Putnam v. Williams

• Decision Date: 04 August 1981
• Docket Number: No. 80-7389,80-7389
• Citation: 652 F.2d 497
• Parties: William R. PUTNAM, Plaintiff-Appellant-Cross-Appellee, v. Robert R. WILLIAMS, Defendant-Appellee-Cross-Appellant. . Unit B
• Court: U.S. Court of Appeals — Fifth Circuit

Page 497

652 F.2d 497

William R. PUTNAM, Plaintiff-Appellant-Cross-Appellee, v. Robert R. WILLIAMS, Defendant-Appellee-Cross-Appellant.

No. 80-7389.

United States Court of Appeals, Fifth Circuit.

Unit B

Aug. 4, 1981.

Skinner, Wilson & Strickland, Warner R. Wilson, Jr., Donald F. Walton, Atlanta, Ga., for plaintiff-appellant-cross-appellee.

Troutman, Sanders, Lockerman & Ashmore, Ralph H. Greil, Atlanta, Ga., William W. Stoudenmire, Mobile, Ala., for defendant-appellee-cross-appellant.

Appeals from the United States District Court for the Northern District of Georgia.

Before FRANK M. JOHNSON, Jr., HENDERSON and ANDERSON, Circuit Judges.

HENDERSON, Circuit Judge:

This is a diversity action removed from the State Court of Fulton County, Georgia to the United States District Court for the Northern District of Georgia on the motion of the defendant, Robert R. Williams, an Alabama businessman and the appellee. Williams was sued by sports organizer William R. Putnam for damages arising from an unsuccessful attempt to form a professional soccer franchise in Atlanta. The district court granted Williams' motion for summary judgment, whereupon Putnam filed this appeal.

In the winter of 1978, Putnam began a search for someone to start an Atlanta franchise of the Super Soccer League. He was advised to approach Williams, a Mobile, Alabama business executive with no previous involvement in sports franchises. Both parties concede that an agreement was reached between them, but they disagree as to its nature. Williams testified that in return for fund raising assistance he was to receive a percentage of the soccer team's stock. (Williams Deposition at 22). Although he agreed that Williams was to help procure investors, Putnam characterized the transaction as a transfer of stock for money. (Putnam Deposition at 18-19, 24). For the purposes of this motion, however, the defendant accepts the plaintiff's statement of facts as true. Thus, the following synopsis of the facts is that recounted by the plaintiff in the trial court.

After negotiations beginning May 5, 1978, Putnam and Williams reached a verbal agreement pursuant to which Williams would provide approximately $75,000.00 as "seed money" to start the soccer operation in return for a 50% stock interest in Georgia Soccer, Inc., a corporation to be formed at a later date. Putnam, because of his expertise in operating sports franchises, would run the Atlanta organization for which he would receive the other 50% stock interest in Georgia Soccer, Inc. plus a $3,000.00 monthly salary. The corporation would be the general partner in a limited partnership which would operate Atlanta's team in the Super Soccer League. The agreement was never reduced to writing.

Neither the franchise nor the league ever successfully materialized. Williams met with various media officials and held himself out as Putnam's partner in the Atlanta franchise. But, Williams' contributions to the organization attempt were limited to an advance of $2,500.00 to cover some expenses and a request that Putnam contact major creditors to ask for terms of credit. Williams failed to answer Putnam's subsequent calls for additional funds.

After Putnam's counsel had made his formal demand for performance, he filed suit in the State Court of Fulton County, Georgia, seeking approximately $45,000.00 damages representing the sum of debts incurred by Putnam while promoting the franchise. According to the complaint, Williams was indebted for this money because he was Putnam's principal and hence, liable for his agent's actions. Williams filed an answer after removing the case to district court generally denying the substantive allegations of the complaint and filed a counterclaim for recovery of the $2,500.00 he had expended for costs. After discovery, Williams amended his answer and counterclaim, alleging that the claim against him was barred by the statute of frauds and that Putnam's violations of state securities laws precluded his recovery.

The trial court granted summary judgment in favor of Williams based on Putnam's own deposition testimony which showed that he was not an agent of Williams, but the agent of the unborn corporation. The judge then dismissed Williams' counterclaim without prejudice for lack of independent subject matter jurisdiction because the amount in controversy was less than $10,000. Putnam filed a notice of appeal from the order and judgment. Williams then timely filed a cross-appeal from the dismissal of his counterclaim.

