Enterprise Distributing Corporation v. Zalkin
| Citation | 113 S.E. 409,154 Ga. 97 |
| Decision Date | 18 August 1922 |
| Docket Number | 3061,3062. |
| Parties | ENTERPRISE DISTRIBUTING CORPORATION v. ZALKIN. ZALKIN v. ENTERPRISE DISTRIBUTING CORPORATION. |
| Court | Supreme Court of Georgia |
Syllabus by the Court.
The written instrument wherein the Enterprise Distributing Corporation let to the United Picture Productions Corporation the property therein described, for a period of 52 weeks, the latter company agreeing to make to the former corporation, at stated intervals during this term, certain payments as rentals, and the former agreeing to deliver to the latter a bill of sale to said property, after the expiration of said term, if the United Picture Productions Corporation had fully complied with all its obligations as to such payments and otherwise, constituted a sale of the property described.
Under this instrument, when the buyer failed to make any one of the payments on the purchase money of this property, the seller had the right to declare the agreement at an end, and to require the buyer to return all the property forthwith to the seller.
Under a conditional bill of sale, the seller, independently of the contract, has a right to the possession of the property sold when the buyer fails to pay therefor, and can retake the property.
A rescission of the contract of sale by the seller under such circumstances gives to the buyer the right to the return of so much of the purchase price as has been paid, less reasonable rental, and less any deterioration in the value of the property by damage, over and above natural wear and tear which it may have sustained while in the possession of the purchaser.
Generally rescission of a contract of sale is in toto, leaving the rights of the parties to be determined by a court of equity and not by the abrogated contract.
When the seller rescinds a conditional contract of sale, and repossesses himself of the property sold, a court of equity may require the return of the purchase money paid, less the amount of any damage sustained to the property, and a reasonable compensation for the use of the same, especially if there be a clause in the contract providing that upon a certain contingency the property shall be returned to the seller.
When the seller rescinds a contract of sale and takes possession of the property sold, this right cannot only be asserted by the buyer defensively to an action by the seller to rescind, but can be enforced affirmatively in equity by the buyer or his trustee in bankruptcy, in an equitable complaint for accounting.
Additional Syllabus by Editorial Staff.
In suit by trustee in bankruptcy of buyer under conditional sale contract for accounting respecting purchase money paid, petition held to sufficiently allege that seller retook the property because of buyer's default in making payments and under right given by the contract.
A court of equity has jurisdiction of a suit to recover the amount paid under conditional sale contract, which seller has rescinded, though only a small portion of the property is within the state; this not being an exercise of extraterritorial authority.
In action by trustee in bankruptcy, jurisdiction of court appointing him to adjudge the party in question a bankrupt is presumed on demurrer, when contrary does not appear on face of petition.
A trustee in bankruptcy can sue without specific authority from the court of his appointment to recover payments made by the bankrupt under a contract of conditional sale.
In buyer's action to recover amounts paid under rescinded conditional sale contract, less damages for reasonable compensation for use of property, the buyer is not required to account for the earnings from the property.
In buyer's action to recover amounts paid on purchase money under rescinded conditional sale contract, paragraph of answer alleging damages to defendant from buyer's failure to carry out the contract held subject to special demurrers on grounds of vagueness, indefiniteness, and uncertainty.
Error from Superior Court, Fulton County; Geo. L. Bell, Judge.
Suit by Harry Zalkin, trustee in bankruptcy of the United Picture Productions Corporation, against the Enterprise Distributing Corporation. Judgment overruling demurrers, and defendant brings error, and plaintiff brings a cross-bill of exceptions. Affirmed on the main bill, and reversed on the cross-bill.
Zalkin, as trustee, filed his petition in Fulton superior court against Enterprise Distributing Corporation, and made this case:
(1) Petitioner "is the duly and legally appointed trustee in bankruptcy, by the District Court of the United States for the Southern District of New York, of United Picture Productions Corporation, a corporation under the laws of the state of Delaware."
