Duryee v. Gray

42 A. 603, 59 N.J. Eq. 595, 1899 N.J. LEXIS 159

• Court: Supreme Court of New Jersey
• Decided: March 6, 1899
• Status: Published

Opinion

The opinion of the court was delivered by

Dixon, J.

This controversy turns on the meaning of the certificate of guarantee issued by the United States Credit System Company and the bond of indemnity issued by the American Credit Indemnity Company, which are above set forth. Only the conclusions of the court on the points involved will be stated, leaving the account to be settled, in the court below, as suggested by counsel on the argument.

The certificate of guarantee is supplementary to the bond of indemnity; but only sales of merchandise and advances to manufacturers made during the year beginning February 1st, 1893, are within the scope of the certificate, while such sales and advances made during the preceding year are also, by force of the renewal clause, included within the scope of the bond. For this reason it is equitable that the appellant’s “ initial loss,” $16,000, and the indemnity fund under the bond, $12,000, should be applied first to the losses on transactions taking place before February 1st, 1893. As those losses do not amount to the aggregate of those sums, $28,000, the balance of that aggregate should be applied to the losses on the transactions of the later year; the residue of these losses is' the sum to which the respondent’s certificate should be applied.

In considering claims for merchandise sold, we understand that no account of this nature exceeds $10,000, and therefore the $10,000 clause of the certificate is here irrelevant.

To ascertain t'he loss occurring on the insolvency of any person owing for goods sold, there should be deducted from the balance owed at the date of insolvency—

First. Charges in the account for goods returned or replevied after insolvency, before April 10th, 1894, the date for adjustment according to the terms of the certificate.

Second: Discounts allowable on the balance if it had been paid at the date of insolvency. '

■Third. Amounts procured on account before April 10th, 1891.

Fourth. Amounts procurable on April 10th, 1891, by which we understand amounts likely to be received oir the account from any source other than the mere personal responsibility of the insolvent.

Fifth. Twelve and a half per cent, of the net balance remaining, which we understand to be the stipulated value of the personal responsibility of the insolvent, the last three deductions being the consideration for which the claim is to remain the property of the creditor.

The loss on the account for advances made to Atwood is within the scope of the certificate, and is subject to the conditions of the certificate, except so far as the conditions are modified by the terms of the rider relating to them.

One of those conditions is that no account shall exceed $10,000, and, if it does, the amount procured or procurable thereon shall be deducted pro rata. But we think this condition is modified by the terms of the rider to this extent, that the account which is not to exceed $10,000 is the balance remaining after crediting upon the advances the proceeds of sale of the merchandise in the hands of the creditor at the time of insolvency, so far as, the merchandise had been sold at the date of adjustment, and the market value of the merchandise then unsold. The balance-thus found, to the amount of $10,000, is to be included’ in the calculation of losses under the certificate. This balance, not exceeding $10,000, will be subject to further reduction by the amounts procured or procurable from any source other than the merchandise on which the advances were made and Atwood’s personal responsibility, and also by the twelve and a half per cent, for which the claim is to remain the property of the creditor.

So much of the advances made to Atwood before February 1st, 1893, as had not been paid at the time of his insolvency should be paid out of the goods then in the hands of the appellant, before the proceeds of those goods are applied to the payment of the advances made after February 1st, 1893. The effect of this will be, we understand, to show that there was no loss on the advances made in the earlier year.

The decree below should be reversed and the cause remitted to the court of chancery, in order that the appellant’s claim against the receiver may be adjusted according to the foregoing views.

For reversal — The Chief-Justice, Depue, Van Syokel, Dixon, Garrison, Gummere, Ludlow, Collins, Lippincott, Bogert, Hendrickson, Adams, Nixon — 13.

For affirmance — None.