Oberan v. Western Machinery Co.

• Decision Date: 25 November 1946
• Docket Number: 4856
• Citation: 65 Ariz. 103,174 P.2d 745
• Parties: OBERAN v. WESTERN MACHINERY CO.
• Court: Arizona Supreme Court

174 P.2d 745

65 Ariz. 103

OBERAN v. WESTERN MACHINERY CO.

No. 4856

Supreme Court of Arizona

November 25, 1946

Appeal from Superior Court, Maricopa County; James A. Walsh, Judge.

Affirmed.

Woolf &amp Shute, of Phoenix, for appellant.

Jennings Salmon & Trask, of Phoenix, for appellee.

LaPrade Judge. Stanford, C. J., and Morgan, J., concurring.

OPINION

LaPrade, Judge.

This action was commenced by complaint filed by appellee Western Machinery Company against appellant N. S. Oberan to recover unpaid rentals on a compressor which appellee alleged it rented to Mr. Oberan. To that complaint defendant Oberan filed an answer denying indebtedness. By a counterclaim he alleged that the agreement between the parties was a contract of conditional sale, whereby plaintiff sold the compressor to Oberan, and that he had completely paid for it. The counterclaim continues to allege that thereafter plaintiff wrongly took the compressor from Oberan, to his damage. To this counterclaim plaintiff responded by answer denying the allegation that the transaction between the parties amounted to a conditional sale. Plaintiff attached to its answer to the counterclaim copies of the two written instruments which embodied the agreement between the parties and which appellee contends defines the relation between them.

On January 9, 1943, plaintiff entered into a formal written contract with N. S. Oberan for the rental of a compressor. This agreement is designated "Rental Agreement"; the parties are described as "Lessor" and "Lessee"; with rental to be paid at the rate of $ 95 per month. Subsequently and on April 10, 1943, the same parties entered into a new written rental agreement extending to lessee an option to purchase the compressor. This agreement, except for the option agreement, is identical with the earlier agreement which it supplanted. The option provision is as follows: "Lessee is hereby granted an option (at any time within 510 days hereafter) to purchase the above described personal property for the sum of $ 1224.50, plus sales tax, and to have applied on account of said purchase price 75% of all subsequent rentals payable to Lessor pursuant to this agreement, up to the time such option is exercised by written notice to that effect, which shall be given by Lessee to Lessor; it being understood, however, that Lessee forfeits all of his rights under this option if any of the rental payments are not made as herein provided. Payment of the balance of purchase price must be made in cash at the time option is exercised. The exercise of this option by Lessee is further subject to the receipt, by Lessor, from Lessee, of a priority rating covering said equipment and satisfactory to Lessor." The complaint was based on the second rental agreement.

Defendant in his cross-complaint alleged that at the time of the first agreement he leased the compressor for a period of three months at $ 95 per month with an oral understanding that should he desire to buy the compressor at an agreed purchase price of $ 1462 at the end of the 90 day period the rental theretofore paid would be applied on the purchase price. He also alleged that at the date of the second agreement he notified plaintiff of his desire to buy the compressor in accordance with the first understanding and agreement, and that in accordance with the alleged understanding plaintiff prepared the written contract sued on, representing to defendant that it was a conditional sales contract whereby the property would vest in the lessee when he had paid a price that was therein agreed upon of $ 1,282.50, to be paid at the rate of $ 95 per month, 75% of which was to apply on the purchase price and 25% of which was to be retained by the seller as a carrying charge. His pleading, in effect, was that if given credit for 75% of the payments that he had made the purchase price would be discharged, and that he was the owner of the compressor.

Defendant in his answer and cross-complaint did not allege fraud or mistake, or that the contract was subterfuge, camouflage, or a screen to cover up an oral understanding that was in truth and fact the real agreement. He did not ask to have the contract re-formed. The trial court sustained objections to his tender of proof in support of his allegations that there was an oral understanding that he could purchase the compressor for $ 1,462 and have applied thereon the first three months' rental. The court also sustained objections to his tender of proof that the second agreement was to carry out the terms of the first contract with the exception that the credit to be allowed was 75% of the rentals paid. The objection to the testimony was upon the ground that the contracts were in writing and that no testimony concerning verbal arrangements or agreements antedating their execution was admissible for the purpose of altering the terms of the agreement. With this objection the court agreed and so ruled.

Pursuant to the agreement, Oberan obtained the compressor. He fell behind in the rental, and many letters, telegrams, and telephone calls were directed to him, calling his attention to the arrears and requesting payment. Payment not being made, plaintiff repossessed the machine. At that time there was a total of five months' rentals unpaid and one-third of an additional month. The only conflict in the evidence as to the amount due and owing was created by the testimony of Oberan, who claims to have made one more payment than plaintiff had given him credit for. Plaintiff moved for a directed verdict upon the amount which Oberan acknowledged remained unpaid. The motion was granted, a verdict ordered, and judgment entered thereon.

Appellant assigns as error (1) the ruling of the court in refusing to hear the offered testimony which he contends would have shown that the transaction involved amounted to a conditional sale of the property, (2) that the court erred in taking the case from the jury because the second agreement was a mere continuation of the agreement existing between the parties on January 10 "embodying the oral agreement and the written lease and constituting only a written continuing offer of sale in place of the oral and written agreement already existing," (3) that the court erred in taking the case from the jury for the reason that the evidence showed that the appellant had completed the purchase price. In support of these assignments, appellant offers two propositions of law; (1) that the transaction amounted to a conditional sale, (2) that if the transaction was not a conditional sale but an option to buy, appellant has paid the purchase price for the property and is the owner thereof.

It is the contention of appellant that the contract sued on had its origin in the first lease -- a contemporaneous, continuing, oral agreement -- and that the real contract is to be isolated and discovered by taking some of the terms of the second contract, as varied by the first alleged oral understanding. In considering such a fact situation as he views it, he says: "The law in such cases pays little heed to the label, but should look beneath and examine the nature of the transaction between the parties, and look through the screen of paper title to ascertain what was the true situation." Citing Thompkins v. Harrisburg Auction House, 3 Cir., 63 F.2d 485; Hamilton v. Highlands, 144 N.C. 279, 56 S.E. 929, 12 Ann.Cas. 876; Bellish v. C. I. T. Corp., 142 Ohio St. 36, 50 N.E.2d 147; Decker v. Williams, 130 Pa.Super. 100, 196 A. 910; Western Machinery Co. v. Graetz, 42 Cal.App.2d 296, 108 P.2d 711.

As we have already pointed out defendant in his...