take possession of this apparatus, and remove the same without legal process, and to retain all payments previously made as compensation for its use and wear. At our election, you will execute and deliver a conditional sale agreement complying with the laws of the place where this apparatus is to be located."

The machine was manufactured according to the specifications and plans, and shipped to the bankrupt in parts on various dates in April, June, August and November 1946. Each shipment was on a uniform bill of lading in which the bankrupt was named as consignee, and each shipment was accompanied by an invoice covering the part or parts shipped. The invoices generally noted the terms of payment provided in the proposal, and all contained provisions to the effect that the property was "sold" to the bankrupt "f. o. b. New Brunswick, New Jersey," and that "Shipments F.O.B. factory become your property upon delivery by the shipper to the carrier." All freight bills were paid by the bankrupt.

The petitioner-appellee duly performed all of its contractual obligations, and as a result the final payment on the machine fell due on January 16, 1947. Payment was not then made, however, but on February 11, 1947, the bankrupt sent the petitioner-appellee a check for $2,500 and two promissory notes payable on March 11, 1947, and April 11, 1947, in the respective amounts of $2,500 and $2,370.95. Subsequently on March 7 it was orally agreed that the total amount of the above notes was the balance then remaining due on the machine; the petitioner-appellee writing the bankrupt on the next day that "upon payment of the notes which you sent us in the amount of $2,500 and $2,370.95 we will consider your account paid in full." The note for $2,500 falling due on March 11 was paid, but the note for $2,370.95 due on April 11 was not paid when presented, was duly protested, and has never been paid.

It is stipulated that the machine involved "was about fifty feet long, nine feet high, and five and one-half feet wide and was of a type normally used to remove grease and dirt from the surface of metal prior to painting and to give a slight etching, known as bonderizing, to the surface in order that paint may properly adhere to it and was so used by the bankrupt."

Counsel for the trustee argue rather half-heartedly that the contract between the petitioner-appellee and the bankrupt was not a contract of conditional sale at all. Pointing to the concluding sentence of the title provision of the proposal, which reads, "At our election, you will execute and deliver a conditional sale agreement complying with the laws of the place where this apparatus is to be located," they say, the proposal which the bankrupt accepted only looked forward to the possibility of the creation of a formal conditional sales agreement at some time in the future if the seller should see fit to so elect. We do not agree, for as the District Court pointed out, the construction of the above quoted sentence contended for by counsel for the trustee would render meaningless, if not actually contradict, not only the preceding language of the provision itself, but also other provisions of the proposal (the insurance provision for instance) and therefore the construction does violence to the familiar principle that whenever possible the provisions of a contract are to be so construed with reference to one another as to make the entire contract a rational business instrument which will effectuate the apparent intention of the parties. And there is a rational construction of the sentence in harmony with the rest of the contract, for, as the court below also pointed out, the petitioning corporation, in this instance, and perhaps in others as well, was doing business in a foreign state, and so might well be assumed to wish to provide for a new and legal conditional sales contract in the event that it should develop that the present one in some respect violated or was invalid under the law of the place where the machine was to be set up and used. Hence we agree with the District Court that the parties intended to execute, and in fact did execute, a contract of conditional sale with respect to the washing machine.

It being clear to us that the contract under which the machine was sold was indeed one of conditional sale, and it being conceded in the stipulation that the bankrupt defaulted in payment, and hence that the condition of the sale was broken, it follows that title to the machine remained in the vendor, the petitioner-appellee, and that it is entitled to reclaim its property, or in this case its proceeds, in the hands of the trustee unless the contract is either invalid for some reason under the law of Massachusetts, Bryant v. Swofford Bros. Dry Goods Co., 214 U.S. 279, 291, 29 S.Ct. 614, 53 L.Ed. 997; Sweeney v. Medler, 10 Cir., 78 F.2d 148, 149, or unless the petitioner-appellee by its conduct has waived its right to assert its title.1

The appellant-trustee contends that the condition in the contract reserving title in the vendor until payment of the purchase price in full by the buyer is invalid and unenforceable for the reason that the contract provides that in the event of default and repossession the vendor shall "retain all payments previously made as compensation for its the machine's use and wear", whereas § 13A of Chapter 255 of the Massachuetts General Laws (Ter.Ed), as amended by St.1939, c. 509, § 1, provides that: "No instrument evidencing a conditional sale of personal property shall be valid...

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