University of Vermont AAHS

Noel v. Johnson

Washington Court of Appeals
UNPUBLISHED, 2000 WL 1335304
September 15, 2000

Summary of Opinion

Plaintiff Noel and defendant Johnson agreed to purchase a horse, train it, sell it at a profit and split the proceeds. Johnson supplied the money to purchase the horse ($750) and Noel supplied the facilities, skills and labor in training the horse.

The arrangement fell apart and this lawsuit was filed to determine who owes what to whom. The trial court found there was no partnership but that there was a contract for a project. The Court of Appeals says there was a joint venture, which, like a partnership, requires that the assets and liabilities of the joint effort must be divided differently. It sent the case back to the trial court for it to do so.

Text of Opinion

Eric Noel appeals this judgment, claiming that the trial court erred by failing to conclude that he and Sandra A. Johnson had a formed a partnership in a horse. We hold the trial court's findings of fact establish a joint venture. Because of our holding, the trial court must recalculate the damages by applying partnership accounting principles, enter a decree of dissolution, and make findings on the fiduciary duty claim with damages, if appropriate. Reversed and remanded.

Eric Noel and Sandra Johnson (n/k/a Hall) entered into an oral agreement to purchase a horse known as Red Hot Prospect (Red). Johnson agreed to contribute the purchase price of $750, and Noel agreed to pay the ongoing expenses and provide his horse training expertise. The parties purchased Red on May 1, 1995. Johnson's name appeared on Red's registration papers as the owner. Both parties agree that they intended to train Red as a show jumper and later sell him, sharing equally in the profits of his sale. Noel testified he believed Red would be worth between $30,000-$50,000 after training.

In August 1995, Johnson started working for Noel at Vancouver Riding Academy, which Noel owned and operated. Noel paid Johnson a salary for her services, including the care, feeding, and riding of Red. Johnson resided on the property in her mobile home. Noel paid all reasonable and necessary expenses for Red's routine care and training during his stay at the Academy.

In August 1996, Johnson left the riding academy and took Red with her to her residence in Skamania, where she began paying all reasonable and necessary expenses to care for Red. In October 1996, Johnson and Noel agreed to ship Red to a farm in California for purposes of selling him. In March 1997, an attempt by Noel to sell Red fell through because Johnson claimed sole ownership in the horse. That same month, Noel shipped Red to a different farm in California for the purpose of marketing him through the farm's owner; this agreement also fell through because of phone calls by Johnson asserting her sole ownership of the horse. Last, in April 1997, Noel sent Red to the Orange County Fairgrounds in California for training and boarding, while he looked for a potential buyer. From April 1997 to October 1997, Johnson did not know the location of the horse. Red remained at the fairgrounds until the end of May 1998. Noel paid for Red's care from April 1997-May of 1998.

In May 1997, Noel sued for a partnership dissolution and to force the sale of the horse. Johnson answered, raising various counterclaims and disputing the existence of a partnership. She also filed a Motion and Declaration for Provisional Process, asking the court to return Red to her possession, and order Noel to provide her immediately with the information regarding Red's location. In October 1997, the court issued an order granting Noel possession of Red and authorizing him to sell the horse for a minimum of $7,500, proceeds of the sale to be entered into the court registry pending the outcome of the trial. The court granted Noel 60 days in which to sell Red; Johnson was ordered not to interfere in the sale. In June 1998, a court granted Johnson's motion to return Red to Washington, and ordered that Red be sold at auction by July of 1998. Both parties were allowed to bid without restriction. Johnson then consigned Red to a cattle auction where her husband purchased the horse for approximately $710.

After a bench trial, the judge orally ruled that '... although (Noel and Johnson) do not have a true partnership, they certainly had a joint venture agreement(.)' On October 15, 1998, the trial judge entered judgment for Noel in the amount of $4,909.00, which was based upon total expenses for Red, [FN1] less: (1) the sale price, (2) 50% of the loss, and (3) credits for board and purchase price paid by Johnson. In the written findings the trial judge crossed out all language stating that Noel and Johnson entered into a 'joint venture,' and replaced it to read the parties entered into an 'oral agreement' for the purpose of buying, selling, and training Red. The trial court concluded that the agreement 'did not constitute a legal partnership.' Clerk's Papers, supplemental, at 4.

