L. C. Smith & Bro Typewriter Co. v. Alleman

• Decision Date: 11 October 1912
• Docket Number: 1,573.
• Citation: 199 F. 1
• Parties: L. C. SMITH & BRO. TYPEWRITER CO. v. ALLEMAN.
• Court: U.S. Court of Appeals — Third Circuit

199 F. 1

L. C. SMITH & BRO. TYPEWRITER CO. v. ALLEMAN.

No. 1,573.

United States Court of Appeals, Third Circuit.

October 11, 1912

John G Johnson, of Philadelphia, Pa., and Wm. F. Berkowitz, for appellant.

D. Hays Solis-Cohen and Albert L. Moise, both of Philadelphia, for appellee.

Before GRAY, Circuit Judge, and BRADFORD and WITMER, District Judges.

WITMER District Judge.

Whether the contract in suit is a bailment or conditional sale is here presented by this record. The writing was entered into between the L. C. Smith & Bro. Typewriter Company and the Franklin Lumber Company, Incorporated, on the 4th day of February, 1909. The latter having since been declared a bankrupt, its creditors are represented by S. H. Alleman, as trustee.

The contract discloses that the Smith Company delivered to the Franklin Company a certain typewriter, designated by factory number, for use and hire for the term of seven months, at a rental of $105, payable as follows: $30 upon the execution of the agreement, and $10 per month thereafter, and one payment of $15 at the office of the Smith Company, without notification or demand. The Franklin Company agreed to preserve the property in as good order and condition as received, natural wear and use only excepted, to exhibit the same to the Smith Company when desired, and not to remove the machine without the consent of the latter. The contract also provides for the return of the property to the Smith Company at the expiration of the term. It furthermore provides, 'upon default of payment or payments,' the Franklin Company should return the machine to the Smith Company; otherwise the latter was authorized to retake the same. There is also this provision:

'It is further agreed between the parties that upon the return of the property at the expiration of the term, that upon the payment of one dollar by the party of the second part in addition to the sum paid for rental, the party of the first part (Smith Company) will execute a bill of sale of the aforesaid property to the party of the second part (Franklin Company).'

Payments under this agreement aggregating $70 were made in unequal amounts at irregular intervals up to May 4, 1910, shortly before the Franklin Company was declared a bankrupt.

The referee held that the 'conduct of the parties' to the agreement, subsequent to its execution, referring to these payments, operated to convert what was once a bailment into a conditional sale. The learned court, in reviewing his decision, held that the contract had not been changed from a bailment to a conditional sale, but that, viewing it in the light of the subsequent acts of the parties, it had always been a conditional sale, saying:

'In our opinion, the contract has not been changed, but only been interpreted by the subsequent conduct of the parties. In reality it has always been a contract of conditional sale, although it may be true that the bankrupt himself would not have been permitted to prove its true character.'

The referee and the court below both agree that, upon its face, the writing constitutes a good bailment. Indeed, under the authorities this cannot be controverted. It bears all the indicia of a bailment and does not contain any of the disabling elements, whereby contracts intended as bailments are sometimes construed by the courts to be conditional sales. Liquid Carbonic Co. v. Quick et al., 25 Am.Bankr.Rep. 396, 182 F. 603, 105 C.C.A. 141; Dando v. Foulds, 4 Penny. (Pa.) 342; Ditman v. Cottrell, 125 Pa. 606, 17 A. 504; Wheeler & Wilson, etc., v. Heil, 115 Pa. 487, 8 A. 616, 2 Am.St.Rep. 575; Collins v. Railroad Co., 171 Pa. 243, 33 A. 331; Harris v. Shaw, 17 Pa.Super.Ct. 1; Jones v. Wands, 1 Pa.Super.Ct. 269.

An analysis of the statement of facts relied upon by the court warranting in his opinion the interpretation that this paper, upon its face a good bailment, was in reality a conditional sale, were: (a) Payments under the agreement in sums other than therein provided; (b) payments at irregular intervals; (c) failure by the Franklin Company to return the machine to the Smith Company at the expiration of the term provided for; and (d) failure by the Smith Company to pursue its remedy under the contract and retake the machine, until six months after the expiration of the term and after the bankruptcy of the Franklin Company.

It is a cardinal rule in the interpretation of contracts that, if the words or terms thereof are equivocal, the subsequent acts of the parties thereunder are admitted to show how the parties understood their contract, and such acts are a practical construction of it. 1 Beach on Contracts, Sec. 721, p. 875. However, where the contract is free from ambiguity, and its meaning is clear in the eye of the law, such mode of construction is inadmissible. The practical construction of a contract adopted by the parties thereto will not control or override language that is so plain as to admit of no controversy as to its meaning. In such cases the intent of the parties must be determined by the language employed, rather than by their acts. 1 Beach on Contracts, Sec. 722, p. 877.

As was said in Wright v. Gas Co., 2 Pa.Super.Ct. 219:

'The parties to a contract, where there may be some ambiguity, always have a right and can put their own construction upon their own lease, and it is a proper question to submit to the jury whether both parties agree to such a mutual construction, and the jury so finding should adopt such construction as their own.

But, where there is no ambiguity, the fact that a party acted in accordance with a certain construction does not make such construction binding upon him. Penna. Co. v. Erie, etc., Co., 108 Pa. 621.

The learned court furthermore says:

'Assuming that the bankrupt would be bound by the words of this agreement and could not deny it to be a lease, his trustee is not so bound, and may contend that the contract is really one of conditional sale. In such a contention he may offer any competent and relevant evidence, and it is obvious, I think that the conduct of the parties may ordinarily throw much light on the true meaning of their agreement. If they...