Ryttenberg v. Schefer

• Decision Date: 23 May 1904
• Citation: 131 F. 313
• Parties: RYTTENBERG v. SCHEFER
• Court: U.S. District Court — Southern District of New York

131 F. 313

RYTTENBERG v. SCHEFER

United States District Court, S.D. New York.

May 23, 1904

Morris J. Hirsch (Benjamin N. Cardozo and Herbert H. Maass, of counsel), for complainant.

Carter Hughes, Rounds & Schurman (Charles E. Hughes and Richard E Dwight, of counsel), for defendants.

HOLT District Judge.

This is a suit in equity brought by the trustee of the firm of Radon & Co., bankrupts, against the members of the firm of Schefer Schramm & Vogel, to determine the ownership of a fund. Radon & Co. were engaged in the business of commission merchants and dealers in woolen goods, in the city of New York. On December 7, 1897, they made a written agreement with the firm of Schefer, Schramm & Vogel, who were commission merchants in New York, which agreement provided as follows:

'1. Radon & Co. agree to transact all their business through Schefer, Schramm & Vogel. The lease of the premises at 530 Broadway, now occupied by Radon & Co. shall be assigned to Schefer, Schramm & Vogel. All goods at present consigned or owned by Radon & Co. shall be consigned by their respective owners to Schefer, Schramm & Vogel as factors for sale upon commission.

'2. Schefer, Schramm & Vogel agree, on the request of Radon & Co., to advance to the respective consignors two-thirds of the net market value of the goods respectively consigned. Account sales shall be furnished to said consignors monthly and Schefer, Schramm & Vogel agree to discount such sales for the respective consignors.

'Schefer, Schramm & Vogel shall be entitled to a commission of two and one-half per cent. on the net amounts of sales, and interest in the accounts current with said consignors shall be charged and credited at the rate of six per cent. per annum.

'3. Radon & Co. agree to take charge of all said consigned goods for Schefer, Schramm & Vogel and of the sale of said goods, and shall defray all the expenses incident to such sale or to the business conducted at 530 Broadway, including the rent of said premises and the premiums for insurance on the said consigned goods, and shall reimburse Schefer, Schramm & Vogel for all payments made by them for any such expenses. But all sales shall be under the supervision of Schefer, Schramm & Vogel and shall be made in their name and on their behalf, and all goods sold shall be charged on bill heads reading 'Bought of Schefer, Schramm & Vogel.' The terms of sale shall in no case exceed four months from date of bills. Radon & Co. shall furnish to Schefer, Schramm & Vogel monthly accounts of sales made for the respective consignors.

'4. Schefer, Schramm & Vogel do not assume the risk of overadvances and Radon & Co. shall be liable to Schefer, Schramm & Vogel for any loss which may accrue by any such overadvances. An account shall be kept between Schefer, Schramm & Vogel and Radon & Co. which shall be called 'Radon & Co. Guarantee Account.' In this account Radon & Co. shall be charged with the net amounts of the account sales furnished by them to Schefer, Schramm & Vogel as aforesaid and also with the rent of said premises and premiums for insurance on said consigned goods and with any moneys paid by Schefer, Schramm & Vogel to Radon & Co., or on their behalf, to defray the expenses of the business conducted at 530 Broadway, or for any other purpose in connection therewith, and also with the commissions of Schefer, Schramm & Vogel payable as aforesaid. Radon & Co. shall be credited in said account with all payments upon the sales therein charged as aforesaid and they shall also be credited in said account with all commissions charged to consignors in their respective accounts current with Schefer, Schramm & Vogel.

'Radon & Co. shall at all times pay to Schefer, Schramm & Vogel, for credit to said guarantee account, a sufficient amount of money so that the debit of said account shall at no time exceed seventy-five per cent. of the solvent accounts then outstanding and representing the sales made as aforesaid in the department under the charge of Radon & Co.

'Interest shall be charged and credited in said guarantee account at the rate of six per cent. per annum.

'5. Radon & Co. shall be responsible for the stock of consigned goods of which they shall take charge as aforesaid, and for the management of the sales thereof, and they agree to furnish to Schefer, Schramm & Vogel letters from said consignors in which they shall respectively agree that Radon & Co. shall have the management of their sales and that Radon & Co. alone shall be responsible to them for such management, and that the responsibility of Schefer, Schramm & Vogel to said consignors shall be strictly limited to the financial part of the business entrusted to them as factors as aforesaid.

