233 F. 309 | S.D.N.Y. | 1916
This is a motion made by plaintiff to strike out the counterclaim contained in the answer of defendant tc the amended bill of complaint, on the ground that the same does not contain facts sufficient to constitute a set-off in equity.
The suit is brought by plaintiff, as trustee in bankruptcy of the Venus Silk Glove Manufacturing Company Incorporated, a New York corporation, to recover certain moneys, alleged to amount to about $24,000, received by defendant under certain contracts which are alleged to be illegal and void by virtue of section 439 of the New York Penal Law. The bankrupt corporation was organized in December, 1913, for the purpose of engaging in the manufacture and sale of silk gloves and similar articles. Upon its incorporation it succeeded to the business of a Pennsylvania corporation which had been organized for the purpose of carrying on a similar business. Defendant corporation was accustomed to act as a factor for enterprises engaged in businesses of this nature.
The bill of complaint sets forth two causes of action. In the first cause of action it is alleged that in or about December, 1913, defendant entered into a contract with the bankrupt corporation whereby it agreed to perform for the bankrupt the services of a factor in consideration of the payment by the bankrupt to defendant of a commission of 10 per cent, of the gross income derived by. the bankrupt from all of its sales. It is further alleged that contemporaneously therewith, and in violation of section 439 of the New York Penal Law, the defendant, for the purpose of procuring the making of such contract by the bankrupt, agreed with Wunsch, president and principal stock
In the second cause of action it is alleged that in or about the month of August, 1911, defendant entered into a similar contract with the predecessor Pennsylvania corporation, to the rights of which the bankrupt corporation had succeeded. It is alleged that at the time of the making of such contract an arrangement was made to pay Wunsch, president and principal stockholder of the Pennsylvania corporation, a similar commission of 6 per cent, from the 10 per cent, commission which was received by the defendant corporation.
Plaintiff, after offering to permit defendant to retain what plaintiff alleges to be just compensation for defendant’s services as a factor, viz., 4 per cent, of the 10 per cent, commission received by it, prays that it be adjudged and decreed—
“that all moneys received by the defendant pursuant to the contracts herein complained of, over and above its equitable compensation for services rendered, belong as of right to the bankrupt estate, ~ * * and that it be adjudged and decreed that defendant hold the sum of $24,000 in trust for the bankrupt, and that it be further adjudged and decreed that the defendant pay to complainant, as trustee for creditors of said bankrupt, the said sum of $24,-000. * * *”
Defendant sets up “a set-off or counterclaim to the causes of action attempted to be set forth in the amended bill of complaint.” Defendant alleges that the entire assets which have come into the hands of the plaintiff trustee are wholly insufficient to pay any dividends upon the claims of creditors of the bankrupt; that defendant has duly filed its proofs of claims, showing that the bankrupt is indebted to it in the sum of $23,609.12, and that these claims are made up of an indebtedness upon drafts accepted and paid by defendant for account of the bankrupt and an indebtedness growing out of a deficiency judgment entered against the bankrupt in favor of the holders of certain of its bonds, of which the defendant was the holder of $10,000, principal amount.
Defendant has not moved to dismiss the bill; its counsel stating that stich a motion was at first contemplated, but that it was decided that the same result could be reached by the equitable set-off pleaded in the answer.
Judge Cardozo in Schank v. Schuchman, 212 N. Y. at page 358, 106 N. E. at page 128, calls attention to the proposition that:
“Tlie action for money liad and received is based, however, upon equitable principles.”
“Tile plaintiffs must show that it is against good conscience for the defendant to keep the money. * * * They do not show this, where they have consumed what they have received, unless the money exceeds the fair value of that which the defendant gave them. If the defendant’s work and wares were paid for at fair prices, the plaintiffs have had a just return for every dollar they have parted with, and the defendant, therefore, can keep the money with good conscience:” Schank v. Schuchman, supra, 212 N. Y. at page 358, 106 N. E. at page 128.
In the case at bar, however, it appears that the customary charge of a factor was 4 per cent., and that, if plaintiff’s allegations are true, defendant was guilty of the offense denounced by section 439 of the New York Penal Taw. There was, therefore, a wide disparity between the value of the services and the price which was agreed upon as the result of the commission of 6 per cent, to Wunsch on the side.
Whether, therefore, the complaint is looked at as setting forth a cause of action in equity or at law, the result is that plaintiff is suing defendant for money had and received, to wit, the amount over and above what may be the fair and reasonable value of the services of defendant as a factor. It may be that plaintiff could have sued to recover back the full 10 per cent.; but I express no opinion upon that proposition, because plaintiff has taken the better course, and, believing himself in equity, has followed the thought of the case of Schank v. Schuchman and offered to let defendant retain what would be fair compensation for its services.
“If the defendant were suing the plaintiffs for the price, and the court were to deny him relief, its refusal would not rest upon the ground that it would be against good conscience for him to have the money. The basis of its refusal would rather be that because of Ms illegal acts the law would leave him where it found him. Oscanyan v. Arms Co., 103 U. S. 261 [26 L. Ed. 539]; McMullen v. Hoffman, 174 U. S. 639 [19 Sup. Ct. 839, 43 L. Ed. 1117].”
So here I think the defendant should be left where in law it placed itself. If, for instance, the commissions had not been paid, defendant could not have sustained an action for and obtained recovery of such commissions. That, however, is precisely what it is attempting to do by this set-off, which constitutes an affirmative defense.
It seems to me that, from whatever point of view the question is approached, the result is that the set-off cannot be entertained. I deem it desirable, however, to point out that defendant denies that the transactions were of the sinister and improper character alleged by plaintiff, and that in describing the transactions I have, of course, merely referred to them in the manner set forth in the complaint. 1 make this note because some stranger reading this memorandum might form an opinion of defendant which in fact might be unjust and unsupported on the trial of the case.
Motion granted.
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