Opinion ID: 1844767
Heading Depth: 1
Heading Rank: 1

Heading: Sufficiency of the Evidence of Joint Venture.

Text: We discussed joint ventures in Brewer v. Central Construction Co., 241 Iowa 799, 806, 43 N.W.2d 131, 136 (1950): A joint venture is defined as an association of two or more persons to carry out a single business enterprise for profit; also as a common undertaking in which two or more combined their property, money, efforts, skill or knowledge. As a general rule, a joint venture is characterized by a joint proprietary interest in the subject matter, a mutual right to control, a right to share in the profits and a duty to share the losses. (Emphasis added.) In Pay-N-Taket, Inc. v. Crooks, 259 Iowa 719, 724, 145 N.W.2d 621, 625 (1966), we said this about joint ventures: A partnership or joint adventure, a limited partnership, is usually a contract where two or more persons place their money, labor and skill in some business to be carried on by the partnership, with an agreement to divide the profits and share the losses. The parties to this appeal have identified five indicia which they have characterized as the elements of a joint venture. They are: (1) a common undertaking; (2) a joint proprietary interest in the subject matter; (3) a mutual right to control; (4) a right to share in the profits; and (5) a duty to share the losses. It might be argued that these five factors are not elements in the sense that they must all be proven in every case. It could be argued they are only character[istic] of a joint venture, e.g., Brewer, 241 Iowa at 806, 43 N.W.2d at 136. In any event, the court here considered them to be elements and instructed the jury that they must all be proven in order to establish a joint venture. The plaintiff did not complain. GPC asserts that no substantial evidence supports any of the elements while Farm-Fuel counters that they are all established by substantial evidence. In deciding whether a joint venture agreement exists, we have said that no particular form of expression or formality of execution is necessary. It need not be expressed but may be implied in whole or in part from the conduct of the parties. Pay-N-Taket, Inc., 259 Iowa at 724, 145 N.W.2d at 625. Even the criteria for a joint venture might vary from case to case. See 46 Am.Jur.2d Joint Venture § 1, at 22 (1969) ([D]espite the general acceptance of the criteria listed above, it has been said that courts have not laid down any very certain definition of what constitutes a joint venture, nor have they established a very fixed or certain boundary thereof, contenting themselves in determining whether the facts of a particular case constitute the relationship of joint venture.). Whether there was substantial evidence of a joint venture is the most troublesome issue in this case. There is strong evidence to support both sides of the argument. GPC concedes that it had a joint venture with ACR for some purposes, but it claims that the development of the Farm-Fuel plant was not among them. It contends that it consistently and expressly disavowed any interest in the development of such plants because they were too small to be economically feasible. Farm-Fuel counters, with some persuasion, that the scope of the joint venture was a fact issue and that the jury's finding is supported by substantial evidence. We will set out only portions of the evidence which support the jury's findings. (The trial of this case lasted approximately nine weeks, producing hundreds of exhibits and thousands of pages of transcript.) On January 5, 1978, representatives of GPC and ACR met to discuss the potential of a joint development of their respective alcohol technology. According to the notes of the meeting, a representative of ACR suggested that GPC and ACR build the first alcohol plant and that the first group with a successful plant will make a handsome profit. Among the objectives of the two corporations, it was suggested, would be to [p]ossibly have a joint venture for gasohol[a] separate corporation which would then license others. These notes also proposed the drafting of a letter of intent by GPC and ACR and, if successful, then enter into joint venture which would provide for parties' objectives. Suggesting a prominent role for GPC, the notes show that GPC seeking controlling interest, be able to run show, [but] not opposed to have Rob [principal of ACR] involved in management. On the following day, GPC and ACR executed a Confidential Disclosure Agreement by which the parties agreed to the exchange and confidentiality of technical information and business information relating to the manufacture, use and sale of alcohol and alcohol-gasoline mixtures (gasohol). One stated reason for the exchange of technology was the parties' intent to make a joint application to the United States Department of Agriculture for a guaranteed loan for the construction of a gasohol pilot plant. On January 31, 1979, GPC and ACR signed one of the pivotal documents in this case, the licensing agreement for combining their respective Know-How and experience for the purpose of developing and marketing an energy responsible process for the