Danleigh Fabrics, Inc. v. Gaynor-Stafford Industries, Inc.

• Decision Date: 01 May 1984
• Docket Number: GAYNOR-STAFFORD
• Citation: 476 N.Y.S.2d 287,62 N.Y.2d 677,464 N.E.2d 985
• Parties: , 464 N.E.2d 985 DANLEIGH FABRICS, INC., Appellant, v.INDUSTRIES, INC., et al., Defendants, and Chemical Bank, Dommerich Division, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 287

476 N.Y.S.2d 287

62 N.Y.2d 677, 464 N.E.2d 985

DANLEIGH FABRICS, INC., Appellant, v. GAYNOR-STAFFORD INDUSTRIES, INC., et al., Defendants and Chemical Bank, Dommerich Division, Respondent.

Court of Appeals of New York.

May 1, 1984.

Jed R. Schlacter and Jeffrey S. Kaplan, New York City, for appellant.

Kenneth J. Kelly and John B. Wynne, New York City, for respondent.

OPINION OF THE COURT MEMORANDUM.

The order of the Appellate Division should be affirmed, with costs.

In accordance with a factoring agreement, a factor may charge back against the seller of textiles the full amount of invoices which are unpaid and disputed, even though the actual dispute which the seller has with its own customer may relate both to the goods which are the subject of the unpaid invoices and to goods previously paid for.

In January, 1978 plaintiff, Danleigh Fabrics, Inc., a textile converter, entered into a factoring agreement with defendant Chemical Bank. Chemical agreed to purchase accounts receivable of Danleigh it found acceptable and to "assume the loss on such receivables, due solely to the financial inability of the customer to pay at maturity, provided the customer has * * * accepted the goods * * * without dispute, offset or counterclaim". Danleigh, for its part, warranted that "the customer in each instance has received and will accept the goods sold * * * and the invoice therefor, and will pay the same as and when due without dispute," and promised to notify Chemical of any disputes by its customers relating to invoices factored through Chemical, settle such disputes, and promptly pay Chemical the amount of the receivables affected thereby. The agreement further provided that "addition to all other rights to which entitled under this agreement, where there is such dispute and/or claim, or if any unapproved receivables be unpaid at its maturity, may charge the amount of the receivable so affected or unpaid to In this action, Danleigh alleges that Chemical made improper charge-backs relating to certain accounts receivable from one of its customers, defendant Gaynor-Stafford Industries, Inc.

In early 1978, Danleigh made several sales of fabric known as Style 579 to Gaynor. As was the parties' practice, upon shipping the goods Danleigh sent original invoices to Gaynor and copies to its factor Chemical. Chemical immediately paid Danleigh the invoice amounts less its commission, and when the invoices became due Gaynor paid all of the Style 579 invoices in full to Chemical. Later that year, Danleigh began selling another fabric, Style 536, to Gaynor. Once again it factored the accounts through Chemical. While Gaynor paid Chemical on...