Shinn v. Edwin Yee, Ltd.

• Citation: 57 Haw. 215,553 P.2d 733
• Decision Date: 24 August 1976
• Docket Number: No. 5540,5540
• Parties: James S. SHINN et al., Plaintiffs-Appellees, Cross-Appellants, v. EDWIN YEE, LTD., a Hawaii Corporation, et al., Defendants-Appellants, Cross-Appellees.
• Court: Supreme Court of Hawai'i

Page 733

553 P.2d 733

57 Haw. 215

James S. SHINN et al., Plaintiffs-Appellees, Cross-Appellants, v. EDWIN YEE, LTD., a Hawaii Corporation, et al Defendants-Appellants, Cross-Appellees.

No. 5540.

Supreme Court of Hawai'i.

Aug. 24, 1976.

Rehearing Denied Oct. 12, 1976.

Syllabus by the Court

1. A joint venture is a mutual undertaking by two or more persons to carry out a single business enterprise for profit, and is predicated on a contractual relationship which necessarily contemplates some contribution by each of the parties of money, property, effort, knowledge, skill, or other resources to the common undertaking.

2. As with a partnership, it is essential that there be an agreement between the parties for a joint venture and that there be a provision in the contract for their sharing, as joint owners, of the profits of the enterprise.

3. The existence of a joint venture agreement must be shown by the preponderance of the evidence, and its essential terms must be established with reasonable certainty.

4. The contract between the parties may be express or implied, and may be proven by direct evidence, or by proof of facts and circumstances from which the agreement of the parties may be ascertained.

5. Where the trial court, sitting without a jury, has made its factual determinations, its findings of fact will not be set aside unless clearly erroneous and due regard will be given the opportunity of the trial court to judge of the credibility of the witnesses.

6. It is for the trial court to determine whether and to what extent a witness is worthy of credit, and it may accept or reject the testimony of a witness in whole or in part.

7. Where the trial court's determinations of fact are largely dependent upon the resolution of conflicting testimony, great weight will be accorded its findings upon review.

8. Where findings of fact are supported by substantial evidence and are not clearly erroneous, the findings of the trial court will be sustained.

9. Substantial evidence is credible evidence which is of sufficient quantity and probative value to justify a reasonable man in reaching a conclusion.

10. The profits of a common undertaking belong to the joint venture, and in the absence of evidence to the contrary, the law will imply an equal division without regard to any inequality of contribution.

11. Where one holding a lease of premises enters into a partnership with another, agreeing to the use and possession of the leased property in the business, a valid interest in the lease is thereby vested in the partnership, and a formal assignment thereof is not required.

12. He who comes into equity must come with clean hands.

13. Where the equity defense of 'unclean hands' is raised for the first time on appeal, the fact that it was not presented to the trial court does not preclude the appellate court from considering the matter.

14. The doctrine of 'unclean hands' is not one of absolutes, and each case must be judged on its particular facts and circumstances.

15. The doctrine of 'unclean hands' is based upon considerations that make for the advancement of right and justice and will not be invoked when to do so would work injustice and wrong.

16. Where the plaintiff's claim has no direct connection with the alleged misconduct and is supported by independent consideration, the doctrine of 'unclean hands' will not be invoked to defeat his claim.

17. A subsequent illegal agreement between the parties cannot affect a previous lawful contract between them in relation to the same subject matter.

18. In the absence of a clear showing to the contrary, it will be presumed that the trial court relied only on properly admissible evidence in making its findings.

19. Plaintiff's remedy in equity is addressed to the sound discretion of the trial court.

Murray Estes, Honolulu (Robert Hogan, Honolulu, of counsel), for defendants-appellants, cross appellees.

Douglas S. Hasegawa, Honolulu (Kashiwa & Kanazawa, Honolulu, of counsel), for plaintiffs-appellees, cross appellants.

Before RICHARDSON, C. J., KOBAYASHI, OGATA and MENOR, JJ., and Retired Justice LEWIS Assigned by Reason of Vacancy.

MENOR, Justice.

This is an action for an accounting predicated upon the alleged existence of a joint venture. The plaintiffs below are James S. Shinn and Kenneth Shinn, a co-partnership doing business as Shinn Brothers Foundation, and James S. Shinn, an individual (hereinafter 'Shinn'). The defendants are Edwin Yee, Ltd., and Edwin K. Q. Yee, an individual (hereinafter 'Yee'), and Condominium Hawaii, Inc.

