Goldmann, Freund and Conford. The opinion of the court was delivered by Freund, J.A.D.
The principal question here is whether the liability of a consignee arising from the failure to pay to the consignor the proceeds of sale is barred from discharge under section 17(a)(2) of the Federal Bankruptcy Act, 11 U.S.C.A., sec. 35, subd. (a) (2), as a willful and malicious injury to the property of the consignor. A subsidiary question argued by the parties is whether the transactions were actually consignments, as the respondents claim, or such in form only, being in reality sales on book account, as the appellants urge.
The defendants appeal from three judgments entered in favor of the plaintiffs in three separate actions, tried concurrently before the court without a jury and consolidated for argument as one appeal because they involve identical issues of law and fact. There is no dispute as to any material fact; the controversy at the trial and on this appeal pertains to the construction of the agreements between the parties and whether, under the conceded facts, the liability of the defendants was discharged in bankruptcy.
The plaintiffs, wholesale poultry dealers, brought these suits against the defendants, retailers, to recover the unpaid balances for deliveries of poultry. The parties had done business with one another for a number of years. The defendants would call at the plaintiffs' place of business for poultry, and on each delivery would sign a receipt, at the bottom of which was printed an agreement termed "Consigned." It provided that title was to remain in the consignor, and that the defendants would within seven days either pay for or return the poultry on demand. The goods were not to be sold below the price mentioned in the receipt, the consignee
to retain any overage. The defendants also assumed additional liabilities. With respect to these, there is a variance between a form of receipt printed as an exhibit and a purported copy thereof quoted in the brief. This may be accounted for by the fact that there were several plaintiffs, and numerous receipts offered in evidence, but only one was printed in the record. However, in legal effect there is no substantial difference. The exhibit purporting to be the consignment agreement contains the following wording: "Consignee assumes liability for dead poultry, or deterioration in value of poultry and all charges for maintenance of poultry." In the statement of facts, the following appears as a quotation from a receipt: "Consignee assumes liability for loss of poultry, for depreciation, deterioration and for all charges for maintenance of said poultry."
The complaint in the first suit was framed in assumpsit for breach of contract. The other two allege the contracts and charge willful and malicious conversion by the defendants of the proceeds of sale. In their answers the defendants admitted the deliveries and their indebtedness, but contended that the sales were unconditional and not on consignment. The pretrial order recites that the actions were in tort, based upon the alleged conversions, which the defendants denied, asserting that the merchandise was sold on book account.
At the commencement of the trial, the defendants stated that pending the litigation they had filed a petition in bankruptcy in the United States District Court for the District of New Jersey, that the plaintiffs were listed as creditors in the schedules and were notified, and that they, the defendants, had been duly discharged in bankruptcy of all provable debts and claims. The defendants were permitted to supplement the answers and the pretrial order to assert this affirmative defense. Thereupon, the issues litigated were whether the transactions were consignments or sales, and whether the bankruptcy discharged the defendants of their liability to the plaintiffs.
The defendants contended that the debts were contractual and did not arise from tort; that they used the proceeds of
sale to pay other creditors and other expenses in the ordinary course of business; and that if there had been a conversion, it was not willful and malicious. The trial judge, holding that the transactions were "consignments" and the conversion willful and malicious, entered judgments for the plaintiffs; wherefore these appeals.
The label which the parties give to a transaction does not determine its character. Terminology may be merely a subterfuge and courts will not permit the parties to cloak or disguise the real character of a transaction by designating it as a consignment. They will look beyond mere labels and examine the contract as a whole in order to ascertain the intention of the parties. Lauter Co. v. Isenreath , 77 N.J.L. 323 (Sup. Ct. 1909); Wood v. Cox , 92 N.J. Eq. 307 (Ch. 1921); Riedinger v. Mack Machine Co., &c., Inc. , 117 N.J. Eq. 334 (Ch. 1934); 77 C.J.S., Sales , § 270 et seq., p. 1072; 46 Am. Jur., Sales , § 16, p. 209 et seq.; 2 Williston on Sales (rev. ed.) , § 336, p. 296; Corbin, Legal Analysis and Terminology , 29 Yale Law J. 163 (1919).
In determining whether in a particular instance the relation of the parties to goods delivered is that of seller and buyer, or that of consignor and consignee, the court does not make a new contract for the parties, but construes their intention from the contract as a whole. Edgewood Shoe Factories, &c., v. Stewart , 107 F.2d 123 (5 Cir. 1939); see also Washington ...