Miller v. Schloss

Citation218 N.Y. 400,113 N.E. 337
PartiesMILLER v. SCHLOSS et al.
Decision Date06 June 1916
CourtNew York Court of Appeals

OPINION TEXT STARTS HERE

Appeal from Superior Court, Appellate Division, First Department.

Action by Nathan J. Miller and others against Harry B. Schloss. From a judgment of the Appellate Division (159 App. Div. 704,144 N. Y. Supp. 996), reversing judgment for defendant entered upon verdict and adjudging that plaintiffs recover of defendant, defendant appeals. Judgment reversed, and case remitted.

Edward L. Blackman, of New York City, for appellant.

Walter H. Pollak, of New York City, for respondents.

COLLIN, J.

The action is to recover the sum of $6,830. The jury rendered a verdict in favor of the defendant. The Appellate Division, upon the appeal of the plaintiffs, reversed the judgment entered upon the verdict and ordered a judgment in their favor for the sum sought to be recovered. From the judgment ordered by the Appellate Division, the defendant appealed to this court. The appeal presents the question of law whether or not the facts presented and the reasonable inferences from them, advantageous to the appellant, constitute an issue of fact. Faber v. City of New York, 213 N. Y. 411, 107 N. E. 756.

The following facts have support in the evidence: In 1903 and 1904, the plaintiffs (or their predecessors and assignors) were cotton brokers and members of the New York Cotton Exchange. The defendant secured orders to be executed on the exchange, which he gave to the plaintiffs for execution. The commissions were divided between the parties. Prior to March 25, 1904, the plaintiffs did not in their books of account recognize the customers of the defendant, but treated the defendant as their customer, placing in accounts with him all the transactions through the orders received from him. Subsequent to January, 1904, there were two accounts in those books, known respectively as ‘H. B. Schloss & Co.,’ or as Account No. 1,’ and H. B. Schloss & Co. No. 2,’ or as Account No. 2.’ Account No. 1 resulted almost entirely from orders received from one Barrett. Account No. 2 resulted wholly from orders received from one Hunt. Such facts were known to the plaintiffs on and prior to March 25, 1904. The defendant advised the plaintiffs with each order in which account it should be entered. The accounts were treated by the parties as though they were with different individuals, the defendant being called upon to make good a balance against him in either, although in the other there might be a balance in his favor. On March 25, 1904, there was in account No. 1 a balance against him, which, as the plaintiffs knew, neither he nor the customer, Barrett, through whose orders it resulted, was able to pay. Account No. 2 was practically even or without a balance. On that date the defendant received from Hunt an order for the purchase of one thousand bales of cotton. Before the defendant would place the order with the plaintiffs or give them any participation in the account arising from it, and on March 25, 1904, the plaintiffs and the defendant agreed that the account No. 2, in which such account should be placed and kept, should be kept separate and distinct, and should not be mixed up in any way with the balance against the defendant in account No. 1. Thereupon the defendant delivered the transaction or account to the plaintiffs. During the days intervening March 25th and March 29th, upon the requests of the plaintiffs, in part directly to Hunt and in part to the defendant and by him communicated to Hunt, as margin or for he protection of account No. 2, Hunt transferred to the plaintiffs $4,000, which was placed as a credit in account No. 2. On March 29th the 1,000 bales of cotton were sold or closed out, and from the avails of the sale and the $4,000 there was a credit to the defendant in account No. 2 of about $6,545. The plaintiffs knew at that time that the credit was created by the deposits made by Hunt and the purchase and sale of the 1,000 bales of cotton for him.

On March 30th Hunt directed the plaintiffs to deposit $2,000 to his credit in the American Exchange Bank. They replying that they had no account with him on their books did not comply. On that date they took and thereafter held the position that they would not allow any withdrawal from account No. 2 until the defendant had settled the balance against him under account No. 1. The defendant insistently claimed that such position was unlawful; that the distinct agreement was that account No. 2 should be kept separate and distinct; and that the credit in it was the property of Hunt alone, and for it the plaintiffs were liable to him. After protracted disputation and negotiation, through which the parties were firm in their respective positions, a transaction or settlement was had between them on April 27, 1904, in which the balance against the defendant in account No. 1 and his indebtedness to the plaintiffs was wholly discharged upon the books of the plaintiffs by, in part the application to it of the credit in account No. 2 and in part by moneys, in the sum of about $8,000, paid to the plaintiffs by parties other than the defendant, and the plaintiffs delivered to defendant a general release of his liability to them. The defendant then stated to the plaintiffs that they had not the right to appropriate to the payment of his indebtedness the credit in account No. 2 belonging to Hunt, and expressed to them his belief that Hunt would sue them for the amount of it. The plaintiffs replied that they would make the appropriation and take care of any suit begun by Hunt. They had stated to him some days before that they needed the money. The defendant declared to them and they knew that he was unable to pay Hunt. Subsequently, Hunt recovered, in an action brought, a judgment against the plaintiffs for the amount of such credit. The plaintiffs paid the judgment and brought this action to recover the sum so paid. Their cause of action, as alleged, is that they paid the sum to the defendant upon his promise to pay it ‘in extinguishment of a liability for said amount due from the said firm of Miller & Company to one C. P. Hunt and in consideration of said promise,’ which promise he had failed to keep; that they through compulsion of a judgment had been forced to pay such amount to Hunt; and that the defendant holds the sum so paid him to their use. The trial court charged the jury that if the defendant, as a part of the transaction of April 27, 1904, agreed, expressly or impliedly, to pay Hunt the sum of the credit in account No. 2, or if the plaintiffs were then ignorant that Hunt was the principal in account No. 2 or had any interest therein, the defendant was liable.

[1][2] The Appellate Division recognized and declared that the action was for moneys had and received. That court reversed the judgment of the trial court and directed judgment in favor of the plaintiffs upon the ground that the defendant promised, through implication, as a matter of law, to pay Hunt the sum of the credit in account No. 2, which was appropriated on the books of the plaintiffs in payment of the indebtedness of the defendant to them. The evidence presented an issue of fact. The law defining the nature and the obligations of implied contracts is thoroughly established. The courts recognize by the language of their opinions two classes of implied contracts. The one class consists of those contracts which are evidenced by the acts of the parties and not by their verbal or written words-true contracts which rest upon an implied promise in fact. The second class consists of contracts implied by the law where none in fact exist-quasi or constructive contracts created by law and not by the intentions of the parties. A contract cannot be implied in fact where the facts are inconsistent with its existence, or against the declaration of the party to be charged, or where there is an express contract covering the subject-matter involved, or against...

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