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United States Plywood Corp. v. Neidlinger

Decided: November 4, 1963.

UNITED STATES PLYWOOD CORPORATION, A CORPORATION, PLAINTIFF-RESPONDENT,
v.
PHILIP L. NEIDLINGER, INDIVIDUALLY AND TRADING AS P. L. NEIDLINGER ASSOCIATES, DEFENDANT-APPELLANT



For reversal -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None.

Per Curiam

The defendant Neidlinger had for many years conducted a business which involved his purchase of plywood materials and their installation in buildings under construction. In 1959, he discovered that his trusted bookkeeper had embezzled about $200,000 and, as a result, the business was insolvent. He consulted his attorney, the late Alfred J. Peer, who scheduled a meeting for May 18, 1959. The notice of the meeting was addressed to each of the defendant's creditors and stated that cooperation "with respect to the settlement of the various claims" was required "in order to effect some orderly payment." The meeting was held as scheduled and was attended by 25 or 30 persons, including Kermit Green, an attorney at law, who appeared for the plaintiff United States Plywood Corporation.

A memorandum, prepared after the meeting by Mr. Peer and distributed to the creditors, set forth his general summary of what had transpired. He noted that a creditors' committee had been appointed and that it consisted of Roy E. Scheider (representing Macy-Fowler, $2,087.85), Kermit Green (representing the United States Plywood Corporation, $23,000) and Frank Pascerella (representing Wood-Art, Inc., $6,000). The obligations of the defendant were reported as approximating $100,000 and his sole assets were reported as $4,000 in furniture, fixtures and equipment, $10,000 in accounts receivable, and some contracts on which no work had commenced. An attorney representing a corporation formed by William Fay, who had been associated with the defendant, offered to take over and complete these contracts and to remit the net profits (estimated at $25,000) to the creditors of the defendant. After referring to miscellaneous matters, the memorandum concluded with the comment that all of the creditors present expressed their willingness to go along with the plan suggested by the attorney for Mr. Fay's corporation. The memorandum was never intended to be an integration of everything that had transpired at the meeting and could not be viewed as precluding supplemental oral testimony. Cf.

Atlantic Northern Airlines, Inc. v. Schwimmer, 12 N.J. 293, 303-304 (1953).

The creditors' committee took control of the defendant's reported assets and he heard nothing further from the plaintiff or any of the other creditors for about a year. In May 1960 his wife died leaving him a substantial inheritance and, in the following month, the plaintiff instituted an action in the Superior Court seeking recovery of the sum of $23,157.36, which represented its claim for merchandise delivered to the defendant. The defendant's answer set forth that the plaintiff, along with the other creditors, had entered into a settlement and composition agreement under which the plaintiff was to receive a proportionate amount of the assets transmitted by the defendant to the creditors. In the pretrial order, the defendant admitted the receipt of the merchandise and the reasonableness of its price and asserted that the oral understanding at the May 18th meeting was, in essence, a settlement and composition under which the plaintiff's claim was to be deemed fully satisfied by a proportionate amount of the assets turned over to the creditors' committee.

At the trial the plaintiff rested its case without introducing any oral testimony. It relied on the pretrial order and the opening statement by the defendant's counsel in which the receipt and reasonable price of the merchandise were acknowledged, though the affirmative defense of settlement and payment was reasserted. See Federal Deposit Insurance Corp. v. Miller, 130 N.J.L. 626, 628 (E. & A. 1943). In support of his defense the defendant presented testimony by Max Geller, along with his own testimony. Mr. Geller stated that he was a creditor of the defendant, that he had attended the May 18th meeting, that there was discussion as to the defendant's liabilities and assets, and that it was stated that something could be salvaged and "a percentage would be given to the creditors for the amounts due them." Counsel for the plaintiff did not cross-examine Mr. Geller.

The defendant testified that, at the meeting, a creditors' committee was appointed with authority to take control of his

inventory and accounts receivable and receive the net profits which would result from the Fay arrangement. When asked what was to happen to him, he said, "I was going bankrupt one way or another, and the term that I used at the time and I guess the only term I could use is a secondary form of bankruptcy." In response to a further question as to what was said at the meeting, he testified that his attorney told the creditors that the defendant would "either go bankrupt or an arrangement could be made which I had discussed with him prior to that in which the creditors could give a clearance to proceed under a bankrupt condition, and yet draw these profits of these contracts to the benefit of the creditors."

At the conclusion of the testimony on the defendant's behalf, the plaintiff still presented no oral testimony but moved for the withdrawal of the case from the jury and the entry of judgment. It urged (1) that nothing had been introduced to establish that Kermit Green was authorized to make a binding settlement on its behalf, and (2) that there was no evidence that the plaintiff and the other creditors had agreed to accept the assets turned over to the committee in full settlement of the claims against the defendant. The trial judge granted the motion on the latter ground and his action was sustained by the Appellate Division. We certified on the request of the defendant. United States Plywood Corp. v. Neidlinger, 40 N.J. 218 (1963).

When the plaintiff moved for the entry of judgment, the defendant was, under settled principles, entitled to have the facts considered most favorably from his point of view. If reasonable men could find from the testimony, and the inferences which might legitimately be drawn therefrom, that the parties attending the May 18th meeting contemplated that the defendant would be released upon the turnover of his assets to the committee, then it was the trial judge's duty to deny the motion, and call upon the plaintiff for any rebuttal testimony. See J.L. Querner ...


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