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IN RE REDMOND

August 21, 1936

In re REDMOND


The opinion of the court was delivered by: MARIS

The Philadelphia National Bank, as assignee, filed a claim against the bankrupt for rental alleged to be due under a bailment lease of a printing press prior to the institution of replevin proceedings under which the press was repossessed by the bank. The amount then due was $1,475, and after crediting a payment on account and adding interest it came to $1,502.74. In opposition to this claim it was shown by the trustee that in the replevin suit, after the bankrupt had filed an affidavit of defense, an agreement of settlement was entered into under which a verdict in the suit in the sum of $572.76 was to be taken, which sum was to be in full settlement of all claims under the lease, that a verdict in this sum was actually taken, and that of this amount the bankrupt actually paid $425, leaving a balance of $147.75 due. Trustee's contention was that this amount only was provable by the bank as a claim against the bankrupt estate. The referee so held and the bank has brought the matter to us for review.

The referee did not decide the effect of the agreement of settlement, but based his decision upon the proposition that the bailment lease involved was in reality an agreement of conditional sale, and since it was not filed as required by the Pennsylvania Conditional Sales Act (69 P.S.Pa. § 361 et seq.) it was invalid as against the trustee in bankruptcy and, therefore, could not support the claim of the bank for payments due by the bankrupt thereunder.

 With this view we disagree. In our opinion the bailment lease in this case met the tests laid down by the law of Pennsylvania and must be held to be what it purported to be, namely a bailment lease of the printing press with an option to the bailee to purchase the same at the expiration of its term. Such agreements are undoubtedly valid and enforceable in accordance with their terms. B.F. Hoffman, Inc. v. Richman (C.C.A.) 75 F.2d 823; General Motors Acceptance Corp. v. Horton, 85 F.2d 452, decided by the Circuit Court of Appeals for the Third Circuit, August 6, 1936. However, whether the contract was one of bailment lease or conditional sale seems to us to be immaterial, since the question here was not whether the title of the bailor (or vendor), to the chattels involved was void against levying creditors or the bankruptcy trustee of the bailee. His title had been established by a replevin action more than four months before these proceedings were instituted and was not in question. The question here is whether the sums due under the agreement, whatever its nature, by the bankrupt to the bank at the time the press was repossessed by the latter constitute a valid indebtedness which may be the subject of a claim in bankruptcy. This question depends, as we see it, on whether the contract itself was a valid agreement between the parties, and of this there could be no question. Consequently the amount claimed by the bank thereunder may be proved against the bankrupt estate unless the agreement between the parties in settlement of the replevin constitutes a valid accord and satisfaction barring it.

 This brings us to the consideration of the agreement dated November 17, 1933, between the parties in settlement of the replevin action. It was in terms as follows:

 "Memorandum of agreement, made and concluded this seventeenth day of November, A.D. 1933, between Frederick H. Spotts, attorney for above named Philadelphia National Bank, use plaintiff, and Charles C. Gartling, attorney for above named defendant, Witnesseth:

 "That it is hereby mutually agreed that the Court of Common Pleas No. 2 is to be requested to direct a verdict in the above entitled proceedings in favor of plaintiff and damages to be awarded in the sum of $572.75, when the case is called for trial on Friday, October 17, 1933, in Room 253 City Hall.

 "That judgment is not to be entered upon said verdict unless and until defendant defaults in the payment of the amount of said verdict, $572.75, as follows:

 $150.00 on or before November 29, 1933, $150.00 on or before December 29, 1933, $150.00 on or before January 29, 1934, $122.75 on or before March 1, 1934.

 "Provided that when the full payment of the said amount of $572.75 has been paid by defendant, then judgment is to be taken upon said verdict and the said judgment is to be taken upon said verdict and the said judgment satisfied forthwith by said Frederick H. Spotts, attorney as aforesaid.

 "That in case of default in any of the payments as above mentioned, the said use-plaintiff shall have the option to take judgment upon said verdict and issue execution thereon, notwithstanding anything in this agreement to the contrary.

 "It is further understood that when said payment of $572.75 has been made as aforesaid, that in addition to satisfying the judgment to be taken upon said verdict, as aforesaid, said use-plaintiff will return, marked cancelled, the unpaid remaining notes given and executed by the defendant on account of the payments to be made in accordance with the agreement made with the Miller Printing Machinery Co., as follows:

 Note for $6250.00, due June 16, 1932, together with the other notes given by defendant to use-plaintiff or its assignors, and ...


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