E. Acceptance Corp. v. Godfrey

• Decision Date: 03 March 1936
• Citation: 183 A. 822
• Parties: EASTERN ACCEPTANCE CORPORATION v. GODFREY.
• Court: New Jersey Supreme Court

183 A. 822

EASTERN ACCEPTANCE CORPORATION

v. GODFREY.

Supreme Court of New Jersey. Essex County.

March 3, 1936.

Action by the Eastern Acceptance Corporation against Freeman A. Godfrey, as sole surviving partner of the copartnership or firm doing business under the firm name and style of the Godfrey-Keeler Company, wherein defendant filed counterclaims. On motion to strike part of the answer and the counterclaims.

Motion granted.

Arthur T. Vanderbilt, of Newark, for plaintiff.

Landau & Mehler, of Hackensack, for defendant.

PORTER, Circuit Judge.

The motion before me, as a Supreme Court Commissioner, is to strike part of the answer and the counterclaims.

The complaint alleges:

(1) That the plaintiff is a New Jersey corporation with its principal office in Newark.

(2) That the defendant, Freeman A. Godfrey, was a partner of William Keeler doing business as Godfrey-Keeler Company, and that since the death of Keeler, October 15, 1933, he became sole surviving partner of said firm.

(3) That on various dates the plaintiff purchased from the defendant certain therein described unmatured promissory notes made payable to the defendant, which notes were duly indorsed by the defendant and his said partner and which are still owned by the plaintiff.

(4) That said notes upon maturity were duly presented for payment and payment refused, notice of which was given the defendant firm.

(5) That on October 28, 1931, a written contract was entered into between plaintiff and defendant firm, wherein the plaintiff agreed to buy, and the defendant firm to sell, certain promissory notes, which notes the defendant firm warranted would be paid, notice of demand and protest being waived by defendant firm; that all of the notes in suit were purchased under the terms of said contract.

(6) That certain attorney's fees and expenses have been and will be incurred in the collection of said notes.

Recovery is sought for the amount due.

The answer admits certain of the allegations and says:

(1) That certain of the notes were paid.

(2) That certain of the notes were delivered to the plaintiff by the defendant without consideration.

(3) That the transactions were not the purchase and sale of the notes, but the discount of same; that such was an illegal transaction because the defendant was not authorized to discount notes, not having the powers of a bank.

(4) That the discounts took place in the state of New York contrary to the laws of that state and therefore are void.

(5) That the transactions were void and unenforceable under the laws of New York because usurious.

The counterclaims are based upon allegations that the plaintiff retained for itself part of the proceeds of the discount of the notes, some of which have been paid to the plaintiff by the makers. None of said retained moneys have been paid to the defendant.

From the pleadings, affidavits, and briefs before me, it appears that the transactions between the parties were the quite general ones between a "finance company," so called, and a merchant whereby, in effect, the plaintiff, the finance company, furnished funds to the customers of the merchant, the defendant. The practice was for the defendant to sell goods under conditional sales agreements and to accept notes of the customers for part of the consideration made payable to them and to indorse same over to the plaintiff with an assignment of the sales agreements as security. The plaintiff would then pay over to the defendant the amount of the notes, less a portion which was retained by it as further security.

At the inception of this arrangement a written contract was entered into between the parties to the suit, which contract sets forth the conditions under which business was to be transacted between them. This contract is dated October 28, 1931. It is apparent that this contract was entered into in good faith by both parties, that considerable business was transacted under it, and it may be assumed, nothing to the contrary being shown, that its terms and conditions were complied with for a time, at least, until this controversy arose.

The defendant repudiates the contract, arguing that it is an illegal one and has therefore no binding effect, but agrees in his brief that it evidences, however, the intention of the parties. That is true. Considering the question of...