FN1. Total expenses included those already paid by each party and outstanding invoices.

 

I. Joint Venture Agreement

The trial judge concluded that Noel and Johnson's agreement regarding Red did not constitute a legal partnership under the Washington Uniform Partnership Act (UPA), Former RCW 25.04 et seq. This was an incorrect legal conclusion based on the trial court's own findings of fact. Applying the law of partnership and joint venture to the trial court's findings of fact, we hold that the parties entered into a joint venture agreement.

A partnership is an association of two or more persons to carry on as co- owners of a business or profit. Former RCW 25.05.060 (1955), repealed by Laws of 1998, ch. 103, sec.1308, effective Jan. 1, 1999. A joint venture is a type of partnership whose purpose is limited to a particular transaction or project. Pietz v. Indermuehle, 89 Wn.App. 503, 510, 949 P.2d 449 (1998). 'Consequently, partnership law generally applies to joint ventures as well.' Pietz, 89 Wn.App. at 510 (citing Paulson v. McMillan, 8 Wn.2d 295, 298, 111 P.2d 983 (1941)). We therefore apply both joint venture and partnership law to the facts in this case to classify the parties' business relationship.

Where, from all the competent evidence, it appears the parties have entered into a business relation combining their property, labor, skill, and experience, or some of these elements on the one side and some on the other, for the purpose of joint profits, a partnership will be deemed established. Malnar v. Carlson, 128 Wn.2d 521, 535, 910 P.2d 455 (1996) (citations omitted). Generally, '(w)here no express agreement exists, whether the parties have entered into a joint venture is a question of fact. No one fact is conclusive.' Goeres v. Ortquist, 34 Wn.App. 19, 22, 658 P.2d 1277, review denied, 99 Wn.2d 1017 (1983) (citing Latham v. Hennesey, 13 Wn.App. 518, 521-522, 535 P.2d 838 (1975), aff'd, 87 Wn.2d 550 (1976). But, '(w)hen reasonable minds could reach but one conclusion, questions of fact can be decided as matters of law.' Douglas v. Jepson, 88 Wn.App. 342, 347, 945 P.2d 244 (1997), review denied, 134 Wn.2d 1026 (1998) (citation omitted). Here, the trial court's own findings of fact are susceptible to only one reasonable conclusion--that the parties entered into a joint venture agreement.

We do not substitute our judgment on disputed facts for that of the trial court, but merely correctly apply the law regarding joint ventures to the trial court's own findings. The trial court found the facts necessary to bring the business relationship within the rule of partnership and joint venture, but the trial court failed to properly apply the law to those facts. We apply the two-step standard of review for a trial court's findings of fact and conclusions of law: first, we determine if the trial court's findings of fact were supported by substantial evidence in the record, and if so, we next decide whether those findings of fact support the trial court's conclusions of law. Landmark Development, Inc. v. City of Roy, 138 Wn.2d 561, 573, 980 P.2d 1234 (1999) (citation omitted); Johnny's Seafood Co. v. City of Tacoma, 73 Wn.App. 415, 418, 869 P.2d 1097 (1994). Here, neither party on appeal disputes the crucial findings of fact of the trial court. Therefore, we examine the trial court's findings of fact and apply the law of joint venture to determine if those facts support the trial court's legal conclusion. We review conclusions of law de novo. Wallace Real Estate Inv., Inc. v. Groves, 72 Wn.App. 759, 766, 868 P.2d 149, aff'd, 124 Wn.2d 881 (1994).

Here, the trial court's findings of fact lead to only one legal conclusion: the facts establish that the parties entered into a joint venture. The trial court made the following findings of fact, which are undisputed on appeal:

1. (Noel and Johnson) entered into an oral agreement to purchase a horse known as Red Hot Prospect for the purpose of training him and selling him for profit.

2. (Johnson) agreed to contribute the initial seven-hundred fifty dollar ($750.00) purchase price.

3. (Noel) agreed to contribute his horse training expertise.

