Blanchard v. Jefferson

Williams, J,:

The action was brought to recover a balance alleged to have been owing by defendant individually to plaintiffs’ testator, Blanchard, growing out of the following facts: The defendant was the wife of John J. Jefferson, who, in his lifetime, was. engaged in the wall paper manufacturing business. Blanchard and one De Lieuw were employees of Mr. Jefferson in that business during his lifetime. Mr. Jefferson died in November, 1868, leaving a will in which the defendant was named as executrix. January 1, 1869, the defendant, Blanchard and- De Lieuw, entered into a copartnership, and continued the business of the late Mr. Jefferson until December 31, 1873, when De Lieuw retired, and the defendant and Blanchard entered into copartnership under a written agreement to continue the business for five years from that time. The defendant was to contribute as cash, ca¡3Ítal $66,309, and Blanchard $13,370, these being the amounts standing to their credits respectively upon the closing of the books of the former copartnership. The profits were to be divided equally. Blanchard was to conduct the business, but was to consult with defendant in cases of importance. Defendant was permitted to draw annually $3,600, and Blanchard $2,500, from, the business. The business was carried on under this agreement for the five years, and until January 1, 1880. Blanchard acted as general manager and kept the books, and among them the ledger upon which the personal accounts of the partners appeared. Four sons of the defendant were employed in the business, one of whom assisted in keeping the books, but Blanchard alone had charge of the ledger. During the seven years this copartnership continued, the accounts were closed at the end. of each year, and the profits or losses,.in equal proportions, were charged or credited to the partners respectively. The accounts were so closed up at the termination of the copartnership December 31, 1880, and there was then standing to the credit of Blanchard the sum of $14,651.92, as his share or interest in the business. Thereafter the business was continued by the defendant individually, she taking all the assets, and employing Blanchard at a salary of $3,000 as manager. This relation continued until June 30, 1887, when Blanchard retired. During all this time Blanchard acted as sole manager of the business, and kept the books with the assistance of one of the defendant’s sons; but Blanchard alone had charge of the ledger. On January 1, 1881, Blanchard opened an account with himself upon defendant’s books, and credited himself with the sum of $14,651.92, balance stock, account, which was the amount taken from the ledger of the copartnership upon closing of their accounts. In this new account Blanchard also credited himself at the end of each year with his salary, $3,000, and semi-annually with interest on the stock balance, or on a lesser amount, and charged himself, with the several amounts taken or drawn out by him from the business, simply stated in the account to be cash. During the whole time the amount of cash drawn by him exceeded the amount of his salary by $2,722.42, which was not, however, a sufficient amount to balance the interest charges in the account. Blanchard died in March, 1891, and in November, 1891, this suit was commenced to recover the balance of this account and interest, $16,845.06. The defense was that the Statute of Limitations had run against any claim made for the stock balance of $14,651.92, and that this amount as entered upon the books was in any event too large; and it was also sought to recover back the amount overdrawn by Blanchard, $2,722.42, and interest.

One of the questions arising on this appeal is. whether the stock balance entered ujion the books of the copartnership as a credit to Blanchard was too large as a matter of fact. Upon the trial some errors of computation were discovered, and plaintiffs made no objection to the corrections being made* on account thereof, by reducing such balance $78.39. The referee found no other errors in the account.