'6. This agreement shall continue in force for one year from January 1st, 1898, and after said date it shall continue subject to termination by either party upon six months' notice in writing.'

Radon & Co. continued to transact business at 530 Broadway for about a year and a half after the making of this agreement, and then removed to 32 Greene Street, and continued business there until April 14, 1903. On that day they filed a voluntary petition in bankruptcy, and a receiver was appointed, who on April 15th qualified and took possession of the merchandise at 32 Greene Street, and in a warehouse at 41 Thirteenth Avenue. Schefer, Schramm & Vogel claimed to have a lien upon such merchandise and the outstanding accounts under the above agreement; and thereafter, under an order of this court, entered upon the consent of all the parties, the merchandise was sold, and the proceeds thereof, together with the proceeds of the outstanding accounts collected by the defendants, were deposited in a trust company, subject to the order of this court. Subsequently, by like consent and order, the money so deposited was delivered to the defendants; they giving a bond to pay to the plaintiff any amount which might be ultimately found to belong to the bankrupt estate.

In pursuance of the above agreement, the lease of the premises occupied by the bankrupts at 530 Broadway, and later of those at 32 Greene Street, was assigned by Radon & Co. to Schefer, Schramm & Vogel. Schefer, Schramm & Vogel thereafter paid the rent to the landlord, and charged it to Radon & Co. in their account. Each of these premises consisted of an upper floor. On the street entrance were placed signs of 'Radon & Co.' On the entrance door of the floor rented were placed two signs-- one 'Radon & Co.,' and below that 'Schefer, Schramm & Vogel, Annex.' The merchandise shipped by manufacturers was invoiced to Schefer, Schramm & Vogel, and on its arrival at New York was delivered and kept at Radon & Co.'s place of business. Goods were also purchased by Radon & Co., and delivered and kept at their place of business. The consignment business gradually diminished, and the purchases by Radon & Co. gradually increased, so that for several years before the failure, and at the time of the failure, most of the goods on hand were goods purchased by Radon & Co. The bills for merchandise sold, whether consigned or purchased, had printed on them at the top 'Radon & Co., Woolen Commission Merchants, 32 Greene Street,' at one side, and 'Bought of Schefer, Schramm & Vogel, 476 & 478 Broome Street,' on the other side. Later an additional notice was stamped in red ink on the bills for goods sold, as follows:

'When making remittances to Messrs. Schefer, Schramm & Vogel, please mention 'For Department Radon & Co.' All other communications kindly address direct to Radon & Co., 32 Greene Street, New York.'

The payment of these bills was generally made to Schefer, Schramm & Vogel directly by the customers. Occasionally Radon & Co. received the payments, in which case they at once turned them over to the defendants. Detailed statements of all goods received from consignors, and of those purchased by the bankrupts, and also statements of all outstanding accounts for sales of goods, either owned by Radon & Co., or consigned to the defendants, were sent to Schefer, Schramm & Vogel by Radon & Co., at first monthly and afterwards quarterly. These statements were at first headed, 'Messrs. Schefer, Schramm & Vogel, Stock of Goods consigned by Radon &Co.' The headings were afterwards shortened to 'Messrs. Schefer, Schramm & Vogel, Radon & Co. Acct.,' or similar forms. On the basis of these statements, Schefer, Schramm & Vogel made their advances to Radon & Co. of 66 2/3 per cent. on the goods purchased, and of 75 per cent. of the outstanding accounts. The 66 2/3 per cent. of the value of the goods consigned by manufacturers was remitted directly to the consignors by Schefer, Schramm & Vogel. When these goods were sold, Schefer, Schramm & Vogel guaranteed the sale, and placed the amount of the sale to the credit of the consignor, deducting 7 per cent. commission for their services and guaranty. The net amount so credited to the consignor was charged against Radon & Co., and they were credited with all collections for goods sold. Radon & Co. were also charged with a commission of 2 1/2 per cent. on all sales made of goods either purchased by them or consigned by manufacturers, with the advances made to them on account of stock and outstanding accounts, with interest on the advances at 6 per cent., with the rent of the premises occupied by them, and with any other expenses paid by the defendants in connection with the business of Radon & Co.

At different times part of the stock on hand was deposited in a warehouse at 41 Thirteenth Avenue, for convenience, and the warehouse receipts taken in the name of Radon & Co., with the defendants' knowledge and consent. All the stock, whether at 530 Broadway or 32 Greene Street, or in the warehouse, was insured by ...