Bushman Construction Company v. Conner, 6931.

• Decision Date: 27 September 1962
• Docket Number: No. 6931.,6931.
• Parties: BUSHMAN CONSTRUCTION COMPANY, a Missouri corporation, Appellant, v. W. S. CONNER, an individual doing business as W. S. Conner Construction Company; and R. P. R. Construction Co., an Arizona corporation, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

307 F.2d 888 (1962)

BUSHMAN CONSTRUCTION COMPANY, a Missouri corporation, Appellant, v. W. S. CONNER, an individual doing business as W. S. Conner Construction Company; and R. P. R. Construction Co., an Arizona corporation, Appellees.

No. 6931.

United States Court of Appeals Tenth Circuit.

August 28, 1962.

Rehearing Denied September 27, 1962.

Laurence W. DeMuth, Jr., of Akolt, Turnquist, Shepherd & Dick, Denver, Colo., and Richard U. Simon, of Simon & Simon, Fort Worth, Tex., for appellant.

C. Blake Hiester and Bill Earl Tom, of Hiester, Tannor & Clanahan, Denver, Colo., for appellees R. P. R. Construction Company.

Before PHILLIPS, PICKETT and and LEWIS, Circuit Judges.

PICKETT, Circuit Judge.

This action by Bushman Construction Company arose out of the failure of the defendant R. P. R. Construction Company, a subcontractor on a military housing project at the United States Air Force Academy, Colorado Springs, Colorado, to deliver, pursuant to a written direction of proceeds, money due to one of its subcontractors. Bushman appeals from a summary judgment in favor of R. P. R.

The record, consisting of the complaint, affidavits, depositions, and evidence introduced in support of an application for an injunction, discloses that R. P. R., by subcontract, agreed to perform a portion of the prime contract requirements in the construction of the housing project at the Air Force Academy. In turn, R. P. R. negotiated with the defendant Conner to do a portion of its work. These parties reached an agreement, and R. P. R. delivered to Conner a letter of intent to award him a portion of its work for a consideration of $2,184,600. Because Conner needed financial assistance, and was unable to furnish the required performance and payment bonds, the letter of intent was presented to Bushman, and, after considerable discussion, a participating arrangement was worked out between Conner and Bushman. In substance, this agreement required Bushman to pay all bills necessary to complete the work, establish a drawing account of $1,000 per month for Conner, and furnish the necessary bonds. Conner agreed to assign all payments to Bushman, and the profits were to be equally divided. On May 22, 1958, Conner delivered the bonds to R. P. R., which were guaranteed by Bushman, and the subcontract involved here was executed.¹ On June 3, 1958, the joint adventure arrangement was reduced to writing.²

Prior to the execution of the written agreement between Conner and Bushman, Conner furnished to R. P. R. an irrevocable direction for the payment of proceeds which provided that all money due to Conner under the subcontract should be forwarded to the Mechanics Bank, St. Joseph, Missouri.³ In addition to the direction for the payment of proceeds, Conner executed his power of attorney authorizing an officer of the Mechanics Bank to endorse the checks so forwarded and credit the proceeds to Bushman's account. As security for the performance of Conner's subcontract, Bushman's name and credit were used. It paid costs of operation in excess of $1,900,000, and received from R. P. R. $1,463,780.05 in accordance with the procedure outlined.

The record indicates that early in August, 1959 Bushman and Conner had a disagreement. Bushman, having advanced approximately one-half million dollars more than it had received, refused to furnish more money for the subcontract until additional progress payments were made by R. P. R. Conner thereupon undertook to terminate the joint adventure and revoke the authority of the officer of the Mechanics Bank to endorse checks. He advised R. P. R. that in the future all checks should bear the personal endorsement of W. S. Conner, and gave notice to R. P. R. that the direction to deliver the proceeds due on the contract to the bank was withdrawn. It is alleged that R. P. R., acting in cooperation with Conner, and with full knowledge of Bushman's interest, stopped payment on a $150,000 check which had been delivered to the bank, endorsed and deposited according to the preexisting agreement. Thereafter R. P. R. refused to make further payments to Bushman, and later payments were made directly to Conner or jointly to him and others. It is also alleged that disbursements were made by R. P. R. to Conner during the pendency of this action, "and with full knowledge of the contentions of Plaintiff."

