Case Name: Brunswick Corporation v. Ciaffoni et al., Appellants
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1968-11-12
Citations: 432 Pa. 442
Docket Number: Appeal, No. 23
Parties: Brunswick Corporation v. Ciaffoni et al., Appellants.
Judges: Before Musmanno, Jones, Cohen, Eagen, O’Brien and Roberts, JJ.
Reporter: Pennsylvania State Reports
Volume: 432
Pages: 442–450

Head Matter:
Brunswick Corporation v. Ciaffoni et al., Appellants.
Argued March 15, 1968.
Before Musmanno, Jones, Cohen, Eagen, O’Brien and Roberts, JJ.
reargument refused December 13, 1968.
Thomas 0. White, with him Milton D. Rosenberg, and Bloom, Bloom, Rosenberg <& Bloom, for appellants.
John G. Buchanan, Jr., with him William R. Newlin, and Buchanan, Ingersoll, Rodewald, Kyle & Buerger, for appellees.
November 12, 1968:

Opinion:
Opinion by
Mr. Justice O'Brien,
This is an appeal from the order of the Court of Common Pleas of Washington County, awarding personal property to the plaintiff-appellees.
One Isadore Toder, under an agreement dated July 30, i960, leased certain property from appellants, Paul Ciaffoni and Peter Ciaffoni, who owned the property as tenants in common. Under a Rider Agreement which formed part of the lease and which was signed by both appellant landlords, the lease was assigned to McDonald Bowl, Inc. (McDonald), a corporation formed by Toder to start a bowling alley. The lease was for a term of ten years, for a total rent of $119,520, payable $11,520 at signing of the lease and $1,000 per month. It provided, in case of default, for confession of judgment, and in the event of default, bankruptcy, or insolvency, for the entire balance of the rent to become due and payable. Provision was made permitting the lessor to distrain for rent on all property found on the premises.
However, the rider provided that a landlord's waiver of the right to distrain in a form as was attached would be executed in order to permit the tenant to finance the purchase of bowling alleys and equipment. The attached form was an unexecuted general form of waiver covering Brunswick automatic pinsetters and naming as the protected seller Brunswick Automatic Pinsetter Corporation. The only waiver that was executed was to the benefit of Brunswick Corporation and was signed only by Paul Ciaffoni and his wife, and acknowledged on September 16, 1960.
McDonald proceeded to purchase under conditional sales contracts a great deal of bowling equipment from Brunswick Corporation and Brunswick Automatic Pinsetter Corporation. These corporations filed proper financing statements and became secured creditors. McDonald then defaulted in its obligations to both Brunswick corporations and to the landlords.
On May 3, 1962, in the U. S. District Court for the Western District of Pennsylvania, McDonald was adjudicated a bankrupt. On July 5, 1962, the Referee in Bankruptcy entered an order that appellees were "entitled to take possession of the personal property" that is here in dispute. When appellees sought, on July 20, 1962, to remove the equipment, Paul Ciaffoni instructed employees of Brunswick to leave the premises and they departed voluntarily. Paul and Peter Ciaffoni then, on July 23, 1962, distrained for'rent on the equipment, taking possession of it.
On July 30, 1962, appellees filed this action in replevin with bond of $300,000. Appellants not having filed a counter bond, the appellees repossessed the property on September 15, 1962.
After a non jury trial, the Honorable Barron P. Mc-Cune made an order awarding to Paul Ciaffoni his one-half share of the rents in default since Paul had not signed the waiver agreement. On appellees' exceptions, the court en banc vacated the prior order and in an opinion by Judge McCune, ordered judgment for appellees, with costs on appellants.
The court en banc was of the view that appellees were creditor beneficiaries of the rider provision in which appellants agreed with Toder to sign a landlord's waiver in favor of appellees. Since equity regards that done which ought to be done, the court held that by virtue of the provision in the rider, Peter Ciaffoni, as well as Paul, had waived his right to distrain as a landlord.
We find it unnecessary to consider this third party creditor beneficiary theory by which the court en banc resolved the case. Nor need we consider whether appellees' recovery can be justified on a donee beneficiary theory, or a unilateral contract theory, or a construc tiye trust theory. We are of the opinion that the issue of the right to possession of the disputed bowling equipment has already been finally litigated in the bankruptcy action in the federal court and that we must abide by that decision.
Judge McCune originally found Paul Ciaffoni's distraint proper, holding that the property passed out of custodia legis at the time of the Referee's order and thus became a proper subject for distraint. The court en banc did not pass on the effect of the Referee's order.
We hold that the bankruptcy proceeding is determinative of the case. Judge McCune relied upon the case of National Cash Register Company v. Miller, 88 Pa. Superior Ct. 550, 553 (1926), where indeed it was held that: ". . . when the referee made the order directing the receivers to return the cash register to the plaintiff, it passed out of the custody of the law and immediately became subject to a distress by the defendant for rent in arrears so long as it remained on the demised premises."
We find that case unpersuasive and decline to follow it. Ordinary common sense requires that custodia legis continue until the order of the Referee could be effected. Otherwise the order of the Referee or bankruptcy court would be meaningless. The property would go 'to him who could get to it first after the order is made.
Moreover, even if the property had passed out of custodia legis, a distraint by appellants was no longer possible. The Referee in Bankruptcy had ordered that appellees were entitled to take possession of the dis puted property. This was an adjudication in rem binding on all who might claim an interest in the property, including appellants. "Adjudications of the referee, if not reviewed within the time and in the manner prescribed, have the force and effect of judgments and orders of the District Court." In re Tinkoff, 85 F. 2d 305, 307 (7th Cir. 1936), cert. denied, 299 U.S. 611. The manner prescribed is an appeal to the United States District Court. Appellants did not attack the Referee's adjudication in that way, and we will not permit a collateral attack here.
The order of the court below is affirmed.
Mr. Chief Justice Bell took no part in the consideration or decision of this case.
Mr. Justice Musmanno did not participate in the decision of this case.
Appellees urge that even if they are not creditor beneficiaries, they are donee beneficiaries whose rights have vested, because either; (a) no knowledge of the contract and assent to it are necessary for a donee beneficiary's rights to vest or (b) if they are necessary, they have impliedly been met.
Appellees claim that appellants, in the rider, promised a waiver to anyone actually providing McDonald with financing for its bowling supply purchases. Acceptance of the offer was to be unilateral, i.e., by the act of providing the financing.
Appellees urge that any award to Peter Ciaffoni would constitute unjust enrichment, since his claim is based solely on his own repudiation of a promise and his brother's illegal acts in preventing the removal of the equipment on July -20, 1962.