BORAH, Circuit Judge.
The plaintiff, Commercial Credit Corporation, as assignee of Lenal Company, Inc., hereinafter called Lenal, brought this action against Milton W. Pepper, Florence M. Pepper and Leonard Pepper, as partners doing business under the firm name of Pepper Supply Company, to recover the sum of $67,291.25 allegedly due plaintiff's assignor. A trial on the merits was had and at the close of all the evidence the plaintiff moved for a directed verdict. The court below denied the motion and submitted the case to the jury, which returned a verdict for defendants. The trial court entered judgment for defendants and thereafter denied plaintiff's motion for a judgment notwithstanding the verdict and, in the alternative, for a new trial. This appeal followed.
The only ground for reversal worthy of serious consideration is the contention that the trial court abused its discretion in overruling plaintiff's motion for a new trial.
Plaintiff alleged in its amended complaint that defendants owed Lenal the sum of $64,684.49 for goods sold by Lenal to defendants or to Lenal Company of the South between December 1, 1946 and March 1, 1947, payment for which was guaranteed by defendants. The additional sum of $2,606.76 for which judgment was demanded was for money had and received by defendants from named persons which was to be paid by defendants to Lenal. It was further alleged that for a valuable consideration Lenal assigned
The answer denied that defendants were indebted to Lenal in any amount and, although admitting the assignment, averred that defendants had no knowledge or notice thereof until June 16, 1947. The answer
In response to interrogatories propounded by Commercial Credit defendants admitted the correctness of a schedule of some 150 items, aggregating $64,684.49, covering goods, wares, and merchandise shipped by Lenal to Lenal of the South or its customers and also admitted that on or about July 31, 1947 Lenal of the South received by cash or credit from the persons named the sum of $2,606.76. And in response to interrogatory No. 16, inquiring as to whether any loans were made by defendants or Lenal of the South to Lenal, the defendants answered that on or about April 1, 1947 Milton W. Pepper made a loan to Lenal in the amount of $20,000.
A pre-trial conference was held and thereafter the Court made and entered an order which in part recites: That the only proof that would be required of plaintiff at the trial in proof of its case in chief would be: (a) the introduction of the statement of indebtedness due plaintiff in the sum of $67,291.25 and evidence as to what the statement represents; and (b) the agreement between Lenal and Lenal of the South, and Milton W. Pepper, stating the conditions of liability of Lenal of the South and Pepper Supply to Lenal.
The case came on for trial and the plaintiff introduced the evidence specified in the pre-trial conference order as necessary to establish a prima facie case of indebtedness due the plaintiff in the amount of $67,291.25. Plaintiff also introduced into evidence Lenal's accounts receivable ledger account with Pepper Supply Company, which shows that the first accounts assigned to plaintiff were dated October 31, 1946.
In an effort to overcome plaintiff's prima facie case and in support of the defense that they were not indebted to plaintiff in any amount, defendants offered evidence to prove they were entitled to receive credit on the indebtedness sued upon for merchandise returned direct to plaintiff in the amount of $23,416.86, for merchandise shipped by Lenal of the South to Lenal or
The only evidence to support the contention that the checks aggregating $87,504.29 represent payments to Lenal is found in the testimony of Albert Lambert, a former secretary treasurer of plaintiff corporation. Defendants' counsel adduced this evidence by handing various cancelled checks to Lambert, who, after examining the instruments, identified them as checks drawn by Pepper Supply Company or Pepper Appliance Company either in favor of Lenal or indorsed to its credit. Lambert was then asked to examine Lenal's account receivable ledger and state whether or not Pepper's account showed a corresponding credit entry for each check. Lambert found corresponding credit entries for some checks and for others no corresponding entry was found. But, Lambert did not testify that any of these checks were delivered and received in payment of accounts due Lenal nor did any other witness so testify. In other words, despite the fact that defendants were authors of the checks and were present at the trial and gave testimony as to other facts in issue, the principal fact in question — whether or not these checks represented payments rather than loans to Lenal and, if payments, whether or not they should have been credited against accounts sued upon — was left entirely to inference.
