Summers v. Carbondale Machine Company

• Decision Date: 11 January 1915
• Docket Number: 115
• Parties: SUMMERS, RECEIVER, v. CARBONDALE MACHINE COMPANY
• Court: Arkansas Supreme Court

173 S.W. 194

116 Ark. 246

SUMMERS, RECEIVER, v. CARBONDALE MACHINE COMPANY

No. 115

Supreme Court of Arkansas

January 11, 1915

Appeal from Woodruff Chancery Court, Northern District; Edward D Robertson, Chancellor; affirmed.

STATEMENT BY THE COURT.

U. S Bratton operated an ice plant at Augusta under the name of the Arkansas Public Service Company, and a creditor sued and recovered judgment against him, and at the instance of this creditor a receiver was appointed for the concern, who took charge of its assets, including the machinery used in making ice. Appellee filed an intervention in that suit, in which it claimed title to this machinery, under a reservation of title clause in the contract of sale. The contract price of this machinery was $ 4,500.00, and the court found that payments had been made which reduced this indebtedness to the sum of $ 3,345.00, and that Bratton had an equity in this property to the extent of his payments, and that equity was ordered sold after the court had decreed that the title to the property had never passed from appellee. All of the creditors of this public service company resisted appellee's intervention and have appealed from the decree of the court.

The contract of sale was a lengthy one and contained the following stipulation:

"The machinery and apparatus herein contracted for shall remain personal property and the title, ownership and right of possession to the same shall remain in us until full and final payment therefor, and of all notes, if any, shall have been made in cash.

"This proposal shall become a contract when accepted by you and approved in writing by the president and secretary of the Carbondale Machine Company, at its home office in the city of Carbondale, State of Pennsylvania."

It is urged, because of this stipulation, that the contract of sale is a Pennsylvania contract and should be construed according to the laws of that State and that, if so construed, this reservation of title in invalid, because the laws of Pennsylvania provide that a contract retaining title is void as against creditors.

It is further contended that the machinery was not sold and delivered in accordance with the provisions of this written contract of sale, but that, upon the contrary, the terms and manner of payment were changed and this written contract thereby annulled, and that, therefore, there was no reservation of title. Under the terms of this written contract payments were to be made as follows: One-fourth cash upon shipment; one-fourth cash when the plant was ready to be charged with ammonia, after its installation; and the balance in two equal notes, bearing interest at 6 per cent., to be dated when the plant was ready to be charged with ammonia and maturing at 60 and 120 days from date.

It was contemplated that the machinery should be shipped immediately after the approval of the order, but the shipment was delayed so that the machinery was not installed until August 25, and during this time a controversy over this delay was pending between Bratton and appellee. The contract of sale provided that Bratton was to deduct all freight charges and the expenses of erecting the plant from his last payment, and it was further provided therein that, upon the installation of the plant, Bratton was to give appellee an acceptance in writing showing an adjustment of any outstanding matters of dispute. This acceptance was made necessary by the following clause in the contract: "We agree and guarantee to construct the plant in all its parts in a thorough and workmanlike manner, using the best materials of their several kinds, and to deliver the plant to you upon completion." This acceptance in writing was to be given to show compliance with the conditions of the contract. This contract further provided that this machinery should be delivered f. o. b. cars Augusta, Arkansas.

Litigation over the delay in shipping the machinery was threatened, but a settlement was made by the terms of which Bratton paid a fourth of the purchase money in cash, and executed notes for the balance, but deducted from the second note, instead of the last, the amount of the freight and installation costs. These notes were not paid when due, and an extension of time was given for payment, and it is insisted that this extension of time, together with the changes in the terms of sale operated to waive the reservation of title.

The contract of sale was approved by appellee on June 5, 1913, on which date Bratton was notified that "We will ship immediately upon receipt of the signed contract which we are sending you today, or upon word from you that the same has been properly signed and mailed." Bratton executed the contract of sale in duplicate and returned the original to appellee.

Decree affirmed.

Manning, Emerson & Morris, for appellants.

1. The contract was made under the laws of the State of Pennsylvania. 20 F. 357; 68 F. 467; 44 Ark. 230; 110 Ark. 123.

2. The law of Pennsylvania provides that a contract retaining title is void as against creditors. 87 F. 976; 134 F. 924, 927; 139 F. 52; 166 Pa. 217; 31. A. 102, 105, 107; 64 Pa.St. 499; 92 Id. 53; 95 Id. 508; 108 Id. 481.

3. Under the rules of private international law a contract is construed according to the law of the State where it is made. 13 Mass. 1; 7 Am. Dec.. 106, 108-9. Under the principle announced in the case just cited, when the contract was entered into, the parties must be presumed to have contracted with the laws of Pennsylvania in mind, and the appellee must be presumed to have known that its contract retaining title was of no effect as against creditors of the purchaser.

In considering this question, the substantive law is not to be confused with mere rules of procedure, for, though the law of the State where the contract is made, the lex loci, governs as to its nature, interpretation and construction, it is clear that the law of the State where the action is brought, the lex fori, governs in all matters of mere procedure. 2 Mass. 84; 3 Am. Dec. 35-7; 91 U.S. 406; 23 Law Ed. 245; 44 Ark. 213; Id. 230-34; 4 Ark. 76; 46 Ark. 50, 66; 14 Ark. 610; 22 Ark. 125; 35 Ark. 261; 61 Ark. 1, 5; 70 Ark. 493; 107 Ark. 70, 73.

Creditors, pro se, and Elmo CarlLee for Bratton.

1. It is undisputed that Bratton from the first emphasized the fact that he must have the machinery by June 1; that on May 9 he advised appellee that time was of the essence of the contract, and that shipment was guaranteed in thirty days. Bratton's testimony further shows that his loss was at least $ 1,500.00 by reason of the delay in shipment of the machinery. He undoubtedly had a valid claim against appellee for damages. This claim was taken up with appellee's representative, and after certain negotiations an entirely new contract was made, Bratton waiving his claim for damages. No title was attempted to be retained in the new contract. Plain notes of hand were accepted for the amount due for the settlement, and in that manner the matter was closed up. Novation may be accomplished either by express or implied agreement, and the court erred in not holding that there was a new contract. 97 P. 438; 75 A. 920; 7 Ky. Law Rep. 358.

2. As to the rights of creditors and the effect of the attempt to retain title in the original contract under the laws of Pennsylvania, see argument on behalf of the receiver and Smith.

Harry M. Woods, for appellee.

In reply to the brief for Bratton and the creditors: (1) Bratton is contradicted by both witnesses, Holcomb and Roe. (2) He is contradicted by the contract and notes in existence, and by the fact that there is no change in the contract, except a minor one, which constitutes neither a deduction in price, interest or terms. (3) Bratton's letter of April 4, 1914, shows he recognized the possession in appellee under the written contract.

The deduction of the freight from the second note instead...