Gross v. Louis Metzger & Co.

The plaintiffs are entitled to judgment herein for $600.39, with interest. On October 31, 1913, defendant made a general assignment for the benefit of its creditors. During the preceding summer, Edward Friedman, assignor of the plaintiffs, had sold merchandise to the defendant, on account of which $3,778.42 remained unpaid on October 31st. Prior to that date Friedman had assigned to various firms items representing all except $1,500.95 of defendant’s indebtedness to him, and defendant had received due notice, by registered mail from the assignees and by conversations with Friedman, of such assignments. On November 22, 1913, Friedman signed a composition agreement with the defendant and its creditors, on a 40 per cent, basis, without specifying therein the amount due him, although in a statement of account sent in by Friedman to the defendant, at the latter’s request a day or two after October 31st, Friedman set out all of the transactions and “business relations” between himself and defendant, and did not indicate on the face of this statement that, as he had advised defendant orally, portions of the indebtedness remaining from such transactions had been assigned by Friedman. Despite its knowledge, and due notice of these assignments, defendant did not have the 40 per cent, composition agreement signed by the firms to which Friedman had assigned portions of the account and did not list or schedule these assignees as creditors. The latter accordingly sued defendant for the full amount of their respective claims, rather than merely 40 per cent, thereon, and defendant had no alternative but to pay these claims in full. Defendant now asserts the right, in this suit

I do not find that Friedman or his subsequent assignees are in any way estopped from asserting against the defendant Friedman’s right to receive, under the composition agreement, 40 per cent, on the sum at that time remaining due to him from the defendant. The fact that the defendant, through its own failure to list proper claims of which it had due notice, and failure to procure the signatures of such debtors to the composition agreement, was obliged to pay such claims in full, rather than on a 40 per cent, basis, gives no right to recoup such losses out of Friedman’s dividend on the amount remaining due him. Harloe v. Foster, 53 N. Y. 385 , does not impress me as an authority to the contrary, inasmuch as that case dealt with the effects of fraud and misrepresentation and the creation of a secret preference, through the fraudulent acts of one participant in the composition. The creditor fraudulently put his signature'to the composition agreement for a claim which he had previously transferred, and he did this without either the debtor or the othér creditors knowing of such transfer. In the case at bar Friedman did not sign the composition agreement for any specified amount of indebtedness, the defendant undoubtedly had full knowledge of the assignment of all except $1,500.95 of the original indebtedness, and it appears from proceedings relative to the bankruptcy receivership that the other creditors had or were chargeable with notice, prior to November 22d, that Friedman’s claim was not $3,778.42, but some sum approximating $1,000.

Judgment for the plaintiffs is directed accordingly.