Unpublished Disposition, 880 F.2d 1324 (9th Cir. 1987)

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U.S. Court of Appeals for the Ninth Circuit - 880 F.2d 1324 (9th Cir. 1987)

Michael WHITE, Plaintiff-Appellee,v.James WHITE, Defendant-Appellant,andDerik J. White, dba Cad Easy, Defendant.

No. 88-3932.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 30, 1989.Decided July 26, 1989.

Before GOODWIN, Chief Judge, and BRUNETTI and O'SCANNLAIN, Circuit Judges.


James White, defendant below, appeals from the district court's judgment awarding Michael White (no relation), plaintiff below, $42,800.00 after a bench trial in this diversity breach of contract action. We affirm.


In late December 1986, Michael White sought services for the manufacture and redesign of an electronically controlled table (the "Project"). He was referred to James White, a resident of Oregon, who traveled to San Francisco to meet with Michael. James' son, Derik White, accompanied James and was introduced to Michael White as the owner and proprietor of CAD EASY. CAD EASY was the assumed name for Derik White's business, registered in the fall of 1986. Michael White denied at trial that he was told Derik White was the owner of CAD EASY but the district court found that Michael knew Derik was the owner of CAD EASY. James White apparently had the experience necessary to do the project. Derik White played only a minor role although he was the owner of CAD EASY and would complete the computer-assisted mechanical drawings essential to finish the project. Derik did not take part in the negotiations and discussions of the project. These were handled exclusively between James White and Michael White.

On December 30, 1986 James White sent a letter agreement to Michael White. James White signed as "Agent for CAD EASY" and Michael White signed on behalf of himself for this project. On January 5th following, Michael White gave James White a check for $3,000.00 made directly payable to James White who cashed the check. The check was never reflected in CAD EASY's books.

On February 6th, 1987, the parties signed a second agreement which replaced the December 30th agreement. The new agreement outlined the mechanical and electrical design goals of the project and provided the following payment schedule:

Para. 6. Total cost of design and manufacture of the 4 (four) or 5 (five) tables to Mike White is Fifty thousand dollars ($50,000.00) to be paid as follows, Twenty-Five thousand dollars ($25,000.00) to be paid in advance, the remaining Twenty-Five thousand dollars ($25,000.00) to be paid out as needed by Cad Easy to purchase necessary parts, labor and services.

Again, this agreement was signed by Michael White individually and by James White as "agent for Cad Easy." Pursuant to the agreement, Michael White made the following payments:

February 9, 1987 Check to Cad Easy $25,000 March, 1987 Check to Cad Easy 3,000 March 24, 1987 Check to Cad Easy 2,000 March 31, 1987 Check to Cad Easy 5,167 March 31, 1987 Check to G. LaGrande 4,633 ------- TOTAL $39,800

The check to G. LaGrande was for payment of a personal debt owed by James White to G. LaGrande and this Project payment was never reflected in Cad Easy's accounts.

James White and Derik White resided in San Francisco during the first five months of 1987 although James White continued to be the sole contact with Michael White on the project. Living expenses for James and Derik White were paid by James White's credit cards and later paid directly through the CAD EASY accounts. No expense records were kept. There was no written agreement between James White and CAD EASY. Both James White and Derik White testified at trial that Derik, as owner, intended to contract James White's services for the Michael White project with payment of one-half of the gross proceeds from the project and expenses. CAD EASY accounts show that from February 9, 1987 to April 5, 1987, CAD EASY received $35,207 from Michael White. The CAD EASY accounts reflect payments of $23,866.52 to James White from January, 1987 to May, 1987 and advances from James White to CAD EASY for $1,846.84. James White received payments not reflected in CAD EASY accounts from Michael White of $7,633. James White further testified at trial that he received approximately $32,700 of the total payments that Michael White made of $42,800 for the project.

