Matoza v. Matoza

McMURRAY, J. pro tem.* Antone Matoza sued his brother, Henry Matoza, and his nephew, Henry Matoza, Jr., for fraud and an accounting of partnership profits. Plaintiff obtained a judgment for $35,653.61 and the court made an order awarding $3,000 to the referee appointed in the matter and provided that this amount be taxable as costs. From this judgment and order defendants appeal.

Antone Matoza does not speak, read or write the English language; Henry speaks English, but does not read it. In 1940 Antone and Henry commenced farming as equal partners. Henry was the business manager, paying all obligations, receiving all payments and doing all the banking; Antone worked in the fields. At this time Henry contributed equipment and money to the partnership of the value of $9,101.70; Antone made no capital contribution.

In 1945 Henry, Jr., became an equal partner with his father and uncle and this partnership continued until the end of 1949. At that time Henry obtained Antone’s signature on a dissolution agreement and paid him $10,000 for his [574]partnership interest in the business, Henry to have the right to continue therein. Antone thereafter commenced this action.

After reference the court found that Henry had at all times from 1940 through 1949 done all the banking for the partners; that he kept no books of account; that the only documents and papers available to the court were: (a) copies of income tax work sheets and returns made on behalf of the partnerships, which did not set forth the annual incomes nor the total annual expenses correctly; (b) copies of various bank statements for the years 1943 to 1950; (c) approximately 4,000 cancelled cheeks through the years 1942-1950, which are not related to any other records; (d) various leases, invoices, statements, correspondence, bills and other documents which were so unclassified as to be unrelated to any withdrawals or deposits shown on the bank statements. The court also found that Henry had converted partnership funds to his own benefit.

Appellants’ principal grounds of appeal from the judgment are that the referee in taking the accounting used inconsistent methods which distorted the facts and that an improper method was used to determine the partners’ withdrawals.

The first inconsistency complained of is that the referee treated certain expenditures, in the last year of the partnership as personal withdrawals by Henry rather than as partnership expenditures and that this procedure resulted in a change from a cash to an accrual method of accounting since there was no credit given Henry for like expenditures at the commencement of the first partnership. The contention is without merit. There is no evidence that Henry made like expenditures at the commencement of the partnership. The expenditures in 1949 were in the nature of prepaying costs of continued operation and the referee was, therefore, justified in treating them as personal withdrawals by Henry, since he. alone would benefit therefrom.