On appeal, Putnam contends that the trial court erred in granting summary judgment because there are issues of fact as to the nature of the relationship between the parties and the resulting liability of Williams for the debts incurred in connection with Georgia Soccer, Inc. Putnam asserts four grounds of liability: (1) that Putnam was an agent of Williams; (2) that Williams and Putnam were co-promoters; (3) that Williams and Putnam entered a joint venture to organize the corporation; and (4) that Williams breached a contract for the contribution of money to fund the corporation. Putnam's pleadings were never formally amended to reflect the last three theories. However, in considering a motion for summary judgment, the pleadings may be treated as though they had been amended to conform to the evidence filed with the motion when not objected to by the opposite party. Freeman v. Marine Midland Bank-New York, 494 F.2d 1334, 1339 (2d Cir. 1974); 6 Moore's Federal Practice P 56:10 at 171 (2d Ed. 1976). Both Williams and Putnam fully briefed and argued each of the alternative theories in the district court so we are free on appeal to address each of the arguments.

Appellate review of a summary judgment in federal court is governed by the "genuine issue of fact, matter of law" standard set forth in Fed.R.Civ.P. 56. Poller v. CBS, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). Georgia precedent indicates that whether the evidence supports a finding of a joint venture, as well as whether an act is within the scope of the venture, is usually a substantial question for consideration by the jury. Security Development & Investment Co. v. Williamson, 112 Ga.App. 524, 525, 145 S.E.2d 581 (1965); Bowman v. Fuller, 84 Ga.App. 421, 426, 66 S.E.2d 249 (1951). However, even accepting Putnam's version as testified to in his deposition, there is no genuine issue of fact. We can say without hesitation that, under Georgia law, ¹ the appellee is entitled to judgment on the agency contention as well as the other grounds constructively raised by the introduction of evidence without objection.

As the district court observed, the appellant's own deposition plainly discloses that he was not Williams' agent. Putnam states that he incurred all expenses on behalf of Georgia Soccer, Inc. (Putnam Deposition at 63-64, 79, 111, 153). Although the corporation was never organized and thus there was no principal in the trust sense, Putnam's efforts were intended to promote the envisioned corporate entity only. Moreover, there is no evidence that Williams ever agreed to reimburse Putnam from his own funds or to incur personal liability for each debt. No simple principal-agent association existed.

The assertions of joint venturer and co-promoter status are considered together. Partnership principles, such as the rule that partners are agents inter sese, often govern the relationships of joint venturers and co-promoters. Fulton National Bank v. Didschuneit, 92 Ga.App. 527, 532, 88 S.E.2d 853 (1955). See Moran v. H.W.S. Lumber Co., 538 F.2d 238 (9th Cir. 1976); Rayonier, Inc. v. Polson, 400 F.2d 909 (9th Cir. 1968); Singer Housing Co. v. Seven Lakes Venture, 466 F.Supp. 369 (D.Colo.1979). There is joint liability with respect to dealings with third persons if the promoters or venturers have an understanding to that effect. 18 C.J.S. Corporations § 129 (1939). Even though Williams was not Putnam's principal as such, he and Putnam each may have been an agent of the other, if they explicitly agreed to joint liability as co-promoters or joint venturers with respect to given debts. Absent agreement, though, persons do not become venturers as between themselves simply by virtue of the pursuit of joint interests in a common excursion. See Keaton v. Fenton, 147 Ga.App. 579, 579-80, 249 S.E.2d 629 (1978); Gainesville Carpet Mart v. First Federal Savings & Loan Assn., 121 Ga.App. 450, 453, 174 S.E.2d 230 (1970). Similarly, a person who merely subscribes for stock in a corporation before it is legally formed does not become a partner with other subscribers who engage in business on behalf of the proposed corporation. 68 C.J.S. Partnership §§ 42-43 (1950). Press releases referred to Putnam and Williams as partners. To accept that report as conclusive, however, would be tantamount to permitting the press to do our work for us. We must undertake an analysis of the relevant facts in light of the foregoing legal principles in order to classify the business relationship of the parties.

Our first concern is whether Putnam and Williams were co-promoters of Georgia Soccer, Inc. or members of a joint venture in its operation. A joint venture relationship is characterized by a number of identifying features. In a joint venture arrangement, two or more people combine property and skill to conduct for profit a single business transaction, as opposed to a continuing business enterprise. The venturers enjoy joint proprietary interest, the right to control each other's conduct, and the obligation to share in losses as well as profits. Bowman v. Fuller, 84 Ga.App. 421, 425, 66 S.E.2d 249 (1951). See Sasportes v. M/V Sol De Copacabana, 581 F.2d 1204 (5th Cir. 1978); DuBuque Stone Products Co. v. Fred L. Gray Co., 356 F.2d 718 (8th Cir. 1966); Crest Construction Co. v. Insurance Co. of North America, 417 F.Supp. 564 (W.D.Okla.1976). Each participant is both a principal for himself and an agent for his associates when...