4. The horse was purchased on May 1, 1995 for seven-hundred fifty dollars ($750.00).

5. (Johnson) caused her name to be placed on the registration papers as the owner.

6. When the horse sold, both parties were to share equally in any profit.

Clerk's Papers, supplemental, at 2.

Although a joint venture is in the nature of a partnership, our law examines four specific elements to determine its existence: (1) a contract, express or implied; (2) a common purpose; (3) a community of interest; and (4) an equal right to a voice and to control. Penick v. Employment Sec. Dep't, 82 Wn.App. 30, 40, 917 P.2d 136 (citing Barrington v. Murry, 35 Wn.2d 744, 752, 215 P.2d 433 (1950) and Paulson v. Pierce County, 99 Wn.2d 645, 654, 664 P.2d 1202 (1983)), review denied, 130 Wn.2d 1004 (1996); Latham, 13 Wn.App. at 521 (citation omitted). The essential element of a joint venture is the express or implied contract between the parties. Carboneau v. Peterson, 1 Wn.2d 347, 374 (1939)

The facts conclusively satisfy the criteria of joint venture. First, an agreement to share profit raises a presumption of partnership and demonstrates a community of interest in the business undertaking. Former RCW 25.04.070(4). The agreement to share profits raised such a presumption here.

The second and third prongs are established by the trial court's Finding of Fact No. 1: an 'oral agreement to purchase a horse known as Red Hot Prospect for the purpose of training him and selling him for a profit.' Clerk's Papers, supplemental, at 2. The essence of a joint venture is the contractual relationship between the parties, sharing both an intent to enter into mutually binding obligations, and a common purpose for the enterprise. Goeres, 34 Wn.App. at 21 (citing Carboneau, 1 Wn.2d at 374-75). See also Paulson, 99 Wn.2d at 654. Here, Finding of Fact No. 1 demonstrates that the trial court found such a contract for a common business purpose when it found that the parties had an 'oral agreement' to purchase, train, and sell Red for a profit. Neither party disputes the existence of this agreement. We also note that the crucial inquiry in determining whether a partnership existed is the intent of the parties, which is necessarily a question of fact. See Malnar, 128 Wn.2d at 535-36 (holding summary judgment inappropriate where question of fact as parties' intent to form a partnership). The parties' intent need not be established by direct evidence, but may be implied from the actions and conduct of the parties. Malnar, 128 Wn.2d at 535; In re Estate of Thornton, 81 Wn.2d 72, 79, 499 P.2d 864 (1972) (quoting Nicholson v. Kilbury, 83 Wash. 196, 202, 145 P. 189 (1915); Latham, 13 Wn.App. at 522. Here, the trial court found the requisite implied intent to 'enter into mutually binding obligations' and a 'common business purpose' when it found that the parties entered into the oral agreement to buy, train, and sell Red, splitting both profit and expenses.

Fourth, both parties exhibited equal control in making sales and marketing choices for Red. Additional findings of fact by the trial court demonstrate that both parties exercised control over Red's location and contact with potential buyers and brokers. Thus, the fourth element, equal control, is clearly met.

In sum, the facts conclusively establish a joint venture agreement. Therefore, the trial court's own findings of fact support only one legal conclusion--that Noel and Johnson entered into a joint venture agreement.

Johnson raises three main arguments to demonstrate that the trial court correctly found that a partnership did not exist: (1) no clear provision in the agreement regarding losses; (2) her own testimony regarding her initial 'intent'; and (3) that she was the sole registered owner of Red. These arguments fail. First, Johnson incorrectly argues that there was no clear provision in the agreement regarding losses because the written findings contain no specific finding regarding an agreement to share expenses, and that this is fatal to a finding of partnership. But, the trial judge clearly found in his oral ruling that the parties agreed to evenly divide all other costs outside of training. In the absence of a specific finding, we may look to the trial court's oral opinion to determine the court's resolution of the issue. Backlund v. University of Washington, 137 Wn.2d 651, 656 n. 1-657, 975 P.2d 950 (1999) (citing In the Matter of the Marriage of Booth, 114 Wn.2d 772, 777, 791 P.2d 519 (1990); Womble v. Local Union 73 of Int'l Bhd. of Elec. Workers, AFL-CIO, 64 Wn.App. 698, 702, 826 P.2d 224, review denied, 119 Wn.2d 1018 (1992)). See also Anderson v. Valley Quality Homes, Inc., 84 Wn.App. 511, 522, 928 P.2d 1143, review denied, 132 Wn.2d 1002 (1997) (using memorandum opinion to clarify written findings).