(2) The defendant is a Georgia corporation, with its principal office in Fulton county, Ga.
(3) On January 17, 1920, the defendant and United Picture Productions Corporation, hereinafter referred to as United, entered into a contract, copy of which is attached as Exhibit A.
(4) Said contract is called a lease, but in truth is not a lease, but a contract of sale under the terms of which United was to purchase the property in said contract described, by making the payments set out in said contract, running over a period of something less than three years, at the end of which time payment for said property would have been completed, and title to said properties would have vested completely in United.
(5) In drawing up a contract of sale, terming the same such contract of lease, calling the payments on account of purchase-price rentals, the defendant was merely adopting a plan by which it sought to provide for the forfeiture of the part payments on the purchase price of said contract in the event United should fail or be unable to meet all the payments on the purchase of said property; and a court of equity will look beyond the mere terms and names applied in said contract, will consider the real nature and character of the transactions involved, will recognize the equity arising on the part payment of the purchase price on said property, and will relieve against such forfeiture.
(6) United paid to the defendant in cash $25,000 on or about the execution of said contract.
(7) United did further pay to the defendant the sum of $7,000 in each and every week, commencing January 25, 1920, and running to or about April 1, 1920, making a total of nine payments, aggregating $63,000.
(8) On information and belief, the total amounts paid in cash to the defendant under the sixth paragraph of the contract aggregated the sum of $88,000.
(9) On or about the second week in April the defendant retook possession of said property, because of the default of United in keeping up its payments, and is now in possession of said property.
(10) The defendant has not returned to United, or your petitioner as its trustee in bankruptcy, said $88,000 or any part thereof.
(11) In equity defendant is liable to account to your petitioner for the sum so paid on the purchase price of said property, less such an amount as may be shown to be the reasonable rental value thereof for the 10 weeks that the same remained in the possession of United, and petitioner is entitled upon said accounting to have a decree for the amount shown to be due, together with interest thereon.
(12) Petitioner is willing to allow the defendant a credit on said amount for whatever amount may be found due as a reasonable rental value of said property for the time the same remained in the possession of United, and on information and belief admits that the rental value of said property was as much as $______ per week, to which the defendant is entitled to a credit.
(13) On or about April 27, 1920, United was adjudged a bankrupt in the District Court of the United States for the Southern District of New York, and petitioner was duly and legally appointed and qualified as trustee in bankruptcy in said cause.
Petitioner prayed that it be decreed that the said contract was and is a contract of sale; that the payments thereon were part payments on the purchase price of said property, creating equities in the purchase thereof; that the device or scheme of said contract for forfeiting the rights and equities arising from the nonpayment of said purchase money be decreed to be an attempted forfeiture and void; that petitioner have an account of the defendant for the sums paid on said contract, on which is to be credited the reasonable value of the property for rent; and that the amount due petitioner upon said account be ascertained and that he have a decree therefor.
Attached as Exhibit A to said petition was a contract between Enterprise Distributing Corporation, hereinafter referred to as Enterprise, and United Picture Productions Corporation, hereinafter referred to as United, the pertinent provisions of which will be stated:
(1) Enterprise operates motion picture film exchanges, in certain premises set forth in Schedule A annexed to said contract.
(2) The subject-matter of this agreement includes certain property fully described in article 2 of said contract.
(3) Enterprise hereby lets to United, and United hereby hires from Enterprise, the physical assets fully described in paragraph 2, for the term of 52 weeks from the 25th day of January, 1920, upon and subject to all the terms and conditions hereinafter set forth. If after the expiration of said 52 weeks United shall have fully complied with all its obligations under this agreement to be performed, Enterprise agrees to deliver to United at such time a bill of sale of all its physical assets, free and clear of any lien or incumbrance.
(4) Enterprise hereby leases to United, and United hereby hires from Enterprise, upon and subject to the terms...
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