Newburger-Morris Co. v. Talcott

• Decision Date: 28 December 1916
• Citation: 114 N.E. 846,219 N.Y. 505
• Parties: NEWBURGER-MORRIS CO. v. TALCOTT.
• Court: New York Court of Appeals Court of Appeals

219 N.Y. 505

114 N.E. 846

NEWBURGER-MORRIS CO.

v.TALCOTT.

Court of Appeals of New York.

Dec. 28, 1916.

Appeal from Supreme Court, appellate Division, First Department.

Action by the Newburger-Morris Company against James Talcott. From an order of the Appellate Division of the Supreme Court (172 App. Div. 485,158 N. Y. Supp. 785) modifying, and, as modified, affirming, an interlocutory judgment of the Special Term for plaintiff, defendant appeals by permission, the Appellate Division certifying questions. Order modified in accordance with the opinion, and questions certified answered, some in the negative and two in the affirmative.

The Appellate Division certified the following questions:

1. Is the defendant, under the contract, Plaintiff's Exhibit 1, entitled to charge interest compounded monthly at the rate of 6 per cent. on all monthly debit balances due from the plaintiff to the defendant?

2. Did the accounts current, Plaintiff's Exhibit 22, rendered by the defendant to the plaintiff become accounts stated and settled, and is the plaintiff precluded under the pleadings and findings from objecting on the accounting to the items in said accounts which are in derogation of the contract?

3. Has the defendant a right under the contract, Plaintiff's Exhibit 1, to charge the plaintiff 9 3/4 per cent. commission on the sale of the consigned goods after the first $100,000 of sales had been made?

4. Is the defendant only entitled to charge a commission of 5 per cent. on all sales over and above $100,000 to be computed on the net amount of sales of the consigned goods during the lifetime of the contract?

5. Has the defendant the right to charge the plaintiff with the fees of attorneys and detectives employed by him for his own protection in a controversy arising in and about the severance of the relations between them, under the contract, Plaintiff's Exhibit 1, and in the protection, as against the plaintiff, of defendant's lien and interests in the security which he claimed to hold?

Julius Henry Cohen, of New York City, for appellant.

Frederick M. Czaki, of New York City, for respondent.

CARDOZO, J. (after stating the facts as above).

The action is one for an accounting by a principal against a factor. The plaintiff agreed to consign to the defendant its goods then owned, and also all goods acquired during the term of the agreement. The defendant was to sell them, and was to collect the accounts. He agreed to make advances on demand up to 50 per cent. of the net cost of the merchandise and 75 per cent. of the net value of outstanding accounts. He was to receive for his services ‘9 3/4 per cent. commission on the first $100,000 of sales' and 5 per cent. on all sales above that amount. Interest was to be ‘charged on the account current * * * at the rate of 6 per cent. per annum.’ The agreement was dated June 21, 1909, but business was not begun under it till September 1, 1909. It was to continue from its date ‘to and including September 1, 1910, and thereafter subject to termination at any time upon thirty days' written notice given by either of said parties to the other.’ The plaintiff gave notice of termination on September 29, 1911.

During this period of their dealings the defendant sent the plaintiff monthly accounts current. The first account was rendered on October 1, 1909, and the last on September 1, 1911. The trial judge found that the plaintiff retained them; that it made no objection to any of them till October, 1911; that they were untainted by fraud; and that the plaintiff read and understood them. He refused, however, to find that they were ‘intended by the defendant and understood by the plaintiff as complete statements of the account between the parties for the period covered thereby.’ In these statements the plaintiff is charged with the defendant's advances, his disbursements, and his commissions. It is credited with his collections, which are not itemized. To explain the computation of commissions, there is appended a schedule of ‘sales as reported.’ This schedule gives the total sales for each day. It does not give the items and does not name the purchasers. The debit balance in each statement includes interest on advances and on other charges. The balance thus reached is carried forward into the next following statement, and bears interest again. Interest is thus compounded monthly. During the first year of business commissions are charged on the first $100,000 of sales at the rate of 9 3/4 per cent., and thereafter at the rate of 5 per cent. During the second year, beginning September 1, 1910, this process is repeated. The trial court and the Appellate Division held that the charge of compound interest was unlawful. They held also that commissions at the rate of 9 3/4 per cent. were due on $100,000 of sales during the first year, and not on $100,000 in each year. Those are the chief items in dispute. Some minor items of disbursements will be referred to later.

[1][2] 1. The charge of compound interest was correctly disallowed. The rule is settled that a promise to pay interest upon interest is void if made at a time before simple interest has accrued. Young v. Hill, 67 N. Y. 162, 23 Am. Rep. 99. The provision in the contract that interest shall be ‘charged on the account current * * * at the rate of 6 per cent. per annum’ must therefore mean simple interest. Any other promise, made at the outset of the dealings, would be invalid. There are times, however, when a promise to pay compound interest will be enforced, if made after simple interest has accrued; and the promise may be the implied one that results from the statement of an account. Even in such cases there must be forbearance or other consideration to make the promise good. Young v. Hill, supra. There was no promise here unless the retention of the accounts current establish an account stated.

[3][4] The trial court held that it did not, and we find no error in the ruling. There is no doubt that an account stated may sometimes result from the retention of accounts current without objection. Knickerbocker v. Gould, 115 N. Y. 533, 537,22 N. E. 573;Spellman v. Muehlfeld, 166 N. Y. 245, 59 N. E. 817. But the result does not always follow. It varies with the circumstances that surround the submission of the statements (Harvey v. West Side Elevated R. Co., 13 Hun, 392; Eames Vacuum Brake Co. v. Prosser, 157 N. Y. 289, 300,51 N. E. 986), and those circumstances include, of course, the relation between the parties. Here the relation was that of principal and factor under an agreement that was to last at least a year, and indefinitely thereafter unless terminated by notice of 30 days. Not till the contract was at an end did the duty to make advances cease. Not till then did the right to recover past advances accrue. Indeed, it is doubtful whether even then there was any personal liability until the security had been exhausted by the enforcement of the lien. The rule in this state is that, in the absence of some agreement to the contrary, the consigned goods are the primary fund to which the factor must look for reimbursement. Gihon v. Stanton, 9 N. Y. 476;Hidden v. Waldo, 55 N. Y. 294, 297;Matter of Atwood & Sons, 3 App. Div. 578, 581,38 N. Y. Supp. 338. The same rule prevails in other jurisdictions. Matter of Murphy, 214 Pa. 258, 63 Atl. 745, 5 L. R. A. (N. S.) 1147,6 Ann. Cas. 308;Balderston v. Nat. Rubber Co., 18 R. I. 338, 27 Atl. 507,49 Am. St. Rep. 772;Frothingham v. Everton, 12 N. H. 239;Kraft v....