Jacobs, Eastwood and Bigelow. The opinion of the court was delivered by Eastwood, J.A.D. Bigelow, J.A.D. (dissenting).
[20 NJSuper Page 204] The partnership accounting action involved here originated in the former Court of Chancery, the bill of complaint being filed on December 20, 1943. Thereafter, an order was made directing an accounting, with a reference to a special master. The defendant took numerous exceptions to the master's report, which were heard and determined by the Chancery Division. On appeal to this court, the ensuing judgment of the Chancery Division was affirmed, with the exception of one item, hereinafter discussed, and the cause was remanded to the trial court for
further consideration and determination. For a more complete understanding of the issues involved between the parties, reference is made to Midler v. Heinowitz , 6 N.J. Super. 359 (App. Div. 1950).
We are now faced with the consideration of the appeal taken from the judgment of the trial court, respecting the matter remanded to it, holding that the joint venture sales account should be credited with the additional sum of $3,863.80, representing sales of materials purchased from the Bridgeport Thermostat Company, rather than the sum of $10,599.39, which the special master recommended.
In reaching his conclusion, Judge Freund makes the following statement:
"Granted that the purchase from the Bridgeport Thermostat Company was scrap metal on which, bought in bulk, more than a usual profit might, on resale, be expected, I deemed it unlikely that it would have produced sales of $13,124.09, being sales of $2,524.70 substantiated by sales slips and accounted for by the defendant, plus $10,599.39 estimated by the plaintiff, unaccounted for by the defendant, unsubstantiated by sales slips, but allowed by the master.
Reference to Exhibit C-11 disclosed not only the purchase of scrap iron in the amount of $1,314, from the Bridgeport Thermostat Company, but additional purchases of scrap metals amounting to $832.68, to which I did not find any previous reference. In making allowance for additional sales from what appeared to be additional purchases, I deemed it more equitable to allow comparable sales from additional purchases rather than add on an arbitrary estimated market value of materials purchased and unaccounted for. Accordingly, I concluded that if the defendant accounted for sales of approximately $2,100., from a purchase of $1,314., the joint venture should be entitled on account of all purchases of scrap iron and scrap metal to $3,430.81. Additionally, the defendant had admitted sales of jars in the amount of $432.99. The sum of those two figures is $3,863.80, to which in my opinion the joint venture is entitled on account of its purchases from the Bridgeport Thermostat Company."
In recommending that the venture's sales account is entitled to an additional credit of $10,599.39, the special master, in his report, stated:
"The plaintiff purchased for the joint venture a lot of material itemized in the invoice of the Bridgeport Thermostat Company,
marked in evidence Exhibit C-13. In Exhibit C-11, at p. 7, this purchase is carried as follows:
'Bridgeport Thermostat Co., oil drainer scrap, $1,314.'
Only about 10% of the total amount of this material is credited in the Sales Account of the joint venture in Exhibit C-11. The largest portion consisted of oil drainer parts and rubber hose. The rubber hose was sold. Numerous items went into the part of the stock described as oil drainer parts. Some of these parts were sold and the prices given. Other parts were sold, but the prices at which they were sold were not ascertainable. Other parts may have been sold, and for these the market value was given. The total of these component parts of the oil drainer is $10,059.72; the rubber hose was sold for $539.67. So that the joint venture is entitled to an additional credit in the Sales Account of $10,599.39."
A copy of the original invoice for this purchase was introduced into evidence. It discloses that the "surplus oil drainer stock and scrap" were purchased for the sum of $1,314. The plaintiff testified as to the items appearing on the invoice; that they consisted of 35 items of new parts, comprising 1,156,695 units and 5,904 pounds of scrap iron and scrap metal; that he compared the invoice with the "Sales Account" and found that only approximately ten per cent of the purchase had been accounted for, consisting of paper boxes, glass jars, rubber tubing, and that is about all; describing the article, the number of units and the respective amounts for which the items were sold by the defendant, or if the sale was unknown to him, the market prices thereof; that these items were brand new and salable in the market; that the total of the known sales and market prices for unknown sales for the items not accounted for by the defendant amounted to the sum of $10,059.72; that the invoice also included 53,850 feet of rubber tubing, in addition to which the defendant obtained without charge from the Bridgeport Thermostat Company, 20,000 more feet of the tubing on the claim of shortage; that the defendant only accounted for the sale of 19,883 feet for the sum of $215.98, and that the sales account should be credited with the sum of $539.67, representing the sales value of the 53,967 feet; thus making the total of the unaccounted for sales of parts and tubing, the sum of $10,599.39. The defendant insisted that all of
this material was bought and sold as scrap and fully accounted for.
