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October 9, 1957

Matter of Freeman Arthur PROCTOR, Bankrupt

The opinion of the court was delivered by: LINDBERG

The only issue presented for decision upon the petition for review herein is whether or not a certain contract between Al Schlaitzer and bankrupt purporting to be a conditional sales contract covering a meat market, being Trustee's Exhibit No. 2, is under the laws of the State of Washington a conditional sales contract or a chattel mortgage.

The matter is submitted on a stipulated summary of evidence containing but two brief paragraphs as follows:


 'Laird B. Peterson testified that he is the duly appointed, qualified and acting trustee of Freeman Arthur Proctor, bankrupt. That among the assets of said estate is a claim of the trustee to certain fixtures and equipment located in bankrupt's former place of business, to-wit: 4746 California Avenue, Seattle, Washington. That said assets were in the possession of bankrupt at the time of his adjudication. That bankrupt has surrendered the keys to said premises to the trustee.


 'That said fixtures and equipment weer sold to bankrupt by Al Schlaitzer, and in connection therewith a document was executed by said parties August 9, 1956, a duly certified copy of which document has been introduced in evidence herein as the only exhibit, and which is incorporated herein by this reference. That there is due and owing on account of said instrument from bankrupt to Al Schlaitzer the approximate sum of $ 9,673.00. That said instrument was filed as a conditional sale contract in the office of the Auditor of King County, Washington, on August 10, 1956.'

 The Referee's certificate on review indicates a hearing was held and evidence received but also shows that he reached his conclusion that the contract was a chattel mortgage as a result of an interpretation of the provisions of the contract without resort to other evidence or testimony, if any, which may have served to establish the attending circumstances or conduct of the parties.

 The Referee apparently believed the case of West American Finance Co. v. Finstad, 146 Wash. 315, 262 P. 636, to be controlling with respect to the substance of the contract before him. It seems clear that the Finstad case stands for the proposition that the true nature of the contract must be determined from a careful consideration of the entire instrument, without regard to the form of the contract or the technical terms used therein, but with regard to the intention and purpose of the parties. 92 A.L.R. 332. It likewise appears from the opinion that the court there was influenced strongly in its conclusion because of the clarity with which sections 9 and 10 of the contract before them spelled out the vendor's right to repossess the property and after sale thereof to recover from the vendee any deficiency. See pages 319 and 320 of 146 Wash., page 638 of 262 P. There was nothing in the instrument that required the vendor to elect one remedy in lieu of another, i.e. rescind and repossess the property or sue for the price and pass title.

 The contract here involved is not subject to the glaring weakness pointed out in that case.

 While the law of the State of Washington is as stated in Low v. Colby, 137 Wash. 476, 243 P. 18, 20, 247 P. 475, namely:

 'Where it is doubtful from the face of an instrument, whether the contract is a conditional sale or a mortgage, the courts generally treat it as a mortgage, for the reason that such construction will be most apt to attain the ends of justice and prevent fraud and oppression.'

 it is still incumbent upon the court to construe an instrument purporting to be a conditional sales contract as being such unless the whole of the instrument gives indication that it was intended by the parties to be a chattel mortgage. Seaboard Securities Co., Inc. v. Berg, 170 Wash. 681, 17 P.2d 646, 92 A.L.R. 297.

 In the main the substance of the provisions or language condemned by the Referee in concluding that the purported conditional sales contract is a chattel mortgage were considered by the Supreme Court of Washington in the case just cited and found to be not inconsistent with the essential elements of a conditional sales contract.

 Exhibit No. 2, being a photostat of the original contract involved, shows that the parties were using a printed form apparently prepared by the Washington Escrow Company for use undoubtedly in connection with the transfer of various business enterprises where payment of the purchase price was deferred. The printed heading of the form is 'conditional sales contract.' The blanks appearing in the form are filled in by typewriter to meet the details of the transaction between Schlaitzer and Proctor without in any way altering the printed wording of the form. There is no evidence to show the attending circumstances under which the contract was made nor who prepared the contract or filled in the blanks of the form and this court must therefore attempt to ascertain the ...

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