Essay v. Essay, 36030

• Decision Date: 01 April 1966
• Docket Number: No. 36030,36030
• Citation: 180 Neb. 47,141 N.W.2d 436
• Parties: Martha ESSAY, Appellee, v. Edward J. ESSAY, Appellant, Business Capital, Inc. of Iowa, Intervenor-Appellant.
• Court: Nebraska Supreme Court

Page 436

141 N.W.2d 436

180 Neb. 47

Martha ESSAY, Appellee, v. Edward J. ESSAY, Appellant Business Capital, Inc. of Iowa, Intervenor-Appellant.

No. 36030.

Supreme Court of Nebraska.

April 1, 1966.

Syllabus by the Court

1. Where the defendant, who as managing partner has had the exclusive control of the production, sales, and distribution of the products of the partnership, seeks to establish the value of the good will and franchise thereof, the burden of doing so will rest upon him.

2. A managing partner who acquiesces in the matter of the depreciation relating to the partnership business as set up by an accountant is in no position to complain about such depreciation.

3. A managing partner having exclusive control of a partnership business not only controls production, sales, and distribution of products but is responsible for keeping all records and books of account.

4. When a question of fact is once determined on its merits, that question is settled so far as the litigants are concerned and it may not be relitigated between the same parties.

5. Ordinarily, an intervener must take the suit as he finds it, is bound by the previous proceedings in the case, and cannot complain of the form of the action or of informalities or defects in the proceedings between the original parties.

6. A managing partner, who has been held by the court to be responsible for keeping its records and accounts, has the burden of showing any errors in a balance sheet prepared from such accounts by an auditor appointed by the court pursuant to a stipulation of the partners in which such managing partner joined.

Reddish, Fiebig & Curtiss, Alliance, R. L. Jeffrey, Richard L. Goos, Lincoln, for intervenor-appellant.

Wright, Simmons & Hancock, Scottsbluff, for appellee.

Heard before WHITE, C.J., and CARTER, SPENCER, BOSLAUGH, BROWER, SMITH and McCOWN, JJ.

BROWER, Justice.

This is the second appearance of this case in this court. Our prior decision is set forth in Essay v. Essay, 175 Neb. 689, 123 N.W.2d 20. In that case a supplemental opinion was entered on rehearing at 175 Neb. 730, 123 N.W.2d 648.

The action was originally brought by the plaintiff Martha Essay for the dissolution of the partnership existing between the plaintiff and the defendant Edward Essay, doing business as Pepsi-Cola Bottling Company and Standard Bottling Company, and for an accounting of its operations and the appointment of a receiver to wind up its affairs. The intervener Business Capital, Inc., of Iowa filed a petition in intervention subsequent to our first decision. Its interest arises by virtue of an assignment of the interest of the defendant in all of the partnership assets as collateral security for the loan of $60,000 made by it to the defendant Edward Essay.

The previous appeal to this court was from a judgment of the trial court entered September 7, 1962, which found the partnership was dissolved on April 13, 1960, by reason of the defendant on that day excluding the plaintiff from the partnership business. The trial court's judgment had approved an audit of the partnership accounts as of July 24, 1961, the day a receiver was appointed. It found the plaintiff's investment account in the partnership was $181,231.27 and that of the defendant was a minus $138,657.43. In addition to his overdraft, the defendant had converted to his own use $40,378.81 of the partnership funds which he had not shown on the books of the partnership. The trial court had entered judgment against defendant in favor of the plaintiff for one-half of the said overdraft in defendant's drawing account, one-half of the money so converted being $89,517.62, together with half of certain rentals due plaintiff amounting to $3,000. The receiver was directed to sell the partnership as a going concern and to make a distribution in a manner to be subsequently determined by the court. This court in its opinion in Essay v. Essay, 175 Neb. 689, 123 N.W.2d 20, accepted the audit and the trial court's judgment with respect to the matters set forth above.

