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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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FILED 

PUBLISH 

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UNITED STATES COURT OF APPEALS 

ROBRRT L. HOECKER · 

Clerk TENTH CIRCUIT 

IN RE: LEE GROFF a/k/a/ ) 

BENNY LEE GROFF and GWEN GROFF ) 

a/k/a DORIS GWEN GROFF d/b/a ) 

GROFF CATTLE COMPANY, ) 

} 

Debtors. } 

AGRI-TECH SERVICES, INC. and 

MORGAN COUNTY FEEDERS, INC.; 

PICKERING- GROFF; ED PICKERING, 

Plai n tiffs-Appellees, 

v . 

CITIZENS BANK OF CLOVIS, 

Defendant-Appell ant, 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

LEE GROFF , also known as Benny Lee ) 

Groff; GWEN GROFF, also known as ) 

DORIS GWEN GROFF; LEE GROFF CATTLE ) 

CO.; EL PASO NATIONAL; PAUL SLOANE;) 

ERSELL SLOANE; THOMAS COUNTY ) 

STOCKYARDS, INC.; WILCOX LIVESTOCK ) 

AUCTION, ) 

Defendants. 

) 

) 

No . 87-2143 

Appeal from the United States District Court 

for the District o f New Mex i co 

(D . C. No . CIV 86-04 1 2 SC) 

Lynell G. Skarda , Clovis, New Mex ico (J. Kerwin Hollowwa of Spann, 

Latimer & Hollowwa, Albuquerque , New Mexico, on the briefs) for 

Appell ant The Citizens Bank of Clovis. 

Appellate Case: 87-2143 Document: 01019729775 Date Filed: 03/26/1990 Page: 1 
Robert H. Jacobvitz of Poole, Tinnin & Martin, Albuquerque, New 

Mexico, for Appellees Agri-Tech Services, Inc., and Morgan County 

Feeders, Inc. 

Before, HOLLOWAY, Chief Judge, BARRETT and LOGAN, Circuit Judges 

LOGAN , Circuit J udge. 

Citizens Bank of Clovis (Citizens Bank) appeals adverse 

rulings in both the bankruptcy and district courts in this 

priority dispute. Both courts determined that Citizens Bank had 

no interest i n certain cattle held by a joint vent ure in which Lee 

Groff , a bankruptcy debtor, part icipated. The central issue on 

appeal is whether the rules governi ng partners' interests in 

partnership assets also apply to joint ventures . We hold that 

they do and, the r efore, affirm the district court's decision. 

To secure a debt of Lee and Gwen Groff, Citi z ens Bank t ook a 

security interest in specified cattle the Groffs owned and all 

cattle ''after acquired ." Unbeknownst to Citizens Bank , Lee Groff 

was about to enter a cattle-feeding venture with Ed Pickering. On 

several subsequent occasions, Groff and Pickering purchased cattle 

from Agri-Tech Services, Inc. (Ag r i-Tech), with Morgan County 

Feeders, Inc . (Morgan County) providing purchase money financing. 1 

When Lee and Gwen Groff filed a bankruptcy petition, the 

question arose conce rning creditors' rights to the Groff-Pickering 

1 Morgan County took purchase money security interests in the 

cattle , but at l east with respect to some of the cattle it did not 

perfect its i nterests as against other creditors by a proper 

public filing . See generally UCC §§ 9-301, 9-302, 9-312. In view 

of our disposition of the case, whether Morgan Count y ' s interests 

were properly perfected is not ma t erial to Citizens Bank 's appeal . 

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Appellate Case: 87-2143 Document: 01019729775 Date Filed: 03/26/1990 Page: 2 
cattle. Citizens Bank argued that the cattle came within the 

after-acquired property clause of their security agreement with 

the Groffs. The bankruptcy court held that (1) Groff and 

Pickeri ng were engaged in a joint venture , (2} the cattle were 

property of the joint ventu re , (3) in this context , New Mex ico 

partnership law applies to joint ventures, and (4) under New 

Mexico partnership law, Citizens Bank, as a creditor of the Groffs 

in their individual capacities only, had no interest in the Gra ffPickering c attle . 2 Consequently, the bankruptcy court ruled that 

the Groffs' bankruptcy ~sta te did not contain the Graff-Pickering 

cattle; the estate contained only "the debtors' interest in the 

Graff-Pick ering joint venture as determined under the New Mexico 

substantive law of partnerships." 3 I I I R. 637. The district 

court a£firmed. On this appeal , Citizens Bank does not contest 

the first two is~ues listed above. Ou r review of the ·remaining 

issues is de novo. See Bartmann v. Maver ick Tube Corp., 853 F.2d 

1540, 1543 (lOth Cir. 1988). 

