Opinion ID: 1240701
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Heading: Partnership IssueThe Written Agreement.

Text: The construction of a written contract, as already noted, is a question of law for the court. Porter v. Iowa Power and Light Co., 217 N.W.2d 221, 228 (Iowa 1974). In construction of written contracts, the cardinal principle is that the intent of the parties must control; and except in cases of ambiguity, this is determined by what the contract itself says. Iowa R.App.P. 14(f)(14). An examination of the contract (exhibit two) in this case discloses that on its face it is the common stock-share lease. The elements of the landlord and tenant relationship are all patently present. [3] Trial court makes no definitive finding that exhibit two, on its face, is a partnership and not a lease. Nonetheless, our review relating to this law issue requires examination of this Farm Lease to determine whether it exhibits the elements required to create a partnership. These are (1) an association, i.e., an intent by the parties to associate as partners; (2) a business; (3) earning of profits; and (4) co-ownership of profits, property and control. Crane and Bromberg § 4; see Iowa Code § 544.6(1); accord, Skaar v. Wisconsin Dept. of Revenue, 61 Wis.2d 93, 98-99, 211 N.W.2d 642, 645 (1973), cert. denied, 416 U.S. 906, 94 S.Ct. 1611, 40 L.Ed.2d 111 (1974).
In Iowa, intention to associate is the crucial test of partnership. Fox, 193 Iowa at 1178, 188 N.W. at 967 (citing Lutz v. Billick, 172 Iowa 543, 546, 154 N.W. 884, 885 (1915)). Exhibit two shows no intent by the parties to associate as partners. On the contrary, it recites an express intention to create the relationship of landlord-tenant. The words partner, partnership, firm, or any other term usually deemed to show such an intent to form a partnership appear nowhere in the document. On the other hand, the agreement is entitled Farm Lease. The word Landlord is used sixteen times; the word Tenant twenty times. The parties are identified in no other way. Such language, employed by the parties in their contract, is important in discerning their intent. See Anderson, 256 Iowa at 1328, 131 N.W.2d at 526; Fox, 193 Iowa at 1178, 188 N.W. at 967.
It is clear from exhibit two that the parties had a business purpose, as opposed to a patriotic, civic, religious, sports, or similar non-business purpose. Crane and Bromberg § 12.
For the purposes of this analysis, this element adds nothing other than to reinforce the business requirement mentioned in the last paragraph.

Exhibit two contains no provision for the sharing of profits by Harder and Davidson. In paragraph two the lease requires that [t]he Tenant shall pay to the Landlord ½ of the receipts from all farm products sold (emphasis added). Paragraph four provides for the sharing of certain expenses. Reading these two provisions together, trial court inferred an agreement to share profits. This inference was the sole basis for the court's finding that the parties had a community of interest in profits. Trial court's approach, of course, does not account for the requirement in the lease that each party individually assume certain expenses, which resulted in each showing a different level of profit or loss generated out of the farm operation. For example, Harder's 1979 tax return disclosed a substantial farm loss; Davidson's a profit of over $36,000. [4] Obviously, profit and loss under this agreement could not be determined until each party deducted from his share of the gross receipts the expenses for which he individually was responsible. Thus, under exhibit two, Harder and Davidson did not share profits. See Cedarberg v. Guernsey, 12 S.D. 77, 80-81, 80 N.W. 159, 160 (1899). Nor does exhibit two provide for the sharing of losses. Trial court inferred this, based upon the requirement that the parties share certain of the expenses, citing as authority 68 C.J.S. Partnership § 29(b)(2). The Iowa rule, however, is not the general rule stated in C.J.S. Our cases are in some disarray on this point, but stated most favorably to Chariton Feed, the Iowa rule is that an agreement to share losses may be inferred only where the partnership is established by other evidence. See Anderson, 256 Iowa at 1329, 131 N.W.2d at 527; Malvern Nat'l Bank, 195 Iowa at 738, 192 N.W. at 846; Fox, 193 Iowa at 1180, 188 N.W. at 968. Addressing the question of profits, trial court stated that [i]n reaching its conclusion as to the existence of a partnership, the court notes section 544.7(4)(b) of the Code of Iowa, 1979, provides that the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business. This conclusion does not take into account Iowa Code section 544.7(3): The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived. Further, the statute referred to by trial court actually carries its own exception that further excludes this situation: The receipt by a person of a share of the profits of a business is prima-facie evidence that the person is a partner in the business, but no such inference shall be drawn if such profits were received in payment: b. As ... rent to a landlord. Iowa Code § 544.7(4)(b).
Exhibit two contemplated co-ownership of only part of the property used in the livestock operation, being the livestock and feeding equipment. That of course does not, of itself, establish a partnership. See Anderson, 256 Iowa at 1327-28, 131 N.W.2d at 526; Fox, 193 Iowa at 1179-80, 188 N.W. at 968; Crane and Bromberg § 12(b).
Co-ownership of control, or a community of interest in the administration of the business, is a key element in determining the existence of a partnership. Crane and Bromberg § 14(d); see Malvern Nat'l Bank, 195 Iowa at 739, 192 N.W. at 846; Anderson, 256 Iowa at 1327, 131 N.W.2d at 527-28. It is at this point that the provisions of exhibit two thoroughly undermine any claim of partnership. Paragraph eleven states that [t]he Tenant shall have full management control, including but not limited to, when to sell the goods, where to sell the goods, to whom to sell the goods, what feed to buy, where to buy the feed, and how much feed to buy. Paragraph twelve provides, Tenant shall use the proper farming methods in the management of said farm. There can be no dispute that the Farm Lease placed Davidson in complete management control of the farm operations and excluded Harder. Although obviously inartfully drawn, we find no ambiguity in the language of this Farm Lease. Assuming trial court found it established a partnership, we cannot agree with its conclusion of law. There remain for our review trial court's findings relating to the conduct of the parties, and its conclusion the parties created a partnership by their acts.