conversion of renewable resources to liquid motor fuel, more specifically, a commercial process for producing ethanol-gasoline mixtures and/or ethanol-gasoline substitute ... mixtures. The agreement calls for the pooling of the parties' technologies through a licensing and sublicensing arrangement and the sharing of all royalty payments received from the commercial use of their technology. This agreement remained in force until July 14, 1981, when it was rescinded by the parties. On August 21, 1980, while the GPC/ACR agreement was in effect, ACR entered into the contract for the design of the Farm-Fuel plant which lies at the heart of this appeal. GPC was not a party to the contract; if it is to be held liable for any warranties contained in the contract, it must be on the basis that a joint venture existed with ACR. GPC, of course, claims that the Farm-Fuel contract was beyond the scope of a joint venture because of the plant's size. Evidence that the GPC/ACR venture did in fact include small plants included the publication of a workbook on February 26, 1979, which contained information provided by ACR and GPC on the establishment of small alcohol plants. The original version of this workbook was copyrighted by GPC, the second version by ACR. The workbook directed all inquiries to be made directly to GPC, which received over 600 of them. GPC acknowledged a substantial role in the area of alcohol technology. In a memo of July 10, 1980, just prior to the ACR/Farm-Fuel contract, the president of GPC stated: The reader should now be reminded that GPC considers it has a near-total package of technologies to market because of a license agreement it has with ACR Corporation (Chambers). That agreement provides, among other things, that our fee for technology will be two percent of sales and that ACR shall be paid 45% of all fees GPC obtains for our combined technologies. Thus, ACR should be required to be responsible for 45% of the obligations and risks of the licensing agreements. But ACR has no material financial strength. This, then, is additional reason why liquidated damages cannot be allowed to exceed the total license fee. While this memo expressed a reluctance by GPC to participate in small facilities, those under 20,000,000 gallons per year, it did not definitely rule out its involvement in such projects. Moreover, one of the principals of GPC suggested that small plants might be cost effective if factors such as availability of raw materials and local demand for the product were favorable. Also tending to refute GPC's claim that small plants were outside the scope of the joint venture was the fact that GPC was directly involved in similar-sized plants in Hydro, Oklahoma, and Houldrege, Nebraska, at about the same time as the Farm-Fuel contract was made. The prospectus for one of the other plants noted that GPC may be deemed to be an affiliate of ACR. Despite GPC's insistence that it only would become involved in small plants by licensing back the technology it had received from ACR, there is no evidence of such a license back in this case. Other evidence of GPC involvement in the Farm-Fuel project is found in the testimony by Farm-Fuel principals that Rob Chambers, of ACR, could not give the final say on contract terms but that such approval had to be obtained by GPC's attorneys. One of the GPC documents in evidence indicated that GPC and ACR were handling small plants on a case-by-case basis from December 1979 to October 1980. This appeared to leave the door open for involvement in some small plants during that time. When the evidence in support of the jury's finding is viewed in the light most favorable to the verdict, it appears that there is sufficient evidence of a joint venture in the Farm-Fuel project to sustain the verdict. The elements of a common undertaking, joint proprietary interest, mutual right to control, and a right to share the profits are clearly shown. (GPC has not seriously challenged the evidence as it pertains to a common undertaking.) A joint proprietary interest, we believe, was shown in the parties' respective ownership and contribution of technology, know-how, and patent rights. As to the mutual right to control, it could be argued that the licensing agreement left the issue in doubt, but the evidence supports the finding that both parties retained some right to control the efforts of the enterprise. A right to share in the profits is clearly shown by the agreement to share any royalty payments received from potential marketers. GPC contends that there was no agreement with ACR to share any losses, therefore there could be no finding of a joint venture. Even assuming that an agreement to share losses is required in every case, it may be implied from an agreement for a sharing of capital and profits. See Smith, Landeryou & Co. v. Hollingsworth, 218 Iowa 920, 934-35, 251 N.W. 749, 752 (1933) (partnership). In summary, we believe substantial evidence supported a finding of a joint venture as to the Farm-Fuel project. While there is also strong evidence to support a conclusion that this project was beyond the scope of any joint venture, that is not the issue.