Police said some of the animals were maimed first before being "finished off".
• Dogs would have cowered in fear, says SPCA head
Others were shot at inside their cage or hit by ricocheting bullets.
The youngest of the animals were aged 3 weeks.
The SPCA is investigating whether the animals were killed humanely, or if charges should be laid.
The dispute, on a rural road in Wellsford, near Auckland, unfolded on Monday when a fox terrier belonging to Russell Mendoza was discovered dead, apparently mauled by another animal.
Mr Mendoza would not speak to reporters on legal advice.
But police said he blamed one or more of the 39 dogs owned by his neighbour, Rowan Hargreaves.
Mr Hargreaves, who kept the animals on his 5ha block in an old quarry, did not believe they were to blame.
However, a day earlier he had shot one of them after discovering it had attacked a sheep.
Until then, he had never had any trouble with his dogs getting out, he said.
Mr Hargreaves, a mechanic who lives alone in a broken-down truck surrounded by car wrecks, said after Mr Mendoza buried the fox terrier, he and another man arrived, armed with a .22 rifle and a 12-gauge shotgun.
They handed Mr Hargreaves a note for him to sign, saying he agreed to them shooting the dogs.
He signed the letter because he felt "under enormous pressure".
He then stood behind a shack to shield himself from the "bloodbath".
Holding back tears yesterday, he described the sounds of his dogs being shot; sounds that echoed off the quarry walls for 20 minutes.
"They were screaming, making sounds dogs just don't make.
"When one was gone, the others knew they'd be next, but they had nowhere to go."
Six surviving dogs were taken to Mr Hargreaves' workshop in Wellsford, but one died.
None were registered.
The SPCA took away some of the animals and Mr Hargreaves was yesterday making a grave in the quarry to bury the rest.
Senior Constable Barry Rose said he found 66 rifle cartridges and seven shotgun shells on the property.
He could see dozens more among the dog carcasses "piled on top of one another".
"I think [the gunmen] went absolutely ballistic and let everything go until the last one stopped squealing . . .
"I've been in this job for over 35 years and this is the first time of ever come across something like this."
Police had received no complaints about Mr Hargreaves' dogs before the shootings, he said.
The dogs, all mongrels, were the offspring of a single breeding pair.
When asked why he had had so many dogs, Mr Hargreaves said they were "my family".
SPCA executive director Bob Kerridge said two investigators had visited the property and would determine whether the dogs suffered before they died.
A decision would then be made on whether the two men would face charges.
A wilful ill-treatment of animals charge carries a penalty of up to three years' imprisonment.
