Opinion ID: 537185
Heading Depth: 4
Heading Rank: 2

Heading: $335,722.20 transfer to Cascade and Interphase

Text: 79 In its response to defendants' various accounting interrogatories, Cascade submitted its December 31, 1981 balance sheet showing that Cascade owed the Joint Venture $305,041.01 as of that date. (R. 322 Exh. Assoc. # 23.) That $305,041.01 item was listed on the balance sheet as a note payable from Cascade to the Joint Venture. 80 At the accounting trial, Weston admitted that Cascade and other Weston entities had taken large sums from the Joint Venture but argued that (1) in the case of Cascade, they totalled $270,200.00 and not $305,041.01; and (2) they constituted capital distributions that need not be reimbursed. The district court held that (1) Cascade's debt to the Joint Venture was $305,041.01 and that Cascade had not adequately justified its contention that it owed only $270,200.00; (2) there was an additional $30,681.89 (which was listed on Cascade's balance sheet as owing from Interphase to Cascade) that Cascade did not demonstrate came from sources other than the Joint Venture; 12 and (3) Cascade's failure to account for the foregoing charges on the theory of 'capital distributions' is an improper and self-serving attempt to avoid accountability for the balances [Cascade and the other Weston entities] owe (Accounting Findings 22). 81 On appeal, Cascade asserts, first, that the district court should not have relied on Cascade's corporate accounting records because they were prepared for Cascade and not the [Joint Venture] and because they were not received into evidence and were not a part of the court's file. (Cascade Br. at 45.) Those contentions are without merit. The fact that Cascade's balance sheet was prepared for Cascade is not relevant to the issue of whether it evidences a bonafide debt owing from Cascade to the Joint Venture. Cascade's assertion that the documents were not properly before the court is belied by the record. Cascade itself filed the documents with the district court as an exhibit to its accounting responses. (R. 322 Exh. Assoc. # 23.) Weston testified about the documents at length during the accounting trial. E.g., Accounting Tr. 87, 151-52. Moreover, the district court invited Cascade to present any clarifying evidence that it had, but Cascade chose not to do so. (Accounting Tr. 183-84, 305-06.) 82 Second, with regard to the $30,681.89 that the district court found owing to the Joint Venture from sums transferred between Interphase and Cascade, Cascade merely responds on appeal that Cascade's ledger account No. 2105 'Interphase N/P' is unrelated to the [Joint Venture]. (Cascade Br. at 45; see also Rex Montis Br. at 18.) Cascade does not provide any record citation for its assertion that the $30,681.89 did not come from the Joint Venture. The record shows that Cascade caused large amounts of money to be transferred from the Joint Venture checking account to Cascade. (R. 322 at 69.) Cascade, in turn, issued numerous checks to Interphase in round-number denominations, such as $1000, $5000, or $10,000. (R. 322 at 82-83; Accounting Tr. 97.) Cascade had hired Interphase to handle the accounting and payroll affairs of Cascade, the Joint Venture, and Weston's other entities. The sums transferred from Cascade to Interphase were transferred either without any invoices being prepared at all or with invoices being prepared after the transaction had taken place. (Accounting Tr. 97.) The funds were transferred into one of Interphase's bank accounts and commingled with the other funds there. (Id. 125.) It was Cascade's burden to show that all funds transferred between Cascade and Interphase were not related to the Joint Venture or else were spent on legitimate Joint Venture expenses. Cascade failed to do so. 13 83 Third, Cascade asserts that much of the money that Cascade and the other Weston entities took from the Joint Venture can be explained as capital distributions. The district court found that explanation to be an after-the-fact rationalization, and we agree. Cascade argues that in February 1981, the Joint Venture issued two checks totalling $40,949 to or for the benefit of Gold Technics. Cascade contends that the $40,949 given to Gold Technics as 10 percent owner of the venture was a capital distribution and that, consequently, Telegraph Limited as 60 percent owner was entitled to $270,200 and Rex Montis as 30 percent owner was entitled to $91,807.55. (Cascade Br. at 45-46.) 14 84 Contrary to Cascade's contention, the evidence at the accounting trial showed that (1) neither the 1980 nor the 1981 tax return for the Joint Venture, both of which were prepared by Cascade, reported the $40,949 payment to Gold Technics as a capital distribution (Accounting Tr. 56-57); (2) neither the 1980 nor the 1981 financial statement of the Joint Venture, both of which were prepared by Cascade, treated the $40,949 payment as a capital distribution (Accounting Tr. 58-59); (3) one of the checks involved in the $40,949 transaction indicated on its stub that $12,255.88 was a repayment to Gold Technics for money advanced by it as part of the Associates' offering (Accounting Tr. 65); (4) another of the checks involved in the transaction indicated on its stub that the remaining $28,723.16 was a loan (Accounting Tr. 68-69; R. 322 Exh. THV7); and (5) Gold Technics' 1981 financial statement, which was prepared by Weston's accountant, treated the $28,723.16 as a loan (Accounting Tr. 73-74). Therefore, the district court was justified in concluding that Gold Technics had not received any capital distributions and that all money taken from the Joint Venture by Cascade and the other Weston entities should be returned. 15