General Refrigerator & Store Fixture Co. v. Patterson

• Decision Date: 01 April 1952
• Docket Number: 6565
• Citation: 82 Pa. D. & C. 504
• Parties: General Refrigerator and Store Fixture Company v. Patterson et al
• Court: Pennsylvania Commonwealth Court

82 Pa. D. & C. 504

General Refrigerator and Store Fixture Company v. Patterson et al

No. 6565

Common Pleas Court of Philadelphia County, Pennsylvania

April 1, 1952

December term, 1950.

Max A. Daroff, for plaintiff.

Oscar Rosenbaum, for additional defendant.

OPINION

Trial without jury.

MACNEILLE P. J.

This is an action in replevin brought by the General Refrigerator and Store Fixture Company against George D. Patterson, Jane H Patterson, and Morris Glick, added defendant, for the recovery of certain commercial refrigerator equipment. When this matter first came on for trial it was apparent that the paramount issue involved was one of law. No evidence was offered by the parties and the case was submitted to the court for determination on the pleadings as on a motion for judgment on the pleadings. Subsequently the court ordered a hearing in order to determine the facts which were left in dispute by the pleadings. A hearing was accordingly held on March 14, 1952.

On April 20, 1950, plaintiff, General Refrigerator and Store Fixture Company, entered into a bailment lease agreement with defendants, George D. Patterson and Jane H. Patterson, for one refrigerator box (described in the complaint as one 4 ft. 7 in. by 6 ft. 6 in. by 6 ft. 6 in. walk-in box) which was subsequently delivered to defendants for their use. Defendants, George D. Patterson and Jane H. Patterson, defaulted in making payments. A writ of replevin with bond was issued on February 28, 1951. No counterbond was filed by any of the defendants and the sheriff replevied the property on March 1, 1951. Defendants, George D. Patterson and Jane H. Patterson, did not file an answer to the complaint, nor did they appear either in person or by counsel when the case was called for trial. Morris Glick, added defendant, filed an answer to the complaint as landlord of defendants, George D. Patterson and Jane H. Patterson.

The pleading filed by Morris Glick, added defendant, in the nature of an answer and new matter, revealed, inter alia, that George D. Patterson filed a voluntary petition in bankruptcy in the District Court of Pennsylvania for the Eastern District on January 16, 1951 (cause no. 23400), and was adjudicated a bankrupt on February 13, 1951. A trustee and receiver in bankruptcy was appointed for George D. Patterson on January 16, 1951, and the trustee sold all of the bankrupt's personalty, including the disputed refrigerator, at public sale on February 13, 1951, in accordance with an order of sale authorized by the Federal district court. At the bankruptcy sale the added defendant, Morris Glick (whether with or without knowledge that the refrigerator was subject to a bailment lease is immaterial) purchased the refrigerator for value and the sale was subsequently confirmed by the district court.

Under the above facts the sole issue for determination is whether or not Morris Glick, the added defendant, is entitled to possession of the refrigerator or to damages as against plaintiff, the original bailor and owner of the property in question.

A bona fide purchaser from a bailee or other custodian does not obtain a good title against the real owner. It has often been held that a bona fide purchaser for value, even without notice of a bailment, will not prevail over the. true owner so as to deprive the bailor of ownership or possession, even though the purchase is made in good faith. See Crist v. Kleber et al., 79 Pa. 290 (1875); Miller Piano Co. v. Parker, 155 Pa. 208 (1893); Collins v. Bellefonte Central R. R. Company, 171 Pa. 243 (1895); Leitch v. Sanford Motor Truck Co. et al., 279 Pa. 160 (1924); Lamb v. Leader, 6 Pa.Super 50 (1897); National Cash Register Co. v. Cochran, 22 Pa.Super 582 (1902); Painter v. Snyder, 22 Pa.Super 603 (1903); Heisley v. Economy Tool Manufacturing Company, 33 Pa.Super 218 (1907); Barnett v. Fein, 41 Pa.Super 423 (1909).

We must determine whether or not the fact that added defendant, Morris Glick, bought at a judicial sale from a trustee in bankruptcy would alter or modify the rule as stated.

Section 70(a ) of The Bankruptcy Act of July 1, 1898, 30 Stat. at L. 565, as amended (11 U.S.C. § 110) provides as follows:

" The trustee of the estate of a bankrupt and his successor or successors, if any, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt as of the date of the filing of petition in bankruptcy. . . ."

Under this provision it has been said that a trustee in bankruptcy holds only such title as the bankrupt possessed; that the rights of the trustee cannot be any greater than those of the creditors of the bankrupt; see Munn v. Lorch, 305 Pa. 55 (1931); Davis v. Billings, 254 Pa. 574 (1916); Schmidt v. Bader, 284 Pa. 41 (1925).

