Court Opinion

ID: 3985014
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:41:15.49653+00
Date Added: 2024-06-11T07:44:18.273688
License: Public Domain

I concur in the conclusion that the content of understanding between the parties must be gleaned not only from their initial conversations, but also from the evolution of the developments *Page 436 
on the various jobs. The actual work necessitated modifications and changes in detail which were not foreseeable in the original negotiations. The parties agree that the original idea was that the plaintiff should furnish forty per cent of the equipment and defendant sixty per cent, but that in actual practice it could not work with exactitude. The real issue pertains to the question of formula for the division of profits. Since the labor costs, costs of materials, supervision and office expense were all deducted from the gross, the issue really revolved about how recompense should be made for the use of machinery furnished by each. Defendant contended for two propositions: First, that in determining what equipment was furnished two elements were to be considered. (a) Value of equipment furnished whether cost, market or inventory, and the time it was furnished and that the value of each piece should be multiplied by the number of units of time and the addition of all these ("weighted values") for each party would give the comparison of what each furnished. The second proposition it contended for was that the profits of any job should be divided in this proportion. To illustrate the contention concretely: Plaintiff furnishes on a certain job a steam shovel valued at $10,000 for 300 hours and a rock crusher valued at $6,000 for 200 hours. The total weighted value of these would be (10,000 x 300) plus (6,000 x 200) equals 4,200,500. The defendant furnishes a roller valued at $3,000 for 200 hours and a concrete mixer valued at $1,000 for 450 hours. The weighted value of the equipment furnished by it would be (3,000 x 200) plus (1,000 x 450) equals 1,050,000. The profits under this contention would be divided as 4 is to 1.
The plaintiff contended differently. It argued that the ideal furnishing of equipment was on a 40-60 per cent ratio and that the profits were to be so divided, but that the actual
furnishing of equipment as it departed from the ideal was to be adjusted to the 40-60 ratio on a rental basis. It could not be adjusted on any other basis. Thus, in the illustration *Page 437 
formerly used, if plaintiff furnished a steam shovel with an hourly rental value of $10 and it were used for 300 hours, it would have a rental charge (not a weighted value) of $3,000 for the steam shovel and for the rock crusher of $1,000, assuming its hourly rental charge to be $5 and it was in use on the job for 200 hours. The total contribution in terms of rental by plaintiff would be, therefore, under the illustration, $4,000. If defendant contributed a roller having a rental value of $3 per hour for 200 hours and a concrete mixer rental value $1 per hour for 400 hours its contribution of equipment in rental value would be $1,000. The plaintiff would then have contributed four times as much as defendant and contended that an adjustment should be made in its favor on the basis of 40-60 contribution. To bring the ratio of contribution to 40-60, the plaintiff must be paid rent for all it has furnished in excess of its forty per cent against defendant's sixty per cent. Defendant's contribution of $1,000 becomes its sixty per cent, and plaintiff's corresponding forty per cent will be 667, and plaintiff will receive rent from gross receipts for its additional 3333.
It can be seen that if defendant's theory is adopted it makes no substantial difference whether weighted value or rental charge is made the formula for division of the profits. The relative weighted values of equipment or relative rental charges for equipment furnished simply determine the division of the profits. The 60-40 ratio is forgotten in this regard. But as to plaintiff it makes much difference. Weighted value which is an abstract figure permitting only a comparison cannot be used as a dollar charge against gross profits, but rental value can. Plaintiff, under its theory, is bound to reject weighted value; whereas defendant is not so much concerned as to whether rental or weighted value is taken so long as the gross profits are divided according to the ratio of the two without allowing a charge against the proceeds for rental of machinery before division. The defendant strongly urged weighted value as the measure of equipment contribution because if it were adopted it would make sure *Page 438 
that its theory of dividing profits according to the actual proportion of equipment furnished would be adopted. But it was about equally well off when the court divided the profits measured by the proportional contribution of equipment in turn measured by the rental charge. But plaintiff was obliged to contend for rental charge, not because it believed the profits should be divided in the ratio of which the rental charge of one bore to the rental charge of the other, but because as above stated and illustrated it was contending for a more fundamental proposition, to-wit: That after adjusting contributions of machinery to the ideal 60-40 ratio, the excess which each party contributed over ideal percentage should be a charge against the gross income and after that what profits remained should be divided on a 60-40 basis.
