Kolb v. Golden Rule Baking Co.

• Decision Date: 11 June 1928
• Citation: 9 S.W.2d 840,222 Mo.App. 1068
• Parties: LOUIS J. KOLB, RESPONDENT, v. GOLDEN RULE BAKING COMPANY, APPELLANT. [*]
• Court: Kansas Court of Appeals

9 S.W.2d 840

222 Mo.App. 1068

LOUIS J. KOLB, RESPONDENT, v. GOLDEN RULE BAKING COMPANY, APPELLANT. ^[*]

Court of Appeals of Missouri, Kansas City

June 11, 1928

Appeal from the Circuit Court of Jackson County.--Hon. O. A. Lucas Judge.

AFFIRMED.

Judgment affirmed.

W. S McClintock, A. L. Quant and F. K. Ferguson for respondent.

George W. Stubbs and Arthur R. Wolfe for appellant.

FRANK C. Williams, C., concurs. Trimble, P. J., absent.

OPINION

FRANK, C.

Action by plaintiff, respondent here, to foreclose a lien on an oven installed by plaintiff on premises owned by defendant. The decree awarded plaintiff a lien on the oven in the sum of $ 2057 with six per cent interest from date of judgment and ordered and adjudged that said lien be foreclosed and the property sold in the manner specified in said decree. Defendant appealed.

On June 20, 1923, plaintiff, transacting business as Duhrkop Oven Co., and the defendant entered into a written contract by the terms of which plaintiff agreed to and did let to defendant for the term of one year the oven in question together with its appurtenances, for a consideration of $ 3400, fifty per cent of which defendant agreed to pay during installation of the oven, the balance to be paid in equal installments, three, six, nine and twelve months after completion with six per cent interest per annum. This contract further provides that plaintiff was to install the oven on defendant's premises located at Independence and Kensington avenues, Kansas City, Missouri; that if defendant should default in one or more of the sums or installments of rentals, plaintiff might enter upon defendant's premises, repossess, remove, take away and enjoy said oven, as though said agreement of letting had not been made; that plaintiff, upon paying said installments might hold and enjoy said oven, and if defendant made no default in payment of aforesaid rental installments when due, plaintiff would execute to defendant a bill of sale for said oven, the consideration of which should be the amount of the said rental installments paid by defendant.

After this contract was entered into, plaintiff began the installation of the oven in July, 1923, and completed it in September of the same year.

About the time the installation of this oven was completed, plaintiff and defendant entered into a verbal agreement whereby plaintiff was to tear down and rebuild an old oven for defendant on a cost plus plan. Plaintiff began work on the old oven in October, 1923, and completed it shortly thereafter.

After the work was completed, it was agreed that the sum of $ 4228.56 was due plaintiff for the entire work including the rebuilding of the old oven, and twelve notes aggregating that amount, due in two, three, four, five, six, seven, eight, nine, ten, eleven and twelve months respectively were executed by defendant and delivered to plaintiff. Default was made in the payment of the notes and this suit was brought to foreclose a lien on the new oven for the balance of the purchase price.

Other facts will be stated in connection with the points discussed in the opinion.

The first and second assignments of error are (1) that the court erred in decreeing a foreclosure of a lien on the oven for the reason that the contract between the parties was not a conditional sale, but a contract to build an oven, and (2) because the contract expressly provides that the oven was let or leased to defendant.

The assignments may be considered together because they both raise the question of plaintiff's right to a lien under the contract.

These contentions involve a proper construction of the contract. The real character of the instrument is not determined from its technical form, but from the intention of the parties as gathered from the four corners of the contract. [24 R. C. L. 748.] In 35 Cyc. 654 and 656 the law on this subject is stated thus:

"Contracts of conditional sale may take such form as the parties choose to give them, but the legal aspect must depend not upon the name which the parties have applied to the contract, nor upon the form of the instrument but upon the intention as evidenced by the entire contract."

"In many cases instruments designated as, and in the form of leases, and usually providing for the payment of rent and stipulating that in default of payment the lessor may retake the goods, but on payment the property and goods shall pass to the lessee, have been construed as contracts of conditional sale, although it was expressly stipulated that the contract should not be regarded as a sale."