The trial court in its judgment had found that since the defendant's investment account was overdrawn and the plaintiff owned all of the capital assets, the plaintiff was entitled to all of the profits from the partnership from its dissolution to the receiver's appointment. In our first opinion, Essay v. Essay, 175 Neb. 689, 123 N.W.2d 20, this portion of the trial court's judgment was reversed and it was there held that the profits from the dissolution, April 13, 1960, to the appointment of the receiver were to be shared equally by the parties. It was this portion of our decision that the supplemental opinion, Essay v. Essay, 175 Neb. 730, 123 N.W.2d 648, changed. That opinion states: 'We direct the trial court to reserve its ruling with reference thereto until there has been a final accounting of the capital and assets of the partnership, and that the profits earned after the dissolution be then apportioned in the proportion that each had in the partnership assets at the time of dissolution, subject to a consideration of the service and personal skill of Edward Essay in earning such profits, either by adequate compensation therefore or by increasing his share of the profits as equity requires.'

Two appeals are presently before this court. The first is from the judgment of the trial court determining the assets of the partnership and the interest of the partners therein on the date of dissolution, and the corresponding interest of the partners in the subsequent profits after dissolution. The second is from an order confirming the sale of the business to the plaintiff. Although both appeals were taken by both the defendant and intervener, the intervener alone has filed briefs herein. We will consider the two appeals in the order stated in this paragraph.

After the case was remanded to the trial court, the plaintiff and defendant on May 7, 1964, stipulated that the receiver retain the accounting firm of Crum, Miller & Melick and instruct it to prepare a balance sheet of the Pepsi-Cola Bottling Company and Standard Bottling Company at the close of business on April 13, 1960. Thereafter such a balance sheet was submitted by the accounting firm mentioned in the stipulation, showing the assets and liabilities of the Pepsi-Cola Bottling Company and the Standard Bottling Company as of that date, with a statement of operations from January 1, 1960, through April 13, 1960, and the capital accounts of the partners from January 1, 1956, through April 13, 1960.

On July 13 and 14, 1964, a hearing was had on this account and the objections of the defendant thereto, simultaneously with objections to the confirmation of a previous sale containing a request for a determination of both partner's capital accounts. At this hearing the intervener was allowed to participate although previous filings by it were later stricken. It also asked that the capital accounts of the partners be set and determined before the court ruled upon the application for confirmation. Evidence was offered on behalf of the plaintiff, the defendant, and the intervener, and the matter was taken under advisement by the court. On July 29, 1964, the court entered its order finding the balance sheet was the best obtainable under the circumstances and the capital accounts of the parties were correctly shown thereby as of April 13, 1960. It further found that on that date the partnership had a capital deficit of $28,991.78 and was overdrawn at the bank in excess of $53,000; that the partnership was insolvent; and that the franchise, good will, and going concern then had no value. It held defendant on that day had a capital deficit of $100,060.97 and was not entitled to share in the profits subsequently earned.

On August 11, 1964, the intervener filed its petition in intervention pursuant to permission granted it on July 29, 1964, at which time its early pleading had been stricken.

On September 4, 1964, the defendant and intervener were granted a new trial for the submission of evidence as to the value of the business and the determination of the capital accounts as of April 13, 1960. A new trial was had on October 5 and 7, 1964, and further evidence was taken. On November 30, 1964, the trial court entered an order reinstating its order of July 29, 1964, and the defendant and intervener have appealed from an order overruling their motion for a new trial on the order reinstating the order of July 29, 1964.

The intervener contends the judgment of the trial court is contrary to the law and the evidence because of certain of its findings and conclusions which are needlessly repeated and successively related to each of the court's rulings. Those necessary to be determined will be stated as discussed.

The intervener maintains the trial court erred in finding the good will of the partnership had no value on April 13, 1960. It insists that it had great value which, if properly determined, would have greatly increased the capital accounts and would have resulted in the defendant having an interest in the subsequent profits earned.

Defendant testified that there was a rule of thumb to determine the value of the intangible assets such as good will, franchise, and going concern in a Pepsi-Cola business. He stated this rule was to multiply the number of cases sold the previous year by $1.50, and in this instance where 140,194 cases were sold, it would have been $210,291. He stated this was in addition to the value of all physical assets. He testified he was familiar with the method of valuing similar intangibles for the been business which, he said, would vary from 25 cents to $1 a case of beer sold, depending on the profits for the preceding year. The value of good will of the beer business in suit, using his formula, is not shown. The receiver, Paul Jones, testified the rule of thumb in the sale of a pepsi-cola business was $1 per case for all bottled goods, for the...