This gives an added significance to the question of whether equipment bought during jobs for the jobs was to be considered as owned jointly or by the party which actually advanced the money. If owned singly, the equipment would vary the division of profits.
The preliminary explanation above given will, it is hoped, lend some intelligence to the conclusions reached in this opinion. The lower court accepted the defendant's theory that not the ideal ratio of 60-40 was to govern distribution of profits, but the actual ratio of contribution of equipment which it found on the Utah-Idaho jobs to be in the ratio of 37-63, excluding equipment owned jointly. In arriving at this ratio it lumped all of the eight Utah-Idaho jobs together, treating them as one big job and found that defendant had in rental value contributed $13,546.21, and the plaintiff $23,268.90, or a total of $36,845.11, which made the contribution of defendant 37 per cent and the contribution of plaintiff 63 per cent. (Finding No. 5) Thus it may be seen that the court accepted plaintiff's theory as to the measuring rod, i.e., rental value, but defendant's theory that profits should be divided not according to the ideal ratio, but according to the actual ratio of contribution. *Page 439 
I think there is evidence to support the lower court in its conclusion that profits should be divided according to what the actual ratio of contribution was and not according to the ideal ratio of contribution. Furthermore, I see no error in taking the rental rather than the weighted value as the formula for division and indeed, respondent is not seriously objecting to that criterion. I think Findings Nos. 9, 10, 11, 12, 13, and 14 were supported by evidence or by reasonable inferences therefrom. These findings pertain to what was jointly and separately purchased.
I find nothing arbitrary in excluding the Adams grader and McCormick unit from joint ownership as found in Finding No. 12. The court had a mass of evidence before it. It made a sincere effort to piece together conflicting evidence into a reasonably harmonious whole and to arrive at the real intention of the parties from evidence which threw little light on either theory.
I concur with the observation of the prevailing opinion that since defendant's theory was adopted there may not be any substantial difference between using rent value or weighted value as the formula for division of profits, but I think that intrinsically there might be considerable difference. Value multiplied by time equals weighted value. Rental charge per unit of time multiplied by the number of time units for which rented equals total rental charge. True, the rental charge is based on value or investment, but it also involves factors such as rate of depreciation, obsolescence, idle time when equipment is not in use when owner is entitled to interest on its investment, etc. These factors are not embraced in weighted value.
I hardly think the Austin contract (in Nevada) is given adequate treatment in the prevailing opinion. The court found this to be a joint enterprise and that it was sublet to the Heiselt Construction Company (Finding No. 6) and that the net profit on it was $3,019.51 (Finding No. 15) which the court divided 40-60. The gross profit on this contract was $12,419.54, but Heiselt failed to complete the job *Page 440 
so respondent did so at a cost of $9,400.12, which was deducted from the gross profit. Heiselt already owed respondent $31,611.33 to which the $9,400.12 was added. Heiselt later repaid part of this total, leaving unpaid $12,203.20. All of Heiselt's payments were applied to his individual indebtedness to respondent. Appellant claims the payments of Heiselt should have been applied pro rata on respondent's debt and on the debt appellant was interested in. Respondent contended that the moneys paid by Heiselt should be applied to the oldest debts first. I think appellant's contention is correct. The court will apply payments in such manner as will effectuate equitable principles. UnitedStates v. Kirkpatrick, 9 Wheat. 720, 737, 6 L. Ed. 199;Korbly v. Springfield Institute for Savings, 245 U.S. 330,336, 38 S. Ct. 88, 62 L. Ed. 326; Lichtenstein v. GrossmanConstruction Corp., 248 N.Y. 390, 162 N.E. 292; Anspacher v.Utterback's Adm'r, 252 Ky. 666, 68 S.W.2d 15; 48 C.J. 655; 21 R.C.L. 97; Restatement of Law, Contracts, Sec. 387; Colby v.Copp, 35 N.H. 434; Russell v. Green, 10 Conn. 269;Boreing v. Wilson, 128 Ky. 570, 108 S.W. 914; 48 C.J. 651, Sec. 99.