Other authorities are to the same effect, among which are the following: 12 American English Annotated Cases, 879; Federal Commercial & Savings Bank v. International Clay Machinery Co., 230 Mich. 33, 203 N.W. 166, 43 A. L. R. 1243; Russell v. Martin, 122 N.E. 447; Stern v. Drew, 285 F. 925; H. G. Craig & Co. v. Uncas Paper Board Co., 133 A. 673; Burroughs Adding Machine v. Bogdon, 9 F.2d 54.

In the case of Hervey v. Rhode Island Locomotive Works, 93 U.S. 664, 23 L.Ed. 1003, speaking to a like question, the court said:

"It is true the instrument of conveyance purports to be a lease, and the sum stipulated to be paid are for rent; but this form was used to cover the real transaction as much so as was rent on the piano in Murch v. Wright, supra, and the price of the piano was to be paid in thirteen months, and here that of the engine figures $ 12,093.96, in one year, it was evidently not the intention that this large sum should be paid as rent for the mere use of the engine for one year. If so, why agree to sell and convey the full title on the payment of the last installment? In both cases the stipulated price of the property was to be paid in short installments, and no word employed by the parties can have the effect of changing the true nature of the contracts."

The contract in the instant case stipulates that if defendant makes no default in the payment of any one or more of the installments of rental when due, plaintiff will execute and deliver to defendant a bill of sale for said oven, the consideration of which shall be the abovementioned installments of rentals. This provision stamps the instrument as a conditional sales contract.

The fact that plaintiff agreed to convey the title to the oven on payment of the last installment, clearly indicates that it was the intention of the plaintiff to sell, and the defendant to buy the oven at the price stipulated. In construing this contract, it is our duty to gather the intention of the parties from the entire instrument without regard to its form, or technical terms used therein. The fact that the contract labels the deferred payments as rentals does not change their character or convert the contract of sale into one of leasing. Substance rather than form shall control the interpretation of the contract.

A test usually applied in determining whether or not an instrument is a lease or a conditional sales contract is whether or not such instrument requires or permits the transferee to return the property in lieu of paying the purchase price. If the return of the property is either required or permitted, such instrument will be held to be a lease. On the other hand if the transferee is obligated to pay the purchase price, even though such price is denominated rental or hire, the contract will be held to be one of sale.

The contract in question does not require or permit defendant to return the property in lieu of paying the purchase price, but does bind him to pay such purchase price.

Viewing the contract in the light of the authorities above cited, we hold it is a contract of conditional sale. Under such a contract, in event of a default on the part of the buyer, the seller may retake the property, sue for the purchase price or foreclose his lien. [Wayne Tank & Pump Co. v. Quick Service Laundry Co., 285 S.W. 750, 752.]

In Farmer v. Moore, 73 Mo.App. 527, plaintiffs and defendants entered into a contract by the terms of which defendants agreed to pay plaintiffs the sum of $ 350 for the possession and use of certain property and that said property should become the absolute property of defendants upon payment of said $ 350, but if defendants failed to pay said sum, plaintiffs might enter the premises of defendants, remove said property and collect damages for the use, wear, waste or injury to said property, if any. Defendants executed to plaintiffs a note for $ 350. Defendants contended that the contract gave them the option to retain the property and pay its agreed value or pay rent for its use and return the property. In the disposition of the case the court said:

"Reading the contract and the supplemental one as a whole, and taking into view all of their provisions, it seems to us that the contract is one of sale with the right reserved in the vendors to retake the property if not paid for in one year, and to collect the value of the use of the property for the time it should remain in the possession of the defendants, or to collect the selling price with eight per cent interest; the option, if there be one, is in the sellers, and not the purchasers. The contract also undertakes to retain a vendor's lien on the property, for it is stipulated that it shall become the absolute property of the defendants upon payment of the $ 350, implying that until this is done (payment made) the title shall remain in the sellers, with the right to repossess themselves of the property in the event of default in the payment. The plaintiff has elected to sue for the purchase price and to enforce her vendor's lien therefor. This we think she had the right to do under the contracts. This is the view the trial court took of the case, and we affirm its judgment."

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