In the first amended complaint Bushman alleges, in its first claim for relief, that there was a breach of Subcontract No. 581 by R. P. R. and a breach of a specific promise to pay Bushman $150,000 made to induce Bushman's continued participation, and it asks for recovery of the balance due on the subcontract as damages. In its second claim for relief recovery is sought on quantum meruit. The allegation is that certain sums were paid for the use and benefit of R. P. R. and Conner, and the relief prayed for is the reasonable value of the services rendered by Bushman or, alternatively, for restitution of the amounts paid on behalf of the defendants. In the third claim for relief Bushman alleges a conspiracy between R. P. R. and Conner to deprive it of the benefit of the joint adventure and defraud it of amounts previously expended. The allegations in this claim for relief could be construed as alleging a scheme to defraud Bushman by inducing it to advance funds for the performance of the subcontract with the intent to stop payments to Bushman after it had advanced substantially more than had been paid to it.⁴ Apparently R. P. R. takes the position that it knew nothing of the Bushman-Conner arrangement and owed no duty to Bushman.

In granting the motion for summary judgment the trial court held that the "Direction of Proceeds" was an unambiguous instrument, complete on its face, which could not be altered or explained by parol evidence. The court also held that the instrument was not an assignment, and that there was no contractual relationship between R. P. R. and Bushman.⁵ The effect of the court's conclusion is that Bushman could not sue on a claim for relief for breach of Subcontract No. 581, and that since no express contract existed, no contract could be implied between R. P. R. and Bushman. As to the third claim for relief, which was not mentioned by the defendant in its motion, the court dismissed it on the theory that no cause of action would lie for conspiracy to breach a contract which did not exist.

Rule 56(c), Fed.R.Civ.P., 28 U.S.C.A., provides that a motion for summary judgment should be granted "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Standards for the application of this rule have been thoroughly developed by this court. E. g., Atkinson v. Jory, 10 Cir., 292 F.2d 169; United States v. Kansas Gas & Elec. Co., 10 Cir., 287 F.2d 601; McCollar v. Euler, 10 Cir., 286 F.2d 327; Champlin v. Oklahoma Furniture Mfg. Co., 10 Cir., 269 F.2d 918, 74 A.L.R.2d 978; Alaniz v. United States, 10 Cir., 257 F.2d 108; James v. Honaker Drilling, Inc., 10 Cir., 254 F.2d 702; Zampos v. United States Smelting, Ref. and Mining Co., 10 Cir., 206 F.2d 171. While it is the duty of the trial court to grant a motion for summary judgment in an appropriate case, the relief contemplated by Rule 56 is drastic, and should be applied with caution to the end that the litigants will have a trial on bona fide factual disputes. Under the rule no margin exists for the disposition of factual issues, and it does not serve as a substitute for a trial of the case nor require the parties to dispose of litigation through the use of affidavits. The pleadings are to be construed liberally in favor of the party against whom the motion is made, but the court may pierce the pleadings, and determine from the depositions, admissions and affidavits, if any, in the record whether material issues of fact actually exist. If, after such scrutiny, any issue as to a material fact dispositive of right or duty remains the case is not ripe for disposition by summary judgment, and the parties are entitled to a trial.

In the instant case the parties agree that there was a joint adventure between Bushman and Conner. As a general proposition, the substantive law of partnerships is applicable to joint adventures. Taylor v. Brindley, 10 Cir., 164 F.2d 235; Goss v. Lanin, 170 Iowa 57, 152 N.W. 43; State ex rel. Crane Co. v. Stokke, 65 S.D. 207, 272 N.W. 811, 110 A.L.R. 761; 48 C.J.S. Joint Adventures § 1 b(6) (1947); 30 Am.Jur. Joint Adventures § 4 (1958). The application of partnership law invokes agency rules since a partner is the agent for the other partners, and the only significant difference in a joint adventure is that one joint adventurer may act for the others only in matters relating to the object for which the joint adventure was formed. While the Colorado Supreme Court has not had occasion to specifically pass upon the subject, it is unlikely that a view contrary to these generally accepted principles would be taken. See Lindsay v. Marcus, 137 Colo. 336, 325 P.2d 267. Until a joint adventure is terminated a party to it cannot be excluded from an interest in the property of the venture without his consent. Lindsay v. Marcus, supra; Smaller v. Leach, 136 Colo. 297, 316 P.2d 1030, 70 A.L.R.2d 891, cert. denied 356 U.S. 936, 78 S.Ct. 777, 2 L.Ed.2d 812; Kincaid v. Miller, 129 Colo. 552, 272 P.2d 276.

These concepts are conceded by R. P. R., but it insists that the record conclusively shows that the joint adventure between Conner and Bushman was not formed until after its subcontract with Conner, and consequently there could be no contractual relationship between R. P. R. and Bushman. There is a sharp conflict between the parties as to the date when the joint adventure was entered into. R. P. R., of course, relies upon the date of the written agreement. Bushman, on the other hand,...