Wittner v. Metzger, A--803

• Decision Date: 23 February 1962
• Docket Number: No. A--803,A--803
• Citation: 72 N.J.Super. 438,178 A.2d 671
• Parties: George WITTNER and Henry W. Wittner, copartners doing business as Merchants Standard Trading Company, Plaintiffs-Respondents, v. Henry W. METZGER and Louis Metzger, Trading as Commercial Union Company, Defendants-Appellants.
• Court: New Jersey Superior Court — Appellate Division

Page 438

72 N.J.Super. 438

178 A.2d 671

George WITTNER and Henry W. Wittner, copartners doing business as Merchants Standard Trading Company Plaintiffs-Respondents, v. Henry W. METZGER and Louis Metzger, Trading as Commercial Union Company, Defendants-Appellants.

No. A--803.

Superior Court of New Jersey Appellate Division.

Argued Nov. 27, 1961.

Decided Feb. 23, 1962.

John Drewen, Jersey City, for appellants (Benjamin Gross, Jersey City, attorney; John Drewen, Jersey City, of counsel and on the brief).

Harry A. Margolis, Newark, for respondents (Max L. Rosenstein, Newark, attorney; Harry A. Margolis, Newark, of counsel and on the brief).

Before Judges GOLDMANN, FOLEY and ROSEN.

The opinion of the court was delivered by

ROSEN, J.C.C. (temporarily assigned).

In a contract action, tried without a jury in the Superior Court, Law Division, defendants seek to reverse a judgment in favor of plaintiffs in the sum of $13,003.97.

Plaintiffs George Wittner and Henry W. Wittner, copartners, doing business as Merchants Standard Trading Company in New York City (hereinafter referred to as Wittners), and defendants Henry W. Metzger and Louis Metzger, trading as Commercial Union Company in Newark, New Jersey (hereinafter referred to as Metzgers), deal in the factoring and purchase of accounts receivable. Wittners had a master agreement with each of two mercantile companies, Metropolitan Home Equipment Co. (Metropolitan) and Atlas Credit Corp. (Atlas). Pursuant to said agreements, Wittners purchased commercial paper and accounts receivable from Metropolitan and Atlas as a specific rate and percentage basis, in accordance with schedules supplied to them by the two companies. When the schedules were obtained by Wittners, they discounted a certain portion of them and thereupon paid Metropolitan and Atlas. Thereafter, Wittners endeavored to collect on these receivables. Under each master agreement, Wittners purchased the 'instruments' listed in the schedules accompanying the master agreements. The instruments consisted of 'scheduled notes accounts receivable and other collateralized obligations.' Wittners and Metzgers entered into two agreements dated August 22, 1950 and September 20, 1950, respectively, providing for their joint participation in the financing of the said instruments. In the Metropolitan agreement Metzgers' participation was 40%, and in the Atlas agreement 50%. In all other relevant respects the agreements are identical.

The agreements provided for Metzgers' participation in the Wittners' 'factoring operations' with Metropolitan and Atlas 'with respect to schedules,' under the master agreements. Copies of the master agreements were to be made available to Metzgers. Wittners were to conduct the factoring transactions solely in their own name, and Metzgers were to refrain from any contact or communication with Metropolitan and Atlas, since the business with the two companies originated with Wittners. Upon Metzgers' request, Wittners were obligated to furnish them with copies of the 'documents' and 'statements' involved in these factoring transactions and to permit Metzgers to examine Wittners' books respecting the transactions with Metropolitan and Atlas.

In each instance Metzgers accepted a participation share in schedules purchased by the Wittners, in accordance with the percentage figure contained in the agreements, and were to receive the same percentage of remittance from said schedules, less a specified reserve. Wittners were to account at stated intervals to the Metzgers upon receipt of remittances from the 'instruments' described in the schedules.

Paragraph 4 of the agreements provided that:

'In the furtherance of our (Metzgers') participation, you (Wittners) hereby Assign to us an undivided 40% (50% In the Atlas agreement) interest in and to said Schedule, And in and to the Instruments, collateral, rights and guarantees held by you with respect to said Schedules; and you shall execute, upon our request, Such further documents as may be required To evidence our said interest. In addition you shall make upon your books and records or ledger sheets appropriate notations reciting The percentage of our participation in said Schedules. You shall occupy the status of a trustee for our benefit with respect to said Schedules so participated in by us.' (Emphasis supplied)

Wittners further agreed to conduct transactions with Metropolitan and Atlas in accordance with 'sound factoring practice * * *.' If Wittners sold their factoring business they were to pay Metzgers their participation percentage of the open balance of the Metropolitan and Atlas schedules. The agreements provided that neither party had any proprietary interest in the general business of the other.

