Archibald v. Panagoulopoulos

• Decision Date: 31 May 1922
• Citation: 233 N.Y. 478,135 N.E. 857
• Parties: ARCHIBALD v. PANAGOULOPOULOS et al.
• Court: New York Court of Appeals Court of Appeals

233 N.Y. 478

135 N.E. 857

ARCHIBALD

v.PANAGOULOPOULOS et al.

Court of Appeals of New York.

May 31, 1922.

Action by Walter S. Archibald, as trustee in bankruptcy of the Excelsior Bag & Tent Company, against John Panagoulopoulos, impleaded with Charles A. Otis and others. From a judgment of the Third Appellate Division (192 App. Div. 940,181 N. Y. Supp. 926), modifying and affirming the judgment in favor of defendant plaintiff appeals.

Judgments reversed.

Appeal from Supreme Court, Appellate Division, Third Department.

Charles B. Sullivan, of Albany, for appellant.

Frederick N. Van Zandt, of New York City, Fred L. Gross and Frederick A. Keck, both of Brooklyn, for respondent.

HISCOCK, C. J.

This appeal deals with questions springing out of a Servian war contract made in the fall of 1914, and it portrays in an interesting manner the way in which such a contract was loaded with tribute to speculators and profit seekers before it engaged any individual who expected really to earn compensation by any actual production. It is necessary to state with considerable detail the history of the transaction in order to furnish a basis for an intelligent discussion of the questions which are now presented to us.

The Servian government desired to procure 150,000 shelter tents with accessories, made according to detailed specifications. One Galatti entered into a contract to furnish them at a price of 15 francs a tent, and which is assumed at that time to have been the equivalent of $3 American money. Galatti manifestly had no ability or intention to manufacture the tents, but only to devise some arrangement which would enable him to obtain part of the money which the government was to pay. He thereafter made a contract with one George Panagoulopoulos under and by which the latter was to manufacture and supply them at a price of $2.55 each. Down to this point the transactions had taken place in Servia. But Panagoulopoulos was the same kind of a tent manufacturer as Galatti, and therefore his efforts were devoted to finding some one who would furnish the tents which he had agreed to supply at a price low enough so that he would be able to retain by way of his profits part of the price which the government would pay. The result of this ambition was that through his brother, the respondent, John Panagoulopoulos, he finally made a contract with one Bartle by which the latter was to furnish the tents directly to the Servian government, collect from it the entire original contract price of $3 a tent, and ‘remit to Panagoulopoulos $.51 for each tent shipped as remittances were received,’ and pay to Galatti the balance of $3 a tent over and above $2.54. One of the questions later to be discussed is whether the price to be received by Bartle was not materially increased as between him and Panagoulopoulos.

While Bartle undoubtedly entered into this contract with the expectation or hope of really manufacturing the tents, these seem to have been based largely on facilities for so doing thereafter to be acquired rather than upon any possessed at the time he entered into the contract. To the end of securing such facilities he thereafter caused to be incorporated the Excelsior Bag & Tent Company which assumed and took over his obligations and contracts above referred to, and under the name of said company he entered into an agreement with the defendants Otis and others, comprising the copartnership of Otis & Co. under which the latter were to furnish financial aid in carrying out said contracts for a consideration of $.15 on each tent and as security for such payment were to receive an assignment of $1.37 out of the price received for each tent. Thus it finally came about that the one who was actually to manufacture and furnish the tents was to receive for each tent $1.88 out of $3 which the government was to pay therefor.

For obvious reasons Bartle did not desire to ship the tents which he might manufacture ture until some arrangement had been made guaranteeing the payment therefor. Originally inally the plan between Bartle and Panagoulopoulos seems to have been that the Irving National Bank of New York should guarantee performance by the former of his contract, and on the other hand should make payment for each shipment on presentation of invoices and bills of lading. For some reason not disclosed or material, the American Express Company was substituted in the place of the Irving National Bank, and ultimately there was established with it by the Servian government through the National Bank of Greece an irrevocable credit in the name of the Excelsior Bag & Tent Company of 13 francs and 25 centimes for each tent, and which credit and arrangement were accepted by Bartle and Otis & Co. and thereafter drawn against by the former. The reduction in this credit from 15 francs to 13 francs and 25 centimes a tent seems to have been through some arrangement by which the original contractor,Galatti, divested himself of all right in the moneys to be paid.

The Excelsior Bag & Tent Company acquired all of Bartle's right and assumed all of his obligations. It fulfilled its contract and manufactured and delivered the tents and collected all of the moneys deposited with the American Express Company as above set forth, except the sum of $20,338.52, which has become one of the subjects of this litigation. The moneys which it thus collected, either directly or through Otis & Co., as its assignee, were in large part paid to the latter, under an agreement by which it was to account for the same when the contract was closed, and out of said moneys there were not paid to Panagoulopoulos the sums agreed by Bartle to be paid to him.

I now go back to the question of the compensation which Bartle under his contract with Panagoulopoulos was to receive for manufacturing the tents. As stated, this compensation was originally fixed at $2.03 a tent. But at the time this arrangement was made the parties apparently were not fully advised of the specifications which had been fixed by the Servian government, and it was later ascertained that tents manufactured in accordance with the specifications originally fixed by Bartle and Panagoulopoulos would not be accepted by the Servian government under its contract which was the basis throughout of all of the subsequent contracts and arrangements which have been referred to. Dealing with this situation, it was found by the trial court in response to requests made by the tent company, the original plaintiff:

‘That thereafter [that is, after the original contract had been made] Bartle and Panagoulopoulos found that the army commercial cloth [specified in such original contract] would not be accepted by the Servian government and Bartle quoted Panagoulopoulos a price of $2.35 for the low count shelter cloth, fabric, 52-56, specification No. 640, and Panagoulopoulos agreed that such cloth should be used; a sample of such cloth procured by Bartle from the United States Armory at Troy, N. Y., was submitted to Panagoulopoulos and accepted by him. * * *

‘That it was understood and agreed between Bartle and Panagoulopoulos that a new agreement in writing providing for the use of low count army shelter cloth at $2.35 per tent for said 150,000 tents was to be prepared by Bartle and executed by both; that such agreement in form was prepared by Bartle and left with Panagoulopoulos for approval and signature but the same was never signed by the parties,’ and, ‘thereupon with the knowledge and approval of Panagoulopoulos, Bartle began at once the manufacture of such tents.’

After the contracts had been performed by the tent company it brought an action to recover from the express company the balance of $20,338.52 still remaining in its possession under the contracts and for the purposes hereinbefore stated. At the same time the respondent, John Panagoulopoulos, to whom had been transferred all the rights of his brother, George, through the foregoing transactions, and Otis & Co. were...