Cafritz v. Corporation Audit Co.
| Decision Date | 14 May 1945 |
| Docket Number | Civ. No. 23005. |
| Citation | 60 F. Supp. 627 |
| Parties | CAFRITZ v. CORPORATION AUDIT CO. et al. |
| Court | U.S. District Court — District of Columbia |
Milton Strasburger, of Washington, D. C., for plaintiff.
Neil Burkinshaw and Dennis Collins, both of Washington, D. C., for defendants.
WYCHE, District Judge (sitting by special designation).
This is an action by Morris Cafritz for discovery and accounting; for a joint and several judgment against the Corporation Audit Company and Rose Robins, administratrix of the estate of Barney Robins, deceased, for the sum of $36,134.75; for judgment against the Corporation Finance Company for the sum of $8,400, and for judgment against Rose Robins, individually, for the sum of $2,889.
By his amended complaint plaintiff alleges that during the year 1941, and for a number of years prior thereto, he had retained and employed the Corporation Audit Company as an expert accountant and auditor to keep and maintain certain books of record for himself and for several corporations in which he was directly interested as an officer and stockholder, including the books used in connection with a bank account maintained by the plaintiff in the Bank of Commerce & Savings, to audit all of his books and records at the end of each calendar year, and to prepare his income tax returns; that Barney Robins, now deceased, was the general manager in exclusive charge, direction and management of the business of the Audit Company, and had actively participated in all of the transactions between Cafritz and the said company; that during the period aforesaid, plaintiff reposed special trust and confidence in the Audit Company and in its general manager, Robins, resulting in a fiduciary relation on the part of the Audit Company and its manager toward the plaintiff; that between February 16, 1941, and October 28, 1941, the Audit Company, by its general manager, caused to be paid out of the said bank account certain monies belonging to the plaintiff, amounting to $36,134.75, for the benefit of the Audit Company, or of its manager, and not for the benefit of the plaintiff; that the Audit Company maintained and kept in its office certain of plaintiff's records and books of account, including check books, bank statements, and paid and cancelled checks on the Bank of Commerce & Savings; and that although plaintiff had duly demanded the same, the defendant had wholly failed and refused to deliver them to the plaintiff. It is further alleged that on or about October 29, 1941, Robins caused to be deposited in a certain bank account to the credit of the Corporation Finance Company (a company controlled by him) one of the checks of the plaintiff for the sum of $8,400.
In their answer to the complaint the defendants admit that the Corporation Audit Company was employed by the plaintiff, as alleged in the complaint, and that Robins was an officer and general manager of the Audit Company. They deny the allegation relating to the conversion of the funds. With respect to the deposit of a check for the sum of $8,400, in the account of the Corporation Finance Company, the defendants aver that such deposit was made but that it was in the nature of a "wash transaction", whereby the defendants received no benefit.
In compliance with Rule 52(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, I find the facts specially as follows:
Findings of Fact.
1. Morris Cafritz, a builder and real estate broker, during the year 1941, and for twelve years prior thereto, had employed the Corporation Audit Company as bookkeeper, auditor and certified public accountant, to keep and maintain Cafritz's original books of entry and those of several Cafritz-controlled corporations; to deposit checks on his behalf in several banks, and to make out income tax returns for Cafritz and his several corporations. Barney Robins was secretary of several of such corporations, and was at all times actively in charge of the affairs of the Audit Company, of which he was general manager and executive officer.
2. Cafritz reposed special trust and confidence in the Audit Company and in Robins.
3. All fees for the services performed by the Company, including those for the year 1941, as the same became due and payable, were regularly paid by Cafritz.
4. Cafritz maintained and owned an account in the Bank of Commerce & Savings in the name of "Cafritz & Specter", and also maintained certain accounts in other banks in his own name, and in the name of his several corporations.
5. During the year 1941, Robins, on behalf of Cafritz, deposited certain checks in the Bank of Commerce & Savings and also on said behalf deposited checks in other banks to the credit of Cafritz and his corporations.
6. Checks on the Cafritz and Specter bank account were always prepared by the Audit Company, signed by Cafritz, and handed to Robins to be deposited to the credit of the Cafritz corporations.
