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Fowler v. Pa. Tire Co. - 326 F.2d 526 (5th Cir. 1964)

Rule:

In determining the intent of the parties, the prevailing view is that it will be determined solely by the words employed in the written instrument, where the meaning of such instrument is clear and unambiguous. But where the contract or agreement is unclear or of doubtful meaning, the court in interpreting what the parties were called upon to do, may properly consider acts done by the parties in the course of performance.

Facts:

Pennsylvania Tire Company and Jeff Martin entered into a contract, whereby the former agreed to deliver tires to the latter for resale at prices and terms fixed by the latter. This contract was termed a consignment with the title expressly being reserved with the appellee. While monthly inventory reports were required, there was no provision for any sort of segregating or earmarking of these tires. Martin eventually filed a voluntary petition for bankruptcy, and on the following day, an order of adjudication was entered. Pennsylvania Tire then filed its petition for reclamation of these tires still in the bankrupt's possession, asserting that their transaction was one of consignment, and therefore, the title to the tires did not pass to the bankrupt and consequently could not pass to appellant trustee, who then, on behalf of the bankruptcy estate, sought review.

Issue:

Was an agreement by which the tire company delivered its tires to the bankruptcy debtor for resale a consignment for sale rather than an absolute sale with a right of return, thus creating a right of reclamation in the tire company?

Answer:

Yes

Conclusion:

Affirming, the United States Court of Appeals held that, in absence of conflict between state law and bankruptcy laws, state law governs for purposes of interpreting the nature of transaction between appellant bankrupt and appellee consignor. In interpreting that transaction, the Court held that parties' intent, as expressed in the unambiguous written agreement, was to create a consignment of goods and not an absolute sale with a right of return. The only obligation of appellant bankrupt was to account to appellee consignor for proceeds of the goods when sold. Because the bankrupt was obligated to neither buy nor pay for the unsold goods, the consignor was entitled to reclaim the goods from the bankrupt.

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