Moore Equipment Co. v. American River Sand & Gravel Co.

BROWN, J.* The present controversy arises out of two equipment rental agreements entered into between the plaintiff as lessor and the defendant as lessee. Separate actions which were instituted on each agreement were consolidated for trial and resulted in judgments for plaintiff, from which defendant now appeals.

The record shows that defendant contemplated an expansion in its existing operations. As a part of this program it needed additional equipment. One such item was a new dragline. Because a conditional sales contract would necessitate a larger down payment than defendant could provide, a rental agreement was arranged. However, since such an agreement likewise called for certain security, defendant gave plaintiff a bill of sale to a used tractor and transferred its equity in a Tracto-shovel then being rented from plaintiff. The old rental agreement was cancelled.

The second rental agreement, which was executed several months later, covered a new portable rock plant with crushers and motor. Again, because of defendant’s lack of funds for the down payment on a conditional sales contract, the second agreement was similar to the first. To finance this agreement, defendant obtained an advance from a customer in the sum of $2,500 and assigned to plaintiff certain items of used equipment.

Each contract gave defendant, subject to certain specified terms and conditions, the option to purchase without limitation as to time. The contracts further provided that should lessee fail to make payments when due, the lessor could, at its option, without notice or demand, take possession of all the property including the items rented, as well as the so-called “security items.”

By reason of defendant’s default under the first rental agreement, plaintiff threatened to repossess the equipment covered by that agreement. Thereupon, defendant commenced an action to restrain the repossession and for a declaration of rights under both rental agreements. Subsequently, the parties entered into written agreements whereby defendant was given the opportunity to remove its delinquencies. The agreements [50]also provided that the equipment given in security would be appraised and sold; that the proceeds would be applied to defendant’s delinquencies; and that the rental payments would be reduced. The delinquencies were removed by defendant and no further proceedings were taken in that action.

Shortly thereafter one of the agreements was again revised by reducing the monthly payments. Sometime later defendant again became delinquent on both agreements and a claim and delivery action was filed by plaintiff. All of the equipment covered by both contracts was repossessed and moved to plaintiff’s Stockton yard. The so-called “security items” were sold at public auction. Defendant received notice of the time and place of sale and was present. The amount received from the sale was credited to the rental agreement.