Opinion
No. 85.
December 10, 1928.
Appeal from the District Court of the United States for the Eastern District of New York.
In the matter of the Armour Ash Can Manufacturing Company, Incorporated, bankrupt. Petition by Arthur Blank and another against John H. Gamaldi, trustee, for the recovery of moneys in trustee's hands resulting from the sale of property belonging to the petitioners. From an order dismissing the petition, petitioners appeal. Reversed and remanded, with directions.
The bankrupt, a company engaged in the manufacture of metal products, on March 1, 1926, entered into a contract with the petitioners, Blank and Bloom, by which it agreed to make 25,000 ironing boards at $2.75 apiece. These consisted of metal stands with wooden tops affixed; Blank and Bloom were to furnish the wooden tops, and the bankrupt to fabricate the metal stands and make them into boards by fitting the tops upon them. When completed, the bankrupt was to wrap the boards in waxed paper and to deliver them at the buyers' warehouse at the rate of 1,000 per month after May 15th; payment 10 days after delivery, less 2 per cent. discount. Difficulties arose in the delivery of the tops, and the bankrupt brought suit upon the contract, to which the buyers filed a counterclaim. This action was discontinued on April 1, 1927, by virtue of a new contract under which the bankrupt, as full performance, agreed to make and deliver, before August 1, 1927, at the old price, some 8,500 more boards than had then been delivered, and the buyers agreed to deliver the wooden tops as before, but, if they failed, the bankrupt might deliver the untopped stands, when complete, at a reduction of 5 cents from the price.
Deliveries were made under the amended contract for about two months, but by the end of May the buyers again fell into arrears in the delivery of tops. The bankrupt, having completed a number of stands, thereupon demanded payment and threatened suit. The buyers, finding it inconvenient to accept delivery of untopped, though completed stands, paid the bankrupt a sum in advance of delivery, calculated upon the number of stands in the bankrupt's factory as ascertained by their foreman. Whether there were then more stands than the advance would cover at the contract price does not appear, but the check was for the round sum of $1,000. This transaction was repeated a number of times in June and July, and until the bankruptcy in August. The bankrupt continued to deliver boards, to make stands, and to receive advances similarly calculated as they needed funds. At the time of petition filed the buyers had a credit for undelivered stands of $3,800, and there were 1,204 completed stands in the bankrupt's factory, awaiting delivery until the tops should arrive. This balance thus represented full payment for all completed stands then on hand and a shortage of about 200, whose disappearance is not accounted for.
After the bankruptcy, the 1,204 stands on hand were by consent of the buyers and the receiver sold at auction for $1,626, and the proceeds set apart to await the determination of a claim to be filed. Besides these, 552 other stands were sold as a separate parcel for $552, of which the petitioners now claim that they had delivered 250 to the bankrupt, to be repainted under a provision of the contract not recited above. As to these the issue was whether 250 stands, admittedly delivered to the bankrupt for that purpose, had been redelivered by the receiver, or whether they still remained at the time of sale. The auctioneer testified that he had returned all boards which he did not sell, and that he withdrew from sale all which had wooden tops. When they appeared at the factory after the bankruptcy, the buyers made no claim to any of the 552 boards later sold, but they testified that they had never received those in question.
After the sale the buyers filed the petition in suit against the trustee, demanding the proceeds of the sale of the 1,204 stands, title to which they asserted had passed to them by their payments, and also the proceeds of 250 of the 552 stands of the separate lot. The trustee answered, and the court referred the issues to a special master, who reported in favor of the trustee. The court confirmed the report and dismissed the petition, on the ground that title to the manufactured stands was not to pass until delivery, and that the proof did not show that any of the 552 stands had come from the petitioners. From this order the petitioners appealed.
Joseph Krinsky and Morris Ehrlich, both of New York City, for appellants.
Joffe Joffe, of New York City (Louis Joffe and Joseph A. Sarafite, both of New York City, of counsel), for appellee.
Before MANTON, L. HAND, and AUGUSTUS N. HAND, Circuit Judges.
We see no reason to disturb the finding below that the 250 boards delivered to the bankrupt for repainting were not among those sold in the lot of 552. Their original delivery to the bankrupt, no doubt, put the burden of proof upon the trustee to show that they were not among the lesser lot; but there was such evidence, and the special master and District Judge believed it. While on this appeal the case is open, we cannot undertake to review such a finding, made by the tribunal of first instance.
The case stands otherwise in respect of the 1,204 stands completed by the bankrupt and covered by advances of the buyers, as to which the facts are not disputed and the question is one of law. It is no doubt true that under the contract, both as originally drawn and as modified, the presumption is that title was not to pass until delivery at the buyers' warehouse. New York Personal Property Law (Consol. Laws, c. 41) § 100, rule 5; Birdsong v. Jordan, 297 F. 742 (C.C.A. 2); Bready v. Wechsler Co., 200 App. Div. 78, 192 N.Y.S. 660, aff'd 235 N.Y. 539, 139 N.E. 726; Kahn v. Rosenstiel (D.C.) 298 F. 656. Whether the further fact that they had not also been wrapped in waxed paper would alone effect the same result under section 100, rule 4(1), we need not consider.
However, the conduct of the parties during May, June, and July cannot be ignored, if it showed an intention to excuse these conditions and to effect an immediate passage of title, notwithstanding their nonperformance. We think that it did. By the modification of the contract the seller had the right to deliver the stands without tops, if the buyers failed to furnish them. The buyers did fail, and the seller demanded his money, saying that he could no longer hold the stands, as his expenses were running on. Strictly, he was obliged to deliver them as they were before his right became absolute, but the buyers did not insist upon this, not wishing to be burdened with the custody of the stands until they had the tops to make them into boards. Had they paid the contract price, less 5 cents per board, upon all the stands then completed, we do not see how the transaction could have been viewed in any other light than as excusing delivery and passing title.
However, the proof does not show that the payments ever covered all the completed stands, and this is the strongest support for the trustee's position. It is hardly likely that the seller meant to part with title to all stands upon part payment; and perhaps the purpose was not to pass title only to so many as each payment might cover, leaving the rest unaffected, though it is entirely possible that it was. Be this as it may, at bankruptcy the payments had come to cover all the stands which remained, and indeed 200 more. However this arrived, the result could only be to create a situation precisely the same as though the payments had always covered the full contract price for all stands completed when they were made. Certainly we must suppose that the bankrupt assumed that what stands remained were allocable to the unpaid balance, and, since these were not enough to satisfy that balance, it no longer made a difference how the payments had originally been intended. The stands were then, at any rate, no longer merely security; the buyers had as full property in them as it was possible to have, and the seller could not honestly claim any further interest in them; he could not repay the advances and reclaim the goods — a right necessarily his if the transaction was a loan.
Hence we think it irrelevant whether the payments, when made, always paid in full the contract price upon all the stands on hand, or the effect of the word "advance," written upon the checks. The only just pattern which the facts will bear at the time of petition filed is that of a change of title, and it is this which we mean when we speak of the intention of the parties.
Order reversed, and cause remanded, with directions to allow a recovery of $1,626.