The equitable principle here involved is that when A. makes payment to B. on a general account and C. owns part of the account, B. cannot use A.'s payment in toto to reduce A.'s individual indebtedness to him and not apply any of it to that part of the account which C. is interested in when A. does not designate what part of the account the payments are to be applied to. B., because of his strategic position as receiver of the payment from A., cannot divert it solely to his own benefit. He owes C. a duty to treat A.'s undesignated payment pro rata a payment to the part of the account C. is interested in. That is only fair. If A. would prefer application solely to B.'s part of the account and so designate, the case might be different. I see no reason why this principle should not be applied in a case where the profits of the venture have been charged with the advance made by one of the parties and that advancement charged *Page 441 
back to the debtor who owes the one both individually and on behalf of a silent partner, or who owes a trustee both as a trustee and in his individual capacity. The beneficiary should have the advantage of a pro rata application. In the instant case, it is as if the appellant had paid its share of the advancement made by respondent out of its (appellant's) share of the profits. As Heiselt pays respondent on respondent's general account with Heiselt, part of which account appellant is interested in, the payments of Heiselt not designated as to application must be pro-rated in their application.
I hardly think sufficient the point urged by respondent to support its theory that the source of the money with which Heiselt made payments to respondent impressed those payments with a right in respondent to make application to the items of individual indebtedness rather than the one owed jointly to respondent and the undisclosed partner or joint venturer, appellant. Respondent claims that on its own account it sublet to Heiselt certain contracts in California on a favorable basis and guaranteed the performance of them. For this reason it claims the money paid to respondent arising out of profit from these contracts was earmarked in respondent's favor, although there is nothing to show that this was considered when the California contracts were sublet. This entire claim is an extraneous consideration. For the reasons above stated I cannot concur in affirming the court's findings in this branch of the case.
I think there is sufficient evidence to sustain Finding No. 16 that the Wells contract as to the graveling and grading part of construction was a joint venture and also that the net profits from it were $3,089.59 (Finding No. 15) and to sustain the disallowance of two items (Finding No. 17) which reduced the profits to $3,089.59. The Wells job was sublet to the Jeff Hunt Construction Company, respondent to retain for itself and appellant seven per cent of the payments made by the state of Nevada. The graveling portion of the job was approximately $44,000. On the entire *Page 442 
job the Hunt Company lost $19,363.81. The respondent made a voluntary allowance of $3,000 and the balance was entirely paid up by the Hunt Company. Respondent also released Hunt from paying the premium on his bond, amounting to $440. Appellant had nothing to do with either of these releases or allowances and respondent contends only that as a matter of law the action of respondent in making the allowances bound its partner, the appellant.
It is fundamental that although the act of respondent might bind its partner so far as Hunt was concerned, in an accounting between the partners it could have only that effect which the relations and agreements of the partners gave it. Respondent produced no evidence of authority, express or implied, from appellant to make a voluntary release of $3,440 which the Hunt Construction Company was bound by its contract to pay. The trial court found, and correctly, that this was not the act of or binding upon the appellant. The case of Reiser v. Johnston,65 Okla. 307, 166 P. 723, L.R.A. 1918A, 924, is not persuasive as against the position of the court and appellant. Its position is supported by Secs. 69-1-6(3), 69-1-15(8), R.S. Utah 1933;Daniel v. Daniel, 48 Ky. 195, 9 B. Mon. 195; Lobdell v.Slawson, 90 Mich. 201, 51 N.W. 349; State ex rel. Crane Co.
v. Stokke, S.D., 272 N.W. 811, 819, 110 A.L.R. 761; Wilson v.McKee, 110 Pa. Super. 544, 549, 168 A. 341 (Real Property);Scanlon v. Kuehn, 225 A.D. 256, 232 N.Y.S. 592
(Confession of Judgment). Consequently, respondent's cross-appeal must fail in that regard.
The next question relates to the Arizona jobs. The Arizona statute provides:
"No foreign corporation shall transact any business in this state until it has complied with the requirements of the preceding section, and every act done by said corporation prior thereto shall be void." (Sec. 658, Ch. 14, Rev. Code of Arizona, 1928.)
