Cummings-Landau Laundry MacHinery Co., Inc. v. Alderman

HARLAN, Circuit Judge.

The question before us is whether the District Court properly refused reclamation of certain laundry machinery sold by petitioner to the bankrupt under two written conditional sales contracts, entered into on August 19 and September 18, 1952, respectively, under each of which there was a due and unpaid balance. The District Court, confirming the Referee in Bankruptcy, denied reclamation on the ground that both contracts failed to satisfy the requirements of Section 6692, Conn.Gen.Stats., and hence were invalid as to the Trustee in Bankruptcy under Section 6694 of those Statutes. Unreported Memorandum of Judge Hincks, Nov. 5, 1953, D.C.Conn., Bankruptcy, No. 25455.

The purchase price of the machinery sold under the first contract was $1,815, of which $815 was payable with the placing of the order, and the balance in ten equal, “monthly installments” evidenced by a series of notes of $100 each, the first note to mature “30 days after delivery” of the machinery. The second contract called for a purchase price of $1,000, of which $300 was payable with the order, and the balance in seven “monthly installments,” evidenced by seven $100 notes, the first note maturing August 1, 1953.

Section 6692, Conn.Gen.Stats., provides that “all contracts for the sale of personal property [with certain exceptions not material here], conditioned that the title thereto shall remain in the vendor after delivery, shall be in writing, describing the property, and all conditions of such sale, and shall be acknowledged before some competent authority and filed within a reasonable time in the town clerk’s office in the town where the vendee resides * * *.” (Italics supplied.) Section 6694 makes all conditional sales not complying with Section 6692 “absolute sales except as between the vendor and the vendee and their personal representatives * *

Each of the contracts here in question was in writing and was duly acknowledged and filed as required by Section 6692. However, the District Court considered that neither contract satisfied the requirement that “all conditions of such sale” be described. As to the first contract, the Court held that the provision that “the balance of $1,-000.00 shall be paid in monthly installments as follows: 10 equal notes of $100.00 each * * * The first note to mature: 30 days after delivery,” was an insufficient description of the maturity dates of either the first or succeeding installment notes. As to the second contract, the Court held that Section 6692 had not been satisfied in that (1) the $300 payable with the order had not in fact been paid, and (2) the provision that “the balance of $700 shall be paid in monthly installments as follows: 7 notes each in the sum of $100.00 * * * The first note to mature: August 1,1953,” was inadequate to describe the maturity dates of the succeeding notes.

In determining the sufficiency of these two contracts under Section 6692 we recognize both that we must follow the decisions of the Connecticut Courts relating to that Statute, and that those decisions have construed the Statute strictly. Also it may be granted that a contract may be enforceable as between the contracting parties, but nonetheless invalid as against third parties because its terms are not sufficiently definite to effectuate the purpose of Section 6692. See Rhode Island Hospital Nat. Bank of Providence v. Larson, 1951, 137 Conn. 541, 79 A.2d 182, 183-184; cf. Refrigeration Discount Corp. v. Chronis, 1933, 117 Conn. 457, 168 A. 783. Nevertheless, giving full play to these considerations, a majority of us find ourselves unable to agree with the District Court’s conclusions.

There is no dispute that the contracts as filed expressed the entire agreement of the contracting parties. In this respect the present case differs from Rhode Island Hospital Nat. Bank of Providence v. Larson, supra, and C. I. T. Corp. v. Meyers, 1942, 129 Conn. 514, 29 A.2d 758, by which the District Court considered itself bound. In each of those cases; the Supreme Court of Errors of Connecticut found that the contract as filed! did not express the full agreement of' the parties. And so the contracts could: hardly be considered as meeting the requirement of Section 6692 that such, contracts “shall be in writing, describing * * * all conditions of such sale * * # »»

The first contract here involved provides that the initial installment note is payable “30 days after delivery” of the machinery. This provision is not an uncommon one in transactions of this kind where it is often impossible to fix in advance the exact date-of delivery. The provision is adequate-to enable interested third parties to ascertain whether and when delivery has. been made, and thereby to fix the maturity date of the first installment note-As such, we think it satisfies the requirements of Section 6692. Matter of Peter Karjanes, Unreported, D.C.Conn., Bankruptcy No. 21372, Judge Smith (1942) cf. Premium Commercial Corp. v. Kasprzycki, 1942, 129 Conn. 446, 29 A.2d. 610, 611, where the Supreme Court of Errors upheld a conditional sales contract, as against third parties, which “recited that the down payment on the purchase price was $1,000, leaving a balance of $3,603.81 which was to be paid! in seventeen, monthly payments of approximately $200 each,” although the-sufficiency of this provision does not. seem to have come in question.

