Opinion
April 9, 1915.
Frederick M. Brown, for the appellant.
Middleton S. Borland, for the respondent.
I think it is quite clear, particularly under the circumstances disclosed by the agreement, that the apparatus in question was not annexed to the building in such manner as to lose its character as personal property. ( Central Union Gas Co. v. Browning, 210 N.Y. 10; Fitzgibbons Boiler Co. v. Manhasset Realty Corp., 125 App. Div. 767, SCOTT, J., dissenting; reversed on dissenting opinion of SCOTT, J., 198 N.Y. 517; Murdock v. Gifford, 18 id. 28; McKeage v. Hanover Fire Ins. Co., 81 id. 38; Cosgrove v. Troescher, 62 App. Div. 123.) The apparatus thus remained a chattel and was not "attached" to the building in such manner as to bring it within that portion of section 62 of the Personal Property Law (Consol. Laws, chap. 41; Laws of 1909, chap. 45) which was added to section 112 of the former Lien Law (Gen. Laws, chap. 49; Laws of 1897, chap. 418) by chapter 698 of the Laws of 1904. ( Central Union Gas Co. v. Browning, supra.)
The question remaining is whether the agreement under which the apparatus was installed constituted a conditional sale within the terms of the 1st paragraph of said section, which in effect provides that all conditional sales of chattels accompanied by delivery shall be void as against subsequent purchasers, pledgees or mortgagees in good faith, unless the contract of sale or a copy thereof is filed, and other provisions of the Lien Law applicable to such contracts are duly complied with.
It is, of course, true that in every such case as the present the court is not bound by the mere form in which the parties have chosen to put their agreement or the name by which they have been pleased to call it and that the whole agreement and the circumstances surrounding the same are to be examined for the purpose of determining its true character. It is equally clear that a lease of chattels is not required to be in any particular form, but may be expressed by an exchange of writings or in other manner sufficient to constitute a binding obligation. With the exception of the single paragraph to which I shall hereafter refer the writing first signed by the parties and on which plaintiff's acceptance was indorsed is in every material respect nothing more than a lease with absolutely nothing to indicate an intention then or thereafter to convey any title. The rent received amounts to only about thirteen and three-quarters per cent per annum of the undisputed value of the apparatus, an amount so disproportionate to such value as to entirely exclude the suspicion that the rent was but a means of disguising periodical payments upon account of a purchase price, which payments when wholly made would automatically or otherwise vest title in the lessee or purchaser. The clause which provided that upon the non-payment of two quarters' rent the balance of the entire rental price should at the option of the plaintiff become immediately "due and payable" and that plaintiff should thereupon have the right to remove the apparatus is, at first blush, equivocal. But on closer examination its legal effect would seem to be abortive so far as it might be claimed to affect any right to purchase or any vesting of title in the purchaser or lessee. Assuming, as I do, that the agreement imports an obligation on the part of the lessee to pay the rent for the entire period, it is clear that should the plaintiff on default have exercised the option to declare the entire amount of rent accruing during the whole period to be then immediately due and payable, it could not have removed the apparatus from the premises, although the agreement assumes to give it that right. Had such option been exercised, and had the lessee paid the entire rent in one payment, his right to have the use of the apparatus until the end of the term and to prevent its removal cannot be questioned. But the agreement contains nothing which would indicate that had such payment been made, the lessee would have become the owner of the apparatus or would have had any other right with respect thereto than to use it to the end of the term without further payment. It remains to consider the effect of the contemporaneous agreement containing the option to buy. This option is upon the following terms:
(1) It must be exercised within four years from the time when use of the apparatus should begin;
(2) The payment then to be made is to be $1,045, the agreed value of the apparatus, plus six per cent interest thereon from the date when the use began, minus the total amount of rent paid to date.
A simple computation shows that if the option had not been exercised until the end of four years, such payment would have amounted to $576, as against a purchase price and interest aggregating $1,285.80, leaving a net payment of $707.80 in excess of the rentals and equalling about seven-tenths of the original purchase price. Had the option been exercised at an earlier date the cash payment would have been proportionately greater. These figures dissipate any suspicion that the term rent and the actual rent expressed to be paid up to the time the option might have been exercised so nearly approximated the purchase price as to show that the so-called rent was a mere substitute and cover for installment payments. In this respect the agreement is both in its actual terms and in the operation of its payments materially different from that considered in the Central Union Gas Company Case ( supra) where the agreement provided that after six annual consecutive payments had been made the chattels were to become the property of the lessee without any additional payment whatsoever.
The learned court below seems to have disposed of the case on the theory that in this State any lease of chattels with an option to the lessee to buy is per se a conditional sale. It is perhaps not surprising that this or any other theory should be evolved from the mass of more or less apparently contradictory decisions to be found in the State and Federal reports. This contrarity of result has largely been due to confusion arising from an attempt in a given case to compare the contract in that case with the contract in some other case and from a supposed analogy of facts to draw an analogous conclusion of law. But where the essential ingredients of a contract have been once determined, it should not be a difficult task to decide what is its legal effect. Leases and options to buy chattels are still in this State as distinct as they ever were, and their incorporation into one agreement does not work a fusion of the two contracts. Manifestly, an option to buy, which the optionee is at liberty to exercise or not as he chooses, is different from an option to return a thing purchased if the buyer so elects. ( Sturm v. Boker, 150 U.S. 312, 328.) The decisive question is still as it ever was, what was the intent of the parties? As was said by BALDWIN, J., in Lambert Hoisting Engine Co. v. Carmody ( 79 Conn. 419, 424), while the dress in which parties clothe their contract is not controlling, "the insertion in a contract of bailment or lease of a provision giving an option of purchase at a fixed price, and making, in case of its exercise, payments previously made in the form of rent applicable to the purchase price, does not, as matter of law, turn the bailee or lessee into a conditional vendee. His character and position depend on the real intent and purpose of the contract." The plaintiff should have recovered for still another reason: The defendant wholly failed to show that he was a purchaser bona fide or otherwise of the apparatus in question. The burden to prove a purchase was upon him. ( Crocker-Wheeler Co. v. Genesee Recreation Co., 160 App. Div. 373.) His only evidence of title was his deed, which did not purport to transfer to the purchaser any chattels whatsoever.
The judgment should be reversed and a new trial granted, with costs to the appellant to abide the event.
INGRAHAM, P.J., CLARKE, SCOTT and DOWLING, JJ., concurred.
Judgment reversed and new trial ordered, with costs to appellant to abide event.