Moore v. Freeman, 5688

Citation266 P.2d 674,41 A.L.R.2d 1388,58 N.M. 139,1954 NMSC 22
Decision Date05 February 1954
Docket NumberNo. 5688,5688
Parties, 41 A.L.R.2d 1388 MOORE v. FREEMAN et al.
CourtSupreme Court of New Mexico

Bert E. Newland, Deming, H. Vearle Payne, Lordsburg, J. Norman Hodges, Silver City, for appellants.

Garland & Sanders, Las Cruces, for appellee.

McGHEE, Chief Justice.

Appeal is brought from the decision of the lower court in action for declaratory judgment that certain funds aggregating to the sum of $4,514 belonged to the seller of an automobile agency and garage under the following contract provision:

'VI. As part of the consideration for transfer of said stock ownership by Seller to Buyers, Buyers further agree to assign by proper instrument to the Seller, all accounts receivable owing to said corporation up to and including August 4, 1951, which accounts shall be considered the property of the Seller.'

The case arose upon the following facts: On August 3, 1951, the plaintiff, J. C. Moore (appellee), was the sole stockholder of the Border Motor Company, Inc., a corporation doing business at Deming, New Mexico, operating a garage for the sale and service of Ford automobiles. Upon that date the plaintiff executed a contract of sale with William R. Freeman and Arthur S. Walder, defendants (appellants), which provided the seller would sell the stock of the corporation to the defendants for the sum of $45,000 payable in installments. The buyers were to take possession on August 5th following, and they were to convey to the seller all used cars except the shop car, all secondhand automobile parts, junk and other salvage on the junk yard. The seller was to have the bank account except for enough money to cover outstanding checks; the buyers were to pay the seller $800 to cover an order of parts paid for by the seller, but not yet delivered; and, as set out above, the buyers were to assign to the seller and accounts receivable up to and including August 4, 1951. In addition, the contract provided:

'IV. It is further agreed that he Seller shall and will assume all indebtedness of the Border Motor Company, Inc., which exists as of the time of transfer of stock ownership in said corporation and the said Seller agrees to indemnify and hold harmless said corporation from any and all indebtedness for merchandise received by said corporation prior to August 5, 1951, but shall not be liable for any accounts owing by said corporation for merchandise received upon receipt of same from the Ford Motor Company.

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'VII. It is understood and agreed by the parties hereto that all property of said corporation including merchandise, stock in trade, parts, accessories, oil grease, new cars, Good Will, and all other property whatsoever owned by the Border Motor Company, Inc., except that reserved to be expressly conveyed to (Seller) shall be retained by said corporation and become the property of the Buyers as purchasers of the stock of said corporation.'

At the time of the execution of this contract, the corporation owned three certain funds, namely: a finance company reserve with Universal C. I. T. Corporation of $3,594; a dealer's deposit with Ford Motor Company of $570; a dealer's incentive fund with Ford Motor Company of $350.

The first of these funds arises from the company financing the purchase of automobiles being given a certain percentage of the finance charge. Such amounts accrue with the finance company to serve as a guarantee against losses arising out of the contracts of sale or the repossession of automobiles which might be suffered by the finance company. When no contracts were outstanding the reserve would be returned to the automobile agency. Otherwise, the fund would fluctuate on a percentage basis with the number of outstanding contracts.

The second of the funds, the dealer's deposit fund with Ford Motor Company, arises from a sum being added to the price of each car purchased by the dealer from the Ford Motor Company, the charge varying according to the value of the car, generally being $15 or $20 per car. These sums accumulate during the year and are returned to the dealer near the end of the year in order to provide him with revenues with which to pay income taxes or other pressing accounts.

The third fund, the dealer's incentive fund, represents a percentage of receipts paid to a dealer for Ford automotive parts sold by him to other garages or dealers for resale.

Each of these funds was carried in the name of Border Motor Company, Inc., and the defendants have received payment of them.