Turning now to the material testimony with reference to specific checks, the record discloses that the check dated November 13, 1946 in the amount of $20,000 and the two checks dated November 21, 1946 in the amounts of $15,000 and $5,000 were received by Lenal and Pepper Supply Company's ledger account on Lenal's books was credited on November 16, 1946 and November 22, 1946 with the total amount of these checks.
As to the check dated November 29, 1946 in the amount of $20,000; the check dated January 20, 1947 in the amount of $5,000; the two checks dated February 24, 1947, each in the amount of $2,500; and the two checks dated February 27, 1947, each in the amount of $5,000, the evidence shows that there were no corresponding credit entries for these checks on Lenal's accounts receivable ledger. The plaintiff contended at the trial, as they do now, that these six checks aggregating $40,000 represented loans from defendants to Lenal. However, plaintiffs did not have available the books of original entry of Lenal to offer in support of their contention but plaintiff's failure to produce them is excusable inasmuch as Lenal's books and records were and had been for forty-eight days prior to the trial stored in a warehouse in the Southern District of New York in the custody of its trustee in bankruptcy and furthermore no issue as to these matters had been formulated, either in the pleadings or at the pre-trial conference.
In addition to the foregoing the defendants also offered as evidence of payment a check dated March 5, 1947, in the amount of $7,504.79. And for this check there is no corresponding entry on Pepper Supply Company's account on Lenal's accounts receivable ledger.
After the trial plaintiff obtained the books and records of Lenal from the trustee in bankruptcy and in support of its motion for a new trial submitted photostatic copies of original pages from pertinent books and records relating to the checks introduced in evidence by the defendants. The photostatic copies disclose that the check dated November 29, 1946 in the amount of $20,000; the check dated January 20, 1947 in the amount of $5,000; the two checks dated February 24, 1947 each in the amount of $2,500; and the two checks dated February 27, 1947, each in the amount of $5,000, represented loans to Lenal rather than payments on account. As to the check dated March 5, 1947, in the amount of $7,504.79, the plaintiff filed the affidavits of the Vice President of the Capital City National Bank of Tallahassee, Florida, the Assistant Cashier of the Chase National Bank of the City of New York, and the Assistant Manager of Manufacturers Trust Company, New York, New York, which in substance recite that pursuant to instructions by the maker, Pepper Supply Company, the sum of $7,500
Under the circumstances presented, and quite independent of the error in the charge, we are of opinion that the trial court erred in denying plaintiff's motion for a new trial. It is a principle well recognized in the federal courts that the granting or refusing of a new trial is a matter resting within the discretion of the trial court. The term "discretion", however, when invoked as a guide to judicial action, means a sound discretion, exercised with regard to what is right and in the interests of justice.
Upon the record before us, we hold that it was an abuse of discretion to deny plaintiff's motion for a new trial.
Reversed and remanded.
"A. It is indorsed pay to the order of Manufacturers Trust Company, Lenal Company, Incorporated, Special account.
"Q. Will you see if proper credit is given Lenal? A. It shows it checked off.
"The Court: On what date does it show? A. It shows a credit to the account on November 16th of $20,000.
"Q. Was that $20,000 check credited to Pepper Supply Company on the books of Lenal Company? A. Oh, yes."
With reference to the check dated November 21, 1946 in the amount of $15,000 Lambert testified as follows:
"Q. Do you find that $15,000 on the credit side to Pepper Supply Co.? A. Not in this group of credits.
"Q. At any place in there? A. I do not see it anywhere."
The witness was then handed the check dated November 21, 1946 in the amount of $5,000 and was asked:
"Q. Do you find that listed as a credit to Pepper Supply? A. It does not appear here."
However, the witness then testified: "There is a credit on the books of $20,000 but it is not a corresponding date. The date on the books here is November 22, of $20,000, there is another date for November 16, for $20,000."
The witness W. J. Botto testified with reference to the two checks dated November 21, 1946, as follows:
"A. There were two checks at that time, one for $15,000 and one for $5,000, making a total of $20,000. I can identify that one (referring to the check for $15,00), the credit is for $20,000 on the books and the date is November 22nd.
"Q. Mr. Botto, I also hand you herewith another check dated November 21, 1946 * * * and ask if that check is shown as a credit * * *? A. Yes, it is."