7. During the month of February, 1941, the Audit Company prepared, and Cafritz signed, four checks payable to his corporations, and some months later a fifth check was prepared and signed in the same manner. These five checks were executed for the purpose of making loans to the Cafritz corporations, and were handed to Robins to be deposited in the bank to the credit of the respective payees, and were to be entered by the Audit Company on the books of record of the Cafritz corporations as loans, and were also to be entered in the Cafritz and Specter ledger, which at all times was kept and maintained in the office of the Audit Company until it was demanded by Cafritz's bookkeeper during the month of August, 1941. The other books of account were at times in the office of the Audit Company, and at other times in Cafritz's office, but were at all times maintained and kept by or under the supervision of the Audit Company.
8. The Bank of Commerce & Savings at all times sent monthly statements of the Cafritz and Specter account, together with paid checks, to the office of the Audit Company in the Rust Building, in which building none of the Cafritz corporations were located.
9. These statements and paid checks, although demanded, were never delivered to Cafritz by the Audit Company or any other person or corporation.
10. The five checks aforesaid were charged by the bank against the Cafritz and Specter account in the amounts and on the respective dates following:
Dates Amounts
February 17, 1941, $8,000.00
February 18, 1941, 7,575.25
February 19, 1941, 6,159.50
February 20, 1941, 6,000.00
October 25, 1941, 8,400.00
11. In August of 1943, agents of the Internal Revenue Department called Cafritz' attention to the first check above enumerated, which had on the bank records a lead pencil reference to Robins, the agents wanting to know whether Cafritz had ever given Robins personally a check for $8,000, to which Cafritz replied in the negative.
12. Cafritz at once obtained a photostat copy of the bank records for 1941, and employed a public accountant to examine all of his books of record, and the books of his corporations, to ascertain whether all of the withdrawals shown by the bank statement of the Cafritz and Specter account were entered on his books of account and properly accounted for.
13. The public accountant made the examination requested, and ascertained and reported that the withdrawals represented by the five checks mentioned were not entered on the Cafritz and Specter ledger or on any other account book of Cafritz or his corporations.
14. Cafritz promptly sent for Robins, and requested an explanation of what had become of the five checks aforesaid, or the proceeds thereof, and an accounting therefor.
15. After waiting a reasonable time Cafritz wrote a letter to Robins, under date of August 18, 1943, calling specific attention to the five checks aforesaid, and requesting an immediate accounting.
16. In response to said letter Cafritz received from Benjamin Kay, Robins' brother-in-law, a letter dated August 20, 1943, calling attention to Robins' then absence from the city, and promising to call the letter to Robins' attention upon his return.
17. A son of Robins called to see Cafritz and requested him to await his father's return to the city.
18. On October 11, 1943, Cafritz wrote a letter to Benjamin Kay, calling attention to the importance of his former letter, but received no reply.
19. Cafritz placed the matter in the hands of his attorney, who wrote a letter to Robins, threatening suit, but no reply was received to this letter.
20. Within a few days after the last demand Robins departed this life. The defendant Rose Robins has been appointed administratrix of his estate.
21. No accounting with respect to the $36,134.75, represented by the five checks on the Cafritz and Specter account, has ever been made by the Audit Company or Robins.
22. Cafritz and his corporations never received the proceeds of said checks or any part thereof.
23. On October 25, 1941, Robins deposited in the Security Savings & Commercial Bank to the credit of his controlled corporation, known as the "Corporation Finance Company", a check on a local bank for the sum of $8,400. Two days later there was charged against the Cafritz and Specter account a withdrawal of the exact sum of $8,400, represented by one of the checks aforementioned.
24. On October 28, 1941, the Corporation Finance Company by Barney Robins, its vice-president, drew a check on the Security Savings & Commercial Bank, payable to the order of Barney Robins, individually, for the sum of $8,400, and this check was cashed by Robins.
25. The defendants have offered no evidence to show the source from which the check for $8,400 was received by the Corporation Finance Company, and no entry for said deposit was made in the books of the Finance Company.
26. Cafritz had never had any dealings or transactions with the Corporation Finance Company ...
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