James White returned to Oregon in May, 1987 and testified that ill health prevented him from working on the Project. Counsel for Michael White wrote on July 30, 1987 and again on August 12, demanding that the Project be finished by the end of August. No design for manufacture is in existence and nothing was ever delivered to Michael White under the agreement. Michael White brought suit on September 10, 1987 against James and Derik White. Derik White subsequently filed for Chapter 7 bankruptcy and trial proceeded only against James White. The district court found James White liable under a "joint venturer" theory and awarded damages to Michael White. James White appeals.


As this is a diversity case, we must look to the forum state's law including its conflict of law rules to determine which law to apply here. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Sims Snowboards, Inc. v. Kelly, 863 F.2d 643, 645 (9th Cir. 1988). Oregon follows the most significant contacts theory to determine what law applies. Summers v. Interstate Tractor and Equipment Co., 466 F.2d 42, 47 (1972); General Elec. Credit Corp. v. R.A. Heintz Const. Co., 302 F. Supp. 958, 961-62 (D. Or. 1969). Here, the agreement was made in California, Michael White is a resident of California and his table was to be manufactured there. However, CAD EASY is an Oregon corporation, Derik and James White are residents of Oregon, the contract was being performed in Oregon and the breach occurred in Oregon. As the parties have not contested Oregon law on appeal, and it appears that the result would be the same under the laws of either state, Oregon law is appropriate for the analysis here.

The district court found James White liable to Michael White as a joint venturer with Derik White. Findings of fact made by a judge after a bench trial may not be set aside by the court of appeals unless they are clearly erroneous. Amadeo v. Zant, 108 S. Ct. 1771, 1777 (1988); Cooling Systems and Flexibles, Inc. v. Stuart Radiator, 777 F.2d 485, 487 (9th Cir. 1985). "If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently." Amadeo, 108 S. Ct. at 1777. Questions of law are reviewed under a de novo standard. Great American Houseboat Co. v. United States, 780 F.2d 741, 746 (9th Cir. 1986).

James White argues that he was an agent of CAD EASY and not a partner with Derik White, as he signed the contracts as agent; the district court found that he was an agent of CAD EASY and was free from personal liability as he disclosed his agency status and the identity of the principal. What James White disputes is that the district court also found him to be a joint venturer with Derik White, and as partnership law applies to joint ventures, was liable to Michael White as a partner of Derik White. James White finds this contradictory and calls it error as a matter of law.

Under Oregon law, a joint venture is a partnership for a single transaction and partnership law controls. Murray v. Rowena Dell Joint Venture, 88 Or.App. 52, 744 P.2d 569, 572 (1987) (citing Stone-Fox, Inc. v. Vandehey Development Co., 290 Or. 779, 626 P.2d 1365, 1367 (1981)). A joint venture agreement can be an express or implied contract and the intention of the parties at the time they enter into the contract controls whether a joint venture is formed. Stone-Fox, Inc., 626 P.2d at 1367; Fitzgibbon v. Carey, 70 Or.App. 127, 688 P.2d 1367, 1370 (1984). The Oregon rule for determining if a joint venture exists looks to 1) right of the party to share profits; 2) the right of the party to share losses; 3) and the degree of control exerted over the project. Stone-Fox, Inc., 626 P.2d at 1367 (citing Hayes v. Killinger, 235 Or. 465, 470, 385 P.2d 747, 750 (1963)).

The district court found that the evidence showed control rested substantially with James White. Evidence at trial showed that Michael White was referred to James White personally and not CAD EASY through a company that they had both worked for. All negotiations for the Project were carried on between Michael White and James White. Derik White's involvement was only to help complete the computer-assisted drawings at his father's direction. James White worked out all the details of the Project with Michael White including business and technical concerns. Furthermore, when Derik White returned to Oregon in May, James White stayed behind for another month to work with Michael White. James White had full control of the Project.