I 

Citizens Bank's principal contention on appeal is that in 

view of the bankruptcy court's finding that Groff and Pickering 

were engaged in a joint venture, it was inconsistent and erroneous 

to apply partnership law to the joint venture's proper ty. Th is 

2 In view of our disposition of this case, we do .. _not reach · the 

other issue addr essed by the bankruptcy and district courts: that 

the Graff-Pickering venture did not own some of the cattle they 

held because they failed to reach an agreement with Agri-Tech on 

mater ial terms o f t he purchase. 

3 The bankruptcy and district courts assumed, as do the parties 

to this appeal, that the substantive law of New Mexico governs 

this dispute; therefore, we will do the sa.me .. 

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Appellate Case: 87-2143 Document: 01019729775 Date Filed: 03/26/1990 Page: 3 
argument, howeve~, ignores the essential nature of a joint 

venture. 

The joint venture as a legal organization was unknown to the 

ea rly common law; it is a creature of the American judiciary, 

dating from the late nineteeth century. Parks v. Riverside Ins. 

Co. of Am., 308 F. 2d 175, 177 (lOth Cir. 1962}; 46 Am. Jur. 2d 

Joint Ventures§ 2, at 23 & n.ll (1969) . Although its history is 

not entir ely clear, apparently the joint venture concept was 

developed to extend princi~les of partnership law to organizations 

that did not meet the technical requirements of a partnership . 

See 1 A. Bromberg & L. Ribstein, Bromberg and Ribstein on 

Partnership § 1.01(b) , at 1:5 (1988) [hereinafter Bromberg and 

Ribs tein on Pa rtnership); H. Reuschlein & W. Gregory, Handbook on 

the Law of Agency and Partnership § 266, at 441-42 {1979)" 

[he re inafter Law of Agency and Partnership]. 

Today, the sole characteristic distinguishing a joint venture 

fr om a partnership is the jo int venture's more limi ted purpose or 

scope: a joint venture is usually limited to carrying out a 

single transaction or a series of related transactions, whi l e a 

pa rtnershi p is for the purpose of carrying on a continuing 

business. 1 Bromberg and Ribstein on Partnership§ 2 . 06(a), at 

2:4 2-:43 ; H. Henn & J . Alexander, Laws of Corporations and Other 

Business Enterprises § 49 , at 10 5-06 (3d ed . 1983) [hereinafter 

Laws of Corporations]; Law of Agency and Partnership § 266, at 

44 2-43; see Quirico v. Lopez, 106 N.M. 169, 740 P.2d 1153, 1 155 

(1987) ( 11 the parties entered into a joint venture , a single 

pa rtnership transaction"); Hansler v. Bass, 106 N.M. 382, 743 P.2d 

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Appellate Case: 87-2143 Document: 01019729775 Date Filed: 03/26/1990 Page: 4 
1031, 1036 (Ct. App.) ("a joint venture is general ly 

considered to be a partnership for a single transact ion "), cer t. 

denied, 10 6 N. M. 375 , 743 P.2d 634 {1987). 4 Deli neating the 

act i vity leve l beyond which a j oint vent ur e becomes a partnership 

can be a challengi ng task, Madison Nat'l Bank v. Newrath, 261 Md. 

321 , 275 A.2d 495, 498 {Ct. App. 1 971) ; Law of Agency a nd 

Partnership § 26 6 , at 442, but in most cases this is unnecessary , 

because u[a]s a general ru le the substant ive law of partnerships 

is applicable in determini ng the rights and liabilities of joint 

venturers and third parties," Stone v. First Wyo. Bank N.A., 62 5 

F.2d 332, 340 {lOth Cir. 1980) ( a pplying Wyoming law); see a lso 

Hansler v. Bass, 743 P .2d at 103 6 (applying N.M. Stat . Ann. § 54 -

1-7, UPA § 7, to joint venture ). 

As a ma tter of fact, "the pres ent trend is to includ e j oint 

ventures as a recognized · type of partnership, rather than a 

distinct bu t analogous bu siness en tity." Law of Agency and 

Part nership § 266, at 446. The Uniform Partnership Act itself 

a pplies to "a partners hip fo r a fixed term or particular 

undertaking." N.M. Stat. Ann . § 54-l- 23(A), UPA § 23 (1); see also 

Brown v . Fairbanks, 121 Cal. ~pp. 2d 432, 263 P.2d 355, 360 (Dist. 

