Opinion ID: 1198944
Heading Depth: 1
Heading Rank: 4

Heading: The Agency Relationship of the Zoo, Fey, and the Joint Venture

Text: The question of the existence of an agency relationship is a mixed question of law and fact, and when the facts are undisputed, a reviewing court must decide the question based on legal principles. See Stortroen, 736 P.2d at 395. An agency's final order must be set aside by a reviewing court if the agency applied an erroneous legal standard. See Givan, 897 P.2d at 756. In this case, the ALJ reached an erroneous conclusion of law. The ALJ concluded that by entering the joint venture with the Zoo, Fey could no longer claim it was an agent of Denver. The ALJ concluded that because Fey and the Zoo had formed a joint venture, each partner was both a principal and an agent with regard to the other partner, and [a]ccordingly, Fey cannot claim that it was solely an agent of the Foundation, because it was equally the principal of the Foundation, just as the Foundation was both the agent and the principal of Fey. The ALJ's determination misapprehends the fundamentals of agency law. Although the ALJ was correct in stating that the partners in a joint venture serve both as principals and agents in conducting partnership business, the partners' duties to one another do not prevent the joint venture from serving as an agent in a transaction between the joint venture and another entity. The existence of a joint venture does not negate an agency relationship, nor does it answer the question whether an agency relationship existed. Rather, the ALJ should have examined the essential factors giving rise to agency: a fiduciary relation; the manifestation of consent by both parties; the agent's authority to act on the principal's behalf; and the principal's right to control. Here, the evidence shows that the parties consented to and intended to enter into an agency relationship from the outset of the relationship and throughout. This is so whether we view Fey as an agent of the Zoo, or the joint venture as an agent of the Zoo. The record demonstrates that the Zoo engaged Fey as its agent to make successful its own concert series, which was faltering. The Zoo retained control over key aspects of Zoofest, including selection of talent, dates, advertising, and other areas in order to ensure that the concerts were consistent with the Zoo's mission and goals. The Zoo was not a mere landlord renting out its premises for profit. It is not important that Fey received 70% of the profits from the joint venture, because it is clear that regardless of the level of Fey's compensation for its services, the concert series was the Zoo's for its sole purpose. The level of compensation presumably reflects the remuneration for the extent of the work which the agent undertakes to perform and is not included as a factor in determining the existence of an agency relationship; rather, agency depends upon the factors we have outlined. See, e.g., Brewing Co. v. Hoder, 123 Colo. 421, 425, 230 P.2d 170, 172-73 (1951) (sharing of profits did not negate agency relationship); see also Restatement (Second) of Agency, §§ 12-14 (method or amount of compensation not mentioned as an essential characteristic of agency relation); Stortroen, 736 P.2d at 397-98 (amount of compensation not mentioned as a factor). In sum, the mere existence of a joint venture is not dispositive of the issue of whether an agency relationship existed. A joint venture or other partnership can be an agent. When written authorizations are ambiguous, the intent and acts of the parties control. Based on the intent and acts of the parties, I conclude that Fey and the Zoo entered into an agency relationship. The creation of a joint venture agreement, in light of the parties' intent and in view of the law of agency, did not negate this agency relationship. The joint venture agreement was executed with the purpose of confirming the parties' intent that an agency relationship was in effect, not to create a separate enterprise. The ALJ concluded that the character of the seller changed when the Foundation and Fey entered into the joint venture agreement, and the exemption became inapplicable. However, the ALJ cited no factual basis for this legal conclusion. The key question in determining the chain of agency from one entity to another is not the identity of the party doing work at a given time, but the nature and structure of the relationships among parties. See Stortroen, 736 P.2d at 397-98. The Zoo's profits, under the joint venture agreement, are thirty percent of the net income after all expenses are paid; Fey's share is seventy percent. Under the majority's holding that the joint venture is liable for the uncollected tax, the Zoo's profits drop from $32,840 to $19,735 when the seat tax is included as an expense, for a total reduction of $13,105. Fey's profits drop from $76,628 to $46,049, for a total reduction of $30,579. This loss to the Zoo and Fey occurs despite the overwhelming facts in this record that an agency relationship existed and despite the exemption in D.R.M.C. 53-347(3) that ticket sales by the city or any department thereof shall not be subject to the tax. Thus, the Zoo directly suffers the consequence of not collecting a seat tax for which it is not liable under Denver's ordinance. This is not what the parties intended and is contrary to the intent of Denver's ordinance.