Meinhard-Commercial Corp. v. Hargo Woolen Mills

Hargo Woolen Mills (Hargo) (defendant) sold and manufactured woolen cloth. Sharby Trading Co. (Sharby) had been supplying Hargo with card waste, which Hargo used in its production process. Sharby shipped 24 bales of card waste to Hargo and included an invoice. Hargo, however, did not want to purchase the card waste at the time, so the parties reached an oral agreement to have Hargo store the 24 bales on its property until it needed them. Under the agreement, Hargo would not be billed for the bales until Hargo actually needed and used them. An invoice, which set the price of the bales, was marked pro forma by Sharby and returned to Hargo. Hargo later notified Sharby that it wanted to purchase eight bales. Sharby created an invoice, which was changed at Hargo’s request to list the date on which Hargo notified Sharby of its intent to purchase the eight bales. Hargo then sent payment for the eight bales. Hargo never used or paid for the remaining 16 bales. Meinhard-Commercial Corporation (Meinhard) (plaintiff) became a secured creditor of Hargo and eventually took possession of the 16 bales. Sharby demanded Meinhard return the bales, claiming Hargo never obtained title. Meinhard sold the bales. Pursuant to a final decree entered by a superior court, Hargo and Meinhard eventually appeared before a master to settle the issue of whether Hargo had ever obtained title to the bales. The master found that, based on the parties’ intent, title to the bales did not pass to Hargo. A superior court approved the master’s report. Meinhard appealed.