Evidence also showed that James White had a right to share in the gross profits of the Project. Derik and James White testified at trial that James White's fee was to be one half of profits plus expenses. James White took the initial $3,000 from Michael White at the start of the Project, cashed the check himself and never recorded the funds in the CAD EASY accounts. He had Michael White write a check directly to a Mr. LaGrande, whom James White owed a personal debt, and this money never went through the CAD EASY accounts. In fact, James White ended up with more than half of the gross receipts, approximately $32,700. Although he claimed much of this money was for "expenses," no expense records were kept by CAD EASY or anyone. Under Oregon law, it is not enough to show that a party received a share of the profits of a venture, it must also be shown that "his right to share in the profits results from the fact he is a part owner of them." Hayes, 385 P.2d at 751. The district court found that James White's actions in personally receiving $7,633 directly, "without regard to the CAD EASY business, is evidence that James White acted as part owner of the profits from the Michael White project. Further, it is significant to note that the initial payment on the project was made out directly to James White creating the impression at the initiation of the project that James White would receive compensation directly from Michael White without regard to the CAD EASY business." These findings are not clearly erroneous. Amadeo, 108 S. Ct. at 1777.

James White's actions as to expenses of the Project were also consistent with a joint venture arrangement. Expenses for the project, including James and Derik White's living expenses while in California, were paid by James White's credit cards, and through CAD EASY accounts. No expense records were kept by CAD EASY. James White advanced funds to CAD EASY. James White negotiated directly with Michael White during the problems in August, just before Michael White brought suit. This exhibits additional exercise of control over the Project, an attempt to limit losses and that both James and Derik White shared in the losses.

The district court concluded that while Derik White and James White had "regard for the CAD EASY protection from liability" by not disregarding the business structure, found that on the whole they functioned as a partnership on the Michael White project and not through CAD EASY. This finding is not clearly erroneous. Id. There is enough evidence to support the district court's finding that James White was a joint venturer with Derik White and liable to Michael White.

Furthermore, that finding is not contradictory to the court's finding that James was not liable under an agency theory. James White contends these are contradictory theories because the ultimate issues were the same. Appellant has misperceived the law here. An agent is not personally liable on a contract he makes so long as he acts within his authority, discloses his representative capacity to the third party and makes contracts in the principal's name. Free v. Wilmar J. Helric Co., 70 Or.App. 40, 688 P.2d 117, 119 (1984). James White was a party to the contract and signed as agent for CAD EASY. He complied with the requirements cited above and the court found that Michael White failed to prove by a preponderance of the evidence that James White was liable under this theory. This does not mean, however, that James White cannot be liable under another theory, that is, the joint venture theory. Maritime Ventures Int'l., Inc. v. Caribbean Trading & Fid., Ltd., 689 F. Supp. 1340, 1357 (S.D.N.Y. 1988) (court considered merits of adding joint venture theory to complaint which contained an undisclosed principal theory and allowed the amendment); Clubb Oil Tools, Inc. v. M/V George Vergottis, 460 F. Supp. 835, 838 (S.D. Tex. 1978) (district court while finding an agency relationship and no joint venture did not find that one theory precluded the other); Baron v. Bryant, 556 F. Supp. 531, 535 (D. Haw. 1983) (court did not find alternative theories of undisclosed principal and joint venturers inconsistent in denying defendants' motion to dismiss); Stone-Fox, 626 P.2d at 1362 (court did not find that a joint venture precluded a joint tenancy relationship or a tenancy in common).

In some instances a finding that someone was an agent of someone else may contradict a finding that that person was a joint venturer with the other person. This is not the case here, because the district court made no finding that James White was actually controlled by CAD EASY. Rather, its inquiry extended only to its determination that James White had adequately disclosed his agency relationship. This determination is not contradictory with the findings necessary to the district court's conclusion that James White was a joint venturer with Derik White. Although James White, because he had disclosed his agency relationship with CAD EASY, was not liable as an undisclosed principal of CAD EASY, nevertheless, acting under his own authority in the Michael White project could incur liability through an implied contract to create the joint venture with Derik White.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Circuit Rule 36-3