Capital Knitting Mills, Inc. v. Duofold, Inc.

131 A.D.2d 87, 519 N.Y.S.2d 968, 1987 N.Y. App. Div. LEXIS 48573
CourtAppellate Division of the Supreme Court of the State of New York
DecidedOctober 20, 1987
StatusPublished
Cited by2 cases

This text of 131 A.D.2d 87 (Capital Knitting Mills, Inc. v. Duofold, Inc.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Capital Knitting Mills, Inc. v. Duofold, Inc., 131 A.D.2d 87, 519 N.Y.S.2d 968, 1987 N.Y. App. Div. LEXIS 48573 (N.Y. Ct. App. 1987).

Opinion

OPINION OF THE COURT

Sandler, J.

The defendant, Duofold, Inc., appeals from an order of the I.A. Court denying its motion for summary judgment dismissing the first cause of action of plaintiff, Capital Knitting Mills, Inc., on the ground that the action is void as based on an oral promise "to answer for the debt, default or miscarriage of another person” (General Obligations Law § 5-701 [a] [2]), and further appeals from the court’s denial of its motion to dismiss the second cause of action seeking to recover on the basis of unjust enrichment.

The facts adduced on behalf of Capital, which must be assumed to be true on this appeal from a denial of a motion for summary judgment, disclosed the following relevant events. In late 1983, Duofold, a manufacturer and seller of underwear, undertook to develop a new line of products for which it required a special fabric. After discussions with several fabric suppliers, including Capital, Duofold ordered from Capital a certain quantity of the fabric in various striped colored patterns. In reliance upon this order, Capital undertook to acquire from its suppliers the yarns that it would require to manufacture the ordered fabric.

After the initial order was received on December 22, 1983, and after the yarn was ordered, Russell Pitman, a merchandise manager for Duofold involved in the merchandising and manufacture of the products, informed Capital that the ordered fabrics were to be shipped to Holtz and Company, which [89]*89was going to manufacture the goods for Duofold, and that Capital would receive a purchase order from Holtz which would include the fabrics previously ordered by Duofold. Pitman was informed that Capital could not proceed until it had checked Holtz’s credit with its insurance company, London Guaranty.

In a communication dated February 15, 1984, London Guaranty informed Capital that its last financial statement for Holtz was dated in 1982 and was insufficient to serve as a basis for a credit approval. In addition, London Guaranty advised that all of Holtz’s financing at that time was secured, that its condition was unbalanced, and that the company’s trend was down. Capital undertook to secure from Holtz an updated financial statement, but although a new statement was promised, none was ever received. Capital then informed Pitman that under the circumstances it could not sell the fabric to Holtz, and Pitman advised that they were "not to be concerned because Duofold was the responsible party.”

On the basis of this assurance, Capital undertook to proceed with the production in accordance with a telephone order from Holtz dated February 6, 1984, and a confirmatory purchase order from Holtz dated February 9, 1984, which orders included the original fabrics ordered by Duofold with certain modifications in color patterns that had been agreed on. Upon receipt of Holtz’s purchase order, Capital’s executive wrote on it the words "1982 financial statement”, referring to the absence as of that date of an updated credit reference from London Guaranty. Some two weeks later London Guaranty advised that they had approved credit for Holtz limited to $20,000.

On or about March 15, 1984, Capital informed Holtz that Capital could not accept the purchase order in the light of the poor credit rating. In a following telephone conversation with Pitman describing the situation, "Pitman reiterated his promise that Duofold was the responsible party.” At about the same time, Duofold paid Capital with respect to the fabrics covered in its original order and which thereafter had been included in the subsequent order from Holtz, although none of the fabric covered by that payment had been shipped to Duofold, all having been shipped to Holtz in accordance with Duofold’s request. Capital further asserts that Duofold continued to supervise and control every aspect of the transaction, reserving the right to alter production schedules, retaining responsibility for changes in the garment specifications, and [90]*90retaining the right to alter the quantities of merchandise to be produced.

On or about March 26, 1984, Duofold requested a reduction in the quantities of the fabric to be supplied by Capital and the garments to be manufactured by Holtz. Thereafter, Pit-man assured Capital, in response to their expression of concern lest they be stuck with excess goods, that Capital need not be concerned because Duofold was responsible for all the yarn and fabric to be supplied by Capital. This assurance is alleged to have been confirmed by a letter to Holtz in which an executive of Duofold stated that Duofold would accept responsibility for yarn or fabric inventories in excess of its revised requirements.

By the end of April 1984, Holtz had fallen behind in the payments for which it had been invoiced by Capital. As a result, a Capital executive proposed to Duofold that Duofold pay directly for all the goods, with Holtz to continue doing the cutting and sewing. In an affidavit submitted by Capital’s sales manager, he asserts that in a telephone conversation in June 1984 Pitman agreed that Duofold would pay Capital directly for all the goods covered by Holtz’s purchase order subject to the agreement of Holtz, and that in a separate conversation Capital was informed that Holtz agreed to this arrangement. Allegedly pursuant to these conversations, Capital sent a letter to Mr. Pitman on June 7, 1984, enclosing all invoices previously billed to Holtz and Company, and stating Capital’s understanding that Duofold had agreed to pay Capital directly for the piece goods and trimming, and to deduct the cost from Holtz and Company bills. No affirmative response to this letter was received, and no payment from Duofold was forthcoming.

Thereafter, on or about June 25, 1984, Capital was informed that Holtz had filed a petition in bankruptcy on June 14, 1984. After various conversations between Capital and Holtz, and Capital having received no payment, Capital on August 24, 1984 sent Duofold an invoice for the value of the fabrics then remaining at Capital. This action seeks the recovery of the amount set forth in that invoice as well as the invoices sent to Duofold together with a letter on June 7, 1984, which had previously been billed to Holtz.

In denying Duofold’s motion for summary judgment, the I.A. Court treated the motion as primarily based on that provision of the Statute of Frauds set forth in UCC 2-201 (1), [91]*91which provides that a contract for the sale of goods valued in excess of $500 must be in writing. The court concluded that factual issues were presented as to whether or not the action falls within the exception to that provision of the Statute of Frauds set forth in UCC 2-201 (3) (a), which applies to specially manufactured goods which are not suitable for sale to others in the ordinary course of the seller’s business. The court did not directly address the issue primarily presented on this appeal, which is whether or not the first cause of action is void as based on an oral promise "to answer for the debt, default or miscarriage of another person”.

Preliminarily, we are in agreement with defendant that the record fails to sustain plaintiff’s second cause of action based upon the theory of unjust enrichment. Whatever may be Duofold’s responsibility for the fabric shipped to Holtz and manufactured but not yet shipped to Holtz, Duofold, having fully paid Holtz for the manufactured goods delivered by Holtz to it, cannot fairly be said to have been unjustly enriched.

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Cite This Page — Counsel Stack

Bluebook (online)
131 A.D.2d 87, 519 N.Y.S.2d 968, 1987 N.Y. App. Div. LEXIS 48573, Counsel Stack Legal Research, https://law.counselstack.com/opinion/capital-knitting-mills-inc-v-duofold-inc-nyappdiv-1987.