J. A. Sweatt v. Aaron Johnson

• Decision Date: 03 October 1923
• Citation: 122 A. 501,97 Vt. 177
• Parties: J. A. SWEATT v. AARON JOHNSON
• Court: Vermont Supreme Court

122 A. 501

97 Vt. 177

J. A. SWEATT v. AARON JOHNSON

Supreme Court of Vermont

October 3, 1923

May Term, 1922.

ACTION AT LAW FOR AN ACCOUNTING BETWEEN PARTNERS. After judgment to account at the April Term, 1921, Essex County, the case was heard by the presiding judge, Wilson, in vacation after such term, in May, 1921. Judgment for the plaintiff. The defendant excepted. The opinion states the case.

Reversed and remanded.

Amey & Cameron for the plaintiff.

Shields & Conant for the defendant.

Present WATSON, C. J., POWERS, TAYLOR, MILES, and SLACK, JJ. MILES J., having retired took no part in the disposition of the case

OPINION

TAYLOR

This is an action at law for an accounting in the matter of a partnership between the parties which had been terminated by mutual consent. After judgment to account the cause was heard by agreement by the presiding judge. Findings of fact were made wherein a balance of $ 3,369.03 was found due the plaintiff, for which he had judgment with costs. The defendant brings up exceptions to the admission and exclusion of certain evidence, numerous exceptions to the findings, and an exception to the account as stated and to the judgment thereon.

For the most part the facts necessary for a proper setting of the case are not excepted to. Respecting such matters as are covered by challenged findings, it is sufficient for present purposes to state the tendency of the evidence in the view most favorable to the plaintiff. It thus appears that the parties entered into a partnership agreement as of November 1, 1919, to carry on a general merchandise business at Beecher Falls, Vermont, under the firm name of Johnson and Sweatt. Each had previously had somewhat extensive experience in the mercantile business. The defendant was also interested in a store at Canaan Village, about two miles from Beecher Falls, and was conducting another store at Connecticut Lake, N.H. By the partnership agreement the partners were to put into the business equal amounts. The plaintiff was to receive a salary of $ 1,500 a year and the defendant a salary of $ 500 a year. The profits and losses were to be shared equally after the salaries were deducted. The total capital of the firm at the beginning of the partnership was $ 12,249.64, or an investment by each partner of $ 6,124.82. The defendant furnished a stock of goods at an agreed price and the plaintiff raised $ 2,000, which he put into the business with certain personal property found to be worth $ 200, and gave his personal note for the benefit of the defendant to cover the balance of his share of the partnership capital. The plaintiff had active charge of the business during all the time the partnership existed, giving his entire time to it. He kept all the books and accounts and managed the store. The defendant was at the store frequently and had access to the books at all times. He had a general knowledge of the business and of the method employed of keeping the accounts.

The location of the Beecher Falls store proved to be a good one. The sales for the first fifteen months were approximately $ 80,000 and for the next twelve months approximately $ 93,000. In February, 1920, an inventory was taken and the partners drew up a statement purporting to show the financial standing of the firm as of February 1, 1920. This statement showed total assets of $ 40,273.83 and total liabilities of $ 21,544.85, or a net worth of $ 18,728.98. The salaries for one year were adjusted between the partners, and the balance due the plaintiff on his salary after deducting what it was supposed he had previously drawn was applied on his debt to the defendant. The profits of the business supposed to be about $ 6,000 were left undivided. This was treated by the parties as a settlement of the first year's business. There was a mistake in the statement which, if corrected, would have materially reduced the showing of profits for the year. Among the outstanding obligations of the firm not included in the statement was a note for $ 2,000, then recently given by the plaintiff on an account for goods purchased. Whether the plaintiff accounted for all sums withdrawn by him prior to February 1, 1920, was in dispute, the defendant claiming that his withdrawals aggregated more than the year's salary and that he was not entitled to the credit secured on his note to the defendant. A year later another inventory was taken. A statement of assets and liabilities was made up by the defendant from the books of the firm and "information furnished by the two partners." This statement showed total assets of $ 41,799.40 and total liabilities $ 22,619.05, or a net worth of $ 19,180.35 as compared with $ 18,728.98 the year before. The showing of profits for the year being so small, trouble arose resulting in accusations by the defendant of dishonesty on the part of the plaintiff. Propositions of settlement were made, but no agreement was reached which covered an accounting between the partners. It was agreed under date of February 5, 1921, to dissolve the partnership and that the defendant should take over the business, assume and pay all partnership liabilities, and have all the partnership assets. The plaintiff turned the business over to the defendant on February 5, 1921, and the latter took immediate charge. Since that date the plaintiff has had no control of the firm property and no access to the books except under order of court or by agreement of counsel after suit was brought.

The court found and stated the partnership accounts as of February 5, 1921, "so far as the evidence establishes the same." The net worth of the firm for sale purposes was found to be $ 15,375.14. Some changes from the statement drawn up by the partners were made which are not questioned. The controversy here relates mainly to the statement of the plaintiff's account, especially the amount charged the plaintiff on account of withdrawals. The court charged the plaintiff with withdrawals amounting to $ 2,592.69 instead of $ 1,627.04 appearing in the statement of February 5, 1921, and disallowed items of charge claimed by the defendant aggregating $ 3,740.16. These questioned items relate to checks drawn by the plaintiff on partnership funds. Whether they should be charged to the plaintiff depends upon a showing of the purpose for which they were drawn. Several of the items disallowed antedated the settlement of February 1, 1920. No item previous to that date was allowed except certain "charge slips" which the plaintiff conceded to be proper charge against him. The court took the view that this settlement was conclusive except as to items clearly established as having been omitted by mistake, fraud, or agreement. It was held that there was nothing in the evidence to indicate that previous to that time either partner acted otherwise than in good faith, and that in the circumstances, the burden of establishing items in dispute was upon the party claiming them. The burden of establishing such disputed items was thus cast upon the defendant and the court states, "Should I endeavor to include other items against either party from the evidence now at hand I must guess, for the evidence does not establish them."

Concerning matters in the final year of the partnership it is found that the plaintiff became more careless in the matter of bookkeeping, and either negligently or intentionally made frequent errors in the books to his own advantage and drew checks for his own benefit without proper memoranda. Certain findings of a recriminatory nature are made which are challenged by exceptions. Therein fault is found with the defendant's conduct in certain respects; but these findings can for the present be disregarded, for they afford no justification to the plaintiff, and have no bearing on the questions presently to be...