Court Opinion

ID: 9559613
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:32:23.805499+00
Date Added: 2024-06-11T09:11:26.239285
License: Public Domain

Justice HOBBS,
dissenting:
I respectfully dissent. The Denver Revised Municipal Code levies a seat tax on anyone who sells tickets to an event held at a city-owned facility, see D.R.M.C. § 53-342, but exempts “all sales to or by the city or any department thereof.” D.R.M.C. § 53-347(3). I conclude that Fey Concert Company (Fey) acted as the Zoo’s agent in promoting the Zoofest concert series. In carrying out its duties, Fey at all times acted on behalf of the Zoo, for the Zoo’s benefit, and subject to the Zoo’s ultimate control. Accordingly, for purposes of assessing the seat tax, Fey falls within the exemption covering “all sales to or by the city or any department thereof.”
Contrary to the majority’s conclusion that no evidence supports an agency relationship between the Zoo and the joint venture, see Maj. op. at 661, the record in this case reveals an unbroken chain of agency from the city to the Zoo to Fey.
A.

The ALJ Made an Erroneous Legal Conclusion and Abused Her Discretion

It is uncontroverted that the Denver Zoological Foundation (Zoo) is an agent of the city. The city’s agreement with the Zoo so provides: “The city hereby employs the Foundation as its agent to manage, control, administer and be in charge of the zoo.” (Emphasis added.) It is also undisputed that, as an agent of the city, the Zoo qualifies as “the city or any department thereof.” The record as a whole shows that Fey, viewed either alone or as part of a joint venture between the Zoo and Fey, acted as an agent of the Zoo in promoting Zoofest.
The majority concludes that no evidence supports the existence of an agency relationship because, “The ALJ found no facts to support a conclusion that the Foundation and the joint venture manifested a mutual intent to enter into an agency agreement.” Maj. op. at 661. However, the ALJ found “no facts” because she failed to make findings of fact pertinent to the existence of an agency relationship, and she misapplied the law of agency. Her legal conclusion that no agency relationship existed was based on an erroneous view that the existence of a joint venture precluded Fey’s claim of agency:
Notwithstanding the agreement, Fey argued at the hearing that it was a mere agent of Denver. However, by entering into the agreement, the Foundation and Fey established a joint venture_ Under the agreement, the Foundation and Fey were partners in a partnership formed for a limited purpose.... As such, each partner was both an [sic] principal and an agent with regard to the other partner.... Accordingly, 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.
(Emphasis in original.)
In reviewing a decision under C.R.C.P. 106(a)(4), we must determine whether the governmental body or officer applied an erroneous legal standard. See City of Colorado Springs v. Givan, 897 P.2d 753 (Colo.1995). In turn, the standard we employ in our review under the rule is whether “any governmental body or officer or any lower judicial body exercising judicial or quasi-judicial *667functions has exceeded its jurisdiction or abused its discretion,” C.R.C.P. 106(a)(4), and, “Erjeview shall be limited to a determination of whether the body or officer has exceeded its jurisdiction or abused its discretion, based on the evidence in the record before the defendant body or officer,” C.R.C.P 106(a)(4)(I).
Contrary to the ALJ’s conclusion, the existence of a joint venture does not preclude an agency relationship. A joint venture can be an agent.. Although partners in a partnership are both principals and agents with respect to one another, as well as agents of the partnership in transacting partnership business, this does not answer the question of whether an agency relationship was created with respect to the production and promotion of Zoofest. The ALJ’s determination that no agency relationship was possible in light of the joint venture constituted an abuse .of discretion because she ignored the pertinent evidence, made no findings on an issue in the case, and reached an erroneous legal conclusion.
The majority concedes that the question of agency is primarily a question of fact, whether “the parties materially agree to enter into a particular relation to which the law attaches the legal consequences of agency.” Maj. op. at 661 (quoting Stortroen v. Beneficial Fin. Co., 736 P.2d 391, 395 (Colo.1987)). But the ALJ focused too narrowly on the joint venture agreement, which was signed August 25, 1993, after most of the concerts had occurred and after many of the facts giving rise to the agency relationship had taken place.
We must base our review on the entire record before the ALJ. See C.R.C.P. 106(a)(4)(I) (“Review shall be ... based on the evidence in the record before the defendant body or officer.”) The question of whether an agency relationship existed is the critical factor in deciding whether the seat tax applies: an agent selling tickets for a ZoO event, whether an individual, a corporation, or a joint venture of the Zoo, acts for the Zoo — and thus, the city — and cannot be assessed the seat tax. Fey’s promotional activities and the joint venture’s co-promotional activities were undertaken in an agency capacity and constitute the activities of “the city or any department thereof.”
B.