It was claimed at the trial, and is mow claimed here, that there was another .serious error in making up this balance by reason of an improper allowance for blocks and rollers. The blocks and rollers were wooden cylinders upon which the printing of the wall paper was executed.. The seasons of wall paper manufacture began in the summer, July, and extended until the following summer, July. New blocks and rollers were required every year, containing new patterns, and the old blocks and rollers were substantially of no value. Inventories were made each year, as of January first, and in each inventory the blocks and rollers contained in the inventory of the- preceding year were brought forward and inserted in the new inventory at a valuation amounting to eighty per cent of their valuation in such preceding inventory, and the blocks and rollers made during the year, and since the preceding inventory was made, were inserted in the new inventory at a valuation equal to their actual cost. In making up the merchandise account each year the amount of the inventory of the preceding year was entered upon the debit side of the account, and the amount of the new inventory was entered on the credit side of the account. The balance of the merchandise account was carried into the profit and loss account, and the balance of the profit and loss account was carried into the account of the copartners, which showed the stock balance of each copartner. It is said that this rule, as to the valuation of the old blocks and rollers, was erroneous, and, therefore, the balance to the credit of Blanchard at the close of the copartnership was too large. The claim made is that the entire amounts in the various inventories for old blocks and rollers should have been left out, and the new blocks and rollers made during the year preceding the inventory should be valued, not at their real costs, but, the year being half gone, at onelialf such cost. This would be fair. These blocks and rollers had then been in use one-half a year — from the July before — were still in use, and would remain in use for another half year, until the following July. An examination of the figures, however, shows that this system of keeping the accounts would have been more favarable to the plaintiffs than the one which was actually adopted. Take the account as made up in January, 1875, strike out of the inventory then made the 80 per cent of the old blocks and rollers, $6,514, and one-half of the valuation of the new blocks and rollers, $1,821, and the new inventory will thus be -reduced in all $8,335. When this inventory is then carried into the merchandise account, the credit side of that account will be reduced by this amount. Leaving out of the merchandise- account the valuation of the old blocks and rollers, taken from the inventory of the preceding year, will reduce the debit side of the merchandise account by the sum of $8,142. So that the net credit balance of the merchandise account in this year, to be carried to the profit and loss account, would be $193, less than appears by the books as they were kept. This change would be favorable to the defendant. And again, in 1876, the 80 per cent was $8,125, and one-half new blocks and rollers, $2,100, making total deduction in new inventory $10,225, while the total for old blocks and rollers by former inventory was $10,156, showing a net reduction of the credit balance for this year to be $69. This would also be favorable to the defendant. But in every succeeding year during the existence of the copartnership the balance would be the other way. In 1877 the. 80 per cent was $9,860, and one-half. the new blocks and rollers $2,000, making total deduction in new inventory $11,860, while the total for old blocks, and rollers by the former inventory was $12,325 ; - that would show an increase of the net balance to be carried to the profit and loss account of -$465. In 1878 the 80. per cent was $11,088, the one-half new blocks and rollers $2,000, making a total of $13,088, while old blocks and rollers in former inventory Were $13,860, showing an increase of net balance of $772. In 1879 the 80 per cent was. $12,070.40, one-half new blocks and rollers $2,350,‘making a total of $14,420.40, while old blocks and rollers in former inventory were $15,088, showing ail increase of net balance of $667.60. In 1880 the 80 per cent was $13,416.32, one-lialf new blocks and rollers $2,185, making a total of $15,601.32, while old blocks and rollers in former inventory were $16,770.40, showing an increase of net balance of $1,169.08. And, in 1881, the 80 per cent was $14,228, one-half of new blocks and rollers $3,200, making a total of $17,428, while old blocks and rollers in former inventory were $17,785, showing an increase of net balance of $357. So that it is literally true, as stated by the referee, that the new system of figuring would be more favorable to the plaintiffs, and would show a greater stock balance to Blanchard’s credit January 1,1881, than did actually appear, upon the books as he kept them, and this without changing the figures of the last year from eighty to fifty per cent for the old blocks and rollers, as was done. We cannot change the stock balance to Blanchard’s credit January 1, 1874, in any event, because that amount was expressly agreed upon ■ in the letters of copartnership. We have seen that the accounts as kept thereafter, during the time of the copartnership, were fully as favorable to the defendant as the facts warranted. The amount of stock balance,' therefore, to .Blanchard’s credit January 1, 1881, 'was not larger than it should have been.

The remaining ■ questions in the case were discussed very fully and fairly by the referee in his opinion. We fully agree with him as to the conclusions at which he arrived, and can add nothing valuable to the suggestions made by him.

We think the judgment should be affirmed, with costs.

Rumsey and O’Brien, JJ., concurred; Ingraham and Barrett, JJ., dissented.