We also think that the language iit both contracts calling for payment of the deferred balance in equal “monthly installments” of $100 each, taken in connection with the provision that the initial installment was payable “30 days, after delivery” (first contract) or on. “August 1, 1953” (second contract), was-a sufficient description of the maturity-date of each of the notes succeeding the-initial note. In ordinary parlance “10-equal monthly installments” means that, one installment is payable in each of ten successive calendar months, and, when coupled with a time for the payment of the first installment, that time also fixes the date in each successive month when that monthly installment becomes payable. The rule of strict construction does not require us to read the language of these contracts other than in the ordinary meaning of the words used, and when so read it seems plain that under the first contract the remaining 9 notes would mature in the •successive nine months, each on the same •day of the month as the day of maturity •of the first note (“30 days after delivery”). We reach the same conclusion as to the 6 remaining notes under the second contract; they would mature in the successive six months, each on the first day of the month, which was the maturity day of the first note.

Do the Rhode Island Hospital and C. I. T. cases, supra, compel a different conclusion? We think not, for as we read them, first, the actual holdings in those cases, so far as here material, went no further than to establish the unassailable proposition that a writing which does not include all the conditions of sale as agreed to by the parties, does not comply with Section 6692; and, second, the ambiguities pointed out in both cases as to the meaning of “month” or “monthly installments” stemmed from the fact that other terms of the contract, which would have removed any ambiguity, had been omitted, although apparently agreed to between the contracting parties. Thus in the Rhode Island Hospital case, the space provided in the written contract for the maturity dates of the notes succeeding the first note had not been filled in, and although the parties had stipulated “July 29” as the due date of the first installment note, non constat they might have agreed to a different maturity date for the succeeding monthly notes. Likewise in the C. I. T. case, the written contract failed to include the agreement of the parties as to the maturity date of the first note; hence there was no point of reference by which the maturity dates of the succeeding monthly notes could be fixed.

Nor do we think that the appellee’s position is helped by Tokheim Oil Tank & Pump Co. v. Fentress, 4 Cir., 1929, 33 F.2d 730, 65 A.L.R. 710, decided under the Virginia conditional sales contract statute, Va.Code Supp. 1922, Section 5189, and cited with approval by the Connecticut Court in Standard Acceptance Corp. v. Connor, 1940, 127 Conn. 199, 15 A.2d 314, 130 A.L.R. 720. There the contract provided that the deferred purchase price was payable in ten monthly installments “to begin 30 days from date of shipment.” In the contract, as recorded, the blank space provided for the date of shipment had not been filled in, and the Fourth Circuit simply held that the contract as recorded did not reflect the full agreement of the parties, as required by the Virginia statute, and that this defect could not be cured by resort to the original written instrument which itself contained a patent ambiguity as to the date of shipment. That is not to say that, absent an agreed specific shipment or delivery date, a provision calling for payment of the first installment upon a fixed number of days after shipment or delivery of the chattels sold is an insufficient description of the due dates of either the first installment or subsequent “monthly” installments.

Finally, we are of the opinion that the circumstance that the $300 down payment called for by the second contract was not in fact paid when due does not touch the adequacy of the contract provision “Cash with order $300” under Section 6692. No case in Connecticut, or elsewhere, holding otherwise has been cited to us. We hold that the default in making this payment no more vitiated the effectiveness of the contract under Sections 6692 and 6694, Conn.Gen. Stats., than would have a default in meeting any of the installment notes. Section 6692 contains no requirement that defaults must be recorded. There is nothing to show in this case that the $300 payment was waived in the sense that it in effect constituted a modification of the original contract. On the contrary, Clause 6 of the matter printed on the reverse side of the contract preserved to the seller all remedies in respect of any default, and Clause 7 provided that “All waivers must be in writing and countersigned by an officer of the Seller corporation.”

While the purpose of these Statutes is to protect third parties dealing in good faith with conditional vendees, it is also manifest that their object is not needlessly to destroy conditional sales contracts. See Rhode Island Hospital Nat. Bank of Providence v. Larson, supra, 79 A.2d 182-183. The desire to give full effect to the basic purpose of these Statutes may sometimes lead to over-refinements, producing results which the Statutes never intended to achieve. In this case we think that the borderline has been crossed.

We conclude that the District Court should have allowed these reclamation claims against the Trustee in Bankruptcy.¹

Order reversed.

1 . The District Court held that whether or not these contracts were also governed by the Connecticut Retail Installment Sales Financing Statute, Conn.Cum. Supp., Sec. 1223(b) (7) was an irrelevant question in this case. On this appeal neither party raises the point, the appellee expressly disclaiming the applicability of that Statute to these contracts. We therefore find it unnecessary to reach the question.