Fads Relevant to the Creation of an Agency Relationship Between the Zoo and Fey

The record demonstrates that the ticket sales occurred solely for the Zoo in the context of an agency relationship. As revealed by the testimony of witnesses, as well as the joint venture agreement itself, the Zoo intended from the outset to create an agency relationship with Fey to produce and promote its concert series. The joint venture agreement did not supplant the agency relationship but rather was meant to confirm it. “Zoofest” always remained a Zoo event, with Fey acting in a fiduciary relationship to the Zoo and subject to its ultimate control.
In the seven years prior to 1993, the Zoo-fest concert series had never been subject to the seat tax. In 1993, the Zoo, desiring to continue Zoofest, but wishing to devote less time and realize more income for the Zoo, solicited bids and selected Fey to help it promote the concert series. Thomas Peterson, who served as Marketing Director of the Zoo in 1993 and had promoted Zoofest for the previous seven years, testified that Zoo-fest was a unique marketing tool for bringing people to the Zoo. Its purpose, extended well beyond obtaining additional revenue for the Zoo. It was intended to expose nOntraditional audiences to the Zoo, promote interest in the Zoo, enhance the Zoo’s reputation in the community, and increase visits and admission revenues throughout the year.1
Prior to 1993, the Zoo continued to hold Zoofest even though it lost money on the series three out of seven years. In securing Fey, a professional promoter, to execute many of the responsibilities of producing and *668promoting Zoofest, the Zoo was seeking to increase the overall effectiveness of the series for generating revenue, enhancing its reputation, and exposing the Zoo to new patrons who might repeat their visits.
The Zoo retained critical aspects of control over Zoofest, while delegating to Fey responsibilities for implementing the success of the series. Under the parties’ original understanding — later confirmed by their joint venture agreement — Fey had the authority to book talent for the concerts, but the talent could be selected only with the Zoo’s approval.2 Fey set the ticket prices, subject to the Zoo’s approval. The dates of the concert were set by the Zoo, and the Zoo set the capacity for the concerts. The Zoo had to approve all advertising. At the hearing, Peterson engaged in the following exchange with opposing counsel:
Q: Was there any provision that the zoo would have any kind of restrictive voice for the advertising or control of the concert? A: I had to approve everything.
Q: Before it went out?
A: Absolutely, including press releases.
(Emphasis added.) Though promotion was primarily delegated to Fey, Peterson himself did some of the media interviews and promotional work for Zoofest. Any sponsors of the events required Zoo approval. The Zoo also determined how late the concerts would extend, as well as the allowable noise level.
In Peterson’s words,
I had management of the venue, authority for approval of every area of the series. The only difference was that instead of me making the calls to creative artists, Fey was to do that. Instead of me contracting out for promotion, Fey was going to do that.
(Emphasis added.)
While the agreement between the Zoo and Fey was that the Zoo would retain 30% of the profits from the series, and Fey would receive 70% of the profits, Fey had to manage and maintain on behalf of Zoofest all books and records as to income and expenses. Thus, the Zoo retained authority over nearly all aspects of Zoofest, while Fey carried out most promotional and production functions and handled the books and records of income and expenses. Peterson testified at trial that:
In my opinion, and in the opinion of the Denver Zoo, Fey was acting as an agent of the Denver Zoo to execute the Zoofest Concert Series ... it was not the intent of this agreement, or the very first conversation with Barry, it was never, “We’re turning this over to you.” Fey would not have been involved in the Zoofest concert series if the zoo didn’t want to have one. The Denver Zoo was not interested at that time, or my understanding, from any time from that point on, [in] allowing the zoo to act as a venue for concerts ... the zoo would hold it, and that’s it.
(Emphasis added.)
Sometime during the planning of Zoofest, Fey raised the subject of the seat tax. Although Fey was operating under the assumption that the seat tax did not apply because of the Zoo’s status with the city, Peterson and Michael McKanna (McKanna), Controller for Fey, sought confirmation from the Denver Department of Revenue (Revenue) that the tax would not apply. At that time, tickets were already on sale and had not been priced to include the seat tax. McKan-na and Peterson both testified that it was always the intent of the Zoo and Fey to structure their relations in such a way as to be exempt from the seat tax.
McKanna placed a phone call to Don Korte (Korte) at Revenue and inquired about the seat tax. Korte’s initial response two weeks later was that Fey would be responsible for paying and collecting the seat tax. McKanna testified that Korte indicated, however, that Revenue would review Fey’s contract with the Zoo, and that a joint venture deal or co-promotion would help Fey’s case. Peterson also testified that a Revenue official informed *669him that a joint venture contract would be helpful in avoiding the seat tax.3
According to McKanna, the Zoo and Fey then turned to formalizing their agreement in writing. By the time Fey and the Zoo received formal notification by letter on August 20, 1993, of Revenue’s intent to levy the seat tax, nearly all tickets had been sold— priced without the 10% seat tax — and the concert series was finished except for one concert.4
On August 25, 1993, Fey and the Zoo signed a joint venture agreement describing the duties and responsibilities of the parties. The contract was made retroactive to May 1, 1993.
C.