Here, in his oral findings, the trial judge specifically determined that in light of similar agreements Noel made in the past, '(i)t did not stand to reason that Mr. Noel would risk bearing all of the expense of this horse for even a few months(.)' Report of Proceedings at 137. Specifically, the trial court found that 'both the parties would bear the risk of the boarding, the shoeing, the vet care, the expenses incurred in getting ready--the horse ready to show, and the expenses of sale.' Report of Proceedings at 137. He also orally found that 'the expenses, except for the training, would be shared equally. If there were any profits, they would be shared equally after deducting the expenses.' Report of Proceedings at 137. The trial court applied this finding of shared expenses when it made its calculations to determine damages. Therefore, the trial court clearly found an agreement to share losses, which, along with an agreement to share profits, meets one of the most important tests of partnership or joint venture. Gottlieb Bros. v. Culbertson's, 152 Wash. 205, 209, 277 P. 447 (1929).

Second, Johnson emphasizes that she testified that she did not believe she was Noel's 'partner.' But, Noel argues that a joint venture existed because Johnson referred to Red as 'the partnership horse' and called their arrangement a 'partnership' in a letter to him early in the relationship. Both Noel and Johnson over-emphasize terminology. It is not dispositive of the partnership issue whether the parties called their relationship a 'partnership.' 'The ((partnership) relationship is not controlled by the name of the arrangement or by certain terms and labels, but in substance is derived from all the circumstances surrounding their relations.' Cusick v. Phillippi, 42 Wn.App. 147, 154, 709 P.2d 1226 (1985) (citing Stipcich v. Marinovich, 13 Wn.2d 155, 161, 124 P.2d 215 (1942)). Here, the substance of Noel and Johnson's business relations is drawn from their actions and the circumstances of their relations--all of their actions regarding Red were directed toward training him and selling him for a profit as co-owners of the venture. The trial court's findings of fact reflect this intent.

Third, neither is it fatal to a finding of joint venture that Red's registration papers listed Johnson as the sole owner. 'An ownership or proprietary interest in the subject matter of the enterprise by all parties is not essential to creation of a joint venture.' Paulson, 99 Wn.2d at 655 (citation omitted). See also Malnar, 128 Wn.2d at 535 (stating that a partnership may exist although title to the alleged partnership property is held in the name of one of the alleged partners). Again, we look to proof that the parties contracted to carry out a single enterprise, and that they possessed a common purpose and community of interest in that enterprise as well as an equal right of control. Goeres, 34 Wn.App. at 21. As already discussed above, the parties' agreement shows a common business purpose to make a profit, and their initial actions demonstrate equal control over decisions regarding Red.

As the trial court's findings of fact demonstrate, the parties clearly intended to enter into a business venture by purchasing Red, training him as a jumper, and then marketing and selling him, splitting the profits of his sale. The trial court's findings meet the essential test of an implied contract of joint venture: Noel and Johnson intended to enter into mutually binding obligations and to share a common business purpose by combining their property, labor, skill, and experience for the purpose of joint profits from the eventual sale of Red. We hold that the trial court incorrectly concluded that its findings did not support the conclusion of the existence of a joint venture. We reverse the trial court and order entry of judgment concluding that the parties entered into a joint venture.

II. Breach of Fiduciary Duty

Because we have held that the parties did enter a joint venture, they owed each other a fiduciary duty. Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Gleason v. Metropolitan Mortgage Co., 15 Wn.App. 481, 496, 551 P.2d 147 (citing Donaldson v. Greenwood, 40 Wn.2d 238, 249, 242 P.2d 1038 (1952)), review denied, 87 Wn.2d 1011 (1976). Furthermore, partners owe each other an obligation of the utmost good faith. Former RCW 25.04.210 (1955); Hsu Ying Li v. Tang, 87 Wn.2d 796, 800, 557 P.2d 342 (1976) (citing Waagen v. Gerde, 36 Wn.2d 563, 219 P.2d 595 (1950)).

