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Miller v. Discount Factors

Supreme Court of New York, Appellate Division

May 10, 1955

Miller
v.
Discount Factors

As Corrected May 24, 1955.

Page 773

[141 N.Y.S.2d 141] George Natanson, New York City, of counsel (Jay F. Gordon, New York City, on the brief; Harte & Natanson, New York City, attorneys), for plaintiff-appellant-respondent.

Maxwell H. Goldstein, New York City, of counsel (Schaeffer & Goldstein, New York City, attorneys), for defendant-appellant.

Page 774

Louis Gruss, New York City, of counsel (Finke, Jacobs & Hirsch, New York City, attorneys), for defendant-respondent.

Before PECK, P. J., and COHN, CALLAHAN, BASTOW and BOTEIN, JJ.

CALLAHAN, Justice.

On or about February 2, 1953, Philip Freeman Co., Inc., a domestic corporation engaged in business as a jobber of plumbing supplies, desired to borrow $30,000. It consulted a note broker who suggested that it draw a series of notes to the order of Walter Freeman, the corporation's president, who was to indorse the same. The broker consulted various money lenders, including Discount Factors, Inc. Although Philip Freeman Co. already owed Discount $20,000, the latter agreed to lend $15,000 more on five notes of $3,000 each to be indorsed by Isidore Miller, Walter Freeman's brother-in-law. Discount and the corporate borrower agreed that there was to be a charge of $675 as a bonus for the loan. The notes were to bear interest at 6% and were payable over a period from one to five months. It was further agreed that $500 was to be paid to the broker.

[141 N.Y.S.2d 142] These arrangements were carried out, and the five notes drawn as aforesaid were indorsed by Miller and delivered to Discount, which gave two checks totaling $13,825 to the order of Philip Freeman Co., another check for $675 to the order of Walter Freeman, which was indorsed by him and returned to Discount, and a final check for $500 to the order of the broker. The last two checks were approved as to payment by the corporate borrower.

The notes were subsequently sold by Discount to David Lippel. The first three notes were not met by the maker, but Miller paid them when they fell due. The maker became bankrupt, and Miller refused to pay notes No. 4 and No. 5 on the ground they were illegal and void under Section 131 of the Banking Law. Lippel brought suit on the last two notes. Miller sued to recover back the sums he had paid on the first three notes, claiming that they were paid under mistake of law. The actions were consolidated. Upon the trial, the court dismissed Lippel's complaint, holding notes No. 4 and No. 5 illegal and void as a matter of law. Miller's claim went to the jury to determine whether he paid under mistake of law or voluntarily with knowledge of his rights. The jury found against Miller and in favor of Discount. Both Lippel and Miller appeal.

The court is agreed that the judgment in Discount's favor against Miller is to be affirmed. We are not in accord as to the correctness of the trial court's ruling on dismissal of Lippel's complaint.

Page 775

Discount Factors, Inc. is incorporated under the Stock Corporation Law. It has no banking powers. It conceded upon the trial that it frequently entered into transactions of the present nature. It agreed that the normal pattern of its business ...


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