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Kalio Universal Inc. v. B.A.M.

Decided: June 15, 1967.

KALIO UNIVERSAL, INC., A CORPORATION OF THE STATE OF PENNSYLVANIA, PLAINTIFF-RESPONDENT,
v.
B.A.M. INC., MATURFLEX KNITTING MILLS CORPORATION, AND FAWN HOSIERY COMPANY, DEFENDANTS-APPELLANTS



Lewis, Labrecque and Goldmann. The opinion of the court was delivered by Labrecque, J.A.D.

Labrecque

Defendant Maturflex Knitting Mills Corporation (Maturflex) appeals from the involuntary dismissal of its counterclaim and from the entry of judgment for plaintiff Kalio Universal, Inc. (Kalio) on the main case.

Plaintiff instituted suit to recover possession of 30 Model LD 401 ladies seamless hosiery knitting machines manufactured by Francesco Lonati, Brescia, Italy, which it had contracted to sell to defendant B.A.M. Inc. (B.A.M.) on June 28, 1962. The sale price was $96,000, of which $24,000 was paid down and the balance was to become due in equal monthly installments of $2,000 beginning August 1, 1962. In accordance with the requirements of the Uniform Commercial Code, Pa. Stat. Ann. tit. 12A ยง 9-401, a financing statement covering the transaction was dated June 28, 1962

and filed December 24, 1962 in the Prothonotary's Office of Center County, Pennsylvania, in which county the machines were then located. When the machines were later removed to Belvedere, Warren County, a new security agreement in which Fawn Hosiery Company (Fawn) joined, was executed, and a financing statement covering the lien was filed in the office of the Warren County Clerk on June 11, 1963. N.J.S. 12A:9-103(3).

On March 26, 1963, prior to removal of the machines to Warren County, Fawn, in which the owners of B.A.M. had an interest, had entered into an agreement with Maturflex whereby the machines were to be turned over to the latter for use in connection with the carrying out of its contract with Fawn for the fabrication of certain greige goods. The contract provided that Maturflex would pay the cost of moving and installing the machines at its plant in Belvedere and would, at its own expense, keep the machines in good operating condition and surrender them at the termination of the agreement "in as good condition as Maturflex received them except for reasonable wear and tear from everyday use * * *." It permitted Fawn's representatives to inspect the plant and examine the machines weekly and required Maturflex to provide:

"[A]ll of the labor and materials, including but not limited to yarn, labels and packaging supplies, necessary to produce and deliver said greige goods. It is understood that Corporation [Fawn] must only furnish said knitting machines."

In the event of any default or upon the happening of certain other conditions not relevant to the present controversy, Fawn was authorized to enter upon the premises and remove the machines.

Maturflex, of which Leopold Schiff and Hermina Schiff were sole stockholders, was obligated to and did furnish a "landlord's waiver" from the Schiffs as individual landlords of 610 Hardwick Street, Belvedere, where the machines were to be installed, whereby they waived any right of distraint or

execution against the machines. However, the machines were actually installed by Maturflex in the adjoining premises at 616 Hardwick Street where Maturflex began to utilize them in the performance of its contract with Fawn.

When plaintiff instituted the present suit to recover possession of the machines for default in payment of the monthly installments by B.A.M. and Fawn, Maturflex counterclaimed charging that (1) Fawn was indebted to it in the amount of $9,287.05 for hosiery already manufactured, for which it claimed a processor's lien upon the machines pursuant to N.J.S. 2A:44-158, (2) it had expended $2,250 in the "repair and enhancement of the value of the machinery," by reason of which it became entitled to a common law artisan's lien or a lien under N.J.S. 2A:44-32 et seq., which was made superior to that of plaintiff as unpaid vendor by virtue of N.J.S. 12A:9-310, and (3) the action of Kalio, B.A.M. and Fawn amounted to a scheme or conspiracy between them to hinder, delay and defraud creditors, especially Maturflex, by removal of the machinery from this State. Neither B.A.M. nor Fawn filed answers.

At the jury trial, Leopold Schiff, president of Maturflex, testified that he had been told by Malesky, Fawn's president, that the machines were in good condition. When he later inspected them he found a "mess," involving broken needles and parts, burned-out parts, wire connections removed and dirty machinery. He testified that this condition was thereafter observed by Friedman, Kalio's president, and Malesky, and that Friedman told him to go ahead and repair the machines and he (Friedman) would pay for the work. The $2,250 represented the total of all sums expended on the machines, without any breakdown. ...


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