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IN RE KAMENS QUALITY MKTS.

DISTRICT COURT, E.D. PENNSYLVANIA


March 19, 1935

In re KAMENS QUALITY MARKETS, Inc.

The opinion of the court was delivered by: DICKINSON

DICKINSON, District Judge.

Sur Motion for Reargument.

Leave was given to file supplemental briefs, which have been received, and the cause ripe for a ruling.

 This discussion takes us to first principles. The controversy is over the ownership of an automobile sedan. We start with the fact that the receiver is in possession. Possession of a personal chattel is evidence of title and is prima facie ownership.The claimant must in consequence overcome this by proof of its title. At the former hearing it was without the support of any evidence of title. This has now been supplied by a stipulation that up to the time of the transaction next mentioned the title was in the claimant. The claimant parted with the possession. Under the rugged common-sense principles of what we know as the common law, one who has all the indicia of ownership of personal property may be dealt with as if he were the owner. The law of Pennsylvania, however, does not recognize the market overt doctrine. An owner out of possession may follow his property wherever found. The question however then becomes, not whether his title is good as against the person to whom he parted with the possession, but whether it is good against the person in possession. The distinction is vital. An owner, for illustration, may sell, delivering possession to the purchaser but retaining the title to secure the payment of the purchase money. He could enforce his title against his vendee but may not be able to enforce it against an execution creditor of his vendee. The latter is the question before us as presented by the receiver. The owner, on the other hand, may put out his property on hire giving to his bailee the possession and use of the property for a term without losing his right to reclaim it in whosever possession it may be. This is the case before us as presented by the claimant. Obviously the determining question is one of fact. Was the transaction a sale or a bailment? The vendor and vendee as between themselves may agree to call a sale a bailment and if they do as between them it is a bailment. Obviously again, however, they cannot as against others make a bailment of a sale by calling it such even if they put their say-so in writing and cast it in the form of a so-called lease. It is the overlooking of this distinction which has kept these "bailment lease" transactions in what is up to date and endless controversy. It is high time the law was settled.

 The very capable counsel for the claimant in an admirably developed argument has rested his cause on a number of earlier cases. There the question was discussed as one of the construction of the writing. In many of them, as in almost all transactions of the kind, there was beyond doubt a sale disguised as a bailment. The writing was attacked by picking flaws in it as, for instance, the absence of a covenant to return the property. The practical consequence was that every hole picked was covered up in the next writing which came before the Courts. The process was then repeated by finding new flaws which were in turn corrected. The only practical result was to lengthen the writing. Finally no further holes could be picked and the courts have met the question on the true basis of a fact finding. Was the transaction in fact a sale or a bailment?

 Here is another distinction often overlooked but enlightening. A writing may be interpreted to discover its meaning. It may also have in it what may be called internal evidence of a fact. The "rent" reserved, for illustration, might be inordinately high as compensation for the hire of the property and be so adjusted in respect to the term that when the total rental exactly equaled the sale price plus interest for deferred payments, the "rental" ceased and the bailee retained the property. Whether the "rental" was high or low would not affect the construction given to the contract, but the feature referred to would be strong evidence that the transaction was in truth a sale.

 The discussion in the cases of such features of the writing are really directed to the evidentiary value of this internal evidence but are often misread as interpretations of the contract. The owner of property which had a sales value of $1,000 and a rental value of $25 per month might make a "bailment lease" for a year at $100 per month with provision that when $300 had been paid the bailee need pay no more rent for the rest of the term. This would be construed as a bailment, but if the agreement was that when the bailee had paid $1,000, with interest on deferred payments, the rent should cease for all time and the bailee be given a bill of sale for a nominal sum for the property, there would be in this strong evidence that the transaction was in fact a sale. Any transaction may be in fact a sale and so found no matter in what form it may be cast. The point attempted to be made, as before stated, is that two persons may have a transaction evidenced by a writing which as between them will be construed as a "bailment lease," and yet the same transaction found in favor of an execution creditor to be in fact a sale and part of the evidence sustaining the finding be disclosed by the writing itself.

 The learned referee properly required the claimant to prove its title. This it attempted to do by proof that it had parted with possession under a "bailment lease" transaction.

 The referee has found as a fact that the transaction although cast in the form of a "bailment lese," and whether as between bailor and bailee such or not, was as against an execution creditor a sale transaction. He has vindicated his conclusions with a characteristically full and clear discussion which leaves nothing to be added.

 We are merely repeating ourselves, but it is evident from the additional briefs submitted that the view the referee has taken and which we have attempted to present has not been made clear to counsel for the claimant. This is doubtless due to the simplicity of the thought. It is so obviously true that its truth is overlooked. In the concrete it is this:

 A is in possession of property under a claim of ownership. B, who may or may not be the owner, seeks to reclaim the property as belonging to him. He submits a so called bailment lease from B to C. It is obvious this is no evidence as against A of title in B. There may be another type os case. B, admitted to have been the owner of property at the time of the bailment, makes one to A or to A's predecessor in title. The bailment is evidence of title against A.

 The case of Kinding v. Wertz (Pa. Super.) 176 A. 769, is of the latter type. In the first type it is not in point. There the action was based upon the title being in the claimant when the bailment lease was made. The question presented was one arising out of the contract of bailment. The controversy was between the parties to the bailment. As between them it is controlling and the question becomes wholly one of the construction of the writing. If, however, the rights of the person in possession rise higher than those of the bailee, the question is not one of the construction of the contract but whether the bailor has parted with his title. He has parted with it if he sold it. Whether he sold it is a fact. As between the bailor and bailee the writing controls, but as between the bailor and a third party the fact controls. The seller, as we have several times said, cannot change a sale into a bailment, as against a third party, by calling it a bailment or by entering into a bailment agreement with another. Whether it is a sale or bailment is a fact finding to be made under all the evidence. The question is not one of the construction of the agreement alone.

 The learned referee has made this distinction so clear that it would be a waste of words to dwell upon it. He has reached the fact conclusion that the transaction was a sale. With this finding we are in hearty accord. He has supported this finding with a discussion which is convincing, and to that we leave it.

 The order heretofore made dismissing the petition for review, etc., is confirmed and re-entered.

19350319

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