Case ID: ad_120/html/0625-01.html
Source: Caselaw Access Project
Author: {"author": "Smith, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Oneida Steel Pulley Company, Respondent, v. New York Leather Belting Company, Appellant.
    Third Department,
    June 25, 1907.
    Principal and agent — accounting — admission by' pleading — contract guaranteeing payment construed.
    In an action against selling agents for an accounting as to goods sold, a credit admitted in the complaint but denied by answer cannot be claimed by .the agent to have been admitted by the principal. .
    A contract with selling agents providing that they at their option may either pay the cost of credit insurance on the amount of business done by them, in which event they shall make good to the principal any initial loss which they would be forced to stand in order to give a claim for a credit loss; or may guarantee the accounts of sales by them, in which event the principal will at any time the agents think it necessary to push collections for goods sold, assign the account to them, or if they do not wish the account pushed, the agents will be released from further guaranty on that particular account, will be construed to mean that the agents shall guarantee the accounts or procure credit insurance as a substitute. Hence a failure of the agents to procure insurance for the second year of the business does not relieve them from their liability-as guarantors of the accounts.
    Such guaranty is one of payment,' not of collection, and the neglect of the principal to collect an account before the insolvency of the debtor does not release the agents from their guaranty.-
    Appeal by the defendant, the New York Leather Belting Company, from a judgment of the Supreme Court in-favor of the plaintiff, entered in the office of'.the clerk of the county of Madison on the 17th day- of September, 1906, upon the report of a referee. ■
    
      George Murray JBroohs and Henry Woog, for the appellant.
    
      H. W. Coley \_T. A. Devereux of counsel], for the respondent.
   Smith, P. J.:

The contract' upon which this action is brought was executed upon the 15th day of July, 1902, and was to continue in force for two years. TJnder that contract the plaintiff, the party of the first part, was to carry at the store of the defendant, the party of the second part, a full line of steel-center pulleys and also a. complete stock of steel-rim pulleys, The party of the second part agreed to industriously prosecute the sale of said pulleys, and to generally look after the business- as if it was being conducted in their' own name.” The contract contains'this further provision: “ It being the understanding that the business, while being carried on in the name of -the party of the first part, is to be entirely in the hands and management for Chicago and territory hereafter named of the party of the second part.” ■ After other provisions immaterial to this controversy, the contract reads: “ The said party of the second part may at their option either pay the cost of credit insurance on the amount of business done by them on the wood-rim and steel-rim pulleys, and in the event of their paying such insurance premiums,- they shall make good to .the-party of the first part any initial loss which they would be forced to stand, in order to give them a claim for a credit loss, or if they so elect they may guarantee the accounts of sales of wood-rim and steel-rim pulleys made from • Chicago, and.in the event of their electing to guarantee, the said. party of the fii-gt part will at any ■ time that party of the second part thinks it necessary to push for- ' the collection of any accounts so sold, assign the account to them, or if, for business reasons, they don’t wish the account pushed, the said party of the second part will be released from further guarantee' of that particular account.”

After two years the contract was terminated. Meantime the plaintiff had furnished to the defendant large quantities of these pulleys of the different, kinds. ■ Some of the pulleys, had' been, sold and some returned'. The first cause of action was for an accounting for the pulleys that had been neither sold nor returned. After- • examination of the evidence we are satisfied that the referee has given the defendant full credit for all-sums to which it is entitled to credit. • The defendant challenges this conclusion by referring to a credit admitted in the complaint, and claiming that that has not' been allowed in the account. The allegation's of the complaint,however, were denied by the answer, and the plaintiff put to its- proof upon all issues. Under such circumstances it cannot claim- the credit allowed in the complaint. (Hurd v. Hannibal & St. J. R. R. Co., 18 N. Y. Wkly. Dig. 239.) Were the rule otherwise, however, it is not clear that this very' sum has not been allowed to- the defendant by the referee. While the evidence is not perfectly clear, it would seem to be more probable that due credit was given therefor. ■

The second cause of action is based upon the guaranty clause in the contract. An account ivas turned over to the plaintiff for pulleys sold in November, 1903. In March, 1904, the debtor became insolvent, and the account was lost. For this account the referee has held the defendant liable to the plaintiff upon its guaranty. This holding is challenged by the defendant upon two grounds: (1) That there was no guaranty that credit insurance had been taken out for. the first year; that it was the duty of the plaintiff to see to it that credit insurance was taken out for the second year, and, failing to do so, the plaintiff cannot claim an existing guaranty on the part of the defendant. This contention, however, is not supported by the terms of the contract. The intention is clear that the defendant shall be the guarantor of the accounts, defendant is permitted, however, to procure credit insurance as a substitute. No duty is imposed upon the plaintiff to procure such insurance, and the failure of the defendant to procure that insurance for the second year does not relieve it from its liability as guarantor of this account.

A further contention is made by the defendant to the effect that, if there be a guaranty, the guaranty is one of collection, and not of payment, and that the plaintiff by neglect to collect the account before the insolvency of the debtor has released the defendant.from its guaranty. If, in the contract, there .were no other clauses indicating the intent of the parties, it might be more difficult to say whether this was a guaranty of collection or of payment. Other provisions in the contract, however, seem to make it plain that this was to be strictly a guaranty of payment. These sales were to be made by the defendant, who presumptively knew its customers. The business was entirely in the hands and management ” of the defendant, and the defendant was “ to generally look after the business as if it was being' conducted in their own name.” More conclusive, however, upon the interpretation of this clause in the contract, vrould. seem to be the provision that if at any time the party of the second part, the defendant, should think it necessary to push for the collection of an account so sold, the first- party should assign such account to the defendant. One who. intended, to guarantee simply the collection of an account would hardly assume the responsibility of taking an assignment' and collecting it himself. This provision is wholly inconsistent with any other intent upon the part of the defendant than the intent to guarantee the payment of the accounts which the defendant itself made. ''

I am unable to find ■ any reason for- disturbing the conclusion of the referee, which should be affirmed, with costs.

‘ Judgment unanimously affirmed, with costs. '