Dubuque Stone Products Co. v. Fred L. Gray Company

• Decision Date: 18 February 1966
• Docket Number: No. 17804,17805.,17804
• Citation: 356 F.2d 718
• Parties: DUBUQUE STONE PRODUCTS CO., an Iowa Corporation, Appellant, v. FRED L. GRAY COMPANY, a Minnesota Corporation, Appellee. FRED L. GRAY COMPANY, a Minnesota Corporation, Appellant, v. DUBUQUE STONE PRODUCTS CO., an Iowa Corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

356 F.2d 718 (1966)

DUBUQUE STONE PRODUCTS CO., an Iowa Corporation, Appellant, v. FRED L. GRAY COMPANY, a Minnesota Corporation, Appellee.

FRED L. GRAY COMPANY, a Minnesota Corporation, Appellant, v. DUBUQUE STONE PRODUCTS CO., an Iowa Corporation, Appellee.

Nos. 17804, 17805.

United States Court of Appeals Eighth Circuit.

February 18, 1966.

F. H. Becker, Dubuque, Iowa, made argument for Fred L. Gray Co. and filed brief with Donald F. Pratt, of Townsend, Pratt, Trench, Ericson & MacGregor, Minneapolis, Minn.

Rolland E. Grefe, Des Moines, Iowa, made argument for Dubuque Stone Products Co. and filed brief with Ross H. Sidney, of Austin, Grefe & Sidney, Des Moines, Iowa.

Before VOGEL, Chief Judge, and MATTHES and RIDGE, Circuit Judges.

MATTHES, Circuit Judge.

These are an appeal and cross-appeal from a judgment in a suit brought by Fred L. Gray Company (Gray), a Minnesota corporation, against Schueller & Co., Inc. (Schueller) and Dubuque Stone Products Co. (Dubuque), Iowa corporations, in the United States District Court for the Northern District of Iowa, for unpaid workmen's compensation, public liability and automobile insurance premiums on Standard Accident Insurance Company policies issued to Schueller & Co., Inc. Schueller defaulted and has not appealed from the judgment against it. Dubuque appeals from the judgment of $36,057.18, while Gray appeals from that portion of the judgment which fails to include $7,232.60 claimed to be owing to it in retrospective workmen's compensation policy premiums.

Diversity of citizenship and the amount in controversy establish jurisdiction. Inasmuch as the parties seemingly agree that Iowa law is controlling as to substantive questions, we, too, recognize the law of that state in disposing of the issues before us.

Gray is a general agent of Standard Accident Insurance Company (Standard), which issues workmen's compensation, public liability, personal liability and property damage policies. Coates Insurance Agency, a sub-agent of Gray, issued, to Schueller, the policies covering the period during which the "joint venture agreements" were in existence. Gray has paid Standard $19,667.02 of the amount owing on both initial premiums and additional premiums developed by audit and has received, since the filing of the suit, an assignment of Standard's rights against Dubuque.

The theory upon which Gray relies for recovery is that the insurance had been purchased to further joint ventures of Schueller and Dubuque and both are jointly and severally liable for the outstanding premiums. There is little disagreement about the basic facts, many of which are contained in stipulations. For many years prior to 1958, Schueller, primarily a sewer contractor, had purchased materials from Dubuque, a material supplier. Between April and July, 1958, Schueller decided it could successfully bid larger construction projects if it obtained additional capital. Thereupon, Schueller and Dubuque entered into a written agreement, designated a "Joint Venture Agreement", in connection with a project at Offutt Air Force Base, Omaha, Nebraska. This agreement, in summary, contained the following sections:

a. A general paragraph describing the job involved.

1. A statement that the parties associated themselves "as joint venturers" until the contract be fully performed, all obligations incurred therein fully paid and all payments received thereunder fully disbursed.

2. A statement that Schueller was to manage the project and furnish full staff.

3. A statement that Schueller would be reimbursed for equipment furnished, at 60% of the then current A.E.D. rates.

4. A statement that all equipment was to be rented; none to be purchased.

5. A statement that Dubuque Stone was to furnish all funds for use in the performance of the contract up to $200,000.

6. A statement that a joint account would be established in the First National Bank of Chicago to handle the money of the venture, all venture monies to be channeled through that account and signature control provided for both parties.

7. A statement that C. M. Elrod was selected as manager; provisions for his salary and bonus.

8. A provision for insurance of $100,000 on Elrod's life.

9. A provision for equal division of profits between Schueller and Dubuque.

10. A statement that the agreement was to be binding on successors and assigns.

Nine other projects were assumed, under either written or oral agreements, materially differing from the Offutt agreement only in that the subsequent agreements did not contain the $200,000 limitation on the part of Dubuque. There is disagreement among the parties as to whether two other additional projects (known as the Burkburnett contracts) were of the same "joint venture" nature.

