The events leading up to the present controversy are as follows:
In the early summer of 1948, the defendant Irving Rosenbaum, then president of Fairtex Glass Manufacturing Company, a New Jersey corporation, employed the plaintiff Landau to make an appraisal of the assets of the Fairtex Company. During the course of the appraisal, Rosenbaum mentioned to Landau that Fairtex needed additional working capital of $20,000 or $25,000 and asked Landau if he could arrange such a loan. At that time Fairtex was indebted to Mill Factors Corporation in the sum of $23,000 which was the balance due on two notes, one for $19,000 dated December 17, 1947, and one for $15,000 dated January 9, 1947. These notes were secured by chattel mortgages bearing even date with the notes.
Landau submitted the Rosenbaum request to David Cohn, the other plaintiff. After some negotiations, Cohn, who was the dominant figure in the transaction, agreed to lend Fairtex the sum of $22,000. At the same time he arranged to take over the Mill Factors mortgages. Landau also participated in the transaction.
The parties met on October 15, 1948, at the office of Cohn, to consummate the deal. Cohn had obtained an assignment of the Mill Factors mortgages for which he paid $23,000. Another chattel mortgage in the sum of $22,000 was executed by Fairtex Glass Company in favor of Cohn. The mortgage was payable in monthly installments of $1,000 with interest at six per cent. Fairtex also executed to the order of Cohn and Landau a promissory note in the amount of $45,000, dated October 15, 1948, and payable one month after date at the United States Trust Company of Paterson. This note was endorsed by Irving Rosenbaum, Mitchell Rosenbaum and Morris Rosenbaum. Additionally, all the stock of Fairtex Glass Manufacturing Company was assigned to Cohn as trustee. And finally, as a bonus for obtaining the loan, Fairtex obligated itself to pay to Cohn and Landau each the sum of $50 a week for 45 months, or a total of $19,500. These payments were to continue regardless of the fact that the mortgage might or might not have been satisfied before the expiration of the 45 months.
Simultaneously with the execution of the various documents detailed above, Mr. Cohn addressed a letter to the Fairtex Company, as follows:
Fairtex Glass Mfg. Co., Inc.
Att: Mr. Irving Rosenbaum
In accordance with the understanding arrived at at our office with you and the officers of the company and your attorney, David Kimmel, on behalf of myself and Sam Landau of Paterson, this letter will serve as an agreement on our part that the total obligation that you
owe covering the two mortgages held by us and taken by assignment from Mill Factors of New York, amount to $23,000.00 and that so long as you continue to reduce the subsequent mortgage executed by you as of this date in the face amount of $22,000.00 payable $1,000.00 each month from the date hereof with interest at 6%, you will not be called upon to satisfy or reduce the Mill Factors mortgage by reduction of payments on the principal amount thereof as provided therein, and ...