The contract contained no specific mention of these funds and no discussion was had regarding them in the negotiations between the contracting parties. However, the funds were listed as assets under various captions on the monthly financial statement submitted to the Ford Motor Company on its form, a copy of which was introduced in evidence as Exhibit A. This statement was examined by the defendants during the negotiations, and they attach considerable significance to it. On it the finance company reserve is carried under 'Total Fixed Assets'; the dealer's deposit with Ford Motor Company is carried under 'Deposits--Ford Motor Company'; and the dealer's incentive fund is carried under 'Wholesale Compensation Receivable--Ford Motor Company'. On the financial statement there is a listing for accounts receivable, however, the funds here involved were not listed thereunder.

Generally it is the contention of the defendants such funds were to be the property of the Border Motor Company, Inc., under paragraph VII of the contract, set out above; while the plaintiff maintains, and the trial court ruled, the funds belong to him under paragraph VI of the contract, also set out above.

The trial court found the execution of the contract as aforesaid, and found that the defendants had received payment of the funds in question without right or authority or consent of the plaintiff; that the plaintiff was the owner thereof and entitled to recover said sums from the defendants. Finding of Fact No. 9 is as follows:

'That the plaintiff is entitled to a declaration of his rights by this Court in and to the Dealer's Reserve Fund, the Dealer's Deposit, and the Dealer's Incentive Fund and the Court expressly finds that each and all of said funds are, and were as of the date that the contract was entered into between plaintiff and defendants, accounts receivable and each and all of said funds are the property of the plaintiff, without right, title, or interest of the defendants therein; the Court also finding that it was the intention of both plaintiff and defendants at the time of the execution of the contract between said parties and at all other times material hereto that each and all said funds be considered accounts receivable as contemplated by the parties and by said contract and there the same be the property of the plaintiff.'

Defendants have set up three points on this appeal: (1) That the term 'accounts receivable' as used in commercial transactions means an open book account owed to the seller by a customer for goods, wares and merchandise purchased, or for services rendered, usually due in the month following the transaction and not evidenced by a note or other written agreement; that the accounts in question are not accounts receivable within this definition. (2) That the term 'accounts receivable' should be interpreted in the light of the circumstances surrounding the transaction, and the intention and understanding of the parties should be considered. (3) That the term 'accounts receivable' should be strictly construed against the plaintiff as the contract was drawn by his attorney. In the view we take of the case the first two points are allied and will be treated together under the determination whether there is substantial evidence to support the finding of the trial court it was the intention of the parties that the funds in dispute be considered accounts receivable and were to be the property of the plaintiff.

The plaintiff testified the various funds were not specifically mentioned in the contract because he considered them to be accounts receivable, and that it is standard procedure in the automobile business to carry and consider such items as accounts receivable. The witness, Jimmy Steven, testified he had had thirty years' experience in accounting and bookkeeping for automobile retail dealers, and eight years' experience with Ford agencies, although not as a registered or certified public accountant. He testified he was familiar with the dealer's deposit fund and the dealer's wholesale incentive fund; that these funds are considered to be accounts receivable from the Ford Motor Company, and that a reserve fund set up...

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3 cases
  • Davies v. Boyd
    • United States
    • Supreme Court of New Mexico
    • September 16, 1963
    ...Market & Supply Co. of Las Cruces, 61 N.M. 138, 296 P.2d 476; Sanders v. Freeland, 64 N.M. 149, 325 P.2d 923. See Moore v. Freeman, 58 N.M. 139, 266 P.2d 674, 41 A.L.R.2d 1388. In our view, the contracts, in this case, does not provide that sellers accepted purchasers' promissory note as pa......
  • Matter of Portsmouth Newspapers, Inc., 17626.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
    • January 8, 1958
    ...privilege in presenting the testimony of a certified public accountant. The question is sufficiently answered in Moore v. Freeman, 58 N.M. 139, 266 P.2d 674, 41 A.L.R.2d 1388, wherein the court had for consideration the status of three funds maintained by an automobile dealer, namely, a fin......
  • Logue v. Allen Laundry, Inc.
    • United States
    • Commonwealth Court of Pennsylvania
    • June 29, 1977
    ......1955);. Nell v. McCrea, 16 D. & C.2d 555 (1958); Moore. v. Freeman, 58 N.M. 139, 266 P.2d 674, 41 A.L.R. 2d 1388. (1954). . . Pennsylvania. ......

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