Opinion ID: 545490
Heading Depth: 3
Heading Rank: 1

Heading: The Joint Venture Theory

Text: 11 Under New York law, which applies to this case, see Itel Containers International Corp. v. Atlanttrafik Express Service Ltd., No. 86 Civ. 1313, slip op. at 12, 1988 WL 75262 (S.D.N.Y. July 13, 1988), a joint venture is in a sense a partnership for a limited purpose, and it has long been recognized that the legal consequences of a joint venture are equivalent to those of a partnership. Gramercy Equities v. Dumont, 72 N.Y.2d 560, 565, 534 N.Y.S.2d 908, 911, 531 N.E.2d 629 (1988). Thus, for example, one coventurer will be bound by a lease signed by another coventurer, even if the first neither signed nor assented to the lease. See Edison Stone Corp. v. 42nd Street Development Corp., 145 A.D.2d 249, 255-56 & 256 n. 3, 538 N.Y.S.2d 249, 252-53 & 253 n. 3 (1st Dep't 1989); see also N.Y. Partnership Law Sec. 20(1) (McKinney 1988). Plaintiffs contend that the district court should have found that SCL and AES Ltd. were joint venturers in operating the AES line and that, under the above principles, SCL was liable for the container leases signed by AES Ltd. We conclude that the district court properly found that SCL was not party to a joint venture. 12 In order to form a joint venture, (1) two or more persons must enter into a specific agreement to carry on an enterprise for profit; (2) their agreement must evidence their intent to be joint venturers; (3) each must make a contribution of property, financing, skill, knowledge, or effort; (4) each must have some degree of joint control over the venture; and (5) there must be a provision for the sharing of both profits and losses. See, e.g., Flammia v. Mite Corp., 401 F.Supp. 1121, 1127 (E.D.N.Y.1975), aff'd without opinion, 553 F.2d 93 (2d Cir.1977). All of these elements must be present before joint venture liability may be imposed. At least two elements were lacking in the present case. 13 The district court found that SCL did not intend to engage in a joint venture. Plaintiffs have pointed to no evidence to the contrary, and the record fully supports the view that SCL purposely used layers of corporations so that its involvement with the AES line would be remote. Thus the second element listed above was not present. Further, the court found that SCL chose to operate through corporations in order to limit its losses to the amounts it was willing to advance in loans. Though SCL plainly hoped to share in whatever profits the AES line produced, there was no indication that it expected to share in the losses except as a lender to AES Ltd. Thus, the fifth element also was not present. Accordingly, assuming that the AES line was properly to be considered the venture, the findings of the district court preclude the conclusion that it was an SCL joint venture. 14 Further, we note that the district court correctly found that AES Ltd. itself was not a joint venture because it was a corporation. A joint venture and a corporation are mutually exclusive ways of doing business. See Arditi v. Dubitzky, 354 F.2d 483, 486 (2d Cir.1965); see also Chalmers v. Eaton Corp., 71 A.D.2d 721, 722, 419 N.Y.S.2d 217, 219 (3d Dep't 1979) (mem.) (joint venture is a business combination  ' without any actual partnership or corporation designation ' ) (quoting Forman v. Lumm, 214 A.D. 579, 583, 212 N.Y.S. 487 (1st Dep't 1925) (quoting Schouler, Personal Property [5th ed.] Sec. 167a)). Though business associates may be treated as partners vis-a-vis one another even when they operate through a corporation, the corporate form is to be respected in dealings with third parties. Arditi v. Dubitzky, 354 F.2d at 486.