Ct. App . 19 53) ("A pa rtners hip may be formed fo r one or two 

ventures as well as fo r the c onduct of a general and continuous 

4 Compa r e. N.M. Stat. Ann . § 54 -1-6 , UPA § 6 ("partnership is an 

association of two or more pe rsons to carry on •.• a business 

for p rofi t" (emphasis adde d)) with Meridian Homes Co r p. v. 

Nicholas W. Pr ass a s & Co ., 687 F .2d 228, 233 (7th Cir. 1982) 

("joint ven ture [is] 'an association o f two or more pers ons to 

carry out a single en t erprise for profit '" {emphasis added)) 

(quoting Ditis v. Ahlvin Constr . Co ., 408 I ll. 416, 426, 97 N.E. 2d 

244, 249 {1951 )). 

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Appellate Case: 87-2143 Document: 01019729775 Date Filed: 03/26/1990 Page: 5 
business . "}. Any departure fr om partnership law in the con text of 

joint ventures should be justified on the basis of the joint 

venture's more limited scope . See Laws of Co r porations § 49, at 

107 ; see, , Meridian Homes Corp. v . Nicholas W. Prassas & Co., 

687 F.2d 228, 231-32 (7th Cir. 1982) (under Illinois law , 

de termining da te of te rmina tion i n absence of ag reemen t di ffe rs 

between partnership and joint venture); Law of Agency and 

Pa r tnership § 266, at 445 (actual and apparent authority of joint 

ven t urer may be more limited than that of partner}. 5 Keeping this 

in mind , we exa.mine par.tnership law governing partners' rights in 

pa r tnership p roperty. 

II 

Before the Uni fo rm Pa rtne rship Act , the cou r ts struggled in 

the i r a ttempts to apply traditional concepts of joint ownership to 

5 One court described t he differences between partnership and 

joi nt venture law a s of a "techincal cha rac te r . whe n they do 

ex ist." Madison Na t'l Ba nk , 275 A. 2d at 499. Even these 

"t echnical distinctions " are fading. For example, in McCulloh v . 

Doyle, 40 N.M. 126, 55 P. 2d 739, 739-40 (19 36 ), the New Mexi co 

Supreme Court stated that "[i]t i s gene rally held that, where the 

a ssociation as pa rt ners is for a single transaction , one partner , 

a t its close, may maintain an action at law ·against the other for 

losses without a fo rma l a ccounting," wh ich the court tho ught was 

the only remedy when one partner sues anothe r partner. Bu t the 

Supreme Court of Hawaii took issue with McCulloh , stating that 

"[i]n reality , however , a partner may s ue another partner at l aw 

rega rding a partnership transaction where an accoun ting i s 

unnecessary. Further , where a fu ll accounting is required to 

properly adjust the accounts between joint venturers, the 

appr opriate r emedy is in equity f or an accounting." Lau v. Va luBilt Homes, Ltd., 59 Haw. 28 3, 5&2 P. 2d 195, 200 (1978) (citations 

omitted). As early as 1931 , Professor Phi llip Mechem stated that 

" (t)he law of partnership is applied, point fo r point, to all 

joi nt adve nture cont roversies, and identical results ar e reached, 

under similar cir c umstances ,. no matter whether the association is 

regarded as a partnersh ip or a joint adventure . " Mechem, The Law 

of Joint Advent ures, 15 Minn. L. Rev. 6 44, 66 6 (1 931} (footno te 

omitted) . 

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Appellate Case: 87-2143 Document: 01019729775 Date Filed: 03/26/1990 Page: 6 
partnership property because none of these approaches were well 

suited to the partnership's business context. The resulting 

confusion and inconsistencies were the principal catalysts behind 

the creatio n of the Uniform Partnership Act (UPA) in 1914.6 See 

generally UPA commissioner's prefatory note & § 25 official 

comment; l Bromberg and Ribstein on Partnership §§ 3.04(a), 

3 . 05(d) (1). 

The UPA provides that the partnership owns property as an 

entity, separate and distinct from the partners. See N.M. Stat. 

