Eastern Elec. Co. v. Taylor Woodrow Blitman Const. Corp.

Decision Date20 January 1981
Citation11 Mass.App.Ct. 192,414 N.E.2d 1023
PartiesEASTERN ELECTRICAL COMPANY v. TAYLOR WOODROW BLITMAN CONSTRUCTION CORPORATION.
CourtAppeals Court of Massachusetts

W. Bradley Ryan, Boston, for defendant.

C. William Altenhof, Arlington, for plaintiff.

Before GRANT, CUTTER and NOLAN, JJ.

CUTTER, Justice.

On May 19, 1971, Eastern Electrical Company (Eastern) entered into a written subcontract with Taylor-South Company (not incorporated, so far as the record shows), the name of a joint venture set out in Art. II of a 1970 joint venture agreement between Taylor Woodrow Blitman Construction Corp. (Taylor), a Delaware corporation, and South Construction Co., Inc. (South), a Massachusetts corporation. The joint venture was for the purpose of constructing an apartment complex in Brockton for Southfield Gardens Company (the owner), a limited partnership formed under G. L. c. 109. This was to be done under a Federal Housing Administration cost-plus-a-fixed-fee contract. Eastern's fixed-price subcontract was for the electrical work on the project. It was signed for Eastern by its president and by Taylor-South Company as follows:

Taylor-South Company

By: /s/ Harold G. Basser

For: Taylor Woodrow Blitman Construction Corp.

By/s/ Lester Gross (L.S.)

Taylor-South Company

For: South Construction Co., Inc.

Harold G. Basser was a vice president of Taylor. The record does not show what office Lester Gross held in South.

Eastern has fully performed its subcontract and has not been paid $11,024.36, the amount remaining due. An action to recover from Taylor the amount due was brought by Eastern in 1974. South was joined as a codefendant on March 5, 1975. On March 11, 1976, Eastern's complaint against South was dismissed because of Eastern's failure to answer interrogatories asked by South. It was not until May 15, 1979, that Eastern sought to have this dismissal vacated. Mass.R.Civ.P. 60(b). See note 12, infra. The motion was denied on May 31, 1979.

Eastern on June 11, 1979, for a second time, 1 sought summary judgment against Taylor for the balance due on the subcontract. The trial judge allowed the motion. In his memorandum of decision he stated that Taylor's only defense to Eastern's action was the contention "that since its liability to Eastern is joint and not several, the dismissal of the action against its co-venturer South causes it to abate against Taylor as well." The trial judge properly rejected this contention.

The trial judge assumed (on principles adopted by some text writers, see part 2, infra) that "(j)oint venturers are actually partners." He correctly noted that, under the Uniform Partnership Act, G. L. c. 108A, partners are jointly and severally liable (a) for certain torts, c. 108A, § 13, and (b) for a partner's misapplication of money, c. 108A, § 14. See § 15(a). He also assumed that (if the members of a joint venture are to be treated as partners and as subject to c. 108A) joint venturers are only jointly liable for all other debts and obligations of the joint venture. See § 15(b). He then (quoting from a reporter's note to Restatement (Second) of Judgments, § 109, at 91 (Tent. Draft No. 4, 1977)) assumed that the Uniform Partnership Act, § 15(b), dealing with true partnerships, also requires that the liability of the joint venture and its participants to Eastern be treated as joint (and not as joint and several), subject to the application of a principle mentioned in Balley v. Davis, 75 Idaho 73, 77, 267 P.2d 631 (1954).

In the Balley case, the Idaho court was considering the plaintiff's contract with a partnership of three men to drill a well on the plaintiffs' land. The plaintiffs dismissed with prejudice the action against two partners, but continued to press for recovery against a partner who had not appeared in the action and had been defaulted (at 74-75, 267 P.2d 631). It was held that the dismissal of the action against two partners operated to dismiss the action against all of the partners and thereafter the partnership and its property could not be bound. The Idaho court in the Balley case said (at 77, 267 P.2d 631): "The partnership obligation of appellants being a joint obligation and not a joint and several obligation, the suit must run against all the partners and the judgment must be against all the partners jointly or against none of them save and except where one partner has a defense personal to himself. ... 68 C.J.S. Partnership, § 235 b., page 728; 40 Am.Jur., Partnership, Section 446, pages 441-2" (emphasis supplied).

