Meredith Development Co. v. Bennett, 33391

• Decision Date: 15 July 1969
• Docket Number: No. 33391,33391
• Citation: 444 S.W.2d 519
• Parties: The MEREDITH DEVELOPMENT COMPANY, a Corporation, and Howard Gale, Plaintiffs-Appellants, v. Richard A. BENNETT and Bruce Rosen, Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 519

444 S.W.2d 519

The MEREDITH DEVELOPMENT COMPANY, a Corporation, and Howard Gale, Plaintiffs-Appellants, v. Richard A. BENNETT and Bruce Rosen, Defendants-Respondents.

No. 33391.

St. Louis Court of Appeals, Missouri.

July 15, 1969.

Motion for Rehearing or to Transfer to Supreme Court Denied

Sept. 15, 1969.

Application to Transfer Denied Nov. 10, 1969.

Greensfelder, Hemker, Wiese, Gale & Chappelow, St. Louis, for appellants.

Marvin Klamen, Clayton, for respondents.

CLEMENS, Commissioner.

This appeal concerns the division of losses resulting from the building and sale of houses by three persons in a series of joint ventures, each on the same terms. Two venturers were real estate developers, Richard A. Bennett and Bruce Rosen. The third venturer's identity was in issue. Bennett and Rosen contend the third joint venturer was Howard Gale. Gale denies personal participation, contending the third venturer was plaintiff Meredith Development Company, a corporation of which Gale was president. The trial court found Gale, not his corporation, was the third venturer and was liable for one-third of the venture's losses, and owed Bennett and Rosen $2,991.41.

Two cases were filed and later consolidated. By the first, Meredith Development Company sued Bennett and Rosen for an accounting and distribution of profits, contending they owed the corporation some undetermined amount. In the second case Bennett and Rosen sued Gale individually for his one-third share of the venture's losses. On joint motion the trial court consolidated the cases and tried them without a jury. By trial time Bennett and Rosen had made full financial disclosure, so the corporation abandoned its prayer for accounting and sought judgment for $923.80, contending that was its one-third share of the joint venture's profits.

Whether the joing venture made a profit or suffered a loss depends on whether interest paid on borrowed money was deductible from income as an expense. If so, there was a loss, and Bennett and Rosen contend Gale must pay his share. If interest paid was not an expense of the venture but was chargeable to Bennett and Rosen personally, then there was a profit, and Gale's corporation contends Bennett and Rosen must pay it its one-third share. The trial court found that interest paid on borrowed money was an expense of the venture and was deductible from income, thereby producing a net loss, for one-third of which Gale was liable.

Gale contends that even if he was the third venturer and there was a loss, he is still not liable for a share of the venture's losses. This, on the asserted ground that where one venturer contributed services and the other contributes only money and there is a loss, each venturer has lost his capital and the money contributor cannot recover from the service contributor. The trial court denied this contention, finding that Bennett and Rosen were not merely to contribute money to the venture but were to contribute services by securing the necessary land, financing the venture, and performing other services. This finding destroyed the basis of Gale's contention that a loss was chargeable only to Bennett and Rosen.

The issues here concern the law of partnerships. A joint venture has the usual attributes of a partnership except duration and scope, generally but not necessarily being limited to one transaction. See Shafer v. Southwestern Bell Telephone Co., Mo., 295 S.W.2d 109(13--15), and Hobart-Lee Tie Co. v. Grodsky, 329 Mo. 706, 46 S.W.2d 859(2), where the court added: 'The (joint venture) relation may be established without a specific formal agreement; it may be implied or proven by facts and circumstances, and an agreement to share losses is not necessary; it also may be implied.'

Since the case was tried without a jury we review it on the law and the evidence, determine the weight of evidence while deferring to the trial court's opportunity to judge the witnesses' credibility, and affirm the judgment unless clearly erroneous. Civil Rule 73.01(d), V.A.M.R.; Hargas v. Tipsword, Mo., 335 S.W.2d 137(1--3).

We have two factual issues. First, the parties differ about the identity of the third venturer, Gale or his corporation. Second, they differ about their agreed contributions, particularly on whether Bennett and Rosen were to furnish their own money or were merely to procure financing for construction. On this fact hangs the issue of whether interest paid on the construction loans was an expense of the venture--as Bennett and Rosen contend--or an expense personal to Bennett and Rosen to meet their obligations to furnish the money--as Gale contends.

Identity of Third Venturer. In 1961 Rosen located three vacant lots at 4124, 4126 and 4128 North Taylor Avenue in St. Louis. He talked with Bennett about developing the two lots at 4124 and 4126 Taylor and they asked Gale to do the building. He agreed. Soon thereafter the three men agreed to develop the other lot, at 4128 Taylor, and shortly later to develop two lots at 8407 and 8411 Hawkesbury. They agreed that the second and third ventures were to be on the same terms as the first. Gale admittedly said nothing to Bennett or Rosen about his corporation, Meredith Development Company, being involved; in testifying about the initial agreement Gale repeatedly spoke of what 'I' was to do. There is no evidence that when the three men agreed to the venture Bennett and Rosen even knew Gale's corporation existed.

The major part of the financing was met by Bennett and Rosen's negotiating five construction loans, one for each lot. A savings and loan association set up separate funds from which it advanced money intermittently to pay construction costs. These payments were made by the loan association on vouchers signed by Gale as president of the Meredith Development Company. This began two months after the parties' agreement to the joint venture and there is no explanation why the corporate name was used.

Despite this participation by Gale's corporation, Bennett, Rosen and Gale dealt with each other as individuals. Aside from two checks naming the Meredith Development Company, all settlements, payments and correspondence between the parties were consistently in Gale's name, not the corporation's.

We find that the original contracting parties were Bennett, Rosen and Gale, individually; that Gale's acts of thereafter doing some joint-venture business in his corporation's name did not release him from personal responsibility to his joint venturers.

Interest as Expense. This factual issue relates to Gale's contention that interest paid for construction loans was Bennett and Rosen's personal expense, not the joint venture's expense, and therefore was not deductible from joint-venture income in determining profit or loss. The parties' oral agreement was informal and testimony about it meager. Gale...