Chrysler Corp. v. Adamatic, Inc.

• Decision Date: 18 June 1973
• Docket Number: No. 336,336
• Citation: 208 N.W.2d 97,59 Wis.2d 219
• Parties: , 12 UCC Rep.Serv. 849 CHRYSLER CORPORATION, Plaintiff-Appellant, v. ADAMATIC, INC., Defendant, Lakeshore Commercial Finance Corp., First Intervenor-Respondent, Russell A. Eisenberg, only as Recr. of Adamatic, Inc., Second Intervenor-Respondent.
• Court: Wisconsin Supreme Court

Page 97

208 N.W.2d 97

59 Wis.2d 219, 12 UCC Rep.Serv. 849

CHRYSLER CORPORATION, Plaintiff-Appellant, v. ADAMATIC, INC., Defendant Lakeshore Commercial Finance Corp., First Intervenor-Respondent Russell A. Eisenberg, only as Recr. of Adamatic, Inc Second Intervenor-Respondent.

No. 336.

Supreme Court of Wisconsin.

June 18, 1973.

Rehearing Denied Aug. 28, 1973.

Whyte, Hirschboeck, Minahan, Harding & Harland, Milwaukee, Victor M. Harding, Frederick A. Muth, Jr., and Anthony W. Asmuth III, Milwaukee, of counsel, for plaintiff-appellant.

Lorinczi & Weiss, Milwaukee, Robert K. Steuer and Robert P. Goldstein, Milwaukee, of counsel, for first intervenor.

Russell A. Eisenberg, Milwaukee, for second intervenor.

Polacheck & Harris, Milwaukee, Allan Polacheck, Milwaukee, Silberfeld, Danziger & Bangser, New York City, for Natl. Commercial Finance Conference, Inc., amicus curiae.

HEFFERNAN, Justice.

It should be emphasized that the cause of action is for replevin. The action was brought by Chrysler to gain possession of the machines and for damages against Lakeshore for their wrongful detention. Although there is evidence in the record indicating a breach of contract by the manufacturer, Adamatic, no relief is sought for that. Lakeshore, on the other hand, asserts ownership of the machines because of its prior perfected security agreement with Adamatic. The receiver, representing the general creditors, bases its claim upon Lakeshore's rights as a secured creditor, but in addition asks for an accounting by Lakeshore for any excess which Lakeshore may receive from Chrysler. As an alternative only, the receiver argues that Chrysler's taking of the goods was avoidable preference as against the unsecured creditors. No claim is asserted by either creditor against Chrysler for amounts unpaid on the contract price.

The legal issues fall into the natural division between the first contract involving the six-coil winder and the subsequent contract concerned with the three machines that are designated as twelve-coil winders.

The first contract--six-coil winder

As recited in the statement of facts, the six-coil winder and the cell inserter were returned to Adamatic for alterations on August 12, 1970. Chrysler asserts, in respect to the six-coil winder, that it had title and possessory rights to the machine from the time it was first delivered to the Chrysler plant in February 1970. It asserts that the machine was returned to Adamatic on a bailment, by which Adamatic was to hold the winder for repair and alteration. Both creditors, Lakeshore and the receiver, assert that the return of the machine revested the title in Adamatic and made it subject to their claims.

Under sec. 402.401(1), Stats., subject to the provisions of ch. 409 and other limitations not applicable here, 'title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.' The contract between Chrysler and Adamatic explicitly agreed that title to the six-coil winder and the cell inserter would vest in Chrysler upon the completion of manufacture and shipment to the Chrysler plant. Chrysler therefore, obtained title to this machine when it was shipped from the Adamatic plant in early February 1970. At that time, under the terms of sec. 402.106(1), Stats., there was a completed sale. It is undisputed that this sale was in good faith and in the ordinary course of business. There is no claim that the original sale was in violation of Lakeshore's security interest or constituted a preference against the unsecured creditors.

In accordance with the provisions of sec. 409.307(1), Stats., Chrysler took the machines free of Lakeshore's security interest. The creditors, however, assert that Chrysler never 'accepted' the goods or, if there were an initial acceptance, such acceptance was subsequently revoked. They rely upon sec. 402.401(4) for the proposition:

'A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller. Such revesting occurs by operation of law and is not a 'sale."

This question was fully litigated, and the trial judge made the finding that Chrysler had title to the six-coil winder and the cell inserter at all times after their initial delivery to Chrysler. A review of the record reveals that this finding is fully supported by the applicable law and the evidence adduced at trial.

