Northwest Collectors, Inc. v. Enders

• Decision Date: 10 October 1968
• Docket Number: No. 38359,38359
• Citation: 446 P.2d 200,74 Wn.2d 585
• Court: Washington Supreme Court
• Parties: NORTHWEST COLLECTORS, INC., a corporation, Appellant, v. Edward H. ENDERS and Ruby E. Enders, his wife, Respondents and Cross-Appellants, Cleo A. Smith and Jane Doe Smith, his wife, Respondents.

Page 585

74 Wn.2d 585

446 P.2d 200

NORTHWEST COLLECTORS, INC., a corporation, Appellant, v. Edward H. ENDERS and Ruby E. Enders, his wife, Respondents and Cross-Appellants Cleo A. Smith and Jane Doe Smith, his wife, Respondents.

No. 38359.

Supreme Court of Washington, En Banc.

Oct. 10, 1968.

William G. Ennis, Spokane, for appellant.

Olwell, Boyle & Hattrup, Seattle, for respondents.

ROSELLINI, Judge.

The plaintiff brought this damage action for breach of the terms of a written instrument designated 'Lease of Personal Property.' It was executed by the plaintiff's assignor, Guthrie Investments, Inc., as lessor, and defendant Edward H. Enders as lessee. Guthrie Investments, Inc., will be referred to in this opinion as 'Guthrie,' and Edward H. Enders as 'Enders.'

The pertinent facts are as follows: Enders desired to enter into a business venture and went to Parker Buck & Son, Inc., hereinafter referred to as 'Parker Buck.' Parker Buck was a seller of heavy equipment, including tractors of the type commonly used for hauling dirt. Enders went to Parker Buck because he was interested in acquiring the use of an International crawler tractor with loader and a four-in-one bucket, which was being offered for sale at the price of $16,800. Because Enders did not wish to make a substantial down payment or pay cash for the property, he entered into an arrangement whereby Guthrie purchased the equipment from Parker Buck and he, Enders, took possession from Guthrie and agreed to make monthly payments for a period of four years. A written instrument was executed by Enders on June 26, 1962. The instrument, called a 'Lease of Personal Property,' required monthly rental payments of $489.22, including sales tax. The total amount payable was computed by adding together the cost of the equipment and financing charges.

In July 1962, at Enders' request, Parker Buck located one Cleo A. Smith, hereinafter referred to as 'Smith,' who was engaged in the dirt-hauling business, and who agreed to assume the obligations of the agreement. For this service Enders paid Parker Buck $1,300, no part of which was paid to Guthrie. Guthrie was asked by Parker Buck, on behalf of Enders, to release Enders from all liability under the agreement upon its assumption by Smith. Guthrie refused, stating that Smith had inadequate responsibility. Guthrie did agree to the assignment and assumption whereby Smith became the possessor of the property as well as an obligor on the contract.

The assignment was signed August 8, 1962, and Smith took possession of the tractor. Subsequently, Smith defaulted on the payments and Guthrie made demand on Smith and Enders for the resumption of the monthly payments. The claim was then assigned to Northwest Collectors, Inc., the plaintiff and appellant in this action, and suit was commenced against Enders and Smith.

Thereafter, Smith gave possession of the tractor to one Bert C. Noble. While the plaintiff was aware of this transfer of possession by virtue of the fact that Smith had informed Guthrie, it did not agree to the transfer.

Smith refused to retake possession of the property from Noble, although he was asked to do so by Guthrie. An employee of Guthrie examined the tractor and found that it was damaged, partially dismantled and not operable. Once again Guthrie requested Smith to retake possession of the property, and on Smith's refusal, requested Noble to deliver the equipment to the Edmonds Equipment Company in Lynnwood, where it was repaired and reassembled. The equipment was subsequently taken to Spokane, the location of the main offices of Guthrie and Northwest Collectors, Inc., to avoid storage charges.

The plaintiff alleged in its complaint against Enders and others that monthly rental payments under the agreement were overdue and unpaid, and that the total rent due for the balance of the term, $18,345.60, was due and prayed for judgment against them in said sum together with costs, interest and attorney's fees.

Enders answered that he signed the instrument, but denied other material allegations of the complaint and as an affirmative defense alleged that the instrument was a conditional sale contract, not a lease; and further alleged that Parker Buck acted as agent for Guthrie in arranging the transfer of the lease to Smith, and that the latter transaction was a sale with the consent of Guthrie, relieving him of any further liability under the lease. By way of counterclaim against Parker Buck and Guthrie, Enders alleged that they were guilty of fraud against him and sought recovery over if judgment was rendered against him in favor of the plaintiff. Enders also counterclaimed against Smith for judgment over by reason of the assignment and assumption agreement signed by Smith.

