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CORN EXCHANGE NATIONAL BANK AND TRUST COMPANY v. BURKHART (12/01/60)

December 1, 1960

CORN EXCHANGE NATIONAL BANK AND TRUST COMPANY
v.
BURKHART, APPELLANT.



Appeal, No. 38, March T., 1960, from judgment of Court of Common Pleas of Cambria County, June T., 1954, No. 694, in case of Corn Exchange National Bank and Trust Company, now Girard Trust Corn Exchange Bank, v. Roy C. Burkhart. Judgment reversed.

COUNSEL

Clarence E. Davis, with him Davis and Davis, for appellant.

Morton Meyers, with him W. Louis Coppersmith, for appellee.

Before Jones, C.j., Bell, Musmanno, Jones, Cohen and Eagen, JJ.

Author: Jones

[ 401 Pa. Page 537]

OPINION BY MR. CHIEF JUSTICE JONES

The defendant appeals from a judgment for the plaintiff bank in the sum of $112,498.10 entered by the court below following a trial without a jury. The action was in assumpsit for the recovery of damages for the defendant's alleged breach of warranty of title as the lessor in two certain bailment leases which, simultaneously with their execution, were assigned by the defendant to the plaintiff bank.

The appellant's principal assignment of error is the trial court's rejection of the defendant's offer to prove that the bank knew at the time it took the lease assignments that the defendant was not the real owner of the machinery covered thereby, but that the lessee was, and that the fictional lessor-lessee relationship adopted for the transaction was at the instance of the bank in

[ 401 Pa. Page 538]

    order that it could discount the leases and thus receive a return on loans, which the bank was to make for the benefit of the actual owner (viz., the putative lessee of the machinery), which would be twice the legal interest rate that could be charged if the loans were made direct to the actual owner and secured directly by his chattel mortgage.

The complaint, which was filed in the court below on August 11, 1954, alleges that on May 11, 1948, the defendant Burkhart executed a bailment lease agreement with one Jesse M. Lingenfelter under which Burkhart leased to Lingenfelter four heavy mining shovels for a down payment of $24,600 and payment, thereafter, of monthly installments of $6,866.67 each until the full purchase price of $65,800 was paid; that the $24,600 down payment stipulated by the lease was never paid to Burkhart by Lingenfelter; that by a writing of the same date Burkhart assigned the bailment lease to the bank for a consideration of $40,000; that the assignment contained an express warranty of title to the shovels in Burkhart; that Burkhart did not, in fact, have title to the shovels; that the bank purchased the bailment lease from Burkhart in good faith and without knowledge of any defect in Burkhart's title; that Lingenfelter, after making four monthly installment payments, defaulted leaving a balance due of $13,733.32; that the bank repossessed two of the shovels from Lingenfelter and sold them for $4,000, crediting that amount to the balance owed by Lingenfelter under the lease; that the two remaining shovels were worth more than the balance owing on the lease but that the bank had been unable to obtain possession of them; and that the bank was therefore damaged in the amount of $9,733.32, owing by Lingenfelter under the lease, for which sum with interest the bank claimed of the defendant Burkhart.

[ 401 Pa. Page 539]

The complaint further alleges that on August 17, 1948, the defendant Burkhart executed a second bailment lease agreement with Lingenfelter under which Burkhart leased to Lingenfelter three heavy mining shovels for a down payment of $9,500 and payment thereafter of monthly installments of $10,300 each until the full purchase price of $71,300 was paid; that the $9,500 down payment stipulated by the lease was never paid to Burkhart by Lingenfelter; that by a writing of the same date Burkhart assigned the bailment lease to the bank for a consideration of $60,000; that the assignment contained an express warranty of title to the shovels in Burkhart; that Burkhart did not, in fact, have title to the shovels; that the bank purchased the bailment lease from Burkhart in good faith and without knowledge of any defect in Burkhart's title; that Lingenfelter defaulted and made no payments to the bank under the lease; that the shovels were worth more than $60,000 but that the bank had been unable to obtain possession of them; and that the bank had been damaged in the sum of $60,000, being the amount which it had paid for the bailment lease, for which sum, with interest, the bank claimed of the defendant Burkhart.

The defendant's answer admitted his execution of the bailment agreement with Lingenfelter on May 11, 1948, and his assignment of it on the same date to the plaintiff bank. The answer also admitted that Burkhart did not own the shovels described in the bailment lease and alleged that the lease was a fictitious arrangement in that Lingenfelter, the putative lessee, was and had been the actual owner of the shovels and that the plaintiff bank knew this all along. Burkhart further alleged that Lingenfelter ...


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