Judge Freund, in his opinion, states that the bookkeeping methods of the venture are unsatisfactory and "The recurring difficulty of an equitable determination from such a welter of conflicting testimony and records again besets me. * * *" We agree that the aforementioned factors on which Judge Freund places emphasis pose a real problem in the attempt to reach a satisfactory basis for the fixing of the amount with which the venture's sales account should be credited for the Bridgeport item. Presumably, Midler testified from memory as to the sales and market values of the unaccounted for materials. He admitted that he had kept a memorandum "about these transactions," but "not all of them" from 1939 to 1944 and, after telling Mr. Israel Pogash, a certified accountant, "the facts of the contents," he destroyed it some time in 1944. It appears that Midler's destruction of the memorandum book was subsequent to the filing of his complaint in December, 1943.
An examination of the plaintiff's testimony reveals that the only sales with which he was familiar were 4,950 two-quart mason jars to a Brooklyn purchaser at 3 cents each ($148.50), 14,292 mason jars sold "locally" at 3 cents each ($428.76), 21,453 oil drainer cartons, purchaser unknown, which the plaintiff testified "were probably worth 2 1/2 cents a piece ($536.25), and shipment of them, 22,500 were probably worth 10 for 1 cent ($22.50)," and 20,000 feet of rubber tubing which was accounted for at a sales price of $215.98. These sales amount to a total sum of $1,350.99. Therefore, to accept the contention of the plaintiff that the venture's sales account should be credited with the additional sum of $10,599.39, we must unqualifiedly accept the plaintiff's testimony from memory as to the market value of the items allegedly unaccounted for at prevailing market prices, for a period of time several years prior to the date of Midler's testimony. Midler's testimony as to the market prices impresses us as lacking the necessary elements of certainty and
reliability. To illustrate, he said that the market prices of the bakelite filler tubes were about 30 cents; that the zinc diecast receptacles "had no resale value only as scrap, and the scrap price at that time, if I remember correctly, was somewhere around 4 1/2 cents a pound, and I imagine, if I remember correctly, they would weigh about half a pound each"; that as to the dust caps, "I believe the resale value of those would be about two cents each"; that the value of the rubber tubing as brand new "was approximately about 2 to 2 1/2 cents per feet. I don't know the exact market"; that "I imagine the value of that (brass valve gauges) would be probably about a quarter of a cent apiece"; that he could not put any value on 192 pieces of assembly in brass as "I don't know what it is. I don't remember it"; that the value of the brass valve stems would be "about 2 cents," et cetera. On the defendant's exception to the master's finding, he conceded sales of 54,440 feet of hose, $599.60, jars, $432.99, six listed purchases purporting to be represented by invoices found in D-14, $1,517.21, totaling $2,549.80; however, some of these sales do not appear in the defendant's records. The trial court found that total sales of $2,100 were substantiated by sales slips and accounted for by the defendant, and that the defendant should also be charged with the admitted unaccounted for sales of jars, amounting to $432.99, as well as additional sales of scrap materials amounting to $832.68, and a profit thereon, which based upon the profit of the other sales, the court calculated to be $498.13, thus determining as a fact that the total sum of sales to be credited to the joint venture is $3,863.80.
In view of the lack of proof of any additional sales other than those with which the Chancery Division charged the defendant, and the rather unconvincing testimony of the plaintiff concerning the market value of the unaccounted for alleged sales, we do not feel that we are warranted in setting aside the Chancery Division's determination.
Through the courtesy of Judge BIGELOW we have had the opportunity of reading his proposed dissenting opinion. We
are not in disagreement with respect to the legal principles set forth therein. However, in view of the factual situation recounted in the foregoing opinion, we think the cited cases are not controlling here.
The judgment is affirmed, with costs.
BIGELOW, J.A.D. (dissenting).
One partner sues to compel the other partner, the defendant, to disgorge the proceeds of partnership assets that he had fraudulently converted to his own use. The only subject of the present phase of the appeal is miscellaneous material bought by the partnership from Bridgeport Thermostat Company for $1,314 under invoice dated September 28, 1938, and marked exhibit C-13. The defendant admits the purchase, and that the materials came to his yard, and in effect that he is accountable for them. The following is a list of the materials copied from the invoice. Where a second amount is shown in parentheses, it is the figure apparently used by the master. The unit values are those given by Midler, the plaintiff. Where no value is shown, the defendant was not surcharged with the item.
Oil burner quantities are
8,194(3,194) Bakelite filler tubes at 3 cents $95.82
42,503 Zinc die cast receptacle at 2 1/4 cents 956.34
37,730 C R S dust cap at 2 cents 754.60
2,300 Copper and steel oil
tube sub-assembly at 14 cents 322.00
53,850ft. (53,967) Rubber tubing, 1/4" ID
x 1/8" wall at 1 cent 539.67
44,920 Brass valve gage at .0025 112.30
41,680 Steel cap spring at .0025 104.20
42,718 Steel bottle cap at 1 cent 427.18
44,140 C R S mounting stud 3" at 2 cents ...