Pursuant to the agreements, Wittners did engage in transactions with Metropolitan and Atlas, making the agreed remittances to Metzgers. However, in May 1951 and April 1952, respectively, Metropolitan and Atlas were declared bankrupts in the federal courts in New York. The respective trustees in bankruptcy instituted proceedings in New York against Wittners to have certain accounts receivable and payments thereon, received by Wittners within the four months prior to bankruptcy, declared as preferences and returned to the bankrupt estates. The trustee of Metropolitan sought the sum of $197,000, and the Atlas trustee the sum of approximately $276,800, for total claims in excess of $473,800. The suits were opposed by Wittners, and counsel was retained to defend in each case. The Wittners notified the Metzgers of the pendency of these suits and requested Metzgers to assist in the defense, but the Metzgers remained silent.

The record discloses that the details of the individual accounts receivable purchased by Wittners pursuant to the master agreement were never furnished Metzgers. However, it is conceded that the Metzgers participated in the purchase of the receivables alleged by the bankruptcy trustees to have been preferences, and received their proportionate share of the proceeds collected from said receivables.

Although Wittners denied taking the preferences they ultimately settled the litigation for $2,000 (Metropolitan) and $15,000 (Atlas). Contribution sought by them totals $8,300, $800 representing 40% Of the $2,000 Metropolitan settlement and $7,500 representing 50% Of the $15,000 Atlas settlement. Counsel fees in defense and settlement of said suits, in the amounts of $3,507.80 and $6,601.70, respectively, were paid by Wittners. The total contribution sought by Wittners in this category is $4,703.97, $1,403.12 representing 40% Of the counsel fees in the Metropolitan action and $3,300.85 representing 50% Of the counsel fees in the Atlas action. Wittners postulate that these payments were 'losses' which should be borne proportionately by Metzgers.

Paragraph 2 of the agreements provided that:

'With respect to the Schedule of Instruments above-mentioned, you (Wittners) may in your discretion offer us and we (Metzgers) hereby accept a 40% (50% In the Atlas agreement) participation therein, and we hereby pay to you for such participation 40% Of the net amount of said schedule, less our charge of 7% (Net Amount as used above is understood to be the unpaid face amount of the schedules less a reserve of 20%). Any loss sustained with respect to said Schedules shall be borne by you and by us in proportion to our respective percentages of participation.' (Emphasis supplied)

The trial court held that Wittners and Metzgers entered into a joint venture, and gave judgment according to the stated proportions for Wittners' aforementioned payments in the total sum of $13,003.97, without costs. Proportionate indemnity for fees paid to Wittners' counsel in the instant litigation was denied. Wittners do not cross-appeal from this determination.

Metzgers contend that the agreements do not establish a joint venture but are contracts of indemnity. In essence, they claim that they purchased only a participation in the 'remittances,' i.e., only the collections.

The Sine qua non of joint venture is a contract purposefully entered into by the parties. The joint venture is not a status created or imposed by law but is a relationship voluntarily assumed and arising wholly Ex contractu, express or implied. 2 Williston, Contracts (3d ed. 1959), § 318A, p. 556 et seq.; 30 Am.Jur., § 7, p. 943. The joint venture concept has undergone noticeable judicial attention. Jaeger, 'Joint Ventures: Origin, Nature and Development,' 9 Am.U.L.Rev. 1 (1960); Taubman, 'What Constitutes a Joint Venture', 41 Cornell L.Q. 640 (1957). In addition to the requirement that there must be a contractual basis for the joint venture, certain requisites have been deemed essential. There is substantial agreement that some or all of the following elements, as summarized by Professor Williston, must be present:

(A) A contribution by the parties of money, property, effort, knowledge, skill or other asset to a common undertaking;

(B) A joint property interest in the subject matter of the venture;

(C) A right of mutual control or management of the enterprise;

(D) Expectation of profit, or the presence of 'adventure,' as it is sometimes called;

(E) A right to participate in the profits;

(F) Most usually, limitation of the objective to a single undertaking or Ad hoc enterprise.

Williston, supra, § 318A, at pp. 563--565

In this State a joint venture has been defined as 'A special combination of two or more persons where in some specific venture a profit is jointly sought without any actual partnership or corporate designation,' and 'a joint adventure is an undertaking usually in a single instance to engage in a transaction of profit where the parties agree to share profits and losses.' Kurth v. Maier, 133 N.J.Eq. 388, 391, 31 A.2d 835, 836 (E. & A. 1943); Kahn v. Massler, 140 F.Supp. 629, (D.N.J.1956), affirmed 241 F.2d 47 (3 Cir. 1957). Between the parties to a joint venture, a common...