Hogue v. Pellerin Laundry Machinery Sales Company

• Decision Date: 21 December 1965
• Docket Number: No. 17941.,17941.
• Citation: 353 F.2d 772
• Parties: Vernon HOGUE and Standard Laundry and Cleaners, Inc., of Benton, Arkansas, Appellants, v. PELLERIN LAUNDRY MACHINERY SALES COMPANY, Inc., Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

353 F.2d 772 (1965)

Vernon HOGUE and Standard Laundry and Cleaners, Inc., of Benton, Arkansas, Appellants, v. PELLERIN LAUNDRY MACHINERY SALES COMPANY, Inc., Appellee.

No. 17941.

United States Court of Appeals Eighth Circuit.

December 21, 1965.

Alston Jennings, Little Rock, Ark., made argument for appellants and filed printed brief.

G. Thomas Eisele, Little Rock, Ark., made argument for appellee and filed brief with Cooper Land, of Wootton, Land & Matthews, Hot Springs, Ark.

Before JOHNSEN, VOGEL and MATTHES, Circuit Judges.

JOHNSEN, Circuit Judge.

The appeal is from a decree awarding restitution to appellee, Pellerin Laundry Machinery Sales Company, Inc., against appellants, Vernon Hogue and Standard Laundry and Cleaners, Inc., of Benton, Arkansas, of some laundry and cleaning machinery and equipment.¹ The suit was one in diversity jurisdiction, with the value of the property found by the court to be $20,000.00.

Pellerin's title to the property was legally without actual dispute on the trial. Possession of it had been given by Pellerin to Hogue under conditional sales contracts, and Hogue had turned it over to Standard, a corporation formed to carry on a laundry and cleaning business, with the capital stock thereof owned by Hogue at the time of suit. Payment defaults on the part of Hogue began to occur soon after the contracts were made; were permitted to accumulate over a considerable period of time; and were ultimately made the basis of a rescission by Pellerin, with the present suit being instituted shortly thereafter.

The errors asserted here against the decree are (1) the court's holding that the suit was not barred by limitations, and (2) the court's holding that there had not been an election of remedies estopping Pellerin to seek restitution relief.

I.

The limitations argument made is that under Ark.Stats.1947, § 37-206, an action for the recovery of goods or chattels must be brought in the language of the statute "within three years after the cause of action shall accrue"; that default on the conditional sales obligation had occurred more than three years prior to the bringing of the present suit; that Pellerin's right to rescind and seek restitution arose when appellants first were in default; and that the statute of limitations began to run from that date.²

This, however, fails to take into account that the obligation on the notes and conditional sales contracts was not for a single payment but for separate monthly installments over a five-year term. There was no provision that caused the entire obligation to become automatically accelerated by the first default, nor was there a provision that required Pellerin to use this default, and only this, as a basis for rescission if it at all wanted to avail itself of the remedy of restitution.

In this situation, Hogue's obligation to make the subsequent installment payments as they became due continued in effect. As to each such installment there was a distinct undertaking for payment on its particular maturity date. Thus, failure of performance as to a subsequent installment as much constituted a contract breach and as much legally provided a basis for rescission as did the first default that occurred. In Williston's language, "* * * rescission is imposed in invitum by the law at the option of the injured party, and it * * * in general is allowed * * * for any breach of contract of so material and substantial a nature as would constitute a defense to an action brought by the party in default for a refusal to proceed with the contract". Williston on Contracts (Rev.Ed.), § 1467. See also Economy Swimming Pool Co., Inc. v. Freeling, 236 Ark. 888, 370 S.W.2d 438, 440.

On this basis, appellants' contention as to limitations is left without its premise. Pellerin's rescission and its suit to recover the property were both engaged in within three years of the time that some (a majority in fact) of the cumulative defaults in payments had occurred on the contract obligation. As noted above, only the statute of limitations is relied on as to delay. There is no claim of any preclusion from laches prior to and other than as a question of bar by the statute itself.³

Any other laches-claim which might have been attempted to be asserted on the basis of occasioned hardship and inequitable injustice would in general have been subject to the principle that "* * * restitution is denied because of laches only because the complainant, with full opportunity to pursue a remedy, delays without adequate reason until, if restitution were granted, the other party or some third person might inequitably suffer a loss which would not have been occasioned had action been brought with a fair degree of promptness". Restatement, Restitution, § 148, Comment c. In the situation here, however, with appellants having had the use of the machinery and equipment in their business through a long period of cumulative defaults, after having made only two payments to Pellerin, they would hardly have been able to make any laches-claim, postulated on inequitable prejudice from Pellerin's forbearance to bring the matter of their defaults to a head. Rather, in Pellerin's exercising of rescission and seeking of restitution, such equities as could be involved between the parties from the forbearance would be on Pellerin's side.

As indicated, Pellerin's rescission and its suit to recover the property occurred within three years from the date of each of a large number of separate installment defaults, so that legally the situation was without basis for claiming bar from the statute of limitations against Pellerin's right to seek restitution. And with the rescission and the suit both having occurred within such a three-year period, there is no occasion for us to consider whether § 37-206 would be construed by the Arkansas courts as having application to these dual aspects concurrently, or whether it would be held that as to the right to seek restitution the limitations period does not commence to run until after a rescission has been made.⁴ Nor, in view of the result commanded legally by the facts as declared above, is there need to consider the theory on which the trial court predicated its holding that the statute of limitations had not run — namely, that Pellerin's cause of action for restitution did not come into existence or accrue until the court's decree and judgment of dismissal in the case of Pellerin Laundry Machinery Sales Co., Inc. v. Hogue, D.C.W.D.Ark., 219 F. Supp. 629, referred to in footnote 1, supra. In relation to this theory, the significant time elements were that judgment in that case was entered on July 12, 1963; that notice of rescission was given by Pellerin to appellants on July 30, 1963; and that suit for recovery of the property was instituted on ...