Continental Bank & Trust Co. v. Webster Hall Corp.

• Decision Date: 28 July 1932
• Docket Number: No. 2567.,2567.
• Parties: CONTINENTAL BANK & TRUST CO. OF NEW YORK v. WEBSTER HALL CORPORATION OF AMERICA et al.
• Court: U.S. District Court — Western District of Pennsylvania

4 F. Supp. 337

CONTINENTAL BANK & TRUST CO. OF NEW YORK v. WEBSTER HALL CORPORATION OF AMERICA et al.

No. 2567.

District Court, W. D. Pennsylvania.

July 28, 1932.

Reed, Smith, Shaw & McClay, of Pittsburgh, Pa., for plaintiff.

David M. Harrison, of Pittsburgh, Pa., for defendant Webster Hall Corporation.

Thorp, Bostwick, Stewart & Reed, of Pittsburgh, Pa., for other defendants.

SCHOONMAKER, District Judge.

This is an action in equity to enforce a conditional sale contract for furniture used in the hotel of defendant Webster Hall Corporation of America, now in custody of this court through its receivers, who are also defendants in this case. From the bill, answer, and proofs, we make and find the following findings of fact and conclusions of law.

Findings of Fact.

We find the facts in this case to be as stated in the plaintiff's requests for findings of fact, which are hereby affirmed and filed herewith as the findings of fact in this case.

Conclusions of Law.

On these facts we make the following conclusions of law:

We adopt and affirm the plaintiff's requests for conclusions of law, which are filed herewith as the conclusions of law in this case.

Opinion.

The sole issue in this case is the validity of a conditional sale contract between the plaintiff, as seller, and defendant Webster Hall Corporation of America, as buyer of the furniture and furnishings of the Webster Hall Hotel in Pittsburgh, Pa. The validity of this contract, as between the parties, is not disputed; but the receiver defendants deny its validity as against the general creditors of the Webster Hall Corporation of America.

The conditional sale contract grew out of an agreement between the Webster Hall Corporation and S. W. Straus Company, Inc., dated November 25, 1925, wherein the Straus Company was to buy an issue of bonds in the sum of $1,650,000, to be secured by a mortgage to a trustee on real estate of the Webster Hall Corporation, with the understanding that the proceeds of the bonds were to be applied to the construction of a hotel building, and to furnishing the same. The title to the furniture in the hotel was to be placed in the name of the trustee under the mortgage, and was to remain in him until the bonds were fully paid off. This was to be accomplished by the assignment to the trustee of the contract for the purchase of the furniture, and then the execution and delivery of a conditional sale contract between the trustee and the Webster Hall Corporation covering the furniture and furnishings of the hotel. This plan was carried out. On January 22, 1926, the Webster Hall Corporation entered into a written contract with Albert Pick & Co. for this furniture and furnishings for the hotel. The same day the Webster Hall Corporation assigned this contract to the trustee. On January 27, 1926, the trustee paid $100,000 to Albert Pick & Co. to apply on this furniture contract. Thereupon, the furniture and furnishings contract was carried out, and the furniture and furnishings were installed in the hotel. When this was accomplished, on or about December 7, 1926, Albert Pick & Co. executed and delivered to the trustee a bill of sale of the furniture and furnishings. Then, on March 31, 1927, the conditional sale contract involved in this suit between the trustee, as seller, and the Webster Hall Corporation, as buyer, was executed, delivered, and filed in the office of the prothonotary of Allegheny county, Pa., in conformity with provisions of the Uniform Conditional Sales Act of Pennsylvania (69 PS § 361 et seq.).

We hold this to be a valid conditional sales contract under the Pennsylvania law.

In the first place, this contract was executed and filed of record before any of the debts owed by the Webster Hall Corporation at the time of the appointment of receivers by this court came into existence, with the possible exception of Albert Pick & Co., who certainly are estopped from contesting its validity after execution and delivery to the trustee of a bill of sale for this furniture. All other persons dealing with the Webster Hall Corporation had notice of this conditional sale from the record.

The contention of the receiver that this sales agreement is a mere attempt to subject the furniture and furnishings of this hotel to the mortgage lien of the entire amount of the mortgage indebtedness, and is therefore illegal and ineffective as against creditors, will not hold in the case at bar. True, it is that a conditional sales contract is more often conditioned for the payment of the purchase price. But the Pennsylvania Conditional Uniform Sales Act specifically provides in section 1 as follows: "Section 1. Definition of Terms. Be it enacted, etc., That in this act `conditional sale' means any contract for the sale of goods under which possession is delivered to the buyer and the property in the goods is to vest in the buyer at a subsequent time upon the payment of part or all of the price or upon the performance of any other condition or the happening of any contingency." 1925 Laws of Pennsylvania, page 604 (69 PS § 361).

The act further provides in section 4 (69 PS § 401): "Section 4. Conditional Sales Valid except as Otherwise Provided. Every provision in a conditional sale, reserving property in the seller after possession of the goods is delivered to the buyer, shall be valid as to all persons, except as hereinafter otherwise provided."

It is apparent from these quotations from the Uniform Sales Act of Pennsylvania that it was the purpose of the act that other conditions than the mere payment of the purchase price might properly be imposed by the terms of the sales agreement, and that it was the purpose of the law that all these conditions should be valid as to all persons, except as otherwise provided in the act. As we construe this provision of the statute, a conditional sales contract is presumptively valid as against the world, and the person attacking the validity of the seller's reservation of title must show that his case falls within one of the exceptions mentioned in section 4 of the act. These exceptions are stated in section 5 of the act (69 PS § 402) in the following language: "Section 5. Conditional Sales Void as to Certain Persons. Every provision in a conditional sale reserving property in the seller shall be void as to any purchaser from or creditor of the buyer who, without notice of such provision, purchases the goods or acquires by attachment or levy a lien upon them before the contract or a copy thereof shall be filed, as hereinafter provided, unless such contract or copy is so filed within ten days after the making of the conditional sale."

In the instant case, there was no creditor who acquired by attachment or levy a lien upon the furniture and furnishings of this hotel. There was no such creditor who had any lien upon the goods covered by the conditional sale contract. The only creditor in existence at the time the conditional sale contract was executed, who was a creditor at the time of the appointment of a receiver in this case, was Albert Pick & Co., who executed a bill of sale to the trustee under the mortgage, who knew all about it long before, and who are therefore estopped from now attacking the validity of the title of the trustee to these hotel furniture and furnishings.

The testimony in this case shows that the only creditors other than Albert Pick & Co., who had any dealings with the Webster Hall Corporation, were the United Laundries, Albert L. Brahm & Co., and Peter Avetta. The indebtedness that was owing to these creditors at the time the conditional sale...