H.G. Craig & Co., Ltd. v. Uncas Paper Board Co.

• Decision Date: 09 June 1926
• Citation: 133 A. 673,104 Conn. 559
• Parties: H. G. CRAIG & CO., LIMITED, ET AL. v. UNCAS PAPER BOARD CO.
• Court: Connecticut Supreme Court

133 A. 673

104 Conn. 559

H. G. CRAIG & CO., LIMITED, ET AL. v. UNCAS PAPER BOARD CO.

Supreme Court of Errors of Connecticut.

June 9, 1926

Appeal from Superior Court, New London County; Isaac Wolfe, Judge.

Suit by H. G. Craig & Co., Limited, and others against the Uncas Paper Board Company, wherein Frank W. Browning was appointed receiver. The Downingtown Manufacturing Company filed a reclamation petition, praying that the receiver be ordered to deliver to the petitioner certain personal property and machinery or to pay to the petitioner an unpaid balance due thereon. Judgment denying the petition, and petitioner appeals. No error.

Edmund W. Perkins, of Norwich, for appellant.

Arthur T. Keefe, of New London, for appellee.

HINMAN, J.

From the admitted allegations of the petition and answer constituting the facts upon which the matter was heard and determined by the trial court, it appears that the petitioner, a Pennsylvania corporation located in that state and the Uncas Paper Board Company (hereinafter referred to as the board company), as the contracting parties, executed and delivered three instruments, Exhibits A, B, and C, made part of the petition. These related, with the exception of one duplex cutter, to parts of a paper-making machine owned by the board company and located in its mill in Norwich, which parts, upon being furnished by the petitioner, were attached to and incorporated in the paper-making machine. Exhibit A, which is dated March 5, 1923, sets forth that the petitioner, called therein the lessor, " leases" to the board company, called the lessee, " addition to wet end and dryers No. 2 machine," also the cutter above mentioned, for the term of 370 days, at a " rental or hire" of $41,000, payable in 12 installments, $4,100 on signing of contract, $4,100 when machinery is delivered at mill, and set up ready to run, $3,280 thirty days after second payment, and a like sum on the corresponding date of each succeeding month " until the whole is paid for." Then follows covenants not inappropriate to a lease, including one to " promptly pay said rent without demand as each and every installment becomes due," and " at the termination of this lease to surrender and deliver the same to the lessor in good condition, ordinary wear and tear excepted." But then follows a further agreement:

" That, if lessee make default in the payment of any installment of rent, or in the performance of any of the above covenants, or become insolvent, or make an assignment for the benefit of creditors, or be adjudged a bankrupt, then and in such event the entire rental for the full term of this lease shall immediately become due and payable and the lessor may enter lessee's premises, without let or hindrance, and forthwith remove said machinery without process of law and retain all rent then paid, and recover all unpaid rent then accrued, with cost of such removal, including transportation, handling, and reasonable attorney's fee, together with damages for injury and depreciation."

Also the following:

" And the lessor agrees that, should the lessee perform all these covenants hereof without default, lessee may purchase said machinery after the expiration of this lease and the surrender of said machinery by paying lessor the sum of $1; upon such payment, lessor shall by bill of sale convey said machinery to lessee."

Exhibit B, dated March 28, 1923, is in form similar to Exhibit A, relates to 12 dryers, prescribes the term as 420 days, and a total " rental or hire" of $11,500, payable in three installments of $3,000 each and one of $2,500, one, two, three, and four months, respectively, " after last installment March 5, 1923, lease," and contains a similar provision for purchase by the " lessee" by paying $1.

Exhibit C, dated August 25, 1924, covers two breaker rolls for Allen mixers and two beater rolls for Marx beaters, specifies the term as 6 months from date, and the " rental" as $4,900 payable in one installment " 4 months after machinery is ready to deliver."

None of these instruments were acknowledged, but Exhibit A was filed with the town clerk of Norwich March 24, 1923, Exhibit B, May 17, 1923, and Exhibit C on September 3, 1924.

The machinery was installed in the board company's mill, and up to March 16, 1925, the company had paid the petitioner $25,223.30 pursuant to Exhibits A, B, and C, which instruments were in full force and effect on that date, when the receiver was appointed and took possession of the plant, including the machinery in question.

The trial court held that the instruments in question, although styled leases, are in legal effect conditional bills of sale, and that, because they are not acknowledged as required by our statute (and the petitioner did not enter upon the premises of the Board Company for the purpose of taking possession of the machinery, and at the time of the appointment of the receiver all the property was under attachment at the instance of a creditor), the machinery in question should be held by the receiver as the absolute property of the board company so far as it may be needed by him for payment of debts.

Of the reasons of appeal, the eighth has no basis in a claim of law made in the trial court, so far as appears of record, and the eleventh was not pursued. All of the others relate to the overruling by the trial court of petitioner's claims of law, which claims may be grouped and generally stated as follows: (1) That the construction of Exhibits A, B, and C is controlled by the law of Pennsylvania, under which they are leases or bailment contracts, creating the relation of bailor and bailee between the petitioner and the board company, and not contracts of conditional sale, and so not required by Connecticut law to be acknowledged; (2) that they are not contrary to any rule of public policy of Connecticut; (3) that the respondent receiver and the creditors of the board company had constructive notice of the instruments, hence the contracts are not, as to such creditors, to be held to be absolute sales; and (4) that the petitioner is entitled to the relief sought.

Regarding the claim that Exhibits A, B, and C are to be construed as leases or contracts of bailment and not as conditional contracts of sale, it is too obvious to justify discussion that, while they are, in form, contracts of renting or hiring, under each of them it was intended and provided that " the general property in the subject-matter of the contract is ultimately to pass, for an agreed price in money" from the petitioner to the board company on the performance by the latter of certain specified conditions.

" Where this is intended to be the effect, operation, and main purpose of the contract, it will, as a rule, be held to be one of conditional sale, without much regard to the name or the form the parties may give to it." In re Wilcox & Howe Co., 70 Conn. 220, and cases cited at page 228, 139 A. 163; Hartford-Connecticut Trust Co. v. Puritan Laundry, Inc., 95 Conn. 172, 181, 111 A. 149.

If construed according to the settled law of Connecticut these instruments are clearly conditional contracts of sale. However, each contains a clause " that this contract is made in the state of Pennsylvania and shall be executed in accordance with the laws of that state," and it is alleged in the petition and admitted by the answer that under the law of Pennsylvania " Exhibits A, B, and C are leases or bailment contracts, and create the relation of lessor bailor and lessee bailee," and the appellant claims that in consequence the instruments must be construed and treated as such. The appellant, in brief and argument interprets the terms " executed" as employed in the contracts as referring to signing and delivery only, rather than performance, but contends that the word " made" should be construed as " governed." We are unable to adopt the latter contention; the only meaning of which " made" as here used is fairly susceptible is as relating to the place of...