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Congress Financial Corp. v. Sterling-Coin OP Machinery Corp.

decided: February 2, 1972.


Seitz, Chief Judge, Kalodner and Gibbons, Circuit Judges. Seitz, Chief Judge (concurring). Kalodner, Circuit Judge (concurring).

Author: Gibbons


GIBBONS, Circuit Judge.

The defendant-appellants, Sterling-Coin Op Machinery Corporation, Sterling Equipment Corporation and Sterling Supply Corporation appeal from a judgment in the sum of $16,273.03*fn1 entered in favor of plaintiff-appellee, Congress Financial Corporation after a non-jury trial. Sterling-Coin Op Machinery Corporation is in the business of selling coin-operated dry cleaning equipment. Congress Financial Corporation (Congress), a finance company, loans money on the security of installment paper. In 1962 Sterling-Coin Op Machinery Corporation entered into a financing contract with Congress. Sterling Equipment Corporation and Sterling Supply Corporation each unconditionally guaranteed the obligations of Sterling-Coin Op Machinery Corporation to Congress, and for purposes of this opinion the defendants will be referred to collectively as Sterling.

In October 1962 Sterling sold certain dry cleaning equipment to Marguerite Mueller and her husband Frederick Mueller for $28,051.33. Simultaneously with their execution of the conditional sale contract the Muellers executed a judgment note for $28,051.33 payable to Sterling's order. The note contained a clause authorizing any attorney to confess judgment against them upon default for any unpaid balance.

In the general financing agreement between Congress and Sterling, Sterling undertook to repurchase on demand any installment paper sold to Congress upon which a default should occur. The Mueller conditional sale contract and judgment note were assigned to Congress by a separate written assignment, which in relevant part said:

". . . [Sterling] warrants the payment when due of each sum payable thereunder and the payment on demand of the entire unpaid balance in the event of non-payment by the buyer of any monthly sum at its due date, or of any other default by the buyer without first requiring assignee to proceed against said buyer.

[Sterling] warrants compliance with all filing and recording requirements, hereby agreeing that any filing or recording or renewals thereof which [Congress] may undertake at [Sterling's] request, or otherwise, shall be at [Sterling's] expense and without responsibility whatsoever on [Congress'] part for any omission or invalid accomplishment thereof, whether through [Congress'] failure, neglect, or for any reason, and such omission or invalid accomplishment shall not relieve [Sterling] of any responsibility to [Congress].

The assignment shall be construed under the laws of the State of New York and none of the terms shall be modified except by a writing signed by an officer of assignee and notice of the acceptance thereof is hereby waived."

The district court found that the quoted language of the assignment was intended by the parties to apply both to the conditional sale contract and to the judgment note. In a transmittal letter accompanying the assignment, conditional sale contract and judgment note, Sterling wrote:

"We are enclosing the Conditional Sale Contract on Bankers Commercial forms, covering a sale to Marguerite M. Mueller. Her husband has signed the guarantee on the back of Page 1.

You will also find enclosed a Judgment Note, endorsed to your order, with our recourse, signed by both husband and wife, which we ask you to record in the proper county, and send us the notice of recording."

At the time they executed the judgment note in October of 1962 the Muellers owned certain real estate in Allegheny County, Pennsylvania. In March of 1963 they defaulted on the note. In December of 1963 they made a conveyance of the Allegheny County real estate. Congress did not record the judgment note in Allegheny County until September, 1964, when it entered judgment against the Muellers in that county for $21,870.39.

Congress and Sterling pursued the Muellers and the transferee of the real estate. Eventually they agreed to a settlement with the Muellers whereby the latter paid $6,500 in cash and returned the equipment to Congress in exchange for a satisfaction of judgment and a release. Congress and Sterling agreed that the settlement was without prejudice to the rights and liabilities of either against the other. The $6,500 payment together with other ...

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