The plaintiffs in their complaint contended that the parties had entered into a joint venture for the development of the Kahala Towers condominium project. The purported agreement called for the development, construction, and sale of condominium apartments on Bishop Estate leasehold premises held in the name of Edwin Yee, Ltd. They alleged that the defendants had wrongfully and illegally excluded them from the joint venture. Additionally, they complained that the defendants had wrongfully utilized certain joint venture assets for their own purposes and requested that these misappropriated funds be traced and a constructive trust impressed upon whatever profits may have accrued to the defendants as a result of the alleged misappropriations.

The trial court found in favor of the plaintiffs on the issue of whether a joint venture existed but denied their request for a tracing of the alleged misappropriated funds. Judgment was entered accordingly. The defendants appeal and the plaintiffs cross-appeal.

I

The initial issue to be decided on appeal is whether a joint venture relationship existed between the parties.

A joint venture is a mutual undertaking by two or more persons to carry out a single business enterprise for profit. It is closely akin to a partnership, and the rules governing the creation and existence of partnerships are generally applicable to joint ventures. ¹ Kienitz v. Sager, 40 Haw 1 (1953). See also Eastern Iron & Metal Co. v. Patterson, 39 Haw. 346 (1952). It is a contractual relationship which necessarily contemplates some contribution by each of the parties of money, property, effort, knowledge, skill, or other resources to the common undertaking. As with a partnership, it is absolutely essential that there be an agreement between the parties for a joint venture and that there be a provision in the contract for their sharing, as joint venturers, of the profits of the business. See Winkelbach v. Honolulu Amusement Co., 20 Haw. 498 (1911).

The existence of a joint venture agreement must be shown by the preponderance of the evidence, Brooks v. Brooks, 357 Mo. 343, 208 S.W.2d 279 (1947); cf. Holmes v. Ray, 13 Haw. 228 (1901), and its essential terms must be established with reasonable certainty. Kienitz v. Sager, supra. It is not necessary, however, that there be a specific formal agreement to enter into a joint venture. The contract between the parties may be express or implied, and may be proven by direct evidence, or by proof of facts and circumstances from which the agreement of the parties may be ascertained. Ibid; James v. Herbert, 149 Cal.App.2d 741, 309 P.2d 91 (1957).

The trial court determined that a joint venture relationship existed between the parties, and specifically found that between December 23, 1965, and March 14, 1966, Yee and Shinn negotiated and agreed to form a joint venture for the purpose of constructing two high-rise condominium apartment buildings to be known as the 'Kahala Towers;' that they were to contribute equally to the capital requirements of the project which was to be built on leasehold premises; that they were to have equal right of control over the project, except that Yee, because of his superior knowledge in this area, was to be the managing joint venturer; and that they were to share equally in the profits of the joint enterprise, except that in the final accounting Yee would be entitled to an additional $121,000 as and for his managerial ability and 'know-how,' including but not limited to his ability to borrow money in the name of the joint venture for joint venture capital purposes and his management of the project to its successful completion.

Whether a joint venture exists generally requires the resolution of disputed issues of fact, and where the trial court, sitting without a jury, has made its factual determinations, its '(f)indings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.' H.R.C.P. Rule 52(a). It is for the trial court to determine whether and to what extend a witness is worthy of credit, and to give to his testimony the weight that it deserves. The court may accept or reject the testimony of a witness in whole or in part. State v. Cannon, 56 Haw. 161, 532 P.2d 391 (1975); Siko v. Seguirant, 51 Haw. 118, 452 P.2d 447 (1969); In re Miller's Estate, 143 Cal.App.2d 544, 299 P.2d 1005 (1956). Accordingly, where the trial court's determinations of fact are largely dependent upon the resolution of conflicting testimony, great weight will be accorded its findings upon review. Lopez v. Tavares, 51 Haw. 94, 451 P.2d 804 (1969); Shannon v. Murphy, 49 Haw. 661, 426 P.2d 816 (1967). And while reasonable minds may fairly differ as to whether certain evidence establishes a fact in issue, yet where findings of fact are supported by substantial evidence the findings of the trial court will be sustained. Imperial Finance Corp. v. Finance Factors, 53 Haw. 203, 490 P.2d 662 (1971). Substantial evidence is credible evidence which is of sufficient quantity and probative value to justify a reasonable man in reaching a conclusion. In re Charley's Tour & Transp., Inc., 55 Haw. 463, 522 P.2d 1272 (1974).

The trial court found that the parties entered into a joint venture agreement as of March 14, 1966. This finding is amply supported by...