However, in addition to the bankrupt's title passing to the trustee under section 70 (a ) the trustee acquires certain other superior rights or titles, including the right of an execution creditor, the right to set aside fraudulent transfers, the right to void preferences and the right to nullify liens. Section 70(c ) (amendment adopted March 18, 1950) provides:

" The trustee, as to all property of the bankrupt at the date of bankruptcy whether or not coming into possession or control of the court, shall be deemed vested as of the date of bankruptcy with all the rights, remedies, and powers of a creditor then holding a lien thereon by legal or equitable proceedings whether or not such a creditor actually exists."

The purport of section 70(c ) is that if, on the date the petition is filed, any creditor of the bankrupt could have acquired a lien which would be superior to the rights of any transferee or pledgee, then the trustee acquires a superior title to such property for the benefit of the estate and all creditors. See Bailey v. Baker Ice Machine Co., 239 U.S. 268, 36 S.Ct. 50 (1915); Eisenlohr v. Ehrich, 296 Fed. 816 (C. C. A. 3, 1924), cert. den. 265 U.S. 584, 44 S.Ct. 459 (1924); New York-Brooklyn Fuel Corporation v. Fuller, 11 F.2d 802 (C. C. A. 2, 1926); Houck v. General Motors Acceptance Corp., 44 F.2d 410 (D. C., W. D. Pa., 1930).

The single question for our consideration is whether the trustee took any superior title to that of plaintiff. In Pennsylvania the law is still settled that a bailment with an option to purchase in the bailee is good as against creditors and purchasers from the bailee even though the contract of bailment is not recorded. See Anchor Concrete Machinery Co. v. Pennsylvania Brick & Tile Co., 292 Pa. 86 (1928); Stern & Company v. Paul et al., 96 Pa.Super 112 (1929); Decker v. Williams, 130 Pa.Super 100, 196 A. 910 (1938); In re Robinson, 40 F.Supp. 320 (D. C., E. D. Pa., 1941), affd. 122 F.2d 336, cert. den. 314 U.S. 686 (1941); Montgomery, " The Pennsylvania Bailment Lease" (1931), 79 U. of Pa. L. Rev. 920; Mueller, " Conditional Sales in Pennsylvania Since the Adoption of the Sales Act" (1924), 72 U. of Pa. L. Rev. 123; note (1932), 80 U. of Pa. L. Rev. 1033.

There is no question but that the law of Pennsylvania determines the nature of the title, if any, which the trustee took in this case. We need not concern ourselves with cases from other jurisdictions refusing efficacy to the bailment lease form unless it is recorded. It is sufficient to note that in 1925 this Commonwealth adopted the Uniform Conditional Sales Act of May 12, 1925, P. L. 603, sec. 31, as amended, 69 PS § 361 et seq.; but in so doing the legislature excluded section 1(2) of the Uniform Act (2 Uniform Laws Ann. Supp. 1930, sec. 1) which brought bailments and leases within the definition of a conditional sale. It is apparent then that a creditor of the Pattersons could not have acquired a lien superior to plaintiff's rights as bailor and the trustee acquired no title sufficient to prevail as against plaintiff. See Sandack v. Tamme, 182 F.2d 759 (C. A., 10, 1950); In re Clover Drugs, Inc. (D. C. E. D., Pa., 1937), 21 F.Supp. 107.

The trustee thus having no title to the refrigerator in question, could not by judicial sale divest plaintiff of ownership. The rights of a trustee in bankruptcy are no greater than those of the creditors and, if he wrongfully sells goods held under the bailment no title passes by such sale. See Schmidt v. Bader, 284 Pa. 41 (1925). In that case the court stated, at page 47:

" As already noted, the manufacturing company was not declared a bankrupt until January of 1921; and the only interest the trustee could sell was the equity which the corporation might have by virtue of the payments under the lease. It was in default, however, and the lessor and present plaintiff had the right to demand a return of the property involved in the present action of replevin. The rights of the trustee in bankruptcy were not greater than those of the creditors, and his sale passed no title to the machines held under the bailment contract. It follows that plaintiff's claim must be sustained."

In National Cash Register Company v. Stoschak, 21 Northumb. 60 (1948), the court held that:

" An innocent purchaser for value of a leased chattel takes no other title than that of the bailee, and if the bailee defaults in performing the covenants of the lease the bailor may recover the chattel by an action of replevin from the purchaser, even though the purchaser claims title through a sheriff's sale, of which the bailor had knowledge, and at which the bailor failed to give notice of his title."

In Bishop & Babcock Sales Company v. Seltzer, 29 D. & C. 325, 327 (1937), the court stated:

" The rule is undoubted in Pennsylvania that the purchaser at a sheriff's sale takes no better title than defendant in the execution had. The authorities are collected in National Cash Register Co. v. Knecht, 24 Northamp. 1...