Ann. § 54-1-8, UPA § .8. The rights of the partners in specific 

partnership property is as co-owners, holding as tenants in 

partnership. Id. § 54-1-25(A), UPA § 25(1). But "[a] partner's 

right in specific part nership property is not assignable except in 

connection with the assignment of rights of all the partners in 

the same property," id. § 54-l.:..25(B}(2), UPA ·§ 25{2)(b); and "[a] 

partner's r i ght in specific partnership property is not subject to 

attachment or execution, except on a claim against the 

partnership," id. § 54-l-25(B)(3), UPA § 25(2)(c) . Individual 

partners can only assign their residual interests i n t he entire 

partnership. This is also the only partnership interest that the 

partners' individual creditors can reach; only partnership 

creditors can attach partnershi p property. See id. §§ 54-l-26 to 

-28, UPA §§ 26-28. On dissolution of the partnership, partnership 

creditors have priority in the distribution of partnershf~ 

p r operty. If an individual partner becomes insolvent, that 

6 New Mexico adopted the UPA in 1947. N.M. Stat. Ann. ch. 54, 

a r t. l. 

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Appellate Case: 87-2143 Document: 01019729775 Date Filed: 03/26/1990 Page: 7 
partner's individual creditors have priority over partnership 

creditors with regard to his separate property. See id. §§ 54-1-

38(A), -40( H} to -40(1), UPA §§ 38(1}, 40(h)-(i). So the UPA 

treats the partnership and its assets and liabilities as a 

separate entity, distinct from the assets and liabilities of its 

owners. This scheme is necessary to prevent disruption of, and 

facilitate credit for , the partnership business. It is equally 

necessary in the context of joint ventures.? 

In this case, because t he Groffs purported to act solely on 

their own behalf in granting a lien on t heir cattle to Citizens 

Bank, they could transfer no interest in the Groff-Pickering 

cattle. 8 The Graff-Picker i ng cattle cou l d not enter the Groffs ' 

7 See Xanadu of Cocoa Beach, Inc. v. Zetley, 822 F.2d 982, 986 

(11th Cir. 1987) (under Florida law, joint venture holds property 

as entity), cert. denied, 484 U.S. 1043 (1988); C~ntury Bank. v. 

Gillespy, 399 So . 2d 1109, 1110 (Fla. Dist. Ct. App. 1981) 

(judgment against individual joint venturer does not support lien 

against joint venture land); Madison Nat'l Bank v. Newrath, 261 

Md. 321, 275 A.2d 495, 498 -501 (Ct. App. 1971) (joint venturerer 

acting in individual capacity cannot grant lien on partnership 

property); Masterson v. Valley Na t 'l Bank, 70 Misc . 2d 623, 33 4 

N.Y.S.2d 356, 359-60 (Sup. Ct. 1972) (same); Horn's Crane Serv. v. 

Prior, 182 Neb. 94, 152 N.W.2d 421, 423-24 (1967) (joint venture 

creditors have priority in j o int venture and individual creditors 

have priority in joint venturers); Milberg Factors, Inc. v. 

Hurwitz-Nord1icht Joi nt Venture, 676 S.W.2d 613, 615-16 (Tex. Ct. 

App. 198 4) (individual joint venturer cannot grant lien on, and 

individual creditors cannot attach, joint venture property). 

8 Citizens Bank argues tha t even if the Groffs were wi t hout power 

to grant a lien on the Graff-Pickering cattle, nonetheless, the 

Groffs had apparent authority to grant the lien, the joint venture 

ratifi ed the grant, and Citizens Bank took in good faith and fo r 

value. The district court held that Citi zens Bank waived these 

issues because it did not present them at trial. Even assuming 

these issues were not waived, they have no merit. The Gro ffs did 

not even purport to act on behalf of the joint venture. Indeed, 

Citizens Bank admits that at the time it took the security 

interest, i t had no knowledge o f the existence of the GraffPickering joi nt venture. Appellant 1 s Brief-in-Chief at 4. 

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Appellate Case: 87-2143 Document: 01019729775 Date Filed: 03/26/1990 Page: 8 
bankruptcy estate under 11 u.s.c. § 541; only the Groffs' residual 

interest in the Groff-Pickering joint venture became property of 

the estate. See E.A. Marti n Mach. Co. v. Willi ams (In re Newman), 

875 F . 2d 668, 671 (8th Ci r . 1989) (partner-debtor); Campbell v . 

Bolen (In re Caudy Custom Builders, Inc.), 31 B. R. 6, 9 (Bankr. 

D.S.C. 1983) (joint venturer-debtor); 1 Bromberg and Ribstein on 

Partnership§ 3.05(d)(4); cf. Hopkins Ill . Elevator Co. v. Pentell 

(In re Pentell), 777 P.2d 1281, 1284-85 {7th Cir. 1985) (limited 

partner-debtor). 

AFFIRMED. 

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