Cajun Elec. Power Co-op., Inc. v. McNamara

• Decision Date: 30 May 1984
• Docket Number: No. 83,83
• Citation: 452 So.2d 212
• Parties: CAJUN ELECTRIC POWER COOPERATIVE, INC., et al. v. Shirley McNAMARA, Secretary of the Department of Revenue and Taxation, State of Louisiana. CA 0680.
• Court: Court of Appeal of Louisiana — District of US

Page 212

452 So.2d 212

CAJUN ELECTRIC POWER COOPERATIVE, INC., et al. v. Shirley McNAMARA, Secretary of the Department of Revenue and Taxation, State of Louisiana.

No. 83 CA 0680.

Court of Appeal of Louisiana First Circuit.

May 30, 1984.

Rehearing Denied June 29, 1984.

Robert R. Rainer, Baton Rouge, for plaintiffs-appellants Cajun Elec. Power Co-op. Inc. and Stone & Webster Engineering Corp. Robert H. Carpenter, Jr., Douglas F. Herbert and Riley F. Boudreaux, Jr., Baton Rouge, for defendant-appellee Shirley McNamara, Secretary of the Dept. of Revenue and Taxation, State of La.

Before PONDER, WATKINS and CARTER, JJ.

CARTER, Judge.

This is a suit filed by Cajun Electric Power Cooperative, Inc. (Cajun) and Stone and Webster Engineering Corporation (S & W) for refund of sales and use taxes paid under protest by Cajun to the State of Louisiana.

In April of 1971, Gulf States Utilities Company (GSU) and S & W entered into a contract for the construction of the River Bend Nuclear Power Plant.

Eight years later (August, 1979), during the course of the construction, GSU and Cajun agreed that Cajun would become a 30% co-owner of River Bend. Pursuant to this agreement, GSU and Cajun executed a contract captioned "Joint Ownership Participation and Operating Agreement." GSU and Cajun agreed that Cajun would acquire its 30% undivided co-ownership interest in River Bend in the following manner. All construction costs up to the point of Cajun's entry into the project had been paid for by GSU. It was agreed that beginning in January, 1981, Cajun would begin paying for all costs of construction and would continue to do so until such time as Cajun had bought and paid for costs of construction which equaled 30% of the total which had been spent on such costs up to that point in time.

From January, 1981, through November, 1981, Cajun paid for all construction costs. During this period, GSU did not contribute any funds. After November, 1981, Cajun had contributed funds which equaled 30% of the total costs, and the parties were at what they refer to as "parity." Since November, 1981, GSU and Cajun have been responsible for the costs of construction by paying 70% and 30%, respectively. The project is still under construction, and the 7 0/30 contribution is still in progress.

At trial, Cajun contended that, as an electric cooperative, it is exempt from all sales and use taxes pursuant to LSA-R.S. 12:425. Cajun argues that all construction materials and equipment were purchased by Cajun, with S & W only acting as purchasing agent. Cajun contends that the exemption granted by 12:425 is applicable to all such purchases, and therefore, no sales or use taxes are owed.

The trial court, in oral reasons for judgment, found that Cajun, as an electric cooperative, was exempt from sales and use taxes, but that S & W, as the purchaser and final customer, owed both sales and use taxes. The court found that S & W was an independent contractor for the purpose of construction of the plant, and therefore, could not also act as an agent of Cajun in the purchase of equipment and materials.

AGENCY

Plaintiffs appeal the ruling of the trial court assigning as error the failure of the trial court to find that S & W was acting as purchasing agent for Cajun and, therefore, that the purchases were tax exempt.

The resolution of this issue is necessary because if S & W is an agent of Cajun or GSU or both, then clearly the principal owes the taxes under basic agency principles. However, if S & W is an independent contractor, as the trial court determined, then S & W is liable for the sales taxes on purchases to construct River Bend, and neither of the joint venturers are liable to the state for sales taxes.

In the case sub judice, the record clearly indicates that an agency relationship existed between Cajun and S & W. For example, the power of attorney executed by Cajun appoints Stone & Webster Engineering Corporation "to act for it in its name, place and stead, for the purpose and rental of tangible personal property with funds constributed (sic) by principal...."

In the case sub judice, the record clearly indicates that an agency relationship existed between Cajun and S & W. For example, the power of attorney executed by Cajun appoints Stone & Webster Engineering Corporation "to act for it in its name, place and stead, for the purpose and rental of tangible personal property with funds contributed (sic) by principal...." Additionally, the purchase orders used by S & W in obtaining material and equipment show that S & W was acting as purchasing agent.

An examination of the entire record convinces us that S & W was not an independent contractor, but was agent of Cajun. ¹

JOINT ADVENTURE

The early case of Ault & Wiborg Co. of Canada v. Carson Carbon Co., 181 La. 681, 160 So. 298 (La.1935) defined joint venture as follows at p. 300:

"The legal relation of joint adventure now widely recognized in judicial decisions results from the undertaking by two or more persons to combine their property or labor in the conduct of a particular line of trade or general business, for joint profits, creating the status of a partnership, although the facts do not show a formal partnership. While a joint adventure is not identical with a partnership, it is analogous to a partnership and is controlled largely by the principles or rules applicable to partnerships."

The jurisprudence has established that the essential elements of a joint venture are generally the same as those of partnership, i.e., two or more parties combining their property, labor, skill, etc. in the conduct of a venture for joint profit, with each having some right of control. Walker v. Simmons, 155 So.2d 234 (La.App. 3rd Cir.1963). Therefore, in general, joint ventures are governed by the law of partnership. Marine Services, Inc. v. A-1 Industries, 355 So.2d 625 (La.App. 4th Cir.1978). ²

LSA-C.C. art. 2801 defines partnership as follows:

"A partnership is a juridical person, distinct from its partners, created by a contract between two or more persons to combine their efforts or resources in determined proportions and to collaborate at mutual risk for their common profit or commercial benefit...."

The same requisites are applicable to a joint venture, ³ and are as follows:

(1) A contract between two or more persons;

(2) A juridical entity or person is established;

(3) Contribution by all parties of either efforts or resources;

(4) The contribution must be in determinate proportions;

(5) There must be joint effort;

(6) There must be a mutual risk vis-a-vis losses;

(7) There must be a sharing of profits.

All of the above items are found in the case sub judice, either in the Joint Ownership Participation and Operating Agreement, the Powers of Attorney, or otherwise. Cajun and GSU agreed to combine their resources in a 70% and 30% ratio, to collaborate, and to share the risk of loss and the hope of gain.

During August, 1979, when GSU and Cajun agreed that Cajun would become a co-owner of River Bend--and the various contracts and powers of attorney were signed--a joint venture came into existence between the two parties.

Cajun strenuously contends that Article Seven of the Joint Ownership Participation and Operating Agreement expressly provides that its association with GSU would not be a partnership or joint venture. Article Seven, Section 7.6 of the Joint Ownership Participation and Operating Agreement provides as follows:

"Notwithstanding any provision of this Agreement, the Co-owners do not intend under Louisiana or Texas law to create hereby or by their actions as Co-owners any joint venture, partnership, association, or trust, or render the Co-owners liable as partners or trustees."

The existence or nonexistence of a joint venture is a question of fact, although what constitutes a joint venture is a question of law. Grand Isle Campsites, Inc. v. Cheek, 262 La. 5, 262 So.2d 350 (La.1972). There are no hard and fast legal rules fixing the requisites for a joint adventure; each case must be considered sui generis and care must be...