It was held in National Union Indemnity Co. v. Bruce Bros.,Inc., 44 Ariz. 454, 38 P.2d 648, as follows (page 654): *Page 443 
"It is the duty of the court, whenever the facts which render the contract void are called to its attention, to declare the law, and no party may recover in an action where the right ofrecovery must rest in some manner upon the void contract." (Italics added.)
Ordinarily, sister states adopt the interpretation and effect of the interpretation of the highest state court of the state owning the law, unless such interpretation conflicts with its own public policy. The plaintiff in its second cause of action, involving a claim for recovery on the Arizona contracts, sues in the first count seemingly on the contract of joint venture. If both plaintiff and defendant carried on the Arizona contracts with the federal government as a joint venture, the plaintiff was doing business without qualifying under the Arizona statutes and the contract was therefore void. The language of the Bruce Case appears to be broad enough to make it void, not only as against the one for whom the work was done (federal government) but as a basis of suit for distribution of the profits. The lower court found that the agreement was joint in Arizona (Finding No. 21); that appellant engaged in business there (Finding No. 22); that appellant received no license to do business in Arizona (Finding No. 23) and concluded that "the contracts entered into between plaintiff and defendant concerning Arizona jobs were null and void in violation of the laws of the State of Arizona and neither party is entitled to recover against the other for any sums based upon said contracts." There is evidence to sustain this finding that the agreement for joint operations was entered into in Flagstaff, Arizona; that appellant's equipment was moved to Arizona and operated there over a period of twenty months and appellant participated as a joint venturer or partner in establishing a camp and operating it, hiring men, making purchases, preparing and submitting bids for other Arizona projects and prosecuting generally the work connected with highway construction. But I have doubt as to the court's conclusion. Assuming, for the purpose of this opinion, that as to the federal government appellant was doing *Page 444 
business, was it doing business in Arizona so far as respondent was concerned? If the parties had agreed in Arizona to a partnership, certainly the mere agreement would not be doing business in Arizona. If, under the partnership, each should work on different jobs rather than jointly on each job, the partnership agreement being merely to split on a 60-40 ratio the net proceeds from the jobs, could respondent defend on the theory that the partnership agreement was void? In a sense, the work is not carried on in pursuance of the partnership agreement, but in pursuance of agreements with the government. The partnership agreement relates to the division of ultimate profits. I realize a tenable argument may be made either way. But at all events, I cannot conceive that the respondent may unjustly enrich himself at the expense of appellant. I think appellant might at least recover on a quantum meruit. While the contract may be void, the acts done under it are not. The construction was not void. The use of machinery was not void. The contract was void in the sense that it furnished no basis for founding a claim on it. One cannot undo the construction work done under it. I do not think respondent can hide behind the voidness of the contract to defeat appellant from recovering for the use of his equipment. But I have some doubt as to whether a quantum meruit is pleaded. Seemingly the second count of the second cause of action was intended to do so, but it still appears to found the claim on the joint venture agreement. But assuming such matters are to be considered as inducement only and that a quantum meruit is stated, I have doubt whether the assignments raise the question of error in not finding judgment on a quantum meruit. Assignments XV and XVI attack Findings Nos. 21 and 22 on the ground that they are not supported by the evidence. As before stated, I think there is evidence to support them. There should have been assignments asserting error in not finding that even though the joint contract and the business done thereunder was a doing of business by plaintiff in Arizona contrary to the Arizona statutes, *Page 445 
it did not prevent recovery as between plaintiff and defendant on a quantum meruit count and that the court should have found to that effect and found the rental value of plaintiff's equipment and given judgment for it to be taken into account in the general judgment. The assignments do not claim error in failing to so find, but only error in finding as the court did find on the theory that it should have found not a quantum meruit but an alternative agreement in the event the parties did not agree on the list and items of equipment to be furnished by each. I hardly think this assignment presents the question of whether the court erred in not finding a quantum meruit for the rental value of the machinery. It may do so. I think the judgment should be reversed with instructions to modify the judgment; but since my opinion will not be the prevailing opinion, I think it unnecessary to conclude as to whether the assignments presented such question.