The first year of their association, Schueller and Dubuque realized a profit of $93,103.70, one-half of which was attributed to each of them. Subsequently, the venture became unprofitable and Dubuque, which had signed indemnity agreements in connection with various contract and performance bonds, was called upon to furnish additional financing. In its 1960 income tax return, Dubuque showed losses of approximately $345,000, due to the joint venture activities. These losses, denominated "joint venture losses" were utilized to claim refunds from the Internal Revenue Service.

Before considering the issues raised on this appeal, it should be helpful to review some well known principles of Iowa law with regard to joint ventures. As was succinctly stated in Brewer v. Central Const. Co., (1950), 241 Iowa 799, 43 N.W.2d 131, at 136:

"A joint adventure is defined as an association of two or more persons to carry out a single business enterprise for profit; also as a common undertaking in which two or more combine their property, money, efforts, skill, or knowledge. The outstanding difference between a joint adventure and a partnership is that the former usually relates to a single transaction while the latter usually relates to a continuing business. (Citing authorities).

"As a rule, a joint adventure is characterized by a joint proprietary interest in the subject matter, a mutual right to control, a right to share in the profits and a duty to share the losses. (Citing authority)."

The Iowa court's expression seems to be in accord with the generally recognized and accepted definition and characterization of a joint venture. See, 48 C.J.S. Joint Adventures §§ 1, 2 and 5a; 30 Am. Jur., Joint Adventures, § 6, which contain detailed discussions of the law in this area.

Under Iowa law, liability of a member of a joint adventure may be derived from any one of three sources: "First, a direct contract with the creditor suing. Second, on the theory of agency arising under the express or implied right of other members of the project to bind a particular one of the group by contracts within the scope of the `authorized' enterprise. This always depends upon the sufficiency of the circumstances in each case. And, third, when the facts warrant it, this responsibility can be established through the principle of partnership when there is contemplated a mutual bearing of the losses." Bond v. O'Donnell, 205 Iowa 902, 218 N.W. 898, 902, 63 A.L.R. 901 (1928). It need not explicitly be agreed that losses resulting from the venture will be shared. Rather, this can be inferred from other provisions of the contract, the nature of the business, and the relation of the parties to the business transacted. Brewer v. Central Const. Co., supra, 43 N.W.2d at 136; Bond v. O'Donnell, supra, 218 N.W. at 902.

Dubuque does not challenge the fact that all of the projects, with the exception of the Burkburnett jobs, were joint ventures on the part of Schueller and Dubuque. It does, however, contend: (1) that it is not liable for the "unpaid insurance premiums because its agreement with Schueller was to provide financing with an express limitation of $200,000, on the amount thereof" and Gray's knowledge of this limitation precludes recovery of the premiums due; and (2) that "the lower court's finding that Schueller and Dubuque Stone agreed to perform the Burkburnett contracts in the same manner and on the same terms as other joint ventures is not supported by the record evidence."

From the very nature of these contentions it is apparent that the district court was basically confronted with fact questions. In this situation, our review must be keyed to two fundamental principles of law. First, in examining the evidence, we must take the view which tends to support the findings and conclusions of the trial court, and we must accept all inferences which reasonably tend to support its conclusions. Minnesota Amusement Co. v. Larkin, 299 F.2d 142, 146 (8 Cir. 1962); United States v. Skolness, 279 F.2d 350, 352-353 (8 Cir. 1960); Barryhill v. United States, 300 F.2d 690, 693-694 (8 Cir. 1962); American Universal Ins. Co. v. Dykhouse, 326 F.2d 694, 695 (8 Cir. 1964). Second, findings of fact are presumed to be correct and may not be set aside unless they are clearly erroneous. F.R.Civ.P. 52(a); United States v. Skolness, supra; Barryhill v. United States, supra; American Universal Ins. Co. v. Dykhouse, supra.

With regard to Dubuque's first contention, it is undisputed that the $200,000 limitation appeared in only the first joint venture agreement (dealing with the Offutt project) and was intentionally left out of all subsequent joint venture agreements. There was also uncontroverted evidence that Dubuque provided financing, and claimed joint venture losses on its income tax returns, in excess of $200,000. This, along with other evidence, was ample to warrant the inferential finding by the court that Dubuque's joint venture liability was not limited to $200,000.¹

A subsidiary part of this issue, concerning the extent of Dubuque's liability, is its claim that "the knowledge of Russell Scherrer, proprietor of the Coates Agency, and sub-agent for Fred L. Gray Company, of the...