BW Acceptance Corporation v. Colley

• Decision Date: 05 June 1958
• Docket Number: No. 5777.,5777.
• Citation: 256 F.2d 937
• Parties: B-W ACCEPTANCE CORPORATION, Appellant, v. R. P. COLLEY, Trustee in Bankruptcy of Shafer Tire and Appliance Center, a co-partnership consisting of Bill L. Shafer, Jack A. Shafer, and Jack J. McKenna, Bankrupt, Appellee. In the Matter of Bill L. SHAFER, Jack A. Shafer, and Jack J. McKenna, individually, and as co-partners, trading under the firm name of Shafer's Tire and Appliance Center, Bankrupt.
• Court: U.S. Court of Appeals — Tenth Circuit

256 F.2d 937 (1958)

B-W ACCEPTANCE CORPORATION, Appellant, v. R. P. COLLEY, Trustee in Bankruptcy of Shafer Tire and Appliance Center, a co-partnership consisting of Bill L. Shafer, Jack A. Shafer, and Jack J. McKenna, Bankrupt, Appellee In the Matter of Bill L. SHAFER, Jack A. Shafer, and Jack J. McKenna, individually, and as co-partners, trading under the firm name of Shafer's Tire and Appliance Center, Bankrupt.

No. 5777.

United States Court of Appeals Tenth Circuit.

June 5, 1958.

James H. Harrod, Oklahoma City, Okl., for appellant.

Joe N. Shidler, Tulsa, Okl. (Wm. J. Threadgill, Tulsa, Okl., was with him on the brief), for appellee.

Before BRATTON, Chief Judge, and PHILLIPS and BREITENSTEIN, Circuit Judges.

PHILLIPS, Circuit Judge.

Prior to May 1, 1957, Bill L. Shafer, Jack A. Shafer, and Jack J. McKenna, individuals and copartners, trading under the name of Shafer's Tire and Appliance Center, were adjudicated bankrupts. They are hereafter referred to as Shafer.

R. P. Colley is the duly appointed, qualified and acting trustee of Shafer.

The Borg-Warner Corporation is the manufacturer of Norge products. Borg-Warner Acceptance Corporation¹ is a finance company owned by Borg-Warner. Modern Appliance Distributors² is the distributor of Norge products in Oklahoma City.

Shafer was engaged in the sale of Norge products at retail in Oklahoma City.

Upon the receipt by Modern from Shafer of an order for Norge products, Modern prepared three instruments: (1) An invoice showing that the products described therein were sold to the Acceptance Corporation; (2) A promissory note payable to the Acceptance Corporation, whereby Shafer agreed to pay the sum stated in the note, which was the total amount of the invoice, within three months after date, and (3) An instrument designated "Trust Receipt" which described each item by model number and serial number and a release price stated opposite each item.

The three instruments were submitted to the Acceptance Corporation for its approval. Each was approved and they were then signed by the duly authorized attorney in fact of Shafer. Thereupon the goods were shipped by Modern to Shafer. The Acceptance Corporation retained the original promissory note, a copy of the invoice, and the trust receipt. A copy of the trust receipt was forwarded to Shafer. The Acceptance Corporation returned a copy of the invoice to Modern, with its check in payment of the invoice.

The trust receipt in part read:

"* * * Due in full in 90 days or as mdse is sold retail if before due date of contract.

* * * * *

"I (we) hereby acknowledge that said articles and any substitutions, exchanges, or replacements thereto are the Property Of Said B-W Acceptance Corporation and agree to take and hold the same, at my (our) sole risk as to all loss or injury, for the purpose of storing said property and I (we) hereby agree to keep said articles brand new, and to return said articles to said B-W Acceptance Corporation or its order upon demand and to pay and discharge all taxes, encumbrances and claims relative thereto. I (we) hereby agree not to sell, loan, deliver, pledge, mortgage, or otherwise dispose of said articles to any other person until after payment of amounts shown in Release Price column above. I (we) further agree that the payment made by me (us), in connection with this transaction, may be applied for reimbursement for any expense incurred by B-W Acceptance Corporation, in the event of breach of this Trust or repossession of said articles.

"It is further agreed that no one has authority to vary the terms of this Trust Receipt."

While the trust receipt provided that Shafer should remit for the appliances described therein before selling or otherwise disposing of the same, it was the practice of Shafer to sell the appliances and thereafter remit the price stated in the trust receipt to the Acceptance Corporation. Such practice was acquiesced in by the Acceptance Corporation.

The Acceptance Corporation filed a reclamation petition, containing three claims. The first claim is not here material. The second claim was predicated on two trust receipts; one dated November 14, 1956, and one dated February 26, 1957, both of which were recorded on May 1, 1957, and after the adjudication in bankruptcy. The third claim was for moneys due and payable to the Acceptance Corporation, collected by Shafer on behalf of the Acceptance Corporation, in the amount of $442.40, and not remitted to the Acceptance Corporation and alleged to have been received by the trustee.

The referee found that the Acceptance Corporation had failed to trace the $442.40 into the hands of the trustee and denied the third claim.

The referee held that the instruments designated "Trust Receipts" were, in fact, conditional sales contracts and concluded that since such instruments were not recorded prior to bankruptcy the Acceptance Corporation was not entitled to recover the items embraced in such instruments, which came into the hands of the trustee.

On petition to review, the order of the referee was affirmed. The Acceptance Corporation has appealed.

While there are decisions in other jurisdictions which support the contentions of the Acceptance Corporation on its second claim,³ the character or legal effect of the instruments involved is to be determined by the local law of Oklahoma.⁴

The case of Ahrens Refrigerator Co. v. R. H. Williams Co., 176 Okl. 5, 54 P.2d 200, 201, presented the question whether an instrument designated a trust receipt, with a time draft, constituted a bailment, a consignment contract, or a conditional sales contract. There, one Brinson, a retailer of refrigerators, executed and delivered to the Refrigerator Company an instrument, the material...