The trial judge in the present case ruled that "when Eastern failed to respond to South's interrogatories, South, by virtue of Mass.R.Civ.P. (33 and) 37 then had 'a defense personal to (itself)' " 2 and that when "that defense resulted in dismissal of Eastern's claim as to South, Eastern could, nevertheless, pursue its claim against Taylor." The trial judge then ordered judgment for Eastern against Taylor for the whole unpaid balance owed to Eastern. He commented that this was "a common sense result. Eastern having satisfactorily performed its contract and conferred a benefit on the joint venture, it ought to be paid." He went on to suggest that Taylor "may satisfy the judgment out of the assets of the joint venture and, to the extent (that) it must satisfy the judgment out of its own assets, may treat such payment as a contribution to the joint venture in any future accounting between Taylor and South."

We agree that the trial judge reached the just, "common sense result." Further analysis, however, is required. Among issues which must be considered are (a) the extent to which the Uniform Partnership Act (G. L. c. 108A) has any mandatory application to this joint venture, Taylor-South; (b) whether, under current general principles of contract law, the obligation of Taylor and South to Eastern on its subcontract must be regarded as joint or may be treated as joint and several; and (c) whether, under modern procedures, the judgment against Eastern in its complaint against South is sufficiently a defense personal to South as to allow recovery by Eastern against Taylor (to which Eastern equitably is entitled).

1. The Massachusetts law concerning joint ventures is not fully developed, especially where a corporation or corporations purport to be coventurers. In Whittenton Mills v. Upton, 10 Gray 582, 598 (1858), it was held that the corporation, a party to that case, could not form a partnership with an individual. See Rosenblum v. Springfield Prod. Brokerage Co., 243 Mass. 111, 115-117, 137 N.E. 357 (1922). The Whittenton Mills decision, and others like it elsewhere, have led to the use of joint ventures for quasi-partnership operations of two or more corporations. In Mendelsohn v. Leather Mfg. Corp., 326 Mass. 226, 233, 93 N.E.2d 537 (1950), it was said of a joint venture, "The exact nature of this relationship has never been precisely defined in our decisions and we make no attempt to do so now. For present purposes, it is sufficient to state that it resembles a partnership and has many of its attributes." See Cardullo v. Landau, 329 Mass. 5, 8-9, 105 N.E.2d 843 (1952); Air Technology Corp. v. General Elec. Co., 347 Mass. 613, 624-626, 199 N.E.2d 538 (1964), 3 where the subsidiary facts did not indicate that the arrangement there considered "was to be a joint venture within that indefinite term's ordinary usage." 4

2. Recent texts and some decided cases (see e. g. Wheatley v. Carl Halvorson, Inc., 213 Or. 228, 235, 323 P.2d 49 (1958)) have tended to regard joint ventures as wholly or substantially partnerships in many respects here material. Undoubtedly, there has been a trend in that direction. See Williston, § 318B, at 585 et seq., § 318C, at 623-624; J. M. Barrett and E. Seago, Partners and Partnerships, Law and Taxation, c. 2, §§ 7, 8 (1956, and 1974 supp.). This, however, does not necessarily mean that the Uniform Partnership Act (G. L. c. 108A; see St. 1922, c. 486) governs directly the activities and liabilities of joint ventures and their members.

3. It would be possible, perhaps, to construe G. L. c. 108A, § 6, and c. 4, § 7, cl. Twenty-third, as subjecting corporate joint ventures to the statute. General Laws c. 108A, § 6 reads in part: "(1) A partnership is an association of two or more persons to carry on as co-owners a business for profit ..." (emphasis supplied). "Person" is not defined in c. 108A, § 4. It is defined, however, in G. L. c. 4, § 7, which reads in part, "In construing statutes the following words shall have the meanings herein given, unless a contrary intention clearly appears ... (cl.) Twenty-third, 'Person' ... shall include corporations, societies, associations and partnerships." If § 6 were to be interpreted as including corporations within the term "persons," then it might be said that c. 108A had general application to at least some joint ventures, although the limited time term and scope of most joint ventures, even then, might prevent that result. See Cardullo v. Landau, 329 Mass. 5, 8, 105 N.E.2d 843 (1952), where it was said of "a joint adventure" that it "differs ... from a partnership in that it is ordinarily, although not necessarily, limited to a single enterprise, whereas a partnership is usually formed for the transaction of a general business. As between the parties, as in the case of a partnership, the relationship of joint adventurers is a matter of intent and arises only when they intend to associate themselves as such."

4. At least one Massachusetts decision did not apply the Uniform Partnership Act so as to override other provisions of general law. See Edgerly v. Equitable Life Assur. Soc., 287 Mass. 238, 242, 191 N.E. 415 (1934), where the uniform statute was held not to have "changed the previously existing law with respect to the incapacity of a married woman to make a contract of partnership with her husband." At page 243, the same principle was...

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