Principles of Agency Law

The law of agency supports a conclusion that Fey and the joint venture were agents of the Zoo, an entity which is exempt from the seat tax. The joint venture agreement did not speak specifically to the issue of agency. Section 2.10, which the majority relies upon, provided the following:
Independent Contractor. Nothing in this Agreement shall be construed nor shall it be construed that FEY is an employee of Zoo nor shall it be construed that FEY is a joint venturer of the Zoo other than for the Zoofest for the Summer of 1993 as provided for herein.
But this contractual provision lends little guidance on the issue of the agency’s existence or non-existence, because an independent contractor may or may not be an agent; whether or not the person is an agent depends on the circumstances of the undertaking. See Restatement (Second) of Agency § 2 (1958).
In Stortroen we determined that the selling broker in a real estate transaction is an agent.of the listing broker, and as such is within a chain pf agency to the seller. See Stortroen v. Beneficial Fin. Co., 736 P.2d 391, 393 (Colo.1987). Although there was no written contract between the selling broker and the listing broker establishing agency, we held that the basic structure of the relationship made the selling broker an agent of the listing broker and, consequently, á sub-agent of the seller. See id. at 399.
Agency is “the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.” Restatement (Second) of Agency § 1(1). “Agency is ultimately a question of the intention of the parties and is evidenced by their acts and not on what the relationship is called.” Moses v. Diocese of Colorado, 863 P.2d 310, 324 (Colo.1993). An agent is generally one who “acts for or, in place of, another, or is entrusted with the business of another.” Id. The control a principal exercises over the manner of work performed by an agent is evidence of agency. See id. No one factor, including control, is determinative, and the most important factor in determining whether a person is an agent is the “right to control, not the fact of control.” Id.
The essential characteristics of an agency relationship are that (1) the agent holds a power to alter legal relations between the principal and third persons and -between the principal and the agent, see Restatement (Second) of Agency § 12; (2) the agent is a fiduciary with respect to matters within the scope of agency,5 see id. § 13; and, (3) the *670principal has the right to control the conduct of the agent with respect to matters entrusted to the agent, see id. § 14.
As we explained in Stortroen, an agent may further delegate its authority to sub-agents. See Stortroen, 736 P.2d at 395. A subagent is “a person appointed by an agent empowered to do so, to perform functions undertaken by the agent for the principal, but for whose conduct the agent agrees with the principal to be primarily responsible.” Id. (quoting Restatement (Second) of Agency § 5(1)).
Independent contractors may or may not be agents or subagents: “the attorney-at-law, the broker, the factor, the auctioneer, and other similar persons employed either for a single transaction or for a series of transactions, are agents, although as to their physical activities they are independent contractors.” Restatement (Second) of Agency § 1 cmt. on subsection (3). The critical factor is that an agent is “a person authorized by another to act on his account and under his control.” Id.
The authority to perform a particular act may be conferred by specific words of a statement to the agent, by directing an agent to perform acts, or by inference from words or conduct. See id. § 26 cmt. c. If the authorization is ambiguous, the interpretation acted upon by the parties controls. Id. § 43.
A partnership, such as a joint venture, also may be an agent. See Scott Rowley, Rowley On Partnership § 9.0 (2d ed.1960). Within a partnership, “each partner is the agent for the other partners and the partnership in the partnership business.” Id. Thus, a partner has the authority to act both as an agent for the other partners and as an agent for the partnership. Additionally, a partner in a firm is not hindered from engaging in business transactions with the firm in good faith so long as the firm receives a fair consideration for its bargain. See id. § 21.1.
D.

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

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 “[ajccordingly, 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 Zoo-fest, including selection of talent, dates, advertising, and other areas in order to ensure *671that 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.

Conclusion

Fey was an agent of the Zoo in producing and promoting Zoofest; the. joint venture agreement was not meant to alter the parties’ purpose in this regard. The exemption to the seat tax provided in D.R.M.C. 53-347(3) should have been applied to the Zoo-fest concert series. The court of appeals correctly held that the ALJ misapplied the relevant legal standards and properly concluded that the exemption applied because the Zoo retained control over Zoofest and “used Fey’s services as a surrogate for those of its own employees,” thereby creating a chain of agency from the city to Fey.
Accordingly, I would affirm the judgment of the court of appeals.
I am authorized to say that Justice MARTINEZ joins in this dissent.

.. According to Peterson, the objective of the series was
to expose different audiences to the zoo, the 25 to 40 without kids. It had added hundreds of thousands of dollars through the summer, in addition to my advertising budget. It had other reasons for being done.

. The agreement between the Zoo and Fey provides that the Zoo retains the right to "reasonably approve” all talent. The fact that the Zoo could not "unreasonably" withhold approval does not alter the fact that the Zoo retained the right to control the selection of the talent in order to ensure that it was consistent with the Zoo’s mission and public image.

. Korte, in regard to the conversation about a joint venture, said that he didn’t recall the conversation and remembered only that his initial reaction was that the seat tax would be applicable.

. On July 28, 1993, in the middle of the concert series, Scott Sprague of Revenue did send a separate letter to McKanna stating that the seat tax would apply "unless Fey can demonstrate that any of the criteria for exemption under Section 53-347 of the Denver Revised Municipal Code (DRMC) have been met.”

.These fiduciary duties include: the duty to account for profits arising out of the employment, the duty not to act as or on account of an adverse party without the principal’s consent, the duty not to compete with the principal on the agent’s own account or for another in matters relating to the subject of the agency, and the duty to deal fairly with the principal in all transactions between them. See Restatement (Second) of Agency § 13 cmt. a.