Schloss Bros. & Co. v. Bennett

• Decision Date: 22 November 1932
• Citation: 183 N.E. 376,260 N.Y. 243
• Parties: SCHLOSS BROS. & CO., Inc., v. BENNETT et al.
• Court: New York Court of Appeals Court of Appeals

260 N.Y. 243

183 N.E. 376

SCHLOSS BROS. & CO., Inc.,

v.BENNETT et al.

Court of Appeals of New York.

Nov. 22, 1932.

Action by Schloss Bros., Incorporated, against Richard Walter Bennett and another, individually and as copartners trading as R. W. Bennett & Company. Judgment of Special Term granting plaintiff's motion for summary judgment was affirmed by the Appellate Division (234 App. Div. 845, 846, 254 N. Y. S. 925), and defendants appeal.

Reversed, plaintiff's motion for summary judgment denied, and defendants' motion for summary judgment granted.Appeal from Supreme Court, Appellate Division, First department.

Benjamin C. Ribman, of New York City, for appellants.

Harry Yarm, H. Lesser, and J. J. Lesser, all of New York City, for respondent.

POUND, C. J.

Plaintiff, a corporation, sues defendants, copartners, for a balance due on the purchase price of goods, wares, and merchandise. The answer alleges a novation whereby the plaintiff accepted R. W. Bennett & Co., Inc., a New York corporation, as its debtor in place of the partnership and released defendants from any liability for the cause of action sued on. Plaintiff's claim was originally against the partnership. Plaintiff continued for a time to do business with the corporation without discharging the partnership from its indebtedness.

The following facts appear: When the Bennett corporation was formed, each of the defendants loaned it the sum of $20,000. After the Bennett corporation found itself in difficulties, a creditors' committee was appointed which took possession of all its assets; and at a meeting of the committee, the defendants Bennett and Rosenberg agreed to waive their $20,000 claims against the Bennett corporation on condition, among other things, that all checks to be sent to the creditors in payment of dividends were to bear the following indorsement: ‘This check is accepted by the payee hereof in full payment, release and discharge of any and all claims of the payee against R. W. Bennett & Co., Inc., and also R. Walter Bennett and Samuel Rosenberg heretofore doing business under the firm name and style of R. W. Bennett & Co., Inc.’

The creditors' committee sent plaintiff a check for $2,457.97, representing the dividend on the total of plaintiff's claims which it was then asserting against the Bennett corporation as well as the copartnership, which check bore language releasing these defendants. Plaintiff returned this check to the committee with its letter, in which it stated: ‘We are willing to accept check for the 28.65% of the claim, that is, in two checks; one covering the amount for which the individual partners are liable, namely, $1,343.22, and the other check for the remainder, $1,114.75, covering the claim against the corporation, and we are willing to release our claim against the corporation * * *.’

In response to this letter, the creditors' committee sent plaintiff a letter, in which the committee said:

‘Upon advice of counsel, we are forced to state that because of the agreement entered into between the Creditors' Committee and R. W. Bennett and Samuel Rosenberg, all checks being sent to creditors must bear the endorsement that they are accepted in full settlement.

‘The consideration for this arrangement was the waiving by said R. W. Bennett and Samuel Rosenberg of their respective claims against the corporation in the amount of $20,000 each.

‘In view of this fact we are holding these checks here subject to your order.

‘Awaiting your further advice, we remain. * * *’

After the exchange of these two letters plaintiff actually did obtain two checks; one for $1,114.75 in payment of the dividend on the alleged claim against the corporation, which it evidently received direct from the creditors' committee; and the other for $1,343.22, which it received as the result of a judgment it obtained by default in a City Court action against the Bennett corporation.

The plaintiff availed itself of the benefit of the composition and now takes the position that it is not bound by the composition.

It further appears that the sale of the assets of the Bennett corporation resulted in a payment of $31,625, which became available for dividends. Bennett and Rosenberg could have shared in this to the extent of receiving a dividend on their claims for $20,000, which they wavied.

The complaint in the action in the City Court sets forth that the goods were sold to the partnership and that plaintiff did not release its claim against the partnership therefor. It recites the liquidation proceedings and alleges that as a result thereof there became due and owing from the defendant in the City Court action to the plaintiff the sum of $2,457.97, being 28.65 per cent. of their claim which was in the hands of the defendant available for payment to the plaintiff, wherefore they demanded judgment for the amount thereof less the amount of the dividend paid on the claim against the corporation. Plaintiff obtained judgment and applied the amount received on the partnership account leaving a balance of $3,345.15, the amount for which summary...