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Shapiro Brothers Factors Corp. v. Cherokee Silk Corp.

Decided: January 10, 1935.


On appeal from a judgment of the Passaic County Circuit Court.

For the appellants, Peter Cohn.

For the respondent, David Kimmel.


The opinion of the court was delivered by

HEHER, J. By a contract entered into on June 1st, 1932, plaintiff (hereinafter referred to as "Shapiro") undertook to factor the goods of the defendant-corporation (hereinafter referred to as "Cherokee"), a dealer in silks. Shapiro thereby agreed to "guarantee payment of all orders received" by Cherokee, and "approved" by the former's credit bureau, provided

Cherokee made "good and proper deliveries pursuant to such orders." This guaranty was expressly "limited to a guarantee of the solvency of the customers, and the payment by the customers at maturity when they accepted the merchandise as good and valid delivery under the various orders and contracts so approved and checked by" the factor "as to credit." It was further provided that if the vendee "claims there have been defaults or delays in deliveries or imperfect, defective or insufficient deliveries and refuse to pay for any other reason except because of insolvency and consequent inability to pay," Shapiro would, in such event, "have the right to charge back * * * such uncollected accounts, and be relieved of * * * responsibility." There was an express assignment to Shapiro, effective "immediately upon the shipment of the goods," of "all outstanding accounts arising from shipments" approved by it. Shapiro bound itself to advance to Cherokee, monthly, eighty-five per cent. of the price of the merchandise shipped, less "returns, * * * discounts and allowances," and to pay the balance of Cherokee's "equities" when the "accounts shall have been paid by" its "customers or at their maturities whichever is sooner." There was a further stipulation that all sales shall be "credited" monthly, and that in case the vendee shall, after the sale shall have been so credited, "reject the same or refuse to pay the full purchase price thereof when due, on account of any merchandise difference * * *, or for any reason claims a defense or offset thereto, the amount credited * * * with interest * * * may be charged back to" Cherokee. The term prescribed was from the date of the contract to May 31st, 1933, and "thereafter from year to year unless ninety (90) days' notice in writing in any year is given by either party of its intention to terminate the contract on May 31st next succeeding."

Kaplan, Klotz and Hopkins, by a separate undertaking, guaranteed that "the said agreement and all the terms and provisions thereof * * * shall be duly, fully and faithfully carried out and performed" by Cherokee, "without recourse first being had against" the latter.

Merchandise was sold and delivered by Cherokee to two concerns, Ambassador Silk Company (hereinafter referred to as "Ambassador") and Union Silk Mills, Inc. (hereinafter referred to as "Union"). These purchasers, claiming prejudicial delays in the delivery of merchandise, in violation of their respective contracts with Cherokee, withheld payment of the price of delivered goods, and Shapiro "charged back" to Cherokee the unpaid sums advanced thereon, $10,624.31, but the latter did not make refund.

The gravamen of the complaint is this asserted indebtedness. Cherokee counter-claimed, averring that Shapiro, on September 13th, 1932, "terminated said contract without notice, cause or reason therefor, declined and refused to carry out the terms of its contract, and declined and refused * * * to make advances up to eighty-five per cent. of the net shipments during any one month, as provided for * * * in the said agreement," and that, in consequence thereof, it was required to dispose of its merchandise in the open market, with substantial loss.

Judge Mackay, in the charge, directed the jury to find for plaintiff in the sum claimed in the complaint, "subject only to the counter-claim." The issue of performance vel non was submitted under instructions that are not criticized. The jury returned a verdict for plaintiff against all defendants (except Hopkins, who was not served with process), in the full sum claimed in the complaint, and "no cause for action" on the counter-claim, and from the judgment thereon Cherokee and Kaplan appeal.

The first insistence of appellants is that there was error in the denial of the motion to nonsuit. The asserted right to a nonsuit seems to be grounded upon the theory that Cherokee substantially performed its contracts with Ambassador and Union; that any delays in deliveries were waived by the latter, and that, consequently, they were not justified in withholding payment for the goods delivered. It is said that, in that situation, it was incumbent upon Shapiro, as the assignee ...

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