The fact that title passed when the goods were first delivered, however, does not ipso facto evince Chrysler's acceptance of them. A sale of goods does not necessarily imply the buyer's acceptance. White & Summers, Uniform Commercial Code, page 249, sec. 8.2. While the delivery of the goods completed the sale, whether Chrysler accepted the machine depends on Chrysler's conduct after the delivery. Sec. 402.606, Stats., delineates conduct that constitutes the acceptance of goods. A buyer accepts goods if he notifies the seller that he accepts them, if he fails to make an effective rejection, or does an act inconsistent with the seller's ownership. There is no evidence that Chrysler expressly notified Adamatic that it was accepting the goods. On the other hand, Chrysler retained the six-coil winder for over six months without rejecting it. Under sec. 402.602, the rejection of goods must be made within a reasonable time after delivery and rejection will be ineffective unless the buyer seasonably notifies the seller.

No notification was ever given of the rejection of the six-coil winder. While there was evidence that Chrysler was displeased with the performance of the initial winder, there was no intimation that the winder was being rejected, although a letter from Chrysler to Adamatic carried the suggestion that, if the six-coil winder did not operate satisfactorily, the second contract--the contract for the three twelve-coil winders--would be cancelled. Chrysler in fact retained the six-coil winder for at least two months following the threat to cancel the other contract.

There was also evidence that Chrysler, during the period of possession, treated the six-coil winder as its own. It tagged the machine with a brass plate, giving it a Chrysler inventory serial number. Such conduct alone has been found to be evidence of acceptance. Julian C. Cohen Salvage Corp. v. Eastern Electric Sales Co. (1965), 205 Pa.Super. 26, 206 A.2d 331. The cell inserter was completely acceptable to Chrysler, but it, too, was returned to Adamatic. There is no contention that the mere return of the cell inserter constituted a rejection; rather, it was needed by Adamatic to run tests on other winders that were being manufactured. The documents that passed between Chrysler and Adamatic at about the time of the return of the six-coil winder and cell inserter show that Chrysler wished to retain title and possession of the machine and was returning it merely for adjustment and modification.

The questions of acceptance or rejection of goods are questions to be resolved by the finder of fact and depend upon the ascertainment of the intent of the parties. Marine Mart, Inc. v. Pearce (1972), 252 Ark. 601, 480 S.W.2d 133; Cervitor Kitchens, Inc. v. Chapman (1972), 7 Wash.App. 520, 500 P.2d 783; Valley Die Cast Corp. v. A.C.W., Inc. (1970), 25 Mich.App. 321, 181 N.W.2d 303; 2 Anderson, Uniform Commercial Code (2d ed.), p. 242, sec. 2--608:9.

The trial judge's finding that the six-coil winder was accepted by Chrysler is not contrary to the great weight and clear preponderance of the evidence. The receiver makes the argument, however, that, because the six-coil winder and the cell inserted were shipped back to Adamatic under a bill of lading, a 'document of title,' the title to the machines was revested in Adamatic. Such argument, under the facts here, is incorrect as a matter of law. The machinery was shipped from the Chrysler plant in Indiana to Adamatic in Wisconsin. The shipment was in interstate commerce, and was subject to the federal Bills of Lading Act, 49 U.S.C.A., sec. 81 et seq., and not Article Seven of the Uniform Commercial Code. The document was a straight, non-negotiable bill, governed by the provisions of 49 U.S.C.A., sec. 112. That section provides:

'A person to whom a bill has been transferred, but not negotiated, acquires thereby as against the transferor the title to the goods, subject to the terms of any agreement with the transferor. . . .'

The essential agreement between Chrysler and Adamatic is contained in the 'Consigned Material Receipt Agreement' executed by the parties, which recites that title was to remain in Chrysler despite the shipment of the six-coil winder to Adamatic for modification.

The receiver claims, however, that title was transferred to Adamatic by virtue of a provision appearing on the reverse side of a quotation form which was sent by Adamatic to Chrysler quoting the price of converting the six-coil winder to a twelve-coil winder. That document in essence provides:

'Delivery of equipment to a carrier at point stated on quotation, consigned to the purchaser, or his order . . . shall constitute transfer of title. . . .'

This document is relevant only when goods are shipped from Adamatic to a customer. It does not purport to place title in Adamatic upon a shipment back. It is only intended to govern the passage of title when goods manufactured by Adamatic are delivered to a buyer.

The receiver also attacks the meaning to be given to the 'Consigned Material Receipt Agreement,' claiming that a consignment passes title, unless additional requirements of the Uniform Commercial Code are complied with, and that the failure to meet these requirements will permit the consignee's creditors to obtain an interest in the goods. For this purpose, the receiver relies upon Columbia International Corp. v. Kempler (1970), 46 Wis.2d 550, 175 N.W.2d 465. That case, however, deals with...