The opinion of the court was delivered by: LACEY
Congress Factors, a Pennsylvania corporation (Congress), sues for alleged breach of its written factoring agreement with American Velour Mills, Inc., a New Jersey corporation (American); and it claims as damages commissions it would have earned had American's accounts receivable been factored with it between November 30, 1968, and June 29, 1969.
Jurisdiction lies under 28 U.S.C. § 1332.
Malden Mills Incorporated, a Massachusetts corporation (Malden), is the named defendant because of its written agreement guarantying American's obligations under the aforesaid factoring agreement.
The principal issues are whether the factoring agreement was orally terminated; and whether the plaintiff's conduct, in November, 1968, and thereafter, estops it from prevailing on its claim.
A non-jury trial was had herein on September 22, 1971. This Memorandum Opinion will first detail the testimony. Thereafter, in opinion form, Findings of Fact and Conclusions of Law will be set forth, pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.
On June 29, 1967, Congress and American entered into a factoring agreement, under which Congress was to factor all of American's accounts receivables, for a term of one year, with an automatic renewal each year unless either party gave written notice of termination to the other party on or before sixty (60) days prior to the expiration date in any year.
At or about the time of the signing of the factoring agreement, American was merged into the defendant Malden; and Malden assumed liability for American's contractual obligations and liabilities and guaranteed American's performance under the aforesaid factoring agreement.
Harmony prevailed until November 30, 1968. Thereafter, American receivables went not to Congress, but to another company. Defendant contends that this change was with the knowledge and consent of Congress and followed an oral agreement terminating the factoring agreement. Plaintiff not only denies oral termination; it also maintains that New York law (which the parties agree applies) bars oral termination under the instant circumstances.
It is noted that the defendant, notwithstanding its assertion of the oral agreement, and presumably out of an abundance of caution, did by letter of April 18, 1969, formally terminate the factoring agreement pursuant to its terms.
Turning to the events which generated the dispute, the principals therein were the litigants' presidents, Mr. Goldman of Congress and Mr. Feuerstein of Malden, each of whom testified as the sole witness for his side. In substantial part their testimony was similar, or at least, reconcilable: That American had been or was being merged out of existence; that Malden, the surviving entity, had arranged for a $4 million loan from Boston First National Bank; that the Boston bank had demanded all of Malden's factoring business for its own factoring house; that Malden management had succeeded in having the American receivables excepted from this demand; that, out of a long standing friendship and business relationship, Aaron Feuerstein's father, obviously a strong force in Malden, wanted the American factoring business to go to another factor, Meinhard Commercial; and that it was to discuss these matters that Mr. Feuerstein initiated certain telephone conversations and conferences with Mr. Goldman.
The critical meetings were in November, 1968. Aaron Feuerstein met twice with Robert Goldman and the latter's father, once at lunch and thereafter on another day, in Congress' office.
These meetings were preceded, and possibly arranged by, a telephone call from Aaron Feuerstein to Robert Goldman, memorialized by Mr. Goldman in his file as follows (Ex. P-4):
Aaron Feuerstein called to ask if he could draw down the full amount of his credit balance with us, to which the writer agreed. He went on to say that Malden Mills is working out a banking relationship with First National Bank of Boston in conjunction with their present arrangement with New England Merchants. He mentioned that there is considerable pressure by First of Boston to pull the factoring business out of Meinhard and Congress and bring it into their own company. * * *
Mr. Goldman, in testifying, denied that Mr. Feuerstein had ever asked him, or that he had ever volunteered, to terminate the factoring agreement. While maintaining that termination had never been discussed, Mr. Goldman acknowledged that it was an "obvious implication that Feuerstein was contemplating termination." Mr. Feuerstein stated that termination was discussed in these terms: That because of his father, he had no alternative other than to attempt to obtain the Goldmans' consent to terminate the factoring agreement; that Robert Goldman said "he had no intention" of insisting upon literal compliance with the termination clause of their agreement,
that he was "not that kind of a factor," that, the decision having been made, "it is wiser to terminate," that Mr. Feuerstein "should go forward immediately with the transfer," and that the attorneys "could work out the documents." Mr. Feuerstein then asked what "immediately" meant; and Mr. Goldman answered "tomorrow." On this note, the meeting ended.
Mr. Goldman testified that, even following their last meeting, he had no basis for believing Congress would after November 30, 1968, receive no more American receivables. He discovered in December, 1968, "when someone told him," that such was the case, and he then "assumed" the receivables were going to another factor. He spoke with Mr. Feuerstein on January 10, 1969, a conversation again preserved by a file memorandum (Ex. P-5):
Mr. Goldman stated, concerning this conversation, his concern about the unpaid mortgage, which was "tied in" to the factoring agreement: "* * * we cross collateralize them;" and he added that the loan came due when "the account receivables terminate."
Mr. Goldman again raised the question of the $400,000 loan, in a call to Mr. Langerman, counsel for Malden, on February 7, 1969. His ...