Answers by the named additional defendants were filed. The court found that the original transaction was a lease, that Enders had not been defrauded, and that the plaintiff had been damaged. The following finding of fact No. 15 on damages was entered by the court:

That the plaintiff has been damaged in the total amount of $6,350.40, less the amount of the payments on the contract of $4,233.60, leaving net damages in the sum of $2,116.80. That the gross amount of damages is computed as follows:

25% Of the total contract value of $22,579.20 for the first 12 months when the equipment was not in the possession of plaintiff and/or additional defendant, Guthrie Investments, Inc., and the additional amount of $705.60 which represents 25% Annual depreciation on the undepreciated balance for the additional two months when the equipment was not in the possession of plaintiff and/or Guthrie Investments, Inc.

Both the plaintiff and Enders have appealed. Although other parties were involved in the trial, we are only concerned with the respective contentions of Enders and the plaintiff.

We will consider first Enders' contention on cross-appeal that the agreement was in fact a conditional sale contract in the guise of a lease of personal property. Enders argues that the contract itself, except for its terminology, has all the provisions and earmarks of a conditional sale contract and that as a consequence of the plaintiff's repossession of the equipment upon a breach of the agreement it has elected its remedy and is precluded from recovery of any damages.

The agreement is entitled 'Lease of Personal Property.' It recites that the term of the lease shall be for 48 months and that the amount of each monthly payment shall be $489.22. No provision is made for a larger initial payment as is generally the case where a conditional sale contract is intended. The lessee has the right to renew for not more than two successive one-year terms. It recites that the '(l)essee hereby leases from lessor, and lessor leases to lessee, the personal property * * *.' Alterations, additions or improvement are not to be made without written consent of the lessor; at all times until redelivery of the leased property to the lessor, the lessee shall keep it free from liens. The instrument also specifically provides: 'Upon the expiration or earlier termination of this lease, lessee, at its expense, shall return the equipment in good repair, ordinary wear and tear resulting from proper use thereof alone excepted, by delivering it, packed and ready for shipment, to such place or carrier as lessor may specify.' The document contains no language concerning the passage of title at any time. It contains no option to purchase.

We have before us an unambiguous contract. In determining whether it is a conditional sale or a lease, the intention of the parties must govern and this in turn must be ascertained from the contract itself. Dixon v. Gustav, 51 Wash.2d 378, 318 P.2d 965 (1957). The court's role is not that of contract maker, it merely gives total effect to the bargained-for contractual relations. Crystal Recreation, Inc. v. Seattle Ass'n of Credit Men, 34 Wash.2d 553, 209 P.2d 358 (1949); Chaffee v. Chaffee, 19 Wash.2d 607, 145 P.2d 244 (1943); Peabody v. Star Sand Co., 186 Wash. 91, 56 P.2d 1018 (1936).

A conditional sale contract is defined as

(A) sale in which the transfer of the title to the buyer * * * is made dependent upon some condition. Usually the condition imposed is the payment of the purchase price, but, whatever may be its nature, to constitute a conditional sale there must be a contract between the parties by which the one party agrees to sell and the other party agrees to buy. * * * Inland Finance Co. v. Inland Motor Car Co., 125 Wash. 301, 305, 216 Pac. 14 (1923).

In the recent case of Heath Northwest, Inc. v. Peterson, 67 Wash.2d 582, 408 P.2d 896 (1965), this court held that a document having substantially the same characteristics which purported to lease to the defendant a custom-made electric sign, was in fact a lease and not a conditional sale contract. In that case, as in this, the lessee offered extrinsic evidence that he was entitled to acquire title to the leased property at the end of the term. We held that such evidence was barred by the parol evidence rule.

We find the agreement to be a lease. It has all the earmarks of a lease, especially the requirement that the lessor may require the return of the property, and it contains no option to purchase. We find nothing in the contract which suggests that it was intended to be anything other than what it purports to be on its face, i.e., an agreement for the 'Lease of Personal Property.'

The plaintiff's contention on appeal is that the trial court did not apply the measure of damages contained in the agreement entered into by Enders. The agreement contains the following damage clause:

In the event lessee defaults in the making of any rental payments when the same shall become due and payable or defaults in the performance of any other covenants of this lease, the lessor may at its option declare all rent for the entire term immediately due and payable and sue for the same if...