Noel argues on appeal that the following support his claim of breach of fiduciary duty: (1) Red sold at auction for only $710; (2) Johnson's husband was the purchaser; (3) Johnson knew of the $5,500 offer to purchase Red made in California just before Red returned to Washington; (4) Johnson testified that she believed there was no partnership; and (5) Johnson told third parties that she was the sole owner of the horse. But, the trial court made no specific findings of fact or conclusions of law regarding whether Johnson breached a fiduciary duty owed Noel.

Noel sought a decree of dissolution of the partnership under Former RCW 25.04.320(c) and (d) (1955) and a right to wind up the partnership affairs as allowed by Former RCW 25.04.370 (1955). The trial court failed entirely to apply the partnership statute, because it did not find a partnership or a joint venture. Generally, failure of a trial judge to render complete findings is error, and requires remand for their entry. CR 52; Federal Signal Corp. v. Safety Factors, Inc., 125 Wn.2d 413, 422, 886 P.2d 172 (1994) (citations omitted). The trial court did not address the issue of fiduciary duty because of its erroneous conclusion. Therefore, we also remand for entry of findings of fact and conclusions of law regarding the claim of dissolution by breach of fiduciary duty.

III. Damages

Noel assigns error to both the findings of the trial court used in totaling expenses for the training and care of Red (findings of fact), and calculation of damages (conclusion of law). Because the trial court did not find there was a partnership, the trial court awarded damages by determining what costs were 'reasonable and necessary' for the care of the horse, and by dividing these costs equitably. We do not disturb the trial court's findings of fact regarding expenses because they are supported by substantial evidence. But, the trial court does not have 'equitable powers' entitling it to disregard applicable partnership statutes. Guntle v. Barnett, 73 Wn.App. 825, 833-34, 871 P.2d 627 (1994).

A partnership accounting generally involves a determination of partnership assets and their valuation, partnership liabilities, partnership profits, and partners' contributions and withdrawals. Such accounting may raise questions about partners' debts, or advances, issues of goodwill and dates of valuation. Colwell v. Eising, 118 Wn.2d 861, 866, 827 P.2d 1005 (1992) (citing 59A Am.Jur.2d Partnership sec. 971-1022 (1987)). As stated above, a joint venture is a type of partnership to which the partnership statute generally applies. Pietz, 89 Wn.App. at 514-520 (applying partnership statute to action for indemnification and contribution by joint venture partner). Because we have held that the trial court erred in failing to find a joint venture, the trial court also made an error of law by not applying the principles of Former RCW 25.04.et seq. in calculating damages in this case. Therefore, because the trial court divided expenses equitably and did not follow partnership accounting principles or order of payment of liabilities as required under the statute, we remand for a partnership accounting and correct reimbursement by each partner.

IV. Attorney Fees

First, Noel argues that 'attorney fees incurred in defense of a partnership and for the preservation of its property are partnership expenses' and he should be awarded these costs, citing RCW 25.04.180. Without stating his reasons, the trial court declined to award fees to either party, except an award of $125 statutory fees to Noel. Whether to award fees in a partnership case is a matter left to the discretion of the trial court. Guntle, 73 Wn.App. at 837. However, reasoning that the power to award attorney fees 'springs from (a court's) inherent equitable powers,' our Supreme Court has awarded attorney fees in a suit for partnership dissolution and accounting where the defendant breached his fiduciary duty to the other partners. Hsu, 87 Wn.2d at 799 (citation omitted). Because the lawsuit preserved partnership assets and prevented further commingling, the attorney fee award was proper. Hsu, 87 Wn.2d at 801. Therefore, because we are remanding on the issue of breach of fiduciary duty, the trial court may reconsider its award of attorney fees after it makes findings regarding the alleged breach.

Second, Noel requests that this court award fees on appeal. But, Noel devotes only one paragraph to this argument in his reply brief and cites no authority as required by RAP 18.1. The rule requires more than a simple request for attorney fees on appeal. Wilson Court Ltd. Partnership v. Tony Maroni's, Inc., 134 Wn.2d 692, 710 n. 4, 952 P.2d 590 (1998) (citing Thweatt v. Hommel, 67 Wn.App. 135, 148, 834 P.2d 1058, review denied, 120 Wn.2d 1016 (1992)). Argument and citation to authority are required under the rule to advise the court of the appropriate grounds for an award of attorney fees and costs. Wilson, 134 Wn.2d at 710 n. 4 (citing Austin v. U.S. Bank of Washington, 73 Wn.App. 293, 313, 869 P.2d 404, review denied, 124 Wn.2d 1015 (1994)). Noel has not provided this Court a proper basis by which to award his attorney fees. Consequently, we deny attorney fees for the appeal.

Reversed and remanded for entry of findings and orders consistent with this opinion.

A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.

MORGAN, J. (dissenting).

The standards of review in this case are simple and well known. (1) If all reasonable minds would believe that Noel and Johnson formed a joint venture, and none would believe that they formed a contract that was not a joint venture, there is no issue of fact and we must reverse the trial court. (2) If all reasonable minds would believe that Noel and Johnson formed a contract that was not a joint venture, and none would believe that they formed a joint venture, there is no issue of fact and we must affirm the trial court. (3) If reasonable minds could believe that Noel and Johnson formed a joint venture, or that they formed a contract that was not a joint venture, there is an issue of fact; the trial court decides it; and we usurp its role if we decide it. Here, in my view, reasonable minds could (and in fact do) differ over whether Noel and Johnson formed a joint venture or a contract that was not a joint venture. Suppose that Bob and John agree to buy, fix up, and resell a car. They further agree that Bob will perform the needed work; John will supply the money needed to purchase the car, paint, parts, and the like; and they will split the profits received on resale. Do they necessarily intend to form a partnership or joint venture, with all of its attendant fiduciary duties and liabilities? Or could a rational trier of fact reasonably infer that they intended to form a simple contract? The difference lies in the existence or non-existence of fiduciary rights and duties, and it is a difference that is highly significant. Neither Bob nor John should be subjected to such rights and duties unless they mutually so intended.

Certainly, different facts might yield a different result. Suppose that Bob and John form the agreement just described. In addition, they agree to travel around the country, race the car, and split the winnings. Now, they are closer to operating an ongoing business, and it is more strongly inferable that they intend the fiduciary rights and duties inherent in a partnership or joint venture.

A case directly on point is Keeler v. International Harvester Used Truck Ctr. In that case, Eck advanced money to Terry for the purchase of a truck. They agreed that they would resell the truck, repay Eck the money he had put in, and split any remaining proceeds. The trial court ruled that their relationship was a joint venture as a matter of law. Reversing, however, the appellate court held that what they had intended was a question of fact. It said:

The sole issue raised on appeal is whether the court erred in ruling that a joint venture existed as a matter of law. We agree with appellant that the question of whether a joint venture existed in this case should have been submitted to the jury.

....

The existence of a joint venture depends on the facts and circumstances of each particular case. It's existence or non-existence depends upon what the parties intended in associating together.

In this case, what the parties intended when entering into their oral agreement was in dispute. This was an issue of fact and therefore was for the jury to resolve. There was sufficient evidence from which the jury could have inferred that the parties intended a joint venture with respect to the sale of the truck. On the other hand, there was testimony which would have supported a finding that no joint venture existed and that the relationship was merely that of debtor of debtor and creditor. When the trial court is presented with a choice between two reasonable inferences, the case must be submitted to the jury.

This case is the same as Keeler. A rational trier of fact could infer that Noel and Johnson intended a partnership or joint venture. On the other hand, a rational trier of fact could infer that Noel and Johnson intended a simple contract for the purchase, training, and resale of a horse. The choice of inferences was for the trial court, not this court, to make. The trial court's judgment should be affirmed; the majority errs